Filing summary
Issuer and period: The supplied filing is Acxiom Corporation’s unaudited Form 10-Q for the quarter ended September 30, 2010 (Acxiom fiscal Q2 2011), not a filing for Liveramp Holdings, Inc. or a period described as 2010 Q2. The filing identifies Acxiom as a marketing technology, data, and services company.
Financial performance
Unless otherwise stated, amounts are U.S. dollars. Quarter and six-month comparisons are to the corresponding 2009 periods.
| Metric | Quarter ended September 30, 2010 | Six months ended September 30, 2010 |
|---|---|---|
| Revenue | $291.7 million, up 7.6% | $562.1 million, up 6.6% |
| Operating income | $27.3 million, up 28.5% | $49.4 million, up 46.3% |
| Net earnings | $12.7 million, versus $9.4 million | $22.1 million, versus $13.6 million |
| Diluted EPS attributable to Acxiom stockholders | $0.16, versus $0.12 | $0.28, versus $0.17 |
| Total gross margin | 23.2%, versus 21.8% | 22.7%, versus 20.8% |
| Operating margin | 9.4%, versus 7.8% | 8.8%, versus 6.4% |
| Cash from operations | $43.0 million, as reported by management | $60.0 million, versus $76.9 million |
Services revenue was $225.6 million for the quarter and products revenue was $66.1 million. Six-month operating cash flow declined despite higher earnings, with increased deferred costs—principally from infrastructure-management contract migration activity—among the pressures described.
Balance sheet and liquidity
- At September 30, 2010, cash and cash equivalents were $199.4 million; current assets were $445.6 million and current liabilities $236.1 million. Working capital was $209.5 million.
- Total debt and capital-lease obligations were $481.8 million, including $31.4 million current and $450.5 million long-term; this compares with $500.7 million at March 31, 2010. The $404.0 million term loan carried a 4.0% weighted-average rate. No revolving borrowings were outstanding.
- Acxiom repaid $36.6 million of debt during the six months, including a $20.0 million term-loan prepayment. It reported compliance with debt covenants at quarter-end.
- Management said available debt capacity and operating cash flow should meet working-capital and capital-spending needs for the foreseeable future, while noting that acquisitions or results below expectations could require additional financing.
Changes, outlook, and material items
- Quarterly revenue grew across service and product categories. U.S. services and products were key contributors; European contract losses and foreign-exchange movements weighed on international results. Management cited improved margins as revenue stabilized and prior efficiency initiatives took effect, but noted higher-than-expected migration costs on a large contract.
- Management described the macroeconomic environment as challenging but showing signs of improvement, and expected continued revenue recovery in the near term. It gave no specific quantified full-year revenue, earnings, or cash-flow guidance in the provided filing text.
- Acxiom acquired a 70% interest in Brazilian marketing-services company GoDigital for $11.7 million, with potential earnout payments up to $9.3 million, and acquired a small Australia/New Zealand digital-marketing business for $1.8 million plus a potential earnout. Acquisition purchase-price accounting for GoDigital remained provisional.
- Goodwill was $488.2 million. The latest impairment test found no impairment, but International Information Products had only 12% excess fair value over carrying value; management identified assumptions and market conditions that could prompt reassessment.
- A drivers’-license data privacy class action settlement was approved but appealed; Acxiom had accrued $5.0 million, of which $2.5 million was in escrow. A separate Spain data-use matter had a remaining $0.4 million accrual. The filing also disclosed $155.6 million of future operating-lease payments, $150.7 million of purchase commitments, and $1.4 million maximum potential guarantee payments.
- The company early-adopted updated revenue guidance for multiple-deliverable arrangements and software-containing products; it reported no material effect for the quarter or six-month period. The anticipated fiscal 2011 effective tax rate was approximately 40%.
Key facts for investors to verify
- Confirm issuer identity and reporting period: the filing is Acxiom Corporation’s, not Liveramp Holdings, Inc.’s.
- Review the sources and sustainability of revenue and margin growth, especially U.S. performance, European contract losses, and migration costs.
- Assess the decline in six-month operating cash flow, elevated deferred costs, capital spending, and acquisition-related cash use.
- Review debt maturities, floating-rate exposure, covenant headroom, and the large term-loan payment due in fiscal 2015.
- Track the appealed settlement, other data-privacy matters, goodwill sensitivity, and acquisition earnouts/integration.