cslt-20210331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______ to ______

Commission File Number: 001-36330

CASTLIGHT HEALTH, INC.

(Exact name of registrant as specified in its charter)


Delaware						26-1989091
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

150 Spear Street, Suite 400

San Francisco, CA 94105

(Address of principal executive offices)

(415) 829-1400

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class B Common Stock, par value $0.0001 per share	CSLT	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

Not applicable

Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of April 27, 2021, there were 28,397,210 shares of the Registrant’s Class A common stock outstanding and 129,521,529 shares of the Registrant’s Class B common stock outstanding.

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TABLE OF CONTENTS


		Page
	PART I. Financial Information
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
	PART II. Other Information
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 6.	Exhibits	50
	Signature	52

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CASTLIGHT HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(unaudited)


	As of
	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	56,501	$	49,242

Accounts receivable and other, net	25,035		31,740
Prepaid expenses and other current assets	6,772		3,800
Total current assets	88,308		84,782
Property and equipment, net	4,966		5,321
Restricted cash, non-current	1,144		1,144
Deferred commissions	8,190		9,556
Deferred professional service costs	4,205		4,462
Intangible assets, net	6,872		7,930
Goodwill	41,485		41,485
Operating lease right-of-use assets, net	9,131		10,238
Other assets	1,838		1,855
Total assets	$	166,139	$	166,773
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,383	$	5,145
Accrued expenses and other current liabilities	7,057		7,898
Accrued compensation	4,755		8,633
Deferred revenue	13,135		6,848
Operating lease liabilities	5,939		5,789
Total current liabilities	35,269		34,313
Deferred revenue, non-current	122		663

Operating lease liabilities, non-current	5,907		7,446
Other liabilities, non-current	480		485
Total liabilities	41,778		42,907
Commitments and contingencies
Stockholders’ equity:
Class A common stock, $0.0001 par value; 200,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 28,397,210 shares and 34,998,171 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	3		4
Class B common stock, $0.0001 par value; 800,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 129,521,529 shares and 120,768,900 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	13		12
Additional paid-in capital	644,566		641,075

Accumulated deficit	(520,221)		(517,225)
Total stockholders’ equity	124,361		123,866
Total liabilities and stockholders’ equity	$	166,139	$	166,773

See Notes to Condensed Consolidated Financial Statements.

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CASTLIGHT HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)


	Three Months Ended March 31,
	2021		2020
Revenue:
Subscription	$	32,110	$	38,383
Professional services and other	2,949		662
Total revenue, net	35,059		39,045
Cost of revenue:
Cost of subscription (1)	8,099		10,232
Cost of professional services and other (1)	4,657		4,241
Total cost of revenue	12,756		14,473
Gross profit	22,303		24,572
Operating expenses:
Sales and marketing (1)	6,913		10,472
Research and development (1)	12,113		13,822
General and administrative (1)	6,366		6,576
Goodwill impairment	—		50,300
Total operating expenses	25,392		81,170
Operating loss	(3,089)		(56,598)
Other income, net	93		263



Net loss	$	(2,996)	$	(56,335)
Net loss per share, basic and diluted	$	(0.02)	$	(0.38)
Weighted-average shares used to compute basic and diluted net loss per share	156,781		148,872

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


	Three Months Ended March 31,
	2021		2020
Cost of revenue:
Cost of subscription	$	257	$	169
Cost of professional services and other	236		116
Sales and marketing	350		672
Research and development	1,069		1,163
General and administrative	1,195		1,066

See Notes to Condensed Consolidated Financial Statements.

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CASTLIGHT HEALTH, INC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(unaudited)


	Three Months Ended March 31,
	2021		2020
Net loss	$	(2,996)	$	(56,335)
Other comprehensive income:
Net change in unrealized gain on available-for-sale marketable securities	—		11
Other comprehensive income	—		11
Comprehensive loss	$	(2,996)	$	(56,324)

See Notes to Condensed Consolidated Financial Statements.

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CASTLIGHT HEALTH, INC

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(unaudited)


	Class A and B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balances as of December 31, 2020	155,767,071	$	16	$	641,075	$	—	$	(517,225)	$	123,866
Vesting of restricted stock units	1,843,767	—		—		—		—		—
Issuance of common stock upon exercise of stock options	93,961	—		128		—		—		128
Issuance of common stock under the ESPP	213,940	—		233		—		—		233
Stock-based compensation	—	—		3,130		—		—		3,130
Comprehensive loss	—	—		—		—		(2,996)		(2,996)
Balances as of March 31, 2021	157,918,739	$	16	$	644,566	$	—	$	(520,221)	$	124,361

Balances as of December 31, 2019	148,209,215	$	15	$	627,899	$	2	$	(455,042)	$	172,874
Vesting of restricted stock units	923,693	—		—		—		—		—
Issuance of common stock upon exercise of stock options	142,729	—		155		—		—		155
Issuance of common stock under the ESPP	242,007	—		186		—		—		186
Stock-based compensation	—	—		3,205		—		—		3,205
Comprehensive loss	—	—		—		11		(56,335)		(56,324)
Balances as of March 31, 2020	149,517,644	$	15	$	631,445	$	13	$	(511,377)	$	120,096

See Notes to Condensed Consolidated Financial Statements.

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CASTLIGHT HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)


	Three Months Ended March 31,
	2021		2020
Operating activities:
Net loss	$	(2,996)	$	(56,335)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,623		1,535
Goodwill impairment	—		50,300
Stock-based compensation	3,107		3,186
Amortization and impairment of deferred commissions	1,340		2,383
Amortization and impairment of deferred professional service costs	580		925
Non-cash operating lease expense	1,107		1,400

Accretion and amortization of marketable securities	—		2
Changes in operating assets and liabilities:
Accounts receivable and other, net	6,705		(6,676)
Deferred commissions	26		(318)
Deferred professional service costs	(300)		(416)
Prepaid expenses and other assets	(2,955)		(494)
Accounts payable	(759)		(7,462)
Operating lease liabilities	(1,389)		(1,516)
Accrued expenses and other liabilities	(382)		19
Deferred revenue	5,746		3,573
Accrued compensation	(3,878)		(4,465)
Net cash provided by (used in) operating activities	7,575		(14,359)
Investing activities:
Purchase of property and equipment	(212)		(1,264)
Purchase of marketable securities	—		(1,989)

Maturities of marketable securities	—		12,400
Net cash (used in) provided by investing activities	(212)		9,147
Financing activities:
Proceeds from exercise of stock options	128		155
Proceeds from ESPP offering	233		186
Principal payments on debt	(465)		(465)
Net cash used in financing activities	(104)		(124)

Net increase (decrease) in cash, cash equivalents and restricted cash	7,259		(5,336)
Cash, cash equivalents and restricted cash at beginning of period	50,386		44,342
Cash, cash equivalents and restricted cash at end of period	$	57,645	$	39,006

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	56,501	$	37,681
Restricted cash included in Prepaid expenses and other current assets	—		181
Restricted cash, non-current	1,144		1,144
Total cash, cash equivalents and restricted cash	$	57,645	$	39,006

See Notes to Condensed Consolidated Financial Statements.

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CASTLIGHT HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization and Description of Business

Castlight Health, Inc. (“Castlight” or “the Company”) provides health navigation solutions for large U.S. employers and health plans (“customers”) and their respective employees and members (“users”). Castlight’s offerings help individuals connect and engage with the right provider, benefit, or virtual care solution, at the right time, leveraging a combination of sophisticated technology and an expert team. Castlight’s navigation offerings have demonstrated measurable results, driving high engagement and user satisfaction, increased program utilization, steerage to the right care and provider, and lower healthcare costs for its customers and millions of users. The Company was incorporated in the State of Delaware in January 2008. The Company's principal executive offices are located in San Francisco, California, and its Customer Center of Excellence is located in Sandy, Utah.

Note 2. Accounting Standards and Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include Castlight and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. In the opinion of management, the information herein reflects all adjustments, consisting only of normal recurring adjustments except as otherwise noted, considered necessary for a fair statement of results of operations, financial position, stockholders’ equity and cash flows. The results for the interim periods presented are not necessarily indicative of the results expected for any future period. The following information should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Other than as described below, there have been no changes to the Company's significant accounting policies described in the Company's Annual Report that have had a material impact on the Company's consolidated financial statements and related notes.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. These estimates include, but are not limited to the determination of:

•Variable consideration included in the transaction price of the Company’s contracts with customers;

•The standalone selling price of the performance obligations in the Company’s contracts with customers;

•Assumptions used in the valuation of certain equity awards;

•Assumptions used in the calculation of goodwill impairment, including the forecast of future cash flows and discount rate; and

•Assumptions used in the calculation of right-of-use assets ("ROU") and lease liabilities for operating leases, including lease terms and the Company’s incremental borrowing rate.

Actual results could differ from those estimates, and such differences could be material to the Company’s consolidated financial position and results of operations.

Concentrations of Risk and Significant Customers

The Company had one customer, Anthem Inc. ("Anthem"), that accounted for approximately 50% of total revenue during the three months ended March 31, 2021. The Company had four customers that accounted for approximately 15%, 12%, 12% and 10%, respectively, of accounts receivable, excluding contract assets, as of March 31, 2021.

Recently Issued Accounting Pronouncements

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CASTLIGHT HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined that the ASUs issued by the FASB during the three months ended March 31, 2021 are either not applicable or are expected to have minimal impact on the Company's condensed consolidated financial results.

Note 3. Revenue, Deferred Revenue, Contract Balances and Performance Obligations

The Company sells to customers based in the United States.

Deferred revenue as of March 31, 2021 and December 31, 2020 was $13.3 million and $7.5 million, respectively. Contract assets as of March 31, 2021 and December 31, 2020 were $7.7 million and $9.4 million, respectively. The decrease in contract assets is primarily due to the Anthem enterprise license agreement that results in invoicing ahead of revenue recognition in the second year of that agreement.

Revenue of $5.7 million and $6.5 million was recognized during the three months ended March 31, 2021 and 2020, respectively, that was included in the Company’s deferred revenue balances at the beginning of the respective periods.

The Company recorded favorable cumulative catch-up adjustments to revenue of $1.2 million and $1.7 million during the three months ended March 31, 2021 and 2020, respectively, arising from changes in variable consideration.

The aggregate balance of remaining performance obligations from non-cancelable contracts with customers as of March 31, 2021 was $143.2 million. The Company expects to recognize approximately 80% of this balance over the next 12 months, with the remaining balance recognized thereafter. Remaining performance obligations are defined as deferred revenue and amounts yet to be billed for the non-cancelable portion of contracts.

Note 4.

SEC Form 10-Q filed by Castlight Health, inc.