Vocus Announces Results for Third Quarter 2013 Better Than Expected EPS and Strong Growth of the Marketing Suite Highlight Quarterly Results
Beltsville, MD:October 22, 2013 – Vocus, Inc. (NASDAQ: VOCS), a leading marketing cloud provider, announced today financial results for the third quarter ended September 30, 2013.
“The third quarter marked an important step forward in our move up-market and transition from providing stand-alone point products to selling a comprehensive, digital marketing suite for mid-sized organizations,” said Rick Rudman, President and CEO of Vocus, Inc. “While our guidance today reflects a more tempered outlook due to the discontinuance of our Small Business Edition and recent pricing and packaging changes, we are very pleased to see strong growth in Q3 of our digital marketing suite on higher average selling prices as well as another quarter of consistent performance for our PR products. ”
Financial Highlights
•
GAAP revenue for the third quarter of 2013 was $46.6 million, a 3% increase over the comparable period in 2012.
•
GAAP loss from operations for the third quarter of 2013 was $(3.3) million, compared to $(3.4) million for the comparable period in 2012.
•
Non-GAAP income from operations for the third quarter of 2013 was $2.5 million, compared to $3.9 million for the comparable period in 2012.
•
GAAP net loss for the third quarter of 2013 was $(3.9) million or $(0.19) per diluted share, compared to $(3.8) million or $(0.20) per diluted share for the comparable period in 2012.
•
Non-GAAP net income for the third quarter of 2013 was $1.9 million or $0.08 per diluted share, compared to $3.5 million or $0.14 per diluted share for the comparable period in 2012.
•
Total deferred revenue as of September 30, 2013 was $76.1 million compared to $68.1 million at September 30, 2012.
Business Highlights
•
Ended the quarter with 17,484 total active annual subscription customers compared to 15,131 active annual subscription customers as of September 30, 2012.
•
Signed subscription agreements with new and existing customers including 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.
•
Released major updates to PRWeb which integrate new social tags for Twitter and Google+, making PRWeb content more accessible and robust in the ever changing world of social media.
•
Announced that Mark Gambill, who previously held executive roles at CDW, Dell and Home Depot, joined the company as Chief Marketing Officer.
Guidance
Vocus is providing, for the first time, guidance for the fourth quarter and revising guidance for the full year 2013 based on information as of October 22, 2013:
•
For the fourth quarter of 2013, revenue is expected to be in the range of approximately $45.1 million to $45.5 million. Non-GAAP EPS is expected to be in the range of $0.03 to $0.04 assuming an estimated non-GAAP weighted average 24.2 million diluted shares outstanding and an estimated tax provision of $400,000. The estimated non-GAAP weighted average diluted shares outstanding assume 3.0 million common shares from the conversion of the Series A redeemable convertible preferred stock. Non-GAAP adjustments are expected to be $0.28 per share. GAAP EPS is expected to be in the range of $(0.25) to $(0.24) assuming an estimated weighted average 20.1 million basic and diluted shares outstanding.
•
For the full year of 2013, revenue is expected to be in the range of $184.6 million to $185.0 million. Non-GAAP diluted EPS is expected to be in the range of $0.20 to $0.21 assuming an estimated non-GAAP weighted average 24.2 million diluted shares outstanding and an estimated tax provision of $1.5 million. The estimated non-GAAP weighted average diluted shares outstanding assume 3.0 million common shares from the conversion of the Series A redeemable convertible preferred stock. The Non-GAAP adjustments are expected to be $1.34 per share. GAAP EPS is expected to be in the range of $(1.14) to $(1.13) assuming an estimated weighted average 20.1 million basic and diluted shares outstanding. Free cash flow is expected to range from $3.0 million to $4.0 million. Capital expenditures are expected to be $6.5 million.
This release includes non-GAAP financial measures and adjustments. For a description of these non-GAAP financial measures and adjustments, please refer to section “Use of Non-GAAP Financial Measures” and the accompanying tables entitled “Reconciliation of Non-GAAP Measures” and “Reconciliation of 2013 Guidance.”
Conference Call Information
Vocus will discuss the financial results and business highlights of the third quarter of 2013 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://investor.shareholder.com/vocs/events.cfm. 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 October 29, 2013 at 11:59 p.m. ET and can be accessed by dialing (404) 537-3406 or (855) 859-2056 and entering conference number 73933164.
About Vocus, Inc.
Vocus, Inc. is a leading marketing cloud provider that helps businesses reach and influence buyers across social networks, online and through media. Vocus provides an integrated suite that combines social marketing, search marketing, email marketing and publicity into a comprehensive solution to help businesses attract, engage and retain customers. Vocus software is used by more than 120,000 organizations worldwide and is available in seven languages. Vocus is based in Beltsville, 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,
September 30,
2012
2013
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
32,107
$
35,932
Short-term investments
662
—
Accounts receivable, net
29,841
20,495
Deferred income taxes
1,478
799
Prepaid expenses and other current assets
2,933
2,484
Total current assets
67,021
59,710
Long-term investments
1,322
—
Property, equipment and software, net
20,068
21,164
Intangible assets, net
26,751
17,687
Goodwill
177,011
177,135
Other assets
641
508
Total assets
$
292,814
$
276,204
Liabilities, Series A redeemable convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
$
21,701
$
17,316
Notes payable and capital lease obligations
854
151
Deferred revenue
77,098
73,687
Total current liabilities
99,653
91,154
Notes payable and capital lease obligations, net of current portion
751
1,240
Other liabilities
6,786
6,486
Deferred income taxes, net of current portion
5,120
5,068
Deferred revenue, net of current portion
2,235
2,416
Total liabilities
114,545
106,364
Series A redeemable convertible preferred stock
77,490
77,490
Stockholders’ equity:
Common stock
219
219
Additional paid-in capital
215,226
224,951
Treasury stock
(41,909
)
(42,301
)
Accumulated other comprehensive loss
(426
)
(320
)
Accumulated deficit
(72,331
)
(90,199
)
Total stockholders’ equity
100,779
92,350
Total liabilities, Series A redeemable convertible preferred stock and stockholders’ equity
$
292,814
$
276,204
Vocus, Inc. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands, except per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2012
2013
2012
2013
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenues
$
45,217
$
46,615
$
123,690
$
139,479
Cost of revenues
8,932
9,301
24,946
28,857
Gross profit
36,285
37,314
98,744
110,622
Operating expenses:
Sales and marketing
25,623
27,126
70,468
81,581
Research and development
3,280
2,426
10,239
8,149
General and administrative
8,805
9,168
31,562
31,392
Amortization of intangible assets
2,016
1,928
5,136
5,962
Total operating expenses
39,724
40,648
117,405
127,084
Loss from operations
(3,439
)
(3,334
)
(18,661
)
(16,462
)
Other income (expense)
(105
)
(136
)
(228
)
(272
)
Loss before provision for income taxes
(3,544
)
(3,470
)
(18,889
)
(16,734
)
Provision for income taxes
301
381
970
1,134
Net loss
$
(3,845
)
$
(3,851
)
$
(19,859
)
$
(17,868
)
Net loss per share:
Basic and diluted
$
(0.20
)
$
(0.19
)
$
(1.02
)
$
(0.89
)
Weighted average shares outstanding used in computing per share amounts:
Basic and diluted
19,570,459
20,151,494
19,385,318
20,015,284
Vocus, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2012
2013
2012
2013
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Cash flows from operating activities:
Net loss
$
(3,845
)
$
(3,851
)
$
(19,859
)
$
(17,868
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
4,733
4,420
11,634
13,161
Other non-cash charges, net
4,016
3,215
13,828
14,116
Payments of contingent consideration for business acquisition
—
—
(494
)
(4,560
)
in excess of fair value on acquisition date
Changes in operating assets and liabilities
(668
)
(4,147
)
6,114
2,621
Net cash provided by (used in) operating activities
4,236
(363
)
11,223
7,470
Cash flows from investing activities:
Business acquisition, net of cash acquired
(152
)
—
(79,801
)
—
Net change in available-for-sale securities
1,029
—
7,308
1,979
Purchases of property, equipment and software, net
(1,294
)
(760
)
(2,727
)
(4,751
)
Software development costs
—
(262
)
(198
)
(478
)
Net cash used in investing activities
(417
)
(1,022
)
(75,418
)
(3,250
)
Cash flows from financing activities:
Purchases of common stock
(56
)
(1
)
(3,058
)
(458
)
Proceeds from exercises of stock options
44
84
59
84
Payments of contingent consideration for business acquisitions
—
—
(3,112
)
—
Net proceeds from (payments on) notes payable and capital
(36
)
465
(168
)
(214
)
lease obligations
Net cash provided by (used in) financing activities
(48
)
548
(6,279
)
(588
)
Effect of exchange rate changes on cash and cash equivalents
171
486
160
193
Net increase (decrease) in cash and cash equivalents
3,942
(351
)
(70,314
)
3,825
Cash and cash equivalents, beginning of period
24,028
36,283
98,284
32,107
Cash and cash equivalents, end of period
$
27,970
$
35,932
$
27,970
$
35,932
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. Adjustments to deferred revenue reflect the reductions in the fair value of the acquired company’s deferred revenue due to purchase accounting. 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 operating expenses consist of professional fees for legal, accounting and other advisory services, integration related professional services, severance costs and retention payments 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 have not presented the tax impact of non-GAAP adjustments in the calculation of non-GAAP net income as a result of the valuation allowance in nearly all of our taxing jurisdictions. The tax impact of the non-GAAP adjustments would have resulted in an annual effective tax rate of 43% and 43% for the three and nine months ended September 30, 2012 and 2013, respectively, and non-GAAP diluted net income per share of $0.09 and $0.06 for the three months ended September 30, 2012 and 2013, respectively, and $0.18 and $0.13 for the nine months ended September 30, 2012 and 2013, respectively.
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 and payments of contingent consideration for business acquisitions in excess of fair value on acquisition date. 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 revenue, 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 the use of non-GAAP measures is 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
Nine Months Ended
September 30,
September 30,
2012
2013
2012
2013
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Reconciliation of GAAP revenue to non-GAAP revenue:
GAAP revenue
$
45,217
$
46,615
$
123,690
$
139,479
Fair value adjustment to deferred revenue
513
—
1,913
44
Non-GAAP revenue
$
45,730
$
46,615
$
125,603
$
139,523
Reconciliation of GAAP loss from operations to non-GAAP income from operations:
Loss from operations
$
(3,439
)
$
(3,334
)
$
(18,661
)
$
(16,462
)
Stock-based compensation
3,481
2,816
10,939
9,449
Amortization of intangible assets
3,129
2,976
7,870
9,107
Fair value adjustment to deferred revenue
513
—
1,913
44
Fair value adjustments to contingent consideration
232
—
696
3,453
Acquisition-related expenses
—
—
4,957
—
Non-GAAP income from operations
$
3,916
$
2,458
$
7,714
$
5,591
Reconciliation of GAAP net loss to non-GAAP net income:
Net loss
$
(3,845
)
$
(3,851
)
$
(19,859
)
$
(17,868
)
Stock-based compensation
3,481
2,816
10,939
9,449
Amortization of intangible assets
3,129
2,976
7,870
9,107
Fair value adjustment to deferred revenue
513
—
1,913
44
Fair value adjustments to contingent consideration including effects of foreign currency
232
—
678
3,453
Acquisition-related expenses
—
—
4,957
—
Non-GAAP net income
$
3,510
$
1,941
$
6,498
$
4,185
Non-GAAP diluted net income per share
$
0.14
$
0.08
$
0.28
$
0.17
Non-GAAP diluted weighted average shares used in computing per share amounts
24,317,807
24,204,219
23,340,209
24,161,969
Reconciliation of GAAP diluted weighted average shares outstanding to non-GAAP diluted weighted average shares outstanding:
GAAP diluted weighted average shares outstanding
19,570,459
20,151,494
19,385,318
20,015,284
Dilutive effect of outstanding equity securities
4,747,348
4,052,725
3,954,891
4,146,685
Non-GAAP diluted weighted average shares outstanding
24,317,807
24,204,219
23,340,209
24,161,969
Supplemental information of stock-based compensation included in:
Cost of revenues
$
343
$
296
$
1,168
$
1,086
Sales and marketing
994
738
3,139
2,473
Research and development
712
409
1,859
1,490
General and administrative
1,432
1,373
4,773
4,400
Total stock-based compensation
$
3,481
$
2,816
$
10,939
$
9,449
Reconciliation of cash flow from operations to free cash flow:
Net cash provided by (used in) operating activities
$
4,236
$
(363
)
$
11,223
$
7,470
Purchases of property, equipment and software, net
(1,294
)
(760
)
(2,727
)
(4,751
)
Software development costs
—
(262
)
(198
)
(478
)
Payments of contingent consideration for business acquisition in excess of fair value on acquisition date
—
—
494
4,560
Free cash flow
$
2,942
$
(1,385
)
$
8,792
$
6,801
Vocus, Inc. and Subsidiaries
Reconciliation of 2013 Guidance
GAAP EPS to Non-GAAP Diluted EPS
Q4 2013
Full Year 2013
(unaudited)
(unaudited)
GAAP EPS
$(0.25) to (0.24)
$(1.14) to (1.13)
Effect of non-GAAP adjustments
0.32
1.53
Dilutive effect of outstanding equity securities
(0.04
)
(0.19
)
Non-GAAP diluted EPS
$
0.03 to 0.04
$
0.20 to 0.21
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