Acxiom Corporation Form 10-Q — quarter ended September 30, 2017
Entity and period: The supplied filing is for Acxiom Corporation, not Liveramp Holdings, Inc. It covers Acxiom’s second fiscal quarter of fiscal 2018 and the six months ended September 30, 2017. LiveRamp is discussed as a growing business within Acxiom’s Connectivity segment. Financial statements are unaudited.
Financial results and liquidity
| Metric | Three months ended September 30, 2017 | Prior-year quarter | Six months ended September 30, 2017 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $225.2 million | $217.3 million | $437.8 million | $432.1 million |
| Gross profit / gross margin | $110.2 million / 48.9% | $97.2 million / 44.7% | $208.7 million / 47.7% | $189.1 million / 43.8% |
| Operating income (loss) / margin | $0.5 million / 0.2% | $7.1 million / 3.3% | ($5.3) million / (1.2)% | $15.3 million / 3.5% |
| Net earnings (loss) | ($3.3) million | $7.1 million | ($4.6) million | $11.1 million |
| Diluted earnings (loss) per share | ($0.04) | $0.09 | ($0.06) | $0.14 |
| Operating cash flow | Quarterly figure is not clearly reconciled in the filing text | — | $32.8 million | $36.2 million |
- Quarterly revenue increased 3.7%; six-month revenue increased 1.3%. Quarterly operating expenses rose 21.8% to $109.7 million, while six-month expenses rose 23.0% to $214.0 million.
- At September 30, cash and cash equivalents were $169.5 million; current assets were $367.9 million and current liabilities $164.8 million, for working capital of $203.1 million. The filing attributes the increase in working capital from $138.3 million at March 31 chiefly to refinancing terms.
- Total debt was $234.5 million, including $230.0 million drawn on a new revolving facility; reported long-term debt, net of current installments and financing costs, was $228.0 million. Cash exceeded total debt by approximately $65.0 million. The company was in compliance with its debt covenants.
- Six-month investing cash outflow was $18.1 million and financing cash outflow was $16.2 million. Cash declined by $0.8 million over the six months. Capital expenditures were $14.5 million and capitalized software costs were $7.1 million.
Material changes and segment performance
- Connectivity: Revenue grew 58% in the quarter to $52.4 million and 52% for the six months to $97.6 million, principally from LiveRamp growth. Segment operating income rose to $5.7 million in the quarter from $1.7 million a year earlier.
- Audience Solutions: Quarterly revenue was essentially flat at $78.8 million; six-month revenue rose 1% to $154.5 million. Digital Data growth was offset by declines in Consumer Data and Recognition.
- Marketing Services: Quarterly revenue fell 11% to $94.0 million and six-month revenue fell 14% to $185.6 million. The Impact email business sale and other volume and contract reductions contributed to the decline.
- Gross margin improved year over year, which management attributed to Connectivity growth and Marketing Services cost efficiencies. However, higher research and development, sales and marketing, stock compensation, and separation and transformation costs weighed on operating results.
Outlook, risks, and unusual items
- No quantified company-wide revenue or earnings guidance is provided in the supplied filing text. Management said it believed available liquidity and operating cash flow would be sufficient for foreseeable working-capital and capital-expenditure needs.
- Management expected modest Digital Data revenue declines in fiscal 2018’s third quarter and more significant declines in the fourth quarter; these trends could continue into fiscal 2019. A significant publisher relationship had converted from revenue sharing to a license arrangement.
- Current-period items included $12.6 million of six-month separation and transformation costs, $3.6 million of restructuring charges and adjustments, and $30.8 million of non-cash stock compensation. The filing also reports $12.0 million of six-month purchased-intangible amortization.
- Acxiom refinanced its credit agreement in June 2017 with a $600 million revolving facility maturing June 20, 2022; $230 million was outstanding at quarter-end, at a weighted-average rate of 3.3%. It paid $4.0 million in refinancing fees.
- The company repurchased 860,000 shares for $19.8 million during the six months, leaving approximately $94.5 million of authorization through June 30, 2018. Operating lease commitments totaled $89.3 million; the filing also lists $67.9 million of purchase commitments and a $2.4 million maximum exposure under a guaranteed lease.
- Management identified risks including changes in data regulation and consumer expectations, loss of data suppliers or clients, competition, integration of acquired businesses, and data-security incidents. It reported no pending legal matter considered material and stated disclosure controls were effective.
Important facts for investors to verify
- Confirm the issuer: this filing is Acxiom Corporation’s, despite the request metadata naming Liveramp Holdings, Inc.
- Track whether Connectivity growth can offset Marketing Services declines and the forecast Digital Data reductions.
- Assess whether rising operating expenses and acquisition-related compensation and transformation costs moderate, and whether the company returns to operating profitability.
- Monitor debt, interest expense, covenant compliance, and continued share repurchases alongside cash generation.
- Review the cited risk factors and the assumptions behind lease, purchase, and other commitments; the filing does not quantify the potential financial impact of all identified risks.