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Acxiom (ACXM) Beats on Q3 Earnings, Raises 2017 Outlook

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Acxiom Corp reported relatively healthy third-quarter fiscal 2017 results on the back of successful execution of operational plans. Non-GAAP earnings (with stock-based compensation adjustments) of 16 cents per share in the quarter comfortably beat the Zacks Consensus Estimate by 9 cents.

Excluding stock-based compensation adjustments and one-time items, earnings jumped 33.3% from the year-ago quarter to 24 cents per share.

Shares rose almost 7% in after-hour trading. We note that shares have outperformed the Zacks IT Services industry over the last one year. While the industry gave a positive return of 9.7%, Acxiom gained 41.1%.



Total revenue was $223.3 million, up 1% driven by robust performance from Audience and Connectivity segments. Quarterly revenues exceeded the Zacks Consensus Estimate of $218 million.

Domestic revenues for the quarter were $203 million, up 2% year over year. However, international revenues declined 11% to $20 million in the reported quarter.

Excluding revenues related to Australia transition and foreign exchange effect, international revenues increased 6% year over year to $22 million. The strong year-over-year growth was backed by strong performance in Europe, specifically in UK and Germany.
 

Acxiom Corporation Price, Consensus and EPS Surprise

 

Acxiom Corporation Price, Consensus and EPS Surprise | Acxiom Corporation Quote

Segment Details

Marketing Services segment revenue decreased 12.6% year over year to $101.2 million. Marketing Database and Strategy & Analytics revenue inched up 1% year over year, but was more than offset by the sale of Acxiom Impact.

Marketing Services segment revenues from the U.S. markets were $93 million, down 12% year over year. International revenues declined 17% to $8 million.

Audience Solutions segment revenues increased 8.2% to $83.4 million, driven by growing customer base. Sales from the U.S. markets were $74 million, up 12% year over year, while international revenues dropped 14% to $9 million. On a trailing 12 month basis new bookings increased more than 20% over the comparable period.

During the quarter Audience Solutions launched the Audience Cloud for advanced cross-channel management of Acxiom data. This self-service solution for accessing Acxiom data allows marketers to find the right audience for their campaigns along with adjusting the size, testing new segments and distributing audiences throughout the marketing ecosystem.

Acxiom noted currently more than 70 clients are using Audience Cloud to access and deploy Acxiom data.

Acxiom continues to expand distribution to digital channels. The company added Spotify and ShareDesk as new data services partners in the reported quarter.

The Connectivity segment continued to show strong momentum, as revenues were up an impressive 36.3% year over year to $38.7 million. LiveRamp product revenue soared 61%. Sales from the U.S. markets were $36 million, advancing 36% year over year. International revenues jumped 44% to $3 million.

Connectivity added more than 50 new direct customers during the quarter and added over 30 new partner integrations. Total direct customer count grew to nearly 385.

Moreover, LiveRamp completed the acquisitions of Arbor and Circulate in the quarter. Acxiom noted that the integration has been smooth and clients are already benefitting from the combination of match data and omnichannel identity graph.

The company stated that on average, clients are experiencing a 10% improvement in deterministic web match rates and a 20% improvement in deterministic mobile match rates by using the combined product.

Operating Details

Non-GAAP gross margin expanded 500 basis points (bps) on a year-over-year basis to 49.9%. The improvement was across the segments. Marketing Services, Audience Solutions and Connectivity gross margins increased 370, 490 and 290 bps, respectively.

Operating expenses as percentage of revenues (prior to one-time items) increased 130 bps to 42.8%, driven by 100 bps jump in research & development (R&D) expense and 270 bps surge in sales & marketing expense. This was partially neutralized by 250 bps decline in general & administrative expense.

Non-GAAP operating margin (including stock-based compensation expense) expanded 250 bps to 8.9% in the reported quarter. Marketing Services and Audience Solutions operating margin expanded 330 and 160 bps, respectively. Connectivity reported operating profit of $1.9 million as compared with a loss of $1 million in the year-ago quarter.

Outlook

For fiscal 2017, Acxiom now anticipates to report revenues in the range of $870–$875 million as compared with the previous guidance of $860–$870 million. The guidance includes approximately $20 million of revenue from its disposed Acxiom Impact business.

For Connectivity, management expects segment revenue growth 40% and LiveRamp product revenue to be between 55% and 60%.

Non-GAAP earnings are anticipated to be almost 70 cents per share up from earlier guidance of 60 cents for the fiscal year.

Acxiom expects Capital Expenditure to be less than previous expectation of $65 million for the year.

Management expects stable top-line growth, expanding margins and improved operating efficiency and leverage for fiscal 2018. Marketing services business is expected to remain stable, while margins will continue to improve.

Audience Solutions is anticipated to have another year of solid growth. However, management expects to continue investments which can impact margins. Growth rate is expected to diminish due to lower digital growth.

Management expects Connectivity growth rate to accelerate and operating margin to expand in fiscal 2018.

Zacks Rank & Key Picks

Acxiom currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space include Barracuda Networks , SecureWorks (SCWX - Free Report) and Science Applications International (SAIC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term earnings growth rate for Barracuda, SecureWorks and Science Applications International are pegged at 21.3%, 25% and 5%, respectively.

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