Acxiom (ACXM) Q1 Earnings & Revenues Beat Estimates, Up Y/Y
Acxiom Corporation ACXM delivered non-GAAP earnings of 24 cents per share in first-quarter fiscal 2019, beating the Zacks Consensus Estimate by 6 cents. The figure soared 71.4% from the year-ago quarter.
Revenues of approximately $227 million were up 6.8% from the year-ago quarter, outpacing the Zacks Consensus Estimate of $220 million.
Domestic revenues came in at $207 million, up 6.7% year over year. Adjusted International revenues increased 5.6% year over year to $29 million. Excluding revenues related to foreign exchange effect, international revenues advanced 11.1% year over year to $20 million.
Shares were up almost 1.3% yesterday. Notably, Acxiom’s stock has returned 57.3% year to date, outperforming the industry’s rally of 18.4%.
The outperformance can primarily be attributed to the company’s initiatives to enhance LiveRamp platform. Further, the recent divestiture of Acxiom Marketing Solutions (“AMS”) business to Interpublic Group IPG has kept the investors optimistic.
Beginning first-quarter fiscal 2019, Acxiom has realigned portfolio into two distinct business units — LiveRamp and AMS.
LiveRamp comprises integrations which will include television, Data Store, Saas and DaaS services. Meanwhile, AMS comprises Acxiom Data, database services, consulting and analytics and other services.
Notably, with the divestiture of its AMS business for $2.3 billion in cash, Acxiom anticipates to receive net cash proceeds of $1.7 billion. The transaction is subject to regulatory clearance. Management noted that the company is on track to conclude the divestiture in third quarter of fiscal 2019.
Management is also optimistic regarding the materialization of LiveRamp “as a pure-play public” Software-as-a-Service(“SaaS”) based platform.
LiveRamp revenues (accounted for 27.5% of total revenues) advanced33.6% year over year to $62.5 million. LiveRamp revenues from the U.S. markets of $56 million surged 33.3% year over year. International revenues were up 20% to $6 million. LiveRamp revenue run rate came in at approximately $250 million in the quarter.
AMS (72.5% of total revenues) revenues declined0.8% from the year-ago quarter to $164.5 million. Sales from the U.S. markets were $150 million, decreasing 1.3% year over year. International revenues remained almost flat on a year-over-year basis at around $14 million.
Excluding Facebook FB, total revenues came in at $220 million, up 13.4% from the year-ago quarter. LiveRamp revenues were $59 million, surging 43.9% year over year, while AMS generated $161 million, up 5.2% from the year-ago quarter.
In the reported quarter, Acxiom added around 35 new clients raising the total count to 625.
During the quarter, LiveRamp gained around 30 new direct clients raising the total count to more than 600 clients, globally. LiveRamp also added new partner integrations. It concluded the reported quarter with 39 clients paying more than around $1 million.
Management is elated on robust bookings in AMS in the quarter. AMS gained two notable renewals and six new logo wins.
Acxiom extended its partnership with Adobe Systems Inc. ADBE. LiveRamp’s IdentityLink for television solution will be integrated with Adobe Audience Manager and Adobe Advertising Cloud. The collaboration is aimed to enhance addressable TV advertising by enabling advertisers to better target audiences. Consequently, Acxiom will gain household-based insights which will aid the company to enhance “people-based” marketing initiatives.
Reported gross profit grew 2.9% to $117.3 million. Gross margin expanded 190 basis points (bps) on a year-over-year basis to 48.3%. LiveRamp segment gross margins surged to 70.8% compared with the year-ago figure of 60.4%. Meanwhile, AMS gross margin contracted 250 bps on a year-over-year basis to 44.5%.
Reported operating expenses surged 10.7% to $115.4million. Sales and marketing (S&M) and General and administrative (G&A) expenses as a percentage of revenues expanded 140 bps and 10 bps, respectively from the year-ago quarter. However, Research and development (R&D) expenses as a percentage of revenues contracted 30 bps on a year-over-year basis.
Total operating segment operating margin expanded 230 bps to 25%. LiveRamp operating margin came in at 14.7%. AMS operating margin contracted 40 bpsfrom the year-ago quarter.
Non-GAAP operating income came in at $28.8 million, up 29.2% from the year-ago quarter. Non-GAAP operating margin expanded 220 bps on a year-over-year basis to 12.7% in the reported quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2018, Acxiom had cash and cash equivalents of approximately $95.1 million compared with $142.3 million at the end of the previous quarter.
Acxiom generated “free cash flow to equity” of $8.4 million, compared with $14 million reported in the previous quarter.
Long term debt (including current portion) was reported at $228.8 million in the quarter, down from $229.4 million at the end of the previous quarter.
Cash flow from operations came in at $17.2 million compared with $35.8 million reported in the previous quarter.
In the first quarter, Acxiom repurchased 1.9 million shares for approximately $46 million.
Acxiom maintained the outlook for fiscal 2019. However, management may update the guidance upon the closure of divestiture of AMS business.
Revenues are expected to come in the range of $935-$955 million (mid-point $945 million)., from Facebook are anticipated to come in at $9 million, representing around 1% of total fiscal 2019 revenues considering the mid-point of the range.
However, excluding Facebook, revenues are anticipated to reach $926-$946 million (mid-point $936 million).
The Zacks Consensus Estimate for fiscal 2019 revenues is pegged at $947.8 million.
Non GAAP earnings are projected to be 90-95 cents. The estimates have been going down in the past 30 days. The Zacks Consensus Estimate for earnings is pegged at 92 cents per share.
Revenues (as percentage of total revenues) in fiscal 2019 are expected to be 22% in the second quarter, 27% in the third quarter and 29% in the fourth quarter. The first quarter is estimated to have reported 22% of the projected total revenues of fiscal 2019.
LiveRamp revenues are expected to be up 25-30% driven by growth in subscription, which is anticipated to generate 80% of segment’s revenues. However, we may note that the projected growth rate is lower than 43% segmental growth reported in fiscal 2018. Excluding Facebook, the segment is anticipated to grow 37%, lower than reported year-ago growth of 47%.
Acxiom’s focus on enhancing people-based marketing holds promise. Expansion to television and other mediums enabling marketers to better target audience is a positive. However, restructuring related initiatives might impact operations in the near-term.
Acxiom currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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