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What's in the Offing for Castlight (CSLT) in Q2 Earnings?

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Castlight Health, Inc. (CSLT - Free Report) is slated to report second-quarter 2018 results on Jul 30.

Notably, the company has beaten the Zacks Consensus Estimate in the three of the trailing four quarters, with an average positive surprise of 20.9%.

The company reported first-quarter 2018 non-GAAP net loss of 6 cents per share, narrower than the Zacks Consensus Estimate of 8 cents per share. However, the figure was wider than year-ago quarter’s loss of 5 cents per share.

Revenues surged 31.7% year over year to $36.5 million and matched the Zacks Consensus Estimate.

Guidance & Estimates

For 2018, Castlight reiterated the outlook. The company continues to forecast revenues between $150 million and $155 million.

Non-GAAP loss is anticipated between 11 cents and 15 cents per share.

The Zacks Consensus Estimate for revenues in the quarter under review is pegged at $36.8 million, up 14.6% year over year. While the Zacks Consensus Estimate for earnings are pegged at a loss of 5 cents per share.

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

Castlight’s software platform that assists organizations in gaining control over their health care costs is witnessing rapid adoption. This was evident from its top-line growth. Moreover, the company expects renewals to boost annualized recurring revenues (“ARR”).

On a pro forma basis, ARR came in at $163.9 million in the last reported quarter, rising 17% year over year. This can primarily be attributed to cross selling of wellbeing clients into legacy care guidance and adoption of the company’s new platforms. Cross-selling of products is also expanding customer base.

Management remains elated on delivering Anthem Engage on Jan 1, “on time and at scale”. Approximately more than 800,000 lives were launched across 20 individual employers. Lighter version of Engage app was launched across Colorado and California.

Moreover, partnerships with the likes of Livongo, Big Health, Hinge Health, Retrofit and Kurbo are likely to help the company rapidly penetrate a number of health markets. Additionally, integration of Castlight's comprehensive health navigation platform with Washington Health Alliance will expand customer base.

In the last reported quarter, Subscription revenues (90.4% of total revenues) increased 27.4% to $33 million. Castlight’s first-quarter marked a record of 29 new customers and 26 cross-sell products in the quarter. Professional Services & other (9.6% of total revenues) soared 93.2%year over year to almost $3.5 million.

The Zacks Consensus Estimate for Professional Services segment revenues is around $3.16 million while that for Subscription revenues is about $33.4 million.

We believe all these factors are likely to aid the company’s second-quarter results.

Castlight Health, inc. Price and Consensus

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Castlight has a Zacks Rank #2 and an Earnings ESP of +1.56%.

Other Stocks With Favorable Combination

Here are few other companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

BMC Stock Holdings, Inc. has an Earnings ESP of +9.29% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intercept Pharmaceuticals, Inc. has an Earnings ESP of +4.25% and a Zacks Rank #2.

HubSpot, Inc. (HUBS - Free Report) has an Earnings ESP of +9.68% and a Zacks Rank of 3.

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