Livongo Health Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

lvgo-20200630

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Index to Financial Statements

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

FORM 10-Q

_________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-38983

___________________________________________

Livongo Health, Inc.

(Exact name of Registrant as specified in its charter)

___________________________________________


Delaware						26-3542036
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

150 West Evelyn Avenue, Suite 150

Mountain View, California 94041

(866) 435-5643

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

___________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	LVGO	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2020, the registrant had approximately 100,308,000 shares of common stock, $0.001 par value per share, outstanding.

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TABLE OF CONTENTS


		PAGE
	Note Regarding Forward-Looking Statements	2
	PART I - Financial Information
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	57
	PART II - Other Information	59
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	105
Item 3.	Default Upon Senior Securities	105
Item 4.	Mine Safety Disclosures	106
Item 5.	Other Information	106
Item 6.	Exhibits	107
	Signatures	109

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

As used in this Quarterly Report on Form 10-Q, references to “Livongo,” “we,” “us,” “our,” “the Company,” and similar references refer to Livongo Health, Inc. and its consolidated subsidiaries, except as expressly indicated or as the context otherwise requires.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. All statements other than present and historical facts and conditions contained in this report, including statements regarding our future results of operations and financial position, business strategy, plans and our objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Actual events or results may differ from those expressed in these forward-looking statements, and these differences may be material and adverse. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the merger with Teladoc Health, Inc., including expected timing, completion and effects of the merger;

•our ability to retain clients and sell additional solutions to new and existing clients;

•our ability to attract and enroll new members;

•the growth and success of our partners and reseller relationships;

•our ability to estimate the size of our target market;

•uncertainty in the healthcare regulatory environment;

•our future financial performance, including trends in revenue, costs of revenue, gross profit or gross margin, operating expenses, paying users, and free cash flow;

•our ability to achieve or maintain profitability;

•the demand for our solutions or for chronic condition management in general;

•our ability to compete successfully in competitive markets;

•our ability to respond to rapid technological changes;

•our expectations and management of future growth;

•our ability to develop new solutions, or enhancements to our existing solutions, and bring them to market in a timely manner;

•our ability to offer high-quality coaching and monitoring;

•our ability to attract and retain key personnel and highly qualified personnel;

•our ability to protect our brand;

•our ability to expand payor relationships;

•our ability to maintain, protect, and enhance our intellectual property;

•restrictions and penalties as a result of privacy and data protection laws;

•our expectations about the impact of natural disasters and public health epidemics, such as COVID-19, on our business, results of operations and financial condition;

•the potential impact of the COVID-19 pandemic on the financial markets in general and on our business in particular;

•our ability to successfully identify, acquire, and integrate companies and assets;

•the increased expenses associated with being a public company;

•our anticipated uses of net proceeds from our initial public offering and issuance of convertible senior notes; and

•the future trading prices of our common stock.

We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our other filings with the Securities and Exchange Commission, or the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. In light of the significant uncertainties in these forward-looking statements, you should not regard these

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statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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Index to Financial Statements

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

LIVONGO HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)


	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	685,953	$	241,738
Short-term investments	150,000		150,000
Accounts receivable, net of allowance for doubtful accounts of $2,774 and $1,245 as of June 30, 2020 and December 31, 2019, respectively	59,237		40,875
Inventories	17,616		28,983
Deferred costs, current	27,137		16,051
Prepaid expenses and other current assets	11,318		9,860
Total current assets	951,261		487,507
Property and equipment, net	16,209		10,354
Operating lease right-of-use assets	16,253		—
Restricted cash, noncurrent	1,270		1,270
Goodwill	35,801		35,801
Intangible assets, net	15,081		16,469
Deferred costs, noncurrent	12,843		5,700
Other noncurrent assets	569		3,460
TOTAL ASSETS	$	1,049,287	$	560,561
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,401	$	8,362
Accrued expenses and other current liabilities	35,684		27,801

Deferred revenue, current	5,420		3,945
Advance payments from partner, current	354		1,767
Total current liabilities	47,859		41,875
Operating lease liabilities, noncurrent	15,758		—
Deferred revenue, noncurrent	1,561		654
Advance payment from partner, noncurrent	9,142		7,754
Convertible senior notes, net	396,446		—
Other noncurrent liabilities	397		2,914
TOTAL LIABILITIES	471,163		53,197

Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, par value of $0.001 per share; 100,000 shares authorized as of June 30, 2020 and December 31, 2019, respectively; zero shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	—		—
Common stock, par value of $0.001 per share; 900,000 shares authorized as of June 30, 2020 and December 31, 2019, respectively; 99,412 and 95,301 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	100		95
Additional paid-in capital	749,349		671,467


Accumulated deficit	(171,325)		(164,198)
TOTAL STOCKHOLDERS’ EQUITY	578,124		507,364
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY	$	1,049,287	$	560,561

The accompanying notes are an integral part of these condensed consolidated financial statements.

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LIVONGO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue	$	91,923	$	40,915	$	160,745	$	72,982
Cost of revenue	21,466		11,964		39,572		21,827
Gross profit	70,457		28,951		121,173		51,155
Operating expenses:
Research and development	15,809		10,291		29,806		19,285
Sales and marketing	32,881		17,833		60,535		32,476
General and administrative	22,027		13,702		37,874		27,816
Change in fair value of contingent consideration	2		282		86		956
Total operating expenses	70,719		42,108		128,301		80,533
Loss from operations	(262)		(13,157)		(7,128)		(29,378)
Interest income	1,099		183		2,476		641
Interest expense	(2,283)		—		(2,320)		—
Other (expense) income, net	(36)		2		(62)		6
Loss before provision for income taxes	(1,482)		(12,972)		(7,034)		(28,731)
Provision for (benefit from) income taxes	72		5		93		(1,383)
Net loss	$	(1,554)	$	(12,977)	$	(7,127)	$	(27,348)
Accretion of redeemable convertible preferred stock	—		(42)		—		(83)
Net loss attributable to common stockholders	$	(1,554)	$	(13,019)	$	(7,127)	$	(27,431)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.02)	$	(0.69)	$	(0.07)	$	(1.48)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	97,896		18,916		96,719		18,564

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Index to Financial Statements

LIVONGO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(unaudited)


	Redeemable Convertible Preferred Stock				Common Stock						Additional Paid-in Capital		Accumulated Deficit	Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance as of March 31, 2020	—	$	—	97,293	$	97	$	670,962	$	(169,771)	$	501,288



Issuance of common stock upon exercise of stock options	—	—		1,590	2		2,122		—		2,124

Issuance of common stock upon release of stock awards	—	—		556	—		—		—		—
Tax withholding on releasing of stock awards	—	—		(118)	—		(6,198)		—		(6,198)
Issuance of common stock ESPP Purchase	—	—		91	1		2,154		—		2,155
Equity component of the convertible senior notes	—	—		—	—		144,106		—		144,106
Equity component of the issuance costs	—	—		—	—		(4,036)		—		(4,036)
Purchase of capped call related to convertible senior notes	—	—		—	—		(69,850)		—		(69,850)
Stock-based compensation expense	—	—		—	—		10,089		—		10,089
Net loss	—	—		—	—				(1,554)		(1,554)
Balance as of June 30, 2020	—	$	—	99,412	$	100	$	749,349	$	(171,325)	$	578,124

Balance as of March 31, 2019	58,615	$	236,970	19,618	$	20	$	27,586	$	(123,299)	$	(95,693)
Accretion of redeemable convertible preferred stock	—	42		—	—		(42)		—		(42)
Issuance of common stock upon exercise of stock options	—	—		1,272	1		1,128		—		1,129
Stock-based compensation expense	—	—		—	—		4,654		—		4,654
Net loss	—	—		—	—		—		(12,977)		(12,977)
Balance as of June 30, 2019	58,615	$	237,012	20,890	$	21	$	33,326	$	(136,276)	$	(102,929)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Index to Financial Statements

LIVONGO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(unaudited)


	Redeemable Convertible Preferred Stock				Common Stock						Additional Paid-in Capital		Accumulated Deficit	Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance as of December 31, 2019	—	$	—	95,301	$	95	$	671,467	$	(164,198)	$	507,364


Issuance of common stock upon exercise of stock options	—	—		2,837	3		3,843		—		3,846

Issuance of common stock upon release of stock awards	—	—		1,676	1		(1)		—		—
Tax withholding on releasing of stock awards	—	—		(493)	—		(16,762)		—		(16,762)

Issuance of common stock ESPP Purchase	—	—		91	1		2,154		—		2,155
Equity component of the convertible senior notes	—	—		—	—		144,106		—		144,106
Equity component of the issuance costs	—	—		—	—		(4,036)		—		(4,036)
Purchase of capped call related to convertible senior notes	—	—		—	—		(69,850)		—		(69,850)
Stock-based compensation expense	—	—		—	—		18,428		—		18,428
Net loss	—	—			—				(7,127)		(7,127)
Balance as of June 30, 2020	—	$	—	99,412	$	100	$	749,349	$	(171,325)	$	578,124

Balance as of December 31, 2018	58,615	$	236,929	17,691	$	18	$	21,789	$	(113,613)	$	(91,806)
Cumulative effect adjustment from adoption of ASC 606	—	—		—	—		—		4,685		4,685
Accretion of redeemable convertible preferred stock	—	83		—	—		(83)		—		(83)
Issuance of common stock upon exercise of stock options	—	—		3,199	2		1,441		—		1,443
Issuance of restricted stock awards	—	—		—	1		(1)		—		—
Issuance of common stock upon vesting of restricted stock units	—	—		—	—		—		—		—
Stock-based compensation expense	—	—		—	—		10,180		—		10,180
Net loss	—	—		—	—				(27,348)		(27,348)
Balance as of June 30, 2019	58,615	$	237,012	20,890	$	21	$	33,326	$	(136,276)	$	(102,929)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Index to Financial Statements

LIVONGO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(7,127)	$	(27,348)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	2,619		1,450
Amortization of intangible assets	1,388		1,193
Non-cash operating lease cost	2,199		—
Amortization of debt discount and debt issuance cost	1,922		—
Change in fair value of contingent consideration	86		956
Allowance for doubtful accounts	1,644		511
Stock-based compensation expense	17,938		9,963
Deferred income taxes	—		(1,396)
Changes in operating assets and liabilities, net of impact of acquisitions:
Accounts receivable, net	(20,006)		(17,637)
Inventories	11,367		(4,901)
Deferred costs	(18,035)		(7,781)
Prepaid expenses and other assets	(667)		(205)
Accounts payable	(2,626)		2,257
Accrued expenses and other liabilities	3,399		(48)

Operating lease liabilities	(83)		—
Deferred revenue	2,382		653
Advance payments from partner	—		2,372
Net cash used in operating activities	(3,600)		(39,961)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(4,476)		(628)
Capitalized internal-use software costs	(2,780)		(2,378)

Change in escrow deposit	2,100		1,750
Investment in certificate of deposit	(50,000)		—
Proceeds from maturity of certificate of deposit	50,000		—
Acquisitions, net of cash acquired	—		(27,435)

Net cash used in investing activities	(5,156)		(28,691)
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from exercise of stock options, net of repurchases	3,846		1,443


Proceeds from issuance of common stock under employee stock purchase plan	2,154		—
Payment of deferred offering costs	(286)		(1,559)
Payment of deferred acquisition-related contingent consideration	(1,356)		(1,316)

Price	19.39	EPS	-0
Shares	94	P/E	-54
MCap	1,831	P/FCF	-118
Net Debt	-400	EBIT	-34
TEV	1,432	TEV/EBIT	-42
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-07
10-K	2019-12-31	Filed 2020-03-24
S-1	2019-12-09	Public Filing
10-Q	2019-09-30	Filed 2019-11-08
10-Q	2019-06-30	Filed 2019-09-05
S-1	2019-06-28	Public Filing

8-K	2020-10-30	Enter Agreement, Leave Agreement, M&A, Shareholder Rights, Control, Officers, Amend Bylaw, Exhibits
8-K	2020-10-29	Shareholder Vote, Other Events
8-K	2020-10-29	Other Events
8-K	2020-10-28	Earnings, Other Events, Exhibits
8-K	2020-10-20	Other Events
8-K	2020-10-15	Officers, Other Events
8-K	2020-10-09	Other Events
8-K	2020-09-18	Other Events
8-K	2020-09-16	Other Events, Exhibits
8-K	2020-08-05	Earnings, Exhibits
8-K	2020-08-05	Enter Agreement, Exhibits
8-K	2020-08-05	Other Events, Exhibits
8-K	2020-07-07	Earnings, Exhibits
8-K	2020-06-01
8-K	2020-05-19
8-K	2020-05-06
8-K	2020-04-07
8-K	2020-03-23
8-K	2020-03-02
8-K	2019-11-06
8-K	2019-10-07
8-K	2019-09-05

EX-4.3	lvgo2020063010qex43.htm
EX-31.1	lvgo2020063010qex311ng.htm
EX-31.2	lvgo2020063010qex312ng.htm
EX-32.1	lvgo2020063010qex321ng.htm
EX-32.2	lvgo2020063010qex322ng.htm

LVGO 10Q Quarterly Report

Livongo Health Earnings 2020-06-30