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Castlight Health
Investor P resentation
S eptember 2020
(NY S E : C S L T )
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Safe Harbor
Statement
This presentation contains forward-looking statements about Castlight Health’sexpectations, plans, intentions, and strategies, including, but not limited to,statements regarding Castlight Health’s second quarter performance and 2020 fullyear projections, impact of C O VID-19, the success of our strategy and ourexpectations for our future business and financial performance. Statementsincluding words such as “anticipate,” “believe,” “estimate,” “will,” “continue,”“expect,” or “future,” and statements in the future tense are forward-lookingstatements. These forward-looking statements involve risks and uncertainties, aswell as assumptions, which, if they do not fully materialize or prove incorrect, couldcause our results to differ materially from those expressed or implied by suchforward-looking statements. The risks and uncertainties include those described inC a stlight Health’s documents filed with or furnished to the Securities and ExchangeCommission, including the risks set forth in our annual report on Form 10-K filed onFebruary 28, 2020, and our quarterly report on Form 10-Q for the three monthsended June 30, 2020, when filed. All forward-looking statements in this pressrelease are expressly qualified in their entirety by these cautionary statements andare based on information available to Castlight Health as of the date hereof.C astlight Health ass umes no obligation to update these forward-looking statements.
We provide guidance in this presentation, but we will not provide any furtherguidance or updates on our performance during the quarter unless we do so in apublic forum. Please refer to today’s press release and the risk factors included inthe company’s filings with the Securities and Exchange Commission for discussionof important factors that may cause actual events or results to differ materially fromthose contained in our forward-looking statements.
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Non-G A A P Financ ial Meas uresTo 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 financialperformance, 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-GAAPoperating 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 amortizationof 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, facilitatethe analysis of the company’s core operating results and comparison of operating results across reporting periods, and can helpenhance 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 financialmeasure, except that we have not reconciled our non-GAAP operating loss and net loss per share guidance for the full year2020 to comparable GAAP measures because we do not provide guidance for stock-based compensation expense, andcapitalization and amortization of internal-use software, which are reconciling items between GAAP and non-GAAP. The factorsthat may impact our future stock-based compensation expense, and capitalization and amortization of internal-use software areout of our control and/or cannot be reasonably predicted, and therefore we are unable to provide such guidance withoutunreasonable effort. Factors include our market capitalization and related volatility of our stock price and our inability to projectthe 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, measuresprepared in accordance with GAAP.
Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peercompanies, and therefore comparability may be limited. Castlight Health encourages investors and others to review thecompany’s financial information in its entirety and not rely on a single financial measure.
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Investment Highlights
A leading prov ider of health nav ig ation s olutions to employers and health plans
Operating in a larg e and growing market driven by consumer adoption of digital healthcare and need for navigation solutions
Launching new hig h-touc h offering s to ex pand market opportunityand better support customers and members (C are Guides )
Multiple way s to grow
New manag ement team bridges outside healthcare expertise with company experience
Non-G A A P profit and pos itiv e cas h flow in 2Q’2020; expect to approach cash flow breakeven during 2H’2020
• E mployers
• Health plans • C O VID -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 des igns into one comprehensive health and wellbeing experience. We guide individuals —based on their unique profile—to the best res ources 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 decis ions to unlock better healthcare outcomes and maximiz ing return on healthcare investments.
2008
400+
60+
~20M
$300+
3B +
$143M
$8B +
6
Cigna Agreement Details
• S igned an ag reement with C ig na to serve their F ederal government and Taft-Hartley population
• Initial population is s ev eral hundred thous and F ederal G overnment employees out of C igna’s 6 million total
• Sta rts J anuary 1, 2021
• E x pec t A R R of ~$2 million*
* Not included in Q2’2020 AR R as the agreement was signed in Q3’2020 * Please see C astlight 8-K filed August 5th, 2020 for additional information
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Senior Management combines company +
healthcare experience
NameY ears at
C S L TP rev ious E x perienc e
Maev e O’Meara C hief E xecutive Officer 10
Will B ondurantC hief F inancial Officer 7
Matt MoranS VP of C orporate
Development<1
J ay es h P atel S VP , Product and User
E xperience 9
A ng el R os aS VP , C ustomer E xperience <1
Tamar R udnic kS VP , Marketing 6
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A decade of innovation
S ingle ex perienc e for the complete
health journey
TO D A Y
2010
Hig h-T ouc h (C are Guides )
Omni-channel approach, with empathic humanconcierge guides and proactive outreach to users with identifiedgaps in car
P ers onalization
Predictive analytics , machine learning/AI based models , omni-channel, real time recommendations
Wellbeing
Challenges , content, mind/ body/wallet, global, social, incentives , coaching, screening
E c os ys tem
Platform integration framework to enable rapid data sharing and user experience integration of best in breed partners
B ehav ioral Health
Guides employees to cost-efficient, effective, access ible behavioral health care
Trans parenc y
Medical, Rx, dentalcomparison, spendmanagement, provider quality, network strategy,care planning tools
2015 2017 2018 20192016
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Strategic Priorities Update
2020 P riorities
Health plan growth s trateg y
B road launc h of Cas tlig htCare G uides
R ev italize direc t-to-employ er bus ines s
Optimize operating profile
• Launched innovative return-to-work s olutions to support our customers
• S igned ag reement with Cig na • S trong mid/late-stage pipeline
• Three customers utiliz ing full Care Guides portfolio
• 30+ us ing free COVID -specific Care Guides support
• E stablishing 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
NutritionP rog ram
E A P
Maternity Manag ement
Health Conc ierg e
B enefit
Condition Manag ement
P rog ram
Mental Wellbeing P rog ram
Cos t & quality trans parenc y
Health S av ing s A c c ount
F inanc ial Wellbeing
HealthB enefits?? ?
What doc tor do I choos e?
?
How can I improve my lifes ty le behav iors ?
?
How can I s av e money
on healthc are?
?
How do I know what benefits are available to me?
?
How can I get help with my condition?
?
Where s hould I go for my care?
?
Can I afford my care?
?
How can I manag e s tres 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 decis ions , demystify available benefits, and engage in the right programs at the right time.
• Guide to the bes t care option• Clarity of prov ider cos t and clinic al quality• R educ e overall medic al spend
Wellbeing
Navigator
Comprehens iv e health nav ig ation 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-s pecific
Wellbeing Navigator engages entire employee populations to our E cos ystem 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 employ ee eng ag ement• Deep integ ration for a seamles s ex perienc e
S ingle experience
for the complete
health journey
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Powered by Data Aggregation & Integration
at Scale
34 Medical payors10 Pharmacy Benefit Managers (P B Ms)16 Dental payors15 Behavioral / E AP programs
113 E ligibility Vendors 60 Bank integrations
100+ distinct AP I integrations150+ distinct single sign-on (S S O ) integrations
AI and machine learningS ingle stack architecture
E c os y s tem Vendor
Medic al Pay ors
PB MsDental Pay ors
Cons umer Trac kers
E nrollment Vendors
Cus tomer Vendors
Us er B ehav ior
HS A vendors
Medical ClaimsProvider DirectoryUnit PricesNarrow Networks AccumulatorsBenefit Des ignIns urance card
Pharmacy ClaimsFormulariesPreventive Drug ListsPharmacy NetworksAdherence AlertsIns urance cardAccumulators
Dental ClaimsDental DirectoryPricesAnnual Accumulator Ortho Accumulator
Program Actions completedProgram completionKey results and outcomes (e.g ., biometrics , HS A balance)
Fitness , sleep, or nutrition data
Member E ligibility information (social, demographic, human info) E mbedded registration enrollment integration
Program Actions completedProgram completionKey results and outcomes
S earch Pulse S urveysGoal selectorHealth Assess ment
Account BalancesS S O
3B+data points
| 1313
E lig ibility file data(s oc ial,
demog raphic s )
Medic al & R x Claims
B iometric s & Health R is k As s es s ment
Health Goals
S earc h, Pag e Views , Etc .
Ingest DataAI/Machine Learning
Models Applied
Over 116 S eg ments
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 ag ing and content, based on their segmentation.
In App R ec ommendation
sTarg eted
E mails
Data Asset Drives Personalization
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Recommendations drive engagement with
pre-integrated ecosystem vendors
* Limited integration available
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Pers onalized home pag e provides key information and promotes relevant programs ,
benefits and services to the user
Provider searc h res ults unique to us er, incorporating proprietary
clinical quality score, cost, and the user’s health profile
Machine-learning bas ed pers onalization rec ommends relevant benefits or “next best
action” to the user, updated daily
Integration with dozens of ec os ys tem vendors to power
health improvement and corporate wellnes s 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 exis ting personalized data platform
Recent Accomplishments
• Completed S alt Lake City Customer Center of E xcellence
• Three cus tomers now utiliz ing full solution
• 30 customers us ing quickly developed Care G uides support for customers and us ers impacted by COV ID -19, with focus on vulnerable populations
F requent 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’spersonalization engine to efficiently deliver ass istance
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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)
• P roducts include white-labeled health navigation solution for large employers and embedded navigation services for Anthem’s full commercial membership
• P roof point for health plan market
R enewed & E x panded A nthem R elations hip
• Approximately 100 health plans worth pursuing (>150m covered members)
• National plans , Blue Cross Blue S hield 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 succes sfully 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
Unloc k ing Health P lans as G rowth Vec tor+
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Work ing WellT M Tes t S ite F inder
COVID-19 Support
• S trong pipeline of interest• S igned several customers worth $0.5mm annualized• Launched first customer J uly 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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Medic al S pend R educ ed
~2% for low-risk members
~7% for high-risk members
Engagement Produces Results
2-3x R O I1
1 S pend reduction for Castlight Complete users utilizing both Care Guidance and Wellnes s features; excludes high-cost outliers (members with more than $75k in annual medical claims cost incurred)
2020
“We wanted one message, one platform, one plac e to go. It worked:
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 R eimbursement 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 comprehens ive wellbeing and enhanced personalization for employees .
• One-stop platform for all health benefits and services
• Increase member awareness and engagement with available resources
• One cons istent, constantly repeated, omnichannel communication campaign
• 100% of HR A account funding at risk pending registration of all adult health plan members
• E mbed program registration in workflows of ons ite 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
• P MP M-bas ed bus iness model selling to employers and health plans
• Highly vis ible and recurring revenue
• Multi-year, non-cancellable contracts
• F avorable S aaS -bas ed gros s margin profile
• Sta ble balance sheet, after cost structure measures in 1Q20
• Delivered pos itive cas h flow 2Q 2020 and expect to approach cas h flow breakeven during 2H 2020
• E xpect to end 2020 with around $40m of cas h
(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 G ross Margin
-$2.2
$2.1
2Q19 2Q20
Non-G AAP Operating Income
A nnualized R ec urring R ev enue (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 P MP M-based bus iness model
• Multi-year contracts
• F avorable S aaS -based gross margin profile
$199 Million of non-canc ellable bac k log (1)
(1) As of J une 30, 2020
27%
23%
11%
10%
8%
6%
15%
Telecomm
ManufacturingHealthcare
Finance
R etail
Consumer P ackaged
Goods
Other
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$44 million
Cash Metrics
Cas h* as of J une 30, 2020
A pproac h cas h-flow breakev en
2H 2020 Outlook
* Cash, cash equivalents and marketable securities
Delivered pos itive cas h flow in 2Q 2020E x pec t to end 2020 with around $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 28 th 2020
(1)
Metric R ang e
G AAP R evenue $127mm – $135mm
Non-G AAP Operating Loss ($17)mm – ($24)mm
Non-G AAP E P S ($0.11) – ($0.16)
Weighted Avg. S hares Outstanding 150mm – 151mm
Cash Used in Operations ($12)mm – ($20)mm
E xpect 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