Filing identity and reporting period
Important mismatch: The supplied filing is for Acxiom Corporation, not Liveramp Holdings, Inc. It reports the unaudited three months ended June 30, 2013, Acxiom’s first quarter of fiscal 2014; comparisons are with the three months ended June 30, 2012. The filing should not be attributed to Liveramp without verification.
Financial results
Amounts below are in U.S. dollars; financial statement amounts are in millions except per-share data.
| Metric | Quarter ended June 30, 2013 | Prior-year quarter | Change |
|---|---|---|---|
| Revenue | $266.2 | $271.7 | Down 2% |
| Operating income | $24.1 | $25.4 | Down 5% |
| Operating margin | 9.0% | 9.4% | Down 0.4 percentage points |
| Net earnings attributable to Acxiom | $13.2 | $13.3 | Slightly lower |
| Diluted EPS attributable to Acxiom | $0.17 | $0.17 | Unchanged |
| Operating cash flow | $16.8 | $(1.9) | Improved |
| Cash and equivalents, period end | $207.6 | $179.3 | Up year over year |
- Cost of revenue fell 3.3% to $202.4 million; gross margin improved to 24.0% from 23.0%. SG&A increased 8.0% to $39.7 million, primarily due to higher legal and consulting expenses.
- Cash used in investing was $16.8 million, including $8.9 million of capital expenditures, $6.0 million of capitalized software development, and $2.0 million of data acquisition costs. Financing used $15.3 million, including $16.1 million of share repurchases and $4.9 million of debt payments.
- At June 30, cash was $207.6 million and total debt and capital lease obligations were $248.6 million, including $14.8 million current; the implied net debt was approximately $41.0 million. No revolver borrowings were outstanding. The company reported $242.3 million of working capital and compliance with debt covenants.
Material changes and business developments
- Marketing and Data Services revenue decreased 2.4% to $187.8 million; segment operating income fell to $12.7 million from $18.7 million. Weakness included Europe and Australia, lower project activity, and lost email-customer business.
- IT Infrastructure Management revenue decreased 1.3% to $69.4 million, while operating income increased to $10.8 million from $8.8 million. Results included approximately $1.1 million of customer termination fees and ongoing efficiency improvements.
- Other Services revenue was $9.0 million, versus $8.9 million; operating income improved to $0.7 million from a $2.0 million loss, reflecting the exit from the U.S. risk business and new UK fulfillment business.
- Acxiom realigned its segments, moving email fulfillment from Other Services to Marketing and Data Services; prior-year segment figures were restated.
- The company repurchased 720,337 shares for $16.1 million. The repurchase program had approximately $43.9 million of capacity remaining and was scheduled to run through February 5, 2014.
Outlook, risks, and contingencies
- Management said it was significantly investing in product innovation and expected investment spending to continue increasing for at least the remainder of fiscal 2014. The Acxiom Audience Operating System launch was planned for September 24, 2013; management believed investment could support revenue growth in fiscal 2014 and beyond. No specific company-wide revenue or earnings guidance was provided.
- Management reported additional IT Infrastructure Management contract termination notices. It expected fiscal 2014 revenue from affected customers of $65–70 million, with revenue from those contracts expected to be negligible in fiscal 2015.
- Management anticipated additional expenses for separating segment operations and for the planned product launch. The filing states that liquidity and capital resources were expected to be sufficient for operations.
- Risks include client losses and contract cancellations, competitive and economic pressures, data security or service interruptions, privacy and regulatory changes affecting data use, foreign currency movements, and possible future goodwill impairment. The quarter’s annual goodwill test found no potential impairment.
- Two highlighted disputes include a putative Fair Credit Reporting Act class action and a GoDigital earnout dispute in Brazil. The company recorded no accrual for either, stating it did not believe a loss was probable; it could not estimate a reasonably possible loss range for the class action. Management said the matters were not expected to have a material adverse effect.
- Other commitments include $132.5 million of operating lease payments, $169.5 million of purchase commitments, and up to $2.9 million of potential payments under guarantees. These amounts are not all immediately payable; the filing provides scheduled periods for contractual obligations.
Most important facts to verify
- Confirm the issuer and filing match the intended company: this document identifies Acxiom Corporation, not Liveramp Holdings, Inc.
- Verify the fiscal-period labeling and source document before relying on the figures; the filing covers the quarter ended June 30, 2013.
- Track the timing and financial impact of announced infrastructure-management contract terminations, especially the expected negligible contract revenue in fiscal 2015.
- Assess whether product investment and the planned Audience Operating System launch translate into growth, given lower quarterly revenue and weaker Marketing and Data Services operating income.
- Monitor cash generation, debt repayment and refinancing needs: the term loan had a substantial final payment scheduled for March 2015, and the revolving commitment expired in March 2014.
- Review developments in the legal matters, restructuring lease liabilities, and the company’s remaining repurchase authorization and purchase commitments.