Acxiom Announces Third Quarter Results

Feb 06, 2018

Connectivity Revenue Up 45% Year-Over-Year – Segment Margin Exceeds 10%

Repurchases 729,000 Shares in the Quarter

CONWAY, Ark--(BUSINESS WIRE)-- Acxiom® (Nasdaq: ACXM), the data foundation for the world's best marketers, today announced financial results for its third quarter ended December 31, 2017.

This press release features multimedia. View the full release here: http://www.businesswire.com/news/home/20180206006192/en/

Financial Highlights

  • Revenue: Total revenue was $235 million, up 5% compared to the third quarter of last year.
  • Operating Income: GAAP operating income was $11 million compared to operating income of $9 million in the prior year. Non-GAAP operating income grew 14% to approximately $38 million.
  • Earnings per Share: GAAP diluted earnings per share were $0.28 compared to earnings per share of $0.01 in the prior year. Non-GAAP diluted earnings per share were $0.31 compared to $0.24 a year ago. Current period results include a $0.28 GAAP tax benefit and $0.04 non-GAAP tax benefit associated with the recent tax reform legislation.
  • Operating Cash Flow: Operating cash flow was $44 million, down from $49 million in the prior year.
  • Free Cash Flow to Equity: Free cash flow to equity was $27 million, roughly flat compared to the prior year. For the trailing twelve-month period, free cash flow to equity improved to $67 million, up from $53 million in the comparable period.

Segment Results

$M

Connectivity

 

Q318

 

Q317

 

Y/Y Δ

Revenue

  $ 56   $ 39   45%

Gross Profit

$ 38 $ 23 64%
Gross Margin 68% 60% 810 bps

Segment Operating Income

$ 7 $ 2 263%
Segment Margin 12% 5% 730 bps
 

Audience Solutions

 

Q318

 

Q317

 

Y/Y Δ

Revenue

$ 84 $ 83 1%

Gross Profit

$ 53 $ 53 (1%)
Gross Margin 63% 64% (110 bps)

Segment Operating Income

$ 33 $ 35 (4%)
Segment Margin 39% 41% (220 bps)
 

Marketing Services

 

Q318

 

Q317

 

Y/Y Δ

Revenue

$ 94 $ 101 (7%)

Gross Profit

$ 36 $ 37 (5%)
Gross Margin 38% 37% 80 bps

Segment Operating Income

$ 22 $ 21 4%
Segment Margin 23% 21% 250 bps

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.

"We again delivered a solid quarter, led by the strong performance of our Connectivity division," said Acxiom CEO Scott Howe. "While revenue in Audience Solutions was softer than expected, we continue to be pleased with our ongoing ability to generate meaningful cash flows in both Marketing Services and Audience Solutions. On a trailing-twelve month basis, these businesses have generated over $200 million in segment income."

Recent Business Highlights

  • LiveRamp® added over 50 new direct clients during the quarter and added several new partner integrations. Marketers can now onboard and activate their data across a growing network of more than 550 publishers and marketing technology providers.
  • Audience Solutions announced the launch of a new partnership with 4INFO to deliver location-based audience segments, modeled by Acxiom. The data-as-a-service solution combines 4INFO's Predictive Visitors™ audience segments with Acxiom data to create location-informed targeting segments for digital campaigns.
  • Marketing Services posted its second largest bookings quarter since the Company divisionalized, driven by several meaningful new logo and upsell wins.
  • Acxiom received the 2018 Supplier of the Year award from Walmart Services in recognition of its high level of performance and service.
  • Acxiom was recognized as a great workplace by the independent analysts at Great Places to Work®. For the second year in a row, Acxiom earned this credential based on positive employee feedback in areas such as culture, rewards, work-life balance, communication and leadership. In addition, Great Places to Work and FORTUNE named Acxiom one of the 2018 Best Workplaces in Technology.
  • Acxiom repurchased 729,000 shares for approximately $20 million during the quarter. Since the inception of its share repurchase program in August 2011, Acxiom has repurchased 18.4 million shares for $325 million, with $75 million remaining under authorization.

Financial Outlook

Acxiom's non-GAAP guidance excludes the impact of non-cash stock compensation, purchased intangible asset amortization, restructuring charges and business separation costs.

For fiscal 2018, Acxiom now expects to report:

  • Revenue of between $910 million and $915 million, an increase of approximately 6% year-over-year after adjusting for the Acxiom Impact divestiture. This is reduced from our previous guidance of between $920 million and $930 million primarily as a result of lower expected revenue from Audience Solutions.
  • GAAP diluted earnings per share of between $0.19 and $0.23. Included in this guidance is an assumed tax reform benefit of approximately $0.28.
  • Non-GAAP diluted earnings per share of between $0.85 and $0.89, an increase of between 20% and 25% year-over-year. Included in this guidance is an assumed tax reform benefit of between $0.04 and $0.05. This guidance is unchanged on a comparable basis.

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 and can be found on our investor site. 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 ethical data use for more than 48 years, Acxiom helps thousands of clients and partners around the globe work together to create a world where all marketing is relevant. Acxiom is a registered trademark of Acxiom Corporation. For more information, 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, 2017, which was filed with the Securities and Exchange Commission on May 26, 2017.

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.

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

Acxiom, LiveRamp, IdentityLink, InfoBase and all other Acxiom marks contained herein are trademarks or service marks of Acxiom Corporation. All other marks are the property of their respective owners.

       
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
 
For the Three Months Ended

December 31,

 

2017

2016

$
Variance

%
Variance

 
Revenues 234,871 223,312 11,559 5.2 %
 
Cost of revenue 115,920   116,468   (548 ) (0.5 %)
Gross profit 118,951 106,844 12,107 11.3 %
% Gross margin 50.6 % 47.8 %
 
Operating expenses:
Research and development 23,318 20,950 2,368 11.3 %
Sales and marketing 53,730 43,048 10,682 24.8 %
General and administrative 30,886 31,620 (734 ) (2.3 %)
Gains, losses and other items, net (41 ) 2,111   (2,152 ) (101.9 %)
Total operating expenses 107,893   97,729   10,164 10.4 %
 
Income from operations 11,058 9,115 1,943 21.3 %
% Margin 4.7 % 4.1 %
Other income (expense):
Interest expense (2,566 ) (1,743 ) (823 ) (47.2 %)
Other, net 419   35   384 1097.1 %
Total other expense (2,147 ) (1,708 ) (439 ) (25.7 %)
 
Income before income taxes 8,911 7,407 1,504 20.3 %
 
Income taxes (14,030 ) 6,334   (20,364 ) (321.5 %)
 
Net earnings 22,941   1,073   21,868 2038.0 %
 
Basic earnings per share 0.29   0.01   0.28 2800.0 %
 
Diluted earnings per share 0.28   0.01   0.27 2700.0 %
 
Basic weighted average shares 79,043 77,507
 
Diluted weighted average shares 81,869 79,851
 
       
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
 

For the Nine Months Ended
December 31,

2017 2016  

$
Variance

%
Variance

 
Revenues 672,625 655,380 17,245 2.6 %
 
Cost of revenue 344,952   359,392   (14,440 ) (4.0 %)
Gross profit 327,673 295,988 31,685 10.7 %
% Gross margin 48.7 % 45.2 %
 
Operating expenses:
Research and development 70,894 58,631 12,263 20.9 %
Sales and marketing 152,288 118,243 34,045 28.8 %
General and administrative 95,166 91,993 3,173 3.4 %
Gains, losses and other items, net 3,521   2,724   797 29.3 %
Total operating expenses 321,869   271,591   50,278 18.5 %
 
Income from operations 5,804 24,397 (18,593 ) (76.2 %)
% Margin 0.9 % 3.7 %
Other income (expense):
Interest expense (7,432 ) (5,244 ) (2,188 ) (41.7 %)
Other, net (61 ) 135   (196 ) (145.5 %)
Total other expense (7,493 ) (5,109 ) (2,384 ) (46.7 %)
 
Income (loss) before income taxes (1,689 ) 19,288 (20,977 ) (108.8 %)
 
Income taxes (19,994 ) 7,099   (27,093 ) (381.6 %)
 
Net earnings 18,305   12,189   6,116 50.2 %
 
Basic earnings per share 0.23   0.16   0.07 43.8 %
 
Diluted earnings per share 0.22   0.15   0.07 46.7 %
 
Basic weighted average shares 78,983 77,475
 
Diluted weighted average shares 81,594 79,494
 
       
ACXIOM CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP EPS (1)

(Unaudited)
(Dollars in thousands, except per share amounts)
 

For the Three Months Ended
December 31,

For the Nine Months Ended
December 31,

2017 2016 2017 2016
 
 
Earnings (loss) before income taxes 8,911 7,407 (1,689 ) 19,288
 
Income taxes (14,030 ) 6,334 (19,994 ) 7,099
 
Net earnings 22,941   1,073 18,305   12,189
 
Earnings per share:
 
Basic 0.29   0.01 0.23   0.16
 
Diluted 0.28   0.01 0.22   0.15
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 5,971 4,621 17,958 12,588
Non-cash stock compensation (cost of revenue and operating expenses) 15,919 13,427 46,707 33,955
Restructuring and merger charges (gains, losses, and other) (41 ) 2,111 3,521 2,725
Separation and transformation costs (general and administrative) 5,214   4,118 17,775   5,573
 
Total excluded items 27,063   24,277 85,961   54,841
 

 

Income before income taxes and excluding items

35,974 31,684 84,272 74,129
 
Income taxes (2) 10,704   12,751 29,713   29,513
 
Non-GAAP net earnings 25,270   18,933 54,559   44,616
 
Non-GAAP earnings per share:
 
Basic 0.32   0.24 0.69   0.58
 
Diluted 0.31   0.24 0.67   0.56
 
Basic weighted average shares 79,043   77,507 78,983   77,475
 
Diluted weighted average shares 81,869   79,851 81,594   79,494
 

 

(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 29.8% and 40.2% in the third quarter of fiscal 2018 and 2017, respectively, and 35.3% and 39.8% for the nine months ended December 31, 2017 and 2016, respectively. The difference between our GAAP and non-GAAP tax rates were primarily due to the Tax Cuts and Jobs Act and net tax effects of the excluded items.

       
ACXIOM CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS (1)

(Unaudited)
(Dollars in thousands)
 

For the Three Months Ended
December 31,

For the Nine Months Ended
December 31,

2017

2016 2017 2016
 
 
Income from operations 11,058   9,115 5,804 24,397
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 5,971 4,621 17,958 12,588
Non-cash stock compensation (cost of revenue and operating expenses) 15,919 13,427 46,707 33,955
Restructuring and merger charges (gains, losses, and other) (41 ) 2,111 3,521 2,725
Separation and transformation costs (general and administrative) 5,214   4,118 17,775 5,573
 
Total excluded items 27,063   24,277 85,961 54,841
 
Income from operations before excluded items 38,121   33,392 91,765 79,238

(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,

2017 2016

$
Variance

%
Variance

 
Revenues
Marketing Services 94,457 101,177 (6,720 ) (6.6 %)
Audience Solutions 84,436 83,399 1,037 1.2 %
Connectivity 55,978   38,736   17,242 44.5 %

Total operating segment revenues

234,871 223,312 11,559 5.2 %
 
Gross profit
Marketing Services 35,798 37,494 (1,696 ) (4.5 %)
Audience Solutions 52,821 53,120 (299 ) (0.6 %)
Connectivity 37,914   23,091   14,823 64.2 %
Total operating segment gross profit 126,533 113,705 12,828 11.3 %
 
Gross margin %
Marketing Services 37.9 % 37.1 %
Audience Solutions 62.6 % 63.7 %
Connectivity 67.7 % 59.6 %
Total operating segment gross margin 53.9 % 50.9 %
 
Income from operations
Marketing Services 22,063 21,127 936 4.4 %
Audience Solutions 33,112 34,572 (1,460 ) (4.2 %)
Connectivity 6,808   1,877   4,931 262.7 %
Total operating segment income from operations 61,983 57,576 4,407 7.7 %
 
Operating income margin %
Marketing Services 23.4 % 20.9 %
Audience Solutions 39.2 % 41.5 %
Connectivity 12.2 % 4.8 %
Total operating segment operating margin 26.4 % 25.8 %
 
 
Some totals may not add due to rounding.
 
       
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
 
 

For the Nine Months Ended
December 31,

2017   2016  

$
Variance

%
Variance

 
Revenues
Marketing Services 280,093 316,571 (36,478 ) (11.5 %)
Audience Solutions 238,984 235,669 3,315 1.4 %
Connectivity 153,548   103,140   50,408 48.9 %
Total operating segment revenues 672,625 655,380 17,245 2.6 %
 
Gross profit
Marketing Services 101,476 109,440 (7,964 ) (7.3 %)
Audience Solutions 148,352 143,030 5,322 3.7 %
Connectivity 100,730   60,509   40,221 66.5 %
Total operating segment gross profit 350,558 312,979 37,579 12.0 %
 
Gross margin %
Marketing Services 36.2 % 34.6 %
Audience Solutions 62.1 % 60.7 %
Connectivity 65.6 % 58.7 %
Total operating segment gross margin 52.1 % 47.8 %
 
Income from operations
Marketing Services 63,721 61,109 2,612 4.3 %
Audience Solutions 91,151 89,640 1,511 1.7 %
Connectivity 12,475   3,831   8,644 225.6 %
Total operating segment income from operations 167,347 154,580 12,767 8.3 %
 
Operating income margin %
Marketing Services 22.7 % 19.3 %
Audience Solutions 38.1 % 38.0 %
Connectivity 8.1 % 3.7 %
Total operating segment operating margin 24.9 % 23.6 %
 
 
Some totals may not add due to rounding.
 
     
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,

 
2017   2016 2017 2016
 
Total operating segment gross profit 126,533 113,705 350,558 312,979
 
Less:
Purchased intangible asset amortization 5,971 4,621 17,958 12,588
Non-cash stock compensation 1,612   2,240 4,927 4,404
 
Gross profit 118,951   106,844 327,673 295,988
 
 
Total operating segment income from operations 61,983 57,576 167,347 154,580
 
Less:
Corporate expenses 23,862 24,184 75,582 75,342
Purchased intangible asset amortization 5,971 4,621 17,958 12,588
Non-cash stock compensation 15,919 13,427 46,707 33,955
Restructuring charges (41 ) 2,111 3,521 2,725
Separation and transformation costs 5,214   4,118 17,775 5,573
 
Income from operations 11,058   9,115 5,804 24,397
 
 
Some totals may not add due to rounding.
 
       
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,

2017 2016 2017 2016  
 
 
Net earnings 22,941 1,073 18,305 12,189
 
Income taxes (14,030 ) 6,334 (19,994 ) 7,099
 
Other expense (2,147 ) (1,708 ) (7,493 ) (5,109 )
 
Income from operations 11,058 9,115 5,804 24,397
 
Depreciation and amortization 21,200   19,947   63,719   61,097  
 
EBITDA 32,258   29,062   69,523   85,494  
 
 
Other adjustments:
Non-cash stock compensation (cost of revenue and operating expenses) 15,919 13,427 46,707 33,955
Gains, losses, and other items, net (41 ) 2,111 3,521 2,725
Separation and transformation costs (general and administrative) 5,214   4,118   17,775   5,573  
 
Other adjustments 21,092   19,656   68,003   42,253  
 
Adjusted EBITDA 53,350   48,718   137,526   127,747  
 

(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 BALANCE SHEETS
(Dollars in thousands)
 

December 31,
2017

March 31,
2017

$
Variance

%
Variance

(unaudited)

Assets

Current assets:
Cash and cash equivalents 177,807 170,343 7,464 4.4 %
Trade accounts receivable, net 155,634 142,768 12,866 9.0 %
Refundable income taxes 6,365 7,098 (733 ) (10.3 %)
Other current assets 42,357   48,310   (5,953 ) (12.3 %)
 
Total current assets 382,163   368,519   13,644 3.7 %
 
Property and equipment 483,355 476,281 7,074 1.5 %
Less - accumulated depreciation and amortization 330,316   320,307   10,009 3.1 %
 
Property and equipment, net 153,039   155,974   (2,935 ) (1.9 %)
 
Software, net of accumulated amortization 37,489 47,638 (10,149 ) (21.3 %)
Goodwill 592,827 592,731 96 0.0 %
Purchased software licenses, net of accumulated amortization 7,775 7,972 (197 ) (2.5 %)
Deferred income taxes 9,621 10,261 (640 ) (6.2 %)
Other assets, net 43,576   51,443   (7,867 ) (15.3 %)
 
1,226,490   1,234,538   (8,048 ) (0.7 %)
 

Liabilities and Stockholders' Equity

Current liabilities:
Current installments of long-term debt 1,837 39,819 (37,982 ) (95.4 %)
Trade accounts payable 46,211 40,208 6,003 14.9 %
Accrued payroll and related expenses 36,592 53,238 (16,646 ) (31.3 %)
Other accrued expenses 53,999 59,861 (5,862 ) (9.8 %)
Deferred revenue 34,169   37,087   (2,918 ) (7.9 %)
 
Total current liabilities 172,808   230,213   (57,405 ) (24.9 %)
 
Long-term debt 227,943 189,241 38,702 20.5 %
 
Deferred income taxes 34,300 58,374 (24,074 ) (41.2 %)
 
Other liabilities 17,328 17,730 (402 ) (2.3 %)
 
Stockholders' equity:
Common stock 13,552 13,288 264 2.0 %
Additional paid-in capital 1,216,565 1,154,429 62,136 5.4 %
Retained earnings 623,156 602,609 20,547 3.4 %
Accumulated other comprehensive income 9,826 7,999 1,827 22.8 %
Treasury stock, at cost (1,088,988 ) (1,039,345 ) (49,643 ) (4.8 %)
Total stockholders' equity 774,111   738,980   35,131 4.8 %
 
1,226,490   1,234,538   (8,048 ) (0.7 %)
 
   
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
 

For the Three Months Ended
December 31,

2017 2016
 
Cash flows from operating activities:
Net earnings 22,941 1,073
Non-cash operating activities:
Depreciation and amortization 21,200 19,947
Loss (gain) on disposal or impairment of assets 235 (78 )
Deferred income taxes (17,213 ) 4,557
Non-cash stock compensation expense 15,911 13,427
Changes in operating assets and liabilities:
Accounts receivable (14,048 ) (4,597 )
Other assets 2,271 4,974
Accounts payable and other liabilities 8,610 10,172
Deferred revenue 3,723   (542 )
Net cash provided by operating activities 43,630   48,933  
Cash flows from investing activities:
Capitalized software (3,188 ) (3,296 )
Capital expenditures (12,432 ) (9,557 )
Data acquisition costs (198 ) (196 )
Equity investments (1,000 ) -
Net cash paid in acquisition -   (137,383 )
Net cash used in investing activities (16,818 ) (150,432 )
Cash flows from financing activities:
Proceeds from debt - 70,000
Payments of debt (582 ) (8,062 )
Sale of common stock, net of stock acquired for withholding taxes 1,412 2,370
Excess tax benefits from share-based compensation - 370
Acquisition of treasury stock (19,665 ) -  
Net cash provided by (used in) financing activities (18,835 ) 64,678  
Effect of exchange rate changes on cash 323   (738 )
 
Net change in cash and cash equivalents 8,300 (37,559 )
Cash and cash equivalents at beginning of period 169,507   175,409  
Cash and cash equivalents at end of period 177,807   137,850  
 
Supplemental cash flow information:
Cash paid during the period for:
Interest 1,950 1,339
Income taxes 328 4,599
 
Noncash investing and financing activities:
Leasehold improvements paid directly by lessor 978 -
 
 
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
   

For the Nine Months Ended
December 31,

2017 2016
 
Cash flows from operating activities:
Net earnings 18,305 12,189
Non-cash operating activities:
Depreciation and amortization 63,719 61,097
Loss (gain) on disposal or impairment of assets 2,646 (520)
Accelerated deferred debt costs 720 -
Deferred income taxes (20,451) (1,982)
Non-cash stock compensation expense 46,707 33,955
Changes in operating assets and liabilities:
Accounts receivable (11,432) (6,161)
Other assets (1,277) 8,653
Accounts payable and other liabilities (18,232) (11,819)
Deferred revenue (4,314) (10,247)
Net cash provided by operating activities 76,391 85,165
Cash flows from investing activities:
Capitalized software (10,332) (11,171)
Capital expenditures (26,950) (30,096)
Data acquisition costs (621) (463)
Equity investments (1,000) -
Net cash received in disposition 4,000 16,988
Net cash paid in acquisitions - (137,383)
Net cash used in investing activities (34,903) (162,125)
Cash flows from financing activities:
Proceeds from debt 230,000 70,000
Payments of debt (226,732) (24,173)
Fees for debt refinancing (4,001) -
Sale of common stock, net of stock acquired for withholding taxes 5,107 9,670
Excess tax benefits from share-based compensation - 1,785
Acquisition of treasury stock (39,441) (30,542)
Net cash provided by (used in) financing activities (35,067) 26,740
Effect of exchange rate changes on cash 1,043 (1,559)
 
Net change in cash and cash equivalents 7,464 (51,779)
Cash and cash equivalents at beginning of period 170,343 189,629
Cash and cash equivalents at end of period 177,807 137,850
 
Supplemental cash flow information:
Cash paid during the period for:
Interest 6,712 5,301
Income taxes 1,152 4,796
 
Noncash investing and financing activities:
Leasehold improvements paid directly by lessor 978 -
 
 
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF FREE CASH FLOW TO EQUITY (1)
(Unaudited)
(Dollars in thousands)
               
                               
06/30/16   09/30/16   12/31/16   03/31/17  

FY2017

06/30/17     09/30/17     12/31/17     YTD FY2018
 
Net Cash Provided by Operating Activities 750 35,482 48,933 30,665 115,830 4,951 27,810 43,630 76,391
 
Less (plus):
Capitalized software (3,982 ) (3,893 ) (3,296 ) (3,306 ) (14,477 ) (3,388 ) (3,756 ) (3,188 ) (10,332 )
Capital expenditures (10,694 ) (9,845 ) (9,557 ) (17,897 ) (47,993 ) (6,888 ) (7,630 ) (12,432 ) (26,950 )
Data acquisition costs (20 ) (247 ) (196 ) (418 ) (881 ) (190 ) (233 ) (198 ) (621 )
Required debt payments (8,053 ) (8,058 ) (8,062 ) (8,070 ) (32,243 ) (572 ) (578 ) (582 ) (1,732 )
Net cash received in disposition - 16,988 - - 16,988 - 4,000 - 4,000
Proceeds from sales of assets -     -     -     25,494     25,494   -     -     -     -  
 
Free Cash Flow to Equity (21,999 )   30,427     27,822     26,468     62,718   (6,087 )   19,613     27,230     40,756  
 

(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
(Unaudited)
(Dollars in thousands, except per share amounts)
   
                               

Q3 FY18 to Q3 FY17

06/30/16   09/30/16   12/31/16   03/31/17   FY2017 06/30/17   09/30/17   12/31/17   YTD FY2018

%

  $  
Revenues 214,801 217,267 223,312 224,867 880,247 212,514 225,240 234,871 672,625 5.2 % 11,559
 
Cost of revenue 122,819     120,105     116,468     118,294     477,686   113,960     115,072     115,920     344,952   -0.5 % (548 )
Gross profit 91,982 97,162 106,844 106,573 402,561 98,554 110,168 118,951 327,673 11.3 % 12,107
% Gross margin 42.8 % 44.7 % 47.8 % 47.4 % 45.7 % 46.4 % 48.9 % 50.6 % 48.7 %
 
Operating expenses
Research and development 18,652 19,029 20,950 23,478 82,109 23,563 24,013 23,318 70,894 11.3 % 2,368
Sales and marketing 37,348 37,847 43,048 48,433 166,676 48,440 50,118 53,730 152,288 24.8 % 10,682
General and administrative 27,506 32,866 31,620 37,721 129,714 32,356 31,924 30,886 95,166 -2.3 % (734 )
Gains, losses and other items, net 314     300     2,111     5,650     8,373   (98 )   3,660     (41 )   3,521   -101.9 % (2,152 )
Total operating expenses 83,820 90,042 97,729 115,282 386,872 104,261 109,715 107,893 321,869 10.4 % 10,164
 
Income (loss) from operations 8,162 7,120 9,115 (8,709 ) 15,689 (5,707 ) 453 11,058 5,804 21.3 % 1,943
% Margin 3.8 % 3.3 % 4.1 % -3.9 % 1.8 % -2.7 % 0.2 % 4.7 % 0.9 %
Other income (expense)
Interest expense (1,812 ) (1,689 ) (1,743 ) (2,137 ) (7,381 ) (2,342 ) (2,524 ) (2,566 ) (7,432 ) -47.2 % (823 )
Other, net 307     (207 )   35     199     334   (672 )   192     419     (61 ) 1096.6 % 384
Total other expense (1,505 ) (1,896 ) (1,708 ) (1,937 ) (7,047 ) (3,014 ) (2,332 ) (2,147 ) (7,493 ) -25.7 % (439 )
 
Income (loss) before income taxes 6,657 5,224 7,407 (10,646 ) 8,642 (8,721 ) (1,879 ) 8,911 (1,689 ) 20.3 % 1,504
Income taxes 2,681     (1,916 )   6,334     (2,565 )   4,534   (7,421 )   1,457     (14,030 )   (19,994 ) -321.5 % (20,364 )
 
Net earnings (loss) 3,976 7,140 1,073 (8,081 ) 4,108 (1,300 ) (3,336 ) 22,941 18,305 2038.2 % 21,868
 
Diluted earnings (loss) per share 0.05     0.09     0.01     (0.10 )   0.05   (0.02 )   (0.04 )   0.28     0.22   1985.5 % 0.27
 
Some earnings (loss) per share amounts may not add due to rounding.
 
 
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP EPS (1)
(Unaudited)
(Dollars in thousands, except per share amounts)
               
                               
06/30/16   09/30/16   12/31/16   03/31/17  

FY2017

06/30/17   09/30/17   12/31/17   YTD FY2018
 
 
Earnings (loss) before income taxes 6,657 5,224 7,407 (10,646 ) 8,642 (8,721 ) (1,879 ) 8,911 (1,689 )
 
Income taxes 2,681   (1,916 )   6,334   (2,565 )   4,534   (7,421 )   1,457     (14,030 )   (19,994 )
 
Net earnings (loss) 3,976   7,140     1,073   (8,081 )   4,108   (1,300 )   (3,336 )   22,941     18,305  
 
Earnings (loss) per share:
 
Basic 0.05   0.09     0.01   (0.10 )   0.05   (0.02 )   (0.04 )   0.29     0.23  
 
Diluted 0.05   0.09     0.01   (0.10 )   0.05   (0.02 )   (0.04 )   0.28     0.22  
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 4,077 3,890 4,621 6,056 18,644 5,966 6,021 5,971 17,958
Non-cash stock compensation (cost of revenue and operating expenses) 8,590 11,938 13,427 15,190 49,145 15,031 15,757 15,919 46,707
Restructuring and merger charges (gains, losses, and other) 314 300 2,111 7,321 10,045 (98 ) 3,660 (41 ) 3,521
Gain on sales of assets (gains, losses and other) - - - (1,671 ) (1,671 ) - - - -
Separation and transformation costs (general and administrative) -   1,455     4,118   3,066     8,639   7,119     5,442     5,214     17,775  
 
Total excluded items 12,981   17,583     24,277   29,962     84,803   28,018     30,880     27,063     85,961  
 

Income before income taxes and excluding items

19,638 22,807 31,684 19,315 93,444 19,297 29,001 35,974 84,272
 
Income taxes 7,852   8,910     12,751   7,139     36,652   7,720     11,289     10,704     29,713  
 
Non-GAAP net earnings 11,786   13,897     18,933   12,177     56,792   11,577     17,712     25,270     54,559  
 
Non-GAAP earnings per share:
 
Basic 0.15   0.18     0.24   0.16     0.73   0.15     0.22     0.32     0.69  
 
Diluted 0.15   0.18     0.24   0.15     0.71   0.14     0.22     0.31     0.67  
 
Basic weighted average shares 77,471   77,446     77,507   78,012     77,609   78,672     79,235     79,043     78,983  
 
Diluted weighted average shares 79,353   79,277     79,851   80,912     79,848   81,440     81,472     81,869     81,594  
 
Some totals 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 FY18 to Q3 FY17
06/30/16   09/30/16   12/31/16   03/31/17   FY2017 06/30/17   09/30/17   12/31/17   YTD FY2018 %   $  
 
Revenues:
 
Marketing Services 109,715 105,679 101,177 94,269 410,840 91,594 94,042 94,457 280,093 (6.6 %) (6,720 )
Audience Solutions 73,744 78,526 83,399 86,396 322,065 75,734 78,814 84,436 238,984 1.2 % 1,037
Connectivity 31,342     33,062     38,736     44,203     147,342   45,186     52,384     55,978     153,548   44.5 % 17,242
 
Total operating segment revenues 214,801     217,267     223,312     224,867     880,247   212,514     225,240     234,871     672,625   5.2 % 11,559
 
Gross profit:
 
Marketing Services 37,466 34,480 37,494 31,207 140,647 31,358 34,320 35,798 101,476 (4.5 %) (1,696 )
Audience Solutions 41,912 47,998 53,120 55,154 198,185 47,210 48,321 52,821 148,352 (0.6 %) (299 )
Connectivity 17,575     19,843     23,091     27,742     88,251   27,525     35,291     37,914     100,730   64.2 % 14,823
 
Total operating segment gross profit 96,953     102,321     113,705     114,104     427,084   106,093     117,932     126,533     350,558   11.3 % 12,828
 
Gross margin %:
 
Marketing Services 34.1 % 32.6 % 37.1 % 33.1 % 34.2 % 34.2 % 36.5 % 37.9 % 36.2 %
Audience Solutions 56.8 % 61.1 % 63.7 % 63.8 % 61.5 % 62.3 % 61.3 % 62.6 % 62.1 %
Connectivity 56.1 % 60.0 % 59.6 % 62.8 % 59.9 % 60.9 % 67.4 % 67.7 % 65.6 %
 
Total operating segment gross margin 45.1 % 47.1 % 50.9 % 50.7 % 48.5 % 49.9 % 52.4 % 53.9 % 52.1 %
 
Income (loss) from operations:
 
Marketing Services 20,145 19,837 21,127 19,513 80,622 19,784 21,874 22,063 63,721 4.4 % 936
Audience Solutions 25,096 29,972 34,572 33,598 123,238 28,542 29,497 33,112 91,151 (4.2 %) (1,460 )
Connectivity 291     1,663     1,877     1,502     5,333   (48 )   5,715     6,808     12,475   262.8 % 4,932
 
Total operating segment income from operations 45,532     51,472     57,576     54,613     209,193   48,277     57,086     61,983     167,347   7.7 % 4,407
 
Operating income (loss) margin %:
 
Marketing Services 18.4 % 18.8 % 20.9 % 20.7 % 19.6 % 21.6 % 23.3 % 23.4 % 22.7 %
Audience Solutions 34.0 % 38.2 % 41.5 % 38.9 % 38.3 % 37.7 % 37.4 % 39.2 % 38.1 %
Connectivity 0.9 % 5.0 % 4.8 % 3.4 % 3.6 % -0.1 % 10.9 % 12.2 % 8.1 %
 
Total operating segment operating margin 21.2 % 23.7 % 25.8 % 24.3 % 23.8 % 22.7 % 25.3 % 26.4 % 24.9 %
 
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 per share amounts)
 

For the year ending
March 31, 2018

 
Low Range High Range
 
Income (loss) before income taxes (3,000 ) 2,500
 
Income taxes (benefit)   (18,500 )   (16,500 )
 
Net earnings   15,500     19,000  
 
Diluted earnings per share $ 0.19   $ 0.23  
 
Excluded items:
Purchased intangible asset amortization 24,000 24,000
Non-cash stock compensation 65,000 65,000
Gains, losses and other items, net 4,000 4,000
Separation and related costs   20,000     20,000  
 
Total excluded items   113,000     113,000  
 
Income before income taxes and excluding items 110,000 115,500
 
Income taxes (2)   40,000     42,000  
 
Non-GAAP net earnings   70,000     73,500  
 
Non-GAAP diluted earnings per share $ 0.85   $ 0.89  
 
Diluted weighted average shares 82,500 82,500
 

(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 approximately 36.5%. The difference between our GAAP and Non-GAAP tax rates was due to the effect of excluded items and the benefit of remeasuring net deferred tax liabilites due to enactment of new legislation.

                   
APPENDIX A
ACXIOM CORPORATION
Q3 FISCAL 2018 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, income from operations 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 and publisher 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.  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.


Separation and transformation costs:  In previous 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 prior and 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 substantially completed these projects during the third quarter of fiscal year 2018. Beginning in the fourth quarter of fiscal 2018, we will likely incur transaction analysis and support expenses related to the Company's announced evaluation of strategic options for its Marketing Solutions business. Our criteria for excluding these transaction related costs are the same. We believe excluding these items from our non-GAAP financial measures is useful for investors and provides meaningful supplemental information.


Our non-GAAP financial schedules are:


Non-GAAP EPS and Non-GAAP Income from Operations: Our non-GAAP earnings per share and Non-GAAP income 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 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.

Acxiom Investor Relations
Lauren Dillard, 650-372-2242
investor.relations@acxiom.com
EACXM

Source: Acxiom Corporation