Filing summary
Entity and period: The supplied filing is Acxiom Corporation’s Form 10-K for the fiscal year ended March 31, 2018, not a filing by Liveramp Holdings, Inc. Acxiom operated LiveRamp as its Connectivity business. The filing includes unaudited results for the quarter ended March 31, 2018, corresponding to fiscal Q4.
Business context
Acxiom provided data connectivity, audience data and marketing services to marketers. Its fiscal 2018 reporting segments were Connectivity, Audience Solutions and Marketing Services. Management said that from fiscal 2019 it would report two segments: LiveRamp and Acxiom Marketing Solutions (AMS).
Financial performance
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | $917.4 million | $880.2 million |
| Gross profit / gross margin | $451.0 million / 49.2% | $402.6 million / 45.7% |
| Operating income / margin | $10.6 million / 1.2% | $15.7 million / 1.8% |
| Net income | $23.5 million | $4.1 million |
| Diluted EPS | $0.29 | $0.05 |
| Operating cash flow | $112.2 million | $115.8 million |
| Cash and cash equivalents at year-end | $142.3 million | $170.3 million |
| Long-term debt, excluding current installments | $227.8 million | $189.2 million |
Revenue grew 4.2%. Connectivity revenue rose 43.2% to $211.0 million; Audience Solutions increased 1.6% to $327.4 million; Marketing Services declined 7.7% to $379.0 million. Gross margin improved, but operating income and margin fell as operating expenses rose 13.8%, including higher sales and marketing, R&D, stock compensation and separation/transformation costs. Net income benefited substantially from a $24.6 million tax benefit related to remeasurement of deferred tax liabilities after U.S. tax reform; pretax income was only $0.7 million.
Fiscal Q4: Revenue was $244.8 million, gross profit $123.3 million, operating income $4.8 million and net income $5.2 million; diluted EPS was $0.06.
Liquidity, debt and capital allocation
Current assets were $360.3 million and current liabilities $178.4 million, for working capital of $182.0 million. The company had a $600 million revolving credit facility maturing June 2022, with $230 million drawn at year-end; the weighted-average borrowing rate was 3.9%, and the company reported covenant compliance. Operating cash flow was slightly lower year over year. Investing activities used $60.3 million, while financing activities used $81.5 million, including $88.9 million of share repurchases. The company had $125.4 million of remaining authorization under its repurchase program and paid no dividends.
Changes, outlook and risks
- Connectivity growth and improved gross margins were offset by Marketing Services contraction and substantially higher operating expenses.
- Facebook said it would discontinue its Partner Categories offering over the following months. Acxiom reported fiscal 2018 Facebook-related revenue of about $40 million in Audience Solutions and $20 million in Connectivity, both expected to be significantly lower in fiscal 2019.
- Management expected R&D investment to remain at similar levels in fiscal 2019. It was exploring strategic options to strengthen AMS, potentially including a partnership, acquisition, merger, joint venture, spin-off or sale; no outcome was assured.
- Key risks include privacy and data-protection regulation, including GDPR; cybersecurity or service interruptions; negative publicity and reduced data availability; reliance on major clients, suppliers and digital platforms; competition and technology change; and economic pressure on marketing budgets. Ten largest clients represented about 36% of fiscal 2018 revenue, though no single client exceeded 10%.
- Other notable items include $20.8 million of separation and transformation costs, $6.4 million of restructuring charges and a $2.1 million maximum exposure under a guaranteed lease. Goodwill was $596.0 million, approximately 49% of total assets.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing identifies Acxiom Corporation (NASDAQ: ACXM), not Liveramp Holdings, Inc.
- Assess the likely fiscal 2019 revenue and profit effect of Facebook’s withdrawal from Partner Categories, and whether replacement demand offsets it.
- Separate recurring operating performance from the one-time tax benefit and substantial stock-based compensation and restructuring costs.
- Review the full financial statements and notes for debt terms, cash-flow detail, legal contingencies and the proposed AMS strategic alternatives; this summary alone does not establish their outcomes.