Castlight Health, Inc.
Q4 2014 Earnings Call Transcript

Published: 19 Feb 2015

[Operator:]

Greetings and welcome to the Castlight Health’s Fourth Quarter and Full-Year Earnings Results Teleconference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to your host Nita Sommers, our Chief Strategy Officer of Castlight Health. Thank you, Ms Sommers. You may now begin.

[Nita Sommers:]

Good afternoon and welcome to Castlight’s conference call to discuss our financial results for the fourth quarter and year-ended December 31, 2014. With me on today’s call are Giovanni Colella, our Co-Founder and CEO and John Doyle, our CFO. Following the prepared remarks we will take questions. Our press release was issued after close of market today and is posted on our website where this call is being simultaneously webcast. During the course of this call we will make forward-looking statements regarding our trends, strategies and anticipated performance of our business including our guidance for the first quarter and full-year 2015. These statements 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 discussion of important factors that may cause actual events or results to differ materially from those contained in our forward-looking statements. Forward-looking statements made during the call are being made as of today. If this call is replayed or viewed after today, the information presented during the call 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 on our performance during the quarter unless we do so in a public forum. On the call we will also discuss certain non-GAAP metrics such as non-GAAP gross margins, operating expense, operating loss a net loss per share. And we believe aid and understanding of our financial results. A reconciliation to the comparable GAAP metrics on a historical basis can be found in today’s earnings release which is available on our website and as an exhibit to the Form 8-K filed with the SEC just before this call. With that, let me turn this call over Gio.

[Giovanni M. Colella:]

Thank you, Nita. And thank all of you for joining us today to discuss Castlight’s first quarter and full-year financial results. Castlight delivered strong results for the fourth quarter and 2014 overall. As we enter 2015, it is worth reflecting of 2014 for Castlight’s which was our first year as a publicly traded company. In short, we made significant progress executing against our growth strategies last year and we believe that we are well-positioned to continue driving strong growth through 2015 and beyond. Let’s review, first we experienced exceptional growth. We grew revenues to $45.6 million which is an increase of more than 250% year-over-year. We added 62 net new customers including 19 Fortune 500 employers. And gross margin increased to 58% in Q4 compared to a negative gross margin in the fourth quarter of 2013. Second, we extended our data relationships with numerous health plans and data providers. Our platform is power to serve a significant majority of the self-insured enterprise market in the U.S. Third, we achieved 103% net dollar retention as a result of strong customer renewals and upsells which we believe reflect the value we are delivering to our customers. Fourth, we continued enriching our enterprise healthcare cloud suite of products which creates greater value for customers and new ways for Castlight to drive higher revenue per customer over time. In 2014, average annual revenue per launch customer grew 17% compared to the previous year. Let me provide more color on each of these areas. On the growth fund we had six times as many launches during the fourth quarter as we did in Q4 2013. These launches include the Sprint Corporation and the State of Kansas. These launches and a full quarter of revenue from customers we launched in Q3 2014 help drive revenue to $14.5 million a 182% increase over Q4 2013. We ended 2014 with a 168 customers, including 45 Fortune 500 firms, from over 25 industries. Our traction among this large and diverse set of employers positions Castlight well to continue to dominate this fast-growing markets. In order to capitalize on this strong and growing market demand. We remain focused on continuing to expand our data and ecosystem relationships. During the current course of 2014 we added numerous regional health plans, pharmacy benefit managers, dental plans and other data providers to our data interchange which now covers a significant majority of self-insured employers. This unmatched set of data relationships provides fertile ground for our sales efforts for the foreseeable future. Another major area of focus for us at Castlight is customer success. We could not be prouder of the results we are achieving with the country's largest and most influential enterprise. We performed rigorous quarterly reviews with our clients and are constantly learning from them. Since our primary focus is on the large enterprises, let's consider our three Fortune 500 customers who are up for renewal in 2014. In each case, and our quarterly business reviews with these customers, we were able to show tangible return on investment analysis that demonstrated Castlight users saving more than nonusers as well as strong growing engagement across the population. In each case on the basis of these results, our customer choose not only to renew their existing contracts for another three years term, but committed to a larger investment in Castlight partnership by purchasing additional products and services. For us, these renewals support our belief that our customers view Castlight as a long-term partner as they deploy new technologies to gain control over their healthcare investments, which brings me to a fourth area of focus then I touched on a moment ago. Innovation, our mission of providing enterprises a best in class cloud-based solution to manage one of their largest expenses line items is ambitious. During 2014, we saw the beginning of a shift in the way heads of HR and benefit leaders are starting to embrace data to manage healthcare strategically for the first time. This is the new discipline of enterprise, healthcare management or EHM. EHM promises to fundamentally change the way employers design and manage healthcare for their people. Our enterprise healthcare cloud enables employers to begin harnessing the value of enterprise healthcare management. Through our platform we are unlocking a very strategic asset for our customers and activated user base. We believe for a long time that transparency is just the beginning of a long-term journey towards something much bigger and more strategic. While transparency is an essential starting point for engaging employees and their healthcare, benefits leaders have been asking for more. That is why we invested significantly in 2013 and 2014 to expand beyond our core transparency solutions to offer an integrated and powerful suite of applications for employers to begin capturing the enormous value that enterprise healthcare management can provide. Let me turn to the coming year. As we look ahead into 2015, we couldn't be more excited about the opportunity we have to fulfill our promise to be the enterprise healthcare management platform of choice for the country's leading companies. We have established a strong leadership position and plan to focus our four priorities to fully capitalize on this multibillion-dollar market opportunity. Let me walk you through each. First, drive strong sales growth. As I said, we have ambitious goals for Castlight. While we delivered strong bookings growth in 2014, the ability of our sales organization to scale effectively as our revenue base and product suite grow is an essential component of achieving our long-term objective. This is why we were very pleased to announce recently that John McCracken has joined us as a Senior Vice President of Worldwide Sales to lead this effort. John’s 25 years of experience in scaling sales at category defining technology companies like Mercury Interactive and Jive Software is already proving invaluable. John has moved quickly to build his team and add sales capacity well ahead of our main selling season in the second half of the year. While it will take some time for his initiatives to take full effect our sales pipeline is strong and we are confident in our ability to drive strong sales growth in 2015 and beyond. Second, expand our data ecosystem. We will be particularly focused on key partnerships that are important to supporting our use upsell product as well as scaling the existing relationships, to speed implementation and drive other efficiency. Third, retain customers and capture upsell opportunities. As our portfolio products and customer grows so does our total opportunity to increase revenues through expansion of existing customer relationships. For 2014, we are again targeting greater than 100% net dollar retention. Fourth, scale our R&D capabilities and launch additional products that meaningfully expand our value proposition to employees. In addition to maintaining our fast pace of deploying new features and functionality for all our existing products we have two innovative new products on track to launch later this year. Overall, we are very pleased with the performance of our business in 2014 and we expect to drive another year of significant growth in 2015. With that I'll turn the call over to John.

[John C. Doyle:]

Thanks Gio and good afternoon everyone. It’s a pleasure to be with you today to talk about our fourth quarter and full-year financial results for 2014. In addition to the financial metrics that’s you are accustomed to hearing from us each quarter, today we will also share information that we plan to provide after each year end. This additional information includes our total backlog at year end, annual bookings for 2013 and 2014 and net dollar retention in 2014, which should provide useful contacts for our financial guidance for 2015. Q4 2014 was another terrific quarter of revenue growth and improving gross margin. 2014 in general was a year of solid execution and tremendous progress for the business on many fronts as Gio described. That said, we always try to do better and have more work to do side of the equation. We want to reduce our implementation timelines for upsell products in particular. So this will be a key area focus for us this year. I will say more on this topic later. The first let’s dive into detail on our excellent results during 2014. Revenue of $14.5 million in the fourth quarter of 2014 represented growth of 19% sequentially and 182% growth compared with the fourth quarter of 2013. For the full-year revenue was $45.6 million of 252% from $13 million in 2013. Our strong revenue growth in the fourth quarter was driven primarily by revenue from customers launched in Q3, as well as a significant increase in new customer launches in Q4 as compared to the prior year. During Q4 2014 we launch 17 new customers on Castlight medical and we completed 10 launches sell products as well. For a total of 27 launches during the quarter, compared to just four total launches in Q4 2013. Subscription revenue of $13.3 million in the fourth quarter and $41.6 million for the full-year 2014, represented just over 90% of our total revenue in each period consistent with the prior year. We excited 2014 was 115 launched customers compared to 48 at the end of 2013. Average annual revenue per launched customer grew 17% to approximately $525,000 in Q4 2014 from approximately $450,000 in Q4 2013. This increase was driven primarily by an increase in our average revenue per member during 2014. Increase in revenue per members suggest to us that our land and expand strategy is taking hold. Our deferred revenue and backlog was $190 million at the end of 2014, compared with $120 million at the end of the previous year. Our weighted average remain term of contractual backlog was 29 months as of December 31, 2014, compared with 33 months at the end of prior year. The growth in deferred revenue and backlog during 2014 resulted from net new bookings of $44.3 million compared with $32.4 million in 2013. We have 168 customers at the end of 2014 compared to 106 at the end of 2013. In addition to strong customer acquisition will so met our target for revenue retention in 2014. Net Dollar Retention or NDR is the metric we used to measure our retention of recurring subscription revenue. Specifically NDR captures the net effects of upsells, renewals and churn on the recurring subscription revenue under contracted customers that we had signed before the beginning of the year. For 2014 we achieved net dollar retention of 103% which exceeded our target of 100% for the year. This means that the total value of new recurring revenue from up sales and renewals to customers we had signed before 2014, exceeded the recurring revenue that we lost to churn among the same cohort. Although the churn we experienced in 2014 was mainly among the small customers, terminations tend to take effect at the end of benefits year. So the initial revenue impact of churn is concentrated for us in Q1 and this dynamic is reflected in our guidance. In addition to price increases upsells contributed to growth from renewals as well. Our overall cumulative attach rates for Castlight pharmacy and rewards was 67% and 15% at the end of 2014 compared with 57% and 14% respectively at the end of 2015. We expect that upsells will contribute meaningfully to new bookings in 2015 as we drive penetration of products like Castlight pharmacy, rewards, dental and reference based benefits and launch new products all continuing to grow our customer base. As all of the metrics I’ve shared demonstrate, we had a stronger year landing new business as well as retaining and expanding revenue from existing customers. No I mentioned at the beginning of my remarks that an area of focus for us in 2015 is to reduce the time it takes us to launch upsell products in particular. This is one of the meaningful factors underlying our forecast I want to provide additional color in this area. First recall that I mentioned that the initial revenue impact of churn is concentrated in the first quarter and determinations typically take effect at the end of a benefit plan cycle, which is most often at the end of the calendar year. I also said that we exceeded our net dollar retention target by driving favorable renewables and upsells that more than offset the revenue last churn. The key point to note here is that in contrast to churn, which impacts revenue right away on the termination date, the positive revenue impact of upsells is not felt until we launched the upsell products and that launch is taking us up to a year or more which is longer than we want. The steps that we need to take to reduce implementation timelines for upsell products closely mirror those we went through with our flagship product Castlight medical. Personalizing our product set scale requires significant upfront effort to establish data relationships, build infrastructure, clean and standardize data formats and create a simple and yet compelling experience for our users. Ultimately we believe that this effort creates enormous differentiation of our products and a major competitive mode for the business. Just as with Castlight medical, it will take time for us to make upsell launches more routine and efficient. Accordingly, while we are focused on making this happen as quickly as possible, our guidance for 2015 does not reflect any material improvements in launch timelines. Turning back to the P&L gross margins improved strongly in the fourth quarter of 2014 reaching 58% compared with the gross margin of negative 4% in the year ago quarter. Gross margin for the year came in at 42% versus a negative 32% gross margin in 2013. As we have noted in the past our overall gross margin blends the effects of gross margins we derive from subscription revenues and gross losses we generate from professional services. We continue to believe that the gross losses we incur on customer implementations represent a rational allocation capital given the high margins and the expected durability and growth potential of our subscription revenue base. The results we have achieved to date in terms of subjective customer satisfaction ratings following implementation, all the way through favorable renewals, reinforce our conviction on this point. To reach our long-term overall gross margin target of 70%, 75% we expect to grow our base of high margin subscription revenues. In addition to improving the margin profile of our professional services offerings. We remain confident in our ability to continue to do both over time. In fact in Q4 2014 gross margins on subscription revenues were 84% compared with 78% in the prior quarter. Subscription gross margins in Q4 benefited from bonuses that we earned or achievement of certain performance guarantees and customer contracts. For the year, gross margins on subscription revenue reached 75% versus 47% in 2013. Total operating expenses were $23.7 million in the fourth quarter, a 28% year-over-year and 10% sequentially. For the year, total operating expenses were $88.8 million and an increase of 60% compared with 2013, this increase in operating expenses reflects our stated and continued intent to invest aggressively in current new products as well as in our distribution capabilities and infrastructure. We believe these investments will enable us to maintain our leadership position in the market and capture the lion share of rapidly growing demand. Put simply, we are leading the way in a large and growing market that we believe represents the long-term future of managing healthcare and large organizations. We believe that the strategic value building and leading the enterprise healthcare management category is large and that our capital allocation decisions are well aligned with the long-term interest of our customers and our shareholders. In particular sales and marketing expenses were $14.2 million in Q4 which represented increases of 22% and 13% compared with the fourth quarter of 2013 and Q3 2014 respectively sales and marketing expenses $53.5 million in 2014 .which was up 64% from $32.7 million in the year prior. This increase reflects a greater investment in our national enterprise sales force as well as a significant increase in marketing spend to define the EHM category among current and potential customers. During 2014 specific high impact marketing investments for us included our first annual Enterprise Healthcare Summit last June, a large presence at the HR Tech conference in Las Vegas in the fall and a series of topical webcast and events that enable us to engage with large numbers of human resources executives, benefits leaders and other decision makers in enterprise healthcare management. R&D expense were $5.3 million in Q4 2014, this was 28% higher than R&D expense in Q4 2013 and consistent with the prior quarter. Overall in 2014 R&D expense of $20.7 million increased 41% compared the year prior. The increase in R&D expense in 2014 enabled monthly releases of new features and functionality of existing products, development of implementation tools that significantly reduce the cost for us with the typical launch of Castlight medical, as well as development of new products like Castlight dental. We also expect to release two currently unannounced products this year as a result of ongoing R&D efforts and we believe that these new products will enable significant upsell opportunities late in 2015 and beyond. G&A expenses of $4.2 million in Q4 2014 were 52% higher than in the year ago period. Total year G&A expenses increased 78% in 2014 compared with the prior year, primarily reflecting the addition of public company infrastructure. We expect the rate of increase in G&A expenses to decline in 2015, compared with the prior year. Our net loss decreased 5% sequentially at $15.2 in the fourth quarter. Our net loss per share in the fourth quarter of 2014 was $0.17 on $90.5 million weighted average shares outstanding, compared to net losses per share in Q3 of $0.18 on $89.7 weighted average shares outstanding. For the year out net loss was $69.4 million compared with $59.6 million in 2013. We ended 2014 with $198.7 million in cash and investments. Cash used in operations was $54.6 million for the year end December 31, 2014. Turning now to 2015 guidance. For the full-year 2015, we are forecasting total revenue of $74 million to $77 million representing growth of 62% to 69% versus 2014. This guidance takes into consideration of strong bookings performance we delivered in 2014 and expected timelines for customer launches including the dynamic with upsell launches that I discussed earlier in my remarks. In addition, we have a large pipeline of higher quality opportunities to drive new sales in 2014, which we expect to yield to strong revenue growth heading into 2016. For the full-year 2015 projecting a non-GAAP operating loss in the range of $64 million to $67 million and non-GAAP net loss per share in the range of $0.69 to $0.73 based on $92 million to $93 million weighted average basic and diluted shares outstanding. We are projecting cash used in operations of $44 million to $47 million in 2015. Turning to the first quarter of 2015 we expect total revenue of $15.3 million to $15.6 million representing growth of 82% to 86% compared with $8.4 million in total revenue in the first quarter of 2014. We are projecting a first quarter operating loss in the range of $16.5 million to $17.5 million. The non-GAAP net loss per share in the range of $0.18 to $0.19 based on $91 million weighted average basic and diluted shares outstanding. In summary, we’re excited about our great progress in the business last year and look forward to more strong growth in 2014. Thanks for your attention and now Gio and I will be happy to take some questions.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from the line of Robert Jones with Goldman Sachs. Please proceed with your question.

[Adam Noble:]

This is Adam noble in for Bob. I just wanted to go into the customer adds for the quarter. It was a little below our expectation, and I believe only half the number you guys find in last year’s 4Q. I was just hoping you could share any insight into both the seasonality of contract wins and any 4Q specific dynamics that might have depressed this year's number?

[John C. Doyle:]

Adam, this is John. So couple of things first of all very important to point out that bookings hit our target for the year. Couple of things we know about our bookings cyclicality that I think are important to emphasize here. One is, we do, do the majority of our business in the second half of the year. So in both 2013 and 2014, we saw low 60% of our total bookings for the year happening in the second half so that was consistent in both years. And the other thing we know is that Q3 is our biggest quarter of the year that’s been the case over each of the last couple of years. Given the variability quarter-to-quarter of bookings, we focus on that annual performance but one more granular think I can share with you is that our growth rate in terms of second half bookings was actually faster than the growth rate year-over-year for first half bookings. So very pleased with that and then looking ahead to 2015, which I think is really the issue we all are focused on, pipeline is very strong and we are in a great position to drive strong growth in bookings in 2015 as well.

[Adam Noble:]

Great, that’s really helpful. And if I could just sneak in one follow-up, I just curious - you having any discussions with UNH, now that contracts exclusively has expired. And I am just curious if there is any potential benefit from a UNH contract baked into current 2015 guidance?

[John C. Doyle:]

Thanks for question. No update on the UNH dynamics so as you know exclusivity expired in terms of implementation in January. No broader data agreement in place with UNH and if there are material developments will certainly you know in terms of guidance for 2015 that guidance does not anticipate the addition of the data relationship with UNH. And important to point out as Gio said in his remarks we've got a very broad set of data relationships in the ecosystem and really a massive opportunity to pursue with the relationships that we already have established.

[Adam Noble:]

Great. Thanks for the questions.

[Operator:]

Thank you. And our next question comes from the line of Jennifer Lowe with Morgan Stanley. Please proceed with your question.

[Jennifer S. Lowe:]

Great. Thank you. Maybe want to start with you’d highlighted the addition of John McCracken to the team I know it is still pretty early, but its sounds like he has been hard at work putting his stamp on the organization. I was just curious if you could give us a little more color on what he's doing the same as what you did before, what he might be changing and to the extent that you contemplate that in 2015 guidance, is there any thought that there could be any disruption on sales cycles as any changes he makes takes effect?

[John C. Doyle:]

Yes, thanks Jen. This is John, so we are super pleased to have John join. He is a very fast working and professional sales leader and as you might imagine he is building the team there very aggressively. In terms of expectations for the year and how his arrival affects that, as you know the ramp time for sales reps in our business tends to be about six months. So one of the reasons that we are particularly pleased to have John starting now and making it so much progress as he is on building that team is that we are going to have a fully ramped sales team heading into our big selling season in the second half of the year, which also happens to be when we expect to have a few new products coming online as well. So we are lined up there.

[Jennifer S. Lowe:]

Great. And the other thing I wanted to touch on is how you are thinking about investments into calendar 2015, is just doing the back of the envelope math on the revenue guidance versus the operating loss guidance it looks like the expense profile of the business is going to grow less in 2015 then it did in 2014. So how are you thinking about that balance right now between growth investments into sales and everything else?

[John C. Doyle:]

Yes, great question. It really goes to how we think about capital allocation in the business. And our belief is that we are at the very front end of a massive change in the way large organizations manage their healthcare spend which is an enormous spend area as you know. We are leading the way in enterprise healthcare management and that opportunity we believe is enormous and so there is no change in that broad context which really informs our capital allocation decisions. And so you are right to point out that the growth rate is slower, we are seeing I think better leverage in various elements of our operations, but still investing very aggressively in product development and sales and marketing to make sure that we’ve got the pieces in place to grow on a bigger pace. So no slowing at all in that respect.

[Jennifer S. Lowe:]

Great. Thank you.

[Operator:]

Thank you, and our next question comes from the line of Brad Reback with Stifel. Please proceed with your questions.

[Brad R. Reback:]

Great. Thanks a lot. The dollar retention rate was down tad from 2013 to 2014, I believe from 109 to 103, is there any dynamic going on there?

[John C. Doyle:]

No, so it’s a good question, thanks for asking it. What's happening there is that the base of installed customers heading into 2013 was quite small, while the renewal volume actually year-to-year was relatively similar, we had a number of customers with one year agreements and so the relative size of the renewal base for the installed base in 2013 was significantly higher than in 2014. And so while we saw a very strong upticks on renewals as Gio talked about their impact on the full portfolio as a proportion was smaller.

[Brad R. Reback:]

Okay and then you know as we look towards 2015 on the renewals side of the equation can you give us a sense of how much more revenue on a percentage basis maybe is said to be renewed in 2015 versus 2014?

[John C. Doyle:]

Yes, we are very focused on 2015 renewals as you can imagine, we're meeting with customers on a quarterly basis so the renewal conversations typically start well ahead of the scheduled end of those contracts, in fact we’ve already completed a number of 2015 renewals. From a size standpoint to your specific question, we’ll do about twice the renewal volume in 2015 that we did in 2014.

[John C. Doyle:]

Great. Thanks very much.

[John C. Doyle:]

Thanks Brad.

[Giovanni M. Colella:]

Thank you.

[Operator:]

Thank you, and our next question comes from the line of Richard Davis with Canaccord. Please proceed with your question.

[Richard Davis:]

Okay, thanks. So I think you said some of the customers that churned off were small. Were they small in terms of fully penetrated potential, i.e. like few numbers of employees or were they small in terms of being a large company with modest penetration level thus far? Thanks.

[John C. Doyle:]

Yes, good question Rich. Of course first of all we take all terminations seriously but it is in fact small customers in terms of total lives so it's not a large customer with low penetration these are small firms. Well we anticipated that we would see a higher rate of churn. What happened as I talked about on the call earlier is concentration of that churn in terms of its revenue impact happening in the first quarter. And just to give you a size there we are talking about total impacts in the hundreds of thousands of dollars in aggregate so it is skewed toward the smaller customer.

[Richard Davis:]

Got it. And then a quick tactical question you gave us bookings for the year, so we kind of got the trend line there but as it works for kind of as when we do our kind of – entry year calculated Billings. Do you have any thoughts that the billing terms would change it all during the year or in other words when we are modeling this out should it stay pretty consistent? That’s a doubt you will change it but I can’t ask that question.

[John C. Doyle:]

Right. So, as you know billing terms are variable among our customers. So while we bill some professional services when we signed contracts the subscriptions Billings really start when we launch and when we launch we are billing in some cases monthly and in others quarterly and then also upfront annually. The weighted average has stayed pretty steady at around 5.5 months. And we actually do expect that, that is going to – that’s our assumption I should say and the forecast although earlier is our preference and so we do focus on that in our customer conversations.

[Richard Davis:]

Got it. Thank you.

[John C. Doyle:]

Thanks.

[Operator:]

And the next question comes from the line of Brian Peterson with Raymond James. Please proceed with your question.

[Brian C. Peterson:]

Hi, good afternoon. Just one question on the churn, could you break into a couple of buckets what the typical reasons for the customers coming off the platform, I appreciate that they’re not big in terms of an absolute revenue contribution but just curious if that is the competitive displacement are going to a health plan or maybe if they are just transitioning off?

[Giovanni M. Colella:]

Yes, thank you. This is Gio by the way, thank you very much, it’s a good question allows me to elaborate a little bit on this. First of all let's talk for the reasons. It is very small customers and mostly it is because of M&A is happening so big changes in the leadership with these customers and that needs to change then because of the acquiring company as may change of that. As I said, a small customers John is focused very much on that. Let me elaborate for a minute on this. We are laser focused on any loss we have, we are a platform that is providing a major change in the way enterprises manage their healthcare costs. And so we are best suited for companies that are on the journey of this big mission. And so that’s where we're seeing the best result. We haven't seen small customer change to competitors.

[Brian C. Peterson:]

Okay. All right, that’s helpful. And just a clarification on the upsell activity, I guess the timeline delays with implementation, is that mainly related to your three large customers that renewed and it maybe more complication associated with that or is that potentially related to upsell activity kind of intro contract where you maybe proactively engaging with more activity with your existing customers?

[John C. Doyle:]

Right, so thanks for asking it’s really important to be clear here. So first of all, it is appropriate to break our implementations up between our core medical implementations and then the other products principally Castlight pharmacy given how much higher the tax rate in penetration are with that product versus the others. Just briefly on the core medical implementations, we've actually made great progress there. In the past we've talked about implementations taking three to 12 months. What we were able to achieve, the team achieved in 2014 there was really terrific in terms of much greater consistency of those renewals around six months. We still see them varying from three to nine, but that was real positive. And then in addition significant reductions in cost as we shipped those more standardized implementations to our implementations team and away from engineering. Getting to the upsell's dynamic specifically, we are talking broadly about upsell implementation, so it’s not focused on any one particular customer. And the reason for that is that the startup efforts associated with laying the groundwork for these products and I’ll stick with pharmacy since that’s the largest one are nontrivial. So it involves for example establishing data relationships with each of the pharmacy benefit managers that we are going to be working with to support our customers. It then requires building the data infrastructure there to in just the data from those partners and finally we’ve got to be cleaning and manipulating those data to produce powerful, simple user experience. All of that work has taken more time than we originally estimated and so that’s creating latency in the pharmacy implementations. The last thing I’ll say there, that upfront effort is fundamental to the personalization of our products which we believe is a huge differentiator relative to our competitors and once completed puts a big moat around that part of the business.

[Brian C. Peterson:]

Okay. Thanks for the question.

[John C. Doyle:]

Thanks a lot.

[Operator:]

Thank you. [Operator Instructions] and the next question comes from the line of Frank Sparacino with First Analysis. Please proceed with your questions.

[Frank Sparacino:]

Hi guys, Gio, earlier you talked the three clients that renewed this year and tangible ROI and I was hoping you might share some of those figures with us and then also related to that maybe any comments around pricing as these contracts came up for renewals in terms of meaningful changes one way or another.

[John C. Doyle:]

Thanks Frank. I’ll go ahead and take that question. So on the pricing question specifically, it's not helpful to the business I think as we may have talked about before to describe details on pricing. So without going there, we were very successful expanding pricing of the core scope on these arrangements. In addition, as Gio said in his remarks adding products and services in each of those cases so meaningfully driving the magnitude of relationships in each case. In terms of the specific ROI by customer, we don’t talk about individual customer results, but we have talked about before for example and as has been published in [indiscernible] very successful results driving savings across the majority of the portfolio. Those results that have been publicly published are representative of what you tend to see in the portfolio. End of Q&A

[Operator:]

There are no other questions in the queue at this time. I would now like to turn the call over to management for any closing comments.

[John C. Doyle:]

Yes, well thank you everyone for joining us today. We are on an incredible journey at Castlight. We're pleased with our progress, but are even more excited about our future. We look forward to speaking with you in the next few weeks and seeing some of you at the upcoming Morgan Stanley and Raymond James conference. Thank you all again for your time today.

[Operator:]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and we think you all for your participation.