Vocus Inc.’s (VOCS) fourth quarter 2010 adjusted earnings per share (EPS) of 4 cents surpassed the Zacks Consensus Estimate of 2 cents. Revenue during the quarter was in line with the Zacks Consensus of $26.0 million.
The adjusted figure excludes amortization of intangible assets, acquisition related adjustments to deferred revenue, fair value adjustments to contingent consideration and acquisition related expenses, but includes stock-based compensation expense.
Revenue
Revenue of $26.0 million in the fourth quarter increased 18.2% from $22.0 million in the year-ago period. The quarter’s result surpassed the company’s guided range of $25.6 million to $25.8 million. The favorable outcome was due to new customer additions, extended geographical reach, strong product traction and an increase in subscription agreements.
Customers
Vocus added 822 net new subscription customers during the fourth quarter and ended the quarter with 8,574 total active subscription customers, compared with 437 net new subscription customers added during the fourth quarter of 2009.
The company signed subscription agreements with new and existing customers, of the likes of Avon Products, BB&T Corp. (BBT), Clear Passage Physical Therapy, The Dow Chemical Company, Elvis Presley Enterprises, Grande Cheese Company, Larson Jewelers, LEGO Systems, March of Dimes Foundation, Oakland Zoo, Office de Tourisme du Grand Lyon, The SEO Guys, Select Italy and Soap Opera Digest.
Operating Results
Gross margin on a GAAP basis was 81.2%, down from 82.7% in the year-ago quarter. Operating loss on a GAAP basis for the quarter was $866,000 versus $308,000 in the year-ago quarter. Excluding one-time items, but including stock-based compensation expense, operating income on a non-GAAP basis was $207,000 versus $162,000 reported in the year-ago quarter.
Net loss on a GAAP basis was $397,000 or 19 cents per share in the fourth quarter of 2010 compared with a net loss of $821,000 or 15 cents per share in the fourth quarter of 2009. Adjusted net income was $709,000 or 4 cents per share, compared with a net loss of $351,000 or 2 cents per share in the year-earlier period.
Balance Sheet & Cash Flow
Vocus exited the quarter with $100.4 million in cash and short-term investments versus $93.1 million in the previous quarter. Accounts receivables were $20.8 million. The company generated $5.8 million in cash from operations versus $2.4 million in the previous quarter. Capital expenditure was $1.2 million. This apart, the company purchased 831,773 shares of common stock during the fourth quarter, under its stock repurchase program, at an aggregate cost of $12.2 million.
Guidance
For the first quarter of 2011, revenue is expected in the range of approximately $26.2 million to $26.4 million, on a GAAP basis, and roughly $26.3 million to $26.5 million, on a non-GAAP basis. Non-GAAP EPS is expected to come in a band of 15 cents to 16 cents assuming an estimated non-GAAP weighted average diluted share count of 20.8 million. The non-GAAP tax rate is expected to be around 8%.
Stock-based compensation, amortization of intangible assets, acquisition-related expenses, the effect of adjustments to deferred revenue related to purchase accounting and adjustments to the fair value of contingent consideration for earn-outs are expected to be cumulatively 27 cents per share in the first quarter of 2011. The GAAP loss per share is expected in the range of 12 cents to 11 cents assuming an estimated weighted average 18.3 million basic and diluted shares outstanding.
For full-year 2011, revenue is forecast in an approximate $112.1 million to $113.1 million range on a GAAP basis, and roughly $112.2 million to $113.2 million on a non-GAAP basis. Non-GAAP EPS is expected in the range of 75 cents to 77 cents assuming an estimated non-GAAP weighted average diluted share count of 21 million shares. The non-GAAP tax rate is expected to be around 4%.
The GAAP loss per share is pegged in the range of 20 cents to 18 cents, assuming an estimated weighted average 18.5 million basic and diluted shares outstanding. The GAAP figure includes stock-based compensation, amortization of intangible assets, acquisition-related expenses, the effect of adjustments to deferred revenue related to purchase accounting and adjustments to the fair value of contingent consideration for earn-outs, which taken together is estimated to cost the company 95 cents per share.
For FY11, Vocus also expects capital expenditure of $6.8 million and free cash flow in the range of $17.0 million to $18.0 million.
Conclusion
Vocus reported impressive fourth quarter results by beating the Zacks Consensus Estimates on both the top and bottom lines. Vocus is a successful player in a nascent market with good growth prospects. The company has also successfully capitalized on strategic acquisitions for growth.
Vocus has been able to steadily expand its customer base in the absence of any real competition. During the quarter, Vocus completed the acquisition of social media software services provider, Engine 140. We believe that this acquisition will further herald Vocus into the social media space.
Currently, Vocus has a Zacks #1 Rank, translating to a short-term Strong Buy recommendation.
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