Why Vocera Communications Inc (NYSE: VCRA) stock crashed

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Vocera Communications Inc (NYSE: VCRA) stock plunged 18.56% on Feb 8th, 2019 (Source: Google finance) after the company delivered in-line earnings for Q4 2018 but projected a significant decline in the first quarter and slowing growth for the full year. The company was caught in the middle of several federal contract negotiations, and some existing order bookings from the Department of Defense and Veterans Affairs didn’t get the follow-up attention that they needed.

VCRA in the fourth quarter of FY 18 has reported the adjusted earnings per share of 18 cents, which is in line with the analysts’ estimates for the adjusted earnings per share of 18 cents, according to FactSet. The company had reported the adjusted revenue growth of 11 percent to $48.9 million in the fourth quarter of FY 18, missing the analysts’ estimates for revenue of $49.8 million.

Why Vocera Communications Inc (NYSE: VCRA) stock crashed

Product revenue in the fourth quarter increased 11% to $27.2 million with very strong performance in software. Device revenue was below the company’s expectation as VCRA believe rumors of the new Smartbadge delayed some purchases in Q4. The software revenue was exceptional at $11.8 million in Q4, representing growth of 41%. Software revenue alone represented 24% of total revenue in the quarter. Services revenue in the fourth quarter was $21.7 million, also up 11% from last year. The professional services revenue was down year-over-year as the company had focused on streamlining the implementation processes and driving down this cost for the customers, which has enabled the company to shift more of the deal value to software. Non-GAAP gross margin in Q4 exceeded 67%, driven largely by a higher mix of software and the associated software maintenance revenue.

Vocera projected that first-quarter revenue would fall between $32 million and $35 million and adjusted losses would be 22 cents a share or higher, after the company posted adjusted earnings of 4 cents a share on sales of $40.2 million in the first quarter last year. The analysts on average had been expecting adjusted earnings of 6 cents a share on sales of $45.7 million. For the full year, VCRA predicted adjusted earnings of 36 cents to 48 cents a share and revenue of $187 million to $197 million, which would mean a reduction in annual profit and a slowdown in revenue growth year-over-year. Analysts on average were predicting full-year adjusted earnings of 65 cents a share on revenue of $205.6 million, according to FactSet.

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