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Acxiom (ACXM) Tops Q2 Earnings, Tweaks Revenue Outlook

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Acxiom Corp (ACXM - Free Report) reported relatively healthy second-quarter fiscal 2017 results on the back of successful execution of operational plans. Non-GAAP earnings (with stock-based compensation adjustments) of 8 cents per share in the quarter comfortably beat the Zacks Consensus Estimate by 4 cents and increased 14.3% on a year-over-year basis.

Shares rose almost 5% to close at $25.70 on Nov 8.

Total revenue was $217.3 million, up 4.8% from the prior-year quarter. The year-over-year increase in revenue was driven by robust performance from Audience and Connectivity segments. Quarterly revenues exceeded the Zacks Consensus Estimate of $215 million.

Excluding Acxiom Impact divestiture, revenues increased 11% to $192 million.

Domestic revenues for the quarter were $200 million, up 6% year over year. However, international revenues declined 5% to $17 million in the reported quarter.

Excluding revenues related to exit from Brazil, ANZ transition and foreign exchange effect, international revenues increased 17% year over year to $18 million. The strong year-over-year growth was driven by double-digit growth in Europe, specifically in UK and Germany.

Segment Details

Marketing Services segment revenue decreased 6.5% year over year to $105.7 million. Marketing Database and Strategy & Analytics revenue grew 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 $98 million, down 5% year over year. Excluding the divestiture, revenues increased 3%.

Audience Solutions segment revenues increased almost 9% to $78.5 million, driven by growing customer base. Digital data revenue was roughly $13 million, up over 100% year over year.

The company closed several deals during the quarter including new customers like Claire's footwear and Kohl's (KSS - Free Report) . Acxiom continues to expand and added 10 new data services providers in the quarter.

Further, the company expanded its existing relationships with Publicis, which now includes Zenith, OptiMedia and Performics. These are in addition to the relationships already in place with Starcom and Mediavest Spark.

Sales from the U.S. markets were $71 million, up 9% year over year.

ACXIOM CORP Price, Consensus and EPS Surprise

The Connectivity segment continued to show strong momentum, as revenues were up an impressive 48.6% year over year to $33.1 million. LiveRamp product revenue surged 68%.

Operating Details

Non-GAAP gross margin expanded 360 basis points (bps) on a year-over-year basis to 44.7%. The improvement was largely driven by growth in the Audience Solutions segment.

Marketing Services gross margin during the quarter declined from 33.2% in the year-earlier quarter to 32.6% in the reported quarter.

Audience Solutions gross margin increased from 54.3% in second-quarter fiscal 2016 to 61.1% in second-quarter fiscal 2017, primarily due to favorable revenue mix and operational cost savings.

The Connectivity segment gross margin in the quarter declined from 60.7% a year ago to 60% due to higher hosting expenses and continued match pool investment.

Non GAAP operating margin (including stock-based compensation expense) expanded 50 bps to 5.9% in the reported quarter.

Marketing Services operating margin increased from 15.9% in the year-earlier quarter to 18.8% in the reported quarter driven by higher cost savings in the U.S.

Audience Solutions operating margin increased from 34.9% in second-quarter fiscal 2016 to 38.2% in second-quarter fiscal 2017.

Connectivity reported operating profit of $1.7 million as compared with a loss of $1.1 million in the year-ago quarter.

Significant second-quarter Highlights

During the quarter, Acxiom completed the sale of its Impact email business to Zeta Interactive.

LiveRamp launched IdentityLink, the company’s new omnichannel resolution service. Moreover, Acxiom added more than 40 new direct customers and completed more than 50 new partner integrations at its Connectivity business.

Further, the company entered into a new partnership with DialogTech, which will help marketers more accurately measure phone call conversions, driven by display advertising.

Meanwhile, the company’s Audience Solutions inked a partnership with Adobe (ADBE - Free Report) . The partnership will enable Acxiom and Adobe Marketing Cloud clients to access Acxiom data via Adobe’s Audience Marketplace.

Balance Sheet and Cash Flow

At quarter end, Acxiom had cash and cash equivalents of $175.4 million up from $150.2 million reported at the end of the previous quarter. Long-term debt reduced slightly to $142.3 million from $150.1 million at the end of first-quarter fiscal 2017.

Net cash from operating activities was $35.5 million as compared with $0.75 million reported at the end of previous quarter. Free cash flow to equity improved to $30 million and included $17 million of net proceeds associated with the sale of Acxiom Impact.

During the quarter, Acxiom repurchased 390,000 shares for approximately $10 million.


For fiscal 2017, Acxiom now anticipates to report revenues in the range of $860–$870 million as compared with the previous guidance of $850–$870 million. The guidance includes approximately $20 million of revenue from its disposed Acxiom Impact business.

For Connectivity, management continues to expect segment revenue growth to be between 40% and 45%, and LiveRamp product revenue to be between 55% and 60%.

Non-GAAP earnings are anticipated to be almost 60 cents per share for the fiscal year.

Acxiom expects Capital Expenditure to be roughly $65 million for the year, flat as compared with full-year 2016.

Zacks Rank & Key Picks

Acxiom carries a Zacks Rank #3 (Hold). Barracuda Networks with a Zacks Rank #2 (Buy) is a better-ranked stock in the sector. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long term earnings growth for Barracuda is currently pegged at 21.1% as compared with Acxiom’s 15% growth.


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