Filing summary
Entity note: The supplied filing is Acxiom Corporation’s Form 10-Q, not a filing by “Liveramp Holdings, Inc.” Acxiom acquired LiveRamp on July 1, 2014 and included its results from that date. The filing covers the quarter and six months ended September 30, 2014 (Acxiom fiscal Q2 and first half of fiscal 2015); the financial statements are unaudited.
Business context and reporting period
Acxiom describes itself as an enterprise data, analytics, and software-as-a-service company. Its continuing operations are reported in Marketing and data services (including LiveRamp) and IT Infrastructure management. The U.K. 2Touch call-center business was substantially sold in May 2014 and is presented as discontinued operations.
Financial results and key metrics
Amounts below are in millions of U.S. dollars, except per-share data. Comparisons are with the corresponding 2013 period.
| Metric | Quarter ended Sep. 30, 2014 | Quarter ended Sep. 30, 2013 | Six months ended Sep. 30, 2014 | Six months ended Sep. 30, 2013 |
|---|---|---|---|---|
| Revenue | $260.0 | $267.8 | $502.3 | $525.0 |
| Operating income (loss) | $3.3 | $19.2 | $(1.2) | $42.7 |
| Net income (loss) attributable to Acxiom | $(1.5) | $9.8 | $(9.1) | $23.0 |
| Diluted EPS attributable to Acxiom | $(0.02) | $0.13 | $(0.12) | $0.30 |
| Operating cash flow | Not separately provided | Not separately provided | $27.7 | $58.8 |
Quarterly revenue declined 2.9%; first-half revenue declined 4.3%. Gross margin fell to 21.0% from 25.6% in the quarter and to 20.8% from 24.7% for the first half. Operating margin was 1.3% versus 7.2% for the quarter and (0.2)% versus 8.1% for the first half.
Segment revenue for the quarter was $204.2 million in Marketing and data services, up 2%, and $55.8 million in IT Infrastructure management, down 17%. The filing attributes the overall revenue decline chiefly to IT client departures; Marketing and data services growth was supported by LiveRamp and Marketing Management, partly offset by declines in other lines.
At September 30, cash and cash equivalents were $109.8 million, restricted acquisition escrow cash was $31.0 million, and working capital was $127.1 million. Cash declined $308.8 million from March 31, primarily reflecting the LiveRamp acquisition. Total reported debt and capital leases were $305.0 million, including $34.1 million current; there were no revolving-credit borrowings. The term loan rate averaged 2.3%, and the company reported compliance with debt covenants. Operating cash flow was $27.7 million; investing cash outflow was $315.7 million, including $265.7 million net cash paid for LiveRamp.
Material changes versus the prior comparable period
- Acxiom moved from prior-year profits to a quarterly and first-half loss, with lower revenue, weaker margins, and increased operating costs.
- IT Infrastructure management revenue fell 16.5% for the quarter and 18.3% for the first half, largely reflecting client contract terminations. Management noted five clients had given termination notices in fiscal 2014.
- SG&A increased 17.8% for the quarter and 21.1% for the first half. Business separation and transformation costs were $9.3 million and $21.3 million, respectively; increased share-based compensation and LiveRamp-related amortization also weighed on results.
- LiveRamp consideration was approximately $272.7 million, including $265.7 million net cash paid, $31.0 million held in escrow, and replacement options. Since acquisition, LiveRamp contributed $7.4 million revenue and a $4.9 million net loss, including acquired-intangible amortization and non-cash compensation.
- Goodwill rose to $573.5 million, including $216.0 million recorded for LiveRamp. The 2Touch disposal generated a $1.9 million pretax loss in the first half.
Outlook, commentary, risks, and unusual items
- No numeric revenue or earnings guidance is provided. Management said liquidity and capital resources should be sufficient to operate the business, while expecting to sustain elevated product investment for at least the remainder of the fiscal year and potentially incur further consulting and third-party costs as it separates and transforms business operations.
- Management cited client losses, execution of the LiveRamp integration, cost-reduction delivery, data and privacy regulation, data security, competition, foreign exchange, and goodwill valuation as risks. The annual goodwill test found no impairment, but management noted U.S. Infrastructure management’s fair value had declined following client terminations and further losses could prompt impairment testing.
- A putative Fair Credit Reporting Act class action had a tentative settlement; Acxiom accrued $3.7 million and said additional loss was considered remote. The filing says the ultimate outcome remains uncertain.
- Restructuring charges and adjustments were $7.6 million for the first half; LiveRamp transaction costs were $0.8 million. Acxiom also reported $21.3 million of first-half separation and transformation costs. These items materially affect comparisons.
- Contractual cash obligations totaled $428.4 million, excluding interest, and purchase commitments totaled $97.7 million. Operating lease commitments were $123.4 million. The company also disclosed a $1.3 million lease guarantee and $2.2 million of letters of credit.
Important facts for investors to verify
- Confirm the issuer and reporting scope: this is Acxiom’s filing, with LiveRamp consolidated only from July 1, 2014—not a standalone LiveRamp Holdings filing.
- Assess whether the declines in IT Infrastructure management revenue and segment margins continue as terminated client contracts wind down.
- Separate recurring operating performance from acquisition amortization, share-based compensation, restructuring, and business separation costs; verify how these expenses evolve.
- Review LiveRamp’s post-acquisition revenue, losses, integration progress, and the final purchase-price allocation, which the filing describes as preliminary.
- Monitor cash generation, acquisition-related liquidity effects, debt amortization, covenant headroom, and the approaching expiration of the share-repurchase authorization on November 18, 2014.
- Track the class-action settlement, potential goodwill impairment indicators, and the effect of regulatory, data-security, and foreign-exchange risks.