Filing summary
Issuer mismatch: The supplied filing is Acxiom Corporation’s Form 10-Q, not a filing by Liveramp Holdings, Inc. LiveRamp is discussed as part of Acxiom’s Connectivity business. The filing covers the quarter ended June 30, 2016, Acxiom’s first quarter of fiscal 2017; amounts below are in U.S. dollars.
Business context and reporting period
Acxiom describes itself as a global marketing data and technology services company, with Marketing Services, Audience Solutions, and Connectivity segments. The unaudited statements cover continuing operations; the previously sold IT infrastructure management business (ITO) is reported as discontinued operations.
Financial performance and position
| Metric | Quarter ended June 30, 2016 | Comparable 2015 quarter / reference |
|---|---|---|
| Revenue | $214.8 million | $196.9 million; up 9.1% |
| Gross profit / margin | $92.0 million / 42.8% | $79.2 million / 40.2% |
| Operating expenses | $83.8 million | $82.1 million |
| Operating income (loss) / margin | $8.2 million / 3.8% | $(2.9) million / (1.5%) |
| Continuing-operations net income (loss) | $4.0 million; $0.05 diluted EPS | $(5.2) million; $(0.07) diluted EPS |
| Operating cash flow | $0.8 million | $12.0 million |
| Cash and working capital | $150.2 million cash; $147.8 million working capital | Cash was $189.6 million at March 31, 2016 |
| Debt | $177.5 million term loan principal; $7.3 million other debt and long-term liabilities. No revolver borrowings. | Total debt and capital leases reported at $184.8 million |
Operating cash flow less investing outflows was negative $13.9 million; investing used $14.7 million, including $10.7 million of capital expenditures and $4.0 million of capitalized software. Financing used $24.8 million, including $20.2 million of share repurchases and $8.1 million of debt repayments. Cash declined $39.5 million during the quarter. The reported current ratio was approximately 1.9.
Segment revenue was $109.7 million for Marketing Services (up 2%), $73.7 million for Audience Solutions (up 8%), and $31.3 million for Connectivity (up 52%). Connectivity growth was attributed primarily to LiveRamp customer additions; Audience Solutions benefited from digital data partners.
Changes versus the prior comparable period
- Revenue growth and improved gross margin helped move operating results from a loss to a profit. Management cited Connectivity growth and cost efficiencies as contributors to the margin improvement.
- Sales and marketing expense rose 27%, mainly from U.S. Connectivity and Audience Solutions sales hiring. Research and development fell 7%; general and administrative expense fell 13%, primarily reflecting lower separation and transformation costs.
- Operating cash flow fell from $12.0 million to $0.8 million, mainly due to working-capital movements, including lower accounts payable and other liabilities and lower deferred revenue.
- The comparison includes ITO discontinued operations in 2015: $52.6 million of revenue and $4.1 million of after-tax earnings. ITO contributed no results in the 2016 quarter following its sale.
Outlook, commentary, risks and unusual items
- No specific revenue or earnings guidance is provided. Management said it expects liquidity and capital resources to be sufficient to operate the business.
- On August 4, 2016, Acxiom announced an agreement to sell its Impact email business for $22 million, subject to customary closing conditions, with closing expected in the second quarter of fiscal 2017. The company said it planned to use the proceeds to help fund expanded repurchases.
- On July 28, 2016, the board expanded the repurchase authorization to $400 million and extended the program through June 30, 2018. At June 30, $124.6 million of authorization remained; repurchases may be suspended or discontinued.
- Debt covenants were met at quarter-end. The term loan bears a floating rate, with a 2.6% weighted-average rate; a $50 million interest-rate swap hedges part of the exposure. Management stated that a one-percentage-point increase in short-term rates would not materially affect results.
- Risks identified include privacy, data-use regulation, security breaches or service interruptions, loss of data suppliers, customer contract losses, competition, foreign exchange exposure, and the ability to retain talent. The company reported no pending legal matters it considered material, while noting that adverse outcomes could still affect results.
- Commitments include $83.0 million of operating lease payments and $92.4 million of purchase commitments. The filing also reports $2.1 million of letters of credit and a lease guarantee with maximum potential payments of approximately $0.4 million.
Important facts for investors to verify
- Confirm the intended issuer: this filing is for Acxiom Corporation, despite the request naming Liveramp Holdings, Inc.
- Review the sources and sustainability of Connectivity’s rapid growth, and the contract and volume declines reported in parts of Marketing Services and Audience Solutions.
- Assess why cash from operations was low and cash fell substantially despite positive net income, including the timing and recurrence of working-capital movements.
- Check the Impact email sale’s closing, proceeds, and effects on continuing operations, and whether planned repurchases proceed as described.
- Review debt repayment and maturity requirements, covenant headroom, and the company’s substantial lease and purchase commitments.