Boosted by diabetes management, Livongo's revenue jumps to $170M

While the company is still not profitable, Livongo Health continued to see its financial performance surge past sales expectations in the fourth quarter of 2019.

The digital health company reported fourth-quarter 2019 revenue rose 137% year over year from $21.2 million to $50.2 million, exceeding its guidance range of $49 million to $49.5 million. Fourth-quarter revenue also beat Wall Street estimates of $49.3 million.

Livongo's full-year 2019 revenue totaled $169.9 million, up 149% from $68.4 million in 2018.

The Mountain View, California-based company's revenue jump was primarily driven by growth in its core Livongo for Diabetes solution. It also included "meaningful contributions" to revenues from its other solutions for hypertension, weight management and behavioral health, said Livongo Chief Financial Officer Lee Shapiro during the company's fourth-quarter and full-year 2019 earnings call Monday.

The company plans to reach profitability in 2021 on an adjusted EBITDA basis, Shapiro said.

Livongo for Diabetes members grew by 96% for the year, adding 109,000 members and finishing the year with 222,700 members.

In the self-insured market, the company's diabetes management solution has been rolled out to 30% of the Fortune 500 companies, Livongo CEO Zane Burke said during the earnings call.

Burke says the company has a large addressable market with room to grow as more than 147 million Americans live with a chronic condition and 40% live with more than one condition.

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Livongo reported a loss of $6 million in its fourth quarter, or $0.06 on a per-share basis. Losses, adjusted for stock option expense and amortization costs, were $0.02 per share for the quarter. The results topped Wall Street expectations. This also beat Wall Street analysts' estimates for a loss of $0.05 per share.

For the full year, the company reported a loss of $54.9 million, or $1.08 per diluted share.

The company expects to drive continued margin improvements in 2020, Shapiro said.

Livongo's strategy is to deliver a whole person platform that addresses multiple conditions in one integrated platform, said company President Jennifer Schneider.

The company collects member data from devices such as the Livongo Meter and from medical and pharmacy claims, social determinants of health, lab data or the Apple HealthKit, she said.

Livongo then uses these data to provide personalized insights, or what it calls nudges, to members to drive behavioral change to improve health, she said.

In January, the company struck a deal with Dexcom to integrate Dexcom's continuous glucose monitoring device into its diabetes coaching platform. The addition of those data will help Livongo offer its members more personalized, actionable insights for diabetes management, according to the company.

"Livongo finished the year with excellent momentum, exceeding all of our guidance metrics, achieving record signings in the fourth quarter, and expanding our reach to over 30% of Fortune 500 companies,” Burke said. "We enter the year well-positioned to continue driving rapid growth with our extension into the fully insured health plan market and our expanded strategic partnerships with CVS Health and Express Scripts."

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Livongo also is growing its "client wallet share," as 14% of Livongo's clients had more than one Livongo offering at the end of 2019 compared to 4% at the end of 2018, he said.

The company finished the year with 48,000 members for its other offerings in hypertension and prediabetes weight management. 

Both CVS and Express Scripts now include Livongo's solutions for hypertension and prediabetes weight management, in addition to diabetes, positioning the company "better to serve those companies' health plan and self-insured employer clients," Burke said.

At Express Scripts, Livongo is the only preferred provider for its digital health formulary. The company also received preferred status within Express Scripts' new Health Connect 360 solution, Burke said.

In 2020, Livongo plans to invest in new markets such as government and labor as well as new solutions.

For the first quarter of 2020, company executives expect revenue to reach $60 million to $62 million, representing growth of 90% to 93% year over year. Adjusted EBITDA loss is expected to be in the range of $5.5 million to $4.5 million for the quarter.

The company also expects revenue to grow between 65% and 71% to the range of $280 million to $290 million, ahead of our preliminary guidance of approximately $276 million, Shapiro said. Adjusted EBITDA loss for 2020 is expected to be in the range of $22 million to $20 million.