Vocus Inc.’s (VOCS) first quarter 2011 adjusted loss per share (EPS) of 4 cents outpaced the Zacks Consensus Estimate of a loss of 5 cents. The quarter’s revenue also surpassed the Zacks Consensus Estimate of $26.0 million.

A surge in demand from organizations eager to woo customers through online social networking sites backed the quarter’s outperformance.

The adjusted earnings 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 $27.0 million in the first quarter increased 21.0% from $22.3 million in the year-ago period. The quarter’s result also bettered the company’s guided range of $26.2 million to $26.4 million. The favorable outcome was due to customer additions, an extended geographical reach and strong product traction.

Customers

Vocus added 682 new subscription customers during the first quarter, compared with 396 net new additions in the year-earlier quarter. The company ended the quarter with 9,256 total active subscription customers.

The company signed subscription agreements with new and existing customers like Bristol Airport, Ceridian, EarthCam, GameStop, iRobot, Moms in Business Unite, Miox Corporation, Moen, Office de Tourisme de Marseille, Otis Spunkmeyer, TD Bank, Wonderlic and University of San Francisco.

Operating Results

Gross margin on a GAAP basis was 79.7%, slightly below the 79.8% in the year-ago quarter. Operating loss on a GAAP basis was $3.1 million versus $549,000 in the year-ago quarter. Excluding one-time items, but including stock-based compensation expense, operating loss on a non-GAAP basis was $1.9 million versus $0.25 million in the year-ago quarter.

Net loss on a GAAP basis was $1.9 million or 19 cents per share in the first quarter of 2011 compared with a net loss of $579,000 or 15 cents per share in the first quarter of 2010. Excluding one-time items, but including stock-based compensation expense, net loss was $0.8 million or 4 cents per share, compared with a net loss of $0.19 million or 1 cent in the year-earlier period.

Balance Sheet & Cash Flow

Vocus exited the quarter with $99.0 million in cash and short-term investments versus $100.4 million in the previous quarter. Accounts receivables were $14.4 million. The company generated $13.8 million in cash from operations versus $5.8 million in the previous quarter. Capital expenditure was $6.0 million. This apart, the company repurchased shares for an aggregate cost of $3.01 million.

Guidance

For the second quarter of 2011, revenue is expected in the range of $27.6 million to $27.8 million. Non-GAAP EPS is expected in the range of 17 cents to 18 cents assuming an estimated non-GAAP weighted average diluted share count of 20.9 million. The non-GAAP tax benefit is expected to be around 4%.

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 total 25 cents per share in the second quarter of 2011. The GAAP loss per share is expected in the range of 8 cents to 7 cents assuming an estimated weighted average 18.5 million basic and diluted shares outstanding.

For full-year 2011, revenue is forecast at between $112.8 million and $113.8 million on a GAAP basis (previously $112.1 million and $113.1 million), and $113.0 million to $114.0 million on a non-GAAP basis (previously $112.2 million to $113.2 million). Non-GAAP EPS is expected in the range of 75 cents to 77 cents (previously 75 cents to 77 cents) assuming an estimated non-GAAP weighted average diluted share count of 21 million shares. The non-GAAP tax benefit is expected to be around 9%.

The expected GAAP loss per share is 21 cents to 19 cents (previously 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 expected to cost the company 97 cents per share.

Vocus continues to expect free cash flow in the range of $17.0 million to $18.0 million.

Conclusion

Vocus reported impressive first quarter results, beating the Zacks Consensus Estimates on both the top and bottom lines. Vocus vies in a nascent market and anticipates good growth prospects.. In the absence of any real competition, the company has been able to steadily expand its customer base.

The company has also successfully capitalized on strategic acquisitions. Notable among these is the take over of North Social, a provider of Facebook applications. We believe that this acquisition will further strengthen Vocus’ position in the social media space.

Currently, Vocus has a Zacks #3 Rank, translating to a short-term Hold recommendation.

 
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