DemandTec Announces Third Quarter Fiscal 2008 Financial Results
SAN CARLOS, Calif. – January 10, 2008 –DemandTec, Inc. (NASDAQ: DMAN) a leading provider of on-demand optimization solutions for retailers and consumer products companies, today announced financial results for the third quarter of fiscal 2008 ended November 30, 2007.
"We were pleased with the company’s financial results in the third quarter, which was highlighted by revenue and profitability that were above the high-end of our guidance, combined with continued strength in cash flow generation,” said Dan Fishback, President and Chief Executive Officer of DemandTec.
Fishback added, “DemandTec’s ability to identify and develop complementary, high value-add applications was demonstrated by the multi-million dollar purchases of our DemandTec Promotion and DemandTec Markdown solutions by two large retailers in the third quarter. We are also pleased to see signs of a growing network effect between retailers and manufacturers, including the one millionth transaction managed through our DemandTec TradePoint and the adoption by three major multi-national manufacturers of our DemandTec Promotion solution following their participation on our collaboration network with our major retailing customers.”
Third Quarter Financial Highlights
Revenue: Revenue was $15.9 million in the third quarter of fiscal 2008, up 49% from $10.7 million in the third quarter of fiscal 2007 and 9% from $14.7 million in the second quarter of fiscal 2008.
Gross Profit: GAAP gross profit was $10.4 million in the third quarter of fiscal 2008. Non-GAAP gross profit, which excludes stock-based compensation expense and amortization of intangibles, was $11.1 million in the third quarter of fiscal 2008, up 48% from the third quarter of fiscal 2007 and representing a non-GAAP gross margin of 69.5%.
GAAP Operating and Net Income/Loss: Loss from operations was $2.0 million in the third quarter of fiscal 2008, compared to a loss from operations of $65,000 in the third quarter of fiscal 2007. Net loss attributable to common stockholders was $967,000, or $0.04 per diluted share, in the third quarter of fiscal 2008, compared to net loss attributable to common stockholders of $322,000, or $0.06 per diluted share, in the third quarter of fiscal 2007.
Non-GAAP Operating and Net Income/Loss: Non-GAAP income from operations, which excludes $2.1 million in stock-based compensation expense and $243,000 in amortization of intangibles, was $352,000 in the third quarter of fiscal 2008, compared to $78,000 in the third quarter of fiscal 2007. Non-GAAP net income attributable to common stockholders was $1.3 million, or $0.04 per diluted share, in the third quarter of fiscal 2008, compared to a non-GAAP net loss attributable to common stockholders of $179,000, or ($0.03) per diluted share, in the third quarter of fiscal 2007.
Cash: Cash and cash equivalents and marketable securities at the end of the quarter totaled $74.1 million, a decrease of approximately $1.1 million from the end of the second quarter of fiscal 2008. The decrease in cash and cash equivalents and marketable securities was primarily attributable to a payment of $1.8 million related to the company’s initial public offering costs and a $1.3 million payment on a note payable offset by positive cash flow from operations of $2.6 million in the third quarter. For the nine months ended November 30, 2007, the company generated $8.2 million in cash flow from operations and invested $2.9 million in capital expenditures, resulting in free cash flow of $5.3 million for that period.
Mark Culhane, Chief Financial Officer of DemandTec, stated, "During the third quarter, we made progress toward each of our three key growth initiatives, including adding retailers to our industry leading customer base, renewing and expanding our relationships with existing retailing customers, and selling incremental solutions into our manufacturing customer base. In addition, we continued to demonstrate the strong cash flow capabilities of our business model while our margins improved on a year-over-year basis.”
Conference Call Information
DemandTec will host a conference call today, January 10, 2008, at 5:00 p.m. EST (2:00 p.m. PST) to discuss the Company's financial results and financial guidance. To access this call, dial 303-262-2130 with passcode 11104661. A replay of this conference call will be available through January 17, 2008, at 800-405-2236. The replay passcode is 11104661#. A live webcast of this conference call will be available on the "Investor Relations" page of the Company's Web site (www.demandtec.com) and a replay will be archived on the Web site as well.
About DemandTec
DemandTec's suite of on-demand applications empowers retailers and consumer products companies to optimize strategic decisions and collaborate in order to achieve their revenue, profitability and sales volume objectives. DemandTec (NASDAQ: DMAN) customers include leading retailers such as Advance Auto Parts, Best Buy, Circle K Stores, Delhaize America, Giant-Carlisle, H-E-B Grocery Co., Monoprix and Safeway, as well as more than 100 consumer products companies. DemandTec has managed more than one million trade promotion deals between retailers and their manufacturer partners. For more information, please visit www.demandtec.com.
Forward-Looking Statements
This press release contains forward-looking statements regarding DemandTec's expectations, hopes, plans, intentions or strategies, including statements about the company’s future financial performance, financial condition or results of operations, statements as to the plans of management for future operations, and statements as to management’s beliefs regarding the company’s target markets. We may, in some cases, use words such as "believes," "expects," "anticipates," "plans," "estimates," and similar expressions to identify these forward-looking statements. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties include changes in our pricing policies or those of our competitors, fluctuations in demand for our software, our ability to develop and implement in a timely manner new software and enhancements that meet customer requirements, any significant changes in the competitive dynamics of our market, including new entrants or substantial discounting of products, general economic conditions in the retail and consumer products markets, the impact of a recession or other adverse economic conditions, and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact DemandTec’s business are set forth in DemandTec’s final prospectus dated August 8, 2007 filed with the SEC, as well as subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. Any future products, features or related specifications that may be referenced in this release are for information purposes only and are not commitments to deliver any technology or enhancement. DemandTec reserves the right to modify future product plans at any time.
Non-GAAP Financial Measures
In addition to disclosing financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons why management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled “Use of Non-GAAP Financial Information” as well as the related tables. We anticipate disclosing forward-looking non-GAAP financial information in our conference call to discuss our third quarter results, including an estimate of non-GAAP operating income and net earnings per share for the fourth quarter and full year fiscal of 2008 that excludes stock-based compensation expenses and amortization of purchased intangible assets. We cannot readily estimate our expected stock-based compensation expenses for these future periods as they depend upon such factors as our future stock price for purposes of computation.
A copy of this press release can be found on the investor relations page of DemandTec’s website at www.demandtec.com.
Contact:
Mark Culhane
EVP and CFO
DemandTec, Inc.
(650) 226-4600
Investor Contact:
Michael Kern
ICR
(617) 956-6731
Michael.kern@icrinc.com
Media Contact:
Cassandra Moren
DemandTec, Inc.
(650) 226-4690
cassandra.moren@demandtec.com
DemandTec and the DemandTec logo are registered trademarks of DemandTec, Inc. DemandTec Promotion, DemandTec Markdown and DemandTec TradePoint are trademarks of DemandTec, Inc. All other trademarks used or mentioned herein are the property of their respective owners.
Source: DemandTec (DMAN)
DemandTec, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
November 30, November 30,
2007 2006 2007 2006
Revenue $15,945 $10,673 $43,866 $31,186
Cost of revenue 5,560 3,274 14,898 9,696
Gross profit 10,385 7,399 28,968 21,490
Operating expenses:
Research and development 5,598 3,786 15,736 10,597
Sales and marketing 4,697 2,929 12,316 8,668
General and administrative 1,956 719 4,354 1,924
Amortization of acquired intangible
assets 89 30 271 30
Total operating expenses 12,340 7,464 32,677 21,219
Income (loss) from operations (1,955) (65) (3,709) 271
Other income (expense), net 1,169 (231) 721 (188)
Income (loss) before provision for
income taxes (786) (296) (2,988) 83
Provision for income taxes 181 18 319 4
Net income (loss) (967) (314) (3,307) 79
Accretion to redemption value of
preferred stock - 8 13 24
Net income (loss) attributable to
common stockholders $(967) $(322) $(3,320) $55
Net income (loss) per share - basic $(0.04) $(0.06) $(0.23) $0.01
Net income (loss) per share - diluted $(0.04) $(0.06) $(0.23) $0.00
Weighted shares used in per share
calculation:
Basic 26,167 5,597 14,705 5,237
Diluted 26,167 5,597 14,705 21,823
DemandTec, Inc.
Consolidated Balance Sheets
(in thousands)
November 30, February 28,
2007 2007
(unaudited)
Current assets:
Cash and cash equivalents $28,762 $21,036
Marketable securities 45,344 4,442
Accounts receivable, net of allowances 17,547 14,338
Prepaid expenses and other current assets 3,323 3,202
Total current assets 94,976 43,018
Property, equipment and leasehold improvements,
net 4,527 2,941
Goodwill 5,290 5,290
Acquired intangible assets 4,002 4,729
Other assets 979 817
Total assets 109,774 56,795
Current liabilities:
Accounts payable and accrued expenses 7,134 7,796
Deferred revenue, current 39,759 31,143
Debt, current 475 3,385
Other current liabilities 99 760
Total current liabilities 47,467 43,084
Deferred revenue, non-current 12,839 11,029
Debt, non-current - 11,678
Other long-term liabilities 545 591
Total redeemable convertible preferred stock - 49,073
Stockholders' equity (deficit):
Convertible preferred stock - 2,071
Common stock 120,184 7,210
Accumulated deficit (71,261) (67,941)
Total stockholders' equity (deficit) 48,923 (58,660)
Total liabilities, redeemable convertible
preferred stock and stockholders'
equity (deficit) $109,774 $56,795
DemandTec, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
November 30, November 30,
2007 2006 2007 2006
Operating activities:
Net income (loss) ($967) ($314) ($3,307) $79
Adjustments to reconcile net income to
net cash
Depreciation 532 280 1,390 732
Stock-based compensation expense 2,064 62 3,065 110
Amortization of warrants issued
in conjunction with debt - 39 64 61
Revaluation of warrants to fair
value - 46 119 57
Amortization of acquired
intangible assets 243 81 727 81
Amortization of financing costs - 52 93 77
Acceleration of interest
amortization upon early
extinguishment of debt - - 504 -
Provision for accounts
receivable 123 45 126 16
Other (215) (4) (120) (58)
Changes in operating assets and
liabilities:
Accounts receivable (4,297) (2,045) (3,269) (4,983)
Prepaid expenses and other
current assets (86) 408 (661) (115)
Deferred commissions 298 (120) (114) 441
Other assets - (133) (30) (251)
Accounts payable and
accrued expenses (345) (226) (1,841) (618)
Accrued compensation 168 (178) 1,056 157
Deferred revenue 5,035 5,892 10,426 4,319
Net cash provided by operating
activities 2,553 3,885 8,228 105
Investing activities:
Purchases of property, equipment,
and leasehold improvements (679) (346) (2,976) (1,442)
Purchase of marketable securities (2,459) (3,150) (56,652) (5,100)
Maturities of marketable
securities 11,650 1,750 15,750 3,442
Acquisition of TradePoint, net of
cash received (1,325) (3,704) (1,325) (3,704)
Net cash provided by (used in)
investing activities 7,187 (5,450) (45,203) (6,804)
Financing activities:
Proceeds from issuance of common
stock, net of repurchases,
excluding initial public offering 142 33 284 521
Proceeds from issuance of
convertible preferred stock - - - 65
Net cash proceeds from initial
public offering (91) - 57,611 -
Increase (decrease) in liability
associated with offering costs (1,791) - 166 -
Proceeds from advances on line of
credit - - - 3,000
Payments on line of credit - - (3,000) (2,218)
Proceeds from issuance of notes
payable - - - 10,000
Payment of term loan balloon
interest - - (400) -
Payments of notes payable - - (10,000) -
Net cash provided by (used in)
financing activities (1,740) 33 44,661 11,368
Effect of exchange rate changes on
cash and cash equivalents 85 4 40 72
Net increase (decrease) in cash and
cash equivalents 8,085 (1,528) 7,726 4,741
Cash and cash equivalents at beginning
of period 20,677 18,557 21,036 12,288
Cash and cash equivalents at end of
period $28,762 $17,029 $28,762 $17,029
Supplemental information:
Cash paid for interest $0 $307 $956 $523
Cash paid for income taxes $75 $9 $200 $15
Common stock issued in connection with
acquisition of TradePoint $0 $4,085 $0 $4,085
Reclassification of deferred stock
warrant from liability to additional
paid-in capital $0 $0 $712 $0
Issuance of warrants for common stock $0 $0 $0 $171
Issuance of warrants for preferred
stock $0 $0 $0 $172
Deferred financing costs on note
payable $0 $0 $0 $400
Note payable to former TradePoint
stockholders $0 $1,800 $0 $1,800
Accretion to redemption value of
preferred stock $0 $8 $13 $24
Conversion of preferred stock to
common stock and additional paid-in
capital $0 $0 $51,144 $0
DemandTec, Inc.
Reconciliation of GAAP to Non-GAAP
Financial Measures
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
November 30, November 30,
2007 2006 2007 2006
GAAP cost of revenue $5,560 $3,274 $14,898 $9,696
Deduct:
Stock-based compensation (539) (13) (839) (21)
Amortization of purchased intangible
assets (154) (51) (458) (51)
Non-GAAP cost of revenue $4,867 $3,210 $13,601 $9,624
GAAP gross profit $10,385 $7,399 $28,968 $21,490
Add back:
Stock-based compensation 539 13 839 21
Amortization of purchased intangible
assets 154 51 458 51
Non-GAAP gross profit $11,078 $7,463 $30,265 $21,562
GAAP gross margin 65.1% 69.3% 66.0% 68.9%
Add back:
Stock-based compensation 3.4% 0.1% 2.0% 0.1%
Amortization of purchased intangible
assets 1.0% 0.5% 1.0% 0.1%
Non-GAAP gross margin 69.5% 69.9% 69.0% 69.1%
GAAP research & development expense $5,598 $3,786 $15,736 $10,597
Deduct stock-based compensation (580) (13) (827) (24)
Non-GAAP research & development
expense $5,018 $3,773 $14,909 $10,573
GAAP sales & marketing expense $4,697 $2,929 $12,316 $8,668
Deduct stock-based compensation (605) (18) (830) (37)
Non-GAAP sales & marketing expense $4,092 $2,911 $11,486 $8,631
GAAP general & administrative expense $1,956 $719 $4,354 $1,924
Deduct stock-based compensation (340) (18) (569) (28)
Non-GAAP general & administrative
expense $1,616 $701 $3,785 $1,896
GAAP total operating expense $12,340 $7,464 $32,677 $21,219
Deduct:
Stock-based compensation (1,525) (49) (2,226) (89)
Amortization of purchased intangible
assets (89) (30) (271) (30)
Non-GAAP total operating expense $10,726 $7,385 $30,180 $21,100
GAAP income (loss) from operations $(1,955) $(65) $(3,709) $271
Add back stock-based compensation and
amortization of purchased intangible
assets 2,307 143 3,794 191
Non-GAAP income (loss) from operations $352 $78 $85 $462
GAAP net income (loss) attributable to
common stockholders $(967) $(322) $(3,320) $55
Add back stock-based compensation and
amortization of purchased intangible
assets 2,307 143 3,794 191
Non-GAAP net income (loss)
attributable to common stockholders $1,340 $(179) $474 $246
GAAP net income (loss) per share,
diluted $(0.04) $(0.06) $(0.23) $0.00
Add back stock-based compensation and
amortization of purchased intangible
assets $0.08 $0.03 $0.25 $0.01
Non-GAAP net income (loss) per share,
diluted $0.04 $(0.03) $0.02 $0.01
GAAP Cash flow from operations $2,553 $3,885 $8,228 $105
Deduct purchases of property,
equipment and leasehold improvements (679) (346) (2,976) (1,442)
Non-GAAP Free cash flow $1,874 $3,539 $5,252 $(1,337)
Use of Non-GAAP Financial Measures
The accompanying press release dated January 10, 2008 contains non-GAAP financial measures. The above table reconciles the non-GAAP financial measures in the press release to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP measures include non-GAAP cost of revenue, gross profit, gross margin, operating expenses, income (loss) from operations, net income (loss) attributable to common stockholders, and net income (loss) per share amounts.
Our non-GAAP financial measures generally exclude costs and expenses for (i) amortization of purchased intangible assets related to our acquisition of TradePoint, Inc. and (ii) stock-based compensation:
Amortization of Purchased Intangible Assets. In accordance with GAAP, we amortize intangible assets acquired in connection with our acquisition of TradePoint, Inc. over the estimated useful lives of the assets. We exclude these amortization costs in our non-GAAP financial measures because they (i) result from a prior acquisition, rather than the ongoing operating performance of our business, and (ii) absent additional acquisitions, are expected to decline over time as the remaining carrying amounts of these assets are amortized. We believe excluding these costs helps investors compare our financial performance with that of other companies with different acquisition histories. However, we recognize that amortization costs provide a helpful measure of the financial impact and performance of prior acquisitions and consider our non-GAAP financial measures in conjunction with our GAAP financial results that include amortization costs.
Stock-Based Compensation Expenses. We exclude stock-based compensation expense associated with equity incentives granted to employees, non-employees and non-executive directors in our non-GAAP financial measures. While stock-based compensation is a significant component of our expenses, we believe that investors may wish to exclude the effects of stock-based compensation expense in comparing our financial performance with that of other companies.
Non-GAAP financial measures should not be considered as a substitute for, or superior to, GAAP financial measures, which should be considered as the primarily financial metrics for evaluating our financial performance. Significantly, non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. Instead, they are based on subjective determinations by management designed to supplement our GAAP financial measures. They are subject to a number of important limitations and should be considered only in conjunction with our consolidated financial statements prepared in accordance with GAAP. In addition, our non-GAAP financial measures differ from GAAP measures with the same names, may vary over time and may differ from non-GAAP financial measures with the same or similar names used by other companies. Accordingly, investors should exercise caution when evaluating our non-GAAP financial measures. |
