Castlight Health Investor Presentation August 2020 (NY S E : C S - - PowerPoint PPT Presentation

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Castlight Health

Investor Presentation August 2020 (NY S E : C S LT)

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Safe Harbor Statement

This presentation contains forward-looking statements about Castlight Health’s expectations, plans, intentions, and strategies, including, but not limited to, statements regarding Castlight Health’s second quarter performance and 2020 full year projections, impact of COVID-19, the success of our strategy and our expectations for our future business and financial performance. Statements including words such as “anticipate,” “believe,” “estimate,” “will,” “continue,” “expect,” or “future,” and statements in the future tense are forward-looking

• statements. These forward-looking statements involve risks and uncertainties, as

well as assumptions, which, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties include those described in Castlight Health’s documents filed with or furnished to the Securities and Exchange Commission, including the risks set forth in our annual report on Form 10-K filed on February 28, 2020, and our quarterly report on Form 10-Q for the three months ended June 30, 2020, when filed. All forward-looking statements in this press release are expressly qualified in their entirety by these cautionary statements and are based on information available to Castlight Health as of the date hereof. Castlight Health assumes no obligation to update these forward-looking statements. We provide guidance in this presentation, but we will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. Please refer to today’s press release and the risk factors included in the company’s filings with the Securities and Exchange Commission for discussion

• f important factors that may cause actual events or results to differ materially from

those contained in our forward-looking statements.

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Non-GA A P Financial Meas ures

To supplement Castlight Health’s financial statements presented in accordance with generally accepted accounting principles (GAAP), we also use and provide investors and others with non-GAAP measures of certain components of financial performance, including non-GAAP gross profit and margin, non-GAAP operating expense, non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP net income (loss) per share. Non-GAAP gross profit and margin, non-GAAP

• perating expense, non-GAAP operating income (loss), and non-GAAP net income (loss) exclude goodwill impairment, stock-

based compensation, certain legal expenses, amortization of intangibles, restructuring charges, capitalization and amortization

• f internal-use software, and lease exit and related charges.

We believe that these non-GAAP financial measures provide useful supplemental information to investors and others, facilitate the analysis of the company’s core operating results and comparison of operating results across reporting periods, and can help enhance overall understanding of the company’s historical financial performance. We have provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, except that we have not reconciled our non-GAAP operating loss and net loss per share guidance for the full year 2020 to comparable GAAP measures because we do not provide guidance for stock-based compensation expense, and capitalization and amortization of internal-use software, which are reconciling items between GAAP and non-GAAP. The factors that may impact our future stock-based compensation expense, and capitalization and amortization of internal-use software are

• ut of our control and/or cannot be reasonably predicted, and therefore we are unable to provide such guidance without

unreasonable effort. Factors include our market capitalization and related volatility of our stock price and our inability to project the cost or scope of internally produced software. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Castlight Health encourages investors and others to review the company’s financial information in its entirety and not rely on a single financial measure.

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Investment Highlights

A leading provider of health navigation solutions to employers and health plans Operating in a large and growing market driven by consumer adoption of digital healthcare and need for navigation solutions Launching new high-touch offerings to expand market opportunity and better support customers and members (C are Guides) Mu Multiple ways to grow New management team bridges outside healthcare expertise with company experience Non-GA A P profit and pos itive cas h flow in 2Q’2020; expect to approach cash flow breakeven during 2H’2020

• Employers
• Health plans
• C OVID-19 related
• New solutions

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Castlight at a Glance

Founded Employees Total Addressable Market Fortune 500 Companies Lives on the Platform Invested in the Platform Records in Data Asset Revenue FY2019

Our health navigation platform connects hundreds of health vendors, benefits resources, and plan designs into one comprehensive health and wellbeing experience. We guide individuals — based on their unique profile—to the best resources available to them, whether they are healthy, chronically ill, or actively seeking medical care. C astlight transforms the employee benefit experience into a deeply personalized, yet simple, guided one, empowering better-informed patient decisions to unlock better healthcare outcomes and maximizing return on healthcare investments.

2008 400+ 60+ ~20M $300+

3B + B + $143M $8B +

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Cigna Agreement Details

• S igned an agreement

t with C igna to serve their Federal government and Taft-Hartley population

• Initial population is several hundred thous and Federal

Government employees out of C igna’s 6 million total

• Starts J anuary 1, 2021
• E xpect

t AR R of ~$2 million*

* Not included in Q2’2020 AR R as the agreement was signed in Q3’2020 * Please see Castlight 8-K filed August 5th, 2020 for additional information

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Senior Management combines company + healthcare experience

Name Y ears at t C S L T Previous Experience

Maeve O’Meara C hief Executive Officer

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Will Bondurant C hief Financial Officer

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Ma Matt Mo Moran S VP of Corporate Development

<1 <1

J ayes h Patel S VP , Product and User Experience

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Angel R os a S VP , C ustomer Experience

<1 <1

Tamar R udnick S VP , Marketing

6

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A decade of innovation

S ingle experience for the complete health journey TODA Y 2010

High-Touch (C are Guides )

Omni- channel approach, with empathic human concierge guides and proactive outreach to users with identified gaps in car

Pers onalization

Predictive analytics, machine learning/AI based models, omni- channel, real time recommendations

Wellbeing

Challenges, content, mind/ body/wallet, global, social, incentives, coaching, screening

Ecos ys tem

Platform integration framework to enable rapid data sharing and user experience integration of best in breed partners

Behavioral Health

Guides employees to cost-efficient, effective, accessible behavioral health care

Trans parency

Medical, Rx, dental comparison, spend management, provider quality, network strategy, care planning tools

2015 2017 2018 2019 2016

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Strategic Priorities Update

2020 Priorities

Health plan growth strategy B road launch of Cas tlight Care Guides R evitalize direct-to to-employer bus ines s Optimize operating profile

• Launched innovative return-to

to- work solutions to support our customers

• S igned agreement with Cigna
• S trong mid/late-stage pipeline
• Three customers utilizing full

Care Guides portfolio

• 30+ using free COVID-specific

Care Guides support

• Establishing financial sustainability
• Non-G AAP profit and pos itive cas h

flow in Q2’2020

2Q 2020 Updates

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Health Benefits are Challenging to Navigate

Nutrition Program EA P Ma Maternity Ma Management Health Concierge Benefit Condition Ma Management Program Mental Wellbeing Program Cos t & quality trans parency Health S avings Account Financial Wellbeing Health Benefits

?

? ?

What doctor do I choos e?

?

How can I improve my lifes tyle behaviors ?

?

How can I save money

• n

healthcare?

?

How do I know what benefits are available to me?

?

How can I get help with my condition?

?

Where should I go for my care?

?

Can I afford my care?

?

How can I manage stres s better?

?

73% of employees don't understand their

health benefits

70% prefer digital over in-person for a

portion of their healthcare solutions

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Castlight Complete Solution

Care Guidance Navigator

Castlight Care Guidance empowers employees to make better healthcare decisions, demystify available benefits, and engage in the right programs at the right time.

• Guide to the bes t care option
• Clarity of provider cos t and clinical quality
• Reduce overall medical spend

Wellbeing Navigator

Comprehens ive health navigation helps employees manage health, whether they are healthy, managing a condition or actively seeking medical care. Improved health = savings for employee and employer.

• One central hub for all health benefits
• Data-driven, personalized user experience
• Highly configurable and company-specific

Wellbeing Navigator engages entire employee populations to our Ecosystem of enterprise vendors you already offer, best-of-breed partners, and apps and wearables employees use every day.

• Claims -driven pers onalization
• S us tain employee engag ement
• Deep integration for a seamles s experience

S ingle experience for the complete health journey

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Powered by Data Aggregation & Integration at Scale

34 Medical payors 10 Pharmacy Benefit Managers (PBMs) 16 Dental payors 15 Behavioral / EAP programs 113 Eligibility Vendors 60 Bank integrations 100+ distinct AP I integrations 150+ distinct single sign-on (S S O) integrations AI and machine learning S ingle stack architecture

Ecos ystem Vendor Medical Payors PB Ms Dental Payors Co Cons umer Trackers Enrollment Vendors Cu Cus tomer Vendors Us er Behavior HS A vendors Medical Claims Provider Directory Unit Prices Narrow Networks Accumulators Benefit Design Insurance card Pharmacy Claims Formularies Preventive Drug Lists Pharmacy Networks Adherence Alerts Insurance card Accumulators Dental Claims Dental Directory Prices Annual Accumulator Ortho Accumulator Program Actions completed Program completion Key results and

• utcomes

(e.g., biometrics, HS A balance) Fitness, sleep, or nutrition data Member Eligibility information (social, demographic, human info) Embedded registration enrollment integration Program Actions completed Program completion Key results and

• utcomes

S earch Pulse S urveys Goal selector Health Assessment Account Balances S S O

3B+

data points

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| 1313 Eligibility file data (social, demographics ) Me Medical & Rx Claims Biometrics & Health Ris k As s es s ment Health Goals S earch, Page Vi Views , Etc.

Ingest Data AI/Machine Learning Models Applied Over 116 S egments Across 35 Categ ories in both Clinical Conditions and Health & Wellbeing S ourced from Claims, S earch History, E-file, Health Assessment, Health Goals, IBM Watson and Biometrics results Prioritize and S egment Users so they receive campaigns with the most relevant, timely mes s aging and content, based on their segmentation.

In App Recommendation s Targeted Emails

Data Asset Drives Personalization

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Recommendations drive engagement with pre-integrated ecosystem vendors

* Limited integration available

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15 Pers onalized home page provides key information and promotes relevant programs, benefits and services to the user Provider search res ults unique to us er, incorporating proprietary clinical quality score, cost, and the user’s health profile Machine-learning based pers onalization recommends relevant benefits or “next best action” to the user, updated daily Integration with dozens of ecos ys tem vendors to power health improvement and corporate wellness programs

Castlight Complete Solution

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Castlight Care Guides

• Offers one-to-one live support to

connect employees to the right benefits and care

• E ngages users through their preferred

modality—chat, telephone, or email

• S teers employees to the best next

step in their healthcare journey

• S calable and fully integrated service

built on top of Castlight’s existing personalized data platform

Recent Accomplishments

• Completed S alt Lake City Customer

Center of Excellence

• Three cus tomers now utilizing full

solution

• 30 customers using quickly developed

Care Guides support for customers and users impacted by COVID-19, with focus on vulnerable populations

Frequent Use Cases

• Am I being overcharged?
• How do I pay for my specialty drug?
• How do I best manage my chronic condition?

R outed to the appropriate team member

• S upport
• Clinical
• Nursing

High-touch, human service leveraging Castlight’s personalization engine to efficiently deliver assistance

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Health Plan Strategy Expands Market Opportunity

• S igned October 2019, effective

J anuary 1st, 2020

• $168M total contract value, 30-month

agreement

• E xpands relationship (~20% increase

in AR R vs AR R at end of Q3 2019)

• Products include white-labeled health

navigation solution for large employers and embedded navigation services for Anthem’s full commercial membership

• Proof point for health plan market

R enewed & Expanded Anthem R elations hip

• Approximately 100 health plans worth pursuing

(>150m covered members)

• National plans, Blue Cross Blue Shield plans, and

regional health plans

• Met 2020 goal of signing a second plan with

Cigna

• Hired health plan sales team in Q3 2019, with

leader who successfully sold technology to multiple health plans

• Offerings include white-labeled full navigation

platform, embedded transparency, personalization services, and clinical quality.

• White-label plus ability to embed functionality

into a plan’s user experience allows us to meet the health plan where they are on their technology journey

Unlocking Health Plans as Growth Vector

+

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Working WellTM Tes t t S ite Finder

COVID-19 Support

• S trong pipeline of interest
• S igned several customers worth $0.5mm annualized
• Launched first customer July 2020
• Free solution for Castlight users and all Americans
• S trengthening relationship with Google and more

than a dozen state & county health departments

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Me Medical S pend R educed ~2% for low-risk members ~7% for high-risk members

Engagement Produces Results

2-3x R OI

1

1 S pend reduction for Castlight Complete users utilizing both Care Guidance and Wellness features; excludes high-cost outliers (members with more than

$75k in annual medical claims cost incurred)

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“We wanted one message, one platform, one place to go. It worked: by by 6 months we had 88% registration with a 90% return rate.”

GE Appliances focused on one simple, meaningful incentive to launch Castlight to their salaried employees who elected Health Reimbursement Accounts (HR A). All adult health plan members were required to register for the program in order to receive HR A dollars. Building on 2019 success, GE Appliances added to their Castlight experience in 2020 with comprehensive wellbeing and enhanced personalization for employees.

• One-stop platform for

all health benefits and services​

• Increase member

awareness and engagement with available resources​

• One consistent, constantly repeated,
• mnichannel​ communication

campaign

• 100% of HR A account funding at risk

pending registration​ of all adult health plan members

• Embed program registration in

workflows of onsite​ healthcare teams and Anthem member touches

Goals Strategies Results

61% viewed a benefit program 89% opened a personalized

communication

75 Net Promoter S core 88% of targeted population registered

in the first 6 months

90% of registered users have

returned to the Castlight platform

Case Study

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Financial Overview

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Financial Highlights

• PMPM-based business model selling to employers and health plans
• Highly visible and recurring revenue
• Multi-year, non-cancellable contracts
• Favorable S aaS -based gross margin profile
• Stable balance sheet, after cost structure measures in 1Q20
• Delivered positive cash flow 2Q 2020 and expect to approach cash

flow breakeven during 2H 2020

• E xpect to end 2020 with around $40m of cash

(1) (1) Based on 2020 Q2 Results Press Release, dated July 28th 2020

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2Q 2020 Results

$35.9 $35.5 2Q19 2Q20

R evenue

65.1% 68.3% 2Q19 2Q20

Non-G AAP Gross Margin

• $2.2

$2.1 2Q19 2Q20

Non-G AAP Operating Income

Annualized R ecurring Revenue (A R R )

• $139 million as of 6/30/20
• 2% sequential decline, reflecting a slowdown in employer contracting during the peak of COVID

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Diverse Customer Base with Durable Revenue Model

Financial Highlights

• High-recurring PMPM-based

business model

• Multi-year contracts
• Favorable S aaS -based gross

margin profile

$19 199 Mi Million of non- cancellable e backlog (1)

(1) As of June 30, 2020

27% 23% 11% 10% 8% 6% 15% Telecomm Manufacturing Healthcare Finance Retail Consumer Packaged Goods Other

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$4 $44 4 million

Cash Metrics

Cas h* as of J une 30, 0, 202 020

Approach cas h-flow breakeven

2H 202 020 Outlook

* Cash, cash equivalents and marketable securities

Delivered pos itive cas h flow in 2Q Q 2020 Expect to end 2020 0 with around $40 $40 million in cas h*

(1) Based on 2020 Q2 Results Press Release, dated July 28th 2020 (1)

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2020 Outlook

(1) 2020 Outlook based on 2020 Q2 Results Press Release, dated July 28th 2020 (1)

Me Metric R ange

GAAP R evenue $127mm – $135mm Non-G AAP Operating Loss ($17)mm – ($24)mm Non-G AAP EP S ($0.11) – ($0.16) Weighted Avg. S hares Outstanding 150mm – 151mm Cash Used in Operations ($12)mm – ($20)mm

Expect to approach cashflow breakeven during 2H 2020

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Appendix

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GAAP to Non-GAAP Reconciliation: Gross profit

Three Months Ended Six Months Ended June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Gross profit: GAAP gross profit subscription $ 25,470

$

28,151

$

25,730

$

53,621

$

51,370 Stock-based compensation 205 169 196 374 415 Amortization of internal-use software 79 26 — 105 — Amortization of intangibles 530 530 587 1,060 1,174 Reduction in workforce 221 — — 221 — Non-GAAP gross profit subscription $ 26,505

$

28,876

$

26,513

$

55,381

$

52,959 GAAP gross margin subscription 74.3 % 73.3 % 75.8 % 73.8 % 75.8 % Non-GAAP gross margin subscription 77.3 % 75.2 % 78.1 % 76.2 % 78.1 % GAAP gross loss professional services $ (2,731)

$

(3,579)

$

(3,983)

$

(6,310)

$

(8,243) Stock-based compensation 144 116 236 260 501 Reduction in workforce 317 —

—

317 — Non-GAAP gross loss professional services $ (2,270)

$

(3,463)

$

(3,747)

$

(5,733)

$

(7,742) GAAP gross margin professional services (226) % (541) % (205) % (337) % (227) % Non-GAAP gross margin professional services (187) % (523) % (193) % (306) % (213) % GAAP gross profit $ 22,739

$

24,572

$

21,747

$

47,311

$

43,127 Impact of non-GAAP adjustments 1,496 841 1,019 2,337 2,090 Non-GAAP gross profit $ 24,235

$

25,413

$

22,766

$

49,648

$

45,217 GAAP gross margin 64.1 % 62.9 % 60.6 % 63.5 % 60.4 % Non-GAAP gross margin 68.3 % 65.1 % 63.4 % 66.6 % 63.3 %

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GAAP to Non-GAAP Reconciliation: Operating Expense

Three Months Ended Six Months Ended June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Operating expense: GAAP sales and marketing $ 7,683

$

10,472

$

8,889

$

18,155

$

18,104 Stock-based compensation (748) (672) (662) (1,420) (1,289) Amortization of intangibles (528) (528) (272) (1,056) (544) Reduction in workforce (334) — — (334) — Non-GAAP sales and marketing $ 6,073

$

9,272

$

7,955

$

15,345

$

16,271 GAAP research and development $ 13,043

$

13,822

$

14,487

$

26,865

$

30,212 Stock-based compensation (1,314) (1,163) (1,733) (2,477) (3,437) Reduction in workforce (658) — — (658) — Certain legal expenses — 191 — 191 (191) Capitalization of internally developed software — 21 — 21 — Non-GAAP research and development $ 11,071

$

12,871

$

12,754

$

23,942

$

26,584 GAAP general and administrative $ 6,340

$

6,576

$

7,010

$

12,916

$

14,303 Stock-based compensation (858) (1,066) (2,030) (1,924) (3,192) Amortization of intangibles — (17) (17) (17) (34) Certain legal expenses — — — — (533) Reduction in workforce (497) — — (497) — Non-GAAP general and administrative $ 4,985

$

5,493

$

4,963

$

10,478

$

10,544 GAAP goodwill impairment $ —

$

50,300

$

—

$

50,300

$

— Goodwill impairment — (50,300) — (50,300) — Non-GAAP goodwill impairment $ —

$

—

$

—

$

—

$

— GAAP operating expense $ 27,066

$

81,170

$

30,386

$

108,236

$

62,619 Impact of non-GAAP adjustments (4,937) (53,534) (4,714) (58,471) (9,220) Non-GAAP operating expense $ 22,129

$

27,636

$

25,672

$

49,765

$

53,399

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GAAP to Non-GAAP Reconciliation: Operating loss

Three Months Ended Six Months Ended June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Operating loss: GAAP operating loss $ (4,327)

$

(56,598)

$

(8,639)

$

(60,925)

$

(19,492) Impact of non-GAAP adjustments 6,433 54,375 5,733 60,808 11,310 Non-GAAP operating income (loss) $ 2,106

$

(2,223)

$

(2,906)

$

(117)

$

(8,182) Net loss and net loss per share: GAAP net loss $ (4,204)

$

(56,335)

$

(8,381)

$

(60,539)

$

(18,920) Total pre-tax impact of non-GAAP adjustments 6,433 54,375 5,733 60,808 11,310 Non-GAAP net income (loss) $ 2,229

$

(1,960)

$

(2,648)

$

269

$

(7,610) GAAP net loss per share, basic and diluted $ (0.03)

$

(0.38)

$

(0.06)

$

(0.41)

$

(0.13) Non-GAAP net income (loss) per share, basic and diluted $ 0.01

$

(0.01)

$

(0.02)

$

—

$

(0.05) Shares used in basic and diluted net loss per share computation 150,078 148,872 144,572 149,475 143,790