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Castlight Health Announces Second Quarter 2016 Results

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

SAN FRANCISCO, CA--(Marketwired - August 08, 2016) - Castlight Health, Inc. (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 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, 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

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