Castlight Health, Inc. Class B

Good afternoon and welcome to the Cast Light Health first quarter 2021 conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Tia Davis. Thank you. Please go ahead.

Leading today's call are Mabel Mara, Chief Executive Officer, and Will Bondurant, Chief Financial Officer. Mabel and Will will offer prepared remarks, and then they will take questions. The Cast Light press release, webcast link, and other related materials are available on the Investor Relations section of Cast Light's website. This call contains forward-looking statements regarding trends, strategies, and anticipated performance of the Cast Light business, including but not limited to guidance for 2021, new sales, our ability to bring new innovation, the opportunities and impact of COVID on our own operations, our ability to sell and our operating results, opportunities, and the impact of COVID on our customers' businesses and their decisions to buy certain benefits, or institute workforce reductions, retention of existing customers, gross margin, and operating expertise trends, cash use, future cash position, and the changes in the growth strategy and the company's performance. These statements are made as of April 29th, 2021, and reflect management's views and expectations at this time and are subject to various risks, uncertainties, and assumptions. If any of these risks or uncertainties develop or if any of the assumptions proven correct, actual results could differ materially from these expressed or implied by our forward-looking statements. The company disclaims any obligation to update or revise any forward-looking statements. This call contains financial guidance, but the company will not provide any further guidance or updates on performance during the quarter unless a regulation FD complaint forms. 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 of important factors that may cause actual events or results to differ materially from those contained in Cashlight's forward-looking statement. Today's call and presentation also includes certain non-GAAP financial metrics, such as non-GAAP gross margin, operating expenses, operating income, and net income per share. These non-GAAP financial measures should be considered in addition to, not as substitute for or in isolation from, measures prepared in accordance with GAAP. However, CastLight believes these non-GAAP metrics aid in the understanding of CastLight's financial results. Disclosures regarding non-GAAP metrics and reconciliation to comparable GAAP metrics on a historical basis can be found under the heading Reconciliation of GAAP to Non-GAAP Financial Measures of the Earnings Release that was filed before the call. With that, I'll turn the call over to Maeve O'Meara, CEO of Cast Light Health. Maeve?

Thank you all for joining us. On the call today, I'll discuss our achievements in the first quarter, including progress against the three goals we shared on our last call, growth, innovation, and operating discipline. After that, I'll turn the call over to Will for a more detailed review of the first quarter financials. Our total revenue for the first quarter of $35.1 million exceeded our guidance. Our non-GAAP growth margin of 66.8% was 170 basis points higher than the same period last year. And Caslight achieved a fourth straight quarter of non-gap profitability and positive cash flow, reflecting our efforts to exercise operating discipline to support continued financial sustainability. Before I discuss each goal, I am pleased to share we agreed to expand our partnership with Boston Children's Hospital, BCH, and the CDC in support of the national COVID-19 vaccination effort. It has been a privilege to leverage our expertise in health navigation and complex healthcare data to support the country in this critical phase of pandemic response. The expansion will allow us to continue to serve BCH and the CDC through the duration of the vaccination effort this year. Will will share more details on the financial impact. In addition, the team delivered several meaningful achievements against our goals for 2021 in the first quarter. Starting with our goal of ARR growth, our annualized recurring revenue, or ARR, increased $1.3 million from last quarter to $128 million. While the first quarter is typically a seasonally light sales and renewals quarter, we were pleased Blue Cross Blue Shield of Alabama chose to add care guides in February and proud that our customer experience teams delivered our lowest churn quarter since 2016. Looking forward, I'll comment on the three core factors to deliver on our goal of ARR growth. Employer sales, health plan sales, and renewals. Employer sales. Given the seasonality of our sales cycle, Q1 and early Q2 are our critical pipeline building period. The combination of a growing navigation market, Our competitive high-tech, high-touch offering and strong team execution on pipeline generation activities have allowed us to make meaningful progress against our pipeline targets. Our Q1 Stage 1 pipeline generation was more than 130% of our target, and we have multiple active sales opportunities with very large employers that we view as winnable. We don't think 2021 will represent a full return to a normal buying year, but we do see faster progression through the early stages of the pipeline and expect a significant improvement from last year's COVID-colored dynamic. Health plan sales. As we see progress with employers, our health plan business is robust and accelerating. Since February, several health plan prospects progressed from the early to mid stage, including several digital navigation opportunities. In addition, we saw multiple net new opportunities related to the transparency and coverage regulations. Turning to our existing health plan partnerships, we believe there is potential for expansion across Anthem, Cigna, and Blue Cross Blue Shield of Alabama. As a point of validation, Blue Cross Blue Shield of Alabama signed an expansion in February to add care guides, and Cigna is in the process of adding additional groups in the Taft-Hartley business segment. These additional Cigna groups are covered under our existing contract and thus will not have an immediate financial impact, but both expansions demonstrate our health plan customers' confidence in our solutions and highlight the opportunity to expand existing plan partnerships. Renewals. As I mentioned above, Q1 represented our lowest churn quarter for Castlite since 2016. This is partly due to a smaller 2021 renewal cohort, but it also reflects strong execution. As an example, we were pleased to renew one of our larger and more complex customer relationships with a meaningful seven-figure contract size. As we work to continue our improvement and retention, we transitioned our customer success managers to a variable compensation plan that aligns customer goals and renewal outcomes with the team's compensation. In addition, we will soon release a third-party study demonstrating Castlight's impact on medical claims costs. As I've said before, we believe third-party validation of our meaningful savings will support renewal conversations. I look forward to sharing more progress in coming quarters as our main renewal season is Q2 and Q3. Next, I'll turn to our goal of pioneering next-generation navigation. As I noted in February, our differentiated, high-tech, high-touch approach to navigation drives strong outcomes for our customers through an affordable combination of self-service and clinical expertise. To that end, we continued to make progress with our CareGuide solution in the quarter. As I mentioned in Q1, we are committed to raising awareness and now see CareGuides in more than 30% of our pipeline discussions, and we were pleased to see the number of RFPs we received for CareGuides increase nearly five-fold over last year. In addition, we launched American Eagle on CareGuides, which is an exciting milestone as they are a net new customer who went to market for high-touch navigation and chose CastLight because of our CareGuides offering. Our national leadership role supporting the CDC and Boston Children's Hospital with COVID-19 vaccinations positioned us to support our customers with a truly best-in-market solution for vaccine navigation. We launched a comprehensive in-app and CareGuide's supported solution for all of our clients in mid-February, which provides educational content, addresses vaccine hesitancy, and guides users through an interactive experience to help them determine their eligibility and identify nearby locations with vaccine inventory. Our customers are also able to tailor their program around vaccination, including messaging, incentives, or education on related programs. Since the launch, one-third of our users have accessed and utilized vaccine navigation. Importantly, the solution also has helped drive new registrations, as up to 65% of the newly registered users in the past 60 days accessed vaccine navigation for customers who promoted the solution. While bringing innovation is a core tenet of our customer relationships, I believe vaccine navigation has been among the best received features we've delivered to clients in my time at Caslight and is a great example of how navigation solutions should be able to flex to serve as critical infrastructure to support a customer's strategy or high priority needs at any time. While we'll provide detail on our progress against our goal of continued operating discipline, I am pleased to be able to raise our 2021 outlook as a result of our expansion with Boston Children's Hospital and the progress we have made on renewals. Finally, as you've heard me say in the past, one of my top priorities has been building a world-class leadership team that can lead Castlight in its next chapter. I'm excited to announce that we have hired a new SVP and Chief Sales Officer, Frank Jennings, to lead our direct employer sales organization. I had the opportunity to work closely with Frank when he was one of Castlight's most successful sales leaders seven years ago. Since then, he's led the commercial organizations at several other digital health companies, including Covaira most recently and Doctor on Demand for five years. I'm thrilled he is returning to Caslight. He brings deep industry experience, strong field sales leadership, Caslight knowledge, and a commitment to the culture of our organization. I'm excited to have Frank on board and pleased with the immediate and visible impact he is already making on the organization. To close, I'm happy to report 2021 is off to such a strong start, and I feel confident in our ability to execute against our three priorities for the year, returning to ARR growth, pioneering next-generation navigation, and continuing to demonstrate operating discipline while investing in growth. As always, I want to express my deep appreciation to the Castlight team for their unwavering dedication to our mission and the way they show up for our customers every single day. I'll now turn the call to Will for a review of the first quarter financial results and our outlook for the remainder of the year. Will?