PR Newswire | Nov 5, 2020 04:06PM EST

11/05 15:05 CST

Castlight Health Announces Third Quarter 2020 Results SAN FRANCISCO, Nov. 5, 2020

SAN FRANCISCO, Nov. 5, 2020 /PRNewswire/ -- Castlight Health, Inc. (NYSE:CSLT), a leading health benefits platform provider, today announced results for its third quarter ended September 30, 2020.

"In the third quarter, we made progress on our strategic priorities, meeting our goal of signing a new health plan partner in 2020, making the high-touch Care Guides solution that launched last year generally available to the market, and achieving strong financial results that allow us to increase our 2020 financial outlook," said Maeve O'Meara, chief executive officer of Castlight Health. "We also delivered significant product innovation in the quarter, aligning our solutions to employer priorities like enablement of virtual care. We are competitively well positioned in the growing navigation market due to the complement of our high-touch capabilities, alongside our high-tech platform. As we look towards 2021, our two national health plan partnerships and the strength of our pipeline provide a foundation for growth through health plans."

Financial performance for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 includes:

* GAAP total revenue of $35.1 million, compared to $35.5 million * GAAP gross margin of 66.1%, compared to 59.1% * Non-GAAP gross margin of 69.0%, compared to 62.1% * GAAP operating loss of $0.5 million, compared to $9.6 million * Non-GAAP operating income of $3.7 million, compared to an operating loss of $5.4 million * GAAP net loss per basic and diluted share of $0.00, compared to a net loss per basic and diluted share of $0.06 * Non-GAAP net income per basic and diluted share of $0.02, compared to a net loss per basic and diluted share of $0.04 * Cash provided by operations of $2.7 million, compared to cash used in operations of $7.4 million

Total cash and cash equivalents were $46.8 million as of September 30, 2020.

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 OutlookThe Company is updating its previously-issued 2020 outlook. For the full year 2020, the Company now expects:

* GAAP revenue in the range of $140 million to $143 million * Non-GAAP operating income between $0 to $3 million * Non-GAAP net income per share between $0.00 and $0.02, based on approximately 151 million shares

Quarterly Conference CallCastlight Health senior management will host a conference call to discuss its third quarter 2020 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. An archive of the webcast can also be accessed through the same link. The live conference call can be accessed by dialing (833) 238-7953 and the replay will be available for one week at (800) 585-8367. The conference ID number for the live call and replay is 8774374.

About Castlight HealthCastlight is on a mission to make it as easy as humanly possible for its users to navigate the healthcare system and live happier, healthier, more productive lives. Our health navigation platform connects hundreds of health vendors, benefits resources, and plan designs into one comprehensive health and wellbeing experience. We guide individuals-based on their unique profile-to the best resources available to them, whether they are healthy, chronically ill, or actively seeking medical care. Castlight transforms the employee benefit experience into a deeply personalized, yet simple, guided one, empowering better-informed patient decisions to unlock better healthcare outcomes and maximizing return on healthcare investments.

For more information visit www.castlighthealth.com. Follow us on Twitter and LinkedIn and Like us on Facebook.

Non-GAAP Financial MeasuresTo 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 income (loss), non-GAAP net income (loss) and non-GAAP net income (loss) per share. Non-GAAP gross profit and margin, non-GAAP operating expense, non-GAAP operating income (loss), and non-GAAP net income (loss) exclude goodwill impairment, stock-based compensation, certain legal expenses, amortization of intangibles, restructuring charges, capitalization and amortization of internal-use software, and lease exit and related charges.

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. However, 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.

The non-GAAP measures we provide 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.

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 2020 to comparable GAAP measures 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. 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.

Safe Harbor for Forward-Looking StatementsThis press release contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "seeks," "estimates," "can," "may," "will," "would" and similar expressions identify such forward-looking statements. These statements are not guarantees of results and should not be considered as an indication of future activity or future performance. The forward-looking statements about Castlight Health's expectations, plans, intentions, and strategies include, but are not limited to, statements regarding Castlight Health's third quarter 2020 performance and 2020 full year projections, the impact of COVID-19, the success of our strategy, and our expectations for our future business and financial performance. 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, including the risks set forth in our annual report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on February 28, 2020, and our quarterly reports on Form 10-Q, including the quarterly report for the three months ended September 30, 2020, when filed. All forward-looking statements in this press release are expressly qualified in their entirety by these cautionary statements and are based on information available to Castlight Health as of the date hereof. Castlight Health assumes no obligation to update these forward-looking statements, except as required by law.

Copyright 2020 Castlight Health, Inc. Castlight Health(r) 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) (unaudited)



As of

September 30, December 31, 2020 2019

Assets

Current assets:

Cash and cash equivalents $46,804 $43,017

Marketable securities - 16,411

Accounts receivable and other, net 30,471 31,397

Prepaid expenses and other current assets 4,399 4,645

Total current assets 81,674 95,470

Property and equipment, net 5,721 4,856

Restricted cash, non-current 1,144 1,144

Deferred commissions 10,597 14,718

Deferred professional service costs 5,277 6,711

Intangible assets, net 8,988 12,178

Goodwill 41,485 91,785

Operating lease right-of-use assets, net 11,383 13,906

Other assets 1,687 2,016

Total assets $167,956 $242,784

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $4,698 $19,596

Accrued expenses and other current 8,184 10,454 liabilities

Accrued compensation 6,821 8,770

Deferred revenue 10,202 10,173

Operating lease liabilities 5,687 5,914

Total current liabilities 35,592 54,907

Deferred revenue, non-current 443 572

Debt, non-current - 1,395

Operating lease liabilities, non-current 8,954 11,823

Other liabilities, non-current 909 1,213

Total liabilities 45,898 69,910

Stockholders' equity 122,058 172,874

Total liabilities and stockholders' equity$167,956 $242,784

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



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue:

Subscription $34,069$34,900 $106,741 $102,670

Professional services and 1,009 561 2,882 4,191 other

Total revenue, net 35,078 35,461 109,623 106,861

Cost of revenue:

Cost of subscription^(1) 8,013 8,517 27,064 24,917

Cost of professional services3,874 5,984 12,057 17,857 and other^(1)

Total cost of revenue 11,887 14,501 39,121 42,774

Gross profit 23,191 20,960 70,502 64,087

Operating expenses:

Sales and marketing^(1) 6,158 9,829 24,313 27,933

Research and development^(1) 11,182 14,295 38,047 44,507

General and administrative^ 6,341 6,440 19,257 20,743 (1)

Goodwill impairment - - 50,300 -

Total operating expenses 23,681 30,564 131,917 93,183

Operating loss (490) (9,604) (61,415) (29,096)

Other income, net 43 268 429 840

Net loss $(447) $(9,336)$(60,986)$(28,256)

Net loss per share, basic and$- $(0.06) $(0.41) $(0.20) diluted

Weighted-average shares used to compute basic and diluted 152,146 145,701 150,372 144,434 net loss per share



(1) Includes stock-based compensation expense as follows:



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Cost of revenue:

Cost of subscription $224 $180 $598 $595

Cost of professional services171 236 431 737 and other

Sales and marketing 282 678 1,702 1,967

Research and development 1,026 1,294 3,503 4,731

General and administrative 1,401 625 3,325 3,817

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



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Operating activities:

Net loss $(447) $(9,336)$(60,986)$(28,256)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization1,763 1,681 4,907 4,368

Goodwill impairment - - 50,300 -

Stock-based compensation 3,104 3,013 9,559 11,847

Amortization of deferred 1,598 2,547 5,517 7,403 commissions

Amortization of deferred 760 1,096 2,417 3,110 professional service costs

Non-cash operating lease 1,134 1,339 3,765 3,919 expense

Accretion and amortization of- (31) 2 (244) marketable securities

Changes in operating assets and liabilities:

Accounts receivable and 2,704 (2,831) 926 (8,626) other, net

Deferred commissions (476) (1,833) (1,396) (4,503)

Deferred professional service(289) (400) (918) (1,301) costs

Prepaid expenses and other 1,066 1,042 242 (822) assets

Accounts payable (3,847) 514 (14,048) 2,378

Operating lease liabilities (1,570) (1,472) (4,186) (4,267)

Accrued expenses and other (1,065) 59 (2,576) (3,072) liabilities

Deferred revenue (2,862) (3,202) (100) (2,890)

Accrued compensation 1,165 378 (1,949) (428)

Net cash provided by (used 2,738 (7,436) (8,524) (21,384) in) operating activities

Investing activities:

Purchase of property and (132) (119) (3,431) (712) equipment

Purchase of marketable - (9,289) (2,994) (23,069) securities

Sales of marketable - - 2,001 - securities

Maturities of marketable - 3,217 17,400 14,670 securities

Net cash (used in) provided (132) (6,191) 12,976 (9,111) by investing activities

Financing activities:

Proceeds from exercise of 23 79 178 1,924 stock options

Proceeds from ESPP offering 185 - 371 -

Principal payments on (465) (464) (1,395) (1,394) long-term debt

Net cash (used in) provided (257) (385) (846) 530 by financing activities



Net increase (decrease) in cash, cash equivalents and 2,349 (14,012) 3,606 (29,965) restricted cash

Cash, cash equivalents and restricted cash at beginning 45,599 51,377 44,342 67,330 of period

Cash, cash equivalents and restricted cash at end of $47,948$37,365 $47,948 $37,365 period



Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents $46,804$36,040 $46,804 $36,040

Restricted cash, non-current 1,144 1,325 1,144 1,325

Total cash, cash equivalents $47,948$37,365 $47,948 $37,365 and restricted cash

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



Three Months Ended Nine Months Ended

September June 30, September September September 30, 2020 2020 30, 2019 30, 2020 30, 2019

Gross profit:

GAAP gross profit $26,056 $25,470 $26,383 $79,677 $77,753 subscription

Stock-based 224 205 180 598 595 compensation

Amortization of 79 79 - 184 - internal-use software

Amortization 530 530 660 1,590 1,834 of intangibles

Reduction in - 221 - 221 - workforce

Non-GAAP gross profit $26,889 $26,505 $27,223 $82,270 $80,182 subscription

GAAP gross margin 76.5 %74.3 %75.6 %74.6 %75.7 %subscription

Non-GAAP gross margin 78.9 %77.3 %78.0 %77.1 %78.1 %subscription



GAAP gross loss $(2,865) $(2,731) $(5,423) $(9,175) $(13,666) professional services

Stock-based 171 144 236 431 737 compensation

Reduction in - 317 - 317 - workforce

Non-GAAP gross loss $(2,694) $(2,270) $(5,187) $(8,427) $(12,929) professional services

GAAP gross margin (284) %(226) %(967) %(318) %(326) %professional services

Non-GAAP gross margin (267) %(187) %(925) %(292) %(308) %professional services



GAAP gross $23,191 $22,739 $20,960 $70,502 $64,087 profit

Impact of non-GAAP 1,004 1,496 1,076 3,341 3,166 adjustments

Non-GAAP gross$24,195 $24,235 $22,036 $73,843 $67,253 profit

GAAP gross 66.1 %64.1 %59.1 %64.3 %60.0 %margin

Non-GAAP gross69.0 %68.3 %62.1 %67.4 %62.9 %margin



Operating expense:

GAAP sales and$6,158 $7,683 $9,829 $24,313 $27,933 marketing

Stock-based (282) (748) (678) (1,702) (1,967) compensation

Amortization (528) (528) (528) (1,584) (1,072) of intangibles

Reduction in 2 (334) - (332) - workforce

Non-GAAP sales$5,350 $6,073 $8,623 $20,695 $24,894 and marketing



GAAP research and $11,182 $13,043 $14,295 $38,047 $44,507 development

Stock-based (1,026) (1,314) (1,294) (3,503) (4,731) compensation

Reduction in (5) (658) - (663) - workforce

Certain legal - - - 191 (191) expenses

Capitalization of internally - - - 21 - developed software

Non-GAAP research and $10,151 $11,071 $13,001 $34,093 $39,585 development



GAAP general and $6,341 $6,340 $6,440 $19,257 $20,743 administrative

Stock-based (1,401) (858) (625) (3,325) (3,817) compensation

Amortization - - (16) (17) (50) of intangibles

Certain legal - - - - (533) expenses

Reduction in 15 (497) - (482) - workforce

Non-GAAP general and $4,955 $4,985 $5,799 $15,433 $16,343 administrative



GAAP goodwill $- $- $- $50,300 $- impairment

Goodwill - - - (50,300) - impairment

Non-GAAP goodwill $- $- $- $- $- impairment



GAAP operating$23,681 $27,066 $30,564 $131,917 $93,183 expense

Impact of non-GAAP (3,225) (4,937) (3,141) (61,696) (12,361) adjustments

Non-GAAP operating $20,456 $22,129 $27,423 $70,221 $80,822 expense



Operating loss:

GAAP operating$(490) $(4,327) $(9,604) $(61,415) $(29,096) loss

Impact of non-GAAP 4,229 6,433 4,217 65,037 15,527 adjustments

Non-GAAP operating $3,739 $2,106 $(5,387) $3,622 $(13,569) income (loss)



Net loss and net loss per share:

GAAP net loss $(447) $(4,204) $(9,336) $(60,986) $(28,256)

Total pre-tax impact of 4,229 6,433 4,217 65,037 15,527 non-GAAP adjustments

Non-GAAP net $3,782 $2,229 $(5,119) $4,051 $(12,729) income (loss)

GAAP net loss per share, $- $(0.03) $(0.06) $(0.41) $(0.20) basic and diluted

Non-GAAP net income (loss) per share, $0.02 $0.01 $(0.04) $0.03 $(0.09) basic and diluted

Shares used in basic and diluted net 152,146 150,078 145,701 150,372 144,434 loss per share computation

Castlight Media Contact:Caroline Kawashimapress@castlighthealth.com415-246-0313

Castlight Investor Contact:ir@castlighthealth.com415-829-1680

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SOURCE Castlight Health, Inc.