Livongo Health, Inc. (NASDAQ: LVGO), the leading Applied Health
Signals company empowering people with chronic conditions to live
better and healthier lives, today announced financial results for
its third quarter ended September 30, 2020.
“Livongo delivered another quarter of greater
than 100% revenue growth, driven by stronger than expected
enrollment during the third quarter. Our whole person
approach to care, which includes multiple product offerings, and
our proven track record of driving positive clinical and financial
outcomes continues to resonate with our Clients and their Members.
We generated new record-high EVA (Estimated Value of Agreements) of
$146 million in the third quarter, which we believe demonstrates
the continued strong momentum in our business,” said Zane Burke,
Chief Executive Officer of Livongo. “The proven strength and
breadth of Livongo’s solutions were once again validated by our new
business wins during the third quarter, including our partnership
with Fresenius Medical Care North America for chronic kidney
disease, our partnership with Magellan Health for behavioral
health, and continued competitive displacements with large
employers for our diabetes prevention program.”
“We remain very confident in Livongo’s continued
growth, and we believe that joining with Teladoc Health (NYSE:
TDOC) will build on Livongo’s success and dramatically accelerate
our mission of empowering people with chronic conditions to live
better and healthier lives,” said Glen Tullman, Founder and
Executive Chairman of Livongo. “Many of our Members and Clients
have expressed excitement for our pending combination with Teladoc
Health because it offers them, for the first time, a truly
comprehensive consumer centered virtual care solution.”
Third Quarter Fiscal 2020 Financial
Highlights:
- Revenue: Total
revenue for the quarter was $106.1 million, up 126% year-over-year,
driven by the continued adoption of our Applied Health Signals
platform.
- Gross Margin: GAAP
gross margin of 75.6% and non-GAAP gross margin of 76.3%.
- Net Loss and Non-GAAP Net
Income: GAAP net loss of $25.5 million, and GAAP net loss
per share attributable to common stockholders of ($0.26) on a
diluted basis; and non-GAAP net income of $19.2 million, and
non-GAAP net income per share attributable to common stockholders
of $0.16 on a diluted basis.
- Adjusted EBITDA:
$20.7 million in the third quarter of 2020.
- Livongo
for Diabetes Members: Over 442,000 as of
September 30, 2020, up 113% year-over-year.
- Livongo
Clients: 1,402 Clients as of September 30, 2020, up
71% year-over-year.
- Estimated Value of
Agreements (EVA): $145.9 million up from $85.5 million in
the third quarter of 2019, representing 71% growth year-over-year.
EVA consists of the estimated value of agreements signed in the
quarter with new Clients or expansions entered into with existing
Clients.
“We believe the future of health is about
keeping people healthy at home and being able to do so at scale,”
said Livongo President Dr. Jennifer Schneider, M.D., M.S. “This
includes meeting individuals where they are in their health journey
in order to understand their status, determining their care needs,
and recommending a next-best action. We call this consumer centered
virtual care, which is enabled by connected devices and powered by
data science. By combining Livongo’s advanced offerings and
underlying data science platform with Teladoc’s telehealth, we can
offer advantages that align with the move towards consumer centered
virtual care.”
“Livongo delivered another strong performance in
the third quarter, with Revenue, Member growth, and EVA all coming
in better than expected,” said Lee Shapiro, Livongo Chief Financial
Officer. “Revenue for the third quarter was driven by higher than
expected enrollment, enabled by the investments we have made in our
data science capabilities.”
Additional information on Livongo's reported
results is included in the financial tables below.
Conference Call
Given the pending transaction with Teladoc
Health, Livongo is not hosting a conference call in conjunction
with its third quarter 2020 earnings release.
Non-GAAP Financial Measures and Key
Metrics
Reconciliations of non-GAAP financial measures
to the most directly comparable financial results as determined in
accordance with GAAP are included at the end of this press release
following the accompanying financial data. We believe that these
non-GAAP financial measures, when taken together with the
corresponding GAAP financial measures, provide meaningful
supplemental information regarding our performance by excluding
certain items that may not be indicative of our business, results
of operations, or outlook. However, non-GAAP financial information
is presented for supplemental informational purposes only, has
limitations as an analytical tool and should not be considered in
isolation or as a substitute for financial information presented in
accordance with GAAP. In addition, other companies, including
companies in our industry, may calculate similarly-titled non-GAAP
measures differently or may use other measures to evaluate their
performance, all of which could reduce the usefulness of our
non-GAAP financial measures as tools for comparison. We compensate
for these limitations by analyzing current and future results on a
GAAP basis as well as a non-GAAP basis and by providing specific
information regarding the GAAP items excluded from these non-GAAP
financial measures.
For a description of these non-GAAP financial
measures, including the reasons management uses each measure,
please see the section of the tables titled "About Non-GAAP
Financial Measures."
In addition, we calculate and present certain
key business metrics that we believe are useful in evaluating our
business. For a description of these key metrics, including the
reasons management uses each measure, please see the section of the
tables titled "Key Metrics."
About Livongo
Livongo empowers people with chronic conditions
to live better and healthier lives, beginning with diabetes and now
including hypertension, weight management, diabetes prevention, and
behavioral health. Livongo pioneered the category of Applied Health
Signals to offer Members clinically-based insights that focus on
the whole person and make it easier to stay healthy. Using its
AI+AI engine, Livongo's team of data scientists aggregate and
interpret substantial amounts of health data and information to
create actionable, personalized and timely health signals delivered
to Livongo Members exactly when and where they need them. The
Livongo approach delivers better clinical and financial outcomes
while creating a different and better experience for people with
chronic conditions. For more information, visit: www.livongo.com or
engage with Livongo on LinkedIn or Twitter.
Cautionary Note Regarding
Forward-Looking Statements
This communication contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements generally include
statements regarding the potential transaction between Teladoc
Health, Inc. (“Teladoc”) and Livongo Health, Inc. (“Livongo”),
including any statements regarding the expected timetable for
completing the potential transaction, the ability to complete the
potential transaction, the expected benefits of the potential
transaction (including anticipated synergies, projected financial
information and future opportunities) and any other statements
regarding Teladoc’s and Livongo’s future expectations, beliefs,
plans, objectives, results of operations, financial condition and
cash flows, or future events or performance. These statements are
often, but not always, made through the use of words or phrases
such as “anticipate,” “intend,” “plan,” “believe,” “project,”
“estimate,” “expect,” “may,” “should,” “will” and similar
expressions. All such forward-looking statements are based on
current expectations of Teladoc’s and Livongo’s management and
therefore involve estimates and assumptions that are subject to
risks, uncertainties and other factors that could cause actual
results to differ materially from the results expressed in the
statements. Key factors that could cause actual results to differ
materially from those projected in the forward-looking statements
include the ability to obtain the requisite Teladoc and Livongo
stockholder approvals; uncertainties as to the timing to consummate
the potential transaction; the risk that a condition to closing the
potential transaction may not be satisfied; the risk that the
anticipated U.S. federal income tax treatment of the transaction is
not obtained; litigation relating to the potential transaction that
have been or could be instituted against Teladoc, Livongo or their
respective directors; the effects of disruption to Teladoc’s or
Livongo’s respective businesses; restrictions during the pendency
of the potential transaction that may impact Teladoc’s or Livongo’s
ability to pursue certain business opportunities or strategic
transactions; the effect of this communication on Teladoc’s or
Livongo’s stock prices; transaction costs; Teladoc’s ability to
achieve the benefits from the proposed transaction; Teladoc’s
ability to effectively integrate acquired operations into its own
operations; the ability of Teladoc or Livongo to retain and hire
key personnel; unknown liabilities; and the diversion of management
time on transaction-related issues. Other important factors that
could cause actual results to differ materially from those in the
forward-looking statements include the effects of industry, market,
economic, political or regulatory conditions outside of Teladoc’s
or Livongo’s control (including public health crises, such as
pandemics and epidemics); changes in laws and regulations
applicable to Teladoc’s business model; changes in market
conditions and receptivity to Teladoc’s services and offerings;
results of litigation; the loss of one or more key clients of
Teladoc (including potential adverse reactions or changes to
business relationships resulting from the announcement or
completion of the potential transaction); changes to Teladoc’s
abilities to recruit and retain qualified providers into its
network; the impact of the COVID-19 pandemic on the parties’
business and general economic conditions; risks regarding Livongo’s
ability to retain clients and sell additional solutions to new and
existing clients; Livongo’s ability to attract and enroll new
members; the growth and success of Livongo’s partners and reseller
relationships; Livongo’s ability to estimate the size of its target
market; uncertainty in the healthcare regulatory environment; and
the factors set forth under the heading “Risk Factors” of Teladoc’s
Annual Report and Livongo’s Annual Report, in each case on Form
10-K, and in subsequent filings with the U.S. Securities and
Exchange Commission (the “SEC”). These risks, as well as other
risks associated with the potential transaction, are more fully
discussed in the joint proxy statement/prospectus filed with the
SEC in connection with the proposed transaction. Other
unpredictable or unknown factors not discussed in this
communication could also have material adverse effects on
forward-looking statements. Neither Teladoc nor Livongo assumes any
obligation to update any forward-looking statements, except as
required by law. Readers are cautioned not to place undue reliance
on these forward-looking statements that speak only as of the date
hereof.
No Offer or Solicitation
This communication does not constitute an offer
to sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval, nor shall there be any sale
of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended.
Important Information for Investors and
Stockholders
In connection with the potential transaction,
Teladoc has filed a registration statement on Form S-4 (File No.
333-248568) with the SEC containing a prospectus of Teladoc that
also constitutes a definitive joint proxy statement of each of
Teladoc and Livongo. The registration statement, as amended, was
declared effective by the SEC on September 15, 2020. Each of
Teladoc and Livongo commenced mailing copies of the definitive
joint proxy statement/prospectus to stockholders of Teladoc and
Livongo, respectively, on or about September 15, 2020. Teladoc and
Livongo may also file other documents with the SEC regarding the
potential transaction. This communication is not a substitute for
the joint proxy statement/prospectus or registration statement or
for any other document that Teladoc or Livongo have filed or may
file with the SEC in connection with the potential transaction.
INVESTORS AND SECURITY HOLDERS OF TELADOC AND LIVONGO ARE URGED TO
READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT
ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS
OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors and security
holders will be able to obtain free copies of the joint proxy
statement/prospectus and other documents filed with the SEC by
Teladoc or Livongo through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the SEC by
Teladoc will be available free of charge on Teladoc’s website at
https://ir.teladochealth.com and copies of the documents filed with
the SEC by Livongo will be available free of charge on Livongo’s
website at https://ir.livongo.com/. Additionally, copies may be
obtained by contacting the investor relations departments of
Teladoc or Livongo.
Teladoc and Livongo and certain of their
respective directors, certain of their respective executive
officers and other members of management and employees may be
considered participants in the solicitation of proxies with respect
to the potential transaction under the rules of the SEC.
Information about the directors and executive officers of Teladoc
is set forth in its proxy statement for its 2020 annual meeting of
stockholders, which was filed with the SEC on April 14, 2020.
Information about the directors and executive officers of Livongo
is set forth in its Annual Report on Form 10-K for the year ended
December 31, 2019, which was filed with the SEC on March 24, 2020,
and its proxy statement for its 2020 annual meeting of
stockholders, which was filed with the SEC on April 6, 2020. These
documents can be obtained free of charge from the sources indicated
above. Additional information regarding the interests of such
participants in the solicitation of proxies in respect of the
potential transaction are included in the registration statement
and joint proxy statement/prospectus and other relevant materials
filed with the SEC.
The term “Livongo” and such terms as “the
company,” “the corporation,” “our,” “we,” “us” and “its” may refer
to Livongo Health, Inc., one or more of its consolidated
subsidiaries, or to all of them taken as a whole. All of these
terms are used for convenience only and are not intended as a
precise description of any of the separate companies, each of which
manages its own affairs.
Investor Contact:
Jason
PlagmanInvestor-relations@livongo.com785-550-6048
Media Contact:
John Hallockpress@livongo.com617-615-7712
LIVONGO HEALTH,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(in thousands, except per share
data)(unaudited)
|
September 30, 2020 |
|
December 31, 2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
644,398 |
|
|
$ |
241,738 |
|
Short-term investments |
152,500 |
|
|
150,000 |
|
Accounts receivable, net of allowance for doubtful accounts of
$2,281 and $1,245 as of September 30, 2020 and December 31, 2019,
respectively |
78,479 |
|
|
40,875 |
|
Inventories |
22,513 |
|
|
28,983 |
|
Deferred costs, current |
30,269 |
|
|
16,051 |
|
Prepaid expenses and other current assets |
16,888 |
|
|
9,860 |
|
Total current assets |
945,047 |
|
|
487,507 |
|
Property and equipment, net |
19,321 |
|
|
10,354 |
|
Operating lease right-of-use
assets |
15,342 |
|
|
— |
|
Restricted cash, noncurrent |
1,270 |
|
|
1,270 |
|
Goodwill |
35,801 |
|
|
35,801 |
|
Intangible assets, net |
14,390 |
|
|
16,469 |
|
Deferred costs, noncurrent |
12,141 |
|
|
5,700 |
|
Other noncurrent assets |
650 |
|
|
3,460 |
|
TOTAL ASSETS |
$ |
1,043,962 |
|
|
$ |
560,561 |
|
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
15,582 |
|
|
$ |
8,362 |
|
Accrued expenses and other current liabilities |
37,059 |
|
|
27,801 |
|
Deferred revenue, current |
6,785 |
|
|
3,945 |
|
Advance payments from partner, current |
1,722 |
|
|
1,767 |
|
Total current liabilities |
61,148 |
|
|
41,875 |
|
Operating lease liabilities,
noncurrent |
15,383 |
|
|
— |
|
Deferred revenue, noncurrent |
1,781 |
|
|
654 |
|
Advance payment from partner,
noncurrent |
7,624 |
|
|
7,754 |
|
Convertible senior notes,
net |
402,935 |
|
|
— |
|
Other noncurrent liabilities |
1,128 |
|
|
2,914 |
|
TOTAL LIABILITIES |
489,999 |
|
|
53,197 |
|
Commitments and
contingencies |
|
|
|
Redeemable convertible preferred
stock, par value of $0.001 per share |
— |
|
|
— |
|
Stockholders’ equity: |
|
|
|
Preferred stock, par value of $0.001 per share |
— |
|
|
— |
|
Common stock, par value of $0.001 per share |
102 |
|
|
95 |
|
Additional paid-in capital |
750,726 |
|
|
671,467 |
|
Accumulated deficit |
(196,865 |
) |
|
(164,198 |
) |
TOTAL STOCKHOLDERS’ EQUITY |
553,963 |
|
|
507,364 |
|
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND
STOCKHOLDERS’ EQUITY |
$ |
1,043,962 |
|
|
$ |
560,561 |
|
|
|
|
|
|
|
|
|
LIVONGO HEALTH,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except per share
data)(unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
Revenue |
$ |
106,104 |
|
|
$ |
46,860 |
|
|
$ |
266,850 |
|
|
$ |
119,842 |
|
Cost of revenue(1)(2) |
25,922 |
|
|
11,448 |
|
|
65,496 |
|
|
33,275 |
|
Gross profit |
80,182 |
|
|
35,412 |
|
|
201,354 |
|
|
86,567 |
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development(1)(3) |
18,907 |
|
|
17,794 |
|
|
48,713 |
|
|
37,079 |
|
Sales and marketing(1)(2) |
37,188 |
|
|
23,923 |
|
|
97,724 |
|
|
56,399 |
|
General and administrative(1)(3) |
45,674 |
|
|
14,182 |
|
|
83,547 |
|
|
41,998 |
|
Change in fair value of contingent consideration |
(2,220 |
) |
|
55 |
|
|
(2,134 |
) |
|
1,011 |
|
Total operating expenses |
99,549 |
|
|
55,954 |
|
|
227,850 |
|
|
136,487 |
|
Loss from operations |
(19,367 |
) |
|
(20,542 |
) |
|
(26,496 |
) |
|
(49,920 |
) |
Interest income |
1,517 |
|
|
1,418 |
|
|
3,993 |
|
|
2,059 |
|
Interest expense |
(7,689 |
) |
|
— |
|
|
(10,009 |
) |
|
— |
|
Other expense, net |
(38 |
) |
|
(9 |
) |
|
(99 |
) |
|
(3 |
) |
Loss before provision for
income taxes |
(25,577 |
) |
|
(19,133 |
) |
|
(32,611 |
) |
|
(47,864 |
) |
Income tax (benefit)
provision |
(37 |
) |
|
6 |
|
|
56 |
|
|
(1,377 |
) |
Net loss |
$ |
(25,540 |
) |
|
$ |
(19,139 |
) |
|
$ |
(32,667 |
) |
|
$ |
(46,487 |
) |
Accretion of redeemable
convertible preferred stock |
— |
|
|
(13 |
) |
|
— |
|
|
(96 |
) |
Net loss attributable to
common stockholders |
$ |
(25,540 |
) |
|
$ |
(19,152 |
) |
|
$ |
(32,667 |
) |
|
$ |
(46,583 |
) |
Net loss per share attributable to common stockholders, basic and
diluted |
$ |
(0.26 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.33 |
) |
|
$ |
(1.27 |
) |
Weighted-average shares used
in computing net loss per share attributable to common
stockholders, basic and diluted(4) |
100,071 |
|
|
72,197 |
|
|
97,849 |
|
|
36,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes stock-based
compensation expense as follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Cost of revenue |
$ |
253 |
|
|
$ |
94 |
|
|
$ |
463 |
|
|
$ |
106 |
|
Research and development |
3,193 |
|
|
5,460 |
|
|
7,002 |
|
|
6,312 |
|
Sales and marketing |
3,335 |
|
|
5,134 |
|
|
7,751 |
|
|
5,394 |
|
General and administrative |
4,503 |
|
|
4,854 |
|
|
14,006 |
|
|
13,693 |
|
Total stock-based compensation expense |
$ |
11,284 |
|
|
$ |
15,542 |
|
|
$ |
29,222 |
|
|
$ |
25,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Includes amortization of
intangible assets as follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Cost of revenue |
$ |
420 |
|
|
$ |
420 |
|
|
$ |
1,260 |
|
|
$ |
1,100 |
|
Sales and marketing |
271 |
|
|
276 |
|
|
819 |
|
|
789 |
|
Total amortization of intangible assets |
$ |
691 |
|
|
$ |
696 |
|
|
$ |
2,079 |
|
|
$ |
1,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Includes
acquisition-related expenses as follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
$ |
24,755 |
|
|
$ |
11 |
|
|
$ |
24,755 |
|
|
$ |
236 |
|
Total acquisition-related
expenses |
$ |
24,755 |
|
|
$ |
11 |
|
|
$ |
24,755 |
|
|
$ |
236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) For all periods presented, the weighted-average
shares used in computing net loss per share attributable to common
stockholders, basic and diluted, include the weighted-average
outstanding shares for the following common stock issued in
connection with our IPO in July 2019: (i) all shares of redeemable
convertible preferred stock then outstanding, totaling 58,615
shares, were automatically converted into an equivalent number of
shares of common stock on a one-to-one basis and (ii) we sold
14,590 shares of our common stock at an offering price of $28.00
per share, including 1,903 shares of common stock pursuant to the
exercise in full of the underwriters' option to purchase additional
shares.
LIVONGO HEALTH,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(in
thousands)(unaudited)
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
CASH FLOWS FROM
OPERATING ACTIVITIES |
|
|
|
Net loss |
$ |
(32,667 |
) |
|
$ |
(46,487 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
Depreciation and amortization expense |
4,382 |
|
|
2,312 |
|
Amortization of intangible assets |
2,079 |
|
|
1,889 |
|
Non-cash operating lease cost |
3,298 |
|
|
— |
|
Amortization of debt discount and debt issuance cost |
8,408 |
|
|
— |
|
Change in fair value of contingent consideration |
(2,134 |
) |
|
1,011 |
|
Allowance for doubtful accounts |
2,462 |
|
|
501 |
|
Stock-based compensation expense |
29,221 |
|
|
25,543 |
|
Deferred income taxes |
— |
|
|
(1,396 |
) |
Changes in operating assets and liabilities, net of impact of
acquisitions: |
|
|
|
Accounts receivable, net |
(40,066 |
) |
|
(23,047 |
) |
Inventories |
6,470 |
|
|
(12,340 |
) |
Deferred costs |
(20,431 |
) |
|
(9,141 |
) |
Prepaid expenses and other assets |
(6,318 |
) |
|
(4,790 |
) |
Accounts payable |
7,112 |
|
|
1,041 |
|
Accrued expenses and other liabilities |
8,013 |
|
|
5,447 |
|
Operating lease liabilities |
(48 |
) |
|
— |
|
Deferred revenue |
3,967 |
|
|
1,128 |
|
Advance payments from partner |
— |
|
|
2,796 |
|
Net cash used in operating activities |
(26,252 |
) |
|
(55,533 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES |
|
|
|
Purchases of property and equipment |
(7,430 |
) |
|
(1,334 |
) |
Capitalized internal-use software costs |
(5,196 |
) |
|
(3,558 |
) |
Change in escrow deposit |
2,100 |
|
|
1,750 |
|
Investment in certificate of deposit |
(52,500 |
) |
|
(50,000 |
) |
Proceeds from maturity of certificate of deposit |
50,000 |
|
|
— |
|
Acquisitions, net of cash acquired |
— |
|
|
(27,435 |
) |
Net cash used in investing activities |
(13,026 |
) |
|
(80,577 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES |
|
|
|
Proceeds from issuance of
common stock upon initial public offering, net of issuance
costs |
— |
|
|
379,925 |
|
Proceeds from exercise of
stock options, net of repurchases |
5,660 |
|
|
1,959 |
|
Proceeds from exercise of
common stock warrants |
— |
|
|
60 |
|
Proceeds from issuance of
common stock under employee stock purchase plan |
2,155 |
|
|
— |
|
Payment of deferred offering
costs |
(286 |
) |
|
(1,972 |
) |
Payment of deferred
acquisition-related contingent consideration |
(1,356 |
) |
|
(1,316 |
) |
Proceeds from issuance of
convertible notes, net of transaction costs of $14,775 |
534,597 |
|
|
— |
|
Payment of capped calls
related to issuance of convertible senior notes |
(69,850 |
) |
|
— |
|
Proceeds from the sale of
common stock to fund employee taxes on equity awards |
21,009 |
|
|
— |
|
Employee taxes paid related to
the settlement of equity awards |
(49,991 |
) |
|
(563 |
) |
Net cash provided by financing activities |
441,938 |
|
|
378,093 |
|
Net increase (decrease) in cash, cash equivalents, and restricted
cash |
402,660 |
|
|
241,983 |
|
Cash, cash equivalents, and restricted cash, beginning of
period |
243,008 |
|
|
109,107 |
|
Cash, cash equivalents, and restricted cash, end of period |
$ |
645,668 |
|
|
$ |
351,090 |
|
Reconciliation of
cash, cash equivalents, and restricted cash: |
|
|
|
Cash and cash equivalents |
$ |
644,398 |
|
|
$ |
349,820 |
|
Restricted cash |
1,270 |
|
|
1,270 |
|
Total cash, cash equivalents, and restricted cash, end of
period |
$ |
645,668 |
|
|
$ |
351,090 |
|
|
|
|
|
|
|
|
|
About Non-GAAP Financial Measures
In addition to our financial results determined
in accordance with U.S. Generally Accepted Accounting Principles
(GAAP), we believe non-GAAP measures are useful in
evaluating our operating performance. In particular, we believe
that the use of non-GAAP net income (loss), adjusted gross profit,
adjusted gross margin, and adjusted EBITDA is helpful to our
investors as they are metrics used by management in assessing the
health of our business and our operating performance. We use
these non-GAAP financial measures to evaluate our ongoing
operations and for internal planning and forecasting purposes. A
reconciliation is provided below for
each non-GAAP financial measure to the most directly
comparable financial measure stated in accordance with GAAP.
Investors are encouraged to review the related GAAP financial
measures and the reconciliation of
these non-GAAP financial measures to their most directly
comparable GAAP financial measures, and not to rely on any single
financial measure to evaluate our business.
Non-GAAP Net Income (Loss)
We define non-GAAP net income (loss) as net loss
less: (i) stock-based compensation expense, (ii) amortization of
intangible assets, (iii) employer payroll taxes on stock-based
compensation, (iv) acquisition-related expenses, (v) change in fair
value of contingent consideration, (vi) non-cash interest expense
on convertible senior notes, and (vi) tax impact. Prior to the
second quarter of 2020, the employer portion of payroll taxes on
stock-based compensation was insignificant and therefore we had not
historically excluded such amounts from non-GAAP net income (loss).
However, because the amount of stock-based compensation expense has
increased in the ordinary course of business, the employer payroll
taxes on our stock-based compensation has also increased and become
more meaningful. We believe that, similar to stock-based
compensation expense, such payroll taxes are unrelated to overall
operating performance and therefore beginning with the second
quarter of 2020 we determined to exclude such amounts from non-GAAP
net income (loss). We made this update to our presentation
prospectively for the second quarter of 2020 and have not updated
any prior periods because such amounts were insignificant.
Non-GAAP net income (loss) is used by our
management to understand and evaluate our operating performance and
trends. We believe that non-GAAP net income (loss) is helpful in
providing useful information about our operating results because it
eliminates the effect of items that are unrelated to overall
performance, but non-GAAP net income (loss) is not meant to be
considered in isolation or as a substitute for comparable GAAP
measures and should be read only in conjunction with our
consolidated financial statements prepared in accordance with
GAAP.
LIVONGO HEALTH,
INC.RECONCILIATION OF GAAP TO NON-GAAP
MEASURES(in thousands, except
percentages)(unaudited)
|
Three Months Ended September 30, 2020 |
|
GAAP |
|
Stock-Based Compensation Expense |
|
Amortization of Intangible Assets |
|
Employer Payroll Taxes on Stock-Based Compensation
(1) |
|
Acquisition Related Expenses |
|
Change in Fair Value of Contingent
Consideration |
|
Non-Cash Interest Expense on Convertible Senior
Notes |
|
Tax Impact |
|
Non-GAAP |
Cost of revenue |
$ |
25,922 |
|
|
$ |
(253 |
) |
|
$ |
(420 |
) |
|
$ |
(73 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
25,176 |
|
Gross profit |
$ |
80,182 |
|
|
$ |
253 |
|
|
$ |
420 |
|
|
$ |
73 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
80,928 |
|
Gross margin |
75.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76.3 |
% |
Research and development |
$ |
18,907 |
|
|
$ |
(3,193 |
) |
|
$ |
— |
|
|
$ |
(1,317 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
14,397 |
|
Sales and marketing |
$ |
37,188 |
|
|
$ |
(3,335 |
) |
|
$ |
(271 |
) |
|
$ |
(725 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
32,857 |
|
General and
administrative |
$ |
45,674 |
|
|
$ |
(4,503 |
) |
|
$ |
— |
|
|
$ |
(1,644 |
) |
|
$ |
(24,755 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
14,772 |
|
Change in fair value of
contingent consideration |
$ |
(2,220 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,220 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total operating expenses |
$ |
99,549 |
|
|
$ |
(11,031 |
) |
|
$ |
(271 |
) |
|
$ |
(3,686 |
) |
|
$ |
(24,755 |
) |
|
$ |
2,220 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
62,026 |
|
Loss from operations |
$ |
(19,367 |
) |
|
$ |
11,284 |
|
|
$ |
691 |
|
|
$ |
3,759 |
|
|
$ |
24,755 |
|
|
$ |
(2,220 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,902 |
|
Interest income |
$ |
1,517 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,517 |
|
Interest expense |
$ |
(7,689 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,486 |
|
|
$ |
— |
|
|
$ |
(1,203 |
) |
Other expense, net |
$ |
(38 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(38 |
) |
Loss before provision for
income taxes |
$ |
(25,577 |
) |
|
$ |
11,284 |
|
|
$ |
691 |
|
|
$ |
3,759 |
|
|
$ |
24,755 |
|
|
$ |
(2,220 |
) |
|
$ |
6,486 |
|
|
$ |
— |
|
|
$ |
19,178 |
|
Income tax benefit |
$ |
(37 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(37 |
) |
Net (loss) income |
$ |
(25,540 |
) |
|
$ |
11,284 |
|
|
$ |
691 |
|
|
$ |
3,759 |
|
|
$ |
24,755 |
|
|
$ |
(2,220 |
) |
|
$ |
6,486 |
|
|
$ |
— |
|
|
$ |
19,215 |
|
Net (loss) income attributable
to common stockholders |
$ |
(25,540 |
) |
|
$ |
11,284 |
|
|
$ |
691 |
|
|
$ |
3,759 |
|
|
$ |
24,755 |
|
|
$ |
(2,220 |
) |
|
$ |
6,486 |
|
|
$ |
— |
|
|
$ |
19,215 |
|
Net (loss) income per share
attributable to common stockholders, diluted |
$ |
(0.26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.16 |
|
Weighted-average shares used
in computing net income (loss) per share attributable to common
stockholders, diluted |
100,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Beginning in the second quarter of
2020, we made a prospective update to our presentation of non-GAAP
net income to exclude (i.e., add back) the employer portion of
payroll taxes on stock-based compensation. As such, the non-GAAP
net income presented above for the three months ended September 30,
2020 excludes our portion of payroll taxes on stock-based
compensation from the third quarter of 2020. We have not updated
any prior periods.
|
Three Months Ended September 30, 2019 |
|
GAAP |
|
Stock-Based Compensation Expense |
|
Amortization of Intangible Assets |
|
Acquisition Related Expenses |
|
Change in Fair Value of Contingent
Consideration |
|
Tax Impact |
|
Non-GAAP |
Cost of revenue |
$ |
11,448 |
|
|
$ |
(94 |
) |
|
$ |
(420 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
10,934 |
|
Gross profit |
$ |
35,412 |
|
|
$ |
94 |
|
|
$ |
420 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
35,926 |
|
Gross margin |
75.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
76.7 |
% |
Research and development |
$ |
17,794 |
|
|
$ |
(5,460 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
12,334 |
|
Sales and marketing |
$ |
23,923 |
|
|
$ |
(5,134 |
) |
|
$ |
(276 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,513 |
|
General and
administrative |
$ |
14,182 |
|
|
$ |
(4,854 |
) |
|
$ |
— |
|
|
$ |
(11 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,317 |
|
Change in fair value of
contingent consideration |
$ |
55 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(55 |
) |
|
$ |
— |
|
|
$ |
— |
|
Total operating expenses |
$ |
55,954 |
|
|
$ |
(15,448 |
) |
|
$ |
(276 |
) |
|
$ |
(11 |
) |
|
$ |
(55 |
) |
|
$ |
— |
|
|
$ |
40,164 |
|
Loss from operations |
$ |
(20,542 |
) |
|
$ |
15,542 |
|
|
$ |
696 |
|
|
$ |
11 |
|
|
$ |
55 |
|
|
$ |
— |
|
|
$ |
(4,238 |
) |
Interest income |
$ |
1,418 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,418 |
|
Interest expense |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Other expense, net |
$ |
(9 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(9 |
) |
Loss before provision for
income taxes |
$ |
(19,133 |
) |
|
$ |
15,542 |
|
|
$ |
696 |
|
|
$ |
11 |
|
|
$ |
55 |
|
|
$ |
— |
|
|
$ |
(2,829 |
) |
Income tax provision |
$ |
6 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6 |
|
Net loss |
$ |
(19,139 |
) |
|
$ |
15,542 |
|
|
$ |
696 |
|
|
$ |
11 |
|
|
$ |
55 |
|
|
$ |
— |
|
|
$ |
(2,835 |
) |
Accretion of redeemable
convertible preferred stock |
$ |
(13 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(13 |
) |
Net loss attributable to
common stockholders |
$ |
(19,152 |
) |
|
$ |
15,542 |
|
|
$ |
696 |
|
|
$ |
11 |
|
|
$ |
55 |
|
|
$ |
— |
|
|
$ |
(2,848 |
) |
Net loss per share
attributable to common stockholders, diluted |
$ |
(0.27 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.04 |
) |
Weighted-average shares used
in computing net loss per share attributable to common
stockholders, diluted |
72,197 |
|
|
|
|
|
|
|
|
|
|
|
|
72,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
GAAP |
|
Stock-Based Compensation Expense |
|
Amortization of Intangible Assets |
|
Employer Payroll Taxes on Stock Based Compensation
(1) |
|
Acquisition Related Expenses |
|
Change in Fair Value of Contingent
Consideration |
|
Non-Cash Interest Expense on Convertible Debt |
|
Tax Impact |
|
Non-GAAP |
Cost of revenue |
$ |
65,496 |
|
|
$ |
(463 |
) |
|
$ |
(1,260 |
) |
|
$ |
(100 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
63,673 |
|
Gross profit |
$ |
201,354 |
|
|
$ |
463 |
|
|
$ |
1,260 |
|
|
$ |
100 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
203,177 |
|
Gross margin |
75.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76.1 |
% |
Research and development |
$ |
48,713 |
|
|
$ |
(7,002 |
) |
|
$ |
— |
|
|
$ |
(2,042 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
39,669 |
|
Sales and marketing |
$ |
97,724 |
|
|
$ |
(7,751 |
) |
|
$ |
(819 |
) |
|
$ |
(1,343 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
87,811 |
|
General and
administrative |
$ |
83,547 |
|
|
$ |
(14,006 |
) |
|
$ |
— |
|
|
$ |
(2,471 |
) |
|
$ |
(24,755 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
42,315 |
|
Change in fair value of
contingent consideration |
$ |
(2,134 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,134 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total operating expenses |
$ |
227,850 |
|
|
$ |
(28,759 |
) |
|
$ |
(819 |
) |
|
$ |
(5,856 |
) |
|
$ |
(24,755 |
) |
|
$ |
2,134 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
169,795 |
|
(Loss) income from
operations |
$ |
(26,496 |
) |
|
$ |
29,222 |
|
|
$ |
2,079 |
|
|
$ |
5,956 |
|
|
$ |
24,755 |
|
|
$ |
(2,134 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33,382 |
|
Interest income |
$ |
3,993 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,993 |
|
Interest expense |
$ |
(10,009 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8,408 |
|
|
$ |
— |
|
|
$ |
(1,601 |
) |
Other expense, net |
$ |
(99 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(99 |
) |
(Loss) income before provision
for income taxes |
$ |
(32,611 |
) |
|
$ |
29,222 |
|
|
$ |
2,079 |
|
|
$ |
5,956 |
|
|
$ |
24,755 |
|
|
$ |
(2,134 |
) |
|
$ |
8,408 |
|
|
$ |
— |
|
|
$ |
35,675 |
|
Income tax provision |
$ |
56 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
56 |
|
Net (loss) income |
$ |
(32,667 |
) |
|
$ |
29,222 |
|
|
$ |
2,079 |
|
|
$ |
5,956 |
|
|
$ |
24,755 |
|
|
$ |
(2,134 |
) |
|
$ |
8,408 |
|
|
$ |
— |
|
|
$ |
35,619 |
|
Net (loss) income attributable
to common stockholders |
$ |
(32,667 |
) |
|
$ |
29,222 |
|
|
$ |
2,079 |
|
|
$ |
5,956 |
|
|
$ |
24,755 |
|
|
$ |
(2,134 |
) |
|
$ |
8,408 |
|
|
$ |
— |
|
|
$ |
35,619 |
|
Net (loss) income per share
attributable to common stockholders, diluted |
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.31 |
|
Weighted-average shares used
in computing net loss per share attributable to common
stockholders, diluted |
97,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Beginning in the second quarter of
2020, we made a prospective update to our presentation of non-GAAP
net income to exclude (i.e., add back) the employer portion of
payroll taxes on stock-based compensation. As such, the non-GAAP
net income presented above for the nine months ended September 30,
2020 excludes our portion of payroll taxes on stock-based
compensation from the second and third quarters of 2020. We have
not updated any prior periods.
|
Nine Months Ended September 30, 2019 |
|
GAAP |
|
Stock-Based Compensation Expense |
|
Amortization of Intangible Assets |
|
Acquisition Related Expenses |
|
Change in Fair Value of Contingent
Consideration |
|
Tax Impact |
|
Non-GAAP |
Cost of revenue |
$ |
33,275 |
|
|
$ |
(106 |
) |
|
$ |
(1,100 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
32,069 |
|
Gross profit |
$ |
86,567 |
|
|
$ |
106 |
|
|
$ |
1,100 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
87,773 |
|
Gross margin |
72.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
73.2 |
% |
Research and development |
$ |
37,079 |
|
|
$ |
(6,312 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
30,767 |
|
Sales and marketing |
$ |
56,399 |
|
|
$ |
(5,394 |
) |
|
$ |
(789 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
50,216 |
|
General and
administrative |
$ |
41,998 |
|
|
$ |
(13,693 |
) |
|
$ |
— |
|
|
$ |
(236 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
28,069 |
|
Change in fair value of
contingent consideration |
$ |
1,011 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1,011 |
) |
|
$ |
— |
|
|
$ |
— |
|
Total operating expenses |
$ |
136,487 |
|
|
$ |
(25,399 |
) |
|
$ |
(789 |
) |
|
$ |
(236 |
) |
|
$ |
(1,011 |
) |
|
$ |
— |
|
|
$ |
109,052 |
|
Loss from operations |
$ |
(49,920 |
) |
|
$ |
25,505 |
|
|
$ |
1,889 |
|
|
$ |
236 |
|
|
$ |
1,011 |
|
|
$ |
— |
|
|
$ |
(21,279 |
) |
Interest income |
$ |
2,059 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,059 |
|
Interest expense |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Other expense, net |
$ |
(3 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(3 |
) |
(Loss) income before provision
for income taxes |
$ |
(47,864 |
) |
|
$ |
25,505 |
|
|
$ |
1,889 |
|
|
$ |
236 |
|
|
$ |
1,011 |
|
|
$ |
— |
|
|
$ |
(19,223 |
) |
Income tax (benefit)
provision |
$ |
(1,377 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,396 |
|
|
$ |
19 |
|
Net loss |
$ |
(46,487 |
) |
|
$ |
25,505 |
|
|
$ |
1,889 |
|
|
$ |
236 |
|
|
$ |
1,011 |
|
|
$ |
(1,396 |
) |
|
$ |
(19,242 |
) |
Accretion of redeemable
convertible preferred stock |
$ |
(96 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(96 |
) |
Net loss attributable to
common stockholders |
$ |
(46,583 |
) |
|
$ |
25,505 |
|
|
$ |
1,889 |
|
|
$ |
236 |
|
|
$ |
1,011 |
|
|
$ |
(1,396 |
) |
|
$ |
(19,338 |
) |
Net loss per share
attributable to common stockholders, diluted |
$ |
(1.27 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.53 |
) |
Weighted-average shares used
in computing net loss per share attributable to common
stockholders, diluted |
36,636 |
|
|
|
|
|
|
|
|
|
|
|
|
36,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Gross Profit and Adjusted Gross
Margin
Adjusted gross profit and adjusted gross margin
are key performance measures that our management uses to assess our
overall performance. We define adjusted gross profit as GAAP gross
profit, excluding (i) stock-based compensation expense, (ii)
amortization of intangible assets, and (iii) employer payroll taxes
on stock-based compensation. Prior to the second quarter of 2020,
the employer portion of payroll taxes on stock-based compensation
was insignificant and therefore we had not historically excluded
such amounts from adjusted gross profit and adjusted gross margin.
However, because the amount of stock-based compensation expense has
increased in the ordinary course of business, the employer payroll
taxes on our stock-based compensation has also increased and become
more meaningful. We believe that, similar to stock-based
compensation expense, such payroll taxes are unrelated to overall
operating performance and therefore beginning with the second
quarter of 2020 we determined to exclude such amounts from adjusted
gross profit and adjusted gross margin. We made this update to our
presentation prospectively for the second quarter of 2020 and have
not updated any prior periods because such amounts were
insignificant.
We define adjusted gross margin as our adjusted
gross profit divided by our revenue. We believe adjusted gross
profit and adjusted gross margin provide our management and
investors consistency and comparability with our past financial
performance and facilitate period-to-period comparisons of
operations, as these metrics eliminate the effects of the
above-referenced items as factors unrelated to overall operating
performance. The following table presents a reconciliation of
adjusted gross profit from the most comparable GAAP measure, gross
profit, for the periods presented:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
(dollars in thousands) |
Gross profit |
$ |
80,182 |
|
|
$ |
35,412 |
|
|
$ |
201,354 |
|
|
$ |
86,567 |
|
Add: |
|
|
|
|
|
|
|
Stock-based compensation expense |
253 |
|
|
94 |
|
|
463 |
|
|
106 |
|
Amortization of intangible assets |
420 |
|
|
420 |
|
|
1,260 |
|
|
1,100 |
|
Employer payroll tax on stock-based compensation(1) |
73 |
|
|
— |
|
|
100 |
|
|
— |
|
Adjusted gross profit |
$ |
80,928 |
|
|
$ |
35,926 |
|
|
$ |
203,177 |
|
|
$ |
87,773 |
|
Adjusted gross margin (as a
percentage of revenue) |
76.3 |
% |
|
76.7 |
% |
|
76.1 |
% |
|
73.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Beginning in the second quarter of 2020,
we made a prospective update to our presentation of adjusted gross
profit and adjusted gross margin to exclude (i.e., add back) the
employer portion of payroll taxes on stock-based
compensation. As such, the adjusted gross profit and adjusted
gross margin presented above excludes our portion of payroll taxes
on stock-based compensation from the second and third quarters of
2020 recorded as a component of cost of revenue. We have not
updated any prior periods.
Adjusted EBITDA
Adjusted EBITDA is a key performance measure
that our management uses to assess our operating performance.
Because adjusted EBITDA facilitates internal comparisons of our
historical operating performance on a more consistent basis, we use
this measure for business planning purposes and in evaluating
acquisition opportunities.
We calculate adjusted EBITDA as net loss
adjusted to exclude (i) depreciation and amortization,
(ii) amortization of intangible assets, (iii) stock-based
compensation expense, (iv) employer payroll taxes on stock-based
compensation, (v) acquisition-related expenses, (vi) change in
fair value of contingent consideration, (vii) the total of interest
income, interest expense and other expense, net, and (viii) income
tax (benefit) provision. Prior to the second quarter of 2020, the
employer portion of payroll taxes on stock-based compensation was
insignificant and therefore we had not historically excluded such
amounts from adjusted EBITDA. However, because the amount of
stock-based compensation expense has increased in the ordinary
course of business, the employer payroll taxes on our stock-based
compensation has also increased and become more meaningful. We
believe that, similar to stock-based compensation expense, such
payroll taxes are unrelated to overall operating performance and
therefore beginning with the second quarter of 2020 we determined
to exclude such amounts from adjusted EBITDA. We made this update
to our presentation prospectively for the second quarter of 2020
and have not updated any prior periods because such amounts were
insignificant.
The following table presents a reconciliation of
adjusted EBITDA from the most comparable GAAP measure, net loss,
for the periods presented:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
(in thousands) |
Net loss |
$ |
(25,540 |
) |
|
$ |
(19,139 |
) |
|
$ |
(32,667 |
) |
|
$ |
(46,487 |
) |
Add: |
|
|
|
|
|
|
|
Depreciation and
amortization(1) |
1,763 |
|
|
862 |
|
|
4,382 |
|
|
2,312 |
|
Amortization of intangible
assets |
691 |
|
|
696 |
|
|
2,079 |
|
|
1,889 |
|
Stock-based compensation
expense |
11,284 |
|
|
15,542 |
|
|
29,222 |
|
|
25,505 |
|
Employer payroll tax on
stock-based compensation(2) |
3,759 |
|
|
— |
|
|
5,956 |
|
|
— |
|
Acquisition-related
expenses(3) |
24,755 |
|
|
11 |
|
|
24,755 |
|
|
236 |
|
Change in fair value of
contingent consideration |
(2,220 |
) |
|
55 |
|
|
(2,134 |
) |
|
1,011 |
|
Interest income, interest
expense and other expense, net |
6,210 |
|
|
(1,409 |
) |
|
6,115 |
|
|
(2,056 |
) |
Income tax (benefit)
provision |
(37 |
) |
|
6 |
|
|
56 |
|
|
(1,377 |
) |
Adjusted EBITDA |
$ |
20,665 |
|
|
$ |
(3,376 |
) |
|
$ |
37,764 |
|
|
$ |
(18,967 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
______________
(1) Depreciation and amortization includes depreciation of
property and equipment, amortization of debt discount, and
amortization of capitalized internal-use software costs.(2)
Beginning in the second quarter of 2020, we made a prospective
update to our presentation of adjusted EBITDA to exclude (i.e., add
back) the employer portion of payroll taxes on stock-based
compensation. As such, the adjusted EBITDA presented above excludes
our portion of payroll taxes on stock-based compensation from the
second and third quarters of 2020. We have not updated any prior
periods. The adjusted EBITDA presented above for the nine months
ended September 30, 2020 also excludes the employer portion of
payroll taxes paid in connection with the stock releases upon the
expiration of the lock-up agreement related to our IPO because such
payroll taxes were a one-time occurrence in the three months ended
March 31, 2020.(3) Acquisition-related expenses consist primarily
of transaction and transition related fees and expenses, including
legal, accounting, and other professional fees.
Some of the limitations of adjusted EBITDA
include (i) adjusted EBITDA does not properly reflect capital
commitments to be paid in the future, and (ii) although
depreciation and amortization are non-cash charges, the
underlying assets may need to be replaced and adjusted EBITDA does
not reflect these capital expenditures. Our adjusted EBITDA may not
be comparable to similarly titled measures of other companies
because they may not calculate adjusted EBITDA in the same manner
as we calculate the measure, limiting its usefulness as a
comparative measure. In evaluating adjusted EBITDA, you should be
aware that in the future we will incur expenses similar to the
adjustments in this presentation. Our presentation of adjusted
EBITDA should not be construed as an inference that our future
results will be unaffected by these expenses or any unusual or
non-recurring items. When evaluating our performance, you should
consider adjusted EBITDA alongside other financial performance
measures, including our net loss and other GAAP results.
Key Metrics
We monitor the following key metrics to help us
evaluate our business, identify trends affecting our business,
formulate business plans and make strategic decisions.
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
(dollars in thousands) |
Clients(1) |
1,402 |
|
|
819 |
|
|
1,402 |
|
|
819 |
|
Enrolled Diabetes Members |
|
442,724 |
|
|
|
207,815 |
|
|
|
442,724 |
|
|
|
207,815 |
|
Estimated Value of
Agreements(2) |
$ |
145,866 |
|
|
$ |
85,534 |
|
|
$ |
343,579 |
|
|
$ |
207,831 |
|
(1) Clients for the three and nine months ended September
30, 2019 have been updated to conform to current methodology as
described further below.(2) Previously referred to as total
contract value
Clients. We define our clients
as business entities that have at least one active paid contract
with us at the end of a particular period. Entities that access our
platform through our channel partners, such as PBMs and resellers,
are counted as individual clients. Historically, we have treated
our partnerships with health plans as a single client because of
the relatively small number of employers who enrolled under those
plans, though multiple employers may contract for our services
through a single health plan. Because of the increase in the number
of employers who are enrolling through health plans instead of
other channels, beginning with the first quarter of 2020 we believe
that it is more appropriate to treat health plans in the same
manner as we treat our channel partners, such as PBMs and
resellers, and include entities who enroll in our platform through
a health plan as separate clients. The historical information
presented has been revised to include such entities as individual
clients. We do not count our channel partners, such as PBMs, health
plans, or resellers as clients, unless they also separately have
active paid contracts for our solutions. If business units or
subsidiaries of the same entity enter into separate agreements with
us, they are counted as separate clients. However, entities that
have purchased multiple solutions through different contracts are
treated as a single client.
Enrolled Diabetes Members. We
believe our ability to grow the number of enrolled diabetes members
is an indicator of penetration of our flagship solution, Livongo
for Diabetes. We define our enrolled diabetes members as all
individuals that are enrolled in Livongo for Diabetes at the end of
a given period. This number excludes: (i) employees (or their
dependents) of a client that have ceased using our solution,
(ii) employees who no longer have an employment relationship
with an active client, and their dependents, and
(iii) employees (and their dependents) who have not been
active on or used our solution for a period of time as specified in
the applicable client’s agreement, which is typically between four
and six months.
Estimated Value of Agreements
(EVA). This represents the estimated value of agreements,
signed in the relevant period and was previously referred to as the
Total Contract Value, or TCV, in certain of Livongo's previous
filings with the Securities and Exchange Commission. Estimated
Value of Agreements includes agreements entered into with new
clients or expansions entered into with existing clients. Estimated
Value of Agreements is helpful in evaluating our business because
it provides some visibility into future revenue. Our new client
subscriptions typically have a term of one to three years, and we
generally invoice our clients in monthly installments at the end of
each month in the subscription period based on the number of
members in such month who were active on or used our solution
within a certain period of time, as specified in the applicable
client’s agreement. We define Estimated Value of Agreements as
contractually committed orders to be invoiced under agreements
initially entered into during the relevant period. Agreements are
only counted in Estimated Value of Agreements in the period in
which they are entered into, and for purposes of this calculation,
we assume an average member enrollment rate. Our estimates include
assumptions regarding the total recruitable individuals at a
client, commencement of enrollment period, enrollment method,
starting enrollment rates, monthly increases to enrollment rates
over time, contract length, and client size and industry. Estimates
also assume the agreement will not be terminated early and will be
serviced for the full term, there are no changes to the total
recruitable individuals at a client during the relevant period, and
no changes to the per participant per month fee during the relevant
period. Until such time as these amounts are invoiced, which occurs
at the end of each month of service, they are not recorded in
revenue, deferred revenue, or elsewhere in our consolidated
financial statements.
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