Castlight Health Announces Second Quarter 2017 Results

Aug 2, 2017

Total Revenue of $32.1 million, Up 36% Year-over-Year

Company Reiterates 2017 Guidance

SAN FRANCISCO, Aug. 2, 2017 /PRNewswire/ — Castlight Health, Inc. (NYSE:CSLT), a leading health benefits platform provider, today announced results for its second quarter ended June 30, 2017.

“In our first quarter after closing the Jiff acquisition, Castlight’s financial results reflect solid execution on our plans to reaccelerate growth and drive the business to breakeven cash flows,” said John Doyle, chief executive officer of Castlight Health. “Our customers are increasingly looking to Castlight to provide a health navigation platform that engages employees with the right benefit at the right time, whether they are accessing care, managing a condition, or focused on their own well-being.”

Financial Performance for the Three Months Ended June 30, 2017

  • Total revenue for the second quarter of 2017 was $32.1 million, an increase of 36% from the second quarter of 2016. Subscription revenue was $29.8 million, an increase of 36% on a year-over-year basis.
  • Gross margin for the second quarter of 2017 was 61.1%, compared to a gross margin of 62.1% in the second quarter of 2016. Non-GAAP gross margin for the second quarter of 2017 was 67.0% compared to a non-GAAP gross margin of 66.3% in the second quarter of 2016.
  • Operating loss for the second quarter of 2017 was $18.9 million, compared to an operating loss of $16.8 million in the second quarter of 2016. Non-GAAP operating loss for the second quarter of 2017 was $9.8 million, compared to a non-GAAP operating loss of $10.6 million in the second quarter of 2016.
  • Net loss per basic and diluted share was $0.11 in the second quarter of 2017, compared to a net loss per basic and diluted share of $0.17 in the second quarter of 2016. Non-GAAP net loss per basic and diluted share for the second quarter of 2017 was $0.07, compared to a net loss per basic and diluted share of $0.11 in the second quarter of 2016. For both GAAP and non-GAAP purposes, the weighted average basic and diluted share count for the second quarter of 2017 was 130.5 million compared to 99.7 million in the second quarter of 2016.
  • Total cash, cash equivalents and marketable securities were $96.0 million at the end of the second quarter of 2017. Cash used in operations for the second quarter of 2017 was $4.1 million, compared to $11.9 million used in operations in the second quarter of 2016.

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

For the full year 2017, the Company expects GAAP revenue in the range of $132 million to $136 million. Castlight expects full year 2017 non-GAAP operating loss in the range of $31 to $35 million and non-GAAP net loss per share of approximately $0.24 to $0.28 based on approximately 125 to 127 million shares. For the full year 2017, non-GAAP guidance excludes the effects of stock-based compensation, amortization of intangibles, capitalization and amortization of internal-use software and charges related to the acquisition.

Quarterly Conference Call

Castlight Health will host a conference call to discuss its second quarter 2017 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. In addition, an archive of the webcast can be accessed through the same link. The conference call can also be accessed by dialing (877) 201-0168. The conference ID number is 48143236. A replay will be available for one week at (800) 585-8367, passcode 48143236.

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 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 net loss, non-GAAP net loss per share and free cash flow. Non-GAAP gross profit and margin, non-GAAP operating expense, non-GAAP operating loss and non-GAAP net loss exclude stock-based compensation, litigation settlement, charges related to a reduction in workforce, amortization of intangibles, capitalization and amortization of internal-use software and charges related to the acquisition 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 2017 to comparable GAAP operating loss and net loss per share guidance because we do not provide guidance for stock-based compensation expense, capitalization and amortization of internal-use software and charges related to the acquisition, 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 and charges related to the proposed acquisition for the year.

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 2017 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 2017 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,
2017
December 31,
2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents$62,201$48,722
Marketable securities33,82165,882
Accounts receivable, net21,35614,806
Deferred commissions8,1908,218
Prepaid expenses and other current assets6,2503,382
Total current assets131,818141,010
Property and equipment, net5,1845,285
Restricted cash, non-current1,5071,144
Goodwill91,398
Intangible assets, net22,684
Deferred commissions, non-current3,3045,050
Other assets7,2664,677
Total assets$263,161$157,166
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$2,743$2,288
Accrued expenses and other current liabilities9,0116,369
Accrued compensation10,4119,443
Deferred revenue36,92430,623
Total current liabilities59,08948,723
Deferred revenue, non-current8,0035,245
Debt, non-current5,578
Other liabilities, non-current1,6771,236
Total liabilities74,34755,204
Commitments and contingencies
Stockholders’ equity:
Class A and Class B common stock1310
Additional paid-in capital573,339457,596
Accumulated other comprehensive loss(15)
Accumulated deficit(384,523)(355,644)
Total stockholders’ equity188,814101,962
Total liabilities and stockholders’ equity$263,161$157,166
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,
2017201620172016
Revenue:
Subscription$29,834$21,955$55,600$42,992
Professional services and other2,2651,6304,2433,310
Total revenue, net32,09923,58559,84346,302
Cost of revenue:
Cost of subscription (1)7,7064,09411,9528,230
Cost of professional services and other (1)4,7934,8508,7819,963
Total cost of revenue12,4998,94420,73318,193
Gross profit19,60014,64139,11028,109
Operating expenses:
Sales and marketing (1)16,57515,45231,01831,734
Research and development (1)15,1949,96126,26520,046
General and administrative (1)6,7666,01915,76414,564
Total operating expenses38,53531,43273,04766,344
Operating loss(18,935)(16,791)(33,937)(38,235)
Other income, net1299205188
Income before income taxes$(18,923)(16,692)$(33,732)(38,047)
Income tax benefit5,2065,206
Net loss$(13,717)$(16,692)$(28,526)$(38,047)
Net loss per Class A and B share, basic and diluted$(0.11)$(0.17)$(0.24)$(0.39)
Weighted-average shares used to compute basic and diluted net loss per Class A and B share130,53799,728117,80798,009
___________________
(1)Includes stock-based compensation expense as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2017201620172016
Cost of revenue:
Cost of subscription$253$120$380$228
Cost of professional services5975351,0581,012
Sales and marketing2,4412,2194,5954,454
Research and development2,2541,2644,0442,669
General and administrative1,1699712,4642,240
CASTLIGHT HEALTH, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(unaudited)
Three Months EndedSix Months Ended
June 30,
2017
June 30,
2016
June 30,
2017
June 30,
2016
Operating activities:
Net loss$(13,717)$(16,692)$(28,526)$(38,047)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization2,0608022,7581,585
Stock-based compensation6,7145,10912,54110,603
Amortization of deferred commissions3,0839535,1722,115
Release of deferred tax valuation allowance due to business combination(5,206)(5,206)
Change in fair value of contingent consideration liability(643)(643)
Accretion and amortization of marketable securities2012984305
Changes in operating assets and liabilities:
Accounts receivable(1,426)1,542(3,117)260
Deferred commissions(2,982)(2,635)(3,398)(2,924)
Prepaid expenses and other assets323(849)(860)(813)
Accounts payable(685)(715)(508)(110)
Accrued expenses and other liabilities4,2303,269(525)(463)
Deferred revenue4,115(2,827)7,2021,585
Net cash used in operating activities(4,114)(11,914)(15,026)(25,904)
Investing activities:
Restricted cash(362)(362)
Purchase of property and equipment(766)(776)(931)(1,242)
Purchase of marketable securities(15,767)(31,706)(31,775)(61,192)
Maturities of marketable securities28,93831,95063,73790,587
Business combination, net of cash acquired(2,264)(2,264)
Net cash provided by (used in) investing activities9,779(532)28,40528,153
Financing activities:
Proceeds from the exercise of stock options4576748311,940
Proceeds from issuance of common stock and warrants17,35817,358
Payments of issuance costs related to equity(119)(46)(731)(46)
Net cash provided by financing activities33817,98610019,252
Net increase in cash and cash equivalents6,0035,54013,47921,501
Cash and cash equivalents at beginning of period56,19835,11148,72219,150
Cash and cash equivalents at end of period$62,201$40,651$62,201$40,651
Non-cash investing and financing activity:
Non-cash purchase consideration related to acquisition of Jiff$101,692$$101,692$
SAP warrant$1,729$$1,729$
CASTLIGHT HEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(unaudited)
Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,June 30,
20172017201620172016
Gross profit:
GAAP gross profit subscription$22,128$21,520$17,861$43,648$34,762
Stock-based compensation253127120380228
Amortization of internal-use software244244244488488
Amortization of intangibles751751
Reduction in workforce55
Acquisition related costs5252
Non-GAAP gross profit subscription$23,428$21,891$18,230$45,319$35,483
GAAP gross margin subscription74.2%83.5%81.4%78.5%80.9%
Non-GAAP gross margin subscription78.5%85.0%83.0%81.5%82.5%
GAAP gross loss professional services$(2,528)$(2,009)$(3,220)$(4,538)$(6,653)
Stock-based compensation5974615351,0581,012
Reduction in workforce9999
Acquisition related costs17147164
Non-GAAP gross loss professional services$(1,914)$(1,401)$(2,586)$(3,316)$(5,542)
GAAP gross margin professional services(112)%(102)%(198)%(107)%(201)%
Non-GAAP gross margin professional services(85)%(71)%(159)%(78.2)%(167)%
GAAP gross profit$19,600$19,511$14,641$39,111$28,109
Impact of non-GAAP adjustments1,9149791,0032,8931,832
Non-GAAP gross profit$21,514$20,490$15,644$42,004$29,941
GAAP gross margin61.1%70.3%62.1%65.4%60.7%
Non-GAAP gross margin67.0%73.9%66.3%70.2%64.7%
Operating expense:
GAAP sales and marketing$16,575$14,443$15,452$31,018$31,734
Stock-based compensation(2,441)(2,154)(2,219)(4,595)(4,454)
Amortization of intangibles(448)(448)
Reduction in workforce(374)(374)
Acquisition related costs(518)(405)(923)
Non-GAAP sales and marketing$13,168$11,884$12,859$25,052$26,906
GAAP research and development$15,194$11,071$9,961$26,265$20,046
Stock-based compensation(2,254)(1,790)(1,264)(4,044)(2,669)
Capitalization of internal-use software1,636
Reduction in workforce(118)(118)
Acquisition related costs(126)(267)(393)
Non-GAAP research and development$12,814$9,014$8,579$21,828$18,895
GAAP general and administrative$6,766$8,998$6,019$15,764$14,564
Stock-based compensation(1,169)(1,295)(971)(2,464)(2,240)
Litigation settlement(250)(141)(250)(2,876)
Amortization of intangibles(17)(17)
Change in fair value of contingent consideration liability643643
Reduction in workforce(80)(80)
Acquisition related costs(899)(2,340)(3,239)
Non-GAAP general and administrative$5,324$5,113$4,827$10,437$9,368
GAAP operating expense$38,535$34,512$31,432$73,047$66,344
Impact of non-GAAP adjustments(7,229)(8,501)(5,167)(15,730)(12,811)
Non-GAAP operating expense$31,306$26,011$26,265$57,317$53,533
Operating loss:
GAAP operating loss$(18,935)$(15,001)$(16,791)$(33,937)$(38,235)
Impact of non-GAAP adjustments9,1439,4806,17018,62314,643
Non-GAAP operating loss$(9,792)$(5,521)$(10,621)$(15,314)$(23,592)
Net loss and net loss per share:
GAAP net loss$(13,717)$(14,809)$(16,692)$(28,526)$(38,047)
Total pre-tax impact of non-GAAP adjustments9,1439,4806,17018,62314,643
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$(9,780)$(5,329)$(10,522)$(15,109)$(23,404)
GAAP net loss per share, basic and diluted$(0.11)$(0.14)$(0.17)$(0.24)$(0.39)
Non-GAAP net loss per share, basic and diluted$(0.07)$(0.05)$(0.11)$(0.13)$(0.24)
Shares used in basic and diluted net loss per share computation130,537104,93599,728117,80798,009

Castlight Media Contact:
Courtney Lamie
[email protected]
276-492-4248

Castlight Investor Contact:
Gary J. Fuges, CFA
[email protected]
415-829-1680

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