Vocus Inc. (VOCS) reported fourth-quarter 2013 adjusted loss per share (excluding amortization, fair value adjustments but including stock-based compensation) of 4 cents, narrower than the Zacks Consensus Estimate of 9 cents loss per share. The quarterly loss was below management’s guidance of earnings of 3 to 4 cents and earnings of 1 cent per share reported in the year-ago quarter.
Revenues
Revenues of $47.4 million in the fourth-quarter increased a marginal 0.7% from the year-ago quarter and were above the Zacks Consensus Estimate of $45.0 million. Reported revenues came ahead of management’s guided range of $45.1 million to $45.5 million.
The year-over-year increase was driven by better-than-expected billings, higher revenues from Vocus’ e-commerce segment and increase in revenues from professional service segments. Moreover, revenues were supported by rapid adoption of Vocus Marketing Suite and better-than-expected performance of the company’s PR products.
Total active subscribers were 16,854 at the end of the fourth quarter compared with16,494 active subscribers in the year-ago quarter. Total bookings in the quarter were $55.9 million, up $5.9 million from management’s forecast, primarily driven by higher new unit sales and subscription prices, which were backed by customer additions and improved adoption of its Marketing Suite.
It is noteworthy that Vocus’s latest Marketing Suite will now include Facebook’s (FB) marketing features. On the other hand, the company announced the discontinuation of the North Social platform, a product which delivers Facebook applications for small businesses.
The company signed a host of subscription agreements with new and existing customers such as Crimson Cup Coffee & Tea, The Boppy Company, Animal Behavior College and Amica to name a few.
Operating Results
Adjusted gross profit decreased a marginal 0.6% from the year-ago quarter to $38.1 million. Moreover, gross margin contracted 105 basis points year over year to 80.1%, primarily due to higher cost and investments related to the Marketing product.
Adjusted operating loss was $0.9 million compared to an income of $0.6 million in the year-ago quarter. Adjusted operating expenses increased 0.9% year over year. Operating expenses increased due to growth in direct sales capacity, higher commission and investments. Moreover, as a percentage of revenues, operating expenses increased 17 basis points, which impacted margins.
Net loss excluding one-time items but including stock-based compensation expense was $1.0 million or 4 cents per share compared with net income of $0.1 million or 1 cent per share in the fourth-quarter of 2012.
Balance Sheet & Cash Flow
Vocus exited the quarter with $34.7 million in cash and short-term investments versus $32.8 million in the previous quarter. Accounts receivables were $28.9 million compared with $29.8 million in the previous quarter. Cash used in operations was $0.6 million compared with $4.2 million generated in the previous quarter.
Guidance
For the first-quarter of 2014, the company expects revenues in the range of approximately $45.1 million to $45.5 million. Non-GAAP earnings per share are expected in the range of 7 to 8 cents. The Zacks Consensus Estimate for revenues and earnings are pegged at $46.0 million and a loss of 7 cents per share, respectively.
For full year 2014, the company expects revenues in the range of $182.0 million to $183.0 million. Vocus expects non-GAAP earnings per share in the range of 31 to 34 cents. The Zacks Consensus Estimate for revenues and earnings are pegged at $188.0 million and loss of 24 cents, respectively. Capital expenditure is expected to be around $7.0 million.
Our Take
Vocus reported better-than-expected fourth-quarter results. The company’s adjusted loss per share was narrower than the Zacks Consensus Estimate while revenues increased on a year-over-year basis and were also above the consensus mark. However, the company provided a tepid guidance.
Nonetheless, the company continued to acquire more customers for its marketing suite, which reflects growing demand. The company is targeting more customers and cloud opportunities, which will boost its software portfolio and expand its geographical reach.
Also, the company is positive about its product development, growing demand and investment plans. Vocus’ shift to high-margin business and synergies from the strategic acquisitions are the other positives, going forward.
However, margin contractions, currency fluctuations and competition from Marketo, Inc. (MKTO) could prove to be headwinds.
Currently, Vocus has a Zacks Rank #4 (Sell). Western Digital Corporation (WDC) is a better-ranked technology stock carrying a Zacks Rank #2 (Buy).
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