Castlight Health Announces First Quarter 2018 Results

May 10, 2018

Total Revenue of $36.5 million, Up 32% Year-over-Year

SAN FRANCISCO, May 10, 2018 /PRNewswire/ — Castlight Health, Inc. (NYSE: CSLT), a leading health benefits platform provider, today announced results for its first quarter ended March 31, 2018.

“We launched a record number of new customers in the first quarter, including more than twenty on Engage, our first product that combines wellbeing and care guidance functionality into a single user experience,” said John Doyle, chief executive officer of Castlight Health. “With the solid start to the year, we are pleased to be reiterating our 2018 outlook.”

Financial performance for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 includes:

GAAP total revenue of $36.5 million, representing an increase of 32%
GAAP gross margin of 59.0%, compared to 70.9%
Non-GAAP gross margin of 63.0% compared to 73.7%
GAAP operating loss of $14.6 million for both quarters
Non-GAAP operating loss of $7.7 million, compared to a loss of $5.3 million
GAAP net loss per basic and diluted share of $0.11, compared to a net loss per basic and diluted share of $0.14
Non-GAAP net loss per basic and diluted share of $0.06, compared to a net loss per basic and diluted share of $0.05
Cash used in operations of $19.0 million, compared to $10.9 million

Total cash, cash equivalents and marketable securities was $74.6 million as of March 31, 2018.

The financial performance of Jiff, Inc., which Castlight acquired on April 3, 2017, is not included in the metrics for first quarter ended March 31, 2017. A reconciliation of GAAP to non-GAAP results has been provided in this press release in the accompanying tables. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Castlight adopted the new accounting standard ASC 606, effective January 1, 2018, and used the full retrospective method of adoption. As such, all historical financial information has been adjusted to reflect the impact of adoption of ASC 606. For more information, please refer to a supplemental presentation available on the company’s investor relations website at http://ir.castlighthealth.com.

Business Outlook

The Company is reiterating its previously-issued 2018 outlook. For the full year 2018, the Company expects:

GAAP revenue in the range of $150 million to $155 million
Non-GAAP operating loss in the range of $15 million to $20 million
Non-GAAP net loss per share of approximately $0.11 to $0.15 based on approximately 137 million to 138 million shares

Quarterly Conference Call

Castlight Health senior management will host a conference call to discuss its first quarter 2018 results and business outlook today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company’s Investor Relations website at http://ir.castlighthealth.com. An archive of the webcast can also be accessed through the same link. The live conference call can be accessed by dialing (866) 393-4306 and the replay will be available for one week at (855) 859-2056. The conference ID number for the live call and replay is 5669898.

About Castlight Health

Castlight is on a mission to make it as easy as humanly possible to navigate healthcare and live happier, healthier, more productive lives. Our health navigation platform connects with hundreds of health vendors, benefits resources, and plan designs, giving rise to the world’s first comprehensive app for all health needs. We guide individuals – based on their unique profile – to the best resources available to them, whether they are healthy, chronically ill, or actively seeking medical care. In doing so, we help companies regain control over rising healthcare costs and get more value from their benefits investments. Castlight revolutionized the healthcare sector with the introduction of data-driven price transparency tools in 2008 and the first consumer-grade wellbeing platform in 2012. Today, Castlight serves as the health navigation platform for millions of people and is a trusted partner to many of the largest employers in the world.

For more information visit www.castlighthealth.com. Follow us on Twitter and LinkedIn and Like us on Facebook.

Non-GAAP Financial Measures

To supplement Castlight Health’s financial statements presented in accordance with generally accepted accounting principles (GAAP), we also use and provide investors and others with non-GAAP measures of certain components of financial performance, including non-GAAP gross profit and margin, non-GAAP operating expense, non-GAAP operating loss, non-GAAP other income, net, non-GAAP net loss and non-GAAP net loss per share. Non-GAAP gross profit and margin, non-GAAP operating expense, non-GAAP operating loss, non-GAAP other income, net and non-GAAP net loss exclude stock-based compensation, litigation settlement, amortization of intangibles, capitalization and amortization of internal-use software, loss on sublease, gain on sale of investment in related party, expense related to expiration of SAP warrant, changes in fair value of contingent consideration liability, and charges related to the acquisition of Jiff and the associated tax impact of these items, where applicable.

We believe that these non-GAAP financial measures provide useful supplemental information to investors and others, facilitate the analysis of the company’s core operating results and comparison of operating results across reporting periods, and can help enhance overall understanding of the company’s historical financial performance.

We have provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, except that we have not reconciled our non-GAAP operating loss and net loss per share guidance for the full year 2018 to comparable GAAP operating loss and net loss per share guidance because we do not provide guidance for stock-based compensation expense, and capitalization and amortization of internal-use software, which are reconciling items between GAAP and non-GAAP operating loss. The factors that may impact our future stock-based compensation expense, and capitalization and amortization of internal-use software are out of our control and/or cannot be reasonably predicted, and therefore we are unable to provide such guidance without unreasonable effort. Factors include our market capitalization and related volatility of our stock price and our inability to project the cost or scope of internally produced software.

These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP.

Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Castlight Health encourages investors and others to review the company’s financial information in its entirety and not rely on a single financial measure.

Safe Harbor For Forward-Looking Statements

This press release contains forward-looking statements about Castlight Health’s expectations, plans, intentions, and strategies, including, but not limited to, statements regarding Castlight Health’s 2018 full year projections, our expectations for our future business and financial performance. Statements including words such as “anticipate,” “believe,” “estimate,” “will,” “continue,” “expect,” or “future,” and statements in the future tense are forward-looking statements. These forward-looking statements involve risks and uncertainties, as well as assumptions, which, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties include those described in Castlight Health’s documents filed with or furnished to the Securities and Exchange Commission. All forward-looking statements in this press release are based on information available to Castlight Health as of the date hereof. Castlight Health assumes no obligation to update these forward-looking statements.

Copyright 2018 Castlight Health, Inc. Castlight Health^®is the registered trademark of Castlight Health, Inc. Other company and product names may be trademarks of the respective companies with which they are associated.

CASTLIGHT HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)

	As of
	March 31, 2018		December 31, 2017
			(as adjusted)⁽¹⁾
Assets
Current assets:
Cash and cash equivalents	$	48,174			$	61,319
Marketable securities	26,433			32,025
Accounts receivable and other, net	33,129			21,933
Prepaid expenses and other current assets	3,632			3,991
Total current assets	111,368			119,268
Property and equipment, net	4,791			5,263
Restricted cash, non-current	1,325			1,325
Deferred commissions	25,830			27,512
Deferred professional service costs	12,318			12,480
Intangible assets, net	19,111			20,253
Goodwill	91,785			91,785
Other assets	2,150			1,997
Total assets	$	268,678			$	279,883
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,549			$	3,907
Accrued expenses and other current liabilities	12,473			13,178
Accrued compensation	7,551			13,941
Deferred revenue	30,050			25,985
Total current liabilities	55,623			57,011
Deferred revenue, non-current	3,575			4,457
Debt, non-current	4,648			4,958
Other liabilities, non-current	2,594			1,900
Total liabilities	66,440			68,326
Stockholders’ equity	202,238			211,557
Total liabilities and stockholders’ equity	$	268,678			$	279,883

CASTLIGHT HEALTH, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(unaudited)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2017		2016		2017		2016
Revenue:
Subscription	$	31,363			$	23,867			$	86,963		$	66,859
Professional services and other	3,209			1,634			7,453			4,944
Total revenue, net	34,572			25,501			94,416			71,803
Cost of revenue:
Cost of subscription (1)	8,123			3,988			20,075			12,218
Cost of professional services and other (1)	4,898			3,978			13,679			13,941
Total cost of revenue	13,021			7,966			33,754			26,159
Gross profit	21,551			17,535			60,662			45,644
Operating expenses:
Sales and marketing (1)	16,006			13,143			47,024			44,877
Research and development (1)	13,809			10,573			40,074			30,619
General and administrative (1)	10,307			5,338			26,071			19,902
Total operating expenses	40,122			29,054			113,169			95,398
Operating loss	(18,571)			(11,519)			(52,507)			(49,754)
Other income, net	84			116			288			304
Loss before income tax benefit	$	(18,487)			(11,403)			$	(52,219)		(49,450)
Income tax benefit	—			—			5,206			—
Net loss	$	(18,487)			$	(11,403)			$	(47,013)		$	(49,450)
Net loss per Class A and B share, basic and diluted	$	(0.14)			$	(0.11)			$	(0.38)		$	(0.50)
Weighted-average shares used to compute basic and diluted net loss per Class A and B share	132,251			103,147			122,675			99,734

	Three Months Ended September 30,		Nine Months Ended September 30,
	2017		2016		2017		2016
Cost of revenue:
Cost of subscription	$	258			$	139		$	638	$	367
Cost of professional services and other	342			456			1,400		1,468
Sales and marketing	3,110			2,190			7,705		6,644
Research and development	1,631			1,631			5,675		4,300
General and administrative	1,121			1,236			3,586		3,476

CASTLIGHT HEALTH, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(unaudited)

	Three Months Ended		Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Operating activities:
Net loss	$	(18,487)			$	(11,403)		$	(47,013)	$	(49,450)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,814			822			4,572		2,407
Stock-based compensation	6,463			5,652			19,004		16,255
Amortization of deferred commissions	2,950			1,042			8,120		3,157
Release of deferred tax valuation allowance due to business combination	—			—			(5,206)		—
Change in fair value of contingent consideration liability	3,931			—			3,288		—
Accretion and amortization of marketable securities	(64)			101			22		406
Changes in operating assets and liabilities:
Accounts receivable	(4,661)			(3,397)			(7,778)		(3,137)
Deferred commissions	(3,280)			(1,479)			(6,678)		(4,403)
Prepaid expenses and other assets	467			745			(393)		(68)
Accounts payable	909			410			401		300
Accrued expenses and other liabilities	3,148			(3,583)			2,623		(4,046)
Deferred revenue	(1,541)			1,733			5,661		3,318
Net cash used in operating activities	(8,351)			(9,357)			(23,377)		(35,261)
Investing activities:
Restricted cash	181			—			(181)		—
Purchase of property and equipment	(1,345)			(345)			(2,276)		(1,587)
Purchase of marketable securities	(25,077)			(11,971)			(56,852)		(73,163)
Maturities of marketable securities	16,896			35,570			80,633		126,157
Business combination, net of cash acquired	—			—			(2,264)		—
Net cash provided by (used in) investing activities	(9,345)			23,254			19,060		51,407
Financing activities:
Proceeds from the exercise of stock options	481			636			1,312		2,576
Proceeds from issuance of common stock and warrants	—			—			—		17,358
Payments of issuance costs related to equity	—			(76)			(731)		(122)
Net cash provided by financing activities	481			560			581		19,812

Net (decrease) increase in cash and cash equivalents	(17,215)			14,457			(3,736)		35,958
Cash and cash equivalents at beginning of period	62,201			40,651			48,722		19,150
Cash and cash equivalents at end of period	$	44,986			$	55,108		$	44,986	$	55,108

Non-cash investing and financing activity:
Non-cash purchase consideration related to acquisition of Jiff	$	—			$	—		$	101,692	$	—

CASTLIGHT HEALTH, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (unaudited)

	Three Months Ended		Nine Months Ended
	September 30,		June 30,		September 30,		September 30,	September 30,
	2017		2017		2016		2017	2016
Gross profit:
GAAP gross profit subscription	$	23,240			$	22,128		$	19,879	$	66,888	$	54,641
Stock-based compensation	258			253			139		638	367
Amortization of internal-use software	244			244			244		732	732
Amortization of intangibles	751			751			—		1,502	—
Reduction in workforce	—			—			—		—	5
Acquisition related costs	—			52			—		52	—
Non-GAAP gross profit subscription	$	24,493			$	23,428		$	20,262	$	69,812	$	55,745
GAAP gross margin subscription	74.1%			74.2%			83.3%		76.9%	81.7%
Non-GAAP gross margin subscription	78.1%			78.5%			84.9%		80.3%	83.4%

GAAP gross loss professional services	$	(1,689)			$	(2,528)		$	(2,344)	$	(6,226)	$	(8,997)
Stock-based compensation	342			597			456		1,400	1,468
Reduction in workforce	—			—			4		—	103
Acquisition related costs	(4)			17			—		160	—
Non-GAAP gross loss professional services	$	(1,351)			$	(1,914)		$	(1,884)	$	(4,666)	$	(7,426)
GAAP gross margin professional services	(53)%			(112)%			(143)%		(84)%	(182)%
Non-GAAP gross margin professional services	(42)%			(85)%			(115)%		(63)%	(150)%

GAAP gross profit	$	21,551			$	19,600		$	17,535	$	60,662	$	45,644
Impact of non-GAAP adjustments	1,591			1,914			843		4,484	2,675
Non-GAAP gross profit	$	23,142			$	21,514		$	18,378	$	65,146	$	48,319
GAAP gross margin	62.3%			61.1%			68.8%		64.2%	63.6%
Non-GAAP gross margin	66.9%			67.0%			72.1%		69.0%	67.3%
Operating expense:
GAAP sales and marketing	$	16,006			$	16,575		$	13,143	$	47,024	$	44,877
Stock-based compensation	(3,110)			(2,441)			(2,190)		(7,705)	(6,644)
Amortization of intangibles	(448)			(448)			—		(896)	—
Reduction in workforce	—			—			(48)		—	(422)
Acquisition related costs	14			(518)			—		(909)	—
Non-GAAP sales and marketing	$	12,462			$	13,168		$	10,905	$	37,514	$	37,811
GAAP research and development	$	13,809			$	15,194		$	10,573	$	40,074	$	30,619
Stock-based compensation	(1,631)			(2,254)			(1,631)		(5,675)	(4,300)
Capitalization of internal-use software	—			—			—		—	—
Reduction in workforce	—			—			(18)		—	(136)
Acquisition related costs	—			(126)			—		(393)	—
Non-GAAP research and development	$	12,178			$	12,814		$	8,924	$	34,006	$	26,183
GAAP general and administrative	$	10,307			$	6,766		$	5,338	$	26,071	$	19,902
Stock-based compensation	(1,121)			(1,169)			(1,236)		(3,586)	(3,476)
Litigation settlement	—			—			—		(250)	(2,876)
Amortization of intangibles	(17)			(17)			—		(34)	—
Change in fair value of contingent consideration liability	(3,931)			643			—		(3,288)	—
Reduction in workforce	—			—			(10)		—	(90)
Acquisition related costs	(126)			(899)			—		(3,365)	—
Non-GAAP general and administrative	$	5,112			$	5,324		$	4,092	$	15,548	$	13,460
GAAP operating expense	$	40,122			$	38,535		$	29,054	$	113,169	$	95,398
Impact of non-GAAP adjustments	(10,370)			(7,229)			(5,133)		(26,101)	(17,944)
Non-GAAP operating expense	$	29,752			$	31,306		$	23,921	$	87,068	$	77,454
Operating loss:
GAAP operating loss	$	(18,571)			$	(18,935)		$	(11,519)	$	(52,507)	$	(49,754)
Impact of non-GAAP adjustments	11,961			9,143			5,976		30,585	20,619
Non-GAAP operating loss	$	(6,610)			$	(9,792)		$	(5,543)	$	(21,922)	$	(29,135)
Net loss and net loss per share:
GAAP net loss	$	(18,487)			$	(13,717)		$	(11,403)	$	(47,013)	$	(49,450)
Total pre-tax impact of non-GAAP adjustments	11,961			9,143			5,976		30,585	20,619
Release of deferred tax valuation allowance due to business combination	—			(5,206)			—		(5,206)	—
Income tax impact of non-GAAP adjustments	—			—			—		—	—
Non-GAAP net loss	$	(6,526)			$	(9,780)		$	(5,427)	$	(21,634)	$	(28,831)
GAAP net loss per share, basic and diluted	$	(0.14)			$	(0.11)		$	(0.11)	$	(0.38)	$	(0.50)
Non-GAAP net loss per share, basic and diluted	$	(0.05)			$	(0.07)		$	(0.05)	$	(0.18)	$	(0.29)
Shares used in basic and diluted net loss per share computation	132,251			130,537			103,147		122,675	99,734

Press Information

[email protected]

2022 Workforce Health Index

Castlight Health Announces First Quarter 2018 Results