Castlight Health. Investor Overview. John Doyle, CEO. January 2018 NYSE: CSLT

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Transcription:

Castlight Health Investor Overview John Doyle, CEO January 2018 NYSE: CSLT 1

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 as to the timing of cash flow and non-gaap operating break-even and managing certain line items as a percentage of revenue. These statements were made as of January 11, 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 January 11, 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. Safe Harbor Statement We provide limited 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 October 25, 2017 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, operating expenses, and operating loss, that we believe aid in the understanding of historical financial results. A reconciliation to comparable GAAP metrics, on a historical basis, can be found in the appendix section of this presentation. In addition, please note the close date of the Jiff acquisition was April 3, 2017. Accordingly, the deferred revenue fair value adjustment discussed in this presentation is a preliminary estimate and is subject to change upon the completion of purchase price accounting. 2

Castlight Health Founded in 2008 500+ 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 differentiation in ecosystem, integrations, data, and personalization 250+ Customers $157M ARR as of 09/30/17 Break Even in Q4 2018 3

Why Healthcare Navigation? Mid 1990 s Mid 2000 s Today Restrict Choice Align Incentives Engage & Guide HMOs Consumer- Directed Health Plans Healthcare Navigation 4

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

The Castlight Health Navigation Platform 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. 6

Differentiator: Ecosystem Connecting all of an employer s critical health benefits data partners Breadth of Connectivity Built ecosystem across the health and wellness spectrum VALUABLE DATA ASSET Depth of Integrations Health claims, ecosystem partners and user-generated data drive deep integrations 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 Reaches out with best available channel for the message Engages each employee with personalized campaigns 8

Demo: Laura Type 2 diabetic Missed recent glucose tests Push notification on smartphone 9

App Home Page Personalized content and recommendations Notification to schedule A1c test Click-to-call information for lab on her care team 10

App Home Page Personalized integrations and recommendations HSA vendor integration Incentivized, personalized ecosystem partner recommendation 11

App Home Page Predictive analytics: depression is comorbid with diabetes Quiz to see if Laura would benefit from her employer s employee assistance program (EAP) 12

App Benefits Tab Additional personalized, incentivized recommendations Breadth of program integrations (partial list shown here) 13

Case Study Overall, 9% reduction in healthcare costs for Castlight users 21% reduction in ER usage 22% reduction in adv imaging procedure costs 9% reduction in office visit costs 9x increase in telehealth usage 14

Castlight s Business Model Target HR buyer within large, self-insured employers Subscription model with three-year contracts Continue to land and expand 15

Go-To-Market Strategy Direct + Channel Sales Strategy + Strategic Go-to-Market Relationship for Large, Innovator Buyers to Penetrate Early Majority Buyers 16

$ in Millions Significant Growth with High Visibility Annualized Recurring Revenue (ARR) $157M from Subscription ARR as of 09/30/17 $110 $122 $78 2014 2015 2016 Sep. '17 Revenue: $45 $75 $102 >$130 (1) (1) FY 2017 guidance as of October 25, 2017. 17

ARR, $ in Millions Strong Platform ARR Traction $157 $110 $122 $78 Platform Transparency 2014 2015 2016 Sep. '17 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, 2017 18

$ in Millions Steady Progress Toward Break Even Non-GAAP Operating Loss Break even in Q4 18 ($31) <($31) (1) ($70) ($65) Acquisition of Jiff completed in 1H 17 2014 2015 2016 2017F 2018F (1) Guidance as of October 25, 2017. Please see the Appendix for a discussion of the Company s non-gaap metrics. 19

Operating Model (Non-GAAP, % of Revenue) 3Q 17 Target Range Year Target Achieved Gross Margin 67% 70% - 75% 2018* Sales & Marketing 36% 30% - 32% 2018* Research & Development 35% 12% - 14% -- (1) General & Administrative 15% 8% - 12% 2018* Operating Income (19)% 20% - 25% Break-even in 4Q 18 (2) * Target achieved in Q4 18 (1) Expect continued discretionary investment above long-term target through at least 2019 (2) Expect to have at least $60 million of cash on the balance sheet at that time Please see the Appendix for a discussion of the Company s non-gaap metrics. 20

2018 Strategic Goals GROWTH Continue to scale platform ARR I NNOVATION Invest to capitalize on the market opportunity SUSTAINABILITY Cash flow break even in Q4 18 21

Thank you 22

Appendix 23

2017 Guidance Initial Range Q3 2017 Update GAAP Revenue $132mm $136mm Above $130mm Non-GAAP Operating (Loss) $ (31)mm $(35)mm Beat the range Non-GAAP EPS $(0.24) $(0.28) Beat the range Basic & Fully-Diluted Shares Outstanding 125mm 127mm 125mm 127mm Cash Used in Operations Mid-$30mm range Mid-$30mm range Guidance as of October 25, 2017. Please see the Appendix for a discussion of the Company s non-gaap metrics. 24

Gross Profit: Reconciliation of GAAP to Non-GAAP Gross profit: September 30, 2016 December 31, 2016 March 31, 2017 June 30, 2017 September 30, 2017 GAAP gross profit subscription $19,879 $23,912 $21,520 $22,128 $23,240 Stock-based compensation 139 139 127 253 258 Amortization of internal-use software 244 244 244 244 244 Amortization of Intangibles - - - 751 751 Acquisition related costs - - - 52 - Reduction in workforce - - - - - Non-GAAP gross profit subscription $20,262 24,295 21,891 23,428 24,493 GAAP gross loss professional services $(2,344) $(2,417) $(2,009) $(2,528) $(1,689) Stock-based compensation 456 493 461 597 342 Acquisition related costs - - 147 17 (4) Capitalization of internal-use software - - - - - Reduction in workforce 4 - - - - Non-GAAP gross loss professional services $(1,884) $(1,924) $(1,401) $(1,914) $(1,351) GAAP gross profit $17,535 $21,495 $19,511 $19,600 $21,551 Impact of non-gaap adjustments 843 876 979 1,914 1,591 Non-GAAP gross profit $18,378 $22,371 $20,490 $21,514 $23,142 25

Operating Expense: Reconciliation of GAAP to Non-GAAP September 30, 2016 December 31, 2016 March 31, 2017 June 30, 2017 September 30, 2017 Operating expense: GAAP sales and marketing $13,143 $13,923 $14,443 $16,575 16,006 Stock-based compensation (2,190) (2,199) (2,154) (2,441) (3,110) Amortization of Intangibles - - - (448) (448) Acquisition related costs - - (405) (518) 14 Reduction in workforce (48) - - - - Non-GAAP sales and marketing $10,905 $11,724 $11,884 $13,168 $12,462 GAAP research and development $10,573 $9,841 $11,071 $15,194 $13,809 Stock-based compensation (1,631) (1,659) (1,790) (2,254) (1,631) Capitalization of internal-use software - - - - - Reduction in workforce (18) - - - - Acquisition related costs - - (267) (126) - Non-GAAP research and development $8,924 $8,182 $9,014 $12,814 $12,178 GAAP general and administrative $5,338 $6,957 $8,998 $6,766 $10,307 Stock-based compensation (1,236) (1,267) (1,295) (1,169) (1,121) Amortization of Intangibles - - - (17) (17) Change in FV of contigent consideration - - - 643 (3,931) Acquisition related costs - (1,731) (2,340) (899) (126) Reduction in workforce (10) - - - Litigation settlement - - (250) - - Non-GAAP general and administrative $4,092 $3,959 $5,113 $5,324 $5,112 GAAP operating expense $29,054 $30,721 $34,512 $38,535 $40,122 Impact of non-gaap adjustments (5,133) (6,856) (8,501) (7,229) (10,370) Non-GAAP operating expense $23,921 $23,865 $26,011 $31,306 $29,752 Operating loss: GAAP operating loss ($11,519) $(9,226) $(15,001) $(18,935) $(18,571) Impact of non-gaap adjustments 5,976 7,732 9,480 9,143 11,961 Non-GAAP operating loss $(5,543) $(1,494) $(5,521) $(9,792) $(6,610) 26

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 net loss and non-gaap net loss per share. Non-GAAP gross profit and margin, non-gaap operating expense, non-gaap operating loss and non-gaap net loss exclude stock-based compensation, litigation settlement, charges related to a reduction in workforce, amortization of intangibles, capitalization and amortization of internal-use software, changes in fair value of contingent consideration and charges related to the acquisition 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 2017 to comparable GAAP operating loss and net loss per share guidance because we do not provide guidance for stock-based compensation expense, capitalization and amortization of internal-use software, changes in fair value of contingent consideration and charges related to the acquisition, which are reconciling items between GAAP and non-gaap operating loss. The factors that may impact our future stockbased 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 and charges related to the proposed acquisition for the year. 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. 27