SOURCE: Castlight Health

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February 17, 2016 16:04 ET

Castlight Health Announces Fourth Quarter and Full Year 2015 Results

Total Revenue of $75.3 Million for the Year, Up 65% Year Over Year

SAN FRANCISCO, CA--(Marketwired - February 17, 2016) - Castlight Health, Inc. (NYSE: CSLT), a leading health benefits platform provider, today announced results for its fourth quarter and full year ended December 31, 2015.

"In 2015, we grew our annual recurring revenue (ARR) 41% year-over-year to $110 million, added 9 Fortune 500 customers and achieved Net Dollar Retention (NDR) of 116% due to strong uptake of our newest products Elevate and Action. While we did not achieve our growth objectives for the business, we made significant progress on several key initiatives in 2015 that lay the foundation for future growth," said Giovanni Colella, M.D., co-founder and chief executive officer of Castlight Health. "In 2016, we will be focused on accelerating sales velocity with our now ramped sale force, leveraging our comprehensive health benefits platform to deliver value to customers, and driving to cash flow break-even. We believe these initiatives along with our company-wide focus on execution will position us well to achieve our long-term goals."

Fourth Quarter Results

  • Total revenue for the fourth quarter of 2015 was $21.3 million, an increase of 47% from the fourth quarter of 2014. Subscription revenue was $19.9 million, an increase of 50% on a year-over-year basis.
  • Gross margin for the fourth quarter of 2015 was 54.7%, compared to a gross margin of 54.3% in the fourth quarter of 2014. Non-GAAP gross margin for the fourth quarter of 2015 was 58.6% compared to a non-GAAP gross margin of 58.3% in the fourth quarter of 2014.
  • Operating loss for the fourth quarter of 2015 was $19.1 million, compared to an operating loss of $19.7 million in the fourth quarter of 2014. Non-GAAP operating loss for the fourth quarter of 2015 was $14.9 million, compared to a non-GAAP operating loss of $15.3 million in the fourth quarter of 2014.
  • Net loss per basic and diluted share was $0.20 in the fourth quarter of 2015, compared to a net loss per basic and diluted share of $0.22 in the fourth quarter of 2014. The non-GAAP net loss per basic and diluted share for the fourth quarter of 2015 was $0.16, compared to a net loss per basic and diluted share of $0.17 in the fourth quarter of 2014. For both GAAP and non-GAAP purposes, the weighted average basic and diluted share count for the fourth quarter of 2015 was 95.0 million compared to 90.5 million in the fourth quarter of 2014.
  • Total cash, cash equivalents and marketable securities were $133.8 million at the end of the fourth quarter of 2015. Cash used in operations for the fourth quarter of 2015 was $12.0 million, compared to $11.5 million used in operations in the fourth quarter of 2014.

Full Year 2015 Results

  • Total revenue for 2015 was $75.3 million, an increase of 65% from 2014. Subscription revenue was $70.4 million, an increase of 69% on a year-over-year basis.
  • Gross margin for 2015 was 55.2%, compared to a gross margin of 39.1% in 2014. Non-GAAP gross margin for 2015 was 58.6% compared to a non-GAAP gross margin of 42.2% in 2014.
  • Operating loss for 2015 was $80.2 million, compared to an operating loss of $86.2 million in 2014. Non-GAAP operating loss for 2015 was $64.5 million, compared to a non-GAAP operating loss of $69.6 million in 2014.
  • Net loss per basic and diluted share was $0.85 in 2015, compared to a net loss per basic and diluted share of $1.16 in 2014. The non-GAAP net loss per basic and diluted share for 2015 was $0.68, compared to a net loss per basic and diluted share of $0.93 in 2014. For both GAAP and non-GAAP purposes, the weighted average basic and diluted share count for 2015 was 93.8 million compared to 74.4 million in 2014.
  • Total cash, cash equivalents and marketable securities were $133.8 million at the end 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

Q1 2016 Guidance: Revenue for the company's first quarter is expected to be $22.0 million to $22.3 million. We expect to generate a non-GAAP operating loss in the range of $14.7 million to $15.7 million and a non-GAAP net loss per share of $0.15 to $0.16 based on 96 million weighted average basic and diluted shares outstanding.

Full Year 2016 Guidance: Revenue for the company's full year 2016 is expected to be in the range of $99.0 million to $102.0 million, an increase of 31% to 35% year-over-year. Non-GAAP operating loss is expected to be in the range of $47.0 million to $50.0 million. Non-GAAP basic and diluted loss per share is expected to be in the range of $0.47 to $0.51 based on 98 million to 99 million weighted average basic and diluted common shares outstanding.

For both the first quarter and the full year 2016, non-GAAP guidance excludes the effects of stock-based compensation 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 2015 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 24103644. A replay will be available for one week at 1-855-859-2056, passcode 24103644.

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 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 more than 190 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 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, 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 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 first quarter and 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
    December 31, 2015     December 31, 2014
  (unaudited)      
Assets          
Current assets:          
  Cash and cash equivalents $
19,150   $ 17,425
  Marketable securities   101,274     175,057
  Accounts receivable, net   12,751     11,097
  Deferred commissions   5,438     3,675
  Prepaid expenses and other current assets   3,772     3,476
Total current assets   142,385     210,730
Property and equipment, net   6,896     3,630
Marketable securities, noncurrent   13,335     6,220
Restricted cash, noncurrent   1,000     -
Deferred commissions, noncurrent   4,923     2,563
Other assets   4,735     131
Total assets $ 173,274   $ 223,274
Liabilities and stockholders' equity          
Current liabilities:          
  Accounts payable $ 3,384   $ 3,217
  Accrued expenses and other current liabilities   4,550     5,791
  Accrued compensation   11,477     10,455
  Deferred revenue   26,590     20,708
Total current liabilities   46,001     40,171
Deferred revenue, noncurrent   7,522     6,652
Other liabilities, noncurrent   1,397     261
Total liabilities   54,920     47,084
Stockholders' equity   118,354     176,190
Total liabilities and stockholders' equity $ 173,274   $ 223,274

CASTLIGHT HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

  Three Months Ended December 31, Year Ended December 31,
  2015   2014   2015   2014
Revenue:        
  Subscription   $ 19,933     $ 13,309     $ 70,350     $ 41,602  
  Professional services     1,382       1,178       4,965       4,003  
Total revenue     21,315       14,487       75,315       45,605  
Cost of revenue:                        
  Cost of subscription (1)     3,885       2,249       12,417       10,472  
  Cost of professional services (1)     5,770       4,368       21,351       17,300  
Total cost of revenue     9,655       6,617       33,768       27,772  
Gross profit     11,660       7,870       41,547       17,833  
Operating expenses:                        
  Sales and marketing (1)     16,579       15,798       67,414       62,065  
  Research and development (1)     8,224       6,284       30,077       22,917  
  General and administrative (1)     5,983       5,536       24,274       19,009  
Total operating expenses     30,786       27,618       121,765       103,991  
Operating loss     (19,126 )     (19,748 )     (80,218 )     (86,158 )
Other income, net     68       64       298       218  
Net loss   $ (19,058 )   $ (19,684 )   $ (79,920 )   $ (85,940 )
Net loss per share, basic and diluted   $ (0.20 )   $ (0.22 )   $ (0.85 )   $ (1.16 )
Weighted-average shares used to compute basic and diluted net loss per share     94,969       90,467       93,753       74,381  

_______________________

  1. Includes stock-based compensation expense as follows:
  Three Months Ended December 31,    Year Ended December 31,    
 
2015
  2014   2015   2014
Cost of revenue:                          
  Cost of subscription   $ 87   $ 81   $ 283   $ 180  
  Cost of professional services     653     494     2,175     1,220  
Sales and marketing     1,822     1,594     7,705     5,933  
Research and development     1,154     1,081     3,498     2,556  
General and administrative     1,069     1,349     4,169     4,312  

CASTLIGHT HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

    Three Months Ended December 31,
    Year Ended December 31,
    2015   2014   2015   2014
Operating activities:                        
Net loss   $ (19,058 )   $ (19,684 )   $ (79,920 )   $ (85,940 )
Adjustments to reconcile net loss to net cash used in operating activities:                        
  Depreciation     646       410       2,024       1,354  
  Stock-based compensation     4,785       4,599       17,830       14,201  
  Amortization of deferred commissions     934       973       3,510       4,092  
  Accretion and amortization of marketable securities     259       468       1,385       1,489  
  Expense related to warrant     -       (20 )     -       2,639  
  Changes in operating assets and liabilities:                        
    Accounts receivable     894       181       (1,654 )     (6,032 )
    Deferred commissions     (4,287 )     (1,235 )     (7,633 )     (4,861 )
    Prepaid expenses and other assets     1,354       27       328       (1,895 )
    Accounts payable     (70 )     (46 )     646       147  
    Accrued expenses and other liabilities     1,604       1,529       (136 )     4,282  
    Deferred revenue     982       1,254       6,752       15,887  
Net cash used in operating activities     (11,957 )     (11,544 )     (56,868 )     (54,637 )
Investing activities:                        
  Restricted cash     -       -       (1,000 )     101  
  Investment in related party     -       -       (4,125 )     -  
  Purchase of property and equipment     (1,877 )     (462 )     (5,376 )     (1,860 )
  Purchase of marketable securities     (33,543 )     (19,928 )     (119,867 )     (230,316 )
  Sales of marketable securities     -       -       5,000       13,000  
  Maturities of marketable securities     40,092       22,762       180,111       76,527  
Net cash provided by (used in) investing activities     4,672       2,372       54,743       (142,548 )
Financing activities:                        
  Proceeds from the exercise of stock options     764       1,366       3,944       3,294  
  Payments of deferred financing costs     -       -       (94 )     (3,781 )
  Proceeds from initial public offering     -       -       -       189,943  
Net cash provided by financing activities     764       1,366       3,850       189,456  
                         
Net (decrease) increase in cash and cash equivalents     (6,521 )     (7,806 )     1,725       (7,729 )
Cash and cash equivalents at beginning of period     25,671       25,231       17,425       25,154  
Cash and cash equivalents at end of period   $ 19,150     $ 17,425     $ 19,150     $ 17,425  

CASTLIGHT HEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

(unaudited)

      Three Months Ended   Year Ended
      December 31,
2015
 
September 30,
2015
 
December 31,
2014
 
December 31, 2015
 
December 31, 2014
Gross profit:                              
  GAAP gross profit subscription   $ 16,048     $ 15,152     $ 11,060     $ 57,933     $ 31,130  
    GAAP gross margin subscription     80.5 %     83.1 %     83.1 %     82.3 %     74.8 %
      Stock-based compensation expense     87       96       81       283       180  
      Amortization of internal-use software     124       24       8       196       8  
  Non-GAAP gross profit subscription   $ 16,259     $ 15,272     $ 11,149     $ 58,412     $ 31,318  
    Non-GAAP gross margin subscription     81.6 %     83.8 %     83.8 %     83 %     75.3 %
  GAAP gross loss professional services   $ (4,388 )   $ (4,300 )   $ (3,190 )   $ (16,386 )   $ (13,297 )
    GAAP gross loss percentage professional services     (318 )%     (329 )%     (271 )%     (330 )%     (332 )%
      Stock-based compensation expense     653       647       494       2,175       1,220  
      Capitalization of internal-use software     (30 )     (33 )     -       (63 )     -  
  Non-GAAP gross loss professional services   $ (3,765 )   $ (3,653 )   $ (2,696 )   $ (14,274 )   $ (12,077 )
    Non-GAAP gross loss percentage professional services     (272 )%     (282 )%     (229 )%     (287 )%     (302 )%
  GAAP gross profit   $ 11,660     $ 10,852     $ 7,870     $ 41,547     $ 17,833  
    GAAP gross margin     54.7 %     55.5 %     54.3 %     55.2 %     39.1 %
      Impact of non-GAAP adjustments     834       734       583       2,591       1,408  
  Non-GAAP gross profit   $ 12,494     $ 11,586     $ 8,453     $ 44,138     $ 19,241  
    Non-GAAP gross margin     58.6 %     59.3 %     58.3 %     58.6 %     42.2 %
Operating expense:                              
  GAAP sales and marketing   $ 16,579     $ 16,731     $ 15,798     $ 67,414     $ 62,065  
    Expense related to warrant     -       -       20       -       (2,639 )
    Stock-based compensation expense     (1,822 )     (2,058 )     (1,594 )     (7,705 )     (5,933 )
  Non-GAAP sales and marketing   $ 14,757     $ 14,673     $ 14,224     $ 59,709     $ 53,493  
  GAAP research and development   $ 8,224     $ 7,868     $ 6,284     $ 30,077     $ 22,917  
    Stock-based compensation expense     (1,154 )     (981 )     (1,081 )     (3,498 )     (2,556 )
    Capitalization of internal-use software     620       841       129       2,256       291  
  Non-GAAP research and development   $ 7,690     $ 7,728     $ 5,332     $ 28,835     $ 20,652  
  GAAP general and administrative   $ 5,983     $ 6,311     $ 5,536     $ 24,274     $ 19,009  
    Stock-based compensation expense     (1,069 )     (1,177 )     (1,349 )     (4,169 )     (4,312 )
  Non-GAAP general and administrative   $ 4,914     $ 5,134     $ 4,187     $ 20,105     $ 14,697  
  GAAP operating expense   $ 30,786     $ 30,910     $ 27,618     $ 121,765     $ 103,991  
    Impact of non-GAAP adjustments     (3,425 )     (3,375 )     (3,875 )     (13,116 )     (15,149 )
  Non-GAAP operating expense   $ 27,361     $ 27,535     $ 23,743     $ 108,649     $ 88,842  
Operating loss:                              
  GAAP operating loss   $ (19,126 )   $ (20,058 )   $ (19,748 )   $ (80,218 )   $ (86,158 )
    Impact of non-GAAP adjustments     4,259       4,109       4,458       15,707       16,557  
  Non-GAAP operating loss   $ (14,867 )   $ (15,949 )   $ (15,290 )   $ (64,511 )   $ (69,601 )
Net loss and net loss per share:                              
  GAAP net loss   $ (19,058 )   $ (20,007 )   $ (19,684 )   $ (79,920 )   $ (85,940 )
    Total pre-tax impact of non-GAAP adjustments     4,259       4,109       4,458       15,707       16,557  
    Income tax impact of non-GAAP adjustments     -       -       -       -       -  
  Non-GAAP net loss   $ (14,799 )   $ (15,898 )   $ (15,226 )   $ (64,213 )   $ (69,383 )
  Basic and Diluted net loss per share                              
    GAAP   $ (0.20 )   $ (0.21 )   $ (0.22 )   $ (0.85 )   $ (1.16 )
    Non-GAAP   $ (0.16 )   $ (0.17 )   $ (0.17 )   $ (0.68 )   $ (0.93 )
  Shares used in basic and diluted net loss per share computation     94,969       94,409       90,467       93,753       74,381  

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