CSLT - Earnings call transcript Q1 2019

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Operator

Good afternoon. My name is Chris and I'll be your conference operator today. At this time, I would like to welcome everyone to the Castlight Health Q1 2019 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator of you Head conference. begin Investor Fuges, may Relations, the Gary

Gary Fuges

afternoon, Castlight Call. the welcome First Good to Conference Health and Quarter XXXX

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

information XXXX; and and in additional and contained website. on regarding at actual breakeven; such factors discussion certain our release the we so updates and subject future metrics refer expected XXXX, forum. If in statements the believe the operating factors management's Exchange X, includes financial after revise and timing A These XXXX, non-GAAP quarter, loss, the cost-saving any forward-looking profitability, and uncertainties year or of in during materially we is channel reflect to release, views risk webcast partners; diluted for in guidance migrations; aid our disclaim expenses, slide this made anticipated strategies to and This and do the provide our be contains earnings platform operating any events time those included operating margin, accurate. gross May but risk we in of Please May assumptions. that, to GAAP operating of press the or reconciliation call forward-looking filings that replayed were available Securities as cash various provide from earnings risks, in position. may cash guidance With impact the our and in presentations and momentum; our Our per and performance share timing basis appendix public call expectations our and per on direct I'll future of obligation of cause update statements nonrenewals; call. our churn release of ARR to can longer section the call Doyle, may call the We growth; company's understanding our any statements. loss this turn further for before efforts; current filed that net not found channel today's press non-GAAP of Today's Castlight's forward-looking X, non-GAAP trends, our statements. CEO. call, business, as or add guidance also flow results comparable the over no We metrics to on of will are differ to the a performance unless are including presentation John and full sales or of ability with income to important John? Commission results. historical be that the share

John Doyle

Thank joining today. you for us on call the

product was believe goals investments We health sales business. The solid our quarter are buyers consultants that program Two our utilization at cost and number investments. product results the for conferences. experience guidance. with years. validate customer accelerate to year and majority made strategy savings. These value is user the to by in we increasing further industry start we've the accounting market results with over navigation last believe million and results a overall financial of of improve and migration XXXX new new and further care progress work that our parallel, of both the direct full on grew product continued and sequentially, benefit demonstrate four for We in record and innovation need we that first drives business personalized our QX. There digital the the QX new health health engagement, of with customers, what book results communicated track In year of our to to $X made close generated launched ARR recent align we a our

we on on first from discuss Siobhan start detail we quarter good focused prime highlights and building As season QX. on financial I'll selling results. are the provide this enter quarter, then our will more the the

As on that quarter I in to said, the as were the ARR, of or plan annualized deals in we sales channel Both ended recurring QX at million. closed employer with direct pipelines revenue, $XXX and we year-end. were

increased terminated year-over-year. that customer major the from last ARR X% ARR Excluding July,

inside I'm sales XX% with the from sales, These and represented encouraged in for of target the Complete we sales QX contribution new expectations. numbers, the direct-to-employer by market. on Castlight Looking traction the saw our

this XX% than we guidance comprehensive illustrating vertical. business a win the QX products, market and of wellbeing our more single-app came One Castlight care major for means now platform navigation in health from players solution. was notable which XX in new demand a the Additionally, five U.S. top Complete of bank, at combined serve

in health seen vendors, Platform year Since Given digital the retention successful business in of customer for believe of our our Complete through the the in health business. launches, improvement banking continued thesis of industry technology for satisfied clients. our meaningful industry point is and institutions and book navigation a we've We validation total reliability. September, our of driving mix on nearly set ARR, U.S. the we the believe account ago testimonials with financial now focus from new bar up their XX% launch to is of commentary XX% for high proof our penetration the platform customers customer from period.

care and even wellbeing achieved on both digital front user First, that our for a engagement health and have support exceed what own. data point cost or care levels early that can our savings health of guidance view care their drive wellbeing benefits personalized door

improvement rates, engagement provider approximately with average active a overall wellbeing example, standalone search health higher savings. is condition For XX%. care users registration cost guidance These rates gains strong and of reflect indicator XX% XX% to is XX% driving in from with monthly Complete program utilization and or which a leading standalone care approaching

trade the by hosted at a keep of such you've some recent the market health including Group toward consultants time and personalization high-quality steering us engagement, National industry care as increasing cost-efficient hearing number Business reinforced they conference employers increasing and data-driven the for recent themes conferences, navigation. on users those been Health, need for Second, from At insights. through

leadership experience clients of However, their entire customers value New conferences the Experience, and comes and Conference employee that ArcBest, from discuss best has in their feedback launched referenceable. March the engage Their validation premier and The we Complete on O'Meara, prime in been logistics they execution. the presented In all webcast accelerating early are Today, over how navigation. participated York their journeys, Health positive rely and in company, next personalized the enables the are Product investment. our April, drive it. believe Customer of Maeve a have Care opportunities a extremely at existing their Diego care population are discussed by of and San have Employee EVP is the us, their Boards, Complete benefits user health and week, programs sales our whole on we hosted which very these of right to Complete. Ford and on This well-being. Complete's of interconnectivity on We willingness focus are to stages individual quarters selling to of how in into helpful pipeline health respective optimizes share supports who considering focus the customers season and to squarely appreciate and believe front expanding Complete Castlight two of resources, we customers' our We launch prospects

over invested in converted can In the to to have generate exceeding legacy and this addition customers process customer is driving product our The business, I'd virtuous plan. of to to balance the the year, wellbeing with on and platform the each. new and give like of a an migration to we goals heavily legacy we of migrating achieve you platform. wellbeing important to expectations migration innovation who've clients We've customers tracking cycle by believe update

Regarding currently pay take We're begin expect engagement testing this will we up progress appointments, level, approach end-to-end our pleased we're bill user quarter ROI. for third the we're Also, towards to pilots the how value and which to partnership in and with a platform, good this implementations both To to progress scheduling incremental standing greater and product made believe the us, we've and areas quarter. later innovation, year. adding taking in ultimately positioned we'll selling transactions drive and a new very season.

resonating employers Our solutions and health with delighting navigation are users. our

the to united on Importantly, continue by dedication I'll we call customers that a today. It's an our drive of most large completed of I migrations, to the is across call, of With market Siobhan. time forward. remaining single entire the and industry majority the to the means whose which nearly have platform company Castlight's in turn for be time that organization powerful will the all efforts solution the expect the of Castlighters the the over that, appreciate QX exciting

Siobhan Nolan Mangini

Good me call. John. after and and for we'll afternoon, QX your on all review Thanks, of questions. everyone, today's you year I'll outlook, thank us and also results that, joining full let our take

mix. to an annualized and of generating healthier recurring early with and new revenue, platform the We million. are tracked quarter The that business investments ARR, expectations ARR indication our first according and a our $XXX.X net strategy provided product ended or quarter

of and $X.X say As million pleased Complete products, John increased over sequentially. represent ARR our mentioned, half We're to ARR. newest total our now Engage,

of users. notified QX Total down Subscription QX. customer the time effective impact our record was due the and Importantly, XX of with revenue we are revenue five million, year-over-year. implementation is and and $XX.X on million a the churn to customers launches at customers increased function all X% shared we contribution. they becoming platform. whilst call. revenue new XX% end was revenue of these year-end, launched months, first Reported implementations which expectations quarter completed to for and $X.X XXXX engaging our speaks was total sequentially in had This strength our revenue first in new is and line revenue of delighting for the ramp Average onetime a quarter prior

revenue declined ago the XX% development as year-over-year services onetime professional expected, included year As fees. period

XX% non-GAAP our number up in gross year-over-year to launches non-GAAP QX essentially down a QX and from and financials. of turn of let's migrations. XX%, year result investments was and period. margin the customer This to wellbeing the margin XX%, gross ago sequentially. Now flat support customer expected was legacy record Subscription required first was was the quarter

We continue most XX% sales wellbeing year efficiencies legacy range as $XX.X continued quarter hit to complete second to due was gross and by of migrations in first expense expect down million, this margin primarily midyear. to non-GAAP the of XX% our operating in XX% customer of the in year-over-year we to target the long-term Total marketing.

$X.X new platform its expect XXXX, Based will to investment high-quality on market run for above, to driver capital gaining the users million non-GAAP a attract was technical million. of year based innovation. used operating We're continue the Cash future on R&D that for The to to period. offerings. Specifically, on platforms. our $X.X loss who're range million year ago the in in requirements we on compared talent largest operations hire full target was above use our and was pleased opportunity $XX from conviction points this to of working continue long-term drive loss

payments quarter and prior turn QX to ended million of our use million our with income on million and breakeven $X platform. and of we on are collect we're that, per $XXX see $X.XX the shares. with operating million $XXX guidance cash the between non-GAAP driving levels of the non-GAAP Revenue in We to XXX of outlook. a cash ranges XXX equivalents. to proof reiterating the million on Today, between share between I'll positive and as our And quarter. provided engagement and $XX.X and point cash based expect earnings XXXX million, $X.XX We we

first continue to now usage at partners to points a and And your a between want to proof for single Complete of and early start first the and cash to their of migrations power quarter support expect work users summary, was we'll third pleased integrated launch $X the million we health flow with the our execution to take as year. the We our from first the hard quarters. million and journey. I generating operator, their you. Thank Castlight's cash successful In to very good employees and be navigation also on platform. In of $X the customers, questions. particular, a with scale operations XXXX on were shareholders, in this take for thank moment we're

Operator

Your first question [Operator with Jeff is William from Instructions] Garro Blair.

is line Your open.

Jeff Garro

the afternoon. ARR. little Thanks with Hi, for question. good We'll taking the start housekeeping a net new on

closed. And some and use some expected sales those ask building wanted to signed QX jumping to some as and had had then a that trending? fourth are just pipeline are the to quarter that the from QX? so last how mentioned if You pushed deals point in quarter sign, And for how QX still cycles I is ask but

John Doyle

Jeff. Thanks, Yes.

QX did important. come it ARR, we the quarter, to that in we a But We're had increase not QX. that's best very So closed excited years. solid miss sequential had I and one of sales the in was the about important, of deals we've number think from a in in

us. the improving conversion which the talked front feel good few in We also of have on the around QX, And in tailwinds business. we've tone really the and strong very years. substance it's in season heading what performance a calls, QX And from tied and opportunities in Those of QX. three and churn as churn to into at We're a than the are that's the just had a perspective, last really we've the the level delivering. in about Castlight about got in on in really more we think is we been coming that selling big turn lowest about prime in rates, pipeline saw market

think the like that York the very New Complete couple this deals successful. closing have I webinar, very Ford been then And Diego, customers illustrating and a strongly and quarters. week, which over seen next launches delivering of a think recently, in for results at driving well product, Boards Castlight Conference reliable The So on we're we've speaking San bodes we ArcBest

Jeff Garro

Great. That's for growth think even question beyond one we this about And more as helpful. year. me

on potential front. see channel quarter, about talked update wanted that new if for so You partners last had to you any

John Doyle

the things than the Yes, slowly where I business is This more I'd the track have for area hoped. QX plans entire for certainly with headlines on across is And our do. the year. one gone executing

selling be keep bit relationships that for we'll channel will anticipated. has taken we the I it shape season, an with a think I here on forward you posted moves good than time XXXX in our of expansion and as but longer

Jeff Garro

second expectation able in it those? is quarter being flux? for to one quarter Any of more Or or announce third

John Doyle

detail in that time the good expansion more to ability I feel our relationships. about frame tell the about channel you of

think in leverage time season and a next relationship hit a good new the we position during to to I be certainly that's one selling fair line a need to the year.

the certainly goal. So that's

Jeff Garro

Great, thanks the questions. for taking

John Doyle

you, Jeff. Thank

Operator

with next question Analysis. First Sparacino Your from is Frank

Your line open. is

Frank Sparacino

I the and you've don't Hi. there just terms to seem Maybe in the to getting wellbeing have any from from clients et start news maybe level a high ROI incentives, sales has the impact kind from wellness around with, your of recent John, It perspective. like was that an if of thoughts feedback know, related programs, months unusually cetera. a And been of perspective? you the in

John Doyle

wellbeing standard care part that to employees is in led At offerings skepticism employee to of Well, combining us words, medical employers from and that guidance the aware those bunch things wellbeing was think point guidance particularly is. of most business about wellbeing and that, spend employers large other investment the hasn't a very that framework made – traditional sense, of the a all, and of not way first In and ROI I care the certainly been of very that wellness a productive economically, in least employer view. reducing historically. the among the that are overall historically think

there been overall to combining has has and as what that to there hypothesis able care that not talked in guidance, we're was higher able is other meant seeing a engagement results, clear. drive the By of think to I wellbeing solutions benefits those product. than but about levels customers solution we've the entire are either is the book that generate combined to and have the that we're across business customers before of ROIs for

You're average seeing around on higher XX%. registration

search the ROI. and lead rates, product use You're seeing active monthly of greater of which much all higher to

portion doing they we're area allocate what us wellbeing, And overall productive, is trends. the their that demonstrably so we differentiates in Castlight quite investment with the historical actually of from customers, that which for believe to

Frank Sparacino

just That's helpful. And other question. maybe one

a activity just look what where relative that mix will XXXX, the was the at trying if the just new assuming you of I'm side last But things. that to think like. sense little As year you to looks of channel get a direct a sales for – and sense to be, bit on disappointing obviously, direct get trying

John Doyle

direct-to-employer new to change the where QX, XX% big looking direct the of want we with more side in than saw for the that We're line was business of a more Yes. sales. continue. business, on what much see in We

will, not not into think Frank, when where track across this it very Complete. on were last folks not time launched had selling the you surprising about only context it's think we're our And the I year, business. we that Castlight really,

product hands having customers of a Today, largest were We've for wasn't our market kind business, put the in midst we're the any in that's test in complex wellbeing there that get which could prospect for were demo excited some of of we've with – put the not about executed, and September, So the the stretching customers. folks are we so got last resolving just to of that to able interested. in prospect hands fully of in a that all a solution we launches But referenceable to you Castlight and test Complete themselves. back the and a most themselves product having that issues compounded reference. the of could legacy in of effects operational the

experience product another the points are the to up so And proof back tailwind.

about context than change we have and with our better customers do XXXX to certainly well bodes even when on direct look QX for did So XXXX. a then, I pretty I as the we forward in in in the that think it's big think in conversations we ability business and

Frank Sparacino

Great. Thank you.

John Doyle

Thanks.

Operator

Charles with Cowen. is Your Rhyee next question from

open. is line Your

Charles Rhyee

of side there? Engage, On Maybe move selling sales talk you later flows the in the of the year, – ebbs how us in we – a quarter season? Engage maybe give can sense direct, focus on were some side and about the it part Anthem of of more function about is or that characteristics that sort on a with as do the the a is selling sign is what's we the Anthem maybe is other that if season or the XX% the think happening the through of the more

John Doyle

I'm sure the Charles. I not it the didn't part come Thanks, can fill I part but your me. I if first I question because in caught I hear, didn't entire correct think didn't, through of here

So business feel overall, think the time side of more stage point I again, our good mature the business, the on to that about channel that of the from view given results includes evolution good, that how relative That's part direct-to-employer year. think the on motion we've the and Castlight got track, with a is market visibility, line XXXX kind which than plan progressing we on we're is in I terms feeling this we've product. the sales that of business. Complete the predict, easiest again, been channel of And to of in a its is of sales

partners about and already quarter. lot certainly On that's the Castlight speak are with focus the prospects prospects of I a talking business, in the spent of opportunity less this who deployed we difference really more availability think the and about Castlight customers the and seeing, Complete. HR and direct in to of leaders product side consultants time because the we're Complete, to for about and I improvements the XXXX, think, particular,

Charles Rhyee

a it's But it launching, forces And channel mature, when like say helpful. Anthem or an sort being was sales or just about I ago, so think we more That's more predictable. if you then, when being year were Okay. of it remember trained. was like the over first

accounts of more first out then this and I broadening to think what year their national brokers. the

a I'm me more see has and that if the So be – for that side strong mature is more of you? or growing you it's predictable it is profile growth at seemed correct side it the When sort just channel the time, wrong, changed? still just this

John Doyle

rate Well, and we've part expectation. about coming in of business the side that business a our of of for new XXXX, channel level in expectations things as the talked our times a in into expected XXXX, run XXXX we've couple we similar that's on of seen and

and a absolute growth so added in the from dollars it a it ARR but as is it's of overusing I there of And mature certainly young new business point view, when an contributes as that use new the of word point that but ours, business XXXX. probably like in certainly

of side we will less we really channel expect It's better the the the direct to We the XXXX where X. a forward we the significantly did side business, – expect balance half XXXX. and improvement business in be of a better going did similar than in where between

Charles Rhyee

then Great. quarter just do a maybe And the quick many follow-up. we customers How with? end

Siobhan Nolan Mangini

XXX, Fortune It's to continue about Charles and XX% XXX around customers.

Charles Rhyee

Great, lot, thanks a guys.

John Doyle

Thank you.

Operator

question next Company. Dougherty Gene & Mannheimer from is with Your

is open. line Your

Gene Mannheimer

customers, the on your think QX. to vulnerable skewed like Congrats Jiff afternoon. ARR legacy how good meaningfully still than and time that's year is now, which thanks a about customers respect XX% that's this transparency-only With the we that ago. more should to sounds about or good to progress that so Is less Hi, speak, in population?

Siobhan Nolan Mangini

Gene. Sure,

most wellbeing is customers year. who news ARR the the we shared what those this different XX% mid-XXs are numbers through is in a great renewal really total point and time. were a was about place. of – of is into ARR number and we point So were all were conversations your incorporated migrating. XXXX, conversations migration happened customers cycles were Those happening And conversations terms in that have The business, transparency-only to about so been talking talking at that this XXXX and it's through we're of and last of in that in we it customers of in group fundamentally the are the

migrating, some migrated of the already who now through of are then we – is are that year. and them with are this committed so rest migrating have customers And

Gene Mannheimer

Okay. helpful understand. Very to Good.

loss you four of of And have the breakout your to platform respect with ARR many of contribution customers? sort question of those biggest the to committed then-largest customer is last the year. and to five approach? their now share or Next Can what your how next

Siobhan Nolan Mangini

Well, what I'll here's share.

is I that at one the scale and that we've There Walmart the they've I We've customer powerful about about proof launched other them, differs. is only what the for that think talked of an Complete. of concentration point been customers one profile a incredibly talked was is think us.

So this different is the there one customer so just that or a in Most we customers we'll actual has provide those is over want XX Complete first terms the for the customers as beyond launches I eight-digit but about that you think are that to have on as breakdown of profile. top much top Complete, Complete different migrating After four. the that's Anything of more do go are John? add, the integrations detail ARR to had. Complete, you and and it's customer, of no

John Doyle

XX can that be has a top we out bit than to that. little less the continued Well, around business, point of concentration customer the the of XX%

Gene Mannheimer

in the Thank jump Great, Okay. you. I’ll queue. back

John Doyle

Gene. Thanks

Operator

the Instructions] Doyle for And this back turn to will concludes closing remarks. call. the any [Operator I portion John Q&A things of now

John Doyle

of offerings new to the Have and for in see front well And us Conference call. on joining the encouraged resonating evening. a our at with buyers. year. hope in right demonstrated time. in users are users wonderful start QX a right and platforms' our confident Healthcare we're Jefferies the you at how Thank health navigation We're Blair promising was by June ability you right William the Growth benefit put We Conference. the to to today's

Operator

disconnect. conference may now call This you and concludes today's

Castlight Health (CSLT) 3 May 192019 Q1 Earnings call transcript