What happened

Shares of Castlight Health (NYSE:CSLT), a software provider focused on employee health benefits, rose by 12% as of 12:15 p.m. EST on Thursday after the company posted strong fourth-quarter results.

So what 

Here's a look at the highlights from the fourth-quarter earnings report:

  • Revenue grew 40% to $29.9 million. This figure was slightly above Wall Street's expectations.
  • Non-GAAP gross margins expanded to 74.8% for the period. This figure was well ahead of the 58.6% gross margin that was recorded in the year-ago period.
  • Non-GAAP net loss was $0.01, down substantially from the $0.16 loss that was recorded in the fourth quarter of 2015. This results also compared favorably to the $0.04 loss that analysts were expecting.
  • Castlight's cash balance at year-end was $114.6 million.
money raining down on man with umbrella

Image source: Getty Images.

The company also stated that it expects its previously announced acquisition of Jiff, another software provider that is focused on employee health benefits, to close by the end of the first quarter.

CEO Dr. Giovanni Colella was quite pleased with its execution during the year, saying, "2016 was an important year for Castlight as we executed on key initiatives to drive long-term growth, increase adoption of our full platform, and improve our operating performance."

Now what

Management believes that the Jiff acquisition will allow its top line to continue to expand significantly in the year ahead. For 2017, the company expects pro forma non-GAAP revenue -- which assumes a full-year contribution from the Jiff acquisition -- to land between $138 to $142 million. This projection represents pro forma growth of 27% to 30%. Better yet, management believes the combined company to stand a good chance at maintaining this growth momentum into 2018 as well.

Turning to the bottom line, the combination of cost savings and revenue growth is expected to allow the company to reach cash flow breakeven by the end of 2018. 

Finally, new COO John Doyle said that he believes that the combined companies are well positioned to deliver even more growth in the future:

As we start 2017 with an even stronger foundation for growth in place, I am excited by the prospect of combining the Castlight and Jiff teams to leverage our complementary strengths in product, data, channel partners, and client relationships.  We believe we are well positioned to accelerate our growth and capitalize on the massive opportunity in the health benefits market.

Given the better-than-expected results and rosy forecast, it is hard to blame the markets for feeling optimistic.

Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.