CASTLIGHT HEALTH, INC., 10-K filed on 2/24/2021
Annual Report
v3.20.4
Cover Page - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Feb. 22, 2021
Jun. 30, 2020
Class of Stock [Line Items]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
Current Fiscal Year End Date --12-31    
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 Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Accelerated Filer    
Entity Small Business true    
Entity Emerging Growth Company false    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 98
Documents Incorporated by Reference Portions of the Registrant’s definitive proxy statement for its 2020 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of the Registrant’s year ended December 31, 2020, are incorporated by reference in Part III of this Report on Form 10-K. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.    
Amendment Flag false    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Entity Central Index Key 0001433714    
Class A      
Class of Stock [Line Items]      
Entity Common Stock, Shares Outstanding   34,998,171  
Class B      
Class of Stock [Line Items]      
Entity Common Stock, Shares Outstanding   122,623,836  
v3.20.4
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 49,242 $ 43,017
Marketable securities 0 16,411
Accounts receivable and other, net 31,740 31,397
Prepaid expenses and other current assets 3,800 4,645
Total current assets 84,782 95,470
Property and equipment, net 5,321 4,856
Restricted cash, non-current 1,144 1,144
Deferred commissions 9,556 14,718
Deferred professional service costs 4,462 6,711
Intangible assets, net 7,930 12,178
Goodwill 41,485 91,785
Operating lease right-of-use assets, net 10,238 13,906
Other assets 1,855 2,016
Total assets 166,773 242,784
Current liabilities:    
Accounts payable 5,145 19,596
Accrued expenses and other current liabilities 7,898 10,454
Accrued compensation 8,633 8,770
Deferred revenue 6,848 10,173
Operating lease liabilities 5,789 5,914
Total current liabilities 34,313 54,907
Deferred revenue, non-current 663 572
Debt, non-current 0 1,395
Operating lease liabilities, non-current 7,446 11,823
Other liabilities, non-current 485 1,213
Total liabilities 42,907 69,910
Commitments and contingencies
Stockholders’ equity:    
Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of December 31, 2020 and 2019; no shares issued and outstanding as of December 31, 2020 and 2019 0 0
Additional paid-in capital 641,075 627,899
Accumulated other comprehensive income 0 2
Accumulated deficit (517,225) (455,042)
Total stockholders’ equity 123,866 172,874
Total liabilities and stockholders’ equity 166,773 242,784
Class A    
Stockholders’ equity:    
Common stock value issued 4 4
Class B    
Stockholders’ equity:    
Common stock value issued $ 12 $ 11
v3.20.4
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Dec. 31, 2020
Dec. 31, 2019
Preferred Stock    
Par value (in USD per share) $ 0.0001 $ 0.0001
Shares authorized (in shares) 10,000,000 10,000,000
Shares issued (in shares) 0 0
Shares outstanding (in shares) 0 0
Class A    
Common Stock    
Par value (in USD per share) $ 0.0001 $ 0.0001
Shares authorized (in shares) 200,000,000 200,000,000
Shares issued (in shares) 34,998,171 35,032,053
Shares outstanding (in shares) 34,998,171 35,032,053
Class B    
Common Stock    
Par value (in USD per share) $ 0.0001 $ 0.0001
Shares authorized (in shares) 800,000,000 800,000,000
Shares issued (in shares) 120,768,900 113,177,162
Shares outstanding (in shares) 120,768,900 113,177,162
v3.20.4
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Revenue:      
Total revenue, net $ 146,709 $ 143,308 $ 156,404
Cost of revenue:      
Total cost of revenue 52,042 59,074 60,189
Gross profit 94,667 84,234 96,215
Operating expenses:      
Selling and marketing [1] 32,026 38,597 49,134
Research and development [1] 49,465 58,994 61,355
General and administrative [1] 25,662 27,981 25,620
Goodwill impairment 50,300 0 0
Total operating expenses 157,453 125,572 136,109
Operating loss (62,786) (41,338) (39,894)
Other income, net 603 1,336 188
Net loss $ (62,183) $ (40,002) $ (39,706)
Net loss per share, basic and diluted (in usd per share) $ (0.41) $ (0.28) $ (0.29)
Weighted-average shares used to compute basic and diluted net loss per share (in shares) 151,478 145,172 137,686
Subscription      
Revenue:      
Total revenue, net $ 141,160 $ 137,393 $ 143,901
Cost of revenue:      
Total cost of revenue [1] 34,996 34,067 34,691
Professional services and other      
Revenue:      
Total revenue, net 5,549 5,915 12,503
Cost of revenue:      
Total cost of revenue [1] $ 17,046 $ 25,007 $ 25,498
[1] Includes stock-based compensation expense as follows:
 Year Ended December 31,
 202020192018
Cost of revenue:
Cost of subscription$813 $774 $1,017 
Cost of professional services and other650 953 1,177 
Sales and marketing2,028 2,142 3,770 
Research and development4,544 6,100 7,214 
General and administrative4,410 5,034 4,954 
v3.20.4
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Subscription      
Allocated share-based compensation expense $ 813 $ 774 $ 1,017
Professional services and other      
Allocated share-based compensation expense 650 953 1,177
Sales and marketing      
Allocated share-based compensation expense 2,028 2,142 3,770
Research and development      
Allocated share-based compensation expense 4,544 6,100 7,214
General and administrative      
Allocated share-based compensation expense $ 4,410 $ 5,034 $ 4,954
v3.20.4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Consolidated Statement of Comprehensive Loss:      
Net loss $ (62,183) $ (40,002) $ (39,706)
Other comprehensive (loss) income:      
Net change in unrealized (loss) gain on available-for-sale marketable securities (2) 2 22
Other comprehensive (loss) income (2) 2 22
Comprehensive loss $ (62,185) $ (40,000) $ (39,684)
v3.20.4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2017   134,539,275      
Beginning balance at Dec. 31, 2017 $ 211,557 $ 13 $ 586,900 $ (22) $ (375,334)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Vesting of restricted stock units (in shares)   4,131,967      
Exercise of stock options, net (in shares)   3,255,963      
Exercise of stock options, net 4,480 $ 1 4,479    
Stock-based compensation 18,318   18,318    
Comprehensive income (loss) (39,684)     22 (39,706)
Ending balance (in shares) at Dec. 31, 2018   141,927,205      
Ending 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)   4,075,341      
Exercise of stock options, net (in shares)   2,206,669      
Exercise of stock options, net 3,060 $ 1 3,059    
Stock-based compensation 15,143   15,143    
Comprehensive income (loss) (40,000)     2 (40,002)
Ending balance (in shares) at Dec. 31, 2019   148,209,215      
Ending 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)   6,854,230      
Vesting of restricted stock units 0 $ 1 (1)    
Exercise of stock options, net (in shares)   236,104      
Exercise of stock options, net 270   270    
Issuance of common stock under the ESPP (in shares)   467,522      
Issuance of common stock under the ESPP 371   371    
Stock-based compensation 12,536   12,536    
Comprehensive income (loss) (62,185)     (2) (62,183)
Ending balance (in shares) at Dec. 31, 2020   155,767,071      
Ending balance at Dec. 31, 2020 $ 123,866 $ 16 $ 641,075 $ 0 $ (517,225)
v3.20.4
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Operating activities:      
Net loss $ (62,183) $ (40,002) $ (39,706)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 6,537 5,920 6,858
Goodwill impairment 50,300 0 0
Stock-based compensation 12,445 15,003 18,132
Amortization and impairment of deferred commissions 7,789 10,768 13,105
Amortization and impairment of deferred professional service costs 3,517 5,242 5,268
Non-cash operating lease expense 4,910 5,315  
Lease exit and related charges 0 0 2,634
Accretion and amortization of marketable securities 2 (238) (516)
Changes in operating assets and liabilities:      
Accounts receivable and other, net (343) (4,581) (4,883)
Deferred commissions (2,627) (5,344) (5,735)
Deferred professional service costs (1,178) (1,686) (2,735)
Prepaid expenses and other assets 824 102 178
Accounts payable (13,622) 9,278 5,744
Operating lease liabilities (5,744) (5,726)  
Accrued expenses and other liabilities (2,821) (3,760) 290
Deferred revenue (3,234) (10,478) (9,219)
Accrued compensation (137) 2,795 (7,966)
Net cash used in operating activities (5,565) (17,392) (18,551)
Investing activities:      
Purchase of property and equipment, net (3,580) (1,953) (2,014)
Purchase of marketable securities (2,994) (30,589) (31,974)
Sales of marketable securities 2,001 0 0
Maturities of marketable securities 17,400 25,745 53,210
Net cash provided by (used in) investing activities 12,827 (6,797) 19,222
Financing activities:      
Proceeds from exercise of stock options 270 3,060 4,480
Proceeds from ESPP offering 371 0 0
Principal payments on debt (1,859) (1,859) (465)
Net cash (used in) provided by financing activities (1,218) 1,201 4,015
Net increase (decrease) in cash, cash equivalents and restricted cash 6,044 (22,988) 4,686
Cash, cash equivalents and restricted cash at beginning of period 44,342 67,330 62,644
Cash, cash equivalents and restricted cash at end of period 50,386 44,342 67,330
Reconciliation of cash, cash equivalents and restricted cash:      
Total cash, cash equivalents and restricted cash 50,386 67,330 62,644
Supplemental cash flow information:      
Cash paid for interest 68 188 215
Purchase of property and equipment, accrued but not paid 26 854 93
Right-of-use assets obtained in exchange for new operating lease liabilities, net $ 0 $ 1,950 $ 0
v3.20.4
Organization and Description of Business
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Description of Business Organization and Description of Business Castlight Health, Inc. (“Castlight”, “the Company” or “we”) provides health navigation solutions for large U.S. employers and health plans (“customers”) and their respective employees and members (“users”). Castlight’s offerings help individuals connect and engage with the right provider, benefit, or virtual care solution, at the right time, leveraging a combination of sophisticated technology and an expert team. Castlight’s navigation offerings have demonstrated measurable results, driving high engagement and user satisfaction, increased program utilization, steerage to the right care and provider, 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, and its Customer Center of Excellence is located in Sandy, Utah.
v3.20.4
Accounting Standards and Significant Accounting Policies
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Accounting Standards and Significant Accounting Policies Accounting Standards and Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). 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 consolidated financial statements include the results of Castlight and its wholly-owned U.S. subsidiaries.
Use of Estimates
The preparation of 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;
Assumptions used in the calculation of goodwill impairment, including the forecast of future cash flows and discount rate; and
Assumptions used in the calculation of right-of-use (“ROU”) assets and lease liabilities for operating leases, including lease terms and the Company’s incremental borrowing 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.

Segment Information
The Company's chief operating decision maker, its CEO, reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating the Company's financial performance. Accordingly, the Company has determined that it operates in a single reportable segment, cloud-based products.

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 related to the Company's subscription service. Nearly all of the Company's professional services are sold on a fixed-fee basis.
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 promised services consisting of subscription services and professional services, including implementation services. For contracts with multiple promised services, the Company evaluates whether the promised services are distinct. If the promised services are distinct, revenue is recognized for the respective performance obligation separately. If one or more of the promised services are not distinct, the promised services that are not distinct are combined with the Company's subscription service, and revenue for the respective combined performance obligation is recognized over the term of the subscription service.

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 contracts with multiple promised services to be a combined performance obligation comprised of subscription services and implementation services.

The transaction price for contracts 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 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.

Costs of Revenue

Cost of revenue consists of cost of subscription revenue and cost of professional services and other revenue.

Cost of subscription revenue primarily consists of data fees, employee-related expenses (including salaries, bonuses, benefits and stock-based compensation), hosting costs of its cloud-based subscription service, cost of subcontractors, expenses for service delivery (which includes call center support), allocated overhead, costs of data center capacity, amortization of internal-use software, depreciation of certain owned computer equipment and software, and amortization of intangibles related to developed technology and backlog.

Cost of professional services and other revenue consists primarily of employee-related expenses (including salaries, bonuses, benefits and stock-based compensation) associated with these services, cost of subcontractors, deferred and amortized professional services costs, travel costs and allocated overhead. The time and costs of the Company's customer implementations vary based on the source and condition of the data the Company receives from third parties, the configurations that the Company agrees to provide and the size of the customer.

Cost of subscription revenue is expensed as the Company incurs the costs. Cost of professional services and other revenue, to the extent it is incurred and is directly attributable to fulfillment of performance obligations under a customer contract, is deferred and amortized over the benefit period of five years.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less from the date of purchase. The Company's cash and cash equivalents generally consist of investments in money market mutual funds and U.S. agency obligations. Cash and cash equivalents are stated at fair value.

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 and losses 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 it will sell the securities before the recovery of their cost basis. In these cases, the unrealized losses are reported in other income, net in the consolidated statements 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.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded when invoiced and at the invoiced amount, net of allowances for doubtful accounts. When accounts receivable are recorded, the related revenue may not commence until a later date depending on the nature of the services invoiced. The allowance for doubtful accounts is based on the Company's assessment of the collectability of accounts. The Company regularly reviews the adequacy of the allowance for doubtful accounts by considering historical information such as the age of each outstanding invoice and the collection history of each customer to determine whether a specific allowance is appropriate. In addition, the Company considers current economic conditions, and expected future economic conditions, to determine future expected losses. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified. For all periods presented, the allowance for doubtful accounts was not significant.
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. Deferred commissions are recoverable through the Company’s future revenues. Amortization of deferred commissions is included in sales and marketing expense in the accompanying consolidated statements of operations. All costs deferred are reviewed for impairment quarterly.

Deferred Professional Service Costs

Deferred professional service 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 consolidated statements of operations. All costs deferred are reviewed for impairment quarterly.

Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective asset as follows (in years):
Software3-5
Computer equipment3
Furniture and equipment5-7
Leasehold improvementsShorter of the lease term or the estimated useful lives of the improvements
Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of operations for the period realized.

Internal-Use Software

For the Company's development costs related to its cloud-based subscription service, the Company capitalizes costs incurred during the application development stage. Costs related to preliminary project and post-implementation stages are expensed as incurred. Capitalized software development costs are included as part of property and equipment and are amortized on a straight-line basis over the technology's estimated useful life, which is generally three years. The amortization expense is recorded as a component of cost of subscription revenue and was $0.3 million, $0.0 million, and $0.8 million for the years ended December 31, 2020, 2019, and 2018, respectively. The Company capitalized software development costs of $0.6 million and $0.3 million and for the years ended December 31, 2020 and 2019, respectively.
Restricted Cash

Restricted cash is included in Prepaid expenses and other current assets or Restricted cash, non-current depending on the remaining term of the restriction and consists of letters of credit related to the Company’s leased office spaces.
Goodwill
The Company reviews goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. The Company has elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the Company’s single reporting unit is less than its carrying amount. If it is determined that it is more likely than not that its fair value is less than its carrying amount, the Company performs a quantitative impairment test of goodwill, in which the fair value of the Company's single reporting unit is compared to its carrying value. Any excess of the goodwill carrying amount over the fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. Refer to Note 5 – Goodwill and Intangible Assets to the consolidated financial statements for further information on goodwill.
Intangible Assets
Acquired finite-lived intangible assets are amortized over their estimated useful lives. The Company evaluates the recoverability of its intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. The Company has not recorded any such impairment charges.

Leases

The Company determines if an arrangement is a lease and its classification at lease inception. Operating lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the lease commencement date to compute the present value of lease payments when the implicit rate is not readily determinable. ROU assets are measured at lease inception based on the initial measurement of the lease liability, plus any prepaid lease amounts, less any lease incentives. The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less. Lease terms do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Generally, lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company's lease agreements have both lease and non-lease components. The Company has elected to account for lease and non-lease components on a combined basis.

Stock-based Compensation
All stock-based compensation to employees is measured based on the grant-date fair value of the awards and recognized in the Company's consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award). The Company accounts for forfeitures as they occur. The Company estimates the fair value of all other stock options and stock purchase rights under the employee stock purchase plan using the Black-Scholes option valuation model. For restricted stock units, fair value is based on the closing price of the Company's Class B common stock on the grant date. Compensation expense is recognized over the vesting period of the applicable award using the straight-line method. For awards with performance based and service vesting conditions, compensation expense is recognized over the requisite service period if it is probable that the performance-based condition will be satisfied based on the accelerated attribution method. For awards with market based and service vesting conditions, compensation expense is recognized over the requisite service period using the accelerated attribution method.

Income Taxes
The Company accounts for income taxes using the liability method, under which deferred tax assets and liabilities are determined based on the future tax consequences attributable to differences between the financial reporting carrying amounts of existing assets and liabilities and their respective tax bases and tax credit and net operating loss carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be in effect when the differences are expected to reverse.
The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income, and a valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized.
The Company recognizes and measures uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions on a regular basis. The Company's evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of audit and effective settlement of audit issues.

Warranties and Indemnification
The Company's cloud-based subscription service is generally warranted to be performed in a professional manner and in a manner that will comply with the terms of the customer agreements.

The Company's arrangements generally include certain provisions for indemnifying customers against liabilities if there is a breach of a customer’s data or if the Company's service infringes a third party’s intellectual property rights. To date, the Company has not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in the financial statements. The Company has entered into service-level agreements with certain customers warranting, among other things, defined levels of performance and response times and permitting those customers to receive credits for prepaid amounts related to subscription services in the event that the Company fails to meet those levels. To date, the Company has not experienced any significant failures to meet defined levels of performance and response times as a result of those agreements.

The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as its director or officer or that person’s services provided to any other company or enterprise at the Company's request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.

Advertising Expenses
Advertising is expensed as incurred. Advertising expense was $0.2 million, $0.1 million and $0.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Concentrations of Risk and Significant Customers
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable. At times, the Company's deposits may exceed federally insured limits.
The Company serves its customers and users from outsourced data center facilities located in the United States. The Company has internal procedures to restore all of its production customer facing services in the event of disasters at its facilities. Procedures utilizing currently deployed hardware, software and services at certain of the Company's disaster recovery locations allow its cloud-based service to be restored within 24 hours during the implementation of the procedures to restore services.
Significant customers represent more than 10% of the total revenue for the most recent period presented or more than 10% of accounts receivable balance as of the most recent balance sheet date. The Company had one customer, Anthem, Inc. (“Anthem”) that represented approximately 47% of total revenue for the year ended December 31, 2020. See Note 3 - Revenue, Deferred Revenue, Contract Balances and Performance Obligations, under the caption “Anthem Agreement” for additional information. No other customers accounted for more than 10% of total revenue for the year ended December 31, 2020. The Company had four customers that accounted for approximately 15%, 15%, 13% and 11%, respectively, of accounts receivable, excluding contract assets, as of December 31, 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 year ended December 31, 2020 are either not applicable or are expected to have minimal impact on the Company's consolidated financial results.
v3.20.4
Revenue, Deferred Revenue, Contract Balances and Performance Obligations
12 Months Ended
Dec. 31, 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 were generated through direct sales for the year ended December 31, 2020. Indirect channel revenue represented approximately 28% of the Company’s total revenue for the year ended December 31, 2019.

Deferred revenue as of December 31, 2020 and December 31, 2019 was $7.5 million and $10.7 million, respectively. Contract assets as of December 31, 2020 and December 31, 2019 were $9.4 million and $0.4 million, respectively. The increase in contract assets is primarily due to the Anthem enterprise license agreement that results in revenue recognized ahead of invoicing in the first year of that agreement.

Revenue of $10.4 million and $19.7 million was recognized during the years ended December 31, 2020 and 2019, respectively, that was included in the deferred revenue balances at the beginning of the respective periods.

The Company recorded favorable cumulative catch-up adjustments to revenue arising from changes in variable consideration of $3.6 million and $2.8 million during the years ended December 31, 2020 and 2019, respectively.

The aggregate balance of remaining performance obligations from non-cancelable contracts with customers as of December 31, 2020 was $163.0 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 be billed for the non-cancelable portion of contracts.

Anthem Agreement
In October 2019, Castlight entered into a 30-month enterprise license agreement with Anthem, Inc., effective January 1, 2020, that extends and expands the Company's existing relationship with Anthem first announced in 2015. The agreement includes Castlight’s core care guidance technology, the Engage health navigation platform, and a new, non-exclusive license for some of Castlight’s underlying health navigation platform technology services, such as transparency and personalization. For these services, Anthem will pay the Company license fees of $168 million over 30 months. The Company began recognizing subscription revenue starting January 2020.
v3.20.4
Deferred Costs
12 Months Ended
Dec. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Deferred Costs Deferred Costs
Changes in the balance of total deferred commissions and deferred professional service costs for the year ended December 31, 2020 are as follows (in thousands):
As of December 31, 2019Expense recognizedAs of December 31, 2020
Additions
Deferred commissions$14,718 $2,627 $(7,789)$9,556 
Deferred professional service costs6,711 1,268 (3,517)4,462 
Total deferred commissions and professional service costs
$21,429 $3,895 $(11,306)$14,018 
    These costs are reviewed for impairment quarterly. Impairment charges were $2.1 million, $3.2 million and $1.9 million for the years ended December 31, 2020, 2019 and 2018 respectively.
v3.20.4
Goodwill and Intangible Assets
12 Months Ended
Dec. 31, 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.

As of December 31, 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. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. As of December 31, 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. Subsequent to the end of the second quarter of 2019, the Company realized elevated churn related to legacy Jiff customers. As a result, the Company performed an analysis of realized churn and future forecasts and updated its estimate of the original useful life of customer relationships and backlog in the third quarter of 2019. The estimated useful life of customer relationships was revised from 10 years to 6 years, and the estimated useful life of backlog was revised from 3 years to 2.5 years. These updates in useful lives were accounted for as a change in accounting estimate and were applied prospectively to the remaining carrying amounts.

The following tables set forth the fair value components of identifiable acquired intangible assets (dollars in thousands):
As of December 31, 2020
Useful Life (in years)GrossAccumulated AmortizationNet
Customer relationships6$10,900 $(5,620)$5,280 
Developed technology510,600 (7,950)2,650 
Total identifiable intangible assets$21,500 $(13,570)$7,930 
As of December 31, 2019
Useful Life (in years)GrossAccumulated 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 years ended December 31, 2020, 2019 and 2018 was $4.2 million, $4.0 million and $4.0 million and is included in cost of subscription, general and administrative, and sales and marketing expenses.

Future estimated amortization expense for acquired intangible assets is as follows (in thousands):
2021$4,232 
20222,642 
20231,056 
Total estimated amortization expense$7,930 
v3.20.4
Marketable Securities
12 Months Ended
Dec. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities Marketable Securities
The amortized cost and fair value of marketable securities was $0.8 million as of December 31, 2020, all of which consisted of money market mutual funds and was included in cash and cash equivalents.
Marketable securities consisted of the following (in thousands):
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 
v3.20.4
Fair Value Measurements
12 Months Ended
Dec. 31, 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 maximizes 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 for the years ended December 31, 2020 and 2019. As of December 31, 2020 and December 31, 2019, there were no securities within Level 3 of the fair value hierarchy.
The Company's assets that are measured at fair value consisted of $0.8 million of money market mutual funds that were included in cash and cash equivalents as of December 31, 2020, all of which were classified as Level 1 within the fair value hierarchy.

The following table presents information about the Company's assets that are measured at fair value on a recurring basis using the above input categories (in thousands): 
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 and losses for cash equivalents and marketable securities as of December 31, 2020 and December 31, 2019 were not material.
Realized gains for the year ended December 31, 2020 were not material. There were no realized gains or losses for the year ended December 31, 2019. As of December 31, 2020 and December 31, 2019, all of the Company's marketable securities mature within one year.
v3.20.4
Property and Equipment
12 Months Ended
Dec. 31, 2020
Property, Plant and Equipment [Abstract]  
Property and Equipment Property and Equipment
Property and equipment consisted of the following (in thousands):
As of December 31,
 20202019
Leasehold improvements$4,606 $2,834 
Computer equipment7,655 8,126 
Software908 1,110 
Internal-use software3,878 2,925 
Furniture and equipment1,492 1,048 
Construction in progress128 1,164 
Total18,667 17,207 
Accumulated depreciation/amortization(13,346)(12,351)
Property and equipment, net$5,321 $4,856 
Depreciation and amortization expense for the years ended December 31, 2020, 2019 and 2018 was $2.3 million, $1.9 million and $2.8 million, respectively. Depreciation is recorded on a straight-line basis.
v3.20.4
Debt
12 Months Ended
Dec. 31, 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 minus 1% or (B) 0%. Interest and principal on the term loan are payable monthly. The maturity date of the Term Loan is September 1, 2021, and the outstanding balance of $1.4 million is classified within accrued expenses and other current liabilities on the consolidated balance sheet as of December 31, 2020.

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. Interest expense related to the Term Loan was $0.2 million, $0.3 million and $0.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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 December 31, 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 December 31, 2020, no borrowings have been made under the Revolving Line, and the Company was in compliance with all financial and reporting covenants.
v3.20.4
Accrued Compensation
12 Months Ended
Dec. 31, 2020
Compensation Related Costs [Abstract]  
Accrued Compensation Accrued Compensation
Accrued compensation consisted of the following (in thousands):
 As of December 31,
 20202019
Accrued bonuses 6,177 5,842 
Other employee and benefits payable2,456 2,928 
Total$8,633 $8,770 
v3.20.4
Leases
12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases Leases
The Company’s principal commitments primarily consist of obligations under leases for office space and data centers. The leases expire at various dates through 2025 and, in some cases, include renewal options. The exercise of an option is at the sole discretion of the Company. The Company subleases certain office facilities to third parties. All leases are classified as operating leases and the Company does not have finance leases. Information about these operating leases is disclosed in the following table (dollars in thousands):

As of December 31,
20202019
Lease cost:
Operating lease cost$6,019 $6,674 
Variable lease cost (1)
738 702 
Short-term lease cost287 93 
Sublease income(2,747)(2,693)
Total lease cost$4,297 $4,776 
Other information:
Operating cash flows used in the measurement of operating lease liabilities$6,853 $7,085 
Weighted-average remaining lease term - operating leases (in years)2.83.3
Weighted-average discount rate - operating leases7.36 %7.52 %
(1) Includes variable payments such as common area maintenance, property taxes and insurance.

The Company adopted Accounting Standards Update 2016-02, Leases, and subsequent amendments ("ASC 842") as of January 1, 2019. As such, reporting periods beginning on and after January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with prior accounting guidance. For these prior years, the Company recognized rent expense on a straight-line basis over the lease period and accrued for rent expense incurred but not paid. Rent expense for the year ended December 31, 2018 was $3.5 million.
In March 2018, the Company subleased a portion of its engineering office located in Mountain View, California reducing its total rent obligation by $2.4 million and recognized a one-time sublease loss of $0.9 million in research and development expense in the accompanying consolidated statement of operations in 2018.
During 2018, the Company recognized a lease exit charge of approximately $1.3 million related to the remaining engineering office space in Mountain View, California that the Company no longer utilizes. These charges were recorded in research and development expense in the accompanying consolidated statement of operations.
Maturities of Lease Liabilities

As of December 31, 2020, the future minimum lease payments under non-cancellable operating leases are as follows (in thousands):

2021$6,533 
20224,247 
20231,759 
20241,397 
2025 714 
Total lease payments14,650 
Less: Interest(1,415)
Present value of lease liabilities13,235 
Less: current portion(5,789)
Operating lease liabilities, non-current$7,446 

The Company had asset retirement obligations of $0.3 million as of December 31, 2020 and 2019.
v3.20.4
Contingencies
12 Months Ended
Dec. 31, 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 notices 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 the Company will incur the loss and when it can reasonably estimate the amount of the loss or range of loss.
v3.20.4
Stockholders' Equity and Stock Compensation
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stockholders' Equity and Stock Compensation Stockholders' Equity and Stock Compensation
Common Stock

The Company has two classes of common stock, Class A common stock and Class B common stock. Each share of Class A common stock and each share of Class B common stock has one vote per share except in certain circumstances pertaining to change in control, the sale of all or substantially all of our assets and liquidation matters, and on all matters if and when any individual, entity or group has, or has publicly disclosed an intent to have, beneficial ownership of 30% or more of the number of outstanding shares of our Class A and Class B common stock, combined. In such circumstances, holders of our Class A common stock are entitled to ten votes per share and holders of our Class B common stock are entitled to one vote per share.

Each outstanding share of Class A common stock is convertible at any time at the option of the holder into one share of Class B common stock.

Employee Equity Plans

     The Company adopted a 2014 Equity Incentive Plan (“EIP”) that became effective on March 12, 2014 and serves as the successor to the Company's 2008 Stock Incentive Plan. Shares issued under the 2008 Stock Incentive Plan were Class A common stock, and shares issued under the EIP are Class B common stock. The Company's 2014 EIP authorizes the award of stock options, restricted stock awards (“RSAs”), stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance awards and stock bonuses. Stock options are generally granted with a contractual term of 10 years. Equity awards generally vest over four years contingent upon employment or service with the Company on the vesting date. As of December 31, 2020, 2,690,710 shares were reserved for future issuance under the EIP.

The Company adopted a 2014 Employee Stock Purchase Plan (“ESPP”) that became effective on March 13, 2014 which allows eligible employees to purchase shares of the Company's Class B common stock at a discount. A total of 6,000,000 shares of Class B common stock was initially reserved and available for issuance under the ESPP. The ESPP, as amended in 2019, provides for an initial three-month offering period commencing December 1, 2019, and for regular six-month offering periods beginning each March 1 and September 1 thereafter. On each purchase date, ESPP participants purchase shares of the Company’s Class B common stock at a price per share equal to 85% of the lesser of (i) the fair market value of the Class B common stock on the offering date, or (ii) the fair market value of the Class B common stock on the purchase date. As of December 31, 2020, 5,532,478 shares were reserved for future issuance under the ESPP.

During the year ended December 31, 2020, in connection with the appointment of a member of senior management, the Company granted the individual 760,870 inducement RSUs and an inducement stock option to purchase 1,178,000 shares of Class B common stock. These grants were issued outside the Company’s 2014 Equity Incentive Plan in accordance with NYSE Listed Company Rule 303A.08, and were approved by the Compensation and Talent Committee of the Company’s board of directors. The information related to these grants is included in the Stock Option Activity and Restricted Stock Units Activity tables below.
Stock-Based Compensation to Employees
The assumptions used in the Black-Scholes option-pricing model were determined as follows:
Volatility. Beginning in 2020, volatility is based on the Company's historical volatility over the expected life of its stock awards. Prior to 2020, the Company did not have enough trading history for its Class B common stock, therefore, the expected volatility was derived from the historical stock volatilities of peer group companies within the Company's industry. In evaluating peer companies, the Company considered factors such as nature of business, customer base, service offerings and markets served.
Expected Life. The expected term represents the period that the Company's stock-based awards are expected to be outstanding. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options.
Risk-Free Interest Rate. The risk-free rate that the Company used is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future. Therefore, the Company uses an expected dividend yield of zero.

Fair Value of Common Stock. The Company has used the market closing price for its Class B common stock as reported on the New York Stock Exchange to determine the fair value of the Company's common stock.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 Year Ended December 31,
 202020192018
Volatility73%75%57 %58 %57%
Expected life (in years)6.16.16.1
Risk-free interest rate0.34 %1.47%1.62 %2.57 %2.72 %2.74 %
Dividend yield—%—%—%
The Company used the following Black-Scholes assumptions in estimating the fair value of the shares under the ESPP:

Year Ended December 31,
20202019
Volatility71 %103 %55%
Expected life equals length of offering period (in years)0.50.3
Risk-free interest rate0.13 %0.95 %1.60%
Dividend yield—%—%
Stock Option Activity

A summary of stock option activity for the year ended December 31, 2020 is as follows:

Number of
Shares
Outstanding
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (in
years)
Aggregate
Intrinsic
Value (in thousands)
Balance at December 31, 20197,207,733 $1.94 7.4$412 
Stock options granted2,007,111 $1.18 
Stock options exercised(236,104)$1.15 
Stock options forfeited and canceled(2,991,497)$1.72 
Balance at December 31, 20205,987,243 $1.82 7.2$568 
Vested or expected to vest at December 31, 20205,987,243 $1.82 7.2$568 
Exercisable as of December 31, 20202,524,951 $2.40 4.5$329 

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2020, 2019 and 2018 was $1.18, $1.58 and $3.69, respectively.

The total grant-date fair value of stock options vested during the years ended December 31, 2020, 2019 and 2018 was $0.8 million, $0.9 million and $3.4 million, respectively.
The total intrinsic value of the options exercised during the years ended December 31, 2020, 2019 and 2018, was $0.1 million, $2.3 million and $5.7 million, respectively. The intrinsic value is the difference of the current fair value of the stock and the exercise price of the stock option.

As of December 31, 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 3.0 years.

Restricted Stock Units Activity

A summary of unvested restricted stock unit activity for the year ended December 31, 2020 is as follows:

Number of sharesWeighted Average Grant-Date Fair Value
Balance at December 31, 201911,615,884 $2.44 
Restricted Stock Units granted
15,101,446 $0.92 
Restricted Stock Units vested (1)
(6,854,230)$1.81 
Restricted Stock Units forfeited and canceled
(4,711,057)$2.14 
Balance at December 31, 202015,152,043 $1.31 
(1) Includes performance stock units (“PSUs”) that vested in the current year.

The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2020, 2019, and 2018 was $0.92, $2.32 and $3.36, respectively.
The total grant-date fair value of RSUs vested during the year ended December 31, 2020, 2019, and 2018 was $12.4 million, $14.6 million and $17.3 million, respectively.
As of December 31, 2020, the Company had $18.3 million in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.6 years.
During 2019, the Company granted 0.9 million PSUs to certain employees. During 2020, the performance targets related to these PSUs were fully achieved and approved by the Compensation and Talent Committee of the Company's board of directors. For the year ended December 31, 2020, the Company recognized compensation expense of approximately $0.9 million related to these performance awards. For the year ended December 31, 2019, the Company recognized compensation expense of approximately $0.5 million related to these performance awards and performance awards granted in 2018. For the year ended December 31, 2018, the Company recognized compensation expense of approximately $0.6 million related to PSUs.

ESPP Activity

Stock-based compensation expense related to the ESPP was immaterial for the years ended December 31, 2020 and 2019. As of December 31, 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 current offering period.
v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Loss before income taxes was $62.2 million, $40.0 million and $39.7 million for years ended December 31, 2020, 2019 and 2018, respectively, all from domestic operations.

As a result of the Company's history of net operating losses and full valuation allowance against its net deferred tax assets, there was no current or deferred income tax provision for the years ended December 31, 2020, 2019 and 2018.  
Reconciliations of the statutory federal income tax rate and the Company's effective tax rate consist of the following (in thousands):
 Year Ended December 31,
 202020192018
Tax at federal statutory rate
$(13,058)$(8,400)$(8,338)
State statutory rate (net of federal benefit)(667)(1,481)(2,279)
Stock compensation(75)79 (194)
Change in valuation allowance
2,861 9,522 10,638 
Goodwill impairment10,563 — — 
Other376 280 173 
$— $— $— 
Significant components of the Company's deferred tax assets, net and deferred tax liabilities were as follows (in thousands):
 As of December 31,
20202019
Deferred tax assets:
Net operating loss carryforwards$124,048 $122,564 
Operating lease liabilities3,418 4,517 
Accrued compensation1,790 1,949 
Stock-based compensation4,615 5,065 
Other reserves and accruals298 518 
Property and equipment605 528 
134,774 135,141 
Valuation allowance
(124,293)(122,995)
Deferred tax assets, net of valuation allowance
10,481 12,146 
Deferred tax liabilities:
Intangibles(1,783)(3,156)
Deferred costs
(6,054)(5,452)
Operating lease right-of-use assets, net
(2,644)(3,538)
Deferred tax liabilities
(10,481)(12,146)
Net deferred tax assets/(liabilities)$— $— 

The Company provided a full valuation allowance for its net deferred tax assets as of December 31, 2020 and 2019, due to the uncertainty surrounding the future realization of such assets. Therefore, no benefit has been recognized for the net operating loss carryforwards and other deferred tax assets.

The valuation allowance increased by $1.3 million during the year ended December 31, 2020, due to the increase in net operating losses for ongoing operations.
As of December 31, 2020, the Company had approximately $494.2 million of federal and $330.0 million of state net operating loss carryforwards available to offset future taxable income. If not utilized, the federal and state net operating loss carryforwards begin to expire in 2029.
As of December 31, 2020, the Company also had approximately $14.4 million and $14.9 million of research and development tax credit carryforwards available to reduce future taxable income, if any, for federal and California purposes, respectively. The federal credit carryforwards expire beginning in 2029, and the California research credits do not expire and may be carried forward indefinitely.
The Company's ability to utilize the net operating loss and tax credit carryforwards in the future may be subject to substantial restrictions in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax laws. In the event the Company should experience an ownership change, as defined under Section 382, utilization of the Company's net operating loss carryforwards and tax credits could be limited.

     The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information.
A reconciliation of the beginning and ending amount of the gross unrecognized tax benefit is as follows (in thousands):
 Year Ended December 31,
 202020192018
Gross unrecognized tax benefits at the beginning of the year$25,718 $22,188 $18,888 
Increases for tax positions related to the current year3,538 3,530 3,300 
Gross unrecognized tax benefits at the end of the year$29,256 $25,718 $22,188 
As of December 31, 2020, all unrecognized tax benefits are subject to a full valuation allowance and, if recognized, will not affect the Company's tax rate.

The Company does not anticipate that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months.
The Company's policy is to include interest and penalties related to unrecognized tax benefits within its provision for income taxes. Due to the Company's net operating loss position, the Company has not recorded an accrual for interest or penalties related to uncertain tax positions for the years ended December 31, 2020, 2019 or 2018.
v3.20.4
Net Loss per Share
12 Months Ended
Dec. 31, 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 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.
When shares of both Class A and Class B common stock are outstanding, 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):
 Year Ended December 31,
 202020192018
Class AClass BClass AClass BClass AClass B
Net loss$(14,380)$(47,803)$(9,817)$(30,185)$(13,375)$(26,331)
Weighted-average shares used to compute basic and diluted net loss per share35,029 116,449 35,627 109,545 46,379 91,307 
Basic and diluted net loss per share$(0.41)$(0.41)$(0.28)$(0.28)$(0.29)$(0.29)

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):
 Year Ended December 31,
 202020192018
Stock options and RSUs21,139 18,824 15,794 
Shares issuable under the ESPP269 216 — 
Warrants115 115 115 
21,523 19,155 15,909 
v3.20.4
401(k) Plan
12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
401(k) Plan 401(k) Plan The Company has a qualified defined contribution plan under Section 401(k) of the Internal Revenue Code covering eligible employees. Under the plan, participating employees may defer up to 90% of their pre-tax earnings, subject to the Internal Revenue Service's annual contribution limits. The Company matches a portion of employee contributions. The Company's contribution expense totaled $1.0 million, $1.2 million and $1.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
v3.20.4
Reduction in Workforce
12 Months Ended
Dec. 31, 2020
Restructuring and Related Activities [Abstract]  
Reduction in Workforce Reduction in Workforce
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 involved the termination of approximately 60 employees, representing 13% of the Company’s headcount. For the year ended December 31, 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 September 30, 2020, all costs were fully paid out.

In addition, as part of its cost reductions in light of the COVID-19 pandemic, the Company 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 anticipated would last at least six months, and would be re-evaluated at that time. Members of the Company’s board of directors also voluntarily agreed to forego 50% of their cash compensation for the duration of the employee salary reductions. In early November 2020, management, in consultation with the board of directors, determined that it would reinstate full salaries for those who were impacted by the salary reduction and restore the board of director’s cash compensation to its original levels, effective November 16, 2020.
On July 30, 2018, the Company announced its intent to undertake a program to reduce its workforce in order to decrease expenses, align its operations with evolving business needs and improve efficiencies. This was in part due to the unexpected churn of a large customer. Under this program, the Company undertook an initiative to reduce its workforce by approximately 12%. For the year ended December 31, 2018, the Company incurred charges of approximately $2.1 million for this reduction, all of which related to severance costs. As of December 31, 2018, all costs were fully paid out.
v3.20.4
Accounting Standards and Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation and Principles of Consolidation Basis of Presentation and Principles of ConsolidationThe consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). 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 consolidated financial statements include the results of Castlight and its wholly-owned U.S. subsidiaries.
Use of Estimates
Use of Estimates
The preparation of 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;
Assumptions used in the calculation of goodwill impairment, including the forecast of future cash flows and discount rate; and
Assumptions used in the calculation of right-of-use (“ROU”) assets and lease liabilities for operating leases, including lease terms and the Company’s incremental borrowing 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.
Segment Information
Segment Information
The Company's chief operating decision maker, its CEO, reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating the Company's financial performance. Accordingly, the Company has determined that it operates in a single reportable segment, cloud-based products.
Revenue Recognition, Cost of Revenue and Deferred Revenue
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 related to the Company's subscription service. Nearly all of the Company's professional services are sold on a fixed-fee basis.
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 promised services consisting of subscription services and professional services, including implementation services. For contracts with multiple promised services, the Company evaluates whether the promised services are distinct. If the promised services are distinct, revenue is recognized for the respective performance obligation separately. If one or more of the promised services are not distinct, the promised services that are not distinct are combined with the Company's subscription service, and revenue for the respective combined performance obligation is recognized over the term of the subscription service.

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 contracts with multiple promised services to be a combined performance obligation comprised of subscription services and implementation services.

The transaction price for contracts 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 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.

Costs of Revenue

Cost of revenue consists of cost of subscription revenue and cost of professional services and other revenue.

Cost of subscription revenue primarily consists of data fees, employee-related expenses (including salaries, bonuses, benefits and stock-based compensation), hosting costs of its cloud-based subscription service, cost of subcontractors, expenses for service delivery (which includes call center support), allocated overhead, costs of data center capacity, amortization of internal-use software, depreciation of certain owned computer equipment and software, and amortization of intangibles related to developed technology and backlog.

Cost of professional services and other revenue consists primarily of employee-related expenses (including salaries, bonuses, benefits and stock-based compensation) associated with these services, cost of subcontractors, deferred and amortized professional services costs, travel costs and allocated overhead. The time and costs of the Company's customer implementations vary based on the source and condition of the data the Company receives from third parties, the configurations that the Company agrees to provide and the size of the customer.

Cost of subscription revenue is expensed as the Company incurs the costs. Cost of professional services and other revenue, to the extent it is incurred and is directly attributable to fulfillment of performance obligations under a customer contract, is deferred and amortized over the benefit period of five years.
Cash and Cash Equivalents
Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less from the date of purchase. The Company's cash and cash equivalents generally consist of investments in money market mutual funds and U.S. agency obligations. Cash and cash equivalents are stated at fair value.
Marketable Securities Marketable SecuritiesThe 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 and losses 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 it will sell the securities before the recovery of their cost basis. In these cases, the unrealized losses are reported in other income, net in the consolidated statements 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.
Accounts Receivable and Allowance for Doubtful Accounts Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are recorded when invoiced and at the invoiced amount, net of allowances for doubtful accounts. When accounts receivable are recorded, the related revenue may not commence until a later date depending on the nature of the services invoiced. The allowance for doubtful accounts is based on the Company's assessment of the collectability of accounts. The Company regularly reviews the adequacy of the allowance for doubtful accounts by considering historical information such as the age of each outstanding invoice and the collection history of each customer to determine whether a specific allowance is appropriate. In addition, the Company considers current economic conditions, and expected future economic conditions, to determine future expected losses. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified. For all periods presented, the allowance for doubtful accounts was not significant.
Deferred Commissions
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. Deferred commissions are recoverable through the Company’s future revenues. Amortization of deferred commissions is included in sales and marketing expense in the accompanying consolidated statements of operations. All costs deferred are reviewed for impairment quarterly.
Deferred Professional Service Costs
Deferred Professional Service Costs

Deferred professional service 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 consolidated statements of operations. All costs deferred are reviewed for impairment quarterly.
Property and Equipment
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective asset as follows (in years):
Software3-5
Computer equipment3
Furniture and equipment5-7
Leasehold improvementsShorter of the lease term or the estimated useful lives of the improvements
Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of operations for the period realized.
Internal-Use Software Internal-Use Software For the Company's development costs related to its cloud-based subscription service, the Company capitalizes costs incurred during the application development stage. Costs related to preliminary project and post-implementation stages are expensed as incurred. Capitalized software development costs are included as part of property and equipment and are amortized on a straight-line basis over the technology's estimated useful life, which is generally three years.
Restricted Cash Restricted CashRestricted cash is included in Prepaid expenses and other current assets or Restricted cash, non-current depending on the remaining term of the restriction and consists of letters of credit related to the Company’s leased office spaces.
Goodwill and Intangible Assets
Goodwill
The Company reviews goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. The Company has elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the Company’s single reporting unit is less than its carrying amount. If it is determined that it is more likely than not that its fair value is less than its carrying amount, the Company performs a quantitative impairment test of goodwill, in which the fair value of the Company's single reporting unit is compared to its carrying value. Any excess of the goodwill carrying amount over the fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. Refer to Note 5 – Goodwill and Intangible Assets to the consolidated financial statements for further information on goodwill.
Intangible Assets
Acquired finite-lived intangible assets are amortized over their estimated useful lives. The Company evaluates the recoverability of its intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. The Company has not recorded any such impairment charges.
Leases
Leases

The Company determines if an arrangement is a lease and its classification at lease inception. Operating lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the lease commencement date to compute the present value of lease payments when the implicit rate is not readily determinable. ROU assets are measured at lease inception based on the initial measurement of the lease liability, plus any prepaid lease amounts, less any lease incentives. The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less. Lease terms do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Generally, lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company's lease agreements have both lease and non-lease components. The Company has elected to account for lease and non-lease components on a combined basis.
Stock-based Compensation Stock-based CompensationAll stock-based compensation to employees is measured based on the grant-date fair value of the awards and recognized in the Company's consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award). The Company accounts for forfeitures as they occur. The Company estimates the fair value of all other stock options and stock purchase rights under the employee stock purchase plan using the Black-Scholes option valuation model. For restricted stock units, fair value is based on the closing price of the Company's Class B common stock on the grant date. Compensation expense is recognized over the vesting period of the applicable award using the straight-line method. For awards with performance based and service vesting conditions, compensation expense is recognized over the requisite service period if it is probable that the performance-based condition will be satisfied based on the accelerated attribution method. For awards with market based and service vesting conditions, compensation expense is recognized over the requisite service period using the accelerated attribution method.
Income Taxes
Income Taxes
The Company accounts for income taxes using the liability method, under which deferred tax assets and liabilities are determined based on the future tax consequences attributable to differences between the financial reporting carrying amounts of existing assets and liabilities and their respective tax bases and tax credit and net operating loss carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be in effect when the differences are expected to reverse.
The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income, and a valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized.
The Company recognizes and measures uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions on a regular basis. The Company's evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of audit and effective settlement of audit issues.
Warranties and Indemnification
Warranties and Indemnification
The Company's cloud-based subscription service is generally warranted to be performed in a professional manner and in a manner that will comply with the terms of the customer agreements.

The Company's arrangements generally include certain provisions for indemnifying customers against liabilities if there is a breach of a customer’s data or if the Company's service infringes a third party’s intellectual property rights. To date, the Company has not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in the financial statements. The Company has entered into service-level agreements with certain customers warranting, among other things, defined levels of performance and response times and permitting those customers to receive credits for prepaid amounts related to subscription services in the event that the Company fails to meet those levels. To date, the Company has not experienced any significant failures to meet defined levels of performance and response times as a result of those agreements.

The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as its director or officer or that person’s services provided to any other company or enterprise at the Company's request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.
Advertising Expenses Advertising ExpensesAdvertising is expensed as incurred.
Concentrations of Risk and Significant Customers
Concentrations of Risk and Significant Customers
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable. At times, the Company's deposits may exceed federally insured limits.
The Company serves its customers and users from outsourced data center facilities located in the United States. The Company has internal procedures to restore all of its production customer facing services in the event of disasters at its facilities. Procedures utilizing currently deployed hardware, software and services at certain of the Company's disaster recovery locations allow its cloud-based service to be restored within 24 hours during the implementation of the procedures to restore services.
Significant customers represent more than 10% of the total revenue for the most recent period presented or more than 10% of accounts receivable balance as of the most recent balance sheet date.
Recently Adopted and 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 year ended December 31, 2020 are either not applicable or are expected to have minimal impact on the Company's consolidated financial results.
v3.20.4
Accounting Standards and Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of Property, Plant and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective asset as follows (in years):
Software3-5
Computer equipment3
Furniture and equipment5-7
Leasehold improvementsShorter of the lease term or the estimated useful lives of the improvements
Property and equipment consisted of the following (in thousands):
As of December 31,
 20202019
Leasehold improvements$4,606 $2,834 
Computer equipment7,655 8,126 
Software908 1,110 
Internal-use software3,878 2,925 
Furniture and equipment1,492 1,048 
Construction in progress128 1,164 
Total18,667 17,207 
Accumulated depreciation/amortization(13,346)(12,351)
Property and equipment, net$5,321 $4,856 
v3.20.4
Deferred Costs (Tables)
12 Months Ended
Dec. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Deferred costs, capitalized, prepaid, and other assets disclosure
Changes in the balance of total deferred commissions and deferred professional service costs for the year ended December 31, 2020 are as follows (in thousands):
As of December 31, 2019Expense recognizedAs of December 31, 2020
Additions
Deferred commissions$14,718 $2,627 $(7,789)$9,556 
Deferred professional service costs6,711 1,268 (3,517)4,462 
Total deferred commissions and professional service costs
$21,429 $3,895 $(11,306)$14,018 
v3.20.4
Goodwill and Intangible Assets (Tables)
12 Months Ended
Dec. 31, 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 December 31, 2020
Useful Life (in years)GrossAccumulated AmortizationNet
Customer relationships6$10,900 $(5,620)$5,280 
Developed technology510,600 (7,950)2,650 
Total identifiable intangible assets$21,500 $(13,570)$7,930 
As of December 31, 2019
Useful Life (in years)GrossAccumulated 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 Finite-Lived Intangible Assets, Future Amortization Expense
Future estimated amortization expense for acquired intangible assets is as follows (in thousands):
2021$4,232 
20222,642 
20231,056 
Total estimated amortization expense$7,930 
v3.20.4
Marketable Securities (Tables)
12 Months Ended
Dec. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Debt Securities, Available-for-sale
Marketable securities consisted of the following (in thousands):
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 
v3.20.4
Fair Value Measurements (Tables)
12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Summary of Fair Value Assets Measured on Recurring Basis
The following table presents information about the Company's assets that are measured at fair value on a recurring basis using the above input categories (in thousands): 
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 
v3.20.4
Property and Equipment (Tables)
12 Months Ended
Dec. 31, 2020
Property, Plant and Equipment [Abstract]  
Summary of Property, Plant and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective asset as follows (in years):
Software3-5
Computer equipment3
Furniture and equipment5-7
Leasehold improvementsShorter of the lease term or the estimated useful lives of the improvements
Property and equipment consisted of the following (in thousands):
As of December 31,
 20202019
Leasehold improvements$4,606 $2,834 
Computer equipment7,655 8,126 
Software908