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Vocus Inc. (VOCS - Analyst Report) reported third-quarter 2013 adjusted loss per share of 6 cents, narrower than the Zacks Consensus Estimate of 9 cents loss per share.

Revenues

Revenues of $46.6 million in the third-quarter increased 1.9% from $45.7 million generated in the year-ago quarter. Quarterly revenues, however, marginally missed the Zacks Consensus Estimate of $47.0 million.

The year-over-year increase was backed by customer additions, strong demand from existing customers and improved adoption of its marketing suite. Revenues were within the company guided range of $46.5 million to $46.8 million.

Total active subscribers were 17,484 at the end of the third quarter compared to 15,131 active subscribers in the year-ago quarter.

The company signed a host of subscription agreements with new and existing customers. Notable among these were the agreements with Adeptia, Dish Network, Dole Packaged Foods, Eurotalk, GoDaddy, Investor’s Business Daily, Kunzler, Lululemon Athletica, Mila Publishing, National Cancer Institute, SimplifyMD, US Environmental Protection Agency, University of Maryland and Valeo.

Operating Results

Adjusted gross margin was 82.9%, down from 83.7% in the year-ago quarter. Adjusted operating income was $2.5 million compared with $3.9 million in the year-ago quarter. Reported operating margin was 5.3%, down from 8.7% in the year-ago quarter. Adjusted operating expenses increased 5.0% year over year. Operating expenses increased due to growth in direct sales capacity, higher commission and investments.

Net loss excluding one-time items but including stock-based compensation expense was $2.1 million or 9 cents per share compared with a net loss of $1.5 million or 6 cents per share in the third quarter of 2012.

Balance Sheet & Cash Flow

Vocus exited the quarter with $32.8 million in cash and short-term investments versus $36.3 million in the previous quarter. Accounts receivables were $29.8 million compared with $22.0 million in the previous quarter. Cash from operations was $4.2 million compared with $3.0 million generated in the previous quarter.

Guidance

For the fourth-quarter of 2013, 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 3 to 4 cents.

For full year 2013, the company expects revenues in the range of $184.6 million to $185.0 million. Vocus expects non-GAAP earnings per share in the range of 20 to 21 cents. Capital expenditure is expected to be around $6.5 million.

Our Take

Vocus’ third-quarter adjusted loss per share was narrower than the Zacks Consensus Estimate. The company’s revenues increased on a year-over-year basis but just fell short of the consensus mark.

Vocus has successfully capitalized on strategic acquisitions. The company continued to acquire more customers for its marketing suite, which reflects growing demand. The company is targeting more customers and cloud opportunities in the small and medium business space. However, tough competition remains a concern for the company.

Additionally, continuous decline in demand for its legacy PR solution, lesser focus on selling low-end solutions to small businesses, margin contraction, currency fluctuations and competition from Marketo, Inc. (MKTO - Snapshot Report) could prove to be headwinds. But growing popularity of its marketing suite and renewed focus on the mid-sized market are catalysts.

Currently, Vocus has a Zacks Rank #3 (Hold). Investors can also consider other technology stocks such as Plexus Corp. (PLXS - Analyst Report) and Western Digital Corp. (WDC - Analyst Report), both carrying a Zacks Rank #1 (Strong Buy).

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