One-time Wall Street healthcare tech darling Castlight reported late Wednesday a major jump in fourth-quarter revenue while recording a net loss for the period smaller than the loss from the same quarter its prior year.
A growing customer base is primarily responsible for the revenue growth, company executives said in an earnings call with industry analysts. The San Francisco-based company launched its products, the most noted is its price transparency tool, to six times more customers during the final quarter of 2014 than the same period in 2013, executives said.
Castlight now sells to 45 Fortune 500 companies. Among its newest customers are Sprint and the state of Kansas, executives said.
The firm is hoping to further expand: During the fourth quarter, it boosted sales expenses by 22% and marketing expenses by 13% when compared to the same period in 2013, signs it continues to ramp up its selling machine.
The firm reported deferred revenues of $190 million. This represents contracts signed, but not yet invoiced. Once implemented—typically a six-month process, a company spokesperson said—the company can collect an initial payment, followed by periodic payments as the client uses the service.
Such a backlog has been a persistent feature of Castlight's business. When it first went public, it reported $108.7 million in deferred revenues as of Dec. 31, 2013. At that time, roughly half of that backlog was non-cancelable. The firm cannot report the current proportion of non-cancelable backlogged revenues until March, the spokesperson said.
Revenue for the fourth quarter 2014 soared to $14.5 million, a 182% increase from the prior year's fourth-quarter performance. Castlight reported a quarterly operating loss of $19.7 million, compared to an operating loss of $20.0 million during the same quarter in 2013. Its net loss for the quarter touched $19.7 million, down from the roughly $20 million loss in the same period of 2013.
Despite the strong quarterly revenue growth, Wall Street has become skeptical of Castlight. Shares traded around $6.85 Thursday afternoon, down from $11.67 at the beginning of the year.
Canadian bank Canaccord Genuity analysts Richard Davis Jr. and David Hynes Jr. have downgraded the stock to a “hold” rating.
“We have no doubt that Castlight is pursuing a tremendously important and exciting effort to provide transparency into healthcare costs and deliver a platform to drive savings,” the analysts wrote in a note. “The firm is not delivering as well as expected,” they said, faulting below-expectations numbers of new clients in the final quarter of the year.
Castlight executives defended their sales performance. Overall, they said during their earnings call, the fourth quarter is generally slower in terms of new sales than the third quarter. Their yearlong performance, they continued, met expectations.
The company lost $85.9 million for the year compared to a loss of $62.2 million in the prior year. Full-year revenue touched $41.6 million compared with 2013 revenue of $11.7 million.
Follow Darius Tahir on Twitter: @dariustahir