CASTLIGHT HEALTH, INC., 10-Q filed on 5/10/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 07, 2018
Class of Stock [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
Trading Symbol CSLT  
Entity Registrant Name CASTLIGHT HEALTH, INC.  
Entity Central Index Key 0001433714  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Class A    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding   51,923,213
Class B    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding   84,139,213
v3.8.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 48,174 $ 61,319
Marketable securities 26,433 32,025
Accounts receivable and other, net 33,129  
Prepaid expenses and other current assets 3,632 3,991
Total current assets 111,368 119,268
Property and equipment, net 4,791 5,263
Restricted cash, non-current 1,325 1,325
Goodwill 91,785 91,785
Intangible assets, net 19,111 20,253
Deferred commissions and professional services costs 25,830  
Deferred Professional Service Costs 12,318 12,480
Other assets 2,150 1,997
Total assets 268,678 279,883
Current liabilities:    
Accounts payable 5,549 3,907
Accrued expenses and other current liabilities 12,473 13,178
Accrued compensation 7,551 13,941
Deferred revenue 30,050  
Total current liabilities 55,623 57,011
Deferred revenue, non-current 3,575  
Debt, non-current 4,648 4,958
Other liabilities, non-current 2,594 1,900
Total liabilities 66,440 68,326
Commitments and contingencies
Stockholders’ equity (deficit):    
Additional paid-in capital 592,023 586,900
Accumulated other comprehensive income (20) (22)
Accumulated deficit (389,778)  
Total stockholders’ equity (deficit) 202,238 211,557
Total liabilities, convertible preferred stock and stockholders’ equity (deficit) 268,678 279,883
Class A    
Stockholders’ equity (deficit):    
Common stock value issued $ 13 $ 13
v3.8.0.1
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Revenue:    
Subscription $ 32,989  
Professional services and other 3,490  
Total revenue, net 36,479 $ 27,703
Cost of revenue:    
Cost of subscription 9,174 [1] 4,246
Cost of professional services [1] 5,769  
Total cost of revenue 14,943 8,055
Gross profit 21,536 19,648
Operating expenses:    
Sales and marketing [1] 13,912 14,145
Research and development [1] 15,371 11,071
General and administrative [1] 6,825 8,998
Total operating expenses 36,108 34,214
Operating loss (14,572) (14,566)
Other income, net 128 192
Net loss $ (14,444) $ (14,374)
Net loss per share, basic and diluted $ (0.11) $ (0.14)
Weighted-average shares used to compute basic and diluted net loss per share 134,994 104,935
[1] Includes stock-based compensation expense as follows: Cost of subscription $120 and $67. Cost of professional services $535 and $450. Sales and marketing $2,219 and $2,074. Research and development $1,264 and $730. General and administrative $971 and $896.
v3.8.0.1
Consolidated Statements of Operations Parenthetical - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cost of subscription [Member]    
Allocated Share-based Compensation Expense $ 242 $ 127
Cost of professional services [Member]    
Allocated Share-based Compensation Expense 301 246
Sales and marketing [Member]    
Allocated Share-based Compensation Expense 1,138 2,154
Research and development [Member]    
Allocated Share-based Compensation Expense 1,654 1,790
General and administrative [Member]    
Allocated Share-based Compensation Expense $ 1,257 $ 1,295
v3.8.0.1
Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement of Comprehensive Income [Abstract]    
Net loss $ (14,444) $ (14,374)
Other comprehensive income (loss):    
Net change in unrealized gain (loss) on available-for-sale marketable securities 2 (19)
Other comprehensive income (loss) 2 (19)
Comprehensive loss $ (14,442) $ (14,393)
v3.8.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement of Cash Flows [Abstract]    
Restricted cash, non-current $ 1,325 $ 1,144
Operating activities:    
Net loss (14,444) (14,374)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 1,860 698
Stock-based compensation 4,592  
Amortization of deferred commissions 2,853  
Release of deferred tax valuation allowance due to business combination   (64)
Accretion and amortization of marketable securities 131  
Changes in operating assets and liabilities:    
Accounts receivable and others, net 11,196 1,691
Deferred commissions (1,171)  
Prepaid expenses and other assets (206) 1,183
Accounts payable 1,783 177
Accrued expenses and other liabilities (7,627) (4,755)
Deferred revenue 3,183  
Net cash used in operating activities (18,972) (10,912)
Investing activities:    
Purchase of property and equipment 388 166
Purchase of marketable securities 10,025 16,007
Maturities of marketable securities 15,750 34,799
Net cash provided by investing activities 5,337 18,626
Financing activities:    
Proceeds from the exercise of stock options 490 374
Payments of issuance costs related to equity 0 612
Net cash provided by (used in) financing activities 490 (238)
Cash, cash equivalents and restricted cash at beginning of period 61,319  
Cash, cash equivalents and restricted cash at end of period 48,174 56,198
Non-cash investing and financing activity:    
Cash, cash equivalents and restricted cash at beginning of period $ 49,499 $ 57,342
v3.8.0.1
Organization and Description of Business
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Description of Business
Organization and Description of Business
Castlight Health, Inc. (“Castlight” or “the Company”) offers a comprehensive software-as-a-service platform that simplifies health benefits navigation for millions of employees. The Castlight platform matches employees to the best resources their employers make available to them - whether they are healthy, actively seeking medical care, or managing a condition - and motivates them to take the best steps for their health. Castlight helps employers generate more value from their benefits investments by helping to improve outcomes, lower health care costs, and increase benefits satisfaction. On April 3, 2017, the Company expanded into wellbeing through its acquisition of Jiff, Inc. (“Jiff”). Jiff's results of operations have been included in the Company’s Consolidated Statements of Operations beginning April 3, 2017. See Note 5–Business Combinations for more information on the Jiff acquisition. The Company was incorporated in the State of Delaware in January 2008. The Company's principal executive offices are located in San Francisco, California.
v3.8.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Accounting Standards and Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include Castlight and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. In the opinion of management, the information herein reflects all adjustments, consisting only of normal recurring adjustments except as otherwise noted, considered necessary for a fair statement of results of operations, financial position and cash flows. The results for the interim periods presented are not necessarily indicative of the results expected for any future period. The following information should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017

Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”). All amounts and disclosures set forth in this Form 10-Q have been updated to comply with this update, as indicated by the “as adjusted” label.

Certain prior period amounts reported in the condensed consolidated financial statements and notes have been reclassified to conform to current period presentation.
Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. These estimates include, but are not limited to the determination of:

The fair value of assets acquired and liabilities assumed for business combination;
The amortization period for deferred commissions and deferred professional services costs;
Variable consideration included in the transaction price of the Company’s contracts with customers;
The standalone selling price of the performance obligations in the Company’s contracts with customers; and
Assumptions used in the valuation of certain equity awards.

Actual results could differ from those estimates, and such differences could be material to the Company’s consolidated financial position and results of operations.

Recently Adopted Accounting Pronouncements
In May 2014 the Financial Accounting Standards Board (“FASB”) issued ASC 606. ASC 606 supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining and fulfilling a contract with a customer.
    
The key changes from adopting the new standard are:

Prior to the adoption of the new standard, the Company recognized revenue of the combined professional services and subscription deliverable over the contractual term of the subscription contract. For certain contracts, this included periods that were cancelable due to termination provisions. Under the new standard, the Company recognizes revenue for the combined professional services and subscription performance obligation over the non-cancelable term of the arrangement.  Additionally, prior to the adoption of the new standard, revenue related to variable fees was deferred until the fees became fixed or determinable.  Under the new standard, the Company estimates variable consideration at the most likely amount to which the Company expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
 
Prior to the adoption of the new standard, the Company capitalized incremental and direct costs to obtain subscription contracts and amortized those costs over the non-cancelable portion of contracts. Under the new standard, the Company capitalizes all incremental costs to obtain subscription contracts and then amortizes those costs on a systematic basis that is consistent with the transfer to the customer of the goods or services to which those assets relate, which the Company has determined to be five years for initial subscription contracts or the contractual period for renewal subscription contracts.
Prior to the adoption of the new standard, the Company expensed costs to fulfill subscription contracts when they were incurred. Under the new standard, the Company recognizes as assets certain costs incurred to fulfill subscription contracts. Additionally, under the new standard, these costs are amortized on a systematic basis over a period that is consistent with the transfer to the customer of the goods or services to which those assets relate, which the Company has determined to be five years.
Select unaudited condensed consolidated balance sheet line items, which reflect the adoption of ASC 606 are as follows (in thousands):
 
 
As of December 31, 2017
 
 
Previously Reported
 
Adjustments
 
As adjusted
Assets
 
 
 
 
 
 
Accounts receivable and other, net
$
20,761

 
$
1,172

 
$
21,933

 
Deferred commissions*
10,583

 
16,929

 
27,512

 
Deferred professional service costs

 
12,480

 
12,480

Liabilities and stockholders' equity
 
 
 
 
 
 
Deferred revenue
29,410

 
(3,425
)
 
25,985

 
Deferred revenue, non-current
6,686

 
(2,229
)
 
4,457

 
Accumulated deficit
(411,569
)
 
36,235

 
(375,334
)
_______________________
*As of December 31, 2017, Deferred commissions, current and non-current, were previously presented separately. The condensed consolidated balance sheet as of December 31, 2017 was reclassified to conform to the current period presentation.


Select unaudited condensed consolidated statement of operations line items, which reflect the adoption of ASC 606 are as follows (in thousands, except per share amounts):
 
 
Three Months Ended March 31, 2017
 
 
Previously Reported
 
Adjustments
 
As adjusted
Revenue:
 
 
 
 
 
 
Subscription
$
25,766

 
$
131

 
$
25,897

 
Professional services and other
1,979

 
(173
)
 
1,806

Cost of revenue:
 
 
 
 
 
 
Cost of professional services and other
3,988

 
(179
)
 
3,809

Operating expenses:
 
 
 
 
 
 
Sales and marketing
14,443

 
(298
)
 
14,145

Operating loss
(15,001
)
 
435

 
(14,566
)
Net loss
(14,809
)
 
435

 
(14,374
)
Net loss per share, basic and diluted
(0.14
)
 

 
(0.14
)
    
Select unaudited condensed consolidated statement of cash flows line items, which reflect the adoption of ASC 606 are as follows (in thousands):
 
 
 
Three Months Ended March 31, 2017
 
 
 
Previously Reported
 
Adjustments
 
As adjusted
Operating activities:
 
 
 
 
 
Net loss
$
(14,809
)
 
$
435

 
$
(14,374
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
Stock-based compensation
5,827

 
(215
)
 
5,612

 
Amortization of deferred professional costs

 
887

 
887

 
Amortization of deferred commissions
2,089

 
(156
)
 
1,933

 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Deferred commissions
(416
)
 
(141
)
 
(557
)
 
 
Deferred professional service costs

 
(852
)
 
(852
)
 
Deferred revenue
3,087

 
42

 
3,129


Summary of Significant Accounting Policies

Revenue Recognition

Revenues are derived primarily from contracts with customers for subscription services and professional services. Revenues are recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues do not include sales taxes.
    
We determine revenue recognition through the following steps:

Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies a performance obligation.

Subscription Revenue. Subscription revenue recognition commences on the date that the Company’s subscription services are made available to the customer, which the Company considers to be the launch date, and subscription revenue is generally recognized over the contract term. Subscription contracts are generally three years in length and certain contracts include termination provisions.

Some of the Company’s subscription contracts include performance incentives that are generally based on engagement. Additionally, some of the Company’s subscription contracts include audit provisions. The Company considers fees related to performance incentives and audit provisions to be variable consideration. The Company estimates variable consideration at the most likely amount to which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of its anticipated performance as well as other information available to the Company. The Company reassesses its estimates related to variable consideration each reporting period and records adjustments when appropriate.

Professional Services and Other Revenue. Professional services and other revenue is primarily comprised of implementation services and communication services related to the Company's subscription service. Nearly all of the Company's professional services are sold on a fixed-fee basis.

The Company determined its implementation services are not capable of being distinct. Accordingly, the Company recognizes implementation services revenue in the same manner as the subscription service, beginning on the launch date. The Company determined its communication services are distinct and the associated revenue is recognized over time from the commencement of the communication services through the end of the contractual term.

Professional services and other revenue also includes revenue from products sold through the Company’s online marketplace and add-on subscription services made available from other ecosystem partners. These revenues are recognized on a net basis primarily because the Company acts as an agent in these contracts.

Contracts with Multiple Performance Obligations. Most of the Company’s contracts have multiple performance obligations consisting of subscription services and professional services, including implementation services and communication services. For arrangements with multiple performance obligations, the Company evaluates whether the individual performance obligations are distinct. If the performance obligations are distinct, revenue is recognized for the respective performance obligation separately. If one or more of the performance obligations are not distinct, the performance obligations that are not distinct are combined with the Company's subscription service, and revenue for the combined performance obligation is recognized over the term of the subscription service commencing on the launch date.

The Company has concluded that its subscription services and its communication services are distinct. Conversely, the Company has concluded that its implementation services are not distinct, primarily because these services are not capable of being distinct as the customer cannot benefit from the implementation services on their own. Accordingly, the Company considers the separate performance obligations in its multiple performance obligation contracts to be communication services and a combined performance obligation comprised of subscription services and implementation services.

The transaction price for arrangements with multiple performance obligations is allocated to the separate performance obligations based on their standalone selling price. The Company determines standalone selling prices based on its overall pricing objectives taking into consideration market conditions and other factors, including the value of the contracts, the subscription services sold, and customer demographics.

Contract Balances

The Company records a contract asset when revenue is recognized prior to invoicing. Contract assets are presented within accounts receivable and other in the accompanying condensed consolidated balance sheet. A contract liability represents deferred revenue.

Deferred revenue consists of professional services and cloud-based subscription services that have been billed in advance of revenue being recognized. The Company invoices its customers for its cloud-based subscription services based on the terms of the contract, which can be annual, quarterly or monthly installments. Deferred revenue that is anticipated to be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as non-current.

Accounts Receivable and Other

Accounts receivable are recorded when invoiced and at the invoiced amount, net of allowances for doubtful accounts, which are not significant for any period presented. When accounts receivable are recorded, the related revenue may not commence until a later date depending on the nature of the services invoiced.

Deferred Commissions

Deferred commissions are the incremental costs that are incurred to obtain contracts with customers and consist primarily of sales commissions paid to the Company's sales force and channel partners. The commissions for initial contracts are deferred and amortized on a straight-line basis over a period of benefit that the Company has determined typically to be five years. The Company determined the period of benefit by taking into consideration the expected life of its subscription contracts, the expected life of the technology underlying its subscription services and other factors. The commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period. The deferred commission amounts are recoverable through the Company’s future revenues. Amortization of deferred commissions is included in sales and marketing expense in the accompanying condensed consolidated statements of operations. All costs deferred are reviewed for impairment periodically.

Deferred Professional Service Costs
    
Deferred professional services costs are the direct costs incurred to fulfill subscription contracts that occur prior to the launch of the Company’s subscription services. Professional service costs, which primarily consist of employee related expenses attributable to launch activities, are deferred and then amortized on a straight-line basis over a period of benefit that the Company has determined typically to be five years for the same reasons as described in the deferred commissions disclosure above. Deferred professional service costs are recoverable through future revenues. Amortization of deferred professional service costs is included in cost of professional services and other revenue in the accompanying condensed consolidated statements of operations. All costs deferred are reviewed for impairment periodically.

Recently Issued Accounting Pronouncements
    
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASU 2016-02”). The guidance will require lessees to put all leases on their balance sheets, whether operating or financing, while continuing to recognize the expenses on their income statements in a manner similar to current practice. The guidance states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The guidance will be effective for the Company beginning January 1, 2019 and early adoption is permitted. The Company is evaluating the full effect the adoption will have on its financial condition, results of operations, and disclosures. The Company is evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the impact of adoption on its consolidated financial statements.     

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The provisions in ASU 2018-02 allow for a reclassification from accumulated other comprehensive income to retained earnings to eliminate the stranded tax effects resulting from the change in federal corporate income tax rate in the Tax Cuts and Jobs Act enacted in December 2017. The Company is required to adopt ASU 2018-02 on January 1, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. The adoption of ASU 2018-02 is not expected to have a significant impact on the Company’s financial position or results of operations.
v3.8.0.1
Contract Balances and Performance Obligations (Notes)
3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block]
Contract Balances and Performance Obligations
    
The Company sells to customers based in the United States.

Deferred revenue as of March 31, 2018 and December 31, 2017 was $33.6 million and $30.4 million, respectively. Contract assets as of March 31, 2018 and December 31, 2017 were $1.7 million and $1.2 million, respectively.

$15.9 million and $12.1 million of revenue was recognized during the three months ended March 31, 2018 and 2017, respectively, that was included in the deferred revenue balances at the beginning of the respective periods. Cumulative catch-up adjustments arising from changes in estimates of transaction price were immaterial during the three months ended March 31, 2018 and 2017.
The aggregate balance of remaining performance obligations from non-cancelable contracts with customers as of March 31, 2018 was $174.0 million. The Company expects to recognize approximately 70% of this balance over the next 12 months, with the remaining balance recognized thereafter. Remaining performance obligations are defined as deferred revenue and amounts yet to billed for the non-cancelable portion of our contracts.
v3.8.0.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
The Company measures its financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activity.
The fair value of marketable securities included in the Level 2 category is based on observable inputs, such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. These values were obtained from a third-party pricing service and were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established third party pricing vendors and broker-dealers.
There have been no changes in valuation techniques in the periods presented. There were no significant transfers between fair value measurement levels as of March 31, 2018 and December 31, 2017.
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above input categories (in thousands):
 
Level 1
 
Level 2
 
Total
March 31, 2018
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Money market mutual funds
$
8,159

 
$

 
$
8,159

U.S. agency obligations

 
16,562

 
16,562

U.S. treasury securities

 
1,500

 
1,500

Marketable securities:
 
 
 
 
 
U.S. agency obligations

 
852

 
852

U.S. treasury securities

 
25,580

 
25,580

 
$
8,159

 
$
44,494

 
$
52,653

 
 
Level 1
 
Level 2
 
Total
December 31, 2017
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Money market mutual funds
$
6,115

 
$

 
$
6,115

U.S. agency obligations


 
18,366

 
18,366

Marketable securities:
 
 
 
 
 
U.S. agency obligations

 
1,000

 
1,000

U.S. treasury securities

 
31,025

 
31,025

 
$
6,115

 
$
50,391

 
$
56,506


Gross unrealized gains and losses for cash equivalents and marketable securities as of March 31, 2018 and December 31, 2017 were not material. The Company does not believe the unrealized losses represent other-than-temporary impairments based on the Company’s evaluation of available evidence as of March 31, 2018 and December 31, 2017.
There were no realized gains or losses during the three months ended March 31, 2018. All of the Company’s marketable securities at March 31, 2018 and December 31, 2017 mature within one year. Marketable securities on the balance sheets consist of securities with original or remaining maturities at the time of purchase of greater than three months, and the remainder of the securities is reflected in cash and cash equivalents.
v3.8.0.1
Marketable Securities
3 Months Ended
Mar. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities
Marketable Securities

All of the Company’s cash equivalents and marketable securities are classified as “available-for-sale” securities. These securities are reported at fair value, with the related unrealized gains and losses included in accumulated other comprehensive income, a component of stockholders’ equity.

As of March 31, 2018 and December 31, 2017, respectively, marketable securities consisted of the following (in thousands):
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
March 31, 2018
 
 
 
 
 
 
 
U.S. agency obligations
$
17,413

 
$
1

 
$

 
$
17,414

U.S. treasury securities
27,101

 

 
(21
)
 
27,080

Money market mutual funds
8,159

 

 

 
8,159

 
52,673

 
1

 
(21
)
 
52,653

Included in cash and cash equivalents
26,219

 
1

 

 
26,220

Included in marketable securities
$
26,454

 
$
1

 
$
(21
)
 
$
26,433


 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
December 31, 2017
 
 
 
 
 
 
 
U.S. agency obligations
$
19,366

 
$

 
$

 
$
19,366

U.S. treasury securities
31,047

 

 
(22
)
 
31,025

Money market mutual funds
6,115

 

 

 
6,115

 
56,528

 

 
(22
)
 
56,506

Included in cash and cash equivalents
24,481

 

 

 
24,481

Included in marketable securities
$
32,047

 
$

 
$
(22
)
 
$
32,025

v3.8.0.1
Business Combinations
3 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Business Combinations
Business Combinations
    
On April 3, 2017, the Company completed its acquisition of Jiff, Inc. Prior to its acquisition, Jiff provided an enterprise health benefits platform that served as a central hub for employee wellbeing and employee benefit programs. The acquisition enabled the Company to offer a wellbeing platform, healthcare decision support and a benefits hub in one comprehensive package. The Company acquired Jiff for approximately 27,000,000 in shares and options.

At the closing of the transaction on April 3, 2017, Venrock, a holder of more than 5% of the Company’s capital stock, acquired a total of 3,965,979 shares of the Company’s Class B common stock in exchange for its shares of Jiff capital stock. Bryan Roberts, who is the chairman of the Company’s board of directors is also a partner at Venrock. Accordingly, the business combination was considered a related party transaction.

The Company’s board appointed a special committee, comprised solely of disinterested directors, to which it delegated the full and exclusive power, authority and discretion to evaluate, assess, and approve the Jiff transaction on its
behalf, including retaining a financial advisor for an opinion on the fairness of the financial conditions of the transaction. The transaction was approved solely by the special committee, which concluded that the transaction terms were fair to the Company and that the transaction was in the best interests of the Company and its stockholders.

As part of the merger, all options to purchase Jiff common stock held by Jiff employees who became employees of the combined company were converted into options to purchase the Company’s Class B common stock. Additionally, certain stockholders and option holders were to receive an aggregate of 1,000,000 shares of the Company’s Class B common stock or options to purchase the Company’s Class B common stock if the Jiff business achieved at least $25 million in revenue in 2017, and an aggregate of 3,000,000 shares of Class B common stock or options to purchase the Company’s Class B common stock if the Jiff business achieved at least $25 million in net new bookings during 2017 (“the milestones”). As of December 31, 2017, the Company evaluated and determined that both milestones were not met.

The following table summarizes the components of the purchase consideration transferred based on the closing price of the Company’s stock as of the acquisition date (in thousands):
 
 
Fair value
Fair value of Company Class B common stock (25,054,049 shares @ $3.65 per share)
 
$
91,447

Fair value of contingent consideration
 
671

Fair value of assumed Jiff options attributable to pre-combination services
 
9,574

Transaction costs paid on behalf of Jiff
 
4,498

Estimated purchase price consideration
 
$
106,190


    
For the Jiff options assumed as part of the acquisition, the Company applied the ratio of pre-combination service provided, on a grant-by-grant basis, to the total service period and applied this ratio to the acquisition date fair value of the Jiff awards.

The Company determined that the contingent consideration shares associated with the milestones are one unit of account, and classified the contingent consideration as a liability as the arrangement can be settled in a variable number of shares and is not considered fixed-for-fixed. The Company determined that the fair value of the contingent consideration liability was $0.7 million at the date of the acquisition. The fair value was estimated by applying the Monte Carlo simulation model, based on the probability of completing the milestones and the changes in the fair value of the Company’s common stock. As of December 31, 2017, the Company reversed the contingent consideration liability as the milestones were not met.

The allocation of purchase consideration to assets acquired and liabilities assumed is not yet finalized. The Company continues to evaluate the fair value of certain assets and liabilities related to the acquisition of Jiff. Additional information, which existed as of the acquisition date but was at that time unknown to the Company, may become known during the remainder of the measurement period. Changes to amounts recorded as assets or liabilities may result in a corresponding adjustment to goodwill. The preliminary estimated fair values of assets acquired and liabilities assumed may be subject to change as additional information is received.

The fair values of the assets acquired and liabilities assumed by major class in the acquisition of Jiff were recognized as follows (in thousands):
Cash
$
2,234

Current assets
5,159

Other assets
1,971

Acquired intangible assets
23,900

Goodwill
91,785

    Total assets acquired
125,049

Deferred revenue
(1,857
)
Other current liabilities
(6,192
)
Debt
(5,578
)
Non-current liabilities
(5,232
)
Total net assets acquired
$
106,190



The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets are based on management’s estimates and assumptions. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the cross-selling opportunities, cost synergies, and a knowledgeable and experienced workforce which play an important role in the integration of the acquired customers and technology. The goodwill balance is not deductible for U.S. income tax purposes.

The following table sets forth the fair value components of identifiable acquired intangible assets (in thousands) and their estimated useful lives (in years):
 
 
Fair Value
 
Useful Life
Customer relationships
 
$
10,900

 
10
Developed technology
 
10,600

 
5
Backlog
 
1,500

 
3
Other acquired intangible assets
 
900

 
1-3
Total identifiable intangible assets
 
$
23,900

 
 

   
Customer relationships represent the fair value of projected cash flows that will be derived from the sale of products to Jiff's existing customers based on existing, in-process, and future versions of the underlying technology. Developed technology represents Jiff’s benefits platform. The Company used the relief from royalty method to value the developed technology. To determine the net cash flow that a market participant would expect to realize from licensing the Company's technology, the Company estimated a net royalty rate, which excludes any expenses that would be incurred to maintain the current functionality of the technology.

The Company has included the financial results of Jiff in the Company’s condensed consolidated statements of operations from the date of acquisition.

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Jiff as if the companies were combined as of the beginning of 2016 (the beginning of the comparable prior reporting period in the year of acquisition). The unaudited pro forma condensed combined financial information is presented for informational purposes only.

The historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The unaudited pro forma financial information presented includes the business combination accounting effects resulting from the acquisition, including amortization charges from acquired intangible assets, stock-based compensation, and acquisition-related costs. In addition, the pro forma combined financial statements give effect to the adoption of the new standard.

The following table presents the unaudited pro forma condensed combined financial information for the periods presented, except for the financial information presented for the three months ended March 31, 2018 which is presented on an as-reported basis (in thousands):
 
 
Three Months Ended March 31,
 
 
2018
 
2017
Total revenue
 
$
36,479
 
 
$
31,345
 
Net loss
 
(14,444
)
 
(18,467
)

v3.8.0.1
Property and equipment, net
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Property and equipment
Property and Equipment
Property and equipment consisted of the following (in thousands):
 
As of
 
March 31, 2018
 
December 31, 2017
Leasehold improvements
$
2,895

 
$
2,915

Computer equipment
6,252

 
6,165

Software
1,149

 
1,149

Internal-use software
2,925

 
2,925

Furniture and equipment
1,178

 
1,293

Total
14,399

 
14,447

Accumulated depreciation
(9,608
)
 
(9,184
)
Property and equipment, net
$
4,791

 
$
5,263


Depreciation and amortization expense for the three months ended March 31, 2018 and 2017, was $0.7 million and $0.7 million, respectively. Depreciation and amortization are recorded on a straight-line basis.
v3.8.0.1
Debt (Notes)
3 Months Ended
Mar. 31, 2018
Debt [Abstract]  
Debt
Debt

Term Loan

In connection with the Company’s acquisition of Jiff, on April 3, 2017, the Company, Jiff and Silicon Valley Bank (“Bank”) agreed to refinance the existing term loan facility owed by Jiff to the Bank (the “Loan Agreement”) for approximately $5.6 million (the “Term Loan”). The Term Loan requires interest-only payments for the period May 2017 through September 2018, followed by 36 monthly payments of principal and interest. Obligations under the Term Loan accrue interest at a floating per annum rate equal to the greater of (A) the prime rate as published in the money rates section of The Wall Street Journal (“Prime Rate”) minus 1% or (B) 0%. Interest on the Term Loan is payable monthly. The maturity date of the Term Loan is September 1, 2021.

In addition to principal and interest payments, the Company is also required to pay $0.5 million as final payment on the earlier of maturity, termination or prepayment of the Term Loan. The Company accrues for the final payment over the life of the Term Loan using the effective interest method.
    
The future maturities of the Term Loan by year as of March 31, 2018 are as follows (in thousands):
Remainder of 2018
$
620

2019
1,859

2020
1,859

2021(1)
1,240

Total future maturities of debt (2)
$
5,578


_______________________
(1) Excludes the $0.5 million required to be paid as final payment on the earlier of maturity, termination or prepayment of the Term Loan.
(2) Includes $4.6 million classified as debt, non-current and $0.9 million classified as debt, current within accrued expenses and other current liabilities on the condensed consolidated balance sheet as of March 31, 2018.

Revolving Line of Credit    

The Loan Agreement also provides for an up to$25 million revolving credit facility (the “Revolving Line”). The Company may request borrowings under the Revolving Line prior to April 3, 2019, on which date the Revolving Line terminates. As of March 31, 2018, no borrowings have been made under the Revolving Line.

In relation to the Loan Agreement, the Company is subject to certain financial and reporting covenants. As of March 31, 2018, none of the financial covenants, which require the Company to maintain a certain minimum liquidity ratio, are applicable. The Company was in compliance with all reporting covenants in the Loan Agreement related to the outstanding principal balance as of March 31, 2018.
v3.8.0.1
Goodwill and Intangible Assets
3 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets
Goodwill and Intangible Assets

Goodwill

Currently, all of the Company’s goodwill relates to the acquisition of Jiff. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. There were no changes to goodwill for the three months ended March 31, 2018.

Intangible assets, net
    
The following table sets forth the fair value components of identifiable acquired intangible assets (in thousands) and their estimated useful lives (in years) as of March 31, 2018 were as follows (in thousands):
 
 
Intangible Assets, Gross
 
Accumulated Amortization
 
Acquired Intangibles, Net
 
Useful Life
 
 
December 31, 2017
 
Additions
 
March 31, 2018
 
December 31, 2017
 
Expense
 
March 31, 2018
 
March 31, 2018
 
Customer relationships
 
$
10,900

 
$

 
$
10,900

 
$
(818
)
 
$
(272
)
 
$
(1,090
)
 
9,810

 
10
Developed technology
 
10,600

 

 
10,600

 
(1,590
)
 
(530
)
 
(2,120
)
 
8,480

 
5
Backlog
 
1,500

 

 
1,500

 
(664
)
 
(148
)
 
(812
)
 
688

 
3
Other acquired intangible assets
 
900

 

 
900

 
(575
)
 
(192
)
 
(767
)
 
133

 
1-3
Total identifiable intangible assets
 
$
23,900

 
$

 
$
23,900

 
$
(3,647
)
 
$
(1,142
)
 
$
(4,789
)
 
$
19,111

 
 


Amortization expense from acquired intangible assets for the three months ended March 31, 2018 was $1.1 million and is included in cost of subscription, and general and administrative and sales and marketing expenses.

Estimated amortization expense for acquired intangible assets for the following five years and thereafter is as follows (in thousands):
Remainder of 2018
$
2,902

2019
3,505

2020
3,242

2021
3,210

2022
1,620

Thereafter
4,632

Total estimated amortization expense
$
19,111

v3.8.0.1
Related Party Transactions (Notes)
3 Months Ended
Mar. 31, 2018
Related Party Transactions [Abstract]  
Related Party Transactions and Variable Interest Entity
Note 11. Related Party Transactions and Variable Interest Entity

In 2015, the Company made a preferred stock investment of $4.1 million and entered into a strategic alliance with Lyra Health, Inc. ("Lyra"), a related party at the time of the investment. During the fourth quarter of 2017, the Company sold its investment in Lyra to a group of buyers that included related parties for a total selling price of $5.5 million.

Lyra was considered a related party to the Company because two of the Company’s directors, Dr. Roberts and Mr. Ebersman, serve on the Lyra board of directors and Mr. Ebersman is Lyra’s chief executive officer. Prior to the sale of the investment in Lyra, the Company determined that Lyra is a variable interest entity (“VIE”) and that it was not required to consolidate the operations of Lyra.

Because Lyra was a related party and potential buyers were also related parties, the Company formed an independent committee of the Company's board of directors (the "Independent Committee"), comprised solely of disinterested directors, to approve the sale. The Company also engaged an independent third-party valuation expert to assist in determining the fair value of the Company's investment in Lyra. Based in part on the valuation performed, the Company negotiated a selling price of $5.5 million, which the Independent Committee approved after concluding that the transaction terms were fair to the Company. The sale resulted in a pre-tax gain of $1.4 million which was recorded in other income, net within the consolidated statements of operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
v3.8.0.1
Stock Compensation
3 Months Ended
Mar. 31, 2018
Equity and Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stockholders' Equity
A summary of restricted stock unit activity for the three months ended March 31, 2018 is as follows:
 
Number of
Shares
Outstanding
 
Weighted-
Average
Grant Date Fair Value
Balance as of December 31, 2017
9,333,896

 
$
4.03

Restricted Stock Units granted (1)
3,834,618

 
$
3.63

Restricted Stock Units vested
(747,311
)
 
$
4.38

Restricted Stock Units forfeited and canceled (2)
(1,467,107
)
 
$
3.59

Balance as of March 31, 2018
10,954,096

 
$
3.93

_______________________
(1) Includes 0.6 million performance stock units (“PSUs”) that were granted during the three months ended March 31, 2018.
(2) Includes PSUs that were granted in the prior year, which were canceled because performance targets were not achieved.
v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Legal Matters

From time to time, the Company may become subject to other legal proceedings, claims or litigation arising in the ordinary course of business. In addition, the Company may receive letters alleging infringement of patents or other intellectual property rights. If an unfavorable outcome were to occur in litigation, the impact could be material to the Company’s business, financial condition, cash flow or results of operations, depending on the specific circumstances of the outcome. The Company accrues for loss contingencies when it is both probable that it will incur the loss and when it can reasonably estimate the amount of the loss or range of loss.
    
Leases and Contractual Obligations

The Company’s principal commitments primarily consist of obligations under leases for office space and co-location facilities for data center capacity. The Company’s existing lease agreements provide it with the option to renew and generally provide for rental payments on a graduated basis. The Company’s future operating lease obligations would change if it entered into additional operating lease agreements as the Company expands its operations and if it exercised these options.

In March 2018, the Company subleased a portion of its office located in Mountain View, California. As a result, the total rent obligation of the Company was reduced by $2.4 million. The Company recognized a one-time charge of $0.9 million loss from sublease, as a result of total anticipated sublease income on the operating lease being less than original lease obligations which is included in research and development expense in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2018.
    
There were no other material changes in the Company’s contractual obligations from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017. Please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in the Company’s Annual Report on Form 10-K for a description of its contractual obligations.
v3.8.0.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Stockholders’ Equity
Note 14. Stockholders’ Equity
Common Stock
As of March 31, 2018, the Company had 52,432,553 shares of Class A common stock and 83,163,275 shares of Class B common stock outstanding.
Transactions with SAP Technologies, Inc.

In May 2016, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with SAP Technologies, Inc. (“SAP”) pursuant to which it sold and issued to SAP 4.7 million shares of its Class B Common Stock and a warrant (the “Warrant”), which gave SAP rights to purchase up to 1.9 million shares of the Company's Class B Common Stock for an exercise price of $4.91, subject to certain conditions. The net proceeds from this transaction were $17.8 million, net of issuance costs, and were used for working capital and other general corporate purposes.
The Warrant was set to expire four years from the date the Company enters into agreements with SAP related to the distribution and the reselling of the Company’s solutions (the “Alliance Agreement”) within a prescribed period. During the second quarter of 2017, the Company and SAP modified the Warrant to extend the time period allowed to execute the Alliance Agreement from May 17, 2017 to November 17, 2017. However, the Alliance Agreement was not executed prior to that date and as a result, the Warrant expired.
The shares and Warrant were considered freestanding instruments and were classified within stockholders’ equity. Initially, upon execution of the Securities Purchase Agreement, the Company preliminarily allocated the net proceeds to the shares, Warrant and a customer prepayment liability classified within accrued expenses and other current liabilities. However, as a result of the Warrant modification during the second quarter of 2017, the Company adjusted its allocation of the net proceeds, changing the classification of the customer prepayment liability to other assets. During the fourth quarter of 2017, the Company released the associated other asset and recorded a $1.1 million non-cash charge in other income, net in the consolidated statement of operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
v3.8.0.1
Income Taxes
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The effective tax rate for the three months ended March 31, 2018 and 2017 was zero percent, primarily as a result of the estimated tax loss for the year and the change in valuation allowance. As of March 31, 2018, all unrecognized tax benefits are subject to a full valuation allowance and, if recognized, will not affect the effective tax rate.

The Tax Cuts and Jobs Act enacted on December 22, 2017 resulted in substantial changes including reducing the US federal corporate income tax rate from 35 percent to 21 percent and requiring companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. The Act creates new taxes starting in 2018 on certain foreign sourced earnings. The Company applied the guidance in SAB 118 and at December 31, 2017 recorded provisional estimates to re-measure deferred taxes and liabilities using the new 21 percent rate which resulted in a net decrease of $54.6 million, with a corresponding offsetting change in valuation allowance of $54.6 million .

During the three months ended March 31, 2018, the Company has not recorded any measurement period adjustments to the provisional estimates recorded at December 31, 2017.
v3.8.0.1
Net Loss per Share
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Net Loss per Share
Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including Preferred Stock and outstanding stock options and warrants, to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive.
Net loss is allocated based on the contractual participation rights of the Class A and Class B common stock as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical, the net loss is allocated on a proportionate basis.
The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock (in thousands, except per share data):
 
Three Months Ended March 31,
 
2018
 
2017
 
 
 
 
 
(as adjusted)*
 
Class A
 
Class B
 
Class A
 
Class B
Net loss
$
(5,646
)
 
$
(8,798
)
 
$
(7,436
)
 
$
(6,938
)
Weighted-average shares used to compute basic and diluted net loss per share
52,764

 
82,230

 
54,288

 
50,647

Basic and diluted net loss per share
$
(0.11
)
 
$
(0.11
)
 
$
(0.14
)
 
$
(0.14
)

_______________________
*See Note 2 for a summary of adjustments.
The following securities were excluded from the calculation of diluted net loss per share for common stock because their effect would have been anti-dilutive for the periods presented (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Stock options and restricted stock units
20,601

 
16,933

Warrants
115

 
2,020

Total
20,716

 
18,953

.
v3.8.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Basis of Accounting Presentation and Principles of Consolidation
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include Castlight and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. In the opinion of management, the information herein reflects all adjustments, consisting only of normal recurring adjustments except as otherwise noted, considered necessary for a fair statement of results of operations, financial position and cash flows. The results for the interim periods presented are not necessarily indicative of the results expected for any future period. The following information should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017
Use of Estimates
Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. These estimates include, but are not limited to the determination of:

The fair value of assets acquired and liabilities assumed for business combination;
The amortization period for deferred commissions and deferred professional services costs;
Variable consideration included in the transaction price of the Company’s contracts with customers;
The standalone selling price of the performance obligations in the Company’s contracts with customers; and
Assumptions used in the valuation of certain equity awards.

Actual results could differ from those estimates, and such differences could be material to the Company’s consolidated financial position and results of operations.

Recently Issued and Adopted Accounting Pronouncements
Recently Issued Accounting Pronouncements
    
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASU 2016-02”). The guidance will require lessees to put all leases on their balance sheets, whether operating or financing, while continuing to recognize the expenses on their income statements in a manner similar to current practice. The guidance states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The guidance will be effective for the Company beginning January 1, 2019 and early adoption is permitted. The Company is evaluating the full effect the adoption will have on its financial condition, results of operations, and disclosures. The Company is evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the impact of adoption on its consolidated financial statements.     

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The provisions in ASU 2018-02 allow for a reclassification from accumulated other comprehensive income to retained earnings to eliminate the stranded tax effects resulting from the change in federal corporate income tax rate in the Tax Cuts and Jobs Act enacted in December 2017. The Company is required to adopt ASU 2018-02 on January 1, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. The adoption of ASU 2018-02 is not expected to have a significant impact on the Company’s financial position or results of operations.
v3.8.0.1
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value, Assets Measured on Recurring Basis
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above input categories (in thousands):
 
Level 1
 
Level 2
 
Total
March 31, 2018
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Money market mutual funds
$
8,159

 
$

 
$
8,159

U.S. agency obligations

 
16,562

 
16,562

U.S. treasury securities

 
1,500

 
1,500

Marketable securities:
 
 
 
 
 
U.S. agency obligations

 
852

 
852

U.S. treasury securities

 
25,580

 
25,580

 
$
8,159

 
$
44,494

 
$
52,653

 
 
Level 1
 
Level 2
 
Total
December 31, 2017
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Money market mutual funds
$
6,115

 
$

 
$
6,115

U.S. agency obligations


 
18,366

 
18,366

Marketable securities:
 
 
 
 
 
U.S. agency obligations

 
1,000

 
1,000

U.S. treasury securities

 
31,025

 
31,025

 
$
6,115

 
$
50,391

 
$
56,506

Reconciliation of Level 3 Contingent Consideration Liabilitiy
v3.8.0.1
Marketable Securities (Tables)
3 Months Ended
Mar. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Available-for-sale Securities
As of March 31, 2018 and December 31, 2017, respectively, marketable securities consisted of the following (in thousands):
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
March 31, 2018
 
 
 
 
 
 
 
U.S. agency obligations
$
17,413

 
$
1

 
$

 
$
17,414

U.S. treasury securities
27,101

 

 
(21
)
 
27,080

Money market mutual funds
8,159

 

 

 
8,159

 
52,673

 
1

 
(21
)
 
52,653

Included in cash and cash equivalents
26,219

 
1

 

 
26,220

Included in marketable securities
$
26,454

 
$
1

 
$
(21
)
 
$
26,433


 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
December 31, 2017
 
 
 
 
 
 
 
U.S. agency obligations
$
19,366

 
$

 
$

 
$
19,366

U.S. treasury securities
31,047

 

 
(22
)
 
31,025

Money market mutual funds
6,115

 

 

 
6,115

 
56,528

 

 
(22
)
 
56,506

Included in cash and cash equivalents
24,481

 

 

 
24,481

Included in marketable securities
$
32,047

 
$

 
$
(22
)
 
$
32,025

v3.8.0.1
Business Combinations (Tables)
3 Months Ended 12 Months Ended
Mar. 31, 2018
Dec. 31, 2017
Business Combinations [Abstract]    
Summary of the Components of the Purchase Consideration Transferred
The following table summarizes the components of the purchase consideration transferred based on the closing price of the Company’s stock as of the acquisition date (in thousands):
 
 
Fair value
Fair value of Company Class B common stock (25,054,049 shares @ $3.65 per share)
 
$
91,447

Fair value of contingent consideration
 
671

Fair value of assumed Jiff options attributable to pre-combination services
 
9,574

Transaction costs paid on behalf of Jiff
 
4,498

Estimated purchase price consideration
 
$
106,190

 
Schedule of Preliminary Fair Values of Assets Acquired and Liabilities Assumed
The fair values of the assets acquired and liabilities assumed by major class in the acquisition of Jiff were recognized as follows (in thousands):
Cash
$
2,234

Current assets
5,159

Other assets
1,971

Acquired intangible assets
23,900

Goodwill
91,785

    Total assets acquired
125,049

Deferred revenue
(1,857
)
Other current liabilities
(6,192
)
Debt
(5,578
)
Non-current liabilities
(5,232
)
Total net assets acquired
$
106,190

 
Schedule of Identifiable Acquired Intangible Assets
The following table sets forth the fair value components of identifiable acquired intangible assets (in thousands) and their estimated useful lives (in years):
 
 
Fair Value
 
Useful Life
Customer relationships
 
$
10,900

 
10
Developed technology
 
10,600

 
5
Backlog
 
1,500

 
3
Other acquired intangible assets
 
900

 
1-3
Total identifiable intangible assets
 
$
23,900

 
 
 
Schedule of Unaudited Pro Forma Financial Information  
The following table presents the unaudited pro forma condensed combined financial information for the periods presented, except for the financial information presented for the three months ended March 31, 2018 which is presented on an as-reported basis (in thousands):
 
 
Three Months Ended March 31,
 
 
2018
 
2017
Total revenue
 
$
36,479
 
 
$
31,345
 
Net loss
 
(14,444
)
 
(18,467
)
v3.8.0.1
Property and equipment, net (Tables)
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
Property and equipment consisted of the following (in thousands):
 
As of
 
March 31, 2018
 
December 31, 2017
Leasehold improvements
$
2,895

 
$
2,915

Computer equipment
6,252

 
6,165

Software
1,149

 
1,149

Internal-use software
2,925

 
2,925

Furniture and equipment
1,178

 
1,293

Total
14,399

 
14,447

Accumulated depreciation
(9,608
)
 
(9,184
)
Property and equipment, net
$
4,791

 
$
5,263

v3.8.0.1
Debt (Tables)
3 Months Ended
Mar. 31, 2018
Debt [Abstract]  
Schedule of Maturities of Long-term Debt
The future maturities of the Term Loan by year as of March 31, 2018 are as follows (in thousands):
Remainder of 2018
$
620

2019
1,859

2020
1,859

2021(1)
1,240

Total future maturities of debt (2)
$
5,578

v3.8.0.1
Goodwill and Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Goodwill

Schedule of Finite-Lived Intangible Assets
The following table sets forth the fair value components of identifiable acquired intangible assets (in thousands) and their estimated useful lives (in years) as of March 31, 2018 were as follows (in thousands):
 
 
Intangible Assets, Gross
 
Accumulated Amortization
 
Acquired Intangibles, Net
 
Useful Life
 
 
December 31, 2017
 
Additions
 
March 31, 2018
 
December 31, 2017
 
Expense
 
March 31, 2018
 
March 31, 2018
 
Customer relationships
 
$
10,900

 
$

 
$
10,900

 
$
(818
)
 
$
(272
)
 
$
(1,090
)
 
9,810

 
10
Developed technology
 
10,600

 

 
10,600

 
(1,590
)
 
(530
)
 
(2,120
)
 
8,480

 
5
Backlog
 
1,500

 

 
1,500

 
(664
)
 
(148
)
 
(812
)
 
688

 
3
Other acquired intangible assets
 
900

 

 
900

 
(575
)
 
(192
)
 
(767
)
 
133

 
1-3
Total identifiable intangible assets
 
$
23,900

 
$

 
$
23,900

 
$
(3,647
)
 
$
(1,142
)
 
$
(4,789
)
 
$
19,111

 
 
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense
Estimated amortization expense for acquired intangible assets for the following five years and thereafter is as follows (in thousands):
Remainder of 2018
$
2,902

2019
3,505

2020
3,242

2021
3,210

2022
1,620

Thereafter
4,632

Total estimated amortization expense
$
19,111

v3.8.0.1
Stock Compensation (Tables)
3 Months Ended
Mar. 31, 2018
Equity and Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Share-based Compensation, Stock Options, Activity 2.72% - 2.74%
Schedule of Other Share-based Compensation, Activity
A summary of restricted stock unit activity for the three months ended March 31, 2018 is as follows:
 
Number of
Shares
Outstanding
 
Weighted-
Average
Grant Date Fair Value
Balance as of December 31, 2017
9,333,896

 
$
4.03

Restricted Stock Units granted (1)
3,834,618

 
$
3.63

Restricted Stock Units vested
(747,311
)
 
$
4.38

Restricted Stock Units forfeited and canceled (2)
(1,467,107
)
 
$
3.59

Balance as of March 31, 2018
10,954,096

 
$
3.93

_______________________
(1) Includes 0.6 million performance stock units (“PSUs”) that were granted during the three months ended March 31, 2018.
(2) Includes PSUs that were granted in the prior year, which were canceled because performance targets were not achieved.
v3.8.0.1
Net Loss per Share (Tables)
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Schedule of Earnings Per Share, Basic and Diluted
The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock (in thousands, except per share data):
 
Three Months Ended March 31,
 
2018
 
2017
 
 
 
 
 
(as adjusted)*
 
Class A
 
Class B
 
Class A
 
Class B
Net loss
$