Vocus Beats Zacks EPS Estimate

Vocus, Inc’s.(VOCS - Analyst Report) third quarter 2009 EPS of 20 cents exceeded the Zacks Consensus Estimate of 3 cents, while revenue of $21.0 million was in line.

Revenue

Revenue for the quarter was $21.0 million, representing a 5.0% increase over the year-ago period. This was in-line with the company’s guided range of $20.8 million to $21.0 million. The third quarter revenue was positively impacted by an increase in the customer base and the introduction of innovative new products.

Operating Performance

GAAP gross margin for the quarter was 81.4%, almost flat versus 81.6% in the year-ago quarter. This was short of its long-term target of gross margin in the 83.0% to 87.0% range. GAAP operating margin for the quarter was a positive 0.8% versus a negative 1.1% in the year-ago quarter. Non-GAAP operating margin was 18.9% versus 18.5% in the year-ago quarter.

GAAP net loss was $0.4 million or $0.02 per share for the third quarter of 2009, compared to a net income of $0.2 million or $0.01 per share for the third quarter of 2008. Excluding amortization of intangibles and stock-based compensation expense, non-GAAP net income for the quarter was $3.4 million or 17 cents per diluted share versus net income of $4.1 million or 20 cents per diluted share in the year-ago quarter. Non-GAAP EPS was slightly above the company’s guidance of 15 to 16 cents.

Customer Activity

Vocus added 240 net new subscription customers during the third quarter and ended the quarter with 4001 total active subscription customers, compared to 233 net new subscription customers added during the third quarter of 2008.

The company signed subscription agreements with new and existing customers, including Brazos Bookstore, Cornell University, The Dannon Company, European Science Foundation, Golf Greens "Fore" U, Ice Caters.com, Lawson Software (LWSN - Analyst Report), The Los Angeles Opera, Military Families United, Silver Dollar City, Sun Life Assurance Company of Canada (SLF - Snapshot Report), Toll Brothers (TOL - Snapshot Report) and Wyndham Worldwide (WYN - Snapshot Report).

Balance Sheet

Vocus exited the quarter with $90.9 million in cash and short-term investments versus $87.2 million in the previous quarter. The company generated $2.7 million in cash from operations versus $1.5 million in the previous quarter, resulting in free cash flow of $4.1 million in the quarter compared to $2.9 million in the previous quarter.

Notes payable and capital lease obligations, including the current portion, was $373,000 in the quarter versus $276,000 in the previous quarter. Deferred revenue as of September 30, 2009 was $42.8 million, compared to $39.8 million in June 30, 2009.

Guidance

For the fourth quarter of 2009, the company expects revenue to be in the range of approximately $21.7 million to $21.9 million. Again, the non-GAAP EPS expectation is 15 to 16 cents, assuming an estimated non-GAAP weighted average 19.9 million diluted shares outstanding. Amortization of intangible assets and stock-based compensation is expected to be 19 per share. GAAP EPS is expected to be in the range of -$0.04 to -$0.03, assuming an estimated weighted average diluted share count of 18.1 million.

For the full year of 2009, the company expects revenue to be in the range of $84.2 million to $84.4 million. The non-GAAP EPS is expected to remain in the range of 65 to 66 cents, assuming an estimated weighted average diluted share count of 19.7 million. Amortization of intangible assets and stock-based compensation is expected to be 76 cents per share. The GAAP EPS is expected to remain in the range of -$0.11 to -$0.10, assuming the share count of 18.1 million.