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Acxiom (ACXM) Down 12.2% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Acxiom Corporation (ACXM - Free Report) . Shares have lost about 12.2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Acxiom Misses Earnings and Revenue Estimates in Q1

Acxiom reported non-GAAP earnings of 14 cents per share in first-quarter fiscal 2018, which was in line with the Zacks Consensus Estimate.

Total revenue was $213.0 million, declining approximately 1% from the year-ago quarter and lower than the Zacks Consensus Estimate of $217 million. Adjusted total revenue increased 6% to $214 million.

Domestic revenues for the quarter were $194 million, down 1% year over year. However, international revenues improved 2% to $18 million in the reported quarter. Excluding revenues related to Australia transition and foreign exchange effect, international revenues increased 15% year over year to $20 million.

Segment Details

Marketing Services segment revenues decreased 16.5% year over year to $91.6 million.

Marketing Services segment revenues from the U.S. markets were $85 million, down 17% year over year. International revenues declined 6% to $7 million.

Audience Solutions segment revenues increased 2.7% to $75.7 million, driven by growing customer base. Sales from the U.S. markets were $68 million, up 4% year over year, while international revenues decreased 6% to $8 million.

Acxiom continues to expand distribution to digital channels. The company added 15 new data services partners in the reported quarter.

The company expanded data partnerships with Pinterest and an integration with LinkedIn. These deals will enhance people-based targeting on its platform.

Acxiom now offers data products in more than 60 countries representing 2.8 billion addressable consumers. In an effort to expand its operations and grow its market share in that region, the company partnered with Four Info to deliver more precise cross channel audience targeting and measurement to the Latin American market.

The Connectivity segment continued to show strong momentum, as revenues increased an impressive 44.2% year over year to $45.2 million.

Sales from the U.S. markets were $42 million, advancing 44% year over year. International revenues jumped 51% to $4 million.

Connectivity added approximately 40 new direct customers during the quarter and added over 25 new partner integrations including Microsoft’s LinkedIn. Total direct customer count grew to more than 450.

Moreover, the integration of Arbor and Circulate with LiveRamp has been smooth and clients are already benefiting from the combination of match data and omnichannel identity graph.

Also, the company recently launched a new solution IdentityLink for publishers, allowing them to better monetize their audiences by supporting people-based marketing initiatives.

Operating Details

Non-GAAP gross margin expanded 480 basis points (bps) on a year-over-year basis to 49.9%. The improvement was primarily driven by robust performance from all the three segments. Connectivity, Audience Solutions and Marketing Services segment gross margins surged 480 bps, 550 bps and 10 bps, respectively.

Operating expenses as percentage of revenues (prior to one-time items) increased 1,020 bps to 49.1%, on the back of 240 bps jump in research & development (R&D) expense, 540 bps surge in sales & marketing expense and 240 bps increase in general & administrative expense.

Total segment operating margin expanded 150 bps to 22.7% in the reported quarter. Audience Solutions and Marketing Services operating margin expanded 370 and 320 bps, respectively. However, Connectivity reported operating margin contracted 100 bps from the year-ago quarter.

Non-GAAP operating margin improved 70 bps to 10.5% in the reported quarter.

Balance Sheet

Acxiom exited the fiscal first quarter with cash and cash equivalents of approximately $163.1 million compared with $170.3 million in the prior quarter. Accounts receivables were $131.3 million, down from $142.8 million in the previous quarter.

Cash flow from operations was $5.0 million against $30.7 million in the prior quarter.

Guidance

For fiscal 2018, Acxiom expects to report revenues in the range of $920—$930 million, up 7—8% over fiscal 2017. Non GAAP EPS is projected to be almost 80 cents, up 13% over fiscal 2017.

Management expects capital expenditure to be approximately $65 million for fiscal 2018, down from $70 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted down by 69.4% due to these changes.

Acxiom Corporation Price and Consensus

 

Acxiom Corporation Price and Consensus | Acxiom Corporation Quote

VGM Scores

At this time, the stock has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. Meanwhile, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.




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