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8-K - LIVE FILING - Vocus, Inc.htm_41450.htm

Vocus Announces Results for First Quarter 2011
Company Reports 21% Revenue Growth, Strong Customer Additions and Better Than Expected Earnings

Lanham, MD: April 26, 2011 – Vocus, Inc. (NASDAQ: VOCS), a leading provider of cloud-based PR and marketing software, announced today financial results for the first quarter ended March 31, 2011.

“We are very pleased to have started the year with a strong quarter as revenue, earnings and cash flow all exceeded our expectations,” said Rick Rudman, President and CEO of Vocus, Inc. “We believe our strong financial results reflect the broad-based demand that we are seeing from organizations who want to reach and influence buyers not only through the media but also across social networks and online.”

Financial Highlights

    GAAP revenue for the first quarter of 2011 was $27.0 million, a 21% increase over the comparable period in 2010.

    Non-GAAP revenue for the first quarter of 2011 was $27.2 million, a 22% increase over the comparable period in 2010.

    GAAP loss from operations for the first quarter of 2011 was $(3.1) million, compared to $(549,000) for the comparable period in 2010.

    Non-GAAP income from operations for the first quarter of 2011 was $2.3 million, compared to $3.1 million for the comparable period in 2010.

    GAAP net loss for the first quarter of 2011 was $(1.9) million or $(0.10) per diluted share, compared to $(579,000) or $(0.03) per diluted share for the comparable period in 2010.

    Non-GAAP net income for the first quarter of 2011 was $3.4 million or $0.17 per diluted share, compared to $3.0 million or $0.15 per diluted share for the comparable period in 2010.

    Our GAAP and non-GAAP net income for the first quarter of 2011 was reduced by $1.2 million of non-recurring transaction costs from the termination of negotiations related to a potential cross-border acquisition.

    Total deferred revenue as of March 31, 2011 was $55.8 million compared to $45.6 million at March 31, 2010.

    Cash flow from operations for the first quarter of 2011 was $13.8 million, and free cash flow for the first quarter of 2011 was $7.8 million.

    Total cash, cash equivalents and short-term investments as of March 31, 2011 was $99.1 million.

This release includes non-GAAP financial measures. For a description of these non-GAAP financial measures, please refer to section “Use of Non-GAAP Financial Measures” and the accompanying table entitled “Reconciliation of Non-GAAP Measures.”

Business Highlights

    On February 24, 2011, acquired North Social, a provider of Facebook applications which help businesses create engaging Facebook pages that attract fans and converts them into loyal customers. The purchase price consisted of $7.0 million cash paid at closing and up to an additional $18.0 million of contingent cash consideration based on the achievement of certain financial metrics in the following 24 months. The acquisition did not have a material impact on results of operations for the first quarter of 2011.

    Added 682 net new annual subscription customers during the first quarter of 2011 compared to 396 net new annual subscription customers added during the comparable period in 2010 and ended the quarter with 9,256 total active annual subscription customers.

    Signed subscription agreements with new and existing customers including 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.

    Launched Vocus Spring 2011 which includes a new release of our social media product. The new release adds significant engagement features which make it easy for customers to send messages, share news and join conversations on Twitter and Facebook directly from within the Vocus dashboard. The new release also tracks interactions across social networks, monitors responses to shared links and builds a complete profile of key influencers.

    Introduced a premium, annual pre-paid subscription for North Social which is now sold exclusively through the Vocus direct sales force.

Guidance

Vocus is providing, for the first time, guidance for the second quarter and revising guidance for the full year 2011 based on information as of April 26, 2011:

    For the second quarter of 2011, revenue is expected to be in the range of approximately $27.6 million to $27.8 million. Non-GAAP EPS is expected to be in the range of $0.17 to $0.18 assuming an estimated non-GAAP weighted average 20.9 million diluted shares outstanding and an estimated non-GAAP effective tax benefit of 4%. Stock-based compensation, amortization of intangible assets, acquisition related expenses and adjustments to the fair value of contingent consideration for earn-outs are expected to be $0.25 per share. GAAP EPS is expected to be in the range of $(0.08) to $(0.07) assuming an estimated weighted average 18.5 million basic and diluted shares outstanding;

    For the full year of 2011, non-GAAP revenue is expected to be in the range of $113.0 million to $114.0 million. For the full year of 2011, GAAP revenue is expected to be in the range of approximately $112.8 million to $113.8 million. Non-GAAP EPS is expected to be in the range of $0.76 to $0.78 assuming an estimated non-GAAP weighted average 21.0 million diluted shares outstanding and an estimated non-GAAP effective tax benefit of 9%. 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 be $0.97 per share. GAAP EPS is expected to be in the range of $(0.21) to $(0.19) assuming an estimated weighted average 18.5 million basic and diluted shares outstanding. Free cash flow is expected to range from $17.0 million to $18.0 million.

Conference Call Information

Vocus will discuss the financial results and business highlights of the first quarter of 2011 in a conference call at 4:30 p.m. ET, or 1:30 p.m. PT, today. Investors are invited to listen to a live audio webcast of the conference call on the Investor Relations section of the Company’s website at http://onlinepressroom.net/vocus/ir/webcast/. A replay of the webcast will be available approximately one hour after the conclusion of the call and will remain available for 30 calendar days following the conference call. An audio replay of the conference call will also be available approximately two hours after the conclusion of the call. The audio replay will be available until May 10, 2011 at 11:59 p.m. ET and can be accessed by dialing (706) 645-9291 or (800) 642-1687 and entering conference number 31797631.

About Vocus, Inc.

Vocus, Inc. is a leading provider of cloud-based PR and marketing software that helps organizations of all sizes reach and influence buyers across social networks, online and through media. Vocus provides a suite of software for social media, content marketing and media relations, creating a comprehensive solution for our customers looking to generate awareness, build their reputation and increase sales in today’s customer-led buying cycle. Vocus is used by more than 30,000 organizations worldwide and is available in seven languages. Vocus is based in Lanham, MD with offices in North America, Europe and Asia. For further information, please visit www.vocus.com or call (800) 345-5572.

Forward-Looking Statement

This release contains “forward-looking” statements that are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “may,” “will,” “expects,” “projects,” “anticipates,” “estimates,” “believes,” “intends,” “plans,” “should,” “seeks,” and similar expressions. This press release contains forward-looking statements relating to, among other things, Vocus’ expectations and assumptions concerning future financial performance. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual future results to differ materially from those projected or contemplated in the forward-looking statements. Forward-looking statements may be significantly impacted by certain risks and uncertainties described in Vocus’ filings with the Securities and Exchange Commission.

The risks and uncertainties referred to above include, but are not limited to, risks associated with possible fluctuations in our operating results and rate of growth, our history of operating losses, risks associated with acquisitions, including our ability to successfully integrate acquired businesses, risks associated with our foreign operations, interruptions or delays in our service or our web hosting, our business model, breach of our security measures, the emerging market in which we operate, our relatively limited operating history, our ability to hire, retain, and motivate our employees and manage our growth, competition, our ability to continue to release and gain customer acceptance of new and improved versions of our service, successful customer deployment and utilization of our services, fluctuations in the number of shares outstanding, foreign currency exchange rates and interest rates.

Vocus, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(dollars in thousands)

                 
    December 31,   March 31,
    2010 *   2011
            (unaudited)
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 94,918     $ 91,543  
Short-term investments
    5,496       7,535  
Accounts receivable, net
    20,846       14,365  
Deferred income taxes
    365       365  
Prepaid expenses and other current assets
    3,790       3,098  
 
               
Total current assets
    125,415       116,906  
Property, equipment and software, net
    6,183       11,747  
Intangible assets, net
    7,534       7,152  
Goodwill
    26,278       38,529  
Deferred income taxes, net of current portion
    8,314       9,475  
Other assets
    156       841  
 
               
Total assets
  $ 173,880     $ 184,650  
 
               
Liabilities and stockholders’ equity
               
Current liabilities:
               
Accounts payable and accrued expenses (including contingent consideration of $1,287 and $3,069 at
  $ 9,456     $ 13,761  
December 31, 2010 and March 31, 2011, respectively)
               
Notes payable and capital lease obligations
    152       162  
Deferred revenue
    55,722       55,108  
 
               
Total current liabilities
    65,330       69,031  
Notes payable and capital lease obligations, net of current portion
    192       257  
Other liabilities
    2,005       8,785  
Deferred income taxes, net of current portion
    1,065       1,130  
Deferred revenue, net of current portion
    854       687  
 
               
Total liabilities
    69,446       79,890  
Stockholders’ equity:
               
Common stock
    204       206  
Additional paid-in capital
    166,985       171,802  
Treasury stock
    (28,417 )     (31,505 )
Accumulated other comprehensive income (loss)
    (175 )     278  
Accumulated deficit
    (34,163 )     (36,021 )
 
               
Total stockholders’ equity
    104,434       104,760  
 
               
Total liabilities and stockholders’ equity
  $ 173,880     $ 184,650  
 
               

* In accordance with ASC 805, balances as of December 31, 2010 reflect adjustments made during the measurement period to the final purchase price allocation resulting in reductions to goodwill of $617 and to accrued expenses and other liabilities of $70 and $547, respectively.

Vocus, Inc. and Subsidiaries

Consolidated Statements of Operations

(dollars in thousands, except per share data)

                 
    Three Months Ended
    March 31,
    2010   2011
    (unaudited)   (unaudited)
Revenues
  $ 22,271     $ 26,987  
Cost of revenues
    4,435       5,452  
 
               
Gross profit
    17,836       21,535  
Operating expenses:
               
Sales and marketing
    11,403       13,781  
Research and development
    1,314       2,015  
General and administrative
    5,199       8,228  
Amortization of intangible assets
    469       616  
 
               
Total operating expenses
    18,385       24,640  
Loss from operations
    (549 )     (3,105 )
Other income (expense)
    61       166  
 
               
Loss before provision (benefit) for income taxes
    (488 )     (2,939 )
Provision (benefit) for income taxes
    91       (1,081 )
 
               
Net loss
  $ (579 )   $ (1,858 )
 
               
Net loss per share:
               
Basic and diluted
  $ (0.03 )   $ (0.10 )
Weighted average shares outstanding used in computing per share amounts:
               
Basic and diluted
    18,062,306       18,145,461  

Vocus, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

                 
    Three Months Ended
    March 31,
    2010   2011
    (unaudited)   (unaudited)
Cash flows from operating activities:
               
Net loss
  $ (579 )   $ (1,858 )
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation and amortization
    823       1,286  
Other non-cash charges, net
    2,968       3,279  
Excess tax benefits from equity awards
    (91 )      
Changes in operating assets and liabilities
    5,049       11,133  
 
               
Net cash provided by operating activities
    8,170       13,840  
Cash flows from investing activities:
               
Business acquisition, net of cash acquired
          (6,947 )
Net change in available-for-sale securities
    6,398       (2,041 )
Purchases of property, equipment and software, net
    (770 )     (6,008 )
Software development costs
    (155 )     (40 )
 
               
Net cash provided by (used in) investing activities
    5,473       (15,036 )
Cash flows from financing activities:
               
Purchases of common stock
    (8,309 )     (3,088 )
Proceeds from exercises of stock options
    19       555  
Excess tax benefits from equity awards
    91        
Net payments on notes payable and capital lease obligations
    (138 )     3  
 
               
Net cash used in financing activities
    (8,337 )     (2,530 )
Effect of exchange rate changes on cash and cash equivalents
    (50 )     351  
 
               
Net increase (decrease) in cash and cash equivalents
    5,256       (3,375 )
Cash and cash equivalents, beginning of period
    85,817       94,918  
 
               
Cash and cash equivalents, end of period
  $ 91,073     $ 91,543  
 
               

Use of Non-GAAP Financial Measures

Vocus provides non-GAAP measures for revenue, income from operations, net income, diluted net income per share and free cash flow as supplemental information.

We define non-GAAP revenue as GAAP revenue adjusted for the impact of the fair value adjustment to deferred revenue related to purchase accounting. Management believes the adjustment is useful to investors as a more accurate measure of our ongoing performance from the acquisitions.

We define non-GAAP income from operations as GAAP income from operations including the impact of non-GAAP revenue and excluding stock-based compensation, amortization of acquired intangible assets, fair value adjustments to contingent consideration and acquisition related expenses.

We define non-GAAP net income as GAAP net income including the impact of non-GAAP revenue and excluding stock-based compensation, amortization of acquired intangible assets, fair value adjustments to contingent consideration including the effect of foreign currencies and acquisition related expenses.

Stock-based compensation included in our GAAP financial results relates to stock option and restricted stock awards. Companies record stock-based compensation by applying varying valuation methodologies and subjective assumptions to different types of equity awards. Amortization of acquired intangible assets included in our GAAP financial results consists of amortization of non-compete agreements, trade names, purchased technology and customer relationships that are not expected to be replaced when fully amortized, as a depreciable tangible asset might. Amortization expense can vary from period to period due to the timing and size of our acquisitions. Our GAAP financial results include adjustments to the fair value of contingent consideration for acquisition earn-outs as of each reporting date from the fair value recorded on the acquisition date. Acquisition related expenses included in our GAAP general and administrative costs consist of legal, accounting and other professional fees incurred during the reporting period in connection with our acquired businesses. Management believes these non-GAAP measures allow management and investors to make meaningful comparisons between our operating results and those of the other companies, as well as provide a consistent comparison of our relative historical financial performance.

We define free cash flow as cash flow from operations less net capital expenditures and capitalized software development costs plus the excess tax benefits from equity awards. Management considers free cash flow to be a liquidity measure which provides useful information to management and investors regarding our ability to generate cash from operations that is available for acquisitions and other investments. Our definition of free cash flow may be different from definitions used by other companies.

Management uses non-GAAP income from operations, non-GAAP net income and free cash flow to evaluate operating performance, determine incentive compensation and to prepare operating budgets and determine the appropriate levels of capital investments. However, management believes that non-GAAP income from operations, non-GAAP net income and free cash flow are subject to material limitations since they may not be indicative of ongoing operating results. Management compensates for the limitations in the use of non-GAAP measures by also utilizing GAAP financial measures and by providing investors with a detailed reconciliation between our GAAP and non-GAAP financial results. Investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in our SEC filings.

Vocus, Inc. and Subsidiaries

Reconciliation of Non-GAAP Measures

(dollars in thousands, except per share data)

                 
    Three Months Ended
    March 31,
    2010   2011
    (unaudited)   (unaudited)
Reconciliation of GAAP revenue to non-GAAP revenue:
               
GAAP revenue
  $ 22,271     $ 26,987  
Fair value adjustment to deferred revenue
          181  
 
               
Non-GAAP revenue
  $ 22,271     $ 27,168  
 
               
Reconciliation of GAAP loss from operations to non-GAAP income from operations:
               
Loss from operations
  $ (549 )   $ (3,105 )
Stock-based compensation
    2,849       4,228  
Amortization of intangible assets
    469       736  
Fair value adjustment to deferred revenue
          181  
Fair value adjustments to contingent consideration
          62  
Acquisition related expenses
    301       167  
 
               
Non-GAAP income from operations
  $ 3,070     $ 2,269  
 
               
Reconciliation of GAAP net loss to non-GAAP net income:
               
Net loss
  $ (579 )   $ (1,858 )
Stock-based compensation
    2,849       4,228  
Amortization of intangible assets
    469       736  
Fair value adjustment to deferred revenue
          181  
Fair value adjustments to contingent consideration including effects of foreign currency
          (21 )
Acquisition related expenses
    301       167  
 
               
Non-GAAP net income
  $ 3,040     $ 3,433  
 
               
Non-GAAP diluted net income per share
  $ 0.15       0.17  
Non-GAAP diluted weighted average shares used in computing per share amounts
    19,769,179       20,432,579  
Reconciliation of GAAP diluted weighted average shares outstanding to non-GAAP diluted weighted average shares outstanding:
               
GAAP diluted weighted average shares outstanding
    18,062,306       18,145,461  
Treasury stock effect of outstanding equity securities and effect of stock-based compensation
    1,706,873       2,287,118  
 
               
Non-GAAP diluted weighted average shares outstanding
    19,769,179       20,432,579  
 
               
Supplemental information of stock-based compensation included in:
               
Cost of revenues
  $ 579     $ 484  
Sales and marketing
    437       1,183  
Research and development
    373       645  
General and administrative
    1,460       1,916  
 
               
Total stock-based compensation
  $ 2,849     $ 4,228  
 
               
Reconciliation of cash flow from operations to free cash flow:
               
Net cash provided by operating activities
  $ 8,170     $ 13,840  
Purchases of property, equipment and software, net
    (770 )     (6,008 )
Software development costs
    (155 )     (40 )
Excess tax benefits from equity awards
    91        
 
               
Free cash flow
  $ 7,336     $ 7,792