CSLT - Earnings call transcript Q3 2017

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Operator

Good afternoon, and welcome to Castlight's Third Quarter 2017 Results Conference Call.

Joining me on the call today are John Doyle, Chief Executive Officer, and Siobhan Nolan Mangini, Chief Financial Officer. John and Siobhan will offer their prepared remarks, and then we will take your questions.

Our press release, webcast and PowerPoint presentation are available on our website. This call contains forward-looking statements such as our guidance for the full-year of 2017 and expected timing of cash flow breakeven. made expectations, today various and and are current reflect risks, statements assumptions. and views are such as and of management's uncertainties All subject to SEC and to may that contained results differ filings press in refer to actual discussion release events from Please with important the cause the materially for or factors our a of statements. our those forward-looking

the any on call obligation presentation after place accurate. not be statements forward-looking should forward-looking the these statements. replayed current undue any is reliance If update or is to today, we may You or the or revise disclaim no and viewed information longer

a We will so we public financial our metrics, forum. GAAP non-GAAP and updates understanding not a or to believe reconciliation use found will release. results. provide More on basis our includes This performance the presentation in we aid a comparable also quarter of that guidance certain about do our today’s in but our during non-GAAP metrics any we historical of guidance to press call, can provide be further the in on unless information metrics

discussed Accordingly, date revenue addition, X, the over of completion remember With April I'll Jiff fair accounting. preliminary that, XXXX. and call, this to In turn acquisition call change please value was the of upon the our close the John. adjustment estimates on to deferred subject purchase price

John Doyle

make and we live money strive do want to when Thank We mission and as to you, default the save drives seek navigate the and we and is this to employers as productive eliminate healthier, more it happier help we well, families lives. employees This that people humanly When healthcare. their to good for most we that Castlight, walk for random they healthcare. At easy possible people afternoon. us.

we market deliver a Over Castlight winning helps our solution strengthening new to last largest By in United and integrated integrated strategy transparency place healthcare business with platform, our and accomplish on confident existing multi-product to proportion we of will the from prior timetable trends said, States, improve performance and the the a headwinds mission. platform among managing with financial breakeven in to entire operating facing progress. to merging profile. significant increased our our confident results healthcare we we're That is After one basis provide We our driven exciting solid and great a the at new while by customers. major evidence quarter tough drive aimed retention. next landscape employees third an we that in that our operating customer more QX that of of broader long-term amount and model a plans business, compared of make right accelerated navigate QX, integrated months, initiatives our we and speak expectations. churn we the churn, Jiff value XX believe we navigation drove These that we've the our more customers, adoption which platform are going driving non-GAAP the of have us relationships increasingly among customers, and potential that and efficiencies are to revenue making health year, won growth can are

than strong the was cross-selling higher track activity, planned we QX. NDR in for transparency target churn to result year mid-XX% While a as continue our above of

to I’ll the moment forward. while build successes the going at previously, of is Castlight. Two our so healthcare we're discussed spend a Cities have on on of gaining are we and As the current steam, what transparency time of mitigating some in truly state impact market we each Tale navigation doing churn

customers more XXX. a years or a QX million On bookings gross three ago. we customers solid platform sequentially. since nearly with integrated was Annualized the was than with Fortune $XXX new the in yet We which was the is of sales, the it of XX is to of of number XX, This start years, best evidence our market. platform includes new that heels a customers performance new added as in highest which quarter the recurring more also including the million basis, September ended churn best strong than QX resonating almost the gross XXX began QX on quarter. third $X so we XX in three provide in our effects up the QX. quarter evolution revenue Let's in a our ARR,

Castlight to Over than Castlight year. generated driven large in more at new is continued last we ARR our responding single and are $XX.X guidance, hub logo of well customers customers believe quarters, speaking, both see customers. increase of strong in Anthem uptick have These piece excellent the care product the by in our This platform our end of This a that This was QX. XX% million. being we favorably engagement of Clearly, by to from two progress cobbling individually. and a direct and last of rather solution platform core Jiff to is engine us. $XX largely as key able Castlight where growth QX, positively been footprint velocity QX together million the performance XX% our sustaining critical Broadly business Castlight customers. address Engage. of in well-being of integrated purchased these primarily time. we of broadening from sales up over driven to compares well-being, XX% relationships more all cross priorities improving. products great are results exciting, with delivering increased platform has sales have by show our to indicators Also ARR with point customers By solutions than three of and end Overall, the products solutions at purchased the our or

and Jiff elements functionality in Castlight app. single to of product Our a combine first

were that about deep find of again bookings enables half than Anthem new sales, Anthem Our much to and sales direct than QX programs them. ever in once our new customer cycles support it easier in for shorter make deals users programs and and these for right access and the partnership More integrations XX% and our clinical will with than logos of we saw business. of many in Engage providers

momentum We market. Engage in are the in encouraged by its for the increased selling Anthem first season

proof XX in year's support We more are initial optimistic selling to provide customers next the season. points of that successful XXXX wave launches of QX important will than

the for markets self we state and insured over local in be Engage in version together Anthem two group delivering Colorado, a making Anthem built markets. us other to first purpose time. January, and we will members look healthcare we an and Anthem’s for XXXX Importantly, exciting is announcements the as fully that will states potential beyond, Anthem’s to Anthem's Engage we insured expand of In recent fully we individual pleased are to navigation insured ahead because of to large customers, see capabilities to to of were California launch partnership new This XX time. with dimension the available

we excited important with our about it for Anthem and growth as continue multi-year the see We to business. progress driver our an in partnership are

the I particular with are expected, customers. important reducing sales hold, running driver key a legacy which which revenue higher moment Our our transparency is noted are in of is growth, drivers churn, taking initiatives long-term ago another than

piece standalone an is market essential is this strong. of not transparency healthcare Although navigation, for the functionality

end dynamic than transparency QX. migration integrated transparency well During of XX% from some reduce of of the QX, this our as customers ARR to at platform as more XX% successful to helped ARR only total

less this than expect our by We is trend from continue the of to XX% total ARR ARR to next end for of customers and represent year. goal transparency

previously hub gives relevant than higher us important to customers. consistent higher and and As of XXXX, for The for our will steerage are our should This we lower engage at increasing wellbeing business rate help these it’s importance revenue for an third-party of to ability healthy growth. point levels. churn into overall ROI longer-term this transparency The platform more platform employer’s churn products improve our in is entire integrated service reach to we engagement more all solutions. and also lower a solutions expect level, later the because to Cross-selling population also broader benefit price we employees, our effective which charge which drives to alone. translates

customers using pre-established to solutions point with solutions to platform. Importantly, integrations purchase we third-party Castlight enable through these engagement drive and help our we

and During the Jiff the growth than signs Castlight are pleased QX, platform more our on partner for helping XX we completed sales the ARR solution of that are paper. Anthem we to integrated improve compared our XXXX. demand partnership and acquisition strong ecosystem Overall, about

by great to role reducing one-third we ways financial we do the our progress maintaining profile. team our in QX operating to $X.X loss making non-GAAP work and played sequentially focus made smart a in efficiently. Everyone growth, drive also seeking million. continuously As has trade-offs sustainable our are on on more Castlight’s to strengthening work We

we for the ever before. Castlight our for is As clearer profitability finalize than path plans to XXXX,

of and Castlight James I'd and to of of and our join members are will Castlight of Cohen Alliances the outstanding announcement Currier, Board X/X/XXXX. from Castlight Finally, Seth Colella integral down the about comment James family. stepped like President Gio Jiff changes currently and on board. co-founders and on and the today's Sales Gio respectively entrepreneurs effective Vice Board

all they've our Castlight grateful mission. us help of them deeply All achieve of are for to both done to to

In board. new we toward also and We a another closing, in trend step acquisition big strong to to took continued began the business Seth excited positive that in QX are add profitability.

broadened of and our We customer our customers. integrated sales existing cross-selling strong of relationships with platform well-being to solutions also

the to that ahead turn together about With made excited over of Siobhan? Siobhan. progress us. the we have opportunities that, and all are We I'll the lie call

Siobhan Nolan Mangini

joining then all up me questions. John. open by results After call call. our note reviewing on afternoon, closed of everyone. today's the Please that, Jiff us discuss And also that our you April we'll on QX Thanks and Good for start acquisition the X. I’ll XXXX let outlook. thank to

is sequential continued results performance operating QX included on reflect drive our new Jiff’s With decrease results XXXX. our dollar strong reported growth, non-GAAP ARR expenses, third logo and improve in sequential to new financial and in business our net execution initiatives So increase starting our operating in our in quarter performance.

net the a increase sequential million. of John annualized QX, revenue end at or million totaled $X.X of As $XXX discussed, recurring ARR

of initiatives Anthem growth Our Jiff comprise our the major and sales. show continue of traction as would go-to-market QX in majority to

and within have approach $XX.X are our transparency a pleased reflects stickier in function end the and customer we by down shift base towards year-over-year a legacy business QX, and at our of stickier our continued proactive to million, some period of products. in towards and well third a business. from third revenue new addressing to ability including on Castlight. is was Total the migrations XX% customers, stronger the the was combination period. XX% ARR new to multi-product relationships, the quarter, with John due proposition mix increased of our we customers end lighter in of Reported had customers, reduction QX move new from way discussed. a of now revenues than QX for increase including XX% launch business transparency of our are an quarter is supporting Anthem the launches now platform action rate to initiative the three six part with net XX% And transparency significant of revenue the local transparency trends our XX% on was Castlight getting such revenue is and a With are approximately with platform, revenue attach seasonally was XX%, clients eight for The increase or services migrating reported on in for total foundation the purchased XX% us, over year-over-year the Subscription We our legacy our At XX% long-term more basis. implementations our a customers at our associated which have of XX% XX% which and in year-ago value Castlight. offerings, renewal. customers revenue out completed platform quarter of The to is year-over-year. This transparency of Jiff alone. the product

primarily from professional continue increase to driven revenue XX% We services an expect growth activity. S&P, by have professional services this year-over-year launch through mid-XXXX. Without initiative in revenue the would been

expect expected gross to our Company prepared at XXXX, compared in year-ago target foundation return we below non-GAAP expect reported expectations Total our turn support flat This to let’s period. in QX to was XX% in third consumer we customers we QX, the combined temporarily XXXX. XX% our due function the gross to non-GAAP customer solid Now year-over-year line with to margin previously and financials. continue in our earlier operating to scale need quarter the is year-over-year XX% to investment for of just long-term XX% up launching stage in mid-XXXX. margins disclosed that launch range our a of million range to Outdoor basis. $XX.X target at is non-GAAP XX% customers to margin as long-term overall gross the on delivery start in to a dip expense

operating All synergies reflecting channel-based sequential basis, go-to-market or we a initiative. the product our we from we in items marketing ability nature to While R&D In innovation, declined Jiff. across to are our million and expense non-GAAP roadmap a expenses broad-based operating support drive of in to $X.X X%. line. post particularly sales all invest leverage continue pleased quarter-over-quarter efficiencies particular, expense and On decreased show capture operating saw operating to continued line future

are expect slightly to R&D quickly sales marketing our capture the grow pleased from levels of We with and and growth ongoing very to their business. support synergies QX the to and expense efforts

As and a the growth result million operating million. operating expense loss $X.X improved QX non-GAAP sequentially of $X.X to efficiencies, revenue

driving execute was million revenue cash million outlook. With $X.X Cash and ARR On I’ll to the quarter operating basis, third and $X.X by million, $X.X cash, on the a We $X.X and non-GAAP $XX we with model. the million the declined ended securities. equivalents, operations continue in increased sequential OpEx by We marketable used turn in quarter. that, of million. to

which due GAAP a days earlier. the slight continue is we customer For quarter, QX, live the due is to foundation tracking $XXX churn reviewed we recognition below The the XXXX our XXXX, indicated million, revenue $XXX modification Last the expect above planned were to for levels today growth handful we sustainable John now is full-year of of million we Overall, the guidance end we to prior slightly above $XXX revenue of of million. beyond. the and that are of sharing go the range begins. timing set to which believe that when in have we to low-end

growth churn full-year look associated we to continue our launches ARR we go now $XX million million. believe we forward, Based expect synergies, well-positioned we growth. operating As proportion to beat platform, drive XXXX range our are ARR sustainable non-GAAP and our Based the to to on with and rate expense improve. expect on well loss $XX we long-term customer rapidly increasing of our our integrated of achieved to

loss expect result, shares. to we this As based share and $X.XX XXXX. OpEx $X.XX operating made the modest we've a growth XXX we million million with approximately also of to progress beat our of expenses XXX on net year in the per non-GAAP to forecast approximately Because

the We now fourth confident XXXX. will are breakeven non-GAAP of Castlight by quarter hit that operating

to year-ago. stronger pleased driving breakeven with a at are We be to were a larger we growth Castlight scale than ARR

includes at full-year performance, range reach We are $XX and XXXX year-to-date expect continue Castlight’s and for of cash flow to strategy million end sustainable at on time. sheet we the In growth. than more the believe our performance summary, we integration-related which XXXX, that our cost. in approximately confident the to to in of used mid-$XX balance working will the in be us on breakeven position acquisition we QX have Based QX cash increasingly operations cash illustrates for million that is long-term our that $XX

product take see And focused and consistent will on We’re go-to-market reaction our Thank to initiatives, drive value positive we pleased of to stakeholders. all your execution to delivering remained the questions. market for now our and you.

Operator

question Stockton first from Wells Jamie comes the Your Instructions] from [Operator of line Fargo.

open. is line Your

Jamie Stockton

in think solution, ARR are piece broadly of to thanks versus I first the taking is the bucket the the the one; us that between, of for decline on transparency as this hey, Hey. got percent attrition maybe guys I'm of guess platform to that going how we've get anyway the fair we us to about sure attention? customers some Is because a much a that's great my around ARR moving are amount point? there you metrics just should how Good and transparency giving questions. evening, for at it

Siobhan Nolan Mangini

Yes, Jamie. majority has the over so to as of It’s the the Siobhan. This that decline folks you. we've the hear transparency year see from is been has obviously there of trying to the decline been ARR. migration nice of Absolutely, have course churn. come through The

we when and say churn, is coming of So talk the from churn ARR you're percentage is that I'd decline then transparency platform. smaller a about rates, the majority the in seeing is churn full over coming to from migration and

in versus two-third, So one-third think like about terms of it migration. churn

Jamie Stockton

hitting statement. quick And up I one it guys, income drove much that expect quarter? maybe year any wrote saw the tied consolidated, that? that's that revenue and that them, you you Is or transaction any I to great. maybe That’s out, how would a during ex like then but like contingent this and to expense you the calendar the not consideration $XX purchasing you related do the Jiff on basically looked assume think Okay. that I business to adjustments on that of a basis, anything million an pay

Siobhan Nolan Mangini

Sure. so earn out components two for to Yes, Jiff. there's the

There’s earn first revenue The of associated just which shares million, is you with the a mentioned. that. million $XX out

net expect associated through net we’re At is that – but how the and is consideration. million see revenue contingent be out There’s the going we of adjustment The to that probability out flowing this G&A through shares will the million of for bookings. it’s QX, see X see $XX play bookings to terms we with second of piece earn looking in end you what still that. hit, don’t point,

Jamie Stockton

really it Anthem. mean, I with seems like great more, one guys just momentum then have And Okay. you

new maybe the much basically at looking pretty in skis that four signed maybe get integrated, legacy it that when is customers I’m platform many and an you in QX, like a incremental over up so accelerate if had be up the customers their and are the of another assume don't are you’ve assumption press down in customers is people customers shutting who QX? would more QX think other as concerned? the right. Jiff to as would QX selling I that platform the would think be are season incremental, far Is things there? how sounds then many do just release the question accurate Like, fully far that that as pace how Castlight in expect signed catalyst XX I you maybe as And

John Doyle

This John. Jamie. is Thanks,

First on in the QX. we momentum look with the on And in as ahead, particular Anthem said pipeline as is question, we’re we really the Anthem Engage pleased healthy. in very new script logos

you is and As season QX QX. in concentrated suggested, the selling

and Engage sets selling that don't of the But that's points uplift we're we in launching with to is meaningfully. heading well-positioned year’s next So season bunch customers XX expect part then that grow to going which QX, to a happen more proof we didn't as and of the us referenceable season one QX, QX. into we Anthem of because look between around. ahead in now first we're this have the in of think selling things a lot QX up In particular, time business than we really

that great trajectory like feel that of we business. So about the and

that a be integrated The your the combined ongoing teams in the be second we’re and end and on hard pipeline an I will selling that we’re as growth the of dialogs which XXXX, migrating, are on of working heading Castlight point the part the the solution, other of from contributor to product. next think kind field solution point XXXX. including launch big launching in But for enablement to to fully perspective, incremental early going is earnest, building half year today when to is packaging pricing of that into Jiff to

meet employer market, think and is And as we're broadly it. momentum we so we landscape great a the in to folks, across about yes, with be absolutely we're so excited going position absolutely navigation in the gaining competitive healthcare

Jamie Stockton

you. thank Okay,

John Doyle

Thanks.

Operator

question comes Chardan. the Wardell line from Your next Steven of from

is line Your open.

Steven Wardell

confidence so mentioned more in far. cost Thank and the to for they're and where release in that track about you from also synergies? interested the the you. us very I'm on and Thank synergies very be the you. synergies they so tell well, example you've seem cost earnings about the most going cost your Can or in maybe coming call

Siobhan Nolan Mangini

think pleased able are capture Sure. I been a Siobhan, great think well the the that synergies we've and we're with example really This of teams is I Steven. Overall to thoughtful and it's about business how together rate rapid smart that really seen and tradeoffs. in I’d the the that's being partially the same is we’ve from sales most buyer. synergies the the area targeting marketing, across making say working

spend, really sales very marketing I itself. and area next has synergies actual and think quickly then programmatic around we the direct the saw been team

we it the into perspective, same perhaps So of ramp XXXX. did just number we the that to put have beginning at of

Anthem well what a think the as it’s as the with and much I leverage that. much the effective Engage we're from of the team more with reps. sales pleased both so smaller seeing we're team, channel more really a contribution consistent but consultants is benefit

continue early In the our as as mentioned sales that replatforming revenue complete a roadmap, that investing the look to to and the actually of launch the additional about QX. is going product synergies the think I X% And to the Castlight heading see the in XXXX. We half ranges As I XX% in of going set we're breakeven. terms terms and be in that in second That we call of we we're long-term as was talking we're revenue percentage G&A so talk midst to at of replatforming and long-term to at we leverage range. to in. said are to we think to being see in of expect range area. operating But end innings we to XXXX bit at QX getting John in helpful we we target terms where complete the marketing, area of expect to some and are we’ll more hit invest continue hit about good of and as in XXXX. going in this is as R&D of This XX% then XX% we a be an we the of forward given

Steven Wardell

Thank have would pick the the future the how Okay. the about and selling thinking now strength now you of from about you the or season you. is or also about XXXX thoughts season, you going up is prospects and Do any XXXX about the as mostly of over it from And nearly the the describe of in less? now same with forward, season selling confidence about strength is clients? market selling buyers it greater or

John Doyle

foot on Jiff an the navigation it’s announced Castlight be when greater, the business look you backed to we space really because in with perspective faster and from exciting we're Absolutely solutions a as our in growing broadest build and front goal we that's absolutely merger was the to January, said a back bigger, what healthcare the and Castlight, doing. again, place to of if growth

quarter just growth we calls, build think the momentum the that And very part that the about from a QX we that's is in – it was I third coming of the talked business. in the off showed platform the unmistakable. of in business strong pipeline coming

more pipeline that moving build look getting and was Engage that of is more XXXX, trajectory we pricing and two Anthem We're outstanding a the the space and value from excited very in seeing is response itself mentioning the packages the to exciting coming in the the begin as put growing ahead direct Jamie's to new places, and think business we're about pipeline question. offers As quickly. we as market together well to we to I

year. the this been the forward and look of business So next notable is we growth in in a trajectory the change pretty to core

Steven Wardell

Thank Great. you.

John Doyle

Thank you.

Operator

of the from Jones Your Sachs. Goldman Robert next from comes question line

line Your is open.

Robert Jones

Thanks insight all the appreciate but the Great. numbers get a attrition. the to question. have shared actual more into little I around bit for trying you churn, guys

leaving? And just folks as they reason few one, share can to are the how be on of you one helpful? I the be they one that choosing the be would anything more I Are any cited keep So up customers have as would guess guess I it far the people just a with actual – as helpful. guess later? not deciding that transparency Are leave questions Just a any different it other customers? share using willing into characterize that. larger commonalities Castlight? Is just product? for why you'd transparency? to then kind Anything who churn would that your far insight to maybe more itself product you not Is as around original came

John Doyle

Yes. to is transparency Robert. And healthcare in important Thanks distinguish, you're navigation. functionality essential right very because

we to that transparency part but communications you we with to that migration steerage powerful on to transparency talk in really search, have the the of pre-populated but important stretching didn't with point, absolutely market, solutions it's conversations That it we've as the transparency guidance platform that So know This part particular is you that care as that eroded. address now excited a on strength asset And the the merger just to steerage, that platform Jiff of more When your search, back levers to able the leveraging this, dawn platform, out business. to of looking talk from had with market navigation the it that's about Plan super the that a the of the when the the the we healthcare developing have of deep didn't employee. did more and which becoming and about and of transparency.” just Health is know product, to personalization part why began “check occurring. on that's point time across hub, the occurred that out us about I that us. for to teams drive dawn box we're wellbeing market why of curated why to characteristics standalone has user channel experience, comes were you a) also breadth programs, to over much of years ship engagement integration more actions that the about clinical of and the

question, answer second choosing And part migrate. customers to types of than your the are so of rather churn the to what

that think a are the a transparency. deductible market are opposed very cost. viable theme today there that from as three And ways one the to high little just while notion is check common I box stories to health looking that to segment idiosyncratic, of management is ago, on is today there do perspective years change the this plan at

user just And the of head-to-head market so we very terms can quality even difficult environment. a compete basis standalone on the a experience think, we when cetera, of successfully it's et et in cetera,

And also going forward year, XX% that do we million going to through think so $XX be customer significant migrate base. as we next the of to see to there's a transparency we to you finally, remaining cycle. have do in the next of and think and churn continuing those transparency ARR looking we're think part We population then about going And less renewal be that stay successful than some to customers. we're on will in

a context And gives so hopefully going what's little more on on there. that you

Robert Jones

wondering give importantly helpful? would then if book more that overall us anything guys for out what be those the mentioned portion the is next I done as look now probably helpful. XXXX, XXXX we renewals And guess can just as XQ, having really renewals, pass lines you up I renewals you this quarter the be talked about had you John, any to sense left. as along of of we That's of year think XX% And might of

Siobhan Nolan Mangini

is Bob. This Sure. Siobhan,

operational one is we've an build done this year really muscle that around thing I renewals. So think

as put we to into from to And last so this year over XX year company. plus a XX, renewals perspective, went combined just

much at gotten we've so better proactively touching customers. And

about we’re through. way right, the You're XX%

planning of to this remains saw, point drove to other to for we're customers customers and what because actually that customers, migration proactively predominantly what the trying continue above push we’re churn renewal outreach to planning actually over the proactive forecast full the do that these year, we We initially talk the levels as we're beyond customer platform. XXXX XXXX. top and was as to of customers XXXX When about John this and elevated of this one that's XXXX that about, churn touching was XX at talking us we transparency was have

of lines us. I of As year conversations number another to components in we in And renewal. of of place major having customers working look what good ahead up forward of XXXX. think now already getting right the a we in renewal and having ARR for terms in operational thinking customers those really is in spot with we're We're base the is terms XX% for really Similar year, schedule next of saw along renewed. it's that of

John Doyle

both earnest us had innovations while of short-term ultimately be. are and a capacity contract on seven one guide quarter, And think figure were in anomalous, Jiff whose QX obviously which and relative And migrating was on in to but rest was scope work which that about through the the broader revenue. everybody think ended situation kept context important of for between alignment the having have Bob, we in unusual actually for we revenue where the portfolio highly customer XXXX. fruition coming I we direct and of And of sides, a those ought come large freeing we range We guidance roadmap, focus from that's second choose the third didn't to conversations scope up would customer the what in understanding to that on so think up piece to portfolio. our into I critical versus forced work product better good where being with the to to quarter forward the in conversations this with faith customized, is

we And anomalous QX. dynamic again, talked why important so one, as company, we to led in situation But an this and a tough thought rightly it's those public trade-off so revenue the that downdraft focus that I was did make but and the call the that's the an about. Siobhan on calls, transparency on make so placed to is think

Robert Jones

guys. it. Thanks the Appreciate all Got detail.

John Doyle

Bob. Thanks

Operator

from from comes line question next the Brian of James. Peterson Your Raymond

open. Your line is

Brian Peterson

guys. Hi, taking for the Thanks the question.

don't Is I you can help potentially to broader know lot now because insured you’ve could there – success Anthem. if a be just So – you had into obviously, of opportunity? the anyway fully selling going base. you're size John, us that with

John Doyle

and their the are those Well, from million half plans the level, of fully highest self rest XXX Americans from let about coverage start employer-based so are insured, me insured. get

adult focused we segments. we on question our your about so get have who historically insured. talked issues And number business as and healthcare are the is very self in we've doubles core as our dependence million And employees answer insured, navigation literally XX to that into solving the for fully

direct business are said XX number their you aware Engage here or the and I that at Now look million that, having a of business local dependants. Anthem public specifically XX million Anthem with and the if filings those about lives in adult opportunity line think the is

look it access have size. lives didn't before we million as you employee product that X sense we give to at that to we So about a with for now this direct

Brian Peterson

to And and okay. that you’re actually But trying then engaging reflected Siobhan, on we it number trying one in just it, actually understand XQ the of sounds come churn this, for that referenced? customers. that's to the you of to like going I’m see expect understand churn, proactively in when quarter first should that you, or that so the just I'm or a that we're fourth is ARR the Got quarter the timing to

Siobhan Nolan Mangini

question. great Yes,

So as notified. take it churn we as soon

been it of the now of How plays ARR to tried terms we've the it million $XXX effective. a notified. notified. becomes in that’s churn P&L right had in ARR so we it of plays we of we've that terms through been conservative So reported is possible, when XXX that that be churn includes it through included Where have, million the

that so customer But in see that at the benefits is John QX. terms And figure of that that's year. what was typically effective what became we about the of churn talking just end in seven consolidates

of QX. we’ve while taken ARR been as it So of out

expect you launch play these and other we we QX imagine and We to as QX as thus can customers sold it then through well as far. customers that Engage Anthem

a reacceleration see revenues in in of XXXX. QX You

Brian Peterson

there right. I but the on dynamic gross it, think the is bookings, Got actually bigger

if annualized were million by XX X it million gross that took you your X the down full-year guidance or ARR XXXX up was I So as more? mean read is that billion to right

Siobhan Nolan Mangini

think exactly that to in figure growth that ARR I quarter. We get notified right take bookings given any that net Yes, ARR we thing. the to report subscription that's last

John Doyle

were bookings gross significantly than higher $XX million Brian in Yes, the…

Brian Peterson

Okay, good.

John Doyle

think think So important platform Really ARR, an book that, right when this significant. it's we really you about recent about that think from significant pretty it’s a the when that you of past cleanly. distinguishes – on flow we're distinction the quarter because through that

Brian Peterson

more, I you we with mentioned renewal, year the business. historically maybe we've of of Okay, XX% kind similar it’s But and seen just last guys I know pressure on know ARR, prior pricing think level, portfolio of the year about about think one versus now transparency trends think as if the we renewals to we pricing Would how it renewals you is relates holding increasing a high to pricing and this in as get up years. on pricing should XXXX? kind about

John Doyle

and increased in these I the we just think confidently fundamentally the show now to they're a where that position think move in the and it. about platform the of the power can pricing the holding them we're is that's a I We're price portfolio, about good remember made of point place where a the the over of earlier broadly customer that because And with very we dynamic the investment the ROI are the a of conversations. driver way and proposition in on function value a time. solution comments making again different sit customer in and fundamental

transparency that opinion. got in there's remaining through that a before and which had portfolio we've portfolio, still in non-transparency we've book a business of think a the much But were book, about healthier I working in ever ton. So broadly churn talked the we've my than in

Brian Peterson

John. thanks Understood,

John Doyle

Thanks a Brian. lot,

Operator

Brian next Morgan question comes from the Stanley. Your line of from Essex

open. Your line is

Unidentified Analyst

kind little I my Thomas wanted Anthem. for into It’s bit more. I in questions. guys. to partnership a guess taking dig Hi, of Brian. Thanks the for

think X or I so rest how their for the kind then million base Anthem you – And you online you're guys. you of this? user was do that? lives? – the read users, How of the like I like you we on economics like to like guys I that have and expand to I And that work penetrate so for paid do a what's kind for guess So I of reps to is guess the off life kind fee pipeline guess, guess full one Are guys of then a their going how like Thanks. compensated are too.

John Doyle

Sure.

to savings is business, efficiency able economic good possible so comparable that obviously to those is a fees Anthem the the customer they’re direct reason per The one is through very we There's overall Anthem to because business, not and of do do that what what the customers XXX% that us. that's just fees a like in favorable the of able is we direct be they're to employee, bring in benefit relationship that but So we our generate doing the the economics per core ROI drive. month of very our clear are and to in and business. Anthem, economics for business the to that Engage

as and as for customer. motion enhancing go-to-market closely partnering have reducing remember that by So friction we we just the with Anthem, aren't the

drive care. space the clinical out these when steer way, carve these money and demonstrable deeply more much efficient more with selling programs, in We we much And derive utilization into folks to integrated products. a for you that are economics save the you from able for settings

how So makes that's the how revenue relationship. Castlight our the pricing in and works there

how Engage now. the and that can and users book accelerate ongoing into terms right those a very our of previous Anthem basis, to Anthem And great reps of versus I significant. all focused ability distinguish attention having penetration in of their actually In easier customers a and compensated, to the are we're of the and I compensate net between in Anthem a the folks get factor driving an that's you market is with serve have new are how business between but customers won't think there a to we incentive basis launches distinguish the the business, have an on sales time. their goodwill customer over going sales compensation they of reps, year-to-year are experience more Anthem time incentive is which talk is team, which penetrating initial Engage, compensation fewer so on how And important is is much renewal through to biggest structures where for much reference that those while a comparatively when deeply and

Unidentified Analyst

Okay. And then more. maybe just one

me, the platform up, you and quarter we Jiff. Thanks. soon? guess of think are is expanded correct on to their last going relationship should kind big signed How see other customers I Walmart I ramping any guys there are

John Doyle

among opportunity of book cross-sells, the tend reasons. broadened also been exciting but in our those So successful about our time to a larger that business, for for for already XXXX that. value add probability customers of long as we've we leave They number have a talked is consequence skewed market, to customers the all expands as the to we've a general over in with a relationships, reasons of which the those those customers relationship have

and increases think I very of all that is positive.

year, of to next the expect of fully said. integrated would that next of half and and but Castlight we've in the Anthem the sales the early the our year – Jiff you end the about that XXXX second comparatively or less the least second to by cross-sell and opportunity, in to the you're portfolio, cross-selling size I direct As business year Engage going because at that next think forward of I ongoing as range of look product deployed of the driven in sales see business customer skewed getting in the growth half more beginning higher in

Unidentified Analyst

Got you. it. Thank

John Doyle

Thomas. Thanks,

Operator

the question Genuity. comes next Close of from Richard Canaccord Your from line

is line Your open.

Richard Close

revenue It we I sure just related to clarify sort was of the Great. revenue a change make time chunk can adjustment. of to like Just to guidance be in the want Thanks customer, that for have the guidance? the just the clear this correct. you Jiff most here. on sounds

John Doyle

guidance. actual that a numbers? your bit the you comment then want I'll on in if or question helpful so that's Is actual about Richard, little just Siobhan talk the and change Yes. did can context

Richard Close

No it. of the context the driver? main What was

John Doyle

Yes, absolutely.

risks particular gave the incorporate the think then focused I are Castlight obviously in to in the looking that we very we that breakeven. at very and time, back we flow we on when to go-forward So year, do guidance been getting see early diligently had cash investors

our to to on able relative that been the at gave we've that guidance pleased time. accelerate I'm so And we progress that dimension

evaluated the and add the the on customers when and gave to would for and of XXXX products is businesses was recently talked that out innovations required was earlier get the we going quarter quarterly stack, to the effort was What saying last the that be guidance implementations Siobhan productivity to like combine we or super kind the which felt to all we as everything same that year that of didn't bottom as the to call our towards put line, the wanted of in some the we building anticipate with important. beginning and about we be On updated large re-platform and moved going us on to the technology innovation accelerate range. at second when revenue had end the even we

out, going As work that to of to required all we significant. was of was of cover R&D stretch our scoped the resources that all be that pretty

it and Castlight for going commitments. decided we to off features And and resources a to project all going where We made R&D which out about you was on a projects started of with benefit kinds we had momentum had our the resources, occurred. to I those in of R&D the customized cases. referenced and look this look what our as things example, overall. But use for really all made many about the QX market evaluated forward figure so given a Jiff that be, that's you're on talking that in turn those was so companies single and could the lot we in company that the think get didn't And getting like process sometimes went across from business roadmaps we're guide that with through call on had just young long-term do and particular that frustrating headed I some something extra meaningful a evaluated make commitments bottom where redundant highly that we at trying different a development at weren't the We agree then landscape. happening good range. to decision we eliminated another work, And of to your and customer on of to is is below is right and a the as seen go line redundancies. scope various it customer as it in of pressure commitments we revenue so be whether the perspective, call a that's focused ultimately really is that took customer. sense to the And I

Richard Close

comments you I services that guess revenue. fast. professional pretty Okay. was Can That some were there over guys again? on go

Siobhan Nolan Mangini

that John is is a in services the Yes, talked Richard. there build-out absolutely. about the Professional related This Siobhan, to call. Anthem fee local

Anthem us moving deliver into California that of fully business, State there’s some Colorado solution and insured for So and configuration required group into Engage the the small to that's there.

professional that And so peanut services. you saw a in QX was hitting

a expect amount three over hitting quarters similar QX We next through XXXX. be the to of

Richard Close

just any fourth so surprised Is or there about fourth thoughts I any far on be ARR, timing too see quarter? at in bar there? reason churn additional we're should as churn to you guess fourth think just Is too we we get And we guys. for anything ahead look a quarter would the to high not quarter ARR the in in decline not Okay. or the there raise of clear sequentially just

Siobhan Nolan Mangini

that’s declined. No, Yes. really

are so we think trying through will that that as we year. I this dynamic, possible transparent to this is be see as a

churn anticipate headwind well. we the as in terms QX So in of notification

Richard Close

Okay.

John Doyle

her talked Richard, little think remarks. Siobhan importantly bit a and I about And this in

these churn if let then dialogues to normal business get if notification where we're really because happening place And just in as to much can able We is quickly drive into its of customers these think to in value. it's a the the question customer of being response conversations proactive trying that of about important it most the platform consequence more proactive decides to and the are you no run one to turn accelerate have migration we a might contract of concentrated course.

a I to we're business QX context advance conversations. because so to for continue the the important to drive for continue going and add as position thing we're think in again, is can, I And those growing, so this good that as migration to but quickly we

Richard Close

or churn these people I into guess mid-XXXX. is – of through move being Jiff that you a it get out little the you proactive second XXXX this. terms think begs of well. in so to timeline you're before as question with when seems or then, of target It moved trying terms you though the this So bit to my But the – in I had commentary of comments platform half next renewables where your

any there there? clarification is So

Siobhan Nolan Mangini

think start XXXX. talking we about I comments. to rate I'm happy and has the with full-year John were for actually churn No, What any the

is. strong ARR because I year. So progress to we much in reducing this transparency think level exposure our got terms that We've base of made where smaller exposure a of the

experiencing versus year-over-year be So in this believe XXXX. overall what the down actually the as should we’re for we year XXXX, head we into rate year,

John Doyle

out the of Yes, the so this to XX%. of the just in XXXX on by that XXXX do in came ARR to at you XX% business. these stake of transparency we're to we the very the QX. different reduce proportion start build that ARR It's QX in And end expect and year coming think below of be year if But amount this that very, to just the rate gradient XXXX on from in about than at relates going conversations end of will at Richard, ahead into terms and XX%. we'll end the the in looking next of think presumably a gross be we the business now the year of at of place churn XX% lower and we

timeline we communicate didn't change on a to that. in So intend

Richard Close

the size the Anthem? difference you've with with respect the of quarter customers industries third Okay, second where to guess second add those quarter in of in quarter of or difference terms versus seen any any and type success I versus compare customers third the some details quarter, or

John Doyle

conceptually much, and cost seeing gaining costs hand the we folks for so to as that to begin, to historically customer we're stronger ecosystem note taking to said Castlight’s it's momentum that think a just across important employers a healthcare as care navigation across of customer guiding acquisition in and I way sizes, efficient, settings industries, across Not serve.

churn days for relationships, customer made those not We’re emerged small and economically certainly of their us business. powerful that early then in part very pretty and as high in the

customers why ask all. to small sell You'd at

that enabled deployment more in One that's which acquisition and relationship customer efficient up of is much support fully the things Siobhan sales attractive much and about we're opens for seeing talked going and Anthem as smaller those economically by business the marketing in efficient, forward, the group efficiencies more Castlight. insured ultimately opportunities

And would business. our type we're so direct smaller in Anthem then wouldn't a we in time, customers that of the in more going few that anything do third of did But business then than out more I make over with probably those I forward continue to saw quarter. more know quarter. going to I of second do think the of we we

Operator

Company. of & Gene Your from comes the next from question Dougherty line Mannheimer

line open. Your is

Gene Mannheimer

Thanks, good progress here. good afternoon. Congrats color in the all the and

it account, way – right XX. that about the added at but so look – I lost you just like net think looks that sounds next count? XX, can logo that the it your So to customer Is

Siobhan Nolan Mangini

it’s right. Yes, about

Gene Mannheimer

improve rate going is guess best seeing and dead if down year, issue, start to relative year? acceleration the we to meaningfully horse that churn Okay, been that next on the do we we've of that around want okay be but the will? churns when given the really you to new optics here of to see come it don't do your what When the middle know I begin

Siobhan Nolan Mangini

I bit what talking return is I is, was earlier a think is this And about notified. Yes. ago

through So next actually the we're turning this QX P&L this in of QX of turning terms plays revenue out in it year. and taking and year QX off, off of in it

customers, our start see we full revenue shifting working And launched customers as we’re other base. in that reacceleration the XXXX way as through Anthem expect we're of quarter do so you’ll the for QX first who our and to that Engage a the preparing revenue of composition launched bought platform we changing in

Gene Mannheimer

with helpful, And update consistent the Very that that’s last SAP great. any thing, with sounds share can agreement us? or prior warrant your on Okay, expectations. then relationship you and

John Doyle

Thanks, from the very distinct great the part date, SAP originally I Gene. two shift was of relationships don't channel strategic notably couple in exact this of years started but almost Anthem When to that now, to we time. allocating a we Most And to things focus talking drive confidence on across think of and the resources And the period of super have have we're and on to have drive about make very you changed now that in relationship velocity. and relationship business over power we're the velocity a most Anthem, significant when would that reciprocation business be of so excited. in that why getting contribution has next slow change. point, compatibly and where SAP dialogue don't relationship to from this I really a from been is that bookings the significant at year, see comparison a perspective a which

the in think when and that a customer to what so any haven't that a by talk that guides That that their as personalized folks relationships Anthem’s build a and build had reason and productive the care about the I right the there notion just as them driving right Anthem. for the in business, the with that that heart how and healthcare we've is with we SAP, you it's in strategic of heart think relationships their of efficient is experience my is settings. as fundamental reason seen I that It when conversations navigation, stretch think they customers. match of you is? integrated isn't natural about into fundamentally dialogue their with Whereas they focus

begun good the from that we the have perhaps distraction think without very is news to the Anthem of less are productive Engage deploy relationship. question resources And results great the able so way powerful on a is a there relationship just finish and to I see in to up another

Gene Mannheimer

Sure.

Okay. Very helpful. Thanks.

John Doyle

Thanks, Gene.

Operator

from Cowen. Your question Charles next comes of from the Rhyee line

open. line is Your

Charles Rhyee

when of the talking transparency will than end less Can you're of ARR I only question. Yes. is to by that talking revenue? saying talking about We're for XXXX. we're about XX% be the just clarify, what we’re about it taking Thanks or reported the

John Doyle

the ARR. That's

Charles Rhyee

Okay.

reason part of renewals had you’ve – and we're higher so And is I out understand it, churn the XXXX XXXX. just to what level reached for so saying, of that and that you

talked how transparency XX% only renewal reaching you of for the out up to next point since when year, about So that practically much this is at been you've already people?

Siobhan Nolan Mangini

in a It’s for great total XX% than that question. Yes. ARR about of It’s XXXX. renewal the less

Charles Rhyee

reason Okay. to will less why And the decline like down XX% year? this which less year that's XX% next the feel to than than was rate we only of drop maybe XX%

John Doyle

you glad I'm it. Actually great raised it's question. a

in they or they actually transparency a business which conversations market the very the have When as is customers, It’s at sorting offers up bar I've that it's On end potential terminate. solution transparency the sorting this platform into a a outcome quite. transparency not clear. and There's third So either renew highest best Castlight the you customer. a obviously basis, for the exercise none. outcome level, we hope is these with head-to-head historically customer, a said

core with to say saying of about that think customers as is experience XX% so continue will are who transparency we think to continue to And consumer customers to going transparency, in exiting we What is we’re is really will number pay their so great there when deliver a transparency. A XXXX, want I customers less Castlight great users. ARR of and product. be to and premium their there

And churn in so of historically. that the beyond than point the seen lower risk should elevated transparency be meaningfully what even business we've

Charles Rhyee

get And of new give sense to can about boarding, helpful. of going and then if Anthem, sort we So that clients referenceable more this trying in comments potential think XX you with some a us the on a to that's were .Okay on back to be year. how season? going into hit that many these brought targets sense you Anthem selling next just rate, you have you made sense

next what year we on this kind a year, get rate can success capabilities. of so to trying was more calibrate Just maybe reference sense the with

John Doyle

I we question is a this Engage just over launched working enablement share the and year. year been It's sales field have a course have but would everybody with statistics what was from sales good on perspective to enablement don't I you, of Anthem the and remind team and

Anthem see sales there and meaningful much of parts in when about in number we conversion. direct cycles. the than a you our by so higher shorter And are rates do definitely business We moving think conversations conversion degree

not successful value teams but We that much heading year that will awareness next proposition expect more only Anthem the much time with greater have forth. familiar and you across and tailwinds and into the from the launches, also do so efficacy by products be

as good So dimension direction we're a on headed I well. in think that

Operator

Analysis. from next First Sparacino Frank from the Your of comes question line

line open. Your is

Frank Sparacino

time. more color Hi, go more the give had maybe, just the what platform to in and discussion outside action much it core the little seeing? products. of a adoption bit guys. that back comment since I'll quarter keep want maybe I short on around haven't talk you’re what that to the given we the product has And around particularly or two just base to grow Elevate that about the perhaps last

Siobhan Nolan Mangini

Sure. for question. Thanks Frank the

is pharmacy a getting or all bundled bit this decision is have north Jiff got to in XX% point increasing quite regardless it’s because in so Castlight that of dental solutions. with actually actually the at Anthem pharmacy, packaged So customers of the we've of Engage support solution,

we that into decision seeing XX% a we’re there's business say go XX% and Jiff, have preserve actually all is with has of mid-teens, dental. Jiff our Jiff. a able the while And a or points times a set preserve of you to of so packaging functionality, So renewals that then product the combination is bias, entire in of robust specifically. XX% associated book other having Castlight then about it. specific customers back price talk being of or to Elevate would preserve the functionality very I been of still when to It’s that had

Frank Sparacino

Thank you.

John Doyle

Operator, more one we’ll please. question take Frank. Thanks,

Operator

Thank you.

Stifel. comes from the of Jeff Your from last Captain line question

line open. Your is

Jeffrey Captain

question. the taking for Thanks guys. Hi,

product on how your talked you have one another of than I just about expected how following resources R&D Jiff. more you've guess, quick a been had constrained kind Just given

plans any if focusing of curious for any Castlight? integrating roadmap are you're at more plans Jiff your your you're – modules Just what what you – if looking kind future new have introducing product primarily on – and if new

John Doyle

the premise. a of Well, all, I little bit think first with

of metrics leading. So and product highly Jiff, the to and including the very forth as market is leverage user powerful number the Castlight terms from traffic integrate we claims data, very we're devices search in think market steer we our across connected ability innovative ability so powerful data and leapfrogging of to and a of and experience, now breadth that dimensions itself on

as innovation integration so and we progress a Anthem boost companies of and onto scale we're of functionality. terms single one combined is The of as with team and QX products getting in the made of think the key from In launched new productivity focus and get merger while Engage and with is the Jiff operation absolutely stack. technology acceleration we've complete been I functionality, has that products with our platforms wonderful R&D the the significant a The the investment. the making there of and and reasons

we And so the can much now, on a to are reassure about but talking of those future. in that have innovations lengthy premature we it's that top will things I of the have you those excited we about be to platform say be list that very to and launching

Jeffrey Captain

for Thanks color. the Great.

John Doyle

Thanks. End of Q&A

Operator

I Mr. to John Q&A over CEO the Doyle, turn our concludes This session. call back you.

John Doyle

Castlight us path we everybody made Have Raymond November James business Thanks was sales QX we're see on for today. and about and you progress of And strong evening. December. to Piper in with ahead the conferences investor joining hope excited opportunities in overall our call growth Jaffrey and super at breakeven. in acceleration and a the platform our to great upcoming

Operator

today's conference concludes call. This

now may disconnect. You

Castlight Health (CSLT) 25 Oct 172017 Q3 Earnings call transcript