Castlight Health Announces Fourth Quarter and Full Year 2014 Results

Feb 18, 2015

Total Revenue of $45.6 Million for the Year, Up 252% Year Over Year

SAN FRANCISCO – February 18, 2015 – Castlight Health, Inc. (NYSE:CSLT), a pioneer of the Enterprise Healthcare Cloud, today announced results for its fourth quarter and full year ended December 31, 2014.

“We delivered strong results across the business in 2014. Revenue growth exceeded 250%, we ended the year with 168 customers, including 45 Fortune 500 firms, and we were successful in expanding our business with existing customers,” said Giovanni Colella, M.D., co-founder and Chief Executive Officer of Castlight. “2015 brings tremendous opportunity to continue our growth and invest to secure our leadership position in the emerging Enterprise Healthcare Management software category.”

Fourth Quarter Results

  • Total revenues were $14.5 million, an increase of 182% from the fourth quarter of 2013. Subscription revenue was $13.3 million, an increase of 188% on a year-over-year basis.
  • Gross margin was 54.3%, compared to a negative gross margin of 4.8% in the fourth quarter of 2013. Non-GAAP gross margin was 58.3% compared to a negative gross margin of 4.1% in the same period in 2013.
  • Operating loss was $19.7 million, compared to an operating loss of $20.0 million during the fourth quarter of 2013. Non-GAAP operating loss was $15.3 million, compared to a non-GAAP operating loss of $18.8 million in the fourth quarter of 2013.
  • Net loss per basic and diluted share was $0.22 compared to a net loss per share of $1.90 in the fourth quarter of 2013. The non-GAAP net loss per share was $0.17 compared to a net loss per share of $1.79 in the fourth quarter of 2013.
  • Cash used in operations for the fourth quarter of 2014 was $11.5 million, compared to $14.5 million used in operations during the same period in 2013.

Full Year 2014 Results

  • Total revenues were $45.6 million, an increase of 252% over 2013. Subscription revenue was $41.6 million, an increase of 257% on a year-over-year basis.
  • Gross margin was 39.1%, compared to a negative gross margin of 33.4% in 2013. Non-GAAP gross margin was 42.2% compared to a negative gross margin of 32.4% in 2013.
  • Operating loss was $86.2 million, compared to an operating loss of $62.3 million during the year 2013. Non-GAAP operating loss was $69.6 million, compared to a non-GAAP operating loss of $59.8 million during 2013.
  • Net loss per basic and diluted share was $1.16, compared to a net loss per share of $6.28 in 2013. The non-GAAP net loss per share was $0.93, compared to a net loss per share of $6.03 in 2013. For both GAAP and non-GAAP purposes, the weighted average basic and diluted share count for 2014 was 74.4 million compared to 9.9 million in 2013.
  • Total cash, cash equivalents and marketable securities were $198.7 million at the end of the fourth quarter of 2014.

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 2015 Guidance: Revenue for 2015 is expected to be in the range of $74.0 million to $77.0 million, an increase of 62% to 69% year-over-year. Non-GAAP operating loss is expected to be in the range of $64.0 million to $67.0 million. Non-GAAP basic and diluted loss per share is expected to be in the range of $0.69 to $0.73 based on 92 to 93 million weighted average basic and diluted common shares outstanding. We are projecting cash used in operations of $44 million to $47 million in 2015.

Q1 2015 Guidance: Revenue for the company’s first quarter is expected to be in the range of $15.3 million to $15.6 million, an increase of 82% to 86% year-over-year. Non-GAAP operating loss is expected to be in the range of $16.5 million to $17.5 million. Non-GAAP basic and diluted loss per share is expected to be approximately $0.18 to $0.19 based on 91 million weighted average basic and diluted common shares outstanding.

For both the first quarter and the full year 2015, non-GAAP estimates exclude the effects of stock-based compensation expense, warrant expense and capitalization and amortization of internal-use software.

Quarterly Conference Call

Castlight Health will host a conference call to discuss its fourth quarter and full year 2014 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 audiocast can be accessed through the same link. Participants who choose to call in to the conference call can do so by dialing 1-201-689-8562. A replay will be available at 1-858-384-5517, passcode 13598721, until midnight (Eastern Time) February 25, 2015.

About Castlight Health Castlight Health, Inc. (NYSE:CSLT) is a leader in Enterprise Healthcare Management. We believe great healthcare builds great business, and U.S. enterprises can gain control over the $620 billion spent annually on healthcare, transforming a crippling cost into a strategic business advantage. Recognized as a top 2014 software platform by the HR Technology Conference & Exposition, the Castlight Enterprise Healthcare Cloud enables employers to understand and manage their healthcare investments while helping employees make the best possible healthcare decisions. Castlight is a great place to work, honored with a Glassdoor Employees’ Choice award and recognized by Rock Health for Diversity in Leadership. For more information visit www.castlighthealth.com. Follow us on Twitter and LinkedIn and Like us on Facebook. Source: Castlight Health.

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 (loss), non-GAAP operating expense, non-GAAP operating 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, expense for a warrant issued to a third-party service provider, 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 first quarter and fiscal year of 2015 to comparable GAAP operating loss and net loss per share guidance because we do not provide guidance for stock-based compensation expense, warrant 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, warrant 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 first quarter and 2015 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 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 2015 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
December 31December 31
20142013
(unaudited)
Assets
Current assets:
Cash and cash equivalents$17,425$25,154
Marketable securities175,05742,017
Accounts receivable, net11,0975,065
Deferred commissions3,6753,648
Prepaid expenses and other current assets3,4761,583
Total current assets210,73077,467
Property and equipment, net3,6302,631
Marketable securities, noncurrent6,220–
Restricted cash, noncurrent–101
Deferred commissions, noncurrent2,5631,821
Other assets1311,497
Total assets$223,274$83,517
Liabilities, convertible preferred stock and stockholders’ equity (deficit)
Current liabilities:
Accounts payable$3,217$2,536
Accrued expenses and other current liabilities5,7914,998
Accrued compensation10,4558,064
Deferred revenue20,7086,925
Total current liabilities40,17122,523
Deferred revenue, noncurrent6,6524,548
Other liabilities, noncurrent261373
Total liabilities47,08427,444
Commitments and contingencies
Convertible preferred stock–180,423
Stockholders’ equity (deficit)176,190(124,350)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)$223,274$83,517
CASTLIGHT HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three Months Ended December 31,Year Ended December 31,
2014201320142013
Revenue:
Subscription$13,309$4,615$41,602$11,655
Professional services1,1785174,0031,318
Total revenue14,4875,13245,60512,973
Cost of revenue:
Cost of subscription (1)2,2492,07210,4726,246
Cost of professional services (1)4,3683,30717,30011,058
Total cost of revenue6,6175,37927,77217,304
Gross profit (loss)7,870(247)17,833(4,331)
Operating expenses:
Sales and marketing (1)15,79812,16362,06533,742
Research and development (1)6,2844,55722,91715,219
General and administrative (1)5,5363,03519,0099,047
Total operating expenses27,61819,755103,99158,008
Operating loss(19,748)(20,002)(86,158)(62,339)
Other income, net6429218157
Net loss$(19,684)$(19,973)$(85,940)$(62,182)
Net loss per share, basic and diluted$(0.22)$(1.90)$(1.16)$(6.28)
Weighted-average shares used to compute basic and diluted net loss per share90,46710,52274,3819,895
(1)Includes stock-based compensation expense as follows:
Three Months Ended December 31,Year Ended December 31,
2014201320142013
Cost of revenue:
Cost of subscription$81$3$180$5
Cost of professional services494351,220120
Sales and marketing1,5943365,933919
Research and development1,0813952,556603
General and administrative1,3492854,312780
CASTLIGHT HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended December 31,Year Ended December 31,
2014201320142013
Operating activities:
Net loss$(19,684)$(19,973)$(85,940)$(62,182)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation4102321,354633
Stock-based compensation4,5991,05414,2012,427
Amortization of deferred commission9731,8004,0922,541
Accretion and amortization of marketable securities4681291,489714
Expense related to warrant(20)1352,639135
Changes in operating assets and liabilities:
Accounts receivable181(1,355)(6,032)(2,703)
Deferred commissions(1,235)(1,658)(4,861)(4,959)
Prepaid expenses and other assets27(91)(1,895)(361)
Accounts payable(46)640147868
Accrued expenses and other liabilities1,5292,6084,2825,555
Deferred revenue1,2541,93615,8877,268
Net cash used in operating activities(11,544)(14,543)(54,637)(50,064)
Investing activities:
Restricted cash––101–
Purchase of property and equipment(462)(308)(1,860)(2,587)
Purchase of marketable securities(19,928)–(230,316)(42,288)
Sales of marketable securities––13,0005,000
Maturities of marketable securities22,76213,30076,52772,135
Net cash (used in) provided by investing activities2,37212,992(142,548)32,260
Financing activities:
Proceeds from the exercise of stock options1,3665503,294864
Payments of deferred financing costs–(440)(3,781)(440)
Net proceeds from initial public offering––189,943–
Net cash (used in) provided by financing activities1,366110189,456424
Net decrease in cash and cash equivalents(7,806)(1,441)(7,729)(17,380)
Cash and cash equivalents at beginning of the period25,23126,59525,15442,534
Cash and cash equivalents at end of the period$17,425$25,154$17,425$25,154
CASTLIGHT HEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(unaudited)
Three Months EndedYear Ended
December 31,September 30,December 31,December 31,December 31,
20142014201320142013
Gross profit (loss):
GAAP gross profit subscription$11,060$8,658$2,543$31,130$5,409
GAAP gross margin subscription83.1%76.9%55.1%74.8%46.4%
Stock-based compensation expense816031805
Amortization of internally developed software8––8–
Non-GAAP gross profit subscription$11,149$8,718$2,546$31,318$5,414
Non-GAAP gross margin subscription83.8%77.5%55.2%75.3%46.5%
GAAP gross loss professional services$(3,190)$(3,604)$(2,790)$(13,297)$(9,740)
GAAP gross loss percentage professional services(271)%(377)%(540)%(332)%(739)%
Stock-based compensation expense494306351,220120
Non-GAAP gross loss professional services$(2,696)$(3,298)$(2,755)$(12,077)$(9,620)
Non-GAAP gross loss percentage professional services(229)%(345)%(533)%(302)%(730)%
GAAP gross profit (loss)$7,870$5,054$(247)$17,833$(4,331)
GAAP gross margin (loss percentage)54.3%41.4%(4.8)%39.1%(33.4)%
Impact of non-GAAP adjustments583366381,408125
Non-GAAP gross profit (loss)$8,453$5,420$(209)$19,241$(4,206)
Non-GAAP gross margin (loss percentage)58.3%44.4%(4.1)%42.2%(32.4)%
Operating expense:
GAAP sales and marketing$15,798$14,760$12,163$62,065$33,742
Expense related to warrant20(160)(135)(2,639)(135)
Stock-based compensation expense(1,594)(2,013)(336)(5,933)(919)
Non-GAAP sales and marketing$14,224$12,587$11,692$53,493$32,688
GAAP research and development$6,284$5,630$4,557$22,917$15,219
Stock-based compensation expense(1,081)(561)(395)(2,556)(603)
Capitalization of internal-use software129162–291–
Non-GAAP research and development$5,332$5,231$4,162$20,652$14,616
GAAP general and administrative$5,536$4,944$3,035$19,009$9,047
Stock-based compensation expense(1,349)(1,169)(285)(4,312)(780)
Non-GAAP general and administrative$4,187$3,775$2,750$14,697$8,267
GAAP operating expenses$27,618$25,334$19,755$103,991$58,008
Impact of non-GAAP adjustments(3,875)(3,741)(1,151)(15,149)(2,437)
Non-GAAP operating expenses$23,743$21,593$18,604$88,842$55,571
Operating loss:
GAAP operating loss$(19,748)$(20,280)$(20,002)$(86,158)$(62,339)
Impact of non-GAAP adjustments4,4584,1071,18916,5572,562
Non-GAAP operating loss$(15,290)$(16,173)$(18,813)$(69,601)$(59,777)
Net loss and net loss per share:
GAAP net loss$(19,684)$(20,199)$(19,973)$(85,940)$(62,182)
Total pre-tax impact of non-GAAP adjustments4,4584,1071,18916,5572,562
Income tax impact of non-GAAP adjustments–––––
Non-GAAP net loss$(15,226)$(16,092)$(18,784)$(69,383)$(59,620)
Basic and Diluted net loss per share
GAAP$(0.22)$(0.23)$(1.90)$(1.16)$(6.28)
Non-GAAP$(0.17)$(0.18)$(1.79)$(0.93)$(6.03)
Shares used in basic and diluted net loss per share computation90,46789,69810,52274,3819,895

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