Vocus Inc.‘s (VOCS) third quarter 2011 adjusted earnings per share (EPS) of 4 cents outpaced the Zacks Consensus Estimate by a penny.
The trend among organizations to woo customers through online social networking sites boosted the demand for Vocus’ products and services, and in turn the quarter’s earnings beat.
The adjusted earnings figure excludes amortization of intangible assets, fair value adjustments to deferred revenue and acquisition-related expenses, but includes stock-based compensation expense.
Revenue
Revenue of $28.9 million in the third quarter increased 16.9% from $24.7 million generated a year ago. The top line managed to just surpass the company’s guided range of $28.6 million to $28.8 million. The favorable outcome was backed by customer additions, an extended geographical reach, deal wins and strong product traction.
Customers
Vocus added 998 new subscribers during the third quarter, compared with 579 in the year-earlier quarter. Total active subscribers were 10,855 at quarter end. A healthy mix of customers across organizations, geographic areas and industries was also noticed.
The company signed a host of subscription agreements with new and existing customers. Notable among these are American Beverage Association, Aroport de Bordeaux, Brad Schmett Realtor, Consumer Electronics Association, Dog Ear Publishing, Life Time Fitness, LogMeIn, Michigan Economic Development Corp, Monsanto, Smiles Change Lives, SunGard Systems International, Toothsoap, Trek Bicycle Corporation and YogaSoul Center.
Operating Results
Gross margin was 81.4%, up from 80.2% in the year-ago quarter. Operating loss was $0.3 million versus $1.0 million in the year-ago quarter.
Net loss on a GAAP basis was $0.2 million or 1 cent per share, compared with $0.7 million or 4 cents per share in the third quarter of 2010. Excluding one-time items, but including stock-based compensation expense, net income was $0.9 million or 4 cents per share, compared with $0.83 million or 4 cents in the year-earlier period.
Balance Sheet & Cash Flow
Vocus exited the quarter with $106.6 million in cash and short-term investments versus $116.8 million in the previous quarter. Accounts receivables were $16.8 million. The company generated $4.8 million in cash from operations versus $6.2 million in the previous quarter. Capital expenditure was $3.0 million. Apart from these, the company repurchased 643,410 shares for an aggregate cost of $13.0 million.
Guidance
For the fourth quarter of 2011, revenue is expected in the range of $30.1 million to $30.3 million. Non-GAAP EPS is expected in the range of 21 cents to 22 cents assuming an estimated non-GAAP weighted average diluted share count of 20.4 million. The non-GAAP tax benefit is expected around 3%.
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 fourth quarter of 2011.
The GAAP loss per share is expected in the range of 4 cents to 3 cents, assuming an estimated weighted average 18.8 million basic and diluted shares outstanding.
For full-year 2011, revenue is forecast between $114.4 million and $114.6 million on a GAAP basis (previously $114.0 million and $114.7 million), and $114.6 million to $114.8 million on a non-GAAP basis (previously $114.2 million to $114.9 million).
Non-GAAP EPS is expected in the range of 78 cents to 79 cents (previously 77 cents to 79 cents) assuming an estimated non-GAAP weighted average diluted share count of 20.8 million shares. The non-GAAP tax benefit is expected around 12%.
The expected GAAP loss per share is 18 cents to 17 cents (previously 19 cents to 17 cents), assuming an estimated weighted average 18.8 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 result in a full-year loss of 96 cents per share.
Vocus continues to expect free cash flow in the range of $17.0 million to $18.0 million.
To Conclude
Vocus reported impressive third quarter results, beating the Zacks Consensus Estimate on the bottom line. 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 takeover 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, which translates into a short-term Hold recommendation.
