Filing summary
Issuer mismatch: The supplied filing is Acxiom Corporation’s Form 10-Q, not a filing for Liveramp Holdings, Inc. It covers the quarter ended September 30, 2016 (Acxiom’s fiscal second quarter) and the six months then ended. Verify the issuer and filing before relying on this summary.
Business context and reporting period
Acxiom described its business as data, marketing and technology services, reported in Marketing Services, Audience Solutions and Connectivity. Results are unaudited and relate to continuing operations unless otherwise noted. Acxiom cautions that interim results are not necessarily indicative of full-year results.
Financial performance
| Metric | Three months ended Sep. 30, 2016 | Prior-year quarter | Six months ended Sep. 30, 2016 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $217.3 million | $207.3 million | $432.1 million | $404.2 million |
| Gross profit / margin | $97.2 million / 44.7% | $86.0 million / 41.5% | $189.1 million / 43.8% | $165.2 million / 40.9% |
| Operating income (loss) | $7.1 million | $(2.1) million | $15.3 million | $(4.9) million |
| Net income from continuing operations | $7.1 million | $(1.3) million | $11.1 million | $(6.5) million |
| Diluted EPS from continuing operations | $0.09 | $(0.02) | $0.14 | $(0.08) |
| Operating cash flow | Not separately reported for the quarter | $36.2 million | $33.4 million |
Quarterly revenue rose 4.8%; six-month revenue rose 6.9%. Growth was led by Audience Solutions and Connectivity, while Marketing Services declined. Segment revenue for the quarter was $105.7 million in Marketing Services (down 6.5%), $78.5 million in Audience Solutions (up 8.9%) and $33.1 million in Connectivity (up 48.6%).
For the six months, investing activities used $11.7 million, including $20.5 million of capital expenditures and $7.9 million of capitalized software development, partly offset by $17.0 million of net disposition proceeds. Financing activities used $37.9 million, including $30.5 million of share repurchases and $16.1 million of debt payments. Cash declined $14.2 million to $175.4 million.
Liquidity, debt and material changes
- At September 30, 2016, current assets were $354.2 million and current liabilities were $184.0 million; reported working capital was $170.2 million.
- Debt and capital leases totaled $176.7 million, including a $170.0 million term loan; cash was $175.4 million. There were no revolving-credit borrowings, and letters of credit were $0.8 million. The term-loan rate averaged 2.4%; the company reported compliance with debt covenants.
- Term-loan installments were scheduled through September 2017, with a final $106.3 million payment due October 9, 2018. The revolving facility also expires October 9, 2018.
- Acxiom repurchased 1.3 million shares for $30.5 million in the six-month period. The repurchase authorization had $114.3 million remaining through June 30, 2018.
- Acxiom completed the sale of its Impact email business in August for $22.0 million of consideration, including a $4.0 million subordinated note. The filing reports $17.0 million of net cash proceeds, a $0.6 million sale gain and a $4.1 million tax benefit. The business was not classified as discontinued operations.
- Prior-year net income included discontinued ITO operations; therefore, total net income comparisons are not directly comparable. Prior-year quarter and six-month discontinued-operations earnings were $12.1 million and $16.2 million, respectively.
Outlook, commentary and risks
Management provided no specific revenue or earnings guidance in the supplied filing. It stated that expected liquidity and capital resources were sufficient to operate the business and meet foreseeable working-capital and capital-expenditure needs. Management attributed margin improvement to the mix and growth of Audience Solutions and Connectivity and to cost efficiencies, while noting increased sales and marketing investment in those businesses.
Risks highlighted include changes in privacy laws and regulation, data security breaches or service interruptions, loss of data suppliers or customers, alternative data sources, competition, client cancellations, foreign-exchange movements and the ability to retain talent. Audience Solutions growth could also be affected by changes in publisher revenue-sharing arrangements or publishers choosing alternative data relationships. The company had no material pending legal matters identified, but disclosed lease commitments of $81.6 million and purchase commitments of $78.2 million. It also guaranteed a lease assigned in the Impact sale, with maximum potential rent payments of $3.0 million.
Important facts to verify
- Confirm that Acxiom Corporation—not Liveramp Holdings, Inc.—is the intended issuer and that September 30, 2016 is the intended reporting period.
- Review the Impact sale terms, including the $4.0 million note receivable, tax benefit and continuing-services agreement.
- Assess whether the strong Connectivity and Audience Solutions growth offset ongoing Marketing Services declines and the Impact business divestiture.
- Check the debt repayment schedule, covenant headroom and 2018 term-loan maturity against subsequent filings.
- Distinguish continuing-operations earnings from prior-year results that included discontinued ITO earnings, and assess the effect of the Impact-related tax benefit.