Leading analytics and software-as-a-service provider Acxiom Corporation reported relatively healthy first-quarter fiscal 2017 (ended Jun 30, 2016) results on the back of successful execution of operational plans. Adjusted earnings (with stock-based compensation adjustments) of 8 cents per share in the quarter comfortably beat the Zacks Consensus Estimate by 6 cents.

Quarter Details   

Total revenue in the fiscal first quarter was $214.8 million, up 9.1% from the prior-year quarter. The year-over-year increase in revenue was due to broad-based growth in each of the operating segments. Quarterly revenues exceeded the Zacks Consensus Estimate of $203 million. Domestic revenues for the quarter were $197 million, up 11% year over year.

Sales from the Marketing Services segment increased 1.8% year over year to $109.7 million due to business expansion. Segment sales from the U.S. markets were approximately $102 million, up 4% year over year. Gross margin during the quarter improved from 33% in the year-earlier quarter to 34% in the reported quarter.

Audience Solutions segment revenues increased to $73.7 million from $68.6 million in the year-ago quarter. Sales from the U.S. markets were $66 million, up 9% year over year. Gross margin increased from 54% in first-quarter fiscal 2016 to 57% in first-quarter fiscal 2017.

The Connectivity segment continued to show strong momentum, as revenues were up an impressive 52.0% year over year to $31.3 million. Gross margin in the quarter declined from 58% a year ago to 56%.

Gross profit in the reported quarter improved to $92 million from $79.0 million in the year-ago quarter, resulting in a gross margin of 42.8%, up from 40.2%. The improvement was largely driven by growth in the Connectivity segment.

Other Significant Developments in the Quarter

During the quarter, Acxiom strengthened its Connectivity segment by signing over 20 deals and adding more than 50 new direct customers, resulting in a direct customer count of about 350.

The company announced a strategic “next-gen” enhancement to its proprietary recognition technology, AbiliTec, enhancing marketers’ ability to assemble disparate consumer data sources for a single, current and accurate view of a customer from corner to corner in all channels.

The company also announced that it has inked a deal to sell its Impact email business (Acxiom Impact) to Zeta Interactive. Additionally, Acxiom is looking to enter into a separate multi-year contract to offer Zeta Interactive with its Connectivity and Audience Solutions services. This transaction will enhance Acxiom’s focus on providing data foundation for the world’s best marketers and enhance its market offerings globally. The deal is expected to be completed in the second quarter of fiscal 2017.

Balance Sheet and Cash Flow

At quarter end, Acxiom had cash and cash equivalents of $150.2 million, while long-term debt was $150.1 million.

Net cash from operating activities was $0.75 million during the quarter compared with $12 million in the prior-year period.

During the quarter, Acxiom repurchased approximately 926,000 shares for $20 million. Since Aug 2011, the company has repurchased 16.4 million shares for $275 million under its share repurchase program.

Outlook

For fiscal 2017, Acxiom has reduced its revenue guidance to $850 million to $870 million from $870 million to $890 million projected earlier. Non-GAAP earnings are expected to be in the range 55–60 cents per share.

Acxiom carries a Zacks Rank #3 (Hold). Some better-ranked stocks include CDK Global, Inc. , ServiceNow, Inc. (NOW Quick QuoteNOW - Free Report) and CDW Corporation (CDW Quick QuoteCDW - Free Report) . All three stocks carry a Zacks Rank #2 (Buy).

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