Castlight Health Jumped 12.1% in August -- Here's Why

By Markets Fool.com

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What happened

Investors inCastlightHealth(NYSE: CSLT),a cloud-based softwarecompany focused on employee health, had an August to smile about. Shares moved 12% higher during the month in response to better-than-expected second-quarter results, according to data fromS&P Global Market Intelligence.

CSLTdata byYCharts.

So what

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The report looked solid all around. Revenue increased by 27% to $23.6 million, which was higher than analysts were expecting. Gross margins shot up to62.1% on a non-GAAP basis, up 800 basis points over the year-ago period. Non-GAAP net loss fell to $10.5 million, or $0.11 per share, which was much better than the $0.13 net loss that analysts had predicted.

Management credits the company's strong growth in part to its recently announced strategic collaborations withAnthemandSAP,which have given its platform a great deal of credibility. Castlight appears to have done a great job recently of leveraging that credibility into new clients. During the quarter, it signed up ahandful of new giant customers that includedRoche's Genetech division andCaterpillar.

With the company successfully growing its top line and signs emerging that the business is starting to scale, it's easy to see why its shares rallied in August.

Now what

Management is currently projecting that full-year revenue will land between $99 million to $102 million, which represents growth of 31% to 35%. That'sconsistent with the outlook provided in its first-quarter report. On the bottom line, the company is now calling for a non-GAAP EPS loss of $0.40 to $0.42 for the year, which is a penny better than its prior outlook.

These results are certainly encouraging, but given that Castlight health is still losing millions each quarter and has been ahorrificlong-term investment, I'll be looking for it to string together a few more successful quarters before considering its shares a buy.

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Brian Feroldi has no position in any stocks mentioned.Like this article? Follow him onTwitter where he goes by the handle@Longtermmindsetor connect with him on LinkedIn to see more articles like this.

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