Castlight Health Inc (NYSE:CSLT) Enters Strategic Agreement with SAP

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Castlight Health Inc (NYSE:CSLT) shares gained 26.56% to $4.26 on Wednesday following reports that the company has entered into a strategic agreement with SAP.

Castlight Health Inc (NYSE:CSLT) is a company that offers a health benefits platform that engages employees to make healthcare decisions, and enables employers to communicate and measure their benefit programs. It operates through cloud-based products segment, enabling  employers to integrate benefit programs into a single platform available to employees and their families.

On May 18, the company announced that SAP, a German multinational software corporation that makes enterprise software to manage business operations and customer relations, purchased 4.76 million shares of newly issued Class B common stock. This means that SAP is holding 4.7% post-issuance of currently outstanding shares of Castlight Health Inc (NYSE:CSLT) at $3.77 per share or a total investment of approximately $18 million. In addition, SAP also has the option to buy an additional 1.9 million shares of Castlight Health Class B stock at $4.91 per share, higher than it’s current market price.

This partnership with the IT giant could lead to lower healthcare costs and increased benefits satisfaction. In particular, Castlight has agreed to be an early participant in SAP’s new Connected Health Platform. This system is designed to connect developers, researchers, and healthcare organizations together. Under the agreement, the companies also plan to integrate Castlight’s health benefits platform into SAP’s SuccessFactors Human Capital Management Suite and launch a pilot program later in the year.

The company released its earnings report a week ago and printed impressive results, indicating that the stock has room to advance. Total revenue for the first quarter of 2016 was $22.7 million, an increase of 42% from the first quarter of 2015, while management issued guidance of second quarter revenue at $22.8 million to $23.1 million. The current growth estimate for the year translates to a 22.6% increase in earnings per share.

 

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