Vocus has acquired marketing software company iContact for $169M in cash and other considerations, adding blast email capabilities to the PR software provider’s suite of services.
“We believe there is now a much larger marketing opportunity for us beyond PR in the larger cloud-based marketing space,” CEO Rick Rudman said in a conference call.
The company's shares were hammered Wednesday, failling 40 percent to $13.53, as said 2012 revenues would be affected by the end of a pact with PR Newswire, closure of its China operations, and investment in sales and marketing.
Vocus announced the deal with its fourth quarter and year-end earnings Feb. 28. The company said Q4 revenue rose 17% to $30.5M over 2010, ahead of expectations.
Net loss soared to $11.8M for Q4 compared to $397K for the same period of ’10 on a tax provision costing $12.2M. Income from operations for Q4 was $393K.
Full year revenues hit $114.9, up 19% over 2010 on a net loss of $14.6M.
Vocus said it has closed a $15M credit line to use for working capital and provide financial flexibility. It plans to add 150 more sales reps in 2012, a 25 percent increase in sales capacity. “The expansion of the sales force is very significant for us,” said CFO Steve Vintz.
The company added 1,052 net new subscribers in Q4, including about 400 sales of its new marketing suite geared toward small and mid-sized businesses at an average price of $3,700. Vocus claims 48,000 paying customers across all of its products, including PRWeb and HARO.
Splits with PR Newswire, Closes China
The company’s 10-year relationship with PR Newswire will terminate on March 31 and not be renewed, according to Vintz, who said the deal represents $3M in bookings for Vocus per year and about one percent of its operating margin.
Vocus will also take a $600K charge in the first quarter to close its China operation, which will cause a $1M hit in bookings for 2012. “The closing of our China operations reflects our strategy to put more focus on both the cloud-based marketing space and our domestic operations in the U.S.,” said Vintz.
Acquires iContact
The iContact deal, the largest acquisition by Vocus so far, includes $91M in cash, $9M in stock, and $79M of convertible preferred stock.
Ryan Allis, CEO and co-founder of iContact, said his company has more than 70,000 customers after nine years since its 2003 founding by Allis and Univ. of North Carolina classmate Aaron Houghton. Vocus CEO Rudman said there is very little overlap in customers, providing an opportunity for the PR software company to add business from iContact, as well.
Vocus said that while the service will be added to its marketing suit, current iContact customers will have the option of continuing to use the stand-alone product or upgrade.
The deal is expected to add $41.9M in revenue and $300K in operating income to Vocus’ 2012.
Rudman noted iContact stood out among the field of email marketers because 40% of its revenue comes from customers paying $8,000 per year.