CASTLIGHT HEALTH, INC., 10-Q filed on 7/31/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2020
Jul. 27, 2020
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 001-36330  
Entity Registrant Name CASTLIGHT HEALTH, INC.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 26-1989091  
Entity Address, Address Line One 150 Spear Street  
Entity Address, Address Line Two Suite 400  
Entity Address, City or Town San Francisco  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 94105  
City Area Code 415  
Local Phone Number 829-1400  
Title of 12(b) Security Class B Common Stock, par value $0.0001 per share  
Trading Symbol CSLT  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Entity Central Index Key 0001433714  
Current Fiscal Year End Date --12-31  
Class A common stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   35,028,171
Class B    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   115,602,861
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 44,274 $ 43,017
Marketable securities 0 16,411
Accounts receivable and other, net 33,175 31,397
Prepaid expenses and other current assets 5,643 4,645
Total current assets 83,092 95,470
Property and equipment, net 6,353 4,856
Restricted cash, non-current 1,144 1,144
Deferred commissions 11,719 14,718
Deferred professional service costs 5,717 6,711
Intangible assets, net 10,046 12,178
Goodwill 41,485 91,785
Operating lease right-of-use assets, net 11,122 13,906
Other assets 1,595 2,016
Total assets 172,273 242,784
Current liabilities:    
Accounts payable 8,606 19,596
Accrued expenses and other current liabilities 8,887 10,454
Accrued compensation 5,656 8,770
Deferred revenue 12,930 10,173
Operating lease liabilities 5,429 5,914
Total current liabilities 41,508 54,907
Deferred revenue, non-current 577 572
Debt, non-current 465 1,395
Operating lease liabilities, non-current 9,290 11,823
Other liabilities, non-current 1,269 1,213
Total liabilities 53,109 69,910
Commitments and contingencies
Stockholders’ equity:    
Additional paid-in capital 634,730 627,899
Accumulated other comprehensive income 0 2
Accumulated deficit (515,581) (455,042)
Total stockholders’ equity 119,164 172,874
Total liabilities and stockholders’ equity 172,273 242,784
Class A common stock    
Stockholders’ equity:    
Common stock 4 4
Class B common stock    
Stockholders’ equity:    
Common stock $ 11 $ 11
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Jun. 30, 2020
Dec. 31, 2019
Class A common stock    
Par value (usd per share) $ 0.0001 $ 0.0001
Common stock authorized (in shares) 200,000,000 200,000,000
Common stock issued (in shares) 35,028,171 35,032,053
Common stock outstanding (in shares) 35,028,171 35,032,053
Class B    
Par value (usd per share) $ 0.0001 $ 0.0001
Common stock authorized (in shares) 800,000,000 800,000,000
Common stock issued (in shares) 115,598,256 113,177,162
Common stock outstanding (in shares) 115,598,256 113,177,162
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenue:        
Total revenue, net $ 35,500 $ 35,910 $ 74,545 $ 71,400
Cost of revenue:        
Total cost of revenue 12,761 14,163 27,234 28,273
Gross profit 22,739 21,747 47,311 43,127
Operating expenses:        
Sales and marketing [1] 7,683 8,889 18,155 18,104
Research and development [1] 13,043 14,487 26,865 30,212
General and administrative [1] 6,340 7,010 12,916 14,303
Goodwill impairment 0 0 50,300 0
Total operating expenses 27,066 30,386 108,236 62,619
Operating loss (4,327) (8,639) (60,925) (19,492)
Other income, net 123 258 386 572
Net loss $ (4,204) $ (8,381) $ (60,539) $ (18,920)
Net loss per share, basic and diluted (in usd per share) $ (0.03) $ (0.06) $ (0.41) $ (0.13)
Weighted-average shares used to compute basic and diluted net loss per share (in shares) 150,078 144,572 149,475 143,790
Subscription        
Revenue:        
Total revenue, net $ 34,289 $ 33,964 $ 72,672 $ 67,770
Cost of revenue:        
Total cost of revenue [1] 8,819 8,234 19,051 16,400
Professional services and other        
Revenue:        
Total revenue, net 1,211 1,946 1,873 3,630
Cost of revenue:        
Total cost of revenue [1] $ 3,942 $ 5,929 $ 8,183 $ 11,873
[1] Includes stock-based compensation expense as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Cost of revenue:
Cost of subscription$205  $196  $374  $415  
Cost of professional services and other144  236  260  501  
Sales and marketing748  662  1,420  1,289  
Research and development1,314  1,733  2,477  3,437  
General and administrative858  2,030  1,924  3,192  
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Subscription        
Stock-based compensation expense $ 205 $ 196 $ 374 $ 415
Professional services and other        
Stock-based compensation expense 144 236 260 501
Sales and marketing        
Stock-based compensation expense 748 662 1,420 1,289
Research and development        
Stock-based compensation expense 1,314 1,733 2,477 3,437
General and administrative        
Stock-based compensation expense $ 858 $ 2,030 $ 1,924 $ 3,192
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net loss $ (4,204) $ (8,381) $ (60,539) $ (18,920)
Other comprehensive income (loss):        
Net change in unrealized gain (loss) on available-for-sale marketable securities (13) 7 (2) 7
Other comprehensive income (loss) (13) 7 (2) 7
Comprehensive loss $ (4,217) $ (8,374) $ (60,541) $ (18,913)
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
$ in Thousands
Total
Class A and B Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2018   141,927,205      
Beginning balance at Dec. 31, 2018 $ 194,671 $ 14 $ 609,697 $ 0 $ (415,040)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Vesting of restricted stock units (in shares)   2,090,898      
Exercise of stock options, net (in shares)   1,180,784      
Issuance of common stock upon exercise of stock options 1,845   1,845    
Stock-based compensation 8,907   8,907    
Comprehensive loss (18,913)     7 (18,920)
Ending balance (in shares) at Jun. 30, 2019   145,198,887      
Ending balance at Jun. 30, 2019 186,510 $ 14 620,449 7 (433,960)
Beginning balance (in shares) at Mar. 31, 2019   143,955,787      
Beginning balance at Mar. 31, 2019 189,829 $ 14 615,394 0 (425,579)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Vesting of restricted stock units (in shares)   1,123,186      
Exercise of stock options, net (in shares)   119,914      
Issuance of common stock upon exercise of stock options 165   165    
Stock-based compensation 4,890   4,890    
Comprehensive loss (8,374)     7 (8,381)
Ending balance (in shares) at Jun. 30, 2019   145,198,887      
Ending balance at Jun. 30, 2019 186,510 $ 14 620,449 7 (433,960)
Beginning balance (in shares) at Dec. 31, 2019   148,209,215      
Beginning balance at Dec. 31, 2019 $ 172,874 $ 15 627,899 2 (455,042)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Vesting of restricted stock units (in shares)   2,032,476      
Exercise of stock options, net (in shares) 142,729 142,729      
Issuance of common stock upon exercise of stock options $ 155   155    
Issuance of common stock under the ESPP (in shares)   242,007      
Issuance of common stock under the ESPP 186   186    
Stock-based compensation 6,490   6,490    
Comprehensive loss (60,541)     (2) (60,539)
Ending balance (in shares) at Jun. 30, 2020   150,626,427      
Ending balance at Jun. 30, 2020 119,164 $ 15 634,730 0 (515,581)
Beginning balance (in shares) at Mar. 31, 2020   149,517,644      
Beginning balance at Mar. 31, 2020 120,096 $ 15 631,445 13 (511,377)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Vesting of restricted stock units (in shares)   1,108,783      
Issuance of common stock upon exercise of stock options 0        
Issuance of common stock under the ESPP 0        
Stock-based compensation 3,285   3,285    
Comprehensive loss (4,217)     (13) (4,204)
Ending balance (in shares) at Jun. 30, 2020   150,626,427      
Ending balance at Jun. 30, 2020 $ 119,164 $ 15 $ 634,730 $ 0 $ (515,581)
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Operating activities:    
Net loss $ (60,539) $ (18,920)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 3,144 2,687
Goodwill impairment 50,300 0
Stock-based compensation 6,455 8,834
Amortization and impairment of deferred commissions 3,919 4,856
Amortization and impairment of deferred professional service costs 1,657 2,014
Non-cash operating lease expense 2,631 2,580
Accretion and amortization of marketable securities 2 (213)
Changes in operating assets and liabilities:    
Accounts receivable and other, net (1,778) (5,795)
Deferred commissions (920) (2,670)
Deferred professional service costs (629) (901)
Prepaid expenses and other assets (824) (1,864)
Accounts payable (10,201) 1,864
Operating lease liabilities (2,616) (2,795)
Accrued expenses and other liabilities (1,511) (3,131)
Deferred revenue 2,762 312
Accrued compensation (3,114) (806)
Net cash used in operating activities (11,262) (13,948)
Investing activities:    
Purchase of property and equipment (3,299) (593)
Purchase of marketable securities (2,994) (13,780)
Sales of marketable securities 2,001 0
Maturities of marketable securities 17,400 11,453
Net cash provided by (used in) investing activities 13,108 (2,920)
Financing activities:    
Proceeds from exercise of stock options 155 1,845
Proceeds from ESPP offering 186 0
Principal payments on long-term debt (930) (930)
Net cash (used in) provided by financing activities (589) 915
Net increase (decrease) in cash, cash equivalents and restricted cash 1,257 (15,953)
Cash, cash equivalents and restricted cash at beginning of period 44,342 67,330
Cash, cash equivalents and restricted cash at end of period 45,599 51,377
Reconciliation of cash, cash equivalents and restricted cash:    
Total cash, cash equivalents and restricted cash $ 45,599 $ 51,377
v3.20.2
Organization and Description of Business
6 Months Ended
Jun. 30, 2020
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”) provides health navigation solutions for large U.S. employers and health plans (“customers”) and their respective employees and members (“users”). Castlight’s offerings deliver a personalized and simplified user experience that helps connect individuals with the right provider or available benefit at the right time. Castlight’s navigation offerings have demonstrated measurable results, driving increased levels of user satisfaction and program utilization and lower healthcare costs for its customers and millions of users. The Company was incorporated in the State of Delaware in January 2008. The Company's principal executive offices are located in San Francisco, California.
v3.20.2
Accounting Standards and Significant Accounting Policies
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Accounting Standards and 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, stockholders’ equity 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, 2019. 

Other than as described below, there have been no changes to the Company's significant accounting policies described in the Company's Annual Report that have had a material impact on the Company's consolidated financial statements and related notes.

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:

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;
Assumptions used in the valuation of certain equity awards; and
Assumptions used in the calculation of goodwill impairment, including the forecast of future cash flows and discount rate.

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

Marketable Securities

The Company's marketable securities consist of U.S. agency obligations and U.S. treasury securities, with maturities at the time of purchase of greater than three months. Marketable securities with remaining maturities in excess of one year are classified as non-current. The Company classifies its marketable securities as available-for-sale at the time of purchase based on its intent and are recorded at their estimated fair value. Unrealized gains for available-for-sale securities are recorded in other comprehensive income/loss. Unrealized losses for available-for-sale securities are recorded in other comprehensive income/loss, unless the losses relate to deterioration in credit risk or if it is likely securities will be sold before the recovery of their cost basis. In these cases, the unrealized losses are reported in other income, net in the consolidated statement of operations.
Realized gains and losses are determined based on the specific identification method and are reported in other income, net in the consolidated statements of operations.

Concentrations of Risk and Significant Customers

The Company had one customer, Anthem Inc. ("Anthem"), that accounted for 49% and 46% of total revenue during the three and six months ended June 30, 2020, respectively, and 32% of accounts receivable as of June 30, 2020. 

Recently Adopted Accounting Pronouncements

Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses, and subsequent amendments (“ASC 326”). The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The adoption of this standard did not have a material impact on the Company’s financial statements. The Company will continue to actively monitor the impact of the current coronavirus (“COVID-19”) pandemic on expected credit losses.

Effective January 1, 2020, the Company adopted ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined that the ASUs issued by the FASB during the six months ended June 30, 2020 are either not applicable or are expected to have minimal impact on the Company's condensed consolidated financial results.
v3.20.2
Revenue, Deferred Revenue, Contract Balances and Performance Obligations
6 Months Ended
Jun. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue, Deferred Revenue, Contract Balances and Performance Obligations Revenue, Deferred Revenue, Contract Balances and Performance Obligations
The Company sells to customers based in the United States. Starting January 1, 2020, the effective date of the Anthem enterprise license agreement, the Company began treating Anthem as a direct health plan customer rather than a channel partner. As a result, substantially all of the Company's revenues are generated through direct sales.

Deferred revenue as of June 30, 2020 and December 31, 2019 was $13.5 million and $10.7 million, respectively. Contract assets as of June 30, 2020 and December 31, 2019 were $4.8 million and $0.4 million, respectively. The increase in contract assets is primarily due to the Anthem enterprise license agreement.

Revenue of $6.6 million and $11.3 million was recognized during the three months ended June 30, 2020 and 2019, respectively, that was included in the Company’s deferred revenue balances at the beginning of the respective periods. Revenue of $8.8 million and $16.0 million was recognized during the six months ended June 30, 2020 and 2019, respectively, that was included in the Company’s deferred revenue balances at the beginning of the respective periods.

The Company recorded favorable cumulative catch-up adjustments to revenue of $0.4 million and $0.5 million during the three months ended June 30, 2020 and 2019, respectively, arising from changes in estimates of transaction price. The Company recorded favorable cumulative catch-up adjustments to revenue of $2.1 million and $1.9 million during the six months ended June 30, 2020 and 2019, respectively, arising from changes in estimates of transaction price.

The aggregate balance of remaining performance obligations from non-cancelable contracts with customers as of June 30, 2020 was $198.6 million. The Company expects to recognize approximately 60% 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 be billed for the non-cancelable portion of contracts.
v3.20.2
Deferred Costs
6 Months Ended
Jun. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Deferred Costs Deferred Costs
Changes in the balance of total deferred commissions and total deferred professional service costs during the six months ended June 30, 2020 are as follows (in thousands):

As of December 31, 2019Expense recognizedAs of June 30, 2020
Additions
Deferred commissions$14,718  $920  $(3,919) $11,719  
Deferred professional service costs6,711  663  (1,657) 5,717  
Total deferred commissions and professional service costs
$21,429  $1,583  $(5,576) $17,436  

 These costs are reviewed for impairment quarterly. Impairment charges were $0.2 million and $1.3 million for the three and six months ended June 30, 2020, respectively. Impairment charges for the three and six months ended June 30, 2019 were immaterial.
v3.20.2
Goodwill and Intangible Assets
6 Months Ended
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Goodwill and Intangible Assets
Impairment

The Company determined that the significant decline in the U.S. economy as a result of the COVID-19 pandemic, together with the decline in the Company’s stock price, constituted a triggering event, which required the Company to perform interim impairment analyses related to its long-lived assets and goodwill during the first quarter of 2020. The impairment analysis for long-lived assets indicated that the assets were recoverable; therefore, no impairment was recorded. After assessing long-lived assets, the Company performed a goodwill impairment analysis and determined that the carrying value of its only reporting unit exceeded its fair value by approximately $50.3 million. The fair value was determined using the income approach. The Company believes that the income approach is the most reliable indication of fair value since it incorporates future estimated revenues and expenses for the reporting unit that the market approach may not directly incorporate. In addition to future estimated revenue and expenses, the determination of fair value included assumptions related to a discount rate.

During the second quarter of 2020, the Company determined that there were no indicators present to suggest that it was more likely than not that the fair value of the reporting unit was less than its carrying amount. The Company will continue to monitor its goodwill on a quarterly basis for indicators of impairment, including but not limited to, further declines in the stock price. Accordingly, there may be future impairments.

Goodwill

The Company’s goodwill relates entirely to the acquisition of Jiff in 2017. As of June 30, 2020, the gross amount of goodwill was $91.8 million and accumulated goodwill impairment was $50.3 million, all of which was recorded in the first quarter of 2020. The goodwill impairment did not involve any cash expenditures.
Intangible assets, net

Identified intangible assets are recorded at their estimated fair values at the date of acquisition and are amortized over their respective estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used.

The following tables set forth the fair value components of identifiable acquired intangible assets (dollars in thousands):
As of June 30, 2020
Useful LifeGrossAccumulated AmortizationNet
Customer relationships6$10,900  $(4,564) $6,336  
Developed technology510,600  (6,890) 3,710  
Total identifiable intangible assets$21,500  $(11,454) $10,046  

As of December 31, 2019
Useful LifeGrossAccumulated AmortizationNet
Customer relationships6$10,900  $(3,509) $7,391  
Developed technology510,600  (5,830) 4,770  
Backlog2.51,500  (1,500) —  
Other acquired intangible assets1-3900  (883) 17  
Total identifiable intangible assets$23,900  $(11,722) $12,178  

Amortization expense from acquired intangible assets for the three months ended June 30, 2020 and 2019 was $1.1 million and $0.9 million, respectively. Amortization expense from acquired intangible assets for the six months ended June 30, 2020 and 2019 was $2.1 million and $1.8 million, respectively. Amortization expense is included in cost of subscription, sales and marketing, and general and administrative expenses.

Future estimated amortization expense for acquired intangible assets is as follows (in thousands):
Remainder of 2020$2,116  
20214,232  
20222,642  
20231,056  
Total amortization expense$10,046  
v3.20.2
Marketable Securities
6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities Marketable Securities
Marketable securities consisted of the following (in thousands):

As of June 30, 2020
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
Money market mutual funds$2,759  $—  $—  $2,759  
Included in cash and cash equivalents$2,759  $—  $—  $2,759  
As of December 31, 2019
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. treasury securities$13,602  $ $—  $13,603  
U.S. agency obligations6,400   —  6,401  
Money market mutual funds8,736  —  —  8,736  
28,738   —  28,740  
Included in cash and cash equivalents12,329  —  —  12,329  
Included in marketable securities$16,409  $ $—  $16,411  
v3.20.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2020
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 June 30, 2020 and December 31, 2019. As of June 30, 2020 and December 31, 2019, there were no securities within Level 3 of the fair value hierarchy.
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):
As of June 30, 2020
Level 1Level 2Total
Cash equivalents:
Money market mutual funds$2,759  $—  $2,759  
$2,759  $—  $2,759  

As of December 31, 2019
Level 1Level 2Total
Cash equivalents:
Money market mutual funds$8,736  $—  $8,736  
U.S. treasury securities—  3,593  3,593  
Marketable securities:
U.S. agency obligations—  6,401  6,401  
U.S. treasury securities—  10,010  10,010  
$8,736  $20,004  $28,740  
Gross unrealized gains for cash equivalents and marketable securities as of June 30, 2020 and December 31, 2019 were not material.
Realized gains during the three and six months ended June 30, 2020 were not material. All of the Company’s securities as of December 31, 2019 mature within one year.
v3.20.2
Property and Equipment
6 Months Ended
Jun. 30, 2020
Property, Plant and Equipment [Abstract]  
Property and Equipment Property and Equipment
Property and equipment consisted of the following (in thousands):
As of
 June 30, 2020December 31, 2019
Leasehold improvements$4,663  $2,834  
Computer equipment8,224  8,126  
Software1,025  1,110  
Internal-use software3,878  2,925  
Furniture and equipment1,684  1,048  
Construction in progress128  1,164  
Total19,602  17,207  
Less: accumulated depreciation(13,249) (12,351) 
Property and equipment, net$6,353  $4,856  
Depreciation and amortization expense for the three months ended June 30, 2020 and 2019 was $0.6 million and $0.5 million, respectively. Depreciation and amortization expense for the six months ended June 30, 2020 and 2019 was $1.0 million and $0.9 million, respectively. Depreciation and amortization are recorded on a straight-line basis.
v3.20.2
Debt
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Debt Debt
Term Loan

The Company has a term loan facility (the “Loan Agreement”) with Silicon Valley Bank (the “Bank”) that provided for a term loan of approximately $5.6 million (the “Term Loan”). 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 June 30, 2020 are as follows (in thousands):

Remainder of 2020$929  
2021(1)
1,395  
Total future maturities of debt2,324  
Less current maturities(2)
(1,859) 
Debt, non-current$465  
(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) Classified within accrued expenses and other current liabilities on the condensed consolidated balance sheet as of June 30, 2020.

Per the Loan Agreement the Company is subject to certain reporting covenants, and the debt obligations are secured by a security interest in the assets of the Company, excluding intellectual property and certain other exceptions. The Company was in compliance with all reporting covenants in the Loan Agreement related to the outstanding principal balance as of June 30, 2020.

Revolving Line of Credit

On May 5, 2020, the Company entered into the Third Amended and Restated Loan and Security Agreement (the "Amended Loan Agreement") with the Bank. The Amended Loan Agreement amended and restated its existing Loan Agreement. Under the Amended Loan Agreement, the Bank agreed to extend a $25.0 million revolving credit facility to the Company (the “Revolving Line”). Borrowings under the Revolving Line accrue interest at a floating per annum rate equal to the Prime Rate plus 1%, and such interest is payable monthly. The Company may request borrowings under the Revolving Line prior to May 4, 2023, on which date the Revolving Line terminates. In relation to the Revolving Line, the Company is subject to certain financial and reporting covenants. As of June 30, 2020, no borrowings have been made under the Revolving Line, and the Company was in compliance with all financial and reporting covenants.

Paycheck Protection Program Loan

On April 22, 2020, the Company entered into a Paycheck Protection Program Loan (the “PPP Note”) sponsored by the Small Business Administration (the “SBA”) through the Bank, providing for $10.0 million in proceeds. The PPP Note was issued pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Note was scheduled to mature on April 22, 2022, carried an interest rate of 1% per annum, and was subject to the terms and conditions applicable to all loans made pursuant to the Paycheck Protection Program as administered by the SBA under the CARES Act, including the debt forgiveness provisions contained therein. Following additional guidance issued by the SBA on April 23, 2020 that cast doubt on the ability of public companies to qualify for loans under the Paycheck Protection Program, the Company repaid the PPP Note on April 29, 2020.
v3.20.2
Contingencies
6 Months Ended
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Contingencies Contingencies Legal Matters From time to time, the Company may become subject to 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.
v3.20.2
Stock Compensation
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stock Compensation Stock Compensation
Restricted Stock Units (“RSUs”) Activity

A summary of unvested restricted stock unit activity for the six months ended June 30, 2020 is as follows:

Number of
Shares
Weighted-
Average
Grant Date Fair Value
Balance as of December 31, 201911,615,884  $2.44  
Granted12,299,276  $0.88  
Vested(2,032,476) $2.77  
Forfeited and canceled
(3,268,027) $2.51  
Balance as of June 30, 202018,614,657  $1.36  

As of June 30, 2020, there was a total of $22.5 million in unrecognized compensation cost related to restricted stock units, which is expected to be recognized over a weighted-average period of approximately 2.7 years.

The Company granted approximately 0.9 million performance stock units ("PSUs") during the third quarter of 2019. The number of shares that will eventually vest depends on achievement of certain performance targets, as determined by the compensation committee of the Company's board of directors. Once the performance is determined, the PSUs, if any, will vest, subject to recipients' continued service, on the later of (i) the attainment of the performance targets and (ii) a year after the grant date. The compensation expense associated with the PSUs is recognized using the accelerated method. For the three and six months ended June 30, 2020, the Company recognized compensation expense of approximately $0.6 million and $0.8 million, respectively, related to these performance awards.

Stock Option Activity

A summary of stock option activity for the six months ended June 30, 2020 is as follows: 
Options
Outstanding
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value (in thousands)
Balance as of December 31, 20197,207,733  $1.94  $412  
Granted749,111  $1.17  
Exercised(142,729) $1.08  
Forfeited and canceled(2,117,240) $1.71  
Balance as of June 30, 20205,696,875  $1.94  $ 

The total grant-date fair value of stock options granted during the six months ended June 30, 2020 and 2019 was $0.6 million and $0.4 million, respectively.
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-valuation model with the following assumptions:

 Six Months Ended June 30,
 20202019
Volatility73%57%
Expected life (in years)
6.11 - 6.12
6.06
Risk-free interest rate
0.84% - 1.47%
2.57%
Dividend yield—%—%

As of June 30, 2020, the Company had $2.6 million in unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately 3.2 years. 
Employee Stock Purchase Plan
The Company used the following Black-Scholes assumptions in estimating the fair value of the shares under the 2014 Employee Stock Purchase Plan (the “ESPP”):

Six Months Ended June 30, 2020
Volatility71%
Expected life equals length of offering period (in years)0.5
Risk-free interest rate0.95%
Dividend yield—%

Stock-based compensation expense related to the ESPP was immaterial for the three and six months ended June 30, 2020. As of June 30, 2020, the unrecognized stock-based compensation expense related to the ESPP was also immaterial, and is expected to be recognized over the remaining term of the offering period.
v3.20.2
Income Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes The effective tax rate for the three and six months ended June 30, 2020 and 2019 was zero percent, primarily as a result of the estimated tax loss for the year and the change in valuation allowance. At June 30, 2020, all unrecognized tax benefits are subject to a full valuation allowance and, if recognized, will not affect the effective tax rate.
v3.20.2
Net Loss per Share
6 Months Ended
Jun. 30, 2020
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 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 June 30,Six Months Ended June 30,
 2020201920202019
Class AClass BClass AClass BClass AClass BClass AClass B
Net loss$(981) $(3,223) $(2,026) $(6,355) $(14,188) $(46,351) $(4,767) $(14,153) 
Weighted-average shares used to compute basic and diluted net loss per share
35,030  115,048  35,276  109,296  35,031  114,444  36,227  107,563  
Basic and diluted net loss per share
$(0.03) $(0.03) $(0.06) $(0.06) $(0.41) $(0.41) $(0.13) $(0.13) 

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 June 30,Six Months Ended June 30,
 2020201920202019
Stock options and restricted stock units
24,312  16,157  24,312  16,157  
Shares issuable under the ESPP297  —  297  —  
Warrants115  115  115  115  
Total24,724  16,272  24,724  16,272  
v3.20.2
Restructuring Program
6 Months Ended
Jun. 30, 2020
Restructuring and Related Activities [Abstract]  
Restructuring Program Restructuring Program On May 4, 2020, the Company announced its intent to undertake a program to reduce its workforce as part of the Company’s efforts to respond to the COVID-19 pandemic and ensure longer-term financial stability for the Company in light of the ongoing economic challenges resulting from COVID-19 and its impact on the Company’s business (the “Program”). The Program involves the termination of approximately 60 employees, representing 13% of the Company’s headcount. For the three months ended June 30, 2020, the Company incurred charges of approximately $2.0 million related to employee severance and benefits costs under the Program, all of which are cash expenditures. As of June 30, 2020, $1.6 million of the total has been paid out, and the remaining balance of $0.4 million is expected to be paid by September 30, 2020.In addition, as part of its cost reductions in light of the COVID-19 pandemic, the Company has implemented reductions in base salary for its employees, effective May 16, 2020, consisting of a 30% reduction for the Company’s Chief Executive Officer, 25% reduction for the Company’s Chief Financial Officer, 20% reduction for members of the Company’s executive leadership team, and tiered reductions of 10-15% for other employees with salaries above $100,000, which the Company anticipates will last at least six months, and will be re-evaluated at that time. Members of the Company’s Board of Directors have also voluntarily agreed to forego 50% of their cash compensation for the duration of the employee salary reductions.
v3.20.2
Accounting Standards and Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of 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, stockholders’ equity 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, 2019. 

Other than as described below, there have been no changes to the Company's significant accounting policies described in the Company's Annual Report that have had a material impact on the Company's consolidated financial statements and related notes.
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:

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;
Assumptions used in the valuation of certain equity awards; and
Assumptions used in the calculation of goodwill impairment, including the forecast of future cash flows and discount rate.

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

The Company's marketable securities consist of U.S. agency obligations and U.S. treasury securities, with maturities at the time of purchase of greater than three months. Marketable securities with remaining maturities in excess of one year are classified as non-current. The Company classifies its marketable securities as available-for-sale at the time of purchase based on its intent and are recorded at their estimated fair value. Unrealized gains for available-for-sale securities are recorded in other comprehensive income/loss. Unrealized losses for available-for-sale securities are recorded in other comprehensive income/loss, unless the losses relate to deterioration in credit risk or if it is likely securities will be sold before the recovery of their cost basis. In these cases, the unrealized losses are reported in other income, net in the consolidated statement of operations.
Realized gains and losses are determined based on the specific identification method and are reported in other income, net in the consolidated statements of operations.
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements Recently Adopted Accounting Pronouncements
Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses, and subsequent amendments (“ASC 326”). The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The adoption of this standard did not have a material impact on the Company’s financial statements. The Company will continue to actively monitor the impact of the current coronavirus (“COVID-19”) pandemic on expected credit losses.

Effective January 1, 2020, the Company adopted ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined that the ASUs issued by the FASB during the six months ended June 30, 2020 are either not applicable or are expected to have minimal impact on the Company's condensed consolidated financial results.
v3.20.2
Deferred Costs (Tables)
6 Months Ended
Jun. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Changes in Balance of Total Deferred Commissions and Total Deferred Professional Service Costs
Changes in the balance of total deferred commissions and total deferred professional service costs during the six months ended June 30, 2020 are as follows (in thousands):

As of December 31, 2019Expense recognizedAs of June 30, 2020
Additions
Deferred commissions$14,718  $920  $(3,919) $11,719  
Deferred professional service costs6,711  663  (1,657) 5,717  
Total deferred commissions and professional service costs
$21,429  $1,583  $(5,576) $17,436  
v3.20.2
Goodwill and Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Finite-Lived Intangible Assets
The following tables set forth the fair value components of identifiable acquired intangible assets (dollars in thousands):
As of June 30, 2020
Useful LifeGrossAccumulated AmortizationNet
Customer relationships6$10,900  $(4,564) $6,336  
Developed technology510,600  (6,890) 3,710  
Total identifiable intangible assets$21,500  $(11,454) $10,046  

As of December 31, 2019
Useful LifeGrossAccumulated AmortizationNet
Customer relationships6$10,900  $(3,509) $7,391  
Developed technology510,600  (5,830) 4,770  
Backlog2.51,500  (1,500) —  
Other acquired intangible assets1-3900  (883) 17  
Total identifiable intangible assets$23,900  $(11,722) $12,178  
Schedule of Amortization Expense for Acquired Intangible Assets
Future estimated amortization expense for acquired intangible assets is as follows (in thousands):
Remainder of 2020$2,116  
20214,232  
20222,642  
20231,056  
Total amortization expense$10,046  
v3.20.2
Marketable Securities (Tables)
6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Available-for-sale Securities
Marketable securities consisted of the following (in thousands):

As of June 30, 2020
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
Money market mutual funds$2,759  $—  $—  $2,759  
Included in cash and cash equivalents$2,759  $—  $—  $2,759  
As of December 31, 2019
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. treasury securities$13,602  $ $—  $13,603  
U.S. agency obligations6,400   —  6,401  
Money market mutual funds8,736  —  —  8,736  
28,738   —  28,740  
Included in cash and cash equivalents12,329  —  —  12,329  
Included in marketable securities$16,409  $ $—  $16,411  
v3.20.2
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2020
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):
As of June 30, 2020
Level 1Level 2Total
Cash equivalents:
Money market mutual funds$2,759  $—  $2,759  
$2,759  $—  $2,759  

As of December 31, 2019
Level 1Level 2Total
Cash equivalents:
Money market mutual funds$8,736  $—  $8,736  
U.S. treasury securities—  3,593  3,593  
Marketable securities:
U.S. agency obligations—  6,401  6,401  
U.S. treasury securities—  10,010  10,010  
$8,736  $20,004  $28,740  
v3.20.2
Property and Equipment (Tables)
6 Months Ended
Jun. 30, 2020
Property, Plant and Equipment [Abstract]  
Property and Equipment
Property and equipment consisted of the following (in thousands):
As of
 June 30, 2020December 31, 2019
Leasehold improvements$4,663  $2,834  
Computer equipment8,224  8,126  
Software1,025  1,110  
Internal-use software3,878  2,925  
Furniture and equipment1,684  1,048  
Construction in progress128  1,164  
Total19,602  17,207  
Less: accumulated depreciation(13,249) (12,351) 
Property and equipment, net$6,353  $4,856  
v3.20.2
Debt (Tables)
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Schedule of Maturities of Long-term Debt
The future maturities of the Term Loan by year as of June 30, 2020 are as follows (in thousands):

Remainder of 2020$929  
2021(1)
1,395  
Total future maturities of debt2,324  
Less current maturities(2)
(1,859) 
Debt, non-current$465  
(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) Classified within accrued expenses and other current liabilities on the condensed consolidated balance sheet as of June 30, 2020.
v3.20.2
Stock Compensation (Tables)
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Schedule of Other Share-based Compensation, Activity
A summary of unvested restricted stock unit activity for the six months ended June 30, 2020 is as follows:

Number of
Shares
Weighted-
Average
Grant Date Fair Value
Balance as of December 31, 201911,615,884  $2.44  
Granted12,299,276  $0.88  
Vested(2,032,476) $2.77  
Forfeited and canceled
(3,268,027) $2.51  
Balance as of June 30, 202018,614,657  $1.36  
Schedule of Share-based Compensation, Stock Options, Activity
A summary of stock option activity for the six months ended June 30, 2020 is as follows: 
Options
Outstanding
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value (in thousands)
Balance as of December 31, 20197,207,733  $1.94  $412  
Granted749,111  $1.17  
Exercised(142,729) $1.08  
Forfeited and canceled(2,117,240) $1.71  
Balance as of June 30, 20205,696,875  $1.94  $ 
Schedule of Share-based Payment Award, Valuation Assumptions
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-valuation model with the following assumptions:

 Six Months Ended June 30,
 20202019
Volatility73%57%
Expected life (in years)
6.11 - 6.12
6.06
Risk-free interest rate
0.84% - 1.47%
2.57%
Dividend yield—%—%
The Company used the following Black-Scholes assumptions in estimating the fair value of the shares under the 2014 Employee Stock Purchase Plan (the “ESPP”):

Six Months Ended June 30, 2020
Volatility71%
Expected life equals length of offering period (in years)0.5
Risk-free interest rate0.95%
Dividend yield—%
v3.20.2
Net Loss per Share (Tables)
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Calculation of Basic and Diluted Earnings per Share 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 June 30,Six Months Ended June 30,
 2020201920202019
Class AClass BClass AClass BClass AClass BClass A