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Acxiom's Q2 Adj. Earnings Fall Shy

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Information technology services provider Acxiom Corporation’s (ACXM - Free Report) second-quarter fiscal 2014 adjusted earnings of 20 cents per share marginally missed the year-ago tally and the Zacks Consensus Estimate by a penny.

Net income for the reported quarter dropped significantly to $9.8 million or 13 cents per share compared with $16.5 million or 21 cents per share in the year-ago quarter. The year-over-year decline in reported earnings was primarily attributable to high operating expenses.


Total revenue for second quarter fiscal 2014 came in at $276.3 million, down 0.4% year over year owing to dismal performances in two of the three segments.

By segments, the Marketing and Data Services segment sales improved 1.2% year over year to $201.0 million in the reported quarter. IT Infrastructure Management Services segment revenues dipped 4.7% to $66.8 million. Revenues from Other Services segment decreased 3.4% year over year to $8.5 million in the reported quarter.


Operating margin for the reported quarter dropped to 7.1% from 10.9% in the year-ago quarter due to lower margin from Marketing and Data Services segment, which accounts for bulk of the revenues. With reduced margin levels, Acxiom intends to trim its operating costs by approximately $20 million to $30 million within the next 6-12 months. However, this would not entail any reduction in ongoing investments for innovative products and services.

Marketing and Data Services operating margin was 8.0% compared with 11.2% in the previous-year quarter. The IT Infrastructure Management segment reported an operating margin of 17.9%, up from 12.2% in the year-ago quarter, while the respective figures for the Other Services segment were 2.6% and (6.2%).

Significant Quarter Developments

During the reported quarter, the company launched a new Acxiom AOS (Audience Operating System) – the first of its kind cloud-based platform that delivers data and insights at marketers’ fingertips for a one-to-one marketing at scale and revolutionizes customer experiences.

At the same time, Acxiom introduced – the first online consumer portal that allows individuals to view and update core data elements that are part of the information Acxiom makes available to advertisers for digital marketing.

Balance Sheet and Cash Flows

Acxiom ended the quarter with cash and cash equivalents of $216.6 million. Long-term debt came in at $230.7 million.

Net cash provided by operating activities aggregated $40.5 million during the reported quarter compared with $39.2 million in the prior-year period. Operating cash flow was $170 million for the trailing twelve-month period, compared with $176 million in the year-ago period. Free cash flow to equity stood at $69 million for the trailing twelve-month period, compared with $159 million for the prior-year period.

Subsequent to the quarter-end, Acxiom refinanced its $300 million term loan and a $300 million undrawn revolving credit facility, both maturing in Oct 2018. The proceeds of the term loan were used to repay debt under its existing $215 million term loan and for other general corporate purposes.

Share Repurchase

In the reported quarter, Acxiom repurchased 900,000 shares for $22.7 million. Since Aug 2011, the company has repurchased 12 million shares for $179 million. Acxiom’s total share repurchase authorization is worth $200 million.


Concurrent with the earnings release, management slightly modified its guidance for fiscal 2014. For fiscal 2014, management expects revenues to dip marginally (versus flat projections earlier) and earnings to remain flat (unchanged from before). Management opined that fiscal 2013 was a transition period for the company, wherein it invested considerably for new product innovation and strengthening its client base. Acxiom expects to continue with these initiatives in fiscal 2014, thereby reaping synergistic benefits in future.

Acxiom currently has a Zacks Rank #3 (Hold). Other stocks in the industry such as CoStar Group Inc. (CSGP - Free Report) , EPAM Systems, Inc. (EPAM - Free Report) and Infosys Ltd. (INFY - Free Report) , each with a Zacks Rank #2 (Buy), are worth considering at the moment.

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