Castlight Health. Investor Overview. June 2018 NYSE: CSLT

Transcription

1 Castlight Health Investor Overview June 2018 NYSE: CSLT 1

2 Safe Harbor Statement This presentation contains forward-looking statements regarding our trends, our strategies and the anticipated performance of our business, including our guidance for the full year of 2018 and timing of cash flow and non-gaap operating break-even. These statements were made as of May 10, 2018, and reflect management s views and expectations at that time, and are subject to various risks, uncertainties and assumptions. If this presentation is viewed after May 10, 2018, the information in the presentation may no longer be current or accurate. We disclaim any obligation to update or revise any forward-looking statements. Undue reliance should not be placed on these statements. We provide guidance in this presentation, but we will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. Please refer to the Company s May 10, 2018 press release and the risk factors included in the company s filings with the Securities and Exchange Commission for discussion of important factors that may cause actual events or results to differ materially from those contained in our forward-looking statements. This presentation also includes certain non-gaap metrics, such as non-gaap gross profit and margin percent, non- GAAP operating expenses, non-gaap operating loss, and non-gaap earnings per share that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics, on a historical basis, can be found in the appendix section of this presentation. 2

3 Castlight Health Founded in Employees HQ in San Francisco Leading healthcare navigation SaaS platform attacking an $8B+ TAM Platform expanded significantly through predictive analytics investments and the April 2017 Jiff acquisition Key differentiators: platform breadth; ecosystem integrations; datadriven personalization 250+ Customers $164M ARR as of 03/31/18 Break Even in Q

4 Our Journey to Health Navigation Today Transparency Predictive Analytics Wellbeing + Care Guidance Claims datadriven cost & quality tool Data-driven personalization to drive action One solution addressing the whole employee 4

5 Every Employee, Every Day Stay healthy Access care Manage conditions Castlight covers the full spectrum of health 5

6 Differentiator: Ecosystem Connecting all of an employer s critical health benefits data partners Breadth of Connectivity Ecosystem spans the health and wellness spectrum VALUABLE DATA ASSET Depth of Integrations Health claims, ecosystem partners and user-generated data 6

7 Differentiator: Personalization An intelligent personalization engine that matches employees to the right resources Data Recommendations User Preferences Program User Behaviors Behavior Data Partners Care Option Claims Predictive Content Employer Incentives Segmentation Engine Gathers data from numerous sources in real-time Builds personalized user profile that evolves over time Recommendation Engine Engages each employee with personalized campaigns Delivers campaigns through the best available channel 7

8 Delivering Value in a Data-Driven Way Direct Cost Savings % Reduction in medical costs through steerage, as measured by Verscend* Program Engagement 2 3x Typical impact on engagement of benefits programs** Employee Satisfaction Create a delightful benefits experience for your employees * Medical cost savings average for Castlight customers ** Impact on engagement of third party solutions integrated with Castlight 8

9 Castlight s Business Model Target HR buyer within large, self-insured employers Subscription model with three-year contracts Continue to land and expand 9

10 Go-To-Market Strategy Direct + Channel Sales Strategy + Strategic Go-to-Market Relationship for Large, Innovator Buyers to Penetrate Early Majority Buyers 10

11 $ in Millions Strong Platform ARR Traction $164 $78 $110 $122 Platform Transparency Q 2018 Go-to-market strategy focused on platform sales to new customers and converting legacy transparency customers to the platform Includes Jiff s ARR beginning April 3,

12 $ in Millions Steady Progress Toward Break Even Non-GAAP Operating Loss ($25) ($15)-($20) ($32) Acquisition of Jiff completed in 1H Guidance Historical metrics and 2018 guidance are in accordance with ASC 606. Please see the Appendix for a discussion of the Company s non-gaap metrics. 12

13 2018 Guidance Expect to reach cash flow break-even in Q with > $65 million of cash Metric GAAP Revenue Range $150mm $155mm Non-GAAP Operating (Loss) ($15)mm ($20)mm Non-GAAP EPS ($0.11) ($0.15) Weighted Average Shares Outstanding 137mm 138mm Cash Used in Operations Mid-$20mm range Guidance as of 05/10/18. Please see Appendix for definition of non-gaap financial measures. 13

14 2018 Strategic Goals G R O W T H & H E A L T H Continue to scale platform ARR through direct channel & Anthem I N N O V A T I O N Finish build-out of the integrated platform to capitalize on the market opportunity S U S T A I N A B I L I T Y Reach cash flow & non-gaap operating income break even in Q

15 Thank you 15

16 Appendix 16

17 The Castlight Total Addressable Market $8+ Billion $5 Billion 17

18 The Castlight Health Navigation Packages Complete Health Navigator Castlight s complete health experience in a single app - built just for the HR suite, personalized for their employees. Wellbeing Navigator Drive engagement across an employer s entire benefit programs with Castlight s personalized, incentivized benefit navigator. Care Guidance Navigator Everything employees need to make better care decisions. 18

19 ASC 606 Impact on Castlight Overall, Castlight is pleased to be moving to the full retrospective adoption for ASC606. Supplemental content includes FY2016 and 2017 quarterly recast financials. Historical Revenue Impact - Revenue impact was primarily driven by the accounting for termination provisions in professional services revenues and variable consideration for subscription revenues, resulting in acceleration of revenue. - Adoption of ASC 606 decreased FY 16 revenue by 3% and a increased in FY 17 revenue by less than 1%. Historical Margin Impact - Capitalization of deferred fulfilment costs and increased capitalization of contract acquisition costs resulted in decrease in cost of revenue and sales & marketing expense. - Adoption of ASC 606 resulted in less than 2% gross margin change and less than 5% of operating margin change in the restated periods. 19

20 Non-GAAP Reconciliations FY 17 & FY 16 Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share data) Year Ended December 31, 2017 Year Ended December 31, 2016 (As reported) (Adjusted for 606) (As reported) (Adjusted for 606) Reconciliation of gross profit: GAAP gross profit subscription $ 92,086 $ 92,958 $ 78,553 $ 75,480 Stock-based compensation Amortization of internal-use software Amortization of intangibles 2,253 2,253 Reduction in workforce 5 5 Acquisition related costs Non-GAAP gross profit subscription $ 96,247 $ 97,119 $ 80,040 $ 76,967 GAAP gross margin subscription 76.4 % 76.6 % 82.7 % 82.1 % Non-GAAP gross margin subscription 79.9 % 80.0 % 84.2 % 83.7 % GAAP gross loss professional services and other $ (7,841) $ (7,590) $ (11,414) $ (8,638) Stock-based compensation 1,656 1,080 1,961 1,204 Reduction in workforce Acquisition related costs Non-GAAP gross loss professional services $ (6,025) $ (6,350) $ (9,350) $ (7,331) GAAP gross margin professional services and other (71.7)% (71.3)% (171)% (128)% Non-GAAP gross margin professional services and other (55.1)% (59.6)% (140)% (108)% GAAP gross profit $ 84,245 $ 85,368 $ 67,139 $ 66,842 Impact of non-gaap adjustments 5,977 5,401 3,551 2,794 Non-GAAP gross profit $ 90,222 $ 90,769 $ 70,690 $ 69,636 GAAP gross margin 64.1 % 64.7 % 66.0 % 67.7 % Non-GAAP gross margin 68.6 % 68.8 % 69.5 % 70.5 % Reconciliation of operating expenses: GAAP sales and marketing $ 62,313 $ 59,767 $ 58,800 $ 58,641 Stock-based compensation (9,665) (9,665) (8,843) (8,843) Amortization of intangibles (1,344) (1,344) Reduction in workforce (422) (422) Acquisition related costs (909) (909) Non-GAAP sales and marketing $ 50,395 $ 47,849 $ 49,535 $ 49,376 GAAP research and development $ 54,502 $ 54,502 $ 40,460 $ 40,460 Stock-based compensation (7,415) (7,415) (5,959) (5,959) Reduction in workforce (136) (136) Acquisition related costs (393) (393) Non-GAAP research and development $ 46,694 $ 46,694 $ 34,365 $ 34,365 GAAP general and administrative $ 28,825 $ 28,825 $ 26,859 $ 26,859 Stock-based compensation (4,954) (4,954) (4,743) (4,743) Litigation settlement (250) (250) (2,876) (2,876) Amortization of intangibles (50) (50) Change in fair value of contingent consideration liability Reduction in workforce (90) (90) Acquisition related costs (3,423) (3,423) (1,731) (1,731) Non-GAAP general and administrative $ 20,819 $ 20,819 $ 17,419 $ 17,419 20

21 Non-GAAP Reconciliations FY 17 & FY 16 (cont.) Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share data) Year Ended December 31, 2017 Year Ended December 31, 2016 (As reported) (Adjusted for 606) (As reported) (Adjusted for 606) GAAP operating expense $ 145,640 $ 143,094 $ 126,119 $ 125,960 Impact of non-gaap adjustments (27,732) (27,732) (24,800) (24,800) Non-GAAP operating expense $ 117,908 $ 115,362 $ 101,319 $ 101,160 Reconciliation of operating loss: GAAP operating loss $ (61,395) $ (57,726) $ (58,980) $ (59,118) Impact of non-gaap adjustments 33,709 33,133 28,351 27,594 Non-GAAP operating loss $ (27,686) $ (24,593) $ (30,629) $ (31,524) Reconciliation of other income, net: GAAP other income, net $ 618 $ 618 $ 432 $ 432 Gain on sale of investment in related party (1,375) (1,375) Expense related to expiration of SAP warrant 1,132 1,132 Non-GAAP other income, net $ 375 $ 375 $ 432 $ 432 Net loss and net loss per share: GAAP net loss $ (55,571) $ (51,902) $ (58,548) $ (58,686) Total pre-tax impact of non-gaap adjustments 33,466 32,890 28,351 27,594 Release of deferred tax valuation allowance due to business combination (5,206) (5,206) Non-GAAP net loss $ (27,311) $ (24,218) $ (30,197) $ (31,092) GAAP net loss per share, basic and diluted $ (0.44) $ (0.41) $ (0.58) $ (0.58) Non-GAAP net loss per share, basic and diluted $ (0.22) $ (0.19) $ (0.30) $ (0.31) Shares used in basic and diluted net loss per share computation 125, , , ,798 21

22 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 other income, net, non-gaap net loss and non-gaap net loss per share. Non-GAAP gross profit and margin, non-gaap operating expense, non-gaap operating loss, non-gaap other income, net and non- GAAP net loss exclude stock-based compensation, litigation settlement, amortization of intangibles, capitalization and amortization of internal-use software, loss on sublease, gain on sale of investment in related party, expense related to expiration of SAP warrant, changes in fair value of contingent consideration liability, and charges related to the acquisition of Jiff 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 2018 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. 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. 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. 22