Castlight Health, Inc.
Q2 2017 Earnings Call Transcript

Published:

  • Operator:
    Good afternoon and welcome to Castlight's conference call to discuss our financial results for the second quarter ended June 30, 2017. Joining me on the call are John Doyle, Chief Executive Officer and Siobhan Nolan Mangini, Chief Financial Officer. In terms of the structure of today's call John and Siobhan will offer their prepared remarks, and then we will open up the call to take your questions. Our press release, webcast and PowerPoint presentation maybe be accessed on our website. This presentation contains forward-looking statements regarding our trends, our strategies, and the anticipated performance of our business, including our guidance for the full year of 2017 and expected timing of cash flow breakeven. We will also discuss matters relating to our acquisition of Jiff, Inc., including but not limited to contributions that we expect Jiff's business to make the Castlight's overall performance, the anticipated benefits of the acquisition and anticipated future combined operations, products and services. All such statements are made as of today and reflect management's current views and expectations, and are subject to various risks, uncertainties and assumptions. Please refer to the press release and the risk factors included in the company's filings with the Securities and Exchange Commission for a discussion of important factors that may cause actual events or results to differ materially from those contained in our forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. If the call is replayed or viewed after today, the information in the presentation may no longer be current or accurate. We disclaim any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but we will not provide any further guidance or updates to our performance during the quarter unless we do so in a public forum. This presentation also includes certain non-GAAP metrics, such as non-GAAP gross margin, operating expenses, net loss and net loss per share that we believe aid in the understanding of our financial results. For more information about our use of non-GAAP metrics and a reconciliation to comparable GAAP metrics on a historical basis can be found in our press release which is on our website. In addition, please remember the close date of the Jiff acquisition was April 3. Accordingly, deferred revenue fair value adjustment discussed on this call is a preliminary estimate and is subject to change upon the completion of purchase price accounting. With that, I'll turn the call over to John.
  • John Doyle:
    Thank you and good afternoon. As I said on last quarter's call, 2017 is a pivotal year for our business. We made a large leap forward in the breadth of our products to address a wider range of our customers' needs. In our view, the new Castlight is the only health benefits platform that covers the full spectrum of well-being, healthcare decision support, and benefits hub all in one complete package. Our integrated solutions are purpose built to help human resources leaders and employees successfully manage the complexity of healthcare and the highly fragmented ecosystem of healthcare and well-being programs. And while it’s still very early in the evolution of our merged business, we are pleased to report solid financial results for Q2 because they indicate to us that our customers are excited about where we're headed together. In particular, Q2 sales results showed a clear improvement relative to recent quarters. Castlight's total ARR reached $151 million at the end of Q2 up from the pro forma level of $140 million at the end of Q1. Also revenue and operating loss was better than guidance in the quarter. Based on these results and the healthy pipeline build heading into the second half of the year, we are increasingly confident that we will achieve our previously stated financial objectives for 2017 and 2018 including reaching cash flow breakeven by the end of next year. The number one reason we acquired Jiff and our top strategic priority in 2017 was to position our combined company for strong sustainable growth in a very large market opportunity. I'm pleased to share that in our first quarter together we generated our largest sequential dollar increase in ARR nearly 3 years through new client additions, transparency client migrations, and strong cross-selling of Jiff capabilities. On a gross basis, we added 11 new logos in Q2 including four Fortune 500 customers that all purchase Anthem Engage. In some cases, the new Anthem Engage customers will long time prospects and other cases the closed opportunities were not even in our pipeline at the beginning of the quarter. Overall, the momentum we saw in terms of closed deals, as well as pipeline build for 2017 and 2018 give us increased confidence in the long-term commercial power of our partnership with Anthem. Another strategic priority for us in 2017 is to migrate our early adopt of customer base to our platform solution at price points that enable us to consistently deliver a demonstrable compelling ROI. This is important because as we grow total ARR, we believe we are also improving the overall health of the customer base which should benefit our long-term revenue retention. As a result of the new wins, cross-sell and migrations in Q2, ARR from our transparency only business declined to approximately 30% of total ARR which is half the level it was a year ago. This represents great progress in our effort to address the churn headwind we've had in the legacy transparency business since early last year. We continue to expect this dynamic will be largely behind us by this time next year. 2017 is a big year for renewals as well as approximately 35% of total ARR at year-end 2016 up for renewal. As of the end of Q2 we have worked through more than 80% of our renewal volume by ARR and results in terms of renewals in churn have been in line with our expectations. Given solid execution on renewals and the strong cross-selling we've seen through Q2, we are confident that we will exceed our mid-90% target for net dollar retention in 2017 that we shared earlier this year. New business, cross-selling, and renewals have all begun to benefit from a greater focus on channels. In addition to our Anthem channel relationship, we have been engaging actively with consultants and brokers as there are critical thought leaders and partners in most of our customer accounts. The consultant community has been integral to our product roadmap in R&D planning decisions as we allocate R&D resources to build a single scalable architecture that will enable accelerated innovation and highly configurable solutions across the Castlight platform. In addition to integrating our businesses and product roadmaps, we have continued to innovate aggressively our existing products that our customers and users rely on. In May, Castlight launched a new mobile application that represents a step change improvement for end-users. This launch was more than a year in the making and the team delivered a top-notch result as registrations, engagement metrics and net promoter scores have all been trending higher week by week. We believe this new app is delivering a world class user experience and we will continue to invest aggressively and data quality design infrastructure and customer research so we can continue to set the standard for product innovation and quality of delivery in the world of digital health. This momentum from our growth in product initiatives is coming before we even launched our fully integrated app which will happen in 2018. With the most powerful comprehensive solution in the market, we will be giving employers the product they are asking, a single app that engages employees with the right benefit at the right time whether they are accessing care, managing a condition or focused on their own well-being. Of course there are also areas in the business where we have work to do to meet our goal this year and in the long-term. First, while cross-sells are illogical near-term opportunity to drive net new ARR, net new logos remain critically important as we aim to become the default health benefits platform solution for large employers across the country. Our Anthem partnership has begun to drive good growth but we remain very focused on go-to-market execution across product and packaging, demand generation, corporate marketing, and sales. As we close out 2017 and lay the groundwork for 2018, our goal is to drive meaningful improvement in the proportion of our growth coming from net new customers. Next, as we continue to bring new customers in the fold we are working to accelerate our conversion of bookings into revenue. This is an area where we've made good progress historically but there's more work to do as we combine Jif and Castlight. As we do so, it's important to note again that our revenue and billings forecasts are sensitive to timelines for large customer deployments which sometimes change for reasons we do not control. That said it's a focus area and I'm confident that our team will do a great job streamlining our deployments further as we grow. Before I turn the call over to Siobhan, I want to take this opportunity to thank our employees especially. Achieving our goals means successfully merging teams, cultures and aspirations from Jiff and Castlight which involves a lot of change from employees. Less than four months since the merger closed, I'm pleased to say that our road to one initiative is solidly on track. Teams are gaining steam, results are improving and are detailed plans are coming into view. We believe today what we believe when we first discussed bringing the companies together that the combination of Castlight and Jiff would create tremendous value not only for customers and shareholders but also for our employees who are making the new Castlight, the best place to work in digital health. So to close, we got off to a strong start in our first quarter following the Jiff acquisition. We had our best ARR performance in years, we made meaningful progress migrating our early adopter customers to our platform solution, and we saw healthy pipeline growth as well. We are also on track to complete all merger-related work streams including integration of our products and teams as planned. When it all comes together, we expect to be a larger faster growing business with the most comprehensive health benefits platform in the market. When we get there, we will take an enormous step towards our ultimate objective which is to make healthcare work better for employers and our users. In doing that, we will make healthcare work better for everyone. Siobhan?
  • Siobhan Nolan Mangini:
    Thanks John. Good afternoon, everyone, and let me also thank all of you for joining us on today's call. I'll start by reviewing our Q2 results and then discuss our 2017 outlook. After that, we'll open up the call to questions. Please note that the Jiff acquisition closed on April 3, so Q2 is the first quarter where Jiff financial performance is included in our reported results. Our second quarter results were better than our guidance for both our revenue and non-GAAP operating loss and was highlighted by the higher sequential dollar increase in ARR since Q3 2014. As John discussed, at the end of Q2 2017 net annualized recurring revenue or ARR totaled $150.8 million and we ended the quarter with more than 240 total customers, including more than 75 of the Fortune 500. Our Anthem Engage initiative began to show traction in Q2 as Anthem Engagement accounted for more than 40% of the sequential of ARR increase. We were pleased by both the growth as well as shift in composition of this ARR over the past year. Now 30% of our ARR is associated with Castlight's legacy transparency only business, which is down meaningfully from the 60% one year ago. Our attach rate of action, our signature platform product is now 30% and just one quarter after the close of the Jiff acquisition we have 10% of our customers who purchased some combination of the Castlight and Jiff offerings. Total revenues for the second quarter was $32.1 million which was an increase of 36% year-over-year on a reported basis. The subscription revenue was 93% of total revenue and also increased 36% year-over-year. As a reminder, Q2 reported revenue includes more than $1 million reduction in Jiff revenue as a result of the write-down of the Jiff deferred revenue related to purchase accounting. Reported revenue is a function of completed implementations and we had 48 total product launches across our entire customer base in the second quarter including 11 new customers. The 39% year-over-year increase in services revenue was primarily driven by increase launch activity. Now I’ll turn to our second quarter non-GAAP financials. Q2 non-GAAP gross margin was 67% compared to 66% in the second quarter of 2016 and 74% in the previous quarter. We shared previously that we expected gross margin to temporarily dip below our 78% to 75% long-term target range due to the inclusion of Jiff. Their gross margin was lower than Castlight due to the fact that they were in earlier stage of launching customers in a rapid growth phase. We continue to expect a robust margin for the combined company to increase over time as Jiff scale just as they did with the legacy Castlight business and to get back to the same long-term target range of 70% to 75%. Total non-GAAP operating expense is $31.3 million in Q2 up 19% year-over-year on a reported basis which reflects the first quarter of Jiff inclusion in our financials. We’re pleased that we captured operating expenses synergies from the Jiff integration more quickly than initially anticipated. In particular this can be seen in the sales and marketing line and G&A line which increased in our reported basis only 2% and 10% on a year-over-year basis respectively. In particular, we have achieved rapid efficiencies in sales and marketing given our channel initiative at combined with the fact that Castlight and Jiff are targeting the same buyer. In Q2, Anthem was our largest channel contributor and its worth clean out that virtually all of our Q2 wins involve some form of channel interaction, so we’re also benefitting from our improved relationships with the benefit consultant. We continue to invest aggressively in R&D given its importance in both delivering on our product roadmap and driving ongoing future envision. As a result of the revenue outperformance and operating expense efficiencies, non-GAAP operating loss was $9.8 million in Q2, an 8% year-over-year improvement on a reported basis. We improved bottom line performance year-over-year on a larger revenue base with more ARR growth which is testament to pre-merger integration work we completed in Q1 so we could hit the grounding running as one company as soon as we close the Jiff acquisition on April 3. We ended the quarter with $96 million in cash and cash equivalents and marketable securities. Cash fees and operations was $4.1 million in the second quarter. This number include the $5 million upfront cash payment that is included in deferred revenue and is expected to be recognized over three years. With that I’ll turn to our outlook. For the full year 2017 we continue to expect GAAP revenue in the range of $132 million to $136 million. As we discussed in the past, our current period bookings have little to and no impact on current period revenue as we did not begin to recognize revenue until the customers implemented which typically takes three to 12 months. Once the customer launches we recognize revenue radically over the remainder of the contract. As we look to the second half of 2017, a few large customer have shifted their launch date from Q3 to the end of Q4 with relatively minor change but one that has his currently tracking more towards the low end of the revenue guidance range. The majority of these adjustments to product launch dates are customer driven delays, and the implementations overall continue to go well. Most importantly, we are confident that our product and go-to market strategy is working. Based on delivering the best ARR growth quarter in nearly three years, and the strength of our pipeline in the second half of the year, we believe we are well positioned to drive long term sustainable growth. Based on our revenue expectations and the achievement of expense synergies earlier than expected, we are pleased to be tracking to the low end of our full year 2017 non-GAAP operating loss from $31 million to $35 million. And we remain on-track to lower non-GAAP operating loss sequentially starting Q3. We continue to expect non-GAAP net loss per share of approximately $0.24 to $0.28 based on approximately 125 million to 127 million shares. Finally, we now expect tax season operations to be in the mid-$30 million range for the full year 2017 which includes $10 million in cash like acquisition and integration related cost. We remain confident that the combined company can reach cash flow breakeven by the end of 2018 with at least $60 million of cash on the balance sheet. In summary, our Q2 results demonstrated the progress we’re making against our key objectives. Most notably, the Anthem go-to market initiative and the Jiff cross-sells drove meaningful ARR growth in Q2. Additionally, we completed our first quarter as a combined company with Jiff, and our pre-merger integration work resulted in faster than expected operating expense synergies. We have much more to accomplish but we believe the plans we’re executing against will deliver substantial value to our customers, users, employees, and shareholders. Thank you. And with that, we’ll now take your question.
  • Operator:
    [Operator Instructions] Our first question comes from Charles Rhyee with Cowen &Company. Your line is open.
  • Samantha Warman:
    This is actually Samantha Warman on for Charles. So I think I want to circle back to this discussion of the channel partnerships and kind of talk about the progress we’re seeing there, specifically with the legacy Castlight site, and then how that’s integrating with your relationships that you had.
  • John Doyle:
    Tremendous progress in the channel relationships generally and you’re right to call out Anthem is our largest channel relationship. As Siobhan just said, it contributed a 40% of the ARR growth that we saw in the second quarter which is really super. The substance of improvement there is a function of just how closely the teams are working together from the leadership level all the way through the field facing employees. Coordinating on our approach to individual accounts and proposals and aligning on quarter-to-quarter bookings goals and the incentives that we’re setting up across both teams. So I couldn’t really be more pleased with the way the groups are working together and to also now be seeing the wheel starting to turn on the reported results with Anthem. More broadly, as we look at the consultant community which is obviously a critical constituency in our business, as we said on the call, we’ve been making a very concerted effort not only to work closely with consultants and individual accounts which is something we’ve been doing for some time, but also to engage the consultant community and the forward road map planning that we’re doing because we’re finding that - aligning the things that we’re investing in building with initiatives that consultants are working with our mutual clients on for 2018 and 2019, for example, is a very powerful way to align ourselves with the market going forward. So lots of good progress there.
  • Samantha Warman:
    And if I could just ask a quick follow up. Kind of going along this discussions you’re having with the consultants and the energy you’re seeing from the sales team, you mentioned approximately 10% of your clients are now cross-selling into both Castlight and Jiff. Where do you see that tracking kind of in the longer term? Thanks.
  • John Doyle:
    So ultimately, first of all, let me be clear about what we did share. So at this point, combined functionality has been sold into about 10% of our customers. That’s almost 25 accounts. And that number was six when we reported in the first quarter. So we’ve seen quadrupling in one quarter of the number of customers that have now purchased combined functionality which we see as a very strong endorsement of one of the core hypothesis behind the acquisition of Jiff which was that combining the capability to both companies would lead to new elements of our overall value proposition that customers would be attracted to, that’s certainly been the case. In terms of the long term expectation, we have not completed the integration of the company's from a product perspective that happens in 2018 and the reception we're getting from customers and from prospects to the early mockups and design of that combined product are outstanding and further support our belief that what the market is looking for right now is broader solutions integrated together in bundled offerings that just reduce the tax on organizations if they try to access best-of-breed solutions. So we think we’re in a great spot there and the long-term expectation is that all of our customers frankly would be using multiple Castlight products including legacy Jiff capabilities.
  • Operator:
    Your next question comes from the line of Brian Peterson with Raymond James. Your line is open.
  • Vince Celentano:
    This is Vince Celentano on for Brian. I just want to also say congratulations on the strong quarter. Could you give any update on the SAP reserve relationship and the one we should expect bookings revenue come?
  • John Doyle:
    So as we talked about in the past from a sequencing perspective, we’re very, very focused on the success of the Anthem relationship which we think is going to be a big contributor to growth for years in the business. You're very early days in terms of what I think that relationship can mean for Castlight and so we’re going to continue to focus there. SAP we see as a good opportunity I think of the developments in the second quarter that that's definitely impacting the pace and tone of that conversation has been leadership changes on the SAP side both in the SAP corporate infrastructure and then at success factors. And those leadership changes impact that dialogue. So never had an expectation that we’d see material near contribution from SAP and continue to believe that that is as soonest contributor to 18 bookings.
  • Vince Celentano:
    And then can you also talk about on the cost of customer acquisition now you've been a bit a little more channel focus as of late?
  • John Doyle:
    Great progress there, I’ll let Siobhan answer that question.
  • Siobhan Nolan Mangini:
    I think you can see the improvement in customer acquisition costs in the fact that we saw a 2% increase in sales and marketing expense this quarter relative to Q2 of 2016 and we’re combined business of Jiff. And I would point actually to the first quarter around channels because that really does amplify our ability to improve efficiencies in sales and marketing and really not sacrifice growth at all. And so I think with we’re feeling good in terms of where we've captured synergies in sales and marketing to-date and we’re really got there much faster than anticipated in the second quarter and that’s a real testament I think to the team and how they have come together between Castlight and Jiff.
  • Operator:
    Your next question comes from the line of Frank Sparacino with First Analysis. Your line is open.
  • Frank Sparacino:
    On the migration of the transparency only clients, can you just sort of talk through that process and sort of what you're seeing and John that maybe I don’t know if this is correct assumption but in terms of the NDR targets at the end of the year just given the success on the cross-sell side should I infer that's ahead and perhaps the turnover attrition on the transparency side is a little bit higher, but just some thoughts there?
  • John Doyle:
    So first point is, our confidence in exceeding the NDR target is a function of the rapid success we've had on Jiff cross-sells. And as I said in the script, we’re very much on plan from a churn and renewals perspective. And I'll comment a little bit on the context there since that was the start of your question, but I think it's critically important to be very, very clear that the NDR outperformance is a dynamic related to the cross-sells. When you dig into how we're moving through the renewals particularly of the transparency only business and the migration to our platform business that effort which has been our focus now for multiple quarters has been all about sorting those legacy customers into one or two buckets. And those two buckets are either what we’re seeing is the purchasing more product and we’re ending up with another three year relationship and expanded set of products, a price point where we think we’re in a very strong position to demonstrate value on a quarter-to-quarter basis and a very clear quantitative way. And then some customers who are terminating and as I said those terminations are tracking with our expectations and we expect to be largely behind us in the first half of next year. So overall very pleased with the outperformance relative to NDR and optimistic that we will sustain that through the balance of the year.
  • Frank Sparacino:
    And one another from me just Siobhan just on the comment you made, I think it was $5 million deferred revenue payment. Can you elaborate there a little bit further?
  • Siobhan Nolan Mangini:
    So Castlight historically had payment terms that vary widely from monthly, quarterly annual. This is unusual method payment - $5 million payment over three years it’s been deferred revenue and we expect it to hit revenues over about three-year timeframe and other that I think that we don’t really put more on our customer typically.
  • Operator:
    Your next question comes from Brian Essex with Morgan Stanley. Your line is open.
  • Brian Essex:
    I was wondering if you could talk a little bit about you guys be a little bit ahead of the curve on the synergy front and things kind of accelerated there a little bit faster than you expected. G&A in particular looks like it came in a little bit lower than expected. So maybe if we could - maybe kind of parse that out and get a better sense of what measures you’ve taken what we can expect going forward and then conversely where you might be investing for the rest of the year.
  • Siobhan Nolan Mangini:
    So overall Brian we’re really pleased with the rate that we've been able to capture synergies across the business and as I have been saying I think this is a real testament to the teamwork of bring Jiff and Castlight together. Where we did see really rapid synergies as I was mentioning with sales and marketing and that coming out of in fact that we're selling to the same buyers. So you can imagine things like marketing problematic spend you’re able to quickly get more efficient there. We’re really at run rate there and you’ll see that line item continue to grow over the course of 2017. R&D as well we’ll continue to invest in. I think G&A while we did capture synergies there is still a bit more you can imagine things office state takes time to leasing. So you’ll see a little bit more savings there over the course of the year but overall I think we’re really pleased by the rate that we were able to capture these synergies and hit run rate that saw into just having combined the companies four months ago.
  • Brian Essex:
    Maybe I can follow up on the point of combined functionality so as you sell into the installed base, what is the typical tipping point there in terms of enabling the customer or convincing a customer to adopt more broadly on the platform. Are these particularly platform customers that are the most valuable in terms of penetration and what is the thought process that they go through as they evaluate either renewing with incremental functionality or adding that functionality on to the platform?
  • John Doyle:
    So one of the really important dynamics that we've observed in the market that I think is being borne out by the reaction that you just described in your question the positive reaction to the combination is that for years now as the Digital Health ecosystem has kind of exploded in number and variety of companies and offerings, we've overwhelmed as a group the ability of HR departments to process through all that functionality to form independent contractual relationships with a whole bunch of small vendors, and then manage those relationships over time we’ve seen incredible fatigue on the part of our buyer. Most of our buyers are providing well-being oriented solutions to their populations. They’re providing, they’re aiming to provide scalable communication solutions in their businesses. And so in a lot of cases we’re bringing functionality that they are already committed to as organizations. But now we’re bringing it to them under the umbrella of a single relationship in a place, in a way that they see as driving emergent value, when the integration of well-being and traditional healthcare services from an analytics perspective, and frankly, just from ease of use for the employee is clearly valuable to these folks. So it’s a sales process but not one where you're having to overcome fundamental objections to the value of the separate products. So when you add in all of the benefits of combining it’s a pretty smooth discussion.
  • Operator:
    Your next question comes from the line of Richard Close with Canaccord Genuity. Your line is open.
  • Brian Hartman:
    This is Brian Hartman for Richard. If I can just hit of the transparency migration a bit more, are those migration strictly tied to when contracts come up for renewal. And if so, how did the back half of this year compare to the first half with respect to contracts coming up for renewal?
  • John Doyle:
    And it’s important to be clear, the renewal conversation is a very natural place to talk about migrating to transparency. But we have believed for some time that it was strategically important to be very proactive about making that shift. And so we’ve been having dialogues broadly across all of the transparency portfolio whether renewing in the near term or still some number of months or years away from renewal about the additional value we can bring with the platform and the opportunity to kind of make that transition sooner rather than later. And that focused effort has been a critical part of the rapid progress we’ve made on the migration. If we would have left it only to renewal conversations, we would not have been in the place where in which I think is a very strong one relative to a year ago when we were at 60% of the portfolio being transparency business, now only 30%.
  • Siobhan Nolan Mangini:
    And I think just to answer the second piece of your question, Brian, is renewals are typically very backend weighted to Q4. So when we look at the dollar ARR that’s up in a given year, it’s like 50% of your renewals are typically in Q4. And that’s why I think just speaking to how proactive we’ve been, we’re already 80% of the way through renewals for 2017. And that means that we’re working way ahead of when a customer actually coming up officially frontloaded and getting those renewals done.
  • Brian Hartman:
    And then can you tell us how much the Walmart cross-sell that you discussed on the last call contributed to the sequential increase in ARR?
  • Siobhan Nolan Mangini:
    It was fraction. I don’t necessarily want to get into the specifics. But it was less than 20%.
  • Operator:
    [Operator Instructions] Our next question comes from Gene Mannheimer with Dougherty & Co. Your line is open.
  • Gene Mannheimer:
    Did you or can you break out the ARR into core cash flight versus Jiff for us?
  • Siobhan Nolan Mangini:
    We really think of the businesses as one now that we’re combined. So that’s why we are focused on providing a pro forma combined ARR number. And then I just point to, John talked about more than 40% ARR came from Anthem Engage. That is a product that actually includes Castlight engage Jiff functionality. So the way we’re going to market now is very much as a combined company. And so that’s really why we’re moving towards one single ARR metrics across the portfolio products that we have.
  • Gene Mannheimer:
    And remind me, did you say in your prepared remarks that you’re tracking to the low end of your revenue view? And if so, what is the driver of some of those customer push-outs? I think it was from Q3 to Q4.
  • Siobhan Nolan Mangini:
    Yes, I did. I talked about us tracking more towards the low end of the revenue guidance range of $132 million to $136 million. When we go into a year, we tend to have about 90% visibility. And that 10% is really driven by conversion of bookings into revenue because we don’t recognize revenues until customers launch. And we've made very good progress. We talked about it a lot in terms of our implementations over time. So we’ve actually launched a 110 different product launches in the first half of this year. But we’re still a small a business where a handful of large customers Fortune 50 customers, as they make decisions around their product deployments can move up from the high end to the low end of our revenue range. And that’s what we’ve seen. It’s driven primarily by decisions around benefits, communication. So you can imagine that these are employers that have extremely complex benefit design, they’re very thoughtful around their employee communication. And so these are driven primarily by the employer, and when they want to be communicating to their employees. And I say, we still are hitting our guidance and we’re very focused as we look forward in terms of just making sure we execute and get these customers launch successfully.
  • Gene Mannheimer:
    And last question would be, in terms of the renewals that remain in the year, are any of those - how many of those are, say, top 10 customers at this point?
  • John Doyle:
    So there’s a handful, I would say top 20 accounts that are up for renewal. And we have a very good process in place tracking very much of the plan we set at the beginning of the year in terms of their status and their ability to get renewed.
  • Operator:
    [Operator Instructions] Our next question comes from the line of Jeff Captain with Stifel. Your line is open.
  • Jeff Captain:
    John, I know you mentioned that you guys had 11 gross customer at this quarter. I was just wondering what the metric looks on a net basis?
  • John Doyle:
    One thing before answering the direct question, I think it’s just really important to point out is, we mentioned quadrupling the number of accounts that have combined functionality. We talked about very strong cross-sells and a number of those cross-sells are into employers that Jiff had been speaking to for some time before combination of companies. And so the net new logos of 11 from my perspective don’t fully capture the momentum that we’re seeing in the market for the independent products. In terms of how we performed on a net basis, Siobhan mentioned that we have more than 240 customers which is roughly the same number that we talked about last quarter. We're going to not be getting into puts and takes at the specific level of customer numbers because the customers are a very different size. And so we think that the ARR metric is a much better way to measure our progress building the business. And so what you can expect from us in terms of describing the size of the portfolio are numbers of customers in terms that we think speak to overall penetration which is an important measurement of the business. And so we have more than 240 now. We think the market that we’re attacking is 4,000 to 5,000 customers. And so the puts and takes of 5 or 10 in any given quarter are really not where we want to be focused.
  • Operator:
    There are no further questions at this time. I would turn the call over to John Doyle, CEO for closing remarks.
  • John Doyle:
    Thanks again for joining us on the call today. Q2 was a strong quarter for Castlight. And we think we’re in a great position to build on this progress from here. We look forward to seeing some of you in person next at the Canaccord Conference in Boston. Have a great evening.
  • Operator:
    This concludes today's conference call. You may now disconnect.