Acxiom® (Nasdaq: ACXM), the data foundation for the world’s best marketers, today announced financial results for its third quarter ended December 31, 2016.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20170131006351/en/

Financial Highlights

  • Revenue: Total revenue was $223 million, up 1% compared to the third quarter of last year driven by growth in Connectivity and Audience Solutions offset by the divestiture of Acxiom Impact.
  • Operating Income (Loss): GAAP operating income from continuing operations was $9 million compared to a small loss in the prior year. Non-GAAP operating income from continuing operations improved 50% to approximately $33 million.
  • Earnings (Loss) per Share: GAAP diluted earnings per share from continuing operations were $0.01 compared to a loss per share of $0.01 in the prior year. Non-GAAP diluted earnings per share from continuing operations were $0.24, up from $0.18 a year ago.
  • Operating Cash Flow: Operating cash flow from continuing operations improved to $49 million, up from $37 million in the prior year. For the trailing twelve-month period, operating cash flow from continuing operations was $128 million, up from $100 million in the comparable period.
  • Free Cash Flow to Equity: Free cash flow to equity improved to $28 million, up from $14 million in the prior year. For the trailing twelve-month period, free cash flow to equity was $53 million, up from $3 million in the comparable period.

Segment Results

Marketing Services

  • Revenue was $101 million, down 13% compared to the third quarter of last year. Marketing Database and Strategy & Analytics revenue grew 1% year-over-year, but was more than offset by the divestiture of Acxiom Impact.
  • Gross margin improved from 33% to 37%.
  • Segment income was $21 million, up 4% compared to the prior year. Segment margin improved to 21%.

Audience Solutions

  • Revenue was $83 million, up 8% compared to the prior year.
  • Gross margin improved from 59% to 64%.
  • Segment income was $35 million, up 13% compared to the prior year. Segment margin improved to 41%.

Connectivity

  • Revenue, which includes the Arbor and Circulate acquisitions, was $39 million, up 36% compared to the third quarter of last year. LiveRamp™ product revenue grew 61% year-over-year.
  • Gross margin improved from 57% to 60%.
  • Segment income was $2 million compared to a loss of $1 million in the prior year. Segment margin improved to 5%.

A detailed discussion of our non-GAAP financial measures and a reconciliation between GAAP and non-GAAP results is provided in the schedules to this press release.

"Our global momentum continues to accelerate,” said Acxiom CEO Scott Howe. “In addition, the integration of Arbor and Circulate is well underway and we are delivering the client benefits and financial synergies we anticipated. This is a win for our partner network, clients and shareholders.”

Recent Business Highlights

  • LiveRamp completed the acquisitions of Arbor and Circulate, two companies at the forefront of helping publishers connect people-based data to the marketing ecosystem. The acquisitions double LiveRamp's publisher partnerships and bring strong "mobile-first" technology, international reach and impressive teams to LiveRamp.
  • Connectivity added more than 50 new direct customers during the quarter and added over 30 new partner integrations. Marketers can now onboard and activate their data across a growing network of more than 450 publishers and marketing technology providers.
  • Audience Solutions launched the Audience Cloud™ for advanced cross-channel management of Acxiom data. The self-service tool simplifies the process for creating and distributing audiences created from Acxiom data, resulting in better campaign planning, optimized marketing spend and increased ROI.
  • Acxiom was certified as a great workplace by the independent analysts at Great Place to Work® based on extensive ratings provided by its associates in anonymous surveys. In addition, LiveRamp was recently recognized as one of the top ten Best Places to Work by Glassdoor.

Financial Outlook

Acxiom’s non-GAAP guidance excludes the impact of non-cash compensation, purchased intangible asset amortization, restructuring and merger charges, the gain on the disposal of Acxiom Impact and separation and transformation costs.

For fiscal 2017, Acxiom expects to report:

  • Revenue in the range of $870 million to $875 million
  • GAAP diluted earnings per share of approximately $0.11
  • Non-GAAP diluted earnings per share of approximately $0.70

Included in the Company’s revenue guidance is approximately $20 million of revenue from its disposed Acxiom Impact business.

Conference Call

Acxiom will hold a conference call at 4:00 p.m. CT today to further discuss this information. Interested parties are invited to listen to the call which will be broadcast via the Internet at investors.acxiom.com. A slide presentation will be referenced during the call and can be accessed here.

About Acxiom

Acxiom provides the data foundation for the world’s best marketers. We enable people-based marketing everywhere through a simple, open approach to connecting systems and data that drives seamless customer experiences and higher ROI. A leader in identity and the ethical use of data for more than 45 years, Acxiom helps thousands of clients and partners around the globe work together to create a world where all marketing is relevant. For more information about Acxiom, visit Acxiom.com.

Forward-Looking Statements

This release and today’s conference call contain forward-looking statements including, without limitation, statements regarding expected levels of revenue and earnings per share. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. The following are factors, among others, that could cause actual results to differ materially from these forward-looking statements: the possibility that the expected revenue from the divisions may not be realized within the expected timeframe; the possibility that the integration of acquired businesses may not be successful as planned; the possibility that certain contracts may not generate the anticipated revenue or profitability or may not be closed within the anticipated time frames; the possibility that significant customers may experience extreme, severe economic difficulty or otherwise reduce or cancel the amount of business they do with us; the possibility that we will not successfully complete customer contract requirements on time or meet the service levels specified in the contracts, which may result in contract penalties or lost revenue; the possibility that data purchasers will reduce their reliance on us by developing and using their own, or alternative, sources of data generally or with respect to certain data elements or categories; the possibility that data suppliers might withdraw data from us, leading to our inability to provide certain products and services to our clients; the possibility that we may not be able to attract, retain or motivate qualified technical, sales and leadership associates, or that we may lose key associates; the possibility that we may not be able to adequately adapt to rapidly changing computing environments, technologies and marketing practices; the possibility that we will not be able to continue to receive credit upon satisfactory terms and conditions; the possibility that negative changes in economic conditions in general or other conditions might lead to a reduction in demand for our products and services; the possibility that there will be changes in consumer or business information industries and markets that negatively impact the company; the possibility that the historical seasonality of our business may change; the possibility that we will not be able to achieve anticipated cost reductions and avoid unanticipated costs; the possibility that the fair value of certain of our assets may not be equal to the carrying value of those assets now or in future time periods; the possibility that unusual charges may be incurred; the possibility that changes in accounting pronouncements may occur and may impact these forward-looking statements; the possibility that we may encounter difficulties when entering new markets or industries; the possibility that we could experience loss of data center capacity or interruption of telecommunication links; the possibility that new laws may be enacted which limit our ability to provide services to our clients and/or which limit the use of data; and the possibility that other risks and uncertainties may emerge, including those detailed from time to time in our current and periodic reports filed with the Securities and Exchange Commission, including our current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports on Form 10-K, particularly the discussion under the caption “Item 1A. RISK FACTORS” in our Annual Report on Form 10-K for the year ended March 31, 2016, which was filed with the Securities and Exchange Commission on May 27, 2016.

With respect to the provision of products or services outside our primary base of operations in the United States, all of the above factors apply, along with the difficulty of doing business in numerous sovereign jurisdictions due to differences in scale, competition, culture, laws and regulations.

We undertake no obligation to update the information contained in this press release or any other forward-looking statement.

Acxiom is a registered trademark of Acxiom Corporation.

To automatically receive Acxiom Corporation financial news by email, please visit www.acxiom.com and subscribe to email alerts.

 

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings (loss) per share)

       
For the Three Months Ended
December 31,
2016 2015 $
Variance 		%
Variance
 
Revenues 223,312 221,193 2,119 1.0 %
 
Cost of revenue 116,468   125,735   (9,267 ) (7.4 %)
Gross profit 106,844 95,458 11,386 11.9 %
% Gross margin 47.8 % 43.2 %
 
Operating expenses:
Research and development 20,950 18,400 2,550 13.9 %
Sales and marketing 43,048 36,581 6,467 17.7 %
General and administrative 31,620 36,793 (5,173 ) (14.1 %)
Gains, losses and other items, net 2,111   4,058   (1,947 ) (48.0 %)
Total operating expenses 97,729   95,832   1,897 2.0 %
 
Income (loss) from operations 9,115 (374 ) 9,489 2537.2 %
% Margin 4.1 % -0.2 %
Other income (expense):
Interest expense (1,743 ) (1,948 ) 205 10.5 %
Other, net 35   303   (268 ) (88.4 %)
Total other expense (1,708 ) (1,645 ) (63 ) (3.8 %)
 
Earnings (loss) from continuing operations before income taxes 7,407 (2,019 ) 9,426 466.9 %
 
Income taxes 6,334   (1,580 ) 7,914 500.9 %
 
Net earnings (loss) from continuing operations 1,073 (439 ) 1,512 344.4 %
 
Loss from discontinued operations, net of tax -   (971 ) 971 100.0 %
 
Net earnings (loss) 1,073   (1,410 ) 2,483 176.1 %
 
Basic earnings (loss) per share:
Net earnings (loss) from continuing operations 0.01 (0.01 ) 0.02 345.4 %
Net loss from discontinued operations -   (0.01 ) 0.01 100.0 %
Net earnings (loss) 0.01   (0.02 ) 0.03 176.4 %
 
Diluted earnings (loss) per share:
Net earnings (loss) from continuing operations 0.01 (0.01 ) 0.02 338.2 %
Net loss from discontinued operations -   (0.01 ) 0.01 100.0 %
Net earnings (loss) 0.01   (0.02 ) 0.03 174.2 %
 
Basic weighted average shares 77,507 77,831
 
Diluted weighted average shares 79,851 77,831
 

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings (loss) per share)

       
For the Nine Months Ended
December 31,
2016 2015 $
Variance 		%
Variance
 
Revenues 655,380 625,433 29,947 4.8 %
 
Cost of revenue 359,392   364,756   (5,364 ) (1.5 %)
Gross profit 295,988 260,677 35,311 13.5 %
% Gross margin 45.2 % 41.7 %
 
Operating expenses:
Research and development 58,631 57,489 1,142 2.0 %
Sales and marketing 118,243 100,334 17,909 17.8 %
General and administrative 91,993 100,055 (8,062 ) (8.1 %)
Impairment of goodwill and other - 729 (729 ) (100.0 %)
Gains, losses and other items, net 2,724   7,369   (4,645 ) (63.0 %)
Total operating expenses 271,591   265,976   5,615 2.1 %
 

Income (loss) from operations

24,397 (5,299 ) 29,696 560.4 %
% Margin 3.7 % -0.8 %
Other income (expense):
Interest expense (5,244 ) (5,789 ) 545 9.4 %
Other, net 135   666   (531 ) (79.7 %)
Total other expense (5,109 ) (5,123 ) 14 0.3 %
 
Earnings (loss) from continuing operations before income taxes 19,288 (10,422 ) 29,710 285.1 %
 
Income taxes 7,099   (3,456 ) 10,555 305.4 %
 
Net earnings (loss) from continuing operations 12,189 (6,966 ) 19,155 275.0 %
 
Earnings from discontinued operations, net of tax -   15,240   (15,240 ) (100.0 %)
 
Net earnings 12,189   8,274   3,915 47.3 %
 
Basic earnings (loss) per share:
Net earnings (loss) from continuing operations 0.16 (0.09 ) 0.25 275.9 %
Net earnings from discontinued operations -   0.20   (0.20 ) (100.0 %)
Net earnings 0.16   0.11   0.05 48.1 %
 
Diluted earnings (loss) per share:
Net earnings (loss) from continuing operations 0.15 (0.09 ) 0.24 271.5 %
Net earnings from discontinued operations -   0.20   (0.20 ) (100.0 %)
Net earnings 0.15   0.11   0.05 44.4 %
 
Basic weighted average shares 77,475 77,903
 
Diluted weighted average shares 79,494 77,903
 

ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP EPS (1)
(Unaudited)
(Dollars in thousands, except earnings (loss) per share)

       
For the Three Months Ended
December 31, 		For the Nine Months Ended
December 31,
2016 2015 2016 2015
 
 
Earnings (loss) from continuing operations before income taxes

7,407

 

(2,019 ) 19,288 (10,422 )
 
Income taxes 6,334   (1,580 ) 7,099   (3,456 )
 
Net earnings (loss) from continuing operations 1,073 (439 ) 12,189 (6,966 )
 
Earnings (loss) from discontinued operations, net of tax -   (971 ) -   15,240  
 
Net earnings (loss) 1,073   (1,410 ) 12,189   8,274  
 
Earnings (loss) per share:
 
Basic 0.01   (0.02 ) 0.16   0.11  
 
Diluted 0.01   (0.02 ) 0.15   0.11  
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 4,621 3,754 12,588 11,262
Non-cash stock compensation (cost of revenue and operating expenses) 13,427 8,046 33,955 23,529
Impairment of goodwill and other - - - 729
Restructuring and merger charges (gains, losses, and other) 2,111 4,058 3,354 7,369
Gain on sale of Impact (gains, losses, and other) - - (629 ) -
Separation and transformation costs (general and administrative) 4,118 6,628 5,573 16,140
Accelerated amortization (cost of revenue) -   78   -   1,598  
 
Total excluded items, continuing operations 24,277   22,564   54,841   60,627  
 

Earnings from continuing operations before income taxes and excluding items

31,684 20,545 74,129 50,205
 
Income taxes (2) 12,751   6,399   29,513   17,194  
 
Non-GAAP net earnings 18,933   14,146   44,616   33,011  
 
Non-GAAP earnings per share:
 
Basic 0.24   0.18   0.58   0.42  
 
Diluted 0.24   0.18   0.56   0.42  
 
Basic weighted average shares 77,507   77,831   77,475   77,903  
 
Diluted weighted average shares 79,851   79,346   79,494   79,336  

(1)

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

(2)

Income taxes were calculated using an effective non-GAAP tax rate of 40.2% and 31.1% in the third quarter of fiscal 2017 and 2016, respectively, and 39.8% and 34.2% for the nine months ended December 31, 2016 and 2015, respectively. The differences between our GAAP and non-GAAP tax rates were primarily due to the net tax effects of the excluded items, including the federal and state income tax benefit related to the sale of Impact.

 

ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP INCOME (LOSS) FROM OPERATIONS (1)
(Unaudited)
(Dollars in thousands)

       
For the Three Months Ended
December 31, 		For the Nine Months Ended
December 31,
2016 2015 2016 2015
 
 
Income (loss) from operations

9,115

 

(374 ) 24,397   (5,299 )
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 4,621 3,754 12,588 11,262
Non-cash stock compensation (cost of revenue and operating expenses) 13,427 8,046 33,955 23,529
Impairment of goodwill and other - - - 729
Restructuring and merger charges (gains, losses, and other) 2,111 4,058 3,354 7,369
Gain on sale of Impact (gains, losses, and other) - - (629 ) -
Separation and transformation costs (general and administrative) 4,118 6,628 5,573 16,140
Accelerated amortization (cost of revenue) -   78   -   1,598  
 
Total excluded items, continuing operations 24,277   22,564   54,841   60,627  
 
Income from operations before excluded items 33,392   22,190   79,238   55,328  

(1)

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
       
For the Three Months Ended
December 31,
2016 2015 $
Variance 		%
Variance
 
Revenues
Marketing Services 101,177 115,725 (14,548 ) (12.6 %)
Audience Solutions 83,399 77,046 6,352 8.2 %
Connectivity 38,736   28,422   10,314 36.3 %
Total operating segment revenues 223,312 221,193 2,118 1.0 %
 
Gross profit
Marketing Services 37,494 38,561 (1,067 ) (2.8 %)
Audience Solutions 53,120 45,265 7,855 17.4 %
Connectivity 23,091   16,130   6,961 43.2 %
Total operating segment gross profit 113,705 99,956 13,749 13.8 %
 
Gross margin %
Marketing Services 37.1 % 33.3 %
Audience Solutions 63.7 % 58.8 %
Connectivity 59.6 % 56.8 %
Total operating segment gross margin 50.9 % 45.2 %
 
Income (loss) from operations
Marketing Services 21,127 20,309 818 4.0 %
Audience Solutions 34,572 30,723 3,849 12.5 %
Connectivity 1,877   (1,015 ) 2,892 284.9 %
Total operating segment income from operations 57,576 50,017 7,559 15.1 %
 
Operating income (loss) margin %
Marketing Services 20.9 % 17.5 %
Audience Solutions 41.5 % 39.9 %
Connectivity 4.8 % -3.6 %
Total operating segment operating margin 25.8 % 22.6 %
 
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
       
For the Nine Months Ended
December 31,
2016 2015 $
Variance 		%
Variance
 
Revenues
Marketing Services 316,571 336,430 (19,859 ) (5.9 %)
Audience Solutions 235,669 217,718 17,951 8.2 %
Connectivity 103,140   71,285   31,854 44.7 %
Total operating segment revenues 655,380 625,433 29,947 4.8 %
 
Gross profit
Marketing Services 109,440 112,140 (2,700 ) (2.4 %)
Audience Solutions 143,030 121,259 21,772 18.0 %
Connectivity 60,509   41,582   18,926 45.5 %
Total operating segment gross profit 312,979 274,981 37,998 13.8 %
 
Gross margin %
Marketing Services 34.6 % 33.3 %
Audience Solutions 60.7 % 55.7 %
Connectivity 58.7 % 58.3 %
Total operating segment gross margin 47.8 % 44.0 %
 
Income (loss) from operations
Marketing Services 61,109 55,070 6,039 11.0 %
Audience Solutions 89,640 80,000 9,640 12.1 %
Connectivity 3,831   (2,874 ) 6,705 233.3 %
Total operating segment income from operations 154,580 132,196 22,384 16.9 %
 
Operating income (loss) margin %
Marketing Services 19.3 % 16.4 %
Audience Solutions 38.0 % 36.7 %
Connectivity 3.7 % -4.0 %
Total operating segment operating margin 23.6 % 21.1 %
 
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF SEGMENT RESULTS
(Unaudited)
(Dollars in thousands)
       
For the Three Months Ended
December 31, 		For the Nine Months Ended
December 31,
 
2016 2015 2016 2015
 
Total operating segment gross profit

113,705

 

99,956 312,979 274,981
 
Less:
Purchased intangible asset amortization 4,621 3,754 12,588 11,263
Non-cash stock compensation 2,240 666 4,404 1,443
Accelerated amortization -   78   -   1,598  
 
Gross profit 106,844   95,458   295,988   260,677  
 
 
Total operating segment income from operations 57,576 50,017 154,580 132,196
 
Less:
Corporate expenses 24,185 27,827 75,342 76,868
Purchased intangible asset amortization 4,621 3,754 12,588 11,262
Non-cash stock compensation 13,427 8,046 33,955 23,529
Impairment of goodwill and other - - - 729
Restructuring and merger charges 2,111 4,058 3,354 7,369
Gain on sale of Impact - - (629 ) -
Separation and transformation costs 4,118 6,628 5,573 16,140
Accelerated amortization -   78   -   1,598  
 
Income (loss) from operations 9,115   (374 ) 24,397   (5,299 )
 
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA (1)
(Unaudited)
(Dollars in thousands)
       
For the Three Months Ended
December 31, 		For the Nine Months Ended
December 31,
2016 2015 2016 2015
 
 
Net earnings (loss) from continuing operations 1,073 (439 ) 12,189 (6,966 )
 
Income taxes 6,334 (1,580 ) 7,099 (3,456 )
 
Other expense (1,708 ) (1,645 ) (5,109 ) (5,123 )
 
Income (loss) from operations 9,115 (374 ) 24,397 (5,299 )
 
Depreciation and amortization 19,947 20,811 61,097 63,221
Less:
Deferred interest amortization -   311   -   901  
Adjusted depreciation and amortization 19,947   20,500   61,097   62,320  
 
EBITDA 29,062   20,126   85,494   57,021  
 
 
Other adjustments:
Non-cash stock compensation (cost of revenue and operating expenses) 13,427 8,046 33,955 23,529
Impairment of goodwill and other - - - 729
Gains, losses, and other items, net 2,111 4,058 2,724 7,369
Separation and transformation costs (general and administrative) 4,118   6,628   5,573   16,140  
 
Other adjustments 19,656   18,732   42,253   47,767  
 
Adjusted EBITDA 48,718   38,858   127,747   104,788  

(1)

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
       
December 31,
2016 		March 31,
2016 		$
Variance 		%
Variance

Assets

Current assets:
Cash and cash equivalents 137,850 189,629 (51,779 ) (27.3 %)
Trade accounts receivable, net 137,523 138,650 (1,127 ) (0.8 %)
Refundable income taxes 526 9,834 (9,308 ) (94.7 %)
Other current assets 48,035   37,897   10,138 26.8 %
 
Total current assets 323,934   376,010   (52,076 ) (13.8 %)
 
Property and equipment 526,847 528,675 (1,828 ) (0.3 %)
Less - accumulated depreciation and amortization 352,842   345,632   7,210 2.1 %
 
Property and equipment, net 174,005   183,043   (9,038 ) (4.9 %)
 
Software, net of accumulated amortization 51,308 55,735 (4,427 ) (7.9 %)
Goodwill 591,102 492,745 98,357 20.0 %
Purchased software licenses, net of accumulated amortization 7,989 10,116 (2,127 ) (21.0 %)
Deferred income taxes 9,115 6,885 2,230 32.4 %
Other assets, net 52,421   25,315   27,106 107.1 %
 
1,209,874   1,149,849   60,025 5.2 %

 

Liabilities and Stockholders' Equity

Current liabilities:
Current installments of long-term debt 36,050 32,243 3,807 11.8 %
Trade accounts payable 43,117 37,717 5,400 14.3 %
Accrued payroll and related expenses 45,082 61,309 (16,227 ) (26.5 %)
Other accrued expenses 57,187 48,254 8,933 18.5 %
Deferred revenue 32,644   44,477   (11,833 ) (26.6 %)
 
Total current liabilities 214,080   224,000   (9,920 ) (4.4 %)
 
Long-term debt 200,798 157,897 42,901 27.2 %
 
Deferred income taxes 57,165 53,964 3,201 5.9 %
 
Other liabilities 14,721 15,020 (299 ) (2.0 %)
 
Stockholders' equity:
Common stock 13,222 13,039 183 1.4 %
Additional paid-in capital 1,131,553 1,082,220 49,333 4.6 %
Retained earnings 610,690 598,501 12,189 2.0 %
Accumulated other comprehensive income 6,297 8,590 (2,293 ) (26.7 %)
Treasury stock, at cost (1,038,652 ) (1,003,382 ) (35,270 ) (3.5 %)
Total stockholders' equity 723,110   698,968   24,142 3.5 %
 
1,209,874   1,149,849   60,025 5.2 %

         
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
 
For the Three Months Ended
December 31,
2016     2015
 
Cash flows from operating activities:
Net earnings (loss) 1,073 (1,410 )
Earnings from discontinued operations, net of tax - 971
Non-cash operating activities:
Depreciation and amortization 19,947 20,811
Loss (gain) on disposal or impairment of assets (78 ) 48
Deferred income taxes 4,557 (5,140 )
Non-cash stock compensation expense 13,427 8,046
Changes in operating assets and liabilities:
Accounts receivable (4,597 ) (5,957 )
Other assets 4,974 (622 )
Accounts payable and other liabilities 10,172 13,518
Deferred revenue (542 ) 6,753  
Net cash provided by operating activities 48,933   37,018  
Cash flows from investing activities:
Capitalized software (3,296 ) (3,627 )
Capital expenditures (9,557 ) (10,702 )
Data acquisition costs (196 ) (424 )
Net cash paid in acquisitions (137,383 ) (5,386 )
Net cash used in investing activities (150,432 ) (20,139 )
Cash flows from financing activities:
Proceeds from debt 70,000 -
Payments of debt (8,062 ) (8,045 )
Sale of common stock, net of stock acquired for withholding taxes 2,370 2,241
Excess tax benefits from share-based compensation 370 2,574
Acquisition of treasury stock -   (10,274 )
Net cash provided by (used in) financing activities 64,678   (13,504 )
Cash flows from discontinued operations:
From operating activities - 562
From investing activities - 1,675
From financing activities -   -  
Net cash provided by discontinued operations -   2,237  
Effect of exchange rate changes on cash (738 ) (167 )
 
Net change in cash and cash equivalents (37,559 ) 5,445
Cash and cash equivalents at beginning of period 175,409   180,945  
Cash and cash equivalents at end of period 137,850   186,390  
 
Supplemental cash flow information:
Cash paid during the period for:
Interest 1,339 1,883
Income taxes 4,599 738
Other debt payments, excluding line of credit 8,062 8,045
 

 
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
         
For the Nine Months Ended
December 31,
2016     2015
 
Cash flows from operating activities:
Net earnings 12,189 8,274
Earnings from discontinued operations, net of tax - (15,240 )
Non-cash operating activities:
Depreciation and amortization 61,097 63,221
Loss (gain) on disposal or impairment of assets (520 ) 209
Impairment of goodwill and other - 729
Deferred income taxes (1,982 ) (4,856 )
Non-cash stock compensation expense 33,955 23,529
Changes in operating assets and liabilities:
Accounts receivable (6,161 ) (15,238 )
Other assets 8,653 (2,643 )
Accounts payable and other liabilities (11,819 ) 3,182
Deferred revenue (10,247 ) 9,205  
Net cash provided by operating activities 85,165   70,372  
Cash flows from investing activities:
Capitalized software (11,171 ) (10,360 )
Capital expenditures (30,096 ) (33,822 )
Data acquisition costs (463 ) (1,135 )
Net cash paid in acquisitions (137,383 ) (5,386 )
Net cash received in disposition 16,988   -  
Net cash used in investing activities (162,125 ) (50,703 )
Cash flows from financing activities:
Proceeds from debt 70,000 -
Payments of debt (24,173 ) (79,183 )
Sale of common stock, net of stock acquired for withholding taxes 9,670 6,343
Excess tax benefits from share-based compensation 1,785 2,022
Acquisition of treasury stock (30,542 ) (37,535 )
Net cash provided by (used in) financing activities 26,740   (108,353 )
Cash flows from discontinued operations:
From operating activities - 10,277
From investing activities - 124,506
From financing activities -   (206 )
Net cash provided by discontinued operations -   134,577  
Effect of exchange rate changes on cash (1,559 ) (513 )
 
Net change in cash and cash equivalents (51,779 ) 45,380
Cash and cash equivalents at beginning of period 189,629   141,010  
Cash and cash equivalents at end of period 137,850   186,390  
 
Supplemental cash flow information:
Cash paid during the period for:
Interest 5,301 6,220
Income taxes 4,796 6,004
Prepayment of debt - 55,000
Payments on capital leases and installment payment arrangements - 269
Other debt payments, excluding line of credit 24,173 24,120
 

                       
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF FREE CASH FLOW TO EQUITY (1)
(Unaudited)
(Dollars in thousands)
 
                               
06/30/15   09/30/15   12/31/15   03/31/16  

FY2016

06/30/16   09/30/16   12/31/16   YTD FY2017
 
Net Cash Provided by Operating Activities 11,997 21,357 37,018 43,270 113,642 750 35,482 48,933 85,165
 
Less (plus):
Capitalized software (2,797 ) (3,936 ) (3,627 ) (4,520 ) (14,880 ) (3,982 ) (3,893 ) (3,296 ) (11,171 )
Capital expenditures (12,876 ) (10,244 ) (10,702 ) (13,601 ) (47,423 ) (10,694 ) (9,845 ) (9,557 ) (30,096 )
Data acquisition costs (430 ) (281 ) (424 ) (418 ) (1,553 ) (20 ) (247 ) (196 ) (463 )
Payments on capital leases and installment payment arrangements (63 ) - - - (63 ) - - - -
Other required debt payments (8,036 ) (8,039 ) (8,045 ) (8,048 ) (32,168 ) (8,053 ) (8,058 ) (8,062 ) (24,173 )
Net cash received in disposition -     -     -     -     -   -     16,988     -     16,988  
 
Free Cash Flow to Equity (12,205 )   (1,143 )   14,220     16,683     17,555   (21,999 )   30,427     27,822     36,250  

(1)

 

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

                             
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS-GAAP
(Unaudited)
(Dollars in thousands, except earnings (loss) per share)
 
                                Q3 FY17 to Q3 FY16
06/30/15   09/30/15   12/31/15   03/31/16   FY2016 06/30/16   09/30/16   12/31/16   YTD FY2017 %   $
Revenues 196,895 207,345 221,193 224,655 850,088 214,801 217,267 223,312 655,380 1.0 % 2,119
 
Cost of revenue 117,709     121,312     125,735     123,626     488,382   122,819     120,105     116,468     359,392   -7.4 % (9,267 )
Gross profit 79,186 86,033 95,458 101,029 361,706 91,982 97,162 106,844 295,988 11.9 % 11,386
% Gross margin 40.2 % 41.5 % 43.2 % 45.0 % 42.5 % 42.8 % 44.7 % 47.8 % 45.2 %
 
Operating expenses
Research and development 20,011 19,078 18,400 16,758 74,247 18,652 19,029 20,950 58,631 13.9 % 2,550
Sales and marketing 29,494 34,259 36,581 45,842 146,176 37,348 37,847 43,048 118,243 17.7 % 6,467
General and administrative 31,743 31,519 36,793 35,330 135,385 27,506 32,866 31,620 91,993 -14.1 % (5,173 )
Impairment of goodwill and other - 729 - 6,100 6,829 - - - - - -
Gains, losses and other items, net 807     2,504     4,058     4,763     12,132   314     300     2,111     2,724   -48.0 % (1,947 )
Total operating expenses 82,055 88,089 95,832 108,793 374,769 83,820 90,042 97,729 271,591 2.0 % 1,897
 
Income (loss) from operations (2,869 ) (2,056 ) (374 ) (7,764 ) (13,063 ) 8,162 7,120 9,115 24,397 2537.2 % 9,489
% Margin-1.5%-1.0%-0.2%-3.5%-1.5%3.8%3.3%4.1%3.7%
Other income (expense)
Interest expense (1,885 ) (1,956 ) (1,948 ) (1,880 ) (7,669 ) (1,812 ) (1,689 ) (1,743 ) (5,244 ) 10.5 % 205
Other, net 304     59     303     (214 )   452   307     (207 )   35     135   -88.4 % (268 )
Total other expense (1,581 ) (1,897 ) (1,645 ) (2,094 ) (7,217 ) (1,505 ) (1,896 ) (1,708 ) (5,109 ) -3.8 % (63 )
 
Earnings (loss) from continuing operations before income taxes (4,450 ) (3,953 ) (2,019 ) (9,858 ) (20,280 ) 6,657 5,224 7,407 19,288 466.9 % 9,426
Income taxes 732     (2,608 )   (1,580 )   (8,176 )   (11,632 ) 2,681     (1,916 )   6,334     7,099   500.9 % 7,914
 
Net earnings (loss) from continuing operations (5,182 ) (1,345 ) (439 ) (1,682 ) (8,648 ) 3,976 7,140 1,073 12,189 344.4 % 1,512
 
Earnings (loss) from discontinued operations, net of tax 4,143     12,068     (971 )   111     15,351   -     -     -     -   100.0 % 971
 
Net earnings (loss) (1,039 ) 10,723 (1,410 ) (1,571 ) 6,703 3,976 7,140 1,073 12,189 176.1 % 2,483
 
Diluted earnings (loss) per share (0.01 )   0.14     (0.02 )   (0.02 )   0.09   0.05     0.09     0.01     0.15   174.2 % 0.03
 
Diluted earnings (loss) per share continuing operations (0.07 )   (0.02 )   (0.01 )   (0.02 )   (0.11 ) 0.05     0.09     0.01     0.15   338.2 % 0.02
 
Some earnings (loss) per share amounts may not add due to rounding
 
Basic shares 77,918 77,960 77,831 76,753 77,616 77,471 77,446 77,507 77,475
Diluted shares 79,352 79,310 79,346 78,386 79,099 79,353 79,277 79,851 79,494

                       
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP EPS (1)
(Unaudited)
(Dollars in thousands, except earnings (loss) per share)
 
                               
06/30/15   09/30/15   12/31/15   03/31/16   FY2016 06/30/16   09/30/16   12/31/16   YTD FY2017
 
 
Earnings (loss) from continuing operations before income taxes (4,450 ) (3,953 ) (2,019 ) (9,858 ) (20,280 ) 6,657 5,224 7,407 19,288
 
Income taxes 732     (2,608 )   (1,580 )   (8,176 )   (11,632 ) 2,681   (1,916 )   6,334   7,099  
 
Net earnings (loss) from continuing operations (5,182 ) (1,345 ) (439 ) (1,682 ) (8,648 ) 3,976 7,140 1,073 12,189
 
Earnings (loss) from discontinued operations, net of tax 4,143     12,068     (971 )   111     15,351   -   -     -   -  
 
Net earnings (loss) (1,039 )   10,723     (1,410 )   (1,571 )   6,703   3,976   7,140     1,073   12,189  
 
Earnings (loss) per share:
 
Basic (0.01 )   0.14     (0.02 )   (0.02 )   0.09   0.05   0.09     0.01   0.16  
 
Diluted (0.01 )   0.14     (0.02 )   (0.02 )   0.09   0.05   0.09     0.01   0.15  
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 3,754 3,754 3,754 4,204 15,466 4,077 3,890 4,621 12,588
Non-cash stock compensation (cost of revenue and operating expenses) 8,123 7,360 8,046 7,934 31,463 8,590 11,938 13,427 33,955
Impairment of goodwill and other - 729 - 6,100 6,829 - - - -
Restructuring and merger charges (gains, losses, and other) 807 2,504 4,058 4,763 12,132 314 929 2,111 3,354
Gain on sale of Impact (gains, losses, and other) - - - - - - (629 ) - (629 )
Separation and transformation costs (general and administrative) 3,414 6,098 6,628 4,686 20,826 - 1,455 4,118 5,573
Accelerated amortization (cost of revenue) 1,442     78     78     252     1,850   -   -     -   -  
 
Total excluded items, continuing operations 17,540     20,523     22,564     27,939     88,566   12,981   17,583     24,277   54,841  
 

Earnings from continuing operations before income taxes and excluding items

13,090 16,570 20,545 18,081 68,286 19,638 22,807 31,684 74,129
 
Income taxes 5,632     5,163     6,399     4,262     21,456   7,852   8,910     12,751   29,513  
 
Non-GAAP net earnings 7,458     11,407     14,146     13,819     46,830   11,786   13,897     18,933   44,616  
 
Non-GAAP earnings per share:
 
Basic 0.10     0.15     0.18     0.18     0.60   0.15   0.18     0.24   0.58  
 
Diluted 0.09     0.14     0.18     0.18     0.59   0.15   0.18     0.24   0.56  
 
Basic weighted average shares 77,918     77,960     77,831     76,753     77,616   77,471   77,446     77,507   77,475  
 
Diluted weighted average shares 79,352     79,310     79,346     78,386     79,099   79,353   79,277     79,851   79,494  
 
Some earnings per share amounts may not add due to rounding

(1)

 

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures and the material limitations on the usefulness of these measures, please see Appendix A.

                         
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
   
                                Q3 FY17 to Q3 FY16
06/30/15   09/30/15   12/31/15   03/31/16   FY2016 06/30/16   09/30/16   12/31/16   YTD FY2017 %   $
 
Revenues:
Marketing Services 107,726 112,979 115,725 113,342 449,772 109,715 105,679 101,177 316,571 -12.6 % (14,548 )
Audience Solutions 68,550 72,122 77,046 80,128 297,846 73,744 78,526 83,399 235,669 8.2 % 6,352
Connectivity 20,619     22,244     28,422     31,185     102,470   31,342     33,062     38,736     103,140   36.3 % 10,314
 
Total operating segment revenues 196,895     207,345     221,193     224,655     850,088   214,801     217,267     223,312     655,380   1.0 % 2,118
 
Gross profit:
 
Marketing Services 36,034 37,545 38,561 40,117 152,257 37,466 34,480 37,494 109,440 -2.8 % (1,067 )
Audience Solutions 36,824 39,170 45,265 46,457 167,716 41,912 47,998 53,120 143,030 17.4 % 7,855
Connectivity 11,953     13,499     16,130     19,617     61,199   17,575     19,843     23,091     60,509   43.2 % 6,961
 
Total operating segment gross profit 84,811     90,214     99,956     106,191     381,172   96,953     102,321     113,705     312,979   13.8 % 13,749
 
Gross margin:
 
Marketing Services 33.4 % 33.2 % 33.3 % 35.4 % 33.9 % 34.1 % 32.6 % 37.1 % 34.6 %
Audience Solutions 53.7 % 54.3 % 58.8 % 58.0 % 56.3 % 56.8 % 61.1 % 63.7 % 60.7 %
Connectivity 58.0 % 60.7 % 56.8 % 62.9 % 59.7 % 56.1 % 60.0 % 59.6 % 58.7 %
 
Total operating segment gross margin 43.1 % 43.5 % 45.2 % 47.3 % 44.8 % 45.1 % 47.1 % 50.9 % 47.8 %
 
Income (loss) from operations:
 
Marketing Services 16,853 17,908 20,309 19,301 74,371 20,145 19,837 21,127 61,109 4.0 % 818
Audience Solutions 24,087 25,190 30,723 29,598 109,598 25,096 29,972 34,572 89,640 12.5 % 3,849
Connectivity (791 )   (1,068 )   (1,015 )   (424 )   (3,298 ) 291     1,663     1,877     3,831   284.9 % 2,892
 
Total operating segment income from operations 40,149     42,030     50,017     48,475     180,671   45,532     51,472     57,576     154,580   15.1 % 7,559
 
Operating income (loss) margin:
 
Marketing Services 15.6 % 15.9 % 17.5 % 17.0 % 16.5 % 18.4 % 18.8 % 20.9 % 19.3 %
Audience Solutions 35.1 % 34.9 % 39.9 % 36.9 % 36.8 % 34.0 % 38.2 % 41.5 % 38.0 %
Connectivity -3.8 % -4.8 % -3.6 % -1.4 % -3.2 % 0.9 % 5.0 % 4.8 % 3.7 %
 
Total operating segment operating margin 20.4 % 20.3 % 22.6 % 21.6 % 21.3 % 21.2 % 23.7 % 25.8 % 23.6 %
 
Some totals may not add due to rounding.

     
ACXIOM CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP EPS GUIDANCE (1)

(Unaudited)
(Dollars in thousands, except earnings per share)
 
For the year ending
March 31, 2017
 
 
Earnings before income taxes 13,000
 
Income taxes   4,000
 
Net earnings   9,000
 
Diluted earnings per share $ 0.11
 
Excluded items:
Purchased intangible asset amortization 19,000
Non-cash stock compensation 50,000
Gains, losses and other items, net 2,000
Separation and transformation costs   8,000
 
Total excluded items   79,000
 
Earnings before income taxes and excluding items 92,000
 
Income taxes (2)   36,000
 
Non-GAAP net earnings   56,000
 
Non-GAAP diluted earnings per share $ 0.70
 
Diluted weighted average shares   80,000
 

(1)

 

 

This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

 

(2)

Income taxes were calculated using an effective non-GAAP tax rate of 39.0%. The difference between our GAAP and Non-GAAP tax rates was due to the effect of excluded items, including the federal and state income tax benefit related to the sale of Impact.

 

ACXIOM CORPORATION APPENDIX A
Q2 FISCAL 2017 FINANCIAL RESULTS
EXPLANATION OF NON-GAAP MEASURES
 

To supplement our financial results, we use non-GAAP measures which exclude certain acquisition related expenses, non-cash stock compensation and restructuring charges. We believe these measures are helpful in understanding our past performance and our future results. Our non-GAAP financial measures and schedules are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated GAAP financial statements. Our management regularly uses these non-GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions. These measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is also based in part on the performance of our business based on these non-GAAP measures.

 

Our non-GAAP financial measures, including non-GAAP earnings per share and adjusted EBITDA, reflect adjustments based on the following items, as well as the related income tax effects when applicable:

 

Purchased intangible asset amortization: We incur amortization of purchased intangibles in connection with our acquisitions. Purchased intangibles include (i) developed technology, (ii) customer relationships, and (iii) trade names. We expect to amortize for accounting purposes the fair value of the purchased intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated. Although the intangible assets generate revenue for us, we exclude this item because this expense is non-cash in nature and because we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our operational performance.

 

Non-cash stock compensation: Non-cash stock compensation consists of charges for associate restricted stock units, performance shares and stock options in accordance with current GAAP related to stock-based compensation including expense associated with stock-based compensation related to unvested options assumed in connection with our acquisitions. As we apply stock-based compensation standards, we believe that it is useful to investors to understand the impact of the application of these standards to our operational performance. Although stock-based compensation expense is calculated in accordance with current GAAP and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by us and because such expense is not used by us to assess the core profitability of our business operations.

 

Restructuring charges: During the past several years, we have initiated certain restructuring activities in order to align our costs in connection with both our operating plans and our business strategies based on then-current economic conditions. As a result, we recognized costs related to termination benefits for associates whose positions were eliminated, lease termination charges, and leasehold improvement write offs. During the current year, we also recognized a gain of the sale of the Acxiom Impact business. These items, reported as gains, losses, and other items, net, are excluded from non-GAAP results because such amounts are not used by us to assess the core profitability of our business operations.

 

Merger expenses: During the current year we have incurred certain third party expenses associated with the acquisitions of Arbor and Circulate. These items, reported as gains, losses and other items, net, are excluded from non-GAAP results because such amounts are used by us to assess the core profitability of our business operations.

 

Separation and transformation costs: In prior years, we incurred significant expenses in connection with the separation of our IT Infrastructure Management ("ITO") and the subsequent transformation of our remaining operating segments. This work enabled us to transform our external reporting and provide investors with enhanced transparency and more granular segment-level disclosures in addition to facilitating the ITO disposition. In the current year, we are incurring expenses to further separate the financial statements of our three operating segments, with particular focus on segment-level balance sheets, and to evaluate portfolio priorities. Our criteria for excluding separation and transformation expenses from our non-GAAP measures is as follows: 1) projects are discrete in nature; 2) excluded expenses consist only of third-party consulting fees that we would not incur otherwise; and 3) we do not exclude employee related expenses or other costs associated with the ongoing operations of our business. We expect to complete these current projects in the next 8 to 12 months. We believe excluding these items from our non-GAAP financials measures is useful for investors and provides meaningful supplemental information.

 
Our non-GAAP financial schedules are:
 

Non-GAAP EPS and Non-GAAP Income (loss) from Operations: Our non-GAAP earnings per share and Non-GAAP income (loss) from operations reflect adjustments as described above, as well as the related tax effects where applicable.

 

Adjusted EBITDA: Adjusted EBITDA is defined as net income (loss) from continuing operations before income taxes, other expenses, depreciation and amortization, and including adjustments as described above. We use Adjusted EBITDA to measure our performance from period to period both at the consolidated level as well as within our operating segments and to compare our results to those of our competitors. We believe that the inclusion of Adjusted EBITDA provides useful supplementary information to and facilitates analysis by investors in evaluating the Company's performance and trends. The presentation of Adjusted EBITDA is not meant to be considered in isolation or as an alternative to net earnings as an indicator of our performance.

 

Free Cash Flow to Equity: To supplement our statement of cash flows, we use a non-GAAP measure of cash flow to analyze cash flows generated from operations. Free cash flow to equity is defined as operating cash flow less cash used by investing activities (excluding the impact of cash paid in acquisitions), less required payments of debt, and excluding the impact of discontinued operations. Management believes that this measure of cash flow is meaningful since it represents the amount of money available from continuing operations for the Company's discretionary spending after funding all required obligations including scheduled debt payments. The presentation of non-GAAP free cash flow to equity is not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.