San Mateo, California-based DemandTec, Inc. (DMAN) reported adjusted earnings of one cent a share in the third quarter of fiscal 2012, well above the Zacks Consensus Estimate of loss of 7 cents but below the year-ago quarter earnings of 3 cents. Reported earnings exclude cost and expense of amortization of purchased intangibles, stock-based compensation expense and acquisition-related costs.
On a GAAP basis, the company reported net loss of $5 million or 15 cents per share as against a loss of $2.1 million or 7 cents per share in the year-ago quarter.
DemandTec, a cloud-based analytics solutions provider, reported revenues of $22.3 million, up 2.8% year over year.
Adjusted gross profit of $15.1 million during the third quarter of 2012 remained flat year over year. Adjusted gross margin fell 210 basis points (bps) to 67.8% owing to a rise in cost of revenue.
Research and development expense, as a percentage of revenue, escalated 90 bps to 37.9%, but sales and marketing expense fell 10 bps to 25.9% and general and administrative expense declined 70 bps to 10.5%.
Adjusted operating income stood at $0.6 million during the reported quarter versus $1.2 million in the prior-year quarter.
Financial Position
DemandTec ended the quarter with cash and cash equivalents of $18.8 million compared with $26.6 million at the end of 2011. Shareholders’ equity at the end of the reported quarter was $54.7 million.
Our Take
International Business Machines Corp. (IBM) has agreed to acquire DemandTec for an estimated $440 million. This would be IBM’s fourth acquisition in a span of three months. The proposed acquisition will enhance and strengthen IBM’s Smarter Commerce initiatives. In an all cash transaction, IBM will be paying $13.20 per share for the acquisition. The transaction is expected to close by the end of the first quarter of fiscal 2012. The completion of the transaction is subject to DemandTec shareholder and other regulatory approvals.
The Zacks Consensus Estimate has not budged in the last 30 days, implying that the analysts do not see any near-term catalyst. The Zacks Consensus Estimates for 2012 and 2013 are pegged at a loss of 35 cents and 18 cents, respectively.
DemandTec provides software that analyzes consumer buying patterns and helps retailers to ascertain the best price and product mix. In the process, DemandTec’s software helps companies to increase revenues and profits. The company boasts more than 450 retailers as its clients, which include grocery, drug, convenience, consumer electronics, office supplies, apparel, department stores, and quick-serve restaurants.
DemandTec has a Zacks #2 Rank, which translates into a short-term Buy rating. Our long-term recommendation remains Neutral.
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