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Acxiom Announces First Quarter Results

Posted: August 4, 2016 8:57 pm (UTC)


Total Revenue Grows 9% Year-over-Year

Enters Into Definitive Agreement to Sell Impact Email Business

Expands Share Repurchase Program

Acxiom Announces First Quarter Results

LITTLE ROCK, Ark. — (BUSINESS WIRE) —

Acxiom® (Nasdaq: ACXM), an enterprise data, analytics and software-as-a-service company, today announced financial results for its first quarter ended June 30, 2016.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20160804006428/en/

Financial Highlights

  • Revenue: Total revenue was $215 million, up 9% compared to the first quarter of last year driven by growth in each segment. US revenue of $197 million was up 11% year-over-year.
  • Operating Income (Loss): GAAP operating income from continuing operations improved to $8 million compared to a loss of $3 million in the prior year. Non-GAAP operating income from continuing operations improved 44% to approximately $21 million.
  • Earnings (Loss) per Share: GAAP diluted earnings per share from continuing operations were $0.05 compared to a loss per share of $0.07 in the prior year. Non-GAAP diluted earnings per share from continuing operations were $0.15, up from $0.09 a year ago.
  • Operating Cash Flow: Operating cash flow from continuing operations was $1 million, down from $12 million last year. For the trailing twelve-month period, operating cash flow from continuing operations was $102 million, up from $89 million in the comparable period.
  • Free Cash Flow to Equity: Free cash flow to equity was negative $22 million compared to negative $12 million in the prior year. For the trailing twelve-month period, free cash flow to equity was $8 million, up from negative $12 million in the comparable period.

Segment Results

Marketing Services

  • Revenue was $110 million, up 2% compared to the first quarter of last year. Marketing Database and Consulting revenue grew 8% year-over-year, but was offset by declines in Acxiom Impact. US revenue of $102 million was up 4% year-over-year.
  • Gross margin improved from 33% to 34%.
  • Segment income was $20 million, up 20% compared to the prior year.

Audience Solutions

  • Revenue was $74 million, up 8% compared to the prior year. US revenue of $66 million was up 9% year-over-year.
  • Gross margin improved from 54% to 57%.
  • Segment income was $25 million, up 4% compared to the prior year.

Connectivity

  • Revenue was $31 million, up 52% compared to the first quarter of last year. Connectivity exited the quarter with a $120 million annualized revenue run rate.
  • Gross margin declined from 58% to 56%.
  • Segment income was break-even 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.

“I am pleased to report a solid first quarter, highlighted by strong financial performance, new partnerships and continued product innovation,” said Acxiom CEO Scott Howe. “Fiscal 2017 is off to a good start, and we are focused on extending our early momentum through the remainder of the year.”

Recent Business Highlights

  • Connectivity added more than 20 new 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 350 marketing platforms and data providers.
  • LiveRamp™ extended its data connectivity partnership with Google, adding Customer Match to an extensive set of integrations that include Google Analytics 360 Suite, Google DoubleClick Digital Marketing solutions and Google Store Transactions for both AdWords and DoubleClick Search. The new integration with Google Customer Match enables brands to activate their first-party data for targeting across YouTube, Search and Gmail.
  • LiveRamp announced a new integration with Facebook’s Offline Conversions API, allowing clients to connect Facebook advertising campaigns with offline sales transactions taking place in stores, branch offices, contact centers and other brick-and-mortar locations.
  • Acxiom announced strategic “next-gen” enhancements to its proprietary recognition technology, AbiliTec®, improving marketers’ ability to bring together disparate consumer data sources for a single, current and accurate view of a customer across all channels.
  • Acxiom repurchased 926,000 shares for approximately $20 million during the quarter. Since inception of the share repurchase program in August 2011, Acxiom has repurchased 16.4 million shares for $275 million.

Acxiom Impact Divestiture

Acxiom also announced that it has entered into a definitive agreement to sell its Impact email business (Acxiom Impact) to Zeta Interactive. In addition, Acxiom will enter into a separate multi-year contract to provide Zeta Interactive with Connectivity and Audience Solutions services. The transaction sharpens Acxiom’s focus on providing the data foundation for the world’s best marketers and opens the door to deeper partnerships with the marketing ecosystem.

The sale is expected to close in the second quarter of fiscal 2017, following the satisfaction of customary closing conditions.

Acxiom will use proceeds from the sale to help fund the expansion of its share repurchase program. As part of the revised program, Acxiom’s Board of Directors has increased the share repurchase authorization by $100 million to $400 million and extended the duration of the program through June 30, 2018. The company is authorized to repurchase shares from time to time in open market or privately negotiated transactions, depending on prevailing market conditions and other factors. The repurchase program may be suspended or discontinued at any time.

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. Acxiom’s fiscal 2017 guidance assumes that the sale of Acxiom Impact will close on September 30, 2016.

For fiscal 2017, Acxiom now expects to report:

  • Revenue in the range of $850 million to $870 million
  • GAAP diluted earnings per share in the range of $0.10 to $0.14
  • Non-GAAP diluted earnings per share in the range of $0.55 to $0.60

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 an enterprise data, analytics and software-as-a-service company that uniquely fuses trust, experience and scale to fuel data-driven results. For over 45 years, Acxiom has been an innovator in harnessing the most important sources and uses of data to strengthen connections between people, businesses and their partners. Utilizing a channel and media neutral approach, we leverage cutting-edge, data-oriented products and services to maximize customer value. Every week, Acxiom powers more than a trillion transactions that enable better living for people and better results for our 3,250+ global clients. 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 we will not complete the sale of Acxiom Impact within the anticipated timeframe; 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
June 30,
$ %
2016   2015   Variance       Variance
 
Revenues 214,801 196,895 17,906 9.1 %
 
Cost of revenue 122,819   117,709   5,110 4.3 %
Gross profit 91,982 79,186 12,796 16.2 %
% Gross margin 42.8 % 40.2 %
 
Operating expenses:
Research and development 18,652 20,011 (1,359 ) (6.8 %)
Sales and marketing 37,348 29,494 7,854 26.6 %
General and administrative 27,506 31,743 (4,237 ) (13.3 %)
Gains, losses and other items, net 314   807   (493 ) (61.1 %)
Total operating expenses 83,820   82,055   1,765 2.2 %
 
Income (loss) from operations 8,162 (2,869 ) 11,031 384.5 %
% Margin 3.8 % -1.5 %
Other income (expense):
Interest expense (1,812 ) (1,885 ) 73 3.9 %
Other, net 307   304   3 1.0 %
Total other expense (1,505 ) (1,581 ) 76 4.8 %
 
Earnings (loss) from continuing operations before income taxes 6,657 (4,450 ) 11,107 249.6 %
 
Income taxes 2,681   732   1,949 266.3 %
 
Net earnings (loss) from continuing operations 3,976 (5,182 ) 9,158 176.7 %
 
Earnings from discontinued operations, net of tax   4,143   (4,143 ) (100.0 %)
 
Net earnings (loss) 3,976   (1,039 ) 5,015 482.7 %
 
Basic earnings (loss) per share:
Net earnings (loss) from continuing operations 0.05 (0.07 ) 0.12 177.2 %
Net earnings from discontinued operations   0.05   (0.05 ) (100.0 %)
Net earnings (loss) 0.05   (0.01 ) 0.06 484.9 %
 
Diluted earnings (loss) per share:
Net earnings (loss) from continuing operations 0.05 (0.07 ) 0.12 175.3 %
Net earnings from discontinued operations   0.05   (0.05 ) (100.0 %)
Net earnings (loss) 0.05   (0.01 ) 0.06 475.8 %
 
Basic weighted average shares 77,471 77,918
 
Diluted weighted average shares 79,353 77,918
 
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)
 
For the Three Months Ended
June 30,
2016 2015  
 
 
Earnings (loss) from continuing operations before income taxes 6,657 (4,450 )
 
Income taxes 2,681 732  
 
Net earnings (loss) from continuing operations 3,976 (5,182 )
 
Earnings from discontinued operations, net of tax 4,143  
 
Net earnings (loss) 3,976 (1,039 )
 
Earnings (loss) per share:
 
Basic 0.05 (0.01 )
 
Diluted 0.05 (0.01 )
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 4,077 3,754
Non-cash stock compensation (cost of revenue and operating expenses) 8,590 8,123
Restructuring charges and other adjustments (gains, losses, and other) 314 807
Separation and transformation costs (general and administrative) 3,414
Accelerated amortization (cost of revenue) 1,442  
 
Total excluded items, continuing operations 12,981 17,540  
 
Earnings from continuing operations before income taxes
and excluding items 19,638 13,090
 
Income taxes (2) 7,852 5,632  
 
Non-GAAP net earnings 11,786 7,458  
 
Non-GAAP earnings per share:
 
Basic 0.15 0.10  
 
Diluted 0.15 0.09  
 
Basic weighted average shares 77,471 77,918  
 
Diluted weighted average shares 79,353 79,352  

 

 

(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 reflecting an effective non-GAAP tax rate of 40.0% and 43.0% in the first quarter of fiscal 2017 and 2016, respectively. The difference between our GAAP and non-GAAP tax rates in the first quarter of fiscal 2017 and 2016 were primarily due to the net tax effects of excluded items.

                           
 
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
 
 
For the Three Months Ended
June 30,
$ %
2016   2015   Variance     Variance
 
Revenues
Marketing Services 109,715 107,726 1,989 1.8 %
Audience Solutions 73,744 68,550 5,194 7.6 %
Connectivity 31,342   20,619   10,723 52.0 %
Total operating segment revenues 214,801 196,895 17,906 9.1 %
 
Gross profit
Marketing Services 37,466 36,034 1,432 4.0 %
Audience Solutions 41,912 36,824 5,089 13.8 %
Connectivity 17,575   11,953   5,622 47.0 %
Total operating segment gross profit 96,953 84,811 12,142 14.3 %
 
Gross profit margin %
Marketing Services 34.1 % 33.4 %
Audience Solutions 56.8 % 53.7 %
Connectivity 56.1 % 58.0 %
Total operating segment gross margin 45.1 % 43.1 %
 
Income (loss) from operations
Marketing Services 20,145 16,853 3,292 19.5 %
Audience Solutions 25,096 24,087 1,009 4.2 %
Connectivity 291   (791 ) 1,082 136.8 %
Total operating segment income from operations 45,532 40,149 5,383 13.4 %
 
Operating income (loss) margin %
Marketing Services 18.4 % 15.6 %
Audience Solutions 34.0 % 35.1 %
Connectivity 0.9 % -3.8 %
Total operating segment operating margin 21.2 % 20.4 %
           
 
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF SEGMENT RESULTS
(Unaudited)
(Dollars in thousands)
 
For the Three Months Ended
June 30,
2016 2015
 
Total operating segment gross profit 96,953 84,811
 
Less:
Purchased intangible asset amortization 4,077 3,754
Non-cash stock compensation 894 429
Accelerated amortization 1,442
 
Gross profit 91,982 79,186
 
 
Total operating segment income from operations 45,532 40,149
 
Less:
Corporate expenses 24,389 25,478
Purchased intangible asset amortization 4,077 3,754
Non-cash stock compensation 8,590 8,123
Restructuring charges and other adjustments 314 807
Separation and transformation costs 3,414
Accelerated amortization 1,442
 
Income (loss) from operations 8,162 (2,869)
               
 
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA (1)
(Unaudited)
(Dollars in thousands)
 
For the Three Months Ended
June 30,
2016   2015  
 
 
Net earnings (loss) from continuing operations 3,976 (5,182 )
 
Income taxes 2,681 732
 
Other expense (1,505 ) (1,581 )
 
Income (loss) from operations 8,162 (2,869 )
 
Depreciation and amortization 20,790 21,775
Less:
Deferred interest amortization   256  
Adjusted depreciation and amortization 20,790   21,519  
 
EBITDA 28,952   18,650  
 
 
Other adjustments:
Non-cash stock compensation (cost of revenue and operating expenses) 8,590 8,123
Restructuring charges and other adjustments (gains, losses, and other) 314 807
Separation and transformation costs (general and administrative)   3,414  
 
Other adjustments 8,904   12,344  
 
Adjusted EBITDA 37,856   30,994  
 

 

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

Assets

Current assets:
Cash and cash equivalents 150,160 189,629 (39,469 ) (20.8 %)
Trade accounts receivable, net 127,655 138,650 (10,995 ) (7.9 %)
Refundable income taxes 7,606 9,834 (2,228 ) (22.7 %)
Other current assets 34,919   37,897   (2,978 ) (7.9 %)
 
Total current assets 320,340   376,010   (55,670 ) (14.8 %)
 
Property and equipment 530,588 528,675 1,913 0.4 %
Less – accumulated depreciation and amortization 351,377   345,632   5,745 1.7 %
 
Property and equipment, net 179,211   183,043   (3,832 ) (2.1 %)
 
Software, net of accumulated amortization 52,537 55,735 (3,198 ) (5.7 %)
Goodwill 492,598 492,745 (147 ) (0.0 %)
Purchased software licenses, net of accumulated amortization 9,561 10,116 (555 ) (5.5 %)
Deferred income taxes 6,170 6,885 (715 ) (10.4 %)
Other assets, net 23,547   25,315   (1,768 ) (7.0 %)
 
1,083,964   1,149,849   (65,885 ) (5.7 %)
 

Liabilities and Stockholders’ Equity

Current liabilities:
Current installments of long-term debt 32,262 32,243 19 0.1 %
Trade accounts payable 26,216 37,717 (11,501 ) (30.5 %)
Accrued payroll and related expenses 27,733 61,309 (33,576 ) (54.8 %)
Other accrued expenses 47,977 48,254 (277 ) (0.6 %)
Deferred revenue 38,378   44,477   (6,099 ) (13.7 %)
 
Total current liabilities 172,566   224,000   (51,434 ) (23.0 %)
 
Long-term debt 150,124 157,897 (7,773 ) (4.9 %)
 
Deferred income taxes 52,571 53,964 (1,393 ) (2.6 %)
 
Other liabilities 14,939 15,020 (81 ) (0.5 %)
 
Stockholders’ equity:
Common stock 13,102 13,039 63 0.5 %
Additional paid-in capital 1,095,510 1,082,220 13,290 1.2 %
Retained earnings 602,477 598,501 3,976 0.7 %
Accumulated other comprehensive income 7,590 8,590 (1,000 ) (11.6 %)
Treasury stock, at cost (1,024,915 ) (1,003,382 ) (21,533 ) (2.1 %)
Total stockholders’ equity 693,764   698,968   (5,204 ) (0.7 %)
 
1,083,964   1,149,849   (65,885 ) (5.7 %)
               
 
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
 
For the Three Months Ended
June 30,
2016         2015  
 
Cash flows from operating activities:
Net earnings (loss) 3,976 (1,039 )
Earnings from discontinued operations, net of tax (4,143 )
Non-cash operating activities:
Depreciation and amortization 20,790 21,775
Loss on disposal or impairment of assets 241
Deferred income taxes (678 ) (1,522 )
Non-cash stock compensation expense 8,590 8,123
Changes in operating assets and liabilities:
Accounts receivable 9,487 (8,037 )
Other assets 5,383 384
Accounts payable and other liabilities (41,021 ) (3,530 )
Deferred revenue (5,777 ) (255 )
Net cash provided by operating activities 750   11,997  
Cash flows from investing activities:
Capitalized software (3,982 ) (2,797 )
Capital expenditures (10,694 ) (12,876 )
Data acquisition costs (20 ) (430 )
Net cash used in investing activities (14,696 ) (16,103 )
Cash flows from financing activities:
Payments of debt (8,053 ) (8,099 )
Sale of common stock, net of stock acquired for withholding taxes 2,974 2,069
Excess tax benefits from share-based compensation 514 (77 )
Acquisition of treasury stock (20,207 ) (14,951 )
Net cash used in financing activities (24,772 ) (21,058 )
Cash flows from discontinued operations:
From operating activities 11,653
From investing activities (4,484 )
From financing activities   (153 )
Net cash provided by discontinued operations   7,016  
Effect of exchange rate changes on cash (751 ) 330  
 
Net change in cash and cash equivalents (39,469 ) (17,818 )
Cash and cash equivalents at beginning of period 189,629   141,010  
Cash and cash equivalents at end of period 150,160   123,192  
 
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest 2,258 2,185
Income taxes (76 ) (1,044 )
Payments on capital leases and installment payment arrangements 216
Other debt payments, excluding line of credit 8,053 8,036
                               
 
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
 
GAAP Net Cash Provided by Operating Activities 11,997 21,357 37,018 43,270 113,642 750
 
Less:
Capitalized software (2,797) (3,936) (3,627) (4,520) (14,880) (3,982)
Capital expenditures (12,876) (10,244) (10,702) (13,601) (47,423) (10,694)
Data acquisition costs (430) (281) (424) (418) (1,553) (20)
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)
 
Free Cash Flow to Equity (12,205)     (1,143)     14,220     16,683     17,555 (21,999)
 

 

                                           
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS-GAAP
(Unaudited)
(Dollars in thousands, except earnings (loss) per share)
 
                            Q1 FY17 to Q1 FY16
06/30/15       09/30/15       12/31/15       03/31/16       FY2016 06/30/16   %       $  
Revenues 196,895 207,345 221,193 224,655 850,088 214,801 9.1 % 17,906
 
Cost of revenue 117,709   121,312   125,735   123,626   488,382   122,819   4.3 % 5,110
Gross profit 79,186 86,033 95,458 101,029 361,706 91,982 16.2 % 12,796
% Gross margin 40.2 % 41.5 % 43.2 % 45.0 % 42.5 % 42.8 %
 
Operating expenses
Research and development 20,011 19,078 18,400 16,758 74,247 18,652 -6.8 % (1,359 )
Sales and marketing 29,494 34,259 36,581 45,842 146,176 37,348 26.6 % 7,854
General and administrative 31,743 31,519 36,793 35,330 135,385 27,506 -13.3 % (4,237 )
Impairment of goodwill and other 729 6,100 6,829
Gains, losses and other items, net 807       2,504       4,058       4,763       12,132   314   -61.1 % (493 )
Total operating expenses 82,055 88,089 95,832 108,793 374,769 83,820 2.2 % 1,765
 
Income (loss) from operations (2,869 ) (2,056 ) (374 ) (7,764 ) (13,063 ) 8,162 384.5 % 11,031
% Margin -1.5 % -1.0 % -0.2 % -3.5 % -1.5 % 3.8 %
Other income (expense)
Interest expense (1,885 ) (1,956 ) (1,948 ) (1,880 ) (7,669 ) (1,812 ) 3.9 % 73
Other, net 304       59       303       (214 )     452   307   1.0 % 3
Total other expense (1,581 ) (1,897 ) (1,645 ) (2,094 ) (7,217 ) (1,505 ) 4.8 % 76
 
Earnings (loss) from continuing operations before income taxes (4,450 ) (3,953 ) (2,019 ) (9,858 ) (20,280 ) 6,657 249.6 % 11,107
Income taxes 732       (2,608 )     (1,580 )     (8,176 )     (11,632 ) 2,681   266.3 % 1,949
 
Net earnings (loss) from continuing operations (5,182 ) (1,345 ) (439 ) (1,682 ) (8,648 ) 3,976 176.7 % 9,158
 
Earnings (loss) from discontinued operations, net of tax 4,143       12,068       (971 )     111       15,351     -100.0 % (4,143 )
 
Net earnings (loss) (1,039 ) 10,723 (1,410 ) (1,571 ) 6,703 3,976 482.7 % 5,015
 
Diluted earnings (loss) per share (0.01 )     0.14       (0.02 )     (0.02 )     0.09   0.05   475.8 % 0.06
 
Diluted earnings (loss) per share continuing operations (0.07 )     (0.02 )     (0.01 )     (0.02 )     (0.11 ) 0.05   175.3 % 0.12
 
Some earnings (loss) per share amounts may not add due to rounding
                           
 
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP EPS
(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
 
 
Earnings (loss) from continuing operations before income taxes (4,450 ) (3,953 ) (2,019 ) (9,858 ) (20,280 ) 6,657
 
Income taxes 732       (2,608 )     (1,580 )     (8,176 )     (11,632 ) 2,681
 
Net earnings (loss) from continuing operations (5,182 ) (1,345 ) (439 ) (1,682 ) (8,648 ) 3,976
 
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
 
Earnings (loss) per share:
 
Basic (0.01 )     0.14       (0.02 )     (0.02 )     0.09   0.05
 
Diluted (0.01 )     0.14       (0.02 )     (0.02 )     0.09   0.05
 
Excluded items:
Purchased intangible asset amortization (cost of revenue) 3,754 3,754 3,754 4,204 15,466 4,077
Non-cash stock compensation (cost of revenue and operating expenses) 8,123 7,360 8,046 7,934 31,463 8,590
Impairment of goodwill and other 729 6,100 6,829
Restructuring charges and other adjustments (gains, losses, and other) 807 2,504 4,058 4,763 12,132 314
Separation and transformation costs (general and administrative) 3,414 6,098 6,628 4,686 20,826
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
 
Earnings from continuing operations before income taxes
and excluding items 13,090 16,570 20,545 18,081 68,286 19,638
 
Income taxes 5,632       5,163       6,399       4,262       21,456   7,852
 
Non-GAAP net earnings 7,458       11,407       14,146       13,819       46,830   11,786
 
Non-GAAP earnings per share:
 
Basic 0.10       0.15       0.18       0.18       0.60   0.15
 
Diluted 0.09       0.14       0.18       0.18       0.59   0.15
 
Basic weighted average shares 77,918       77,960       77,831       76,753       77,616   77,471
 
Diluted weighted average shares 79,352       79,310       79,346       78,386       79,099   79,353
 
Some earnings per share amounts may not add due to rounding
 
 
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
                                                    Q1 FY17 to Q1 FY16
06/30/14       09/30/14       12/31/14       03/31/15       FY2016 06/30/16   %       $
                   
Revenues:
Marketing services 107,726 112,979 115,725 113,342 449,772 109,715 1.8 % 1,989
Audience Solutions 68,550 72,122 77,046 80,128 297,846 73,744 7.6 % 5,194
Connectivity 20,619       22,244       28,422       31,185       102,470   31,342   52.0 % 10,723
 
Total operating segment revenues 196,895       207,345       221,193       224,655       850,088   214,801   9.1 % 17,906
 
Gross profit:
 
Marketing services 36,034 37,545 38,561 40,117 152,257 37,466 4.0 % 1,432
Audience Solutions 36,824 39,170 45,265 46,457 167,716 41,912 13.8 % 5,089
Connectivity 11,953       13,499       16,130       19,617       61,199   17,575   47.0 % 5,622
 
Total operating segment gross profit 84,811       90,214       99,956       106,191       381,172   96,953   14.3 % 12,142
 
Gross margin:
 
Marketing services 33.4 % 33.2 % 33.3 % 35.4 % 33.9 % 34.1 %
Audience Solutions 53.7 % 54.3 % 58.8 % 58.0 % 56.3 % 56.8 %
Connectivity 58.0 % 60.7 % 56.8 % 62.9 % 59.7 % 56.1 %
 
Total operating segment gross margin 43.1 % 43.5 % 45.2 % 47.3 % 44.8 % 45.1 %
 
Income (loss) from continuing operations:
 
Marketing services 16,853 17,908 20,309 19,301 74,371 20,145 19.5 % 3,292
Audience Solutions 24,087 25,190 30,723 29,598 109,598 25,096 4.2 % 1,009
Connectivity (791 )     (1,068 )     (1,015 )     (424 )     (3,298 ) 291   136.8 % 1,082
 
Total operating segment income from operations 40,149       42,030       50,017       48,475       180,671   45,532   13.4 % 5,383
 
Margin:
 
Marketing services 15.6 % 15.9 % 17.5 % 17.0 % 16.5 % 18.4 %
Audience Solutions 35.1 % 34.9 % 39.9 % 36.9 % 36.8 % 34.0 %
Connectivity -3.8 % -4.8 % -3.6 % -1.4 % -3.2 % 0.9 %
 
Total operating segment operating margin 20.4 % 20.3 % 22.6 % 21.6 % 21.3 % 21.2 %
 
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
Low Range High Range
 
Earnings before income taxes 14,000 21,000
 
Income taxes   7,000   9,870
 
Net earnings   7,000   11,130
 
Diluted earnings per share $ 0.09 $ 0.14
 
Excluded items:
Purchased intangible asset amortization 16,000 16,000
Non-cash stock compensation 32,000 32,000
Restructuring charges 1,000 1,000
Separation and transformation costs   10,000   10,000
 
Total excluded items   59,000   59,000
 
Earnings before income taxes and excluding items 73,000 80,000
 
Income taxes (2)   29,200   32,000
 
Non-GAAP net earnings   43,800   48,000
 
Non-GAAP diluted earnings per share $ 0.55 $ 0.60
 
Diluted weighted average shares   80,000   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 reflecting 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.

                 
 
ACXIOM CORPORATION APPENDIX A
Q1 FISCAL 2017 FINANCIAL RESULTS
EXPLANATION OF NON-GAAP MEASURES
   
To supplement our financial results we use non-GAAP measures as indicated in the press release schedules, which excludes certain expenses related to acquisitions as well as other significant expenses including non-cash stock compensation and restructuring charges, that we belive 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 condensed consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions. These non-GAAP 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 current 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 and other adjustments:

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 charges, reported as gains, losses, and other items, net, are excluded from non-GAAP results because such expense is not used by us to assess the core profitability of our business operations.

 

Separation and transformation costs:

We incurred significant expenses in connection with the separation of the IT Infrastructure Management and Marketing and Data Services business and subsequent

transformation activities post separation, which we generally would not have otherwise incurred in the periods presented as part of our continuing operations. Separation and transformation costs consist of third party consulting arrangements. We believe it is useful for investors to understand the effects of these items and excluding such items in non-GAAP financial measures provides meaningful supplemental information.

 
Our non-GAAP financial schedules are:
 

Non-GAAP EPS:

Our non-GAAP earnings per share reflects 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.

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