Castlight Health Announces Second Quarter 2016 Results

Aug 8, 2016

Total Revenue of $23.6 Million, Up 27% Year Over Year

SAN FRANCISCO – August 8, 2016 – Castlight Health, Inc. (NYSE:CSLT), a leading health benefits platform provider, today announced results for its second quarter ended June 30, 2016.

“In the second quarter Castlight added nearly $7 million of signed annual recurring revenue and continued to gain traction among large enterprises, including notable customers such as Caterpillar and Genentech,” said Giovanni Colella, M.D., co-founder and chief executive officer of Castlight Health. “We had strong adoption of Castlight’s health benefits platform across our new customers and saw increased contribution from our channel relationships, in particular Anthem, which provide validation of both our expanding value proposition and the evolution of our go-to-market strategy.”

Financial Performance for the Three Months Ended June 30, 2016

Total revenue for the second quarter of 2016 was $23.6 million, an increase of 27% from the second quarter of 2015. Subscription revenue was $22.0 million, an increase of 27% on a year-over-year basis.
Gross margin for the second quarter of 2016 was 62.1%, compared to a gross margin of 55.4% in the second quarter of 2015. Non-GAAP gross margin for the second quarter of 2016 was 66.3% compared to a non-GAAP gross margin of 58.3% in the second quarter of 2015.
Operating loss for the second quarter of 2016 was $16.8 million, compared to an operating loss of $21.3 million in the second quarter of 2015. Non-GAAP operating loss for the second quarter of 2016 was $10.6 million, compared to a non-GAAP operating loss of $17.6 million in the second quarter of 2015.
Net loss per basic and diluted share was $0.17 in the second quarter of 2016, compared to a net loss per basic and diluted share of $0.23 in the second quarter of 2015. The non-GAAP net loss per basic and diluted share for the second quarter of 2016 was $0.11, compared to a net loss per basic and diluted share of $0.19 in the second quarter of 2015. For both GAAP and non-GAAP purposes, the weighted average basic and diluted share count for the second quarter of 2016 was 99.7 million compared to 93.8 million in the second quarter of 2015.
Total cash, cash equivalents and marketable securities were $125.7 million at the end of the second quarter of 2016. Cash used in operations for the second quarter of 2016 was $11.9 million, compared to $17.2 million used in operations in the second quarter of 2015.

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”.

Business Outlook

Full Year 2016 Guidance: Revenue for the company’s full year 2016 is expected to be tracking to the midpoint of the range of $99.0 million to $102.0 million, an increase of 31% – 35% year-over-year. Non-GAAP operating loss is expected to be at the low end or below the range of $40.0 million to $42.0 million. Non-GAAP net loss per share is expected to be at the low end or below the range of $0.40 to $0.42 based on 100 million to 101 million weighted average basic and diluted common shares outstanding.

For the full year 2016, non-GAAP guidance excludes the effects of stock-based compensation expense, charge related to reduction in workforce and the capitalization and amortization of internal-use software.

Quarterly Conference Call

Castlight Health will host a conference call to discuss its second quarter 2016 results 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. In addition, an archive of the webcast can be accessed through the same link. Participants who choose to call in to the conference call can do so by dialing 1-877-201-0168. The conference ID number is 46202160. A replay will be available for one week at 1-855-859-2056, passcode 46202160.

About Castlight Health

Our mission is to empower people to make the best choices for their health and to help companies make the most of their health benefits. We offer a health benefits platform that engages employees to make better healthcare decisions and can guide them to the right program, care, and provider. The platform also enables benefit leaders to communicate and measure their programs while driving employee engagement with targeted, relevant communications. Castlight has partnered with enterprise customers, spanning millions of lives, to improve healthcare outcomes, lower costs, and increase benefits satisfaction.

For more information visit castlightstg2.wpengine.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 margin, non-GAAP operating expense, non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per share. These non-GAAP financial measures differ from GAAP financial measures in that they exclude stock-based compensation, warrant expense, litigation settlement, charges related to a reduction in workforce, and capitalization and amortization of internal-use software 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 2016 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.

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 2016 full year projections, our expectations for future performance of our business, market growth and business conditions, future innovation by the company and future developments with respect to the digital healthcare industry. 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 2016 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)

		As of
		June 30, 2016		December 31, 2015
		(unaudited)
Assets
Current assets:
	Cash and cash equivalents		$	40,651		$	19,150
	Marketable securities			85,042			101,274
	Accounts receivable, net			12,491			12,751
	Deferred commissions			6,072			5,438
	Prepaid expenses and other current assets			5,140			3,772
Total current assets			149,396			142,385
Property and equipment, net			6,476			6,896
Marketable securities, noncurrent			–			13,335
Restricted cash, noncurrent			1,000			1,000
Deferred commissions, noncurrent			5,098			4,923
Other assets			4,692			4,735
Total assets		$	166,662		$	173,274
Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable		$	3,197		$	3,384
	Accrued expenses and other current liabilities			7,892			4,550
	Accrued compensation			7,969			11,477
	Deferred revenue			29,200			26,590
Total current liabilities			48,258			46,001
Deferred revenue, noncurrent			6,497			7,522
Other liabilities, noncurrent			1,689			1,397
Total liabilities			56,444			54,920
Stockholders’ equity			110,218			118,354
Total liabilities and stockholders’ equity		$	166,662		$	173,274

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

		Three Months Ended June 30,			Six Months Ended June 30,
		2016			2015			2016		2015
Revenue:
	Subscription		$	21,955			$	17,278		$	42,992		$	32,184
	Professional services			1,630				1,232			3,310			2,277
Total revenue			23,585				18,510			46,302			34,461
Cost of revenue:
	Cost of subscription (1)			4,094				2,932			8,230			5,451
	Cost of professional services (1)			4,850				5,322			9,963			9,975
Total cost of revenue			8,944				8,254			18,193			15,426
Gross profit			14,641				10,256			28,109			19,035
Operating expenses:
	Sales and marketing (1)			15,452				17,641			31,734			34,104
	Research and development (1)			9,961				7,391			20,046			13,985
	General and administrative (1)			6,019				6,517			14,564			11,980
Total operating expenses			31,432				31,549			66,344			60,069
Operating loss			(16,791	)			(21,293	)		(38,235	)		(41,034	)
Other income, net			99				81			188			179
Net loss		$	(16,692	)		$	(21,212	)	$	(38,047	)	$	(40,855	)
Net loss per share, basic and diluted		$	(0.17	)		$	(0.23	)	$	(0.39	)	$	(0.44	)
Weighted-average shares used to compute basic and diluted net loss per share			99,728				93,804			98,009			92,801

1. Includes stock-based compensation expense as follows:

		Three Months Ended June 30,			Six Months Ended June 30,
		2016			2015			2016		2015
Cost of revenue:
	Cost of subscription		$	120			$	67		$	228		$	100
	Cost of professional services			535				450			1,012			875
Sales and marketing			2,219				2,074			4,454			3,825
Research and development			1,264				730			2,669			1,363
General and administrative			971				896			2,240			1,923

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

		Three Months Ended June 30,			Six Months Ended June 30,
		2016			2015			2016			2015
Operating activities:
Net loss		$	(16,692	)		$	(21,212	)		$	(38,047	)		$	(40,855	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation and amortization			802				456				1,585				910
	Stock-based compensation			5,109				4,217				10,603				8,086
	Amortization of deferred commissions			953				802				2,115				1,659
	Accretion and amortization of marketable securities			129				384				305				827
	Changes in operating assets and liabilities:
		Accounts receivable			1,542				(560	)			260				49
		Deferred commissions			(2,635	)			(1,113	)			(2,924	)			(1,751	)
		Prepaid expenses and other assets			(849	)			(1,848	)			(813	)			(1,818	)
		Accounts payable			(715	)			(254	)			(110	)			1,258
		Accrued expenses and other liabilities			3,269				1,234				(463	)			(3,169	)
		Deferred revenue			(2,827	)			682				1,585				4,403
Net cash used in operating activities			(11,914	)			(17,212	)			(25,904	)			(30,401	)
Investing activities:
	Restricted cash			–				(1,000	)			–				(1,000	)
	Investment in related party			–				(3,125	)			–				(3,125	)
	Purchase of property and equipment			(776	)			(806	)			(1,242	)			(1,693	)
	Purchase of marketable securities			(31,706	)			(5,924	)			(61,192	)			(18,958	)
	Sales of marketable securities			–				–				–				5,000
	Maturities of marketable securities			31,950				31,373				90,587				61,553
Net cash used in (provided by) investing activities			(532	)			20,518				28,153				41,777
Financing activities:
	Proceeds from the exercise of stock options			674				1,186				1,940				2,826
	Proceeds from issuance of common stock and warrants			17,358				–				17,358				–
	Payments of issuance costs			(46	)			–				(46	)			(94	)
Net cash provided by financing activities			17,986				1,186				19,252				2,732

Net increase in cash and cash equivalents			5,540				4,492				21,501				14,108
Cash and cash equivalents at beginning of period			35,111				27,041				19,150				17,425
Cash and cash equivalents at end of period		$	40,651			$	31,533			$	40,651			$	31,533

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

		Three Months Ended			Six Months Ended
		June 30,			March 31,			June 30,			June 30,			June 30,
		2016			2016			2015			2016			2015
Gross profit:
GAAP gross profit subscription		$	17,861			$	16,901			$	14,346			$	34,762			$	26,733
	Stock-based compensation			120				108				67				228				100
	Amortization of internal-use software			244				244				24				488				48
	Reduction in workforce			5				–				–				5				–
Non-GAAP gross profit subscription			18,230				17,253				14,437				35,483				26,881
GAAP gross margin subscription			81.4	%			80.3	%			83.0	%			80.9	%			83.1	%
Non-GAAP gross margin subscription			83.0	%			81.9	%			83.6	%			82.5	%			83.5	%

GAAP gross loss professional services		$	(3,220	)		$	(3,433	)		$	(4,090	)		$	(6,653	)		$	(7,698	)
	Stock-based compensation			535				477				450				1,012				875
	Reduction in workforce			99				–				–				99				–
Non-GAAP gross loss professional services		$	(2,586	)		$	(2,956	)		$	(3,640	)		$	(5,542	)		$	(6,823	)
GAAP gross margin professional services			(198	)%			(204	)%			(332	)%			(201	)%			(338	)%
Non-GAAP gross margin professional services			(159	)%			(176	)%			(295	)%			(167	)%			(300	)%

GAAP gross profit		$	14,641			$	13,468			$	10,256			$	28,109			$	19,035
	Impact of non-GAAP adjustments			1,003				829				541				1,832				1,023
Non-GAAP gross profit		$	15,644			$	14,297			$	10,797			$	29,941			$	20,058
GAAP gross margin			62.1	%			59.3	%			55.4	%			60.7	%			55.2	%
Non-GAAP gross margin			66.3	%			62.9	%			58.3	%			64.7	%			58.2	%

Operating expense:
GAAP sales and marketing		$	15,452			$	16,282			$	17,641			$	31,734			$	34,104
	Stock-based compensation			(2,219	)			(2,235	)			(2,074	)			(4,454	)			(3,825	)
	Reduction in workforce		$	(374	)			–				–			$	(374	)			–
Non-GAAP sales and marketing		$	12,859			$	14,047			$	15,567			$	26,906			$	30,279
GAAP research and development		$	9,961			$	10,085			$	7,391			$	20,046			$	13,985
	Stock-based compensation			(1,264	)			(1,405	)			(730	)			(2,669	)			(1,363	)
	Capitalization of internal-use software			–				–				513				–				795
	Reduction in workforce		$	(118	)			–				–			$	(118	)			–
Non-GAAP research and development		$	8,579			$	8,680			$	7,174			$	17,259			$	13,417
GAAP general and administrative		$	6,019			$	8,545			$	6,517			$	14,564			$	11,980
	Stock-based compensation			(971	)			(1,269	)			(896	)			(2,240	)			(1,923	)
	Litigation settlement			(141	)			(2,735	)			–				(2,876	)			–
	Reduction in workforce		$	(80	)			–				–			$	(80	)			–
Non-GAAP general and administrative		$	4,827			$	4,541			$	5,621			$	9,368			$	10,057
GAAP operating expense		$	31,432			$	34,912			$	31,549			$	66,344			$	60,069
	Impact of non-GAAP adjustments			(5,167	)			(7,644	)			(3,187	)			(12,811	)			(6,316	)
Non-GAAP operating expense		$	26,265			$	27,268			$	28,362			$	53,533			$	53,753

Operating loss:
GAAP operating loss		$	(16,791	)		$	(21,444	)		$	(21,293	)		$	(38,235	)		$	(41,034	)
	Impact of non-GAAP adjustments			6,170				8,473				3,728				14,643				7,339
Non-GAAP operating loss		$	(10,621	)		$	(12,971	)		$	(17,565	)		$	(23,592	)		$	(33,695	)

Net loss and net loss per share:
GAAP net loss		$	(16,692	)		$	(21,355	)		$	(21,212	)		$	(38,047	)		$	(40,855	)
	Total pre-tax impact of non-GAAP adjustments			6,170				8,473				3,728				14,643				7,339
	Income tax impact of non-GAAP adjustments			–				–				–				–				–
Non-GAAP net loss		$	(10,522	)		$	(12,882	)		$	(17,484	)		$	(23,404	)		$	(33,516	)
GAAP net loss per share, basic and diluted		$	(0.17	)		$	(0.22	)		$	(0.23	)		$	(0.39	)		$	(0.44	)
Non-GAAP net loss per share, basic and diluted		$	(0.11	)		$	(0.13	)		$	(0.19	)		$	(0.24	)		$	(0.36	)
Shares used in basic and diluted net loss per share computation			99,728				96,291				93,804				98,009				92,801

Investor Contact:
Ann Hickey
[email protected]
415-829-1400

Media Contact:
Jim Rivas
[email protected]
415-829-1568

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Castlight Health Announces Second Quarter 2016 Results