Castlight Health. Q Financial & Business Update November 6, 2018 Q3 FY

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Transcription:

Castlight Health Q3 2018 Financial & Business Update November 6, 2018 Q3 FY 2018 1

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, timing of cash flow and non-gaap operating break-even, cost savings efforts, impact of non-renewals, direct and indirect sales momentum, our ability to add additional channel partners, future churn risk and future cash position. These statements were made as of November 6, 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 November 6, 2018, the information it contains may no longer be current or accurate. We disclaim any obligation to update or revise any forward-looking 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 November 6, 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 margin, operating expenses, operating income and operating loss, and net loss per diluted 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. Q3 FY 2018 2

John Doyle CEO Q3 FY 2018 3

Castlight Complete Launched The best most concise way to gather information on my coverage and benefits - thank you! telecom company user This is very close to being a one stop shop site for health and wellness automotive company user Home Easy to use and a good way to get motivated about your fitness goals coupled with easy access to your plan info. telecom company user Key capabilities: 3 rd -party integrations, personalization, health goals & assessment, communications suite Launches included large, multi-national businesses with hundreds of thousands of employees, multiple ecosystem integrations and complex incentives programs Q3 FY 2018 4

Q3 2018 Highlights Castlight Complete launched at-scale in September Launched first targeted cohort of industry leading customers Record number of logos closed in Q3 Strong channels contribution Strong financial performance post-restructuring Record revenue, non-gaap operating profitability milestone Additional channel partner discussions in-progress Robust interest from a diverse group of firms Q3 FY 2018 5

Turning the Corner on Churn Risk Less ARR up for renewal in 2019 Higher quality book of business Reduced exposure in 2019 renewals cycle by both number of customers and dollar value up for renewal Majority of customers on integrated platform going forward Reduced platform migration risk Integrated platform is delighting users Q3 marked a quarter of technology migration discussions Strong technology infrastructure is delivering value at scale Q3 FY 2018 6

Moving Forward All products are now generally available for sale via direct sales team and channel partners On-track to sunset legacy products next year, freeing up R&D for innovation and driving improved margin profile Deployed scalable, reliable solutions that users love across all segments due to data, integrations and platform investments Delivered on 2018 sustainability commitments, poised to build on them in 2019 Q3 FY 2018 7

Siobhan Nolan Mangini CFO Q3 FY 2018 8

Revenue ($M) GAAP Revenue Under ASC 606 Accounting Standard $45 $30 Services Subscription $34.5 $3.1 $37.2 $36.5 $3.5 $3.5 $37.8 $3.0 $40.0 $3.3 $15 $31.4 $33.7 $33.0 $34.8 $36.7 $0 Q3 17 Q4 17 Q1 18 2Q 18 3Q 18 Q/Q Growth 6% 8% (2)% 4% 6% Y/Y Growth NA NA 32% 16% 16% Columns may not sum due to rounding Q3 FY 2018 9

Gross Profit ($M) Non-GAAP Gross Profit & Margin Under ASC 606 Accounting Standard $35 Gross Profit (L Axis) Gross Margin (R Axis) $30 67% 68% 68% 70% 63% 62% $25 $20 $15 $10 $23.1 $25.3 $23.0 $23.5 $27.1 60% 50% 40% Gross Margin (%) $5 $0 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 30% Q/Q Growth 5% 10% (9)% 2% 15% Y/Y Growth NA NA 13% 7% 17% Please see Appendix for definition of non-gaap financial measures Q3 FY 2018 10

Operating Expense ($M) Non-GAAP Operating Expense Under ASC 606 Accounting Standard $35 G&A R&D S&M $30 $25 $29.3 $29.7 $5.1 $5.3 $30.7 $30.4 $5.6 $5.0 $26.8 $4.9 $20 $15 $12.2 $12.7 $12.8 $13.7 $12.5 $10 $5 $12.0 $11.7 $12.3 $11.7 $9.5 $0 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q/Q Growth (5)% 1% 3% (1)% (12)% Y/Y Growth NA NA 19% (1)% (8)% Columns may not sum due to rounding Please see Appendix for definition of non-gaap financial measures Q3 FY 2018 11

Non-GAAP Operating Income (Loss) ($M) Non-GAAP Operating Income (Loss) Under ASC 606 Accounting Standard $5 $0 $0.3 ($5) ($6.2) ($4.4) ($7.7) ($6.9) ($10) ($15) Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Please see Appendix for definition of non-gaap financial measures Q3 FY 2018 12

Cash-Related Metrics Expect to end the year with at least $70 million in cash & marketable securities Cash * as of September 30, 2018 Q3 2018 Cash Used in Operations $68.4 million $6.0 million * Cash and marketable securities. Q3 FY 2018 13

2018 Guidance Metric Range Current Expectations GAAP Revenue $150mm $155mm High-end of range Non-GAAP Operating (Loss) $(15)mm $(20)mm Beat the range Non-GAAP EPS $(0.11) $(0.15) Beat the range Weighted Avg. Shares Outstanding 137mm 138mm Guidance as of 11/06/18. Please see Appendix for definition of non-gaap financial measures. Q3 FY 2018 14

Q&A Session Q3 FY 2018 15

Appendix Q3 FY 2018 16

Gross profit: Gross Profit: Reconciliation of GAAP to Non-GAAP September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018 September 30, 2018 (Adjusted for 606) (Adjusted for 606) GAAP gross profit subscription $ 23,255 $ 25,376 $ 23,815 $ 25,662 28,144 Stock-based compensation 258 250 242 231 322 Amortization of internal-use software 244 236 219 219 220 Amortization of intangibles 751 751 678 678 678 Reduction in workforce 130 Non-GAAP gross profit subscription $ 24,508 $ 26,613 $ 24,954 $ 26,790 $ 29,494 GAAP gross margin subscription 74.1 % 75.3 % 72.2 % 73.7 % 76.7 % Non-GAAP gross margin subscription 78.1 % 78.9 % 75.6 % 77.0 % 80.4 % GAAP gross loss professional services and other $ (1,677) $ (1,532) $ (2,279) $ (3,608) $ (2,898) Stock-based compensation 244 228 301 315 322 Reduction in workforce 173 Acquisition related costs (4) Non-GAAP gross loss professional services $ (1,437) $ (1,304) $ (1,978) $ (3,293) $ (2,403) GAAP gross margin professional services and other (53.9)% (44.0)% (65.3)% (121)% (86.8)% Non-GAAP gross margin professional services and other (46.1)% (37.4)% (56.7)% (110)% (72.0)% GAAP gross profit $ 21,578 $ 23,844 $ 21,536 $ 22,054 $ 25,246 Impact of non-gaap adjustments 1,493 1,465 1,440 1,443 1,845 Non-GAAP gross profit $ 23,071 $ 25,309 $ 22,976 $ 23,497 $ 27,091 GAAP gross margin 62.6 % 64.1 % 59.0 % 58.4 % 63.1 % Non-GAAP gross margin 66.9 % 68.0 % 63.0 % 62.2 % 67.7 % Q3 FY 2018 17

Operating Expense: Reconciliation of GAAP to Non-GAAP Operating expenses: September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018 September 30, 2018 (Adjusted for 606) (Adjusted for 606) GAAP sales and marketing $ 15,538 $ 14,149 $ 13,912 $ 13,306 $ 11,497 Stock-based compensation (3,110) (1,960) (1,138) (1,318) (699) Amortization of intangibles (448) (448) (448) (273) (271) Reduction in workforce (1,055) Acquisition related costs 14 Non-GAAP sales and marketing $ 11,994 $ 11,741 $ 12,326 $ 11,715 $ 9,472 GAAP research and development $ 13,809 $ 14,428 $ 15,371 $ 16,425 $ 15,028 Stock-based compensation (1,631) (1,740) (1,654) (1,908) (1,798) Lease exit and related charges (916) (842) (253) Reduction in workforce (522) Non-GAAP research and development $ 12,178 $ 12,688 $ 12,801 $ 13,675 $ 12,455 GAAP general and administrative $ 10,307 $ 2,754 $ 6,825 $ 6,382 $ 6,193 Stock-based compensation (1,121) (1,368) (1,257) (1,375) (1,129) Litigation settlement Amortization of intangibles (17) (17) (17) (17) (16) Change in fair value of contingent consideration liability (3,931) 3,959 Reduction in workforce (172) Acquisition related costs (126) (58) Non-GAAP general and administrative $ 5,112 $ 5,270 $ 5,551 $ 4,990 $ 4,876 GAAP operating expense $ 39,654 $ 31,331 $ 36,108 $ 36,113 $ 32,718 Impact of non-gaap adjustments (10,370) (1,632) (5,430) (5,733) (5,915) Non-GAAP operating expense $ 29,284 $ 29,699 $ 30,678 $ 30,380 $ 26,803 Operating loss: GAAP operating loss $ (18,076) $ (7,487) $ (14,572) $ (14,059) $ (7,472) Impact of non-gaap adjustments 11,863 3,097 6,870 7,176 7,760 Non-GAAP operating income (loss) $ (6,213) $ (4,390) $ (7,702) $ (6,883) $ 288 Q3 FY 2018 18

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 income and 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 income and operating loss, non-gaap other income, net and non-gaap net loss exclude stock-based compensation, litigation settlement, amortization of intangibles, amortization of internal-use software, lease exit and related charges, changes in fair value of contingent consideration liability, restructuring charges 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. Q3 FY 2018 19