Just a few months into its life as a publicly traded company, Castlight Health had a good first quarter since its $180 million offering. The company added 29 new customers this quarter, three times as many as any previous quarter, the company announced on its first ever earnings call since going public in March.
"With the capital resources we received in the IPO, we believe that Castlight is very well-positioned to build on our momentum as the leading provider of enterprise healthcare cloud solutions," CEO Giovanni Colella said on the call. "We will do this by delivering a highly specialized technology platform to large organizations that enables them to track and manage their healthcare expenses in new and innovative ways that were not feasible before Castlight."
Castlight Health offers employees a personalized platform, online and on iOS or Android, to compare prices of healthcare services and keep track of healthcare spending so that employers can reduce that spending over time. The company also integrates prescription drug information into the platform so that they can also track medication cost.
The company did not turn a profit during the quarter, but revenues were generally higher than expected: The company made $8.4 million in the first quarter, a 339 percent increase from the first quarter of 2013. Most of the revenue ($7.5 million) was from subscriptions, while the rest was from professional services, but professional services revenue grew more since last year. The company's operating loss for Q1 2014 was $24.3 million, compared to an operating loss of $11.5 million during the first quarter of 2013. Castlight projects revenues for the full year to shake out around $40 million, with non-GAAP operating losses around $75 million.
Chief financial officer John Doyle pointed out on the call that because so many companies implement their new health programs at the start of the year, the first quarter would likely be the high mark for implementations, and that implementations tend to cost more money than they generate at first. Therefore, margins should be higher in subsequent quarters. He said the company's strategy is to continue aggressively pursuing new customers.
Toward that end, the company signed a number of new customers this quarter yet to be implemented, including 3M, Toys R Us, Freescale Semiconductor, and bebe. Their two biggest new customers were Comcast and the state of Kansas, which is the company's third large government contract. Comcast and Kansas will both bring in more than $1 million per year, according to Colella. Castlight also launched its pharmacy platform with seven existing customers, including Adobe.
Colella said that Castlight is "competing only against inertia" -- like many companies, Castlight does not believe it has any true competitors, although Colella acknowledged that other companies are making cost transparency tools.
"While many other organizations offer transparency or cost estimator tools, there are no direct alternatives to Castlight's comprehensive enterprise healthcare cloud solutions," he said. "When we have a robust dialogue with prospects and they decide to leverage cloud technology to gain control of their healthcare spending, we generally win the business. In the cases where the prospect decides not to move forward with us, most common reason is they’re not ready for a comprehensive technology platform. We generally revisit these companies and they often become our customers the second time around. Comcast is a good example of a recent customer who revisited their need after first deciding not to proceed."
He said evidence is also mounting for the platform's stickiness: Two companies switched health plans this quarter, but both maintained their relationship with Castlight through the transition.