Acxiom Announces Second Quarter Results

Total Revenue Increases 5% Driving Strong Earnings Growth

LiveRamp Launches IdentityLink to Power People-Based Marketing for the Ecosystem

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LITTLE ROCK, Ark.--()--Acxiom® (Nasdaq: ACXM), the data foundation for the world’s best marketers, today announced financial results for its second quarter ended September 30, 2016.

Financial Highlights

  • Revenue: Total revenue was $217 million, up 5% compared to the second quarter of last year, driven by growth in Connectivity and Audience Solutions.
  • Operating Income (Loss): GAAP operating income from continuing operations was $7 million compared to a loss of $2 million in the prior year. Non-GAAP operating income from continuing operations improved 34% to approximately $25 million.
  • Earnings (Loss) per Share: GAAP diluted earnings per share from continuing operations were $0.09 compared to a loss per share of $0.02 in the prior year. Non-GAAP diluted earnings per share from continuing operations were $0.18, up from $0.14 a year ago.
  • Operating Cash Flow: Operating cash flow from continuing operations improved to $35 million, up from $21 million in the prior year. For the trailing twelve-month period, operating cash flow from continuing operations was $117 million, up from $96 million in the comparable period.
  • Free Cash Flow to Equity: Free cash flow to equity improved to $30 million, up from negative $1 million in the prior year. For the trailing twelve-month period, free cash flow to equity was $39 million, up from negative $2 million in the comparable period.

Segment Results

Marketing Services

  • Revenue was $106 million, down 6% compared to the second quarter of last year. Marketing Database and Strategy & Analytics revenue grew 1% year-over-year, but was more than offset by the sale of Acxiom Impact.
  • Gross margin remained roughly flat at 33%.
  • Segment income was $20 million, up 11% compared to the prior year.

Audience Solutions

  • Revenue was $79 million, up 9% compared to the prior year.
  • Gross margin improved from 54% to 61%.
  • Segment income was $30 million, up 19% compared to the prior year.

Connectivity

  • Revenue was $33 million, up 49% compared to the second quarter of last year. Connectivity exited the quarter with a $135 million annualized revenue run rate.
  • Gross margin declined slightly to 60%.
  • Segment income was $2 million compared to a loss of $1 million in the prior year.

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.

"Solid second quarter performance was driven by continued strong global execution across each of our businesses,” said Acxiom CEO Scott Howe. “In addition, we are very excited by the launch of LiveRampTM IdentityLinkTM to power people-based marketing for the open ecosystem. Identity resolution is key to understanding the customer journey and delivering superior customer experiences. LiveRamp is creating the foundation which will enable true omnichannel marketing.”

Recent Business Highlights

  • Acxiom completed the sale of its Impact email business to Zeta Interactive on August 31, 2016 and plans to use the sale proceeds to help fund its recently expanded share repurchase program.
  • LiveRamp launched IdentityLink, its new omnichannel resolution service. IdentityLink builds on the Company’s existing identity resolution capabilities to help brands create a unified view of the consumer and activate that understanding across the marketing ecosystem.
  • Connectivity added more than 40 new direct customers during the quarter and added over 50 new partner integrations. Marketers can now onboard and activate their data across a growing network of more than 400 marketing platforms and data providers.
  • Audience Solutions entered into a Premier Partnership with Adobe, enabling Acxiom and Adobe Marketing Cloud clients to access Acxiom data via Adobe’s Audience Marketplace with even greater ease to drive more accurate marketing campaigns.
  • Acxiom repurchased 390,000 shares for approximately $10 million during the quarter. Since the inception of its share repurchase program in August 2011, Acxiom has repurchased 16.8 million shares for $286 million.

Financial Outlook

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

For fiscal 2017, Acxiom expects to report:

  • Revenue in the range of $860 million to $870 million
  • GAAP diluted earnings per share of approximately $0.12
  • Non-GAAP diluted earnings per share of approximately $0.60

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 is a technology and services company that 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 contains 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 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 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 other risks and uncertainties, 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
September 30,
$ %
2016 2015 Variance   Variance
 
Revenues 217,267 207,345 9,922 4.8 %
 
Cost of revenue 120,105   121,312   (1,207 ) (1.0 %)
Gross profit 97,162 86,033 11,129 12.9 %
% Gross margin 44.7 % 41.5 %
 
Operating expenses:
Research and development 19,029 19,078 (49 ) (0.3 %)
Sales and marketing 37,847 34,259 3,588 10.5 %
General and administrative 32,866 31,519 1,347 4.3 %
Impairment of goodwill and other - 729 (729 ) (100.0 %)
Gains, losses and other items, net 300   2,504   (2,204 ) (88.0 %)
Total operating expenses 90,042   88,089   1,953 2.2 %
 
Income (loss) from operations 7,120 (2,056 ) 9,176 446.3 %
% Margin 3.3 % -1.0 %
Other income (expense):
Interest expense (1,689 ) (1,956 ) 267 13.7 %
Other, net (207 ) 59   (266 ) (450.8 %)
Total other expense (1,896 ) (1,897 ) 1 0.1 %
 
Earnings (loss) from continuing operations before income taxes 5,224 (3,953 ) 9,177 232.2 %
 
Income taxes (1,916 ) (2,608 ) 692 26.5 %
 
Net earnings (loss) from continuing operations 7,140 (1,345 ) 8,485 630.9 %
 
Earnings from discontinued operations, net of tax -   12,068   (12,068 ) (100.0 %)
 
Net earnings 7,140   10,723   (3,583 ) (33.4 %)
 
Basic earnings (loss) per share:
Net earnings (loss) from continuing operations 0.09 (0.02 ) 0.11 634.4 %
Net earnings from discontinued operations -   0.15   (0.15 ) (100.0 %)
Net earnings 0.09   0.14   (0.05 ) (33.0 %)
 
Diluted earnings (loss) per share:
Net earnings (loss) from continuing operations 0.09 (0.02 ) 0.11 622.0 %
Net earnings from discontinued operations -   0.15   (0.15 ) (100.0 %)
Net earnings 0.09   0.14   (0.05 ) (34.5 %)
 
Basic weighted average shares 77,446 77,960
 
Diluted weighted average shares 79,277 77,960
 
Some earnings per share amounts may not add due to rounding
 
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings (loss) per share)
       
 
For the Six Months Ended
September 30,
$ %
2016 2015 Variance   Variance
 
Revenues 432,068 404,240 27,828 6.9 %
 
Cost of revenue 242,924   239,021   3,903 1.6 %
Gross profit 189,144 165,219 23,925 14.5 %
% Gross margin 43.8 % 40.9 %
 
Operating expenses:
Research and development 37,681 39,089 (1,408 ) (3.6 %)
Sales and marketing 75,195 63,753 11,442 17.9 %
General and administrative 60,372 63,262 (2,890 ) (4.6 %)
Impairment of goodwill and other - 729 (729 ) (100.0 %)
Gains, losses and other items, net 614   3,311   (2,697 ) (81.5 %)
Total operating expenses 173,862   170,144   3,718 2.2 %
 
Income (loss) from operations 15,282 (4,925 ) 20,207 410.3 %
% Margin 3.5 % -1.2 %
Other income (expense):
Interest expense (3,501 ) (3,841 ) 340 8.9 %
Other, net 100   363   (263 ) (72.5 %)
Total other expense (3,401 ) (3,478 ) 77 2.2 %
 
Earnings (loss) from continuing operations before income taxes 11,881 (8,403 ) 20,284 241.4 %
 
Income taxes 765   (1,876 ) 2,641 140.8 %
 
Net earnings (loss) from continuing operations 11,116 (6,527 ) 17,643 270.3 %
 
Earnings from discontinued operations, net of tax -   16,211   (16,211 ) (100.0 %)
 
Net earnings 11,116   9,684   1,432 14.8 %
 
Basic earnings (loss) per share:
Net earnings (loss) from continuing operations 0.14 (0.08 ) 0.23 271.4 %
Net earnings from discontinued operations -   0.21   (0.21 ) (100.0 %)
Net earnings 0.14   0.12   0.02 15.5 %
 
Diluted earnings (loss) per share:
Net earnings (loss) from continuing operations 0.14 (0.08 ) 0.22 267.3 %
Net earnings from discontinued operations -   0.21   (0.21 ) (100.0 %)
Net earnings 0.14   0.12   0.02 12.8 %
 
Basic weighted average shares 77,459 77,939
 
Diluted weighted average shares 79,317 77,939
 
Some earnings 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 earnings (loss) per share)
       
For the Three Months Ended For the Six Months Ended
September 30, September 30,
2016 2015 2016 2015
 
 
Earnings (loss) from continuing operations before income taxes 5,224 (3,953 ) 11,881 (8,403 )
 
Income taxes (1,916 ) (2,608 ) 765   (1,876 )
 
Net earnings (loss) from continuing operations 7,140 (1,345 ) 11,116 (6,527 )
 
Earnings from discontinued operations, net of tax -   12,068   -   16,211  
 
Net earnings 7,140   10,723   11,116   9,684  
 
Earnings per share:
 
Basic 0.09   0.14   0.14   0.12  
 
Diluted 0.09   0.14   0.14   0.12  
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 3,890 3,754 7,967 7,508
Non-cash stock compensation (cost of revenue and operating expenses) 11,938 7,360 20,528 15,483
Impairment of goodwill and other - 729 - 729
Restructuring charges (gains, losses, and other) 929 2,504 1,243 3,311
Gain on sale of Impact (gains, losses, and other) (629 ) - (629 ) -
Separation and transformation costs (general and administrative) 1,455 6,098 1,455 9,512
Accelerated amortization (cost of revenue) -   78   -   1,520  
 
Total excluded items, continuing operations 17,583   20,523   30,564   38,063  
 

Earnings from continuing operations before income taxes and excluding items

22,807 16,570 42,445 29,660
 
Income taxes (2) 8,910   5,163   16,762   10,795  
 
Non-GAAP net earnings 13,897   11,407   25,683   18,865  
 
Non-GAAP earnings per share:
 
Basic 0.18   0.15   0.33   0.24  
 
Diluted 0.18   0.14   0.32   0.24  
 
Basic weighted average shares 77,446   77,960   77,459   77,939  
 
Diluted weighted average shares 79,277   79,310   79,317   79,331  
 

(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 39.1% and 31.2% in the second quarter of fiscal 2017 and 2016, respectively, and 39.5% and 36.4% for the six months ended September 30, 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 For the Six Months Ended
September 30, September 30,
2016 2015 2016 2015
 
 
Income (loss) from operations 7,120   (2,056 ) 15,282   (4,925 )
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 3,890 3,754 7,967 7,508
Non-cash stock compensation (cost of revenue and operating expenses) 11,938 7,360 20,528 15,483
Impairment of goodwill and other - 729 - 729
Restructuring charges (gains, losses, and other) 929 2,504 1,243 3,311
Gain on sale of Impact (gains, losses, and other) (629 ) - (629 ) -
Separation and transformation costs (general and administrative) 1,455 6,098 1,455 9,512
Accelerated amortization (cost of revenue) -   78   -   1,520  
 
Total excluded items, continuing operations 17,583   20,523   30,564   38,063  
 
Income from operations before excluded items 24,703   18,467   45,846   33,138  
 

(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
September 30,
$ %

 

2016 2015 Variance   Variance
 
Revenues
Marketing Services 105,679 112,979 (7,300 ) (6.5 %)
Audience Solutions 78,526 72,122 6,404 8.9 %
Connectivity 33,062   22,244   10,818 48.6 %
Total operating segment revenues 217,267 207,345 9,922 4.8 %
 
Gross profit
Marketing Services 34,480 37,545 (3,065 ) (8.2 %)
Audience Solutions 47,998 39,170 8,828 22.5 %
Connectivity 19,843   13,499   6,344 47.0 %
Total operating segment gross profit 102,321 90,214 12,107 13.4 %
 
Gross margin %
Marketing Services 32.6 % 33.2 %
Audience Solutions 61.1 % 54.3 %
Connectivity 60.0 % 60.7 %
Total operating segment gross margin 47.1 % 43.5 %
 
Income (loss) from operations
Marketing Services 19,837 17,908 1,929 10.8 %
Audience Solutions 29,972 25,190 4,782 19.0 %
Connectivity 1,663   (1,068 ) 2,731 255.7 %
Total operating segment income from operations 51,472 42,030 9,442 22.5 %
 
Operating income (loss) margin %
Marketing Services 18.8 % 15.9 %
Audience Solutions 38.2 % 34.9 %
Connectivity 5.0 % -4.8 %
Total operating segment operating margin 23.7 % 20.3 %
 
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
       
 
For the Six Months Ended
September 30,
$ %
2016 2015 Variance   Variance
 
Revenues
Marketing Services 215,394 220,705 (5,311 ) (2.4 %)
Audience Solutions 152,270 140,672 11,598 8.2 %
Connectivity 64,404   42,863   21,541 50.3 %
Total operating segment revenues 432,068 404,240 27,828 6.9 %
 
Gross profit
Marketing Services 71,946 73,579 (1,633 ) (2.2 %)
Audience Solutions 89,910 75,994 13,916 18.3 %
Connectivity 37,418   25,452   11,966 47.0 %
Total operating segment gross profit 199,274 175,025 24,249 13.9 %
 
Gross margin %
Marketing Services 33.4 % 33.3 %
Audience Solutions 59.0 % 54.0 %
Connectivity 58.1 % 59.4 %
Total operating segment gross margin 46.1 % 43.3 %
 
Income (loss) from operations
Marketing Services 39,982 34,761 5,221 15.0 %
Audience Solutions 55,068 49,277 5,791 11.8 %
Connectivity 1,954   (1,859 ) 3,813 205.1 %
Total operating segment income from operations 97,004 82,179 14,825 18.0 %
 
Operating income (loss) margin %
Marketing Services 18.6 % 15.7 %
Audience Solutions 36.2 % 35.0 %
Connectivity 3.0 % -4.3 %
Total operating segment operating margin 22.5 % 20.3 %
 
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF SEGMENT RESULTS
(Unaudited)
(Dollars in thousands)
       
For the Three Months Ended For the Six Months Ended
September 30, September 30,
 
2016 2015 2016 2015
 
Total operating segment gross profit 102,321 90,214 199,274 175,025
 
Less:
Purchased intangible asset amortization 3,890 3,754 7,967 7,508
Non-cash stock compensation 1,269 349 2,163 778
Accelerated amortization -   78   -   1,520  
 
Gross profit 97,162   86,033   189,144   165,219  
 
 
Total operating segment income from operations 51,472 42,030 97,004 82,179
 
Less:
Corporate expenses 26,769 23,563 51,158 49,041
Purchased intangible asset amortization 3,890 3,754 7,967 7,508
Non-cash stock compensation 11,938 7,360 20,528 15,483
Impairment of goodwill and other - 729 - 729
Restructuring charges 929 2,504 1,243 3,311
Gain on sale of Impact (629 ) - (629 ) -
Separation and transformation costs 1,455 6,098 1,455 9,512
Accelerated amortization -   78   -   1,520  
 
Income (loss) from operations 7,120   (2,056 ) 15,282   (4,925 )
 
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA (1)
(Unaudited)
(Dollars in thousands)
       
For the Three Months Ended For the Six Months Ended
September 30, September 30,
2016 2015 2016 2015
 
 
Net earnings (loss) from continuing operations 7,140 (1,345 ) 11,116 (6,527 )
 
Income taxes (1,916 ) (2,608 ) 765 (1,876 )
 
Other expense (1,896 ) (1,897 ) (3,401 ) (3,478 )
 
Income (loss) from operations 7,120 (2,056 ) 15,282 (4,925 )
 
Depreciation and amortization 20,360 20,635 41,150 42,410
Less:
Deferred interest amortization -   333   -   589  
Adjusted depreciation and amortization 20,360   20,302   41,150   41,821  
 
EBITDA 27,480   18,246   56,432   36,896  
 
 
Other adjustments:
Non-cash stock compensation (cost of revenue and operating expenses) 11,938 7,360 20,528 15,483
Impairment of goodwill and other - 729 - 729
Gains, losses, and other items, net 300 2,504 614 3,311
Separation and transformation costs (general and administrative) 1,455   6,098   1,455   9,512  
 
Other adjustments 13,693   16,691   22,597   29,035  
 
Adjusted EBITDA 41,173   34,937   79,029   65,931  
 

(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)
       
September 30, March 31, $ %
2016 2016 Variance   Variance

Assets

Current assets:
Cash and cash equivalents 175,409 189,629 (14,220 ) (7.5 %)
Trade accounts receivable, net 130,509 138,650 (8,141 ) (5.9 %)
Refundable income taxes 5,347 9,834 (4,487 ) (45.6 %)
Other current assets 42,916   37,897   5,019 13.2 %
 
Total current assets 354,181   376,010   (21,829 ) (5.8 %)
 
Property and equipment 521,793 528,675 (6,882 ) (1.3 %)
Less - accumulated depreciation and amortization 346,857   345,632   1,225 0.4 %
 
Property and equipment, net 174,936   183,043   (8,107 ) (4.4 %)
 
Software, net of accumulated amortization 45,048 55,735 (10,687 ) (19.2 %)
Goodwill 487,055 492,745 (5,690 ) (1.2 %)
Purchased software licenses, net of accumulated amortization 8,792 10,116 (1,324 ) (13.1 %)
Deferred income taxes 10,038 6,885 3,153 45.8 %
Other assets, net 22,007   25,315   (3,308 ) (13.1 %)
 
1,102,057   1,149,849   (47,792 ) (4.2 %)
 

Liabilities and Stockholders' Equity

Current liabilities:
Current installments of long-term debt 32,281 32,243 38 0.1 %
Trade accounts payable 36,300 37,717 (1,417 ) (3.8 %)
Accrued payroll and related expenses 35,413 61,309 (25,896 ) (42.2 %)
Other accrued expenses 46,581 48,254 (1,673 ) (3.5 %)
Deferred revenue 33,394   44,477   (11,083 ) (24.9 %)
 
Total current liabilities 183,969   224,000   (40,031 ) (17.9 %)
 
Long-term debt 142,341 157,897 (15,556 ) (9.9 %)
 
Deferred income taxes 53,532 53,964 (432 ) (0.8 %)
 
Other liabilities 14,727 15,020 (293 ) (2.0 %)
 
Stockholders' equity:
Common stock 13,190 13,039 151 1.2 %
Additional paid-in capital 1,115,194 1,082,220 32,974 3.0 %
Retained earnings 609,617 598,501 11,116 1.9 %
Accumulated other comprehensive income 7,616 8,590 (974 ) (11.3 %)
Treasury stock, at cost (1,038,129 ) (1,003,382 ) (34,747 ) (3.5 %)
Total stockholders' equity 707,488   698,968   8,520 1.2 %
 
1,102,057   1,149,849   (47,792 ) (4.2 %)
 
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
   
For the Three Months Ended
September 30,
2016   2015
 
Cash flows from operating activities:
Net earnings 7,140 10,723
Earnings from discontinued operations, net of tax - (12,068 )
Non-cash operating activities:
Depreciation and amortization 20,360 20,635
Loss (gain) on disposal or impairment of assets (629 ) (57 )
Impairment of goodwill and other - 729
Deferred income taxes (5,861 ) 1,806
Non-cash stock compensation expense 11,914 7,360
Changes in operating assets and liabilities:
Accounts receivable (11,051 ) (1,244 )
Other assets (1,704 ) (2,405 )
Accounts payable and other liabilities 19,241 (6,829 )
Deferred revenue (3,928 ) 2,707  
Net cash provided by operating activities 35,482   21,357  
Cash flows from investing activities:
Capitalized software (3,893 ) (3,936 )
Capital expenditures (9,845 ) (10,244 )
Data acquisition costs (247 ) (281 )
Net cash received in disposition 16,988   -  
Net cash provided by (used in) investing activities 3,003   (14,461 )
Cash flows from financing activities:
Payments of debt (8,058 ) (63,039 )
Sale of common stock, net of stock acquired for withholding taxes 4,326 2,033
Excess tax benefits from share-based compensation 901 (475 )
Acquisition of treasury stock (10,335 ) (12,310 )
Net cash used in financing activities (13,166 ) (73,791 )
Cash flows from discontinued operations:
From operating activities - (1,938 )
From investing activities - 127,315
From financing activities -   (53 )
Net cash provided by discontinued operations -   125,324  
Effect of exchange rate changes on cash (70 ) (676 )
 
Net change in cash and cash equivalents 25,249 57,753
Cash and cash equivalents at beginning of period 150,160   123,192  
Cash and cash equivalents at end of period 175,409   180,945  
 
Supplemental cash flow information:
Cash paid during the period for:
Interest 1,704 2,152
Income taxes 273 6,310
Prepayment of debt - 55,000
Payments on capital leases and installment payment arrangements - 53
Other debt payments, excluding line of credit 8,058 8,039
 
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
   
For the Six Months Ended
September 30,
2016   2015
 
Cash flows from operating activities:
Net earnings 11,116 9,684
Earnings from discontinued operations, net of tax - (16,211 )
Non-cash operating activities:
Depreciation and amortization 41,150 42,410
Loss (gain) on disposal or impairment of assets (629 ) 161
Impairment of goodwill and other - 729
Deferred income taxes (6,539 ) 284
Non-cash stock compensation expense 20,504 15,483
Changes in operating assets and liabilities:
Accounts receivable (1,564 ) (9,281 )
Other assets 3,679 (2,021 )
Accounts payable and other liabilities (21,780 ) (10,336 )
Deferred revenue (9,705 ) 2,452  
Net cash provided by operating activities 36,232   33,354  
Cash flows from investing activities:
Capitalized software (7,875 ) (6,733 )
Capital expenditures (20,539 ) (23,120 )
Data acquisition costs (267 ) (711 )
Net cash received in disposition 16,988   -  
Net cash used in investing activities (11,693 ) (30,564 )
Cash flows from financing activities:
Payments of debt (16,111 ) (71,138 )
Sale of common stock, net of stock acquired for withholding taxes 7,300 4,102
Excess tax benefits from share-based compensation 1,415 (552 )
Acquisition of treasury stock (30,542 ) (27,261 )
Net cash used in financing activities (37,938 ) (94,849 )
Cash flows from discontinued operations:
From operating activities - 9,715
From investing activities - 122,831
From financing activities -   (206 )
Net cash provided by discontinued operations -   132,340  
Effect of exchange rate changes on cash (821 ) (346 )
 
Net change in cash and cash equivalents (14,220 ) 39,935
Cash and cash equivalents at beginning of period 189,629   141,010  
Cash and cash equivalents at end of period 175,409   180,945  
 
Supplemental cash flow information:
Cash paid during the period for:
Interest 3,962 4,337
Income taxes 197 5,266
Prepayment of debt - 55,000
Payments on capital leases and installment payment arrangements - 269
Other debt payments, excluding line of credit 16,111 16,075
 
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   YTD FY2017
 
Net Cash Provided by Operating Activities 11,997 21,357 37,018 43,270 113,642 750 35,482 36,232
 
Less (plus):
Capitalized software (2,797 ) (3,936 ) (3,627 ) (4,520 ) (14,880 ) (3,982 ) (3,893 ) (7,875 )
Capital expenditures (12,876 ) (10,244 ) (10,702 ) (13,601 ) (47,423 ) (10,694 ) (9,845 ) (20,539 )
Data acquisition costs (430 ) (281 ) (424 ) (418 ) (1,553 ) (20 ) (247 ) (267 )
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 ) (16,111 )
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     8,428  
 

(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)
 
                            Q2 FY17 to Q2 FY16
06/30/15   09/30/15   12/31/15   03/31/16   FY2016 06/30/16   09/30/16   YTD FY2017 %   $
Revenues 196,895 207,345 221,193 224,655 850,088 214,801 217,267 432,068 4.8 % 9,922
 
Cost of revenue 117,709     121,312     125,735     123,626     488,382   122,819     120,105     242,924   -1.0 % (1,207 )
Gross profit 79,186 86,033 95,458 101,029 361,706 91,982 97,162 189,144 12.9 % 11,129
% Gross margin 40.2 % 41.5 % 43.2 % 45.0 % 42.5 % 42.8 % 44.7 % 43.8 %
 
Operating expenses
Research and development 20,011 19,078 18,400 16,758 74,247 18,652 19,029 37,681 -0.3 % (49 )
Sales and marketing 29,494 34,259 36,581 45,842 146,176 37,348 37,847 75,195 10.5 % 3,588
General and administrative 31,743 31,519 36,793 35,330 135,385 27,506 32,866 60,372 4.3 % 1,347
Impairment of goodwill and other - 729 - 6,100 6,829 - - - -100.0 % (729 )
Gains, losses and other items, net 807     2,504     4,058     4,763     12,132   314     300     614   -88.0 % (2,204 )
Total operating expenses 82,055 88,089 95,832 108,793 374,769 83,820 90,042 173,862 2.2 % 1,953
 
Income (loss) from operations (2,869 ) (2,056 ) (374 ) (7,764 ) (13,063 ) 8,162 7,120 15,282 446.3 % 9,176
% Margin -1.5 % -1.0 % -0.2 % -3.5 % -1.5 % 3.8 % 3.3 % 3.5 %
Other income (expense)
Interest expense (1,885 ) (1,956 ) (1,948 ) (1,880 ) (7,669 ) (1,812 ) (1,689 ) (3,501 ) 13.7 % 267
Other, net 304     59     303     (214 )   452   307     (207 )   100   -450.8 % (266 )
Total other expense (1,581 ) (1,897 ) (1,645 ) (2,094 ) (7,217 ) (1,505 ) (1,896 ) (3,401 ) 0.1 % 1
 
Earnings (loss) from continuing operations before income taxes (4,450 ) (3,953 ) (2,019 ) (9,858 ) (20,280 ) 6,657 5,224 11,881 232.2 % 9,177
Income taxes 732     (2,608 )   (1,580 )   (8,176 )   (11,632 ) 2,681     (1,916 )   765   26.5 % 692
 
Net earnings (loss) from continuing operations (5,182 ) (1,345 ) (439 ) (1,682 ) (8,648 ) 3,976 7,140 11,116 630.9 % 8,485
 
Earnings (loss) from discontinued operations, net of tax 4,143     12,068     (971 )   111     15,351   -     -     -   -100.0 % (12,068 )
 
Net earnings (loss) (1,039 ) 10,723 (1,410 ) (1,571 ) 6,703 3,976 7,140 11,116 -33.4 % (3,583 )
 
Diluted earnings (loss) per share (0.01 )   0.14     (0.02 )   (0.02 )   0.09   0.05     0.09     0.14   -34.5 % (0.05 )
 
Diluted earnings (loss) per share continuing operations (0.07 )   (0.02 )   (0.01 )   (0.02 )   (0.11 ) 0.05     0.09     0.14   622.0 % 0.11
 
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 earnings (loss) per share)
 
 
                           
06/30/15   09/30/15   12/31/15   03/31/16   FY2016 06/30/16   09/30/16   YTD FY2017
 
 
Earnings (loss) from continuing operations before income taxes (4,450 ) (3,953 ) (2,019 ) (9,858 ) (20,280 ) 6,657 5,224 11,881
 
Income taxes 732     (2,608 )   (1,580 )   (8,176 )   (11,632 ) 2,681   (1,916 )   765  
 
Net earnings (loss) from continuing operations (5,182 ) (1,345 ) (439 ) (1,682 ) (8,648 ) 3,976 7,140 11,116
 
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     11,116  
 
Earnings (loss) per share:
 
Basic (0.01 )   0.14     (0.02 )   (0.02 )   0.09   0.05   0.09     0.14  
 
Diluted (0.01 )   0.14     (0.02 )   (0.02 )   0.09   0.05   0.09     0.14  
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 3,754 3,754 3,754 4,204 15,466 4,077 3,890 7,967
Non-cash stock compensation (cost of revenue and operating expenses) 8,123 7,360 8,046 7,934 31,463 8,590 11,938 20,528
Impairment of goodwill and other - 729 - 6,100 6,829 - - -
Restructuring charges (gains, losses, and other) 807 2,504 4,058 4,763 12,132 314 929 1,243
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 1,455
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     30,564  
 

Earnings from continuing operations before income taxes and excluding items

13,090 16,570 20,545 18,081 68,286 19,638 22,807 42,445
 
Income taxes 5,632     5,163     6,399     4,262     21,456   7,852   8,910     16,762  
 
Non-GAAP net earnings 7,458     11,407     14,146     13,819     46,830   11,786   13,897     25,683  
 
Non-GAAP earnings per share:
 
Basic 0.10     0.15     0.18     0.18     0.60   0.15   0.18     0.33  
 
Diluted 0.09     0.14     0.18     0.18     0.59   0.15   0.18     0.32  
 
Basic weighted average shares 77,918     77,960     77,831     76,753     77,616   77,471   77,446     77,459  
 
Diluted weighted average shares 79,352     79,310     79,346     78,386     79,099   79,353   79,277     79,317  
 
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)
                                          Q2 FY17 to Q2 FY16
06/30/15   09/30/15   12/31/15   03/31/16   FY2016 06/30/16   09/30/16   YTD FY2017 %   $
             
Revenues:
Marketing Services 107,726 112,979 115,725 113,342 449,772 109,715 105,679 215,394 -6.5 % (7,300 )
Audience Solutions 68,550 72,122 77,046 80,128 297,846 73,744 78,526 152,270 8.9 % 6,404
Connectivity 20,619     22,244     28,422     31,185     102,470   31,342     33,062     64,404   48.6 % 10,818
 
Total operating segment revenues 196,895     207,345     221,193     224,655     850,088   214,801     217,267     432,068   4.8 % 9,922
 
Gross profit:
 
Marketing Services 36,034 37,545 38,561 40,117 152,257 37,466 34,480 71,946 -8.2 % (3,065 )
Audience Solutions 36,824 39,170 45,265 46,457 167,716 41,912 47,998 89,910 22.5 % 8,828
Connectivity 11,953     13,499     16,130     19,617     61,199   17,575     19,843     37,418   47.0 % 6,344
 
Total operating segment gross profit 84,811     90,214     99,956     106,191     381,172   96,953     102,321     199,274   13.4 % 12,107
 
Gross margin:
 
Marketing Services 33.4 % 33.2 % 33.3 % 35.4 % 33.9 % 34.1 % 32.6 % 33.4 %
Audience Solutions 53.7 % 54.3 % 58.8 % 58.0 % 56.3 % 56.8 % 61.1 % 59.0 %
Connectivity 58.0 % 60.7 % 56.8 % 62.9 % 59.7 % 56.1 % 60.0 % 58.1 %
 
Total operating segment gross margin 43.1 % 43.5 % 45.2 % 47.3 % 44.8 % 45.1 % 47.1 % 46.1 %
 
Income (loss) from operations:
 
Marketing Services 16,853 17,908 20,309 19,301 74,371 20,145 19,837 39,982 10.8 % 1,929
Audience Solutions 24,087 25,190 30,723 29,598 109,598 25,096 29,972 55,068 19.0 % 4,782
Connectivity (791 )   (1,068 )   (1,015 )   (424 )   (3,298 ) 291     1,663     1,954   255.7 % 2,731
 
Total operating segment income from operations 40,149     42,030     50,017     48,475     180,671   45,532     51,472     97,004   22.5 % 9,442
 
Operating income (loss) margin:
 
Marketing Services 15.6 % 15.9 % 17.5 % 17.0 % 16.5 % 18.4 % 18.8 % 18.6 %
Audience Solutions 35.1 % 34.9 % 39.9 % 36.9 % 36.8 % 34.0 % 38.2 % 36.2 %
Connectivity -3.8 % -4.8 % -3.6 % -1.4 % -3.2 % 0.9 % 5.0 % 3.0 %
 
Total operating segment operating margin 20.4 % 20.3 % 22.6 % 21.6 % 21.3 % 21.2 % 23.7 % 22.5 %
 
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 11,000
 
Income taxes   1,700
 
Net earnings   9,300
 
Diluted earnings per share $ 0.12
 
Excluded items:
Purchased intangible asset amortization 16,000
Non-cash stock compensation 42,000
Restructuring charges and gain on sale of Impact 1,000
Separation and transformation costs   10,000
 
Total excluded items   69,000
 
Earnings before income taxes and excluding items 80,000
 
Income taxes (2)   32,000
 
Non-GAAP net earnings   48,000
 
Non-GAAP diluted earnings per share $ 0.60
 
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 40.0%. 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.

APPENDIX A

ACXIOM CORPORATION
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.

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.

Contacts

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

Contacts

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