All schedules are omitted because they are not applicable or not required or because the required information is included in the consolidated financial statements or notes thereto.
The following exhibits are filed with this report or are incorporated by reference to previously filed material:material.
ACXIOM CORPORATION
SELECTED FINANCIAL DATA
(In thousands, except per share data)
Years ended March 31, | | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
Statement of operations data: | | | | | | | | | | | | | | | |
Revenue | | $ | 850,088 | | | $ | 804,911 | | | $ | 805,153 | | | $ | 792,689 | | | $ | 809,992 | |
Net earnings (loss) from continuing operations | | $ | (8,648 | ) | | $ | (26,542 | ) | | $ | (17,340 | ) | | $ | 30,645 | | | $ | 17,527 | |
Net earnings from discontinued operations, net of tax | | | 15,351 | | | | 15,511 | | | | 26,143 | | | | 26,474 | | | | 53,989 | |
Net earnings (loss) | | $ | 6,703 | | | $ | (11,031 | ) | | $ | 8,803 | | | $ | 57,119 | | | $ | 71,516 | |
Net earnings (loss) attributable to Acxiom | | $ | 6,703 | | | $ | (11,031 | ) | | $ | 8,863 | | | $ | 57,607 | | | $ | 77,263 | |
Basic earnings (loss) per share: | | | | | | | | | | | | | | | | | | | | |
Net earnings (loss) from continuing operations | | $ | (0.11 | ) | | $ | (0.34 | ) | | $ | (0.23 | ) | | $ | 0.41 | | | $ | 0.22 | |
Net earnings from discontinued operations | | | 0.20 | | | | 0.20 | | | | 0.35 | | | | 0.35 | | | | 0.68 | |
Net earnings (loss) | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | | | $ | 0.76 | | | $ | 0.90 | |
Net earnings (loss) attributable to Acxiom | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | | | $ | 0.77 | | | $ | 0.97 | |
Diluted earnings (loss) per share: | | | | | | | | | | | | | | | | | | | | |
Net earnings (loss) from continuing operations | | $ | (0.11 | ) | | $ | (0.34 | ) | | $ | (0.23 | ) | | $ | 0.40 | | | $ | 0.22 | |
Net earnings from discontinued operations | | | 0.20 | | | | 0.20 | | | | 0.35 | | | | 0.35 | | | | 0.67 | |
Net earnings (loss) | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | | | $ | 0.75 | | | $ | 0.89 | |
Net earnings (loss) attributable to Acxiom | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | | | $ | 0.75 | | | $ | 0.96 | |
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Acxiom has not paid cash dividends for any of the periods reported. | |
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As of March 31, | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | |
Balance sheet data: | | | | | | | | | | | | | | | | | | | | |
Current assets | | $ | 376,010 | | | $ | 511,404 | | | $ | 656,056 | | | $ | 447,715 | | | $ | 456,898 | |
Current liabilities | | $ | 224,000 | | | $ | 283,792 | | | $ | 249,469 | | | $ | 224,576 | | | $ | 256,401 | |
Total assets | | $ | 1,149,849 | | | $ | 1,294,087 | | | $ | 1,310,497 | | | $ | 1,174,306 | | | $ | 1,217,596 | |
Long-term debt, excluding current installments | | $ | 157,897 | | | $ | 244,753 | | | $ | 275,976 | | | $ | 225,082 | | | $ | 233,697 | |
Total equity | | $ | 698,968 | | | $ | 703,257 | | | $ | 682,857 | | | $ | 619,368 | | | $ | 611,855 | |
The selected financial data for the periods reported above has been derived from the consolidated financial statements and, unless otherwise indicated, reflect the Company's continuing operations. Refer to Note 4 – Discontinued Operations for additional information regarding discontinued operations.
This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes contained in this report. Previously reported amounts have been reclassified to conform to the presentation in the current year. The historical results are not necessarily indicative of results to be expected in any future period.
Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and the related notes to those statements included in Item 8 to this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations, and involve risks and uncertainties. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section titled "Item 1A. Risk Factors."
We begin Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations with an introduction and overview, ofincluding our operating segments andsegment, sources of revenue, summary results and notable events. This overview is followed by a summary of our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.
Unless otherwise indicated, we refer to captions such as earnings (loss), and earnings (loss) per share from continuing operations attributable to the Company simply as "earnings (loss)", and "earnings (loss) per share" throughout this Management's Discussion and Analysis. Similarly, discussion of other matters in our consolidated financial statements relates to continuing operations unless otherwise indicated.
Introduction and Overview
Acxiom CorporationLiveRamp Holdings, Inc. ("LiveRamp", "we", "us", or the "Company") is a global technology company that helps companies build enduring brand and enablementbusiness value by collaborating responsibly with data. A groundbreaking leader in consumer privacy, data ethics and foundational identity, LiveRamp is setting a new standard for building a connected customer view with unmatched clarity and context while protecting brand and consumer trust. Our best-in-class enterprise platform enables data collaboration, where companies can share first-party consumer data with trusted business partners securely and in a privacy conscious manner. We offer flexibility to collaborate wherever data lives to support a wide range of data collaboration use cases—within organizations, between brands, and across our global network of premier partners. Global innovators, from iconic consumer brands and tech platforms to retailers, financial services, company with a visionand healthcare leaders, turn to power a world where all marketing is relevant. We provideLiveRamp to deepen customer engagement and loyalty, activate new partnerships, and maximize the value of their first-party data foundation forwhile staying on the world's best marketers. By making it safeforefront of rapidly evolving compliance and easy to activate, validate, enhance, and unify data, we provide marketers with the ability to deliver relevant messages at scale and tie those messages back to actual results. Our products and services enable people-based marketing, allowing our clients to generate higher return on investment and drive better omni-channel customer experiences.privacy requirements.
AcxiomLiveRamp is a Delaware corporation foundedheadquartered in 1969 in Conway, Arkansas.San Francisco, California. Our common stock is listed on the NASDAQ Global Select MarketNew York Stock Exchange under the symbol "ACXM."“RAMP.” We serve a global client base from locations in the United States, Europe, and the Asia-Pacific ("APAC"(“APAC”) region. Our direct client list includes more than 3,000many of the world's largestworld’s best-known and best knownmost innovative brands across most major industry verticals, including but not limited to financial, insurance and investment services, retail, automotive, retail, telecommunications, high tech, consumer packaged goods, healthcare, travel, entertainment non-profit, and government.non-profit. Through our expansive partner ecosystem we serve thousands of additional companies, unlocking access to unique customer moments and creating powerful network effects.
Operating SegmentsSegment
DuringThe Company operates as one operating segment. An operating segment is defined as a component of an enterprise for which separate financial information is evaluated regularly by the first quarter of fiscal 2016, the Company realigned its organizational structure to better reflect its business strategy. As a result of the sale of the IT Infrastructure Management business ("ITO") and the organizational realignment, information that ourchief operating decision maker. Our chief operating decision maker regularly reviews for purposes of allocatingevaluates our financial information and resources and assessingassesses the performance changed. Thus, beginningof these resources on a consolidated basis. Since we operate as one operating segment, all required financial segment information can be found in fiscal year 2016, the Company began reporting itsconsolidated financial performance based on new segments: Marketing Servicesstatements.
Sources of Revenues
LiveRamp recognizes revenue from the following sources: (i) Subscription revenue,which consists primarily of subscription fees from clients accessing our platform; and Audience Solutions,(ii) Marketplace and Connectivity. DuringOther revenue, which primarily consists of revenue-sharing fees generated from data transactions through our LiveRamp Data Marketplace, and transactional usage-based revenue from arrangements with certain publishers and addressable TV providers.
LiveRamp Data Collaboration Platform
As depicted in the third quarter of fiscal 2016,graphic below, we power the operationalindustry’s leading enterprise platform for data collaboration. We enable organizations to access and financial activitiesleverage data more effectively across the applications they use to separate Marketing Services and Audience Solutions were completed and are now reported as separate operating segments.
Our segments provide managementinteract with a comprehensive viewtheir customers. At the core of our key businesses based on how we manage our operationsplatform is an omnichannel, deterministic identity resolution technology that offers unparalleled accuracy, breadth, and measure results. Additional information relateddepth. Leveraging deep expertise in identity and data collaboration, the LiveRamp Data Collaboration platform formerly branded as Safe Haven) enables an organization to our operating segments and geographic information is contained in Note 17 – Segment Information of the Notes to Consolidated Financial Statements.
Marketing Services
Our Marketing Services segment helps clients unify data at the individual level in a privacy-safe environment, so they can execute people-based marketing campaigns, tie back to real results, and drive a continual cycle of optimization. We help architect the foundation for data-driven marketing by delivering solutions that integrate customer and prospect data across the enterprise, thereby enabling our clients(first-, second-, or third-party) to establish a single view of the customer. We also support our clients in navigating the complexities of consumer privacy regulation, making it easy and safe for them to use innovative technology, maintain choice in channels and media, and stay agile in this competitive era of the consumer. These services allow our clients to generate higher return on marketing investments and, at the same time, drive better, more relevant customer experiences.
The Marketing Services segment includes the following service offerings: Marketing Database Services, Strategy and Analytics, and Impact Email Platform and Services.
· | Marketing Database Services. Our Marketing Database offering provides solutions that unify consumer data across an enterprise, enabling clients to execute relevant, people-based marketing and activate data across the marketing ecosystem. Our consumer marketing databases, which we design, build and manage for our clients, make it possible for our clients to collect and analyze information from all sources, thereby increasing customer acquisition, retention, and loyalty. Through our growing partner network, clients are able to integrate their data with best-of-breed marketing solutions while respecting and protecting consumer privacy.
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Marketing Database services are generally provided under long-term contracts. Our revenue consists primarily of recurring monthly billings, and to a lesser extent, other volume and variable based billings.
· | Strategy and Analytics. Our Strategy and Analytics group consists of marketing strategists and data scientists who leverage industry knowledge and advanced analytics to assist our clients with identifying growth opportunities, addressing marketing data and technology needs, and adopting best practices. In addition, we help our clients identify and address their data privacy and governance requirements.
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Strategy and Analytics revenue consists primarily of project-based fees.
· | Impact Email Platform and Services. Acxiom Impact™ provides email and cross-channel data-driven marketing solutions for enterprise marketers, including a proprietary marketing platform and agency services.
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Acxiom Impact revenue consists of (1) volume-based fees for the use of the Impact email platform and (2) project-based and retainer-based fees for associated agency services.
Audience Solutions
Our Audience Solutions segment helps clients validate the accuracy of their data, enhance it with additional insight, and keep it up to date, enabling clients to reach desired audiences with highly relevant messages. Leveraging our recognition and data assets, clients can identify, segment, and differentiate their audiences for more effective marketing and superior customer experiences. Audience Solutions' offerings include InfoBase, our large consumer data store that serves as the basis for Acxiom's consumer demographics products, and AbiliTec, our patented identity resolution technology that assists our clients in reconciling and managing variations of customer identity over time and across multiple channels.
· | InfoBase. With more than 1,500 demographic, socio-economic and lifestyle data elements and several thousand predictive models, our InfoBase products provide marketers with the ability to identify and reach the right audience with the right message across both traditional and digital channels. Through partnerships with a wide range of online publishers and digital marketing platforms, including Facebook, Twitter, 4INFO, AOL, eBay, MSN, and Yahoo!, marketers can use InfoBase data to create and target specific audiences. For example, using InfoBase data available inside of Facebook's Custom Audiences tool, a local pet store can run a campaign targeting male pet-owners that live in zip code 94123. Similarly, a regional bank can leverage our data to create and target an audience of households with children that generate a certain annual income and live in Central Arkansas.
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· | AbiliTec. As shown in the illustration below, AbiliTec helps brands recognize individuals and households using a number of different input variables and connects identities online and offline.
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By identifying and linking multiple identifiers and data elements back to a persistent ID, our clients are able to create a single view of the customer which allows them to perform more effective audience targeting and deliver better, more relevant customer experiences.
Our Audience Solutions revenue consists primarily of licensing fees, which are typically in the form of recurring monthly billings, but can also be based on transactional volume or one-time usage. In addition, Audience Solutions generates digital data revenue from certain digital publishers and addressable television providers in the form of revenue sharing agreements. Our Marketing Database clients are a significant channel for our Audience Solutions offerings.
Connectivity
As shown in the illustration below, our Connectivity segment activates data and makes it portable across the open marketing ecosystem.
Through integrations with more than 300 leading digital marketing platforms and data providers, we have become a key point of entry into the digital ecosystem, thus helping our clients eliminate data silos and unlock greater value from the marketing tools they use every day. We operate as an open connectivity layer enabling our clients to reach consumers across channels and measure the impact of marketing on sales.
Today, we offer two primary services through our LiveRamp Connect platform:
· | Data Onboarding. Data Onboarding enables clients to activate offline data for use across their preferred marketing platforms for display, search, video, mobile, site optimization, data management, attribution, and more. By activating data through a central hub that is automated, secure, and privacy-safe, brands are able to reduce the number of places they send personally identifiable information. Data files are securely imported, anonymized, matched to online or mobile devices and digital IDs, and distributed for use to any of the more than 300 partners in our network.
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· | Customer Link. Customer Link helps clients tie together customer data in a privacy-safe way. Using the same infrastructure developed for Data Onboarding, we ingest data from a variety of sources, including campaign impression data from digital advertising platforms, website traffic, and purchase data, and tie it to anonymous links that represent a unique consumer. This enables our clients to create a unified view of online and offline customer activity that can be used to improve campaign performance.
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Our Connectivity revenue consists primarily of recurring subscription fees paid by advertisers, and to a lesser extent, transactional revenue from certain digital publishers and addressable television providers in the form of revenue-sharing agreements.
Summary
Together, our products and services form the "power grid" for data, the critical foundation for people-based marketing that brands need to engage consumers across today's highly fragmented landscape of channels and devices.
We provide integrations with the largest number of marketing platforms and data providers in the digital marketing ecosystem, enabling our clients to innovate through their preferred choice of technology, data, and services providers. Our industry-leading recognition and data assets power best-in-class consumer identification and linking across channels and devices. And, our integrated services offering provides the expertise required to manage large sets of data legally, ethically, securely, and in a way that protects consumer privacy. This single customer view can then be enhanced and activated across any of the 550 partners in our ecosystem in order to support a variety of people-based marketing solutions, including:
•Data Collaboration. We enable second-party data collaboration between organizations and their trusted partners in a neutral, manageable environment. Our platform provides customers with collaborative opportunities to safely and securely build a more accurate, dynamic view of their customers leveraging partner data. Advanced measurement and analytics use cases can be performed on this shared data without either party giving up control or compromising privacy.
•Activation. We enable organizations to leverage their customer and prospect data in the digital and TV ecosystems and across the customer experience applications they use through a safe and secure data matching process called data onboarding. Our technology ingests a customer’s first-party data, removes all offline data (directly identifiable information or "DII"), and replaces them with pseudonymized IDs called RampID™, a durable identifier for connecting to the digital ecosystem. RampID can then be distributed through direct integrations to the top platforms our customers work with, including leading marketing cloud providers, publishers and social networks, personalization tools, and connected TV services.
•Measurement & Analytics. We power more accurate, more complete measurement with the measurement vendors and partners our customers use. Our platform allows customers to combine disparate data files (typically ad exposure and customer events, like transactions), replacing customer identifiers with RampID. Customers then can use that aggregated view of each customer for measurement of reach and frequency, sales lift, closed loop offline to online conversion and cross-channel attribution.
•Identity. We provide enterprise-level identity solutions that enable organizations to: 1) resolve and connect disparate identities, 2) enrich data sets with hygiene capabilities and additional audience data from the LiveRamp Data Marketplace providers, and 3) translate data between different systems. Our approach to identity is built from two complementary graphs, combining offline data and online data and providing accuracy with a focus on privacy. LiveRamp technology for DII gives brands and platforms the ability to connect and update what they know about consumers, resolving DII across enterprise databases and systems to deliver better customer experiences. Our digital identity graph powered by our Authenticated Traffic Solution (or "ATS") associates pseudonymous device IDs, TV IDs and other online customer IDs from premium publishers, platforms or data providers, around a RampID. This allows marketers to perform the personalized segmentation, targeting, and measurement use cases that require a consistent view of the user. There are currently more than 165 supply-side platforms and demand-side platforms live or committed to bid on RampID or ATS. In addition, to date more than 14,000 publisher domains, including nearly 70% of the comScore 100 largest digital publishers, have integrated ATS worldwide.
•Data Marketplace. Our Data Marketplace provides customers with simplified access to industry-leading third-party data providers globally. The LiveRamp Data Collaboration Platform allows for the search, discovery and distribution of data from data providers to improve targeting, measurement, and customer intelligence. Our customers may license data through the LiveRamp Data Marketplace and connect via RampID to enrich their first-party data, leveraging across technology and media platforms, agencies, analytics environments, and TV partners. Our platform provides tools for data providers to manage the organization, distribution, and operation of their data and services across our network of customers and partners. Today we work with more than 200 data providers across all verticals and many data types (see below for discussion on Marketplace and Other).
Subscription
We primarily charge for our platform services on an annual basis. Our subscription pricing is based primarily on data volume, which is a function of data input records and connection points.
Our solutions are sold to enterprise marketers and the companies they partner with to execute their marketing, including agencies, marketing technology providers, publishers and data providers. Today, we work with 920 direct customers world-wide, including approximately 25% of the Fortune 500, and serve thousands of additional customers indirectly through our reseller partnership arrangements.
•Brands and Agencies. We work with over 500 of the largest brands and agencies in the world, helping them execute people-based marketing by creating an omni-channel understanding of the consumer and activating that understanding across their choice of best-of-breed digital marketing platforms.
•Marketing Technology Providers. We provide marketing technology providers with the identity foundation required to offer people-based targeting, measurement and personalization within their platforms. This adds value for brands by increasing reach, as well as the speed at which they can activate their marketing data.
•Publishers. We enable publishers of any size to offer people-based marketing on their properties. This adds value for brands by providing direct access to their customers and prospects in the publisher's premium inventory.
•Data Sellers. Leveraging our vast network of integrations, we allow data sellers to easily connect to the digital ecosystem and monetize their own data. Data can be distributed to clients or made available through
the LiveRamp Data Marketplace feature. This adds value for brands as it allows them to augment their understanding of consumers and increase both their reach against and understanding of customers and prospects.
Marketplace and Other
As we have scaled the LiveRamp network and technology, we have found additional ways to leverage our platform, deliver more value to clients and create incremental revenue streams. Leveraging our common identity system and broad integration network, the Data Marketplace seamlessly connects data sellers’ audience data across the marketing ecosystem. The Data Marketplace enables data sellers to easily monetize their data across hundreds of marketing platforms and publishers. At the same time, it provides a single platform where data buyers, including platforms and publishers, in addition to brands and their agencies, access third-party data from more than 200 data sellers, supporting all industries and encompassing all types of data. Data providers include sources andbrands exclusive to LiveRamp, emerging platforms with access to previously unavailable deterministic data, and data partnerships enabled by our platform.
We generate revenue from the Data Marketplace primarily through revenue-sharing arrangements with data sellers that are monetizing their data assets via our marketplace platform service. We also generate Marketplace and Other revenue through transactional usage-based arrangements with certain publishers and addressable TV providers.
To complement our product offering, we provide professional services and enhanced support entitlements to help customers leverage our platform and drive business outcomes. Our services offering includes product implementation, data science analytics, audience measurement and general advisory.We generate revenue from services primarily from project fees paid by subscribers to our platform. Service projects are sold on an ad hoc basis as well as bundled with platform subscriptions. Services revenue is less than 5% of total Company revenue.
Summary Results and Notable Events
During fiscal 2016,2022, the Company completed the saleacquisition of its ITO business to Charlesbank Capital Partners and M/C Partners.certain technology assets owned by Rakam, Inc. ("Rakam") for approximately $2.2 million in cash. The business qualified for treatment as discontinued operations during fiscal 2016. Accordingly, the results of operations, cash flows, and the balance sheet amounts pertaining to ITO, for all periods reported, have been classified as discontinued operationstechnology asset is a cloud-agnostic customer data analytics platform that is deployed directly in the consolidated financial statements.
Atclient's data warehouse. The purchased technology has been embedded into the closing of the transaction, the Company received total consideration of $131.0 million ($140.0 million stated sales price less closing adjustmentsCompany's platform, enabling us to provide a single, unified segmentation solution and transaction costs of $9.0 million).enable our clients to generate real-time insights and create custom audiences wherever their data resides. The Company may also receive up toconcluded the acquired assets did not meet the definition of a maximumbusiness under ASU 2017-01, "Clarifying the Definition of $50 million in contingent payments in future periods through 2020 subject to certain conditions. Due toa Business", and therefore has accounted for the uncertainty of contingent payments, income will beacquisition as an asset acquisition. The purchased asset was recorded upon receipt of payment as a component$2.2 million developed technology intangible asset and is being amortized over a period of income from discontinued operations. In addition, the Company has the right to participate in distributions of the divested entity above a defined amount. The Company reported a gain of $9.3 millionthree years based on the sale which is included in earnings from discontinued operations, net of tax. The Company used $55.0 million of proceeds from the sale to repay outstanding Company indebtedness in order to comply with the Company's existing credit agreement. The remaining proceeds from the sale were used to fund expansion of its common stock repurchase program and for general corporate purposes.estimated useful life.
During fiscal 2015,2022, the Company acquired allcompleted the acquisition of the outstanding shares of LiveRamp,Diablo.ai, Inc. ("LiveRamp"Diablo"), a leading service providerfirst-party data resolution platform and graph builder, for onboarding customer dataapproximately $9.7 million in cash. Diablo's technology was embedded into digital marketing applications.our unified platform and plays an integral role in our global identity capability. The Company has included the financial results of LiveRampDiablo in the consolidated financial statements from the date of acquisition. LiveRamp is included in the Connectivity segment. Under the termsas of the merger agreement, the Company paid $265.7 million, netfirst quarter of cash acquired, in cash for all outstanding LiveRamp shares. The purchase price for the acquisition also included certain replacement stock options issued to LiveRamp employees resulting in an acquisition date total fair value of consideration transferred for LiveRamp of approximately $272.7 million.fiscal 2022.
During fiscal 2015,2021, the Company completed the saleacquisition of its U.K. call center operation, 2Touch, to ParseqDataFleets, Ltd. ("DataFleets"), a European business process outsourcing service provider.cloud data platform that enables data silos to be unified without moving data or compromising privacy. This acquisition expanded LiveRamp's data protection capabilities to unlock greater data access and control for its customers. In addition, the deal opened up new use cases as well as new markets for distributed data collaboration. The business qualified for treatment as discontinued operations during fiscal 2015. Accordingly,Company has included the financial results of operations, cash flows, and the balance sheet amounts of 2Touch, for all periods reported, have been classified as discontinued operationsDataFleets in the consolidated financial statements.statements as of the fourth quarter of fiscal 2021. The acquisition consideration for DataFleets was approximately $67.2 million cash.
During fiscal 2021, the Company completed the acquisition of Acuity Data ("Acuity"), a team of global retail and consumer packaged goods (“CPG”) experts, for approximately $2.9 million in cash. The acquisition also included a three-year performance plan having a maximum potential attainment of $5.1 million that would be recorded as non-cash stock compensation if achieved. The acquisition strengthened the retail analytics capabilities of our data collaboration platform by enabling better reporting, insights, and collaboration for retailers and CPG companies, bridging the gap between trade and media by bringing consumers’ digital signals and retail transaction data together in a privacy-conscious manner. The Company has included the financial results of Acuity in the consolidated financial statements as of the second quarter of fiscal 2021.
A financial summary of the most recently completed fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022 (fiscal 2022) is presented below.below:
•Revenues were $596.6 million, a 12.8% increase from $528.7 million in fiscal 2022.
· | Revenues of $850.1 million, a 5.6% increase from $804.9 million in fiscal 2015. |
•Cost of revenue was $170.1 million, a 15.4% increase from $147.4 million in fiscal 2022.· | Cost of revenue of $488.4 million, a 1.1% decrease from $494.0 million in fiscal 2015. |
•Gross margin decreased to 71.5% from 72.1% in fiscal 2022.· | Gross margin increased to 42.5% from 38.6% in fiscal 2015. |
•Total operating expenses were $552.3 million, a 23.6% increase from $446.8 million in fiscal 2022.· | Total operating expenses of $374.8 million, a 9.1% increase from $343.6 million in fiscal 2015. |
•Cost of revenue and operating expenses for fiscal 2023 and 2022 included the following items:· | Cost of revenue and operating expenses for fiscal 2016 and 2015 include the following items: |
◦Non-cash stock compensation of $125.8 million and $87.3 million, respectively (cost of revenue of $6.3 million and $4.1 million, respectively, and operating expenses of $119.5 million and $83.1 million, respectively)o | Non-cash stock compensation of $31.5 million and $28.3 million, respectively (cost of revenue and operating expenses) |
◦Purchased intangible asset amortization of $16.8 million and $18.7 million, respectively (cost of revenue)◦Transformation costs of $9.0 million in fiscal 2023 (general and administrative)
◦Restructuring charges of $35.3 million and $1.5 million, respectively (gains, losses, and other)
•Total other income, net was $6.9 million, a decrease of $23.5 million from $30.5 million in fiscal 2022.
o | Purchase intangible asset amortization of $15.5 million and $11.5 million, respectively (cost of revenue) |
•Net loss was $118.7 million, or $1.79 per diluted share, in fiscal 2023 compared to $33.8 million, or $0.50 per diluted share, in fiscal 2022.o | Accelerated amortization of $1.8 million and $4.3 million, respectively (cost of revenue) |
•Net cash provided by operating activities was $34.4 million in fiscal 2023 compared to $78.1 million in fiscal 2022.o | Separation and transformation costs of $20.8 million and $31.3 million, respectively (operating expenses) |
•The Company repurchased 6.1 million shares of its common stock in fiscal 2023 for $150.0 million compared to 1.3 million shares in fiscal 2022 for $58.6 million under the Company's common stock repurchase program.o | Restructuring charges, impairmentThis summary and the following discussion and analysis highlight financial results as well as other adjustments of $19.0 million and $22.6 million, respectively (operating expenses) |
· | Net loss from continuing operations of $8.6 million, a $17.9 million improvement from a loss of $26.5 million in fiscal 2015. |
· | Net cash provided by operating activities of $113.6 million, an 85.9% increase from $61.1 million in fiscal 2015. |
· | The Company acquired $52.8 million of its stock under the Company's common stock repurchase program. |
· | The Company completed the sale of its ITO business. |
The summary highlights significant events and transactions of the Company during the fiscal yearsyear ended March 31, 20162023 compared to the same period in fiscal 2022, unless otherwise stated. Discussion and 2015. However,analysis for the year ended March 31, 2022 compared to the same period ended March 31, 2021 may be found in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended March 31, 2022, filed with the Securities and Exchange Commission on May 24, 2022
On June 27, 2022, the third and final vesting date relating to the Company's fiscal 2020 acquisition of Data Plus Math, the Company issued an additional 311,868 shares of common stock of the Company in the aggregate to the co-founders.
On August 8, 2022, in connection with the second earn-out period of the Acuity acquisition, the Company paid an aggregate cash amount equal to approximately $0.5 million and issued 44,796 shares of common stock of the Company in the aggregate to the Acuity shareholders.
On November 3, 2022, the Company announced (i) a reduction in force involving approximately 10% of our full-time employees, and (ii) a planned downsizing of our real estate footprint in addition to the footprint reduction that occurred during our fiscal year second quarter. The headcount reduction is part of a broader strategic re-prioritization to build a stronger, more profitable company by tightening our focus and simplifying and driving efficiency into our business processes. These actions are expected to result in an annualized operating expense savings of approximately $30 million beginning in the fourth quarter of fiscal 2023.
On November 15, 2022, the board of directors voted to amend the Amended and Restated 2005 Equity Compensation Plan of LiveRamp, Inc. (the "2005 Plan"). The 2005 Plan was amended to provide that, in the event of a participant’s retirement on or after age 65 with at least five years of service, awards held by the participant at retirement will continue to vest in accordance with their terms. This amendment to the 2005 Plan impacted stock-based compensation expense by accelerating $5.4 million of expense recognition into fiscal 2023 that would have otherwise been recognized over future reporting periods through the quarter ending December 31, 2025
On December 20, 2022, the board of directors approved an amendment to the Company's existing share repurchase program to (i) authorize an additional $100 million in repurchases, thereby increasing the total amount authorized for repurchase under the Company's share repurchase program to $1.1 billion, and (ii) extend its duration through December 31, 2024. As of March 31, 2023, the share repurchase program had remaining capacity of $217.8 million.
On February 15, 2023, Warren C. Jenson, the Company's President, Chief Financial Officer and Executive Managing Director of International, notified the Company that he would resign from those positions and terminate his employment with the Company effective as of April 14, 2023 (the “Termination Date”), to pursue other opportunities. The Company subsequently announced on February 21, 2023 that Lauren Dillard, Senior Vice President of Finance and Investor Relations, will serve as the interim Chief Financial Officer of the Company effective as of the Termination Date. She retains her present title and will continue to serve in her present position during her tenure as the interim Chief Financial Officer of the Company. As interim Chief Financial Officer, Ms. Dillard is the Company’s principal financial and accounting officer.
On February 17, 2023, the second vesting date of the acquisition of DataFleets, the Company issued an additional 90,141 shares of common stock of the Company in the aggregate to the co-founders pursuant to a distribution under the holdback agreements entered into in connection with the acquisition. In connection with this summary is not intendedvesting, the Company elected to calculate the number of shares to be a full discussionissued using the closing share price floor set forth in the
holdback agreements. Accordingly, in accordance with the requirements of the Company's results. This summary should be readholdback agreements, the Company paid the co-founders an aggregate amount in conjunction with the following discussion of Results of Operations and Capital Resources and Liquidity and with the Company's consolidated financial statements and footnotes accompanying this report.cash equal to approximately $3.8 million.
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"(“GAAP”) as set forth in the Financial Accounting Standards Board's ("FASB"Board’s (“FASB”) Accounting Standards Codification ("ASC"(“ASC”), and we consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission ("SEC"(“SEC”). GAAP, as set forth within the ASC, requires management to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Note 1 to the accompanying consolidated financial statements includes a summary of significant accounting policies used in the preparation of Acxiom'sLiveRamp’s consolidated financial statements. Of those policies, we have identified the following as the most critical because they are both important to the portrayal of the Company'sCompany’s financial condition and operating results, and they may require management to make judgments and estimates about inherently uncertain matters:
· | Software, Purchased Software Licenses, and Research and Development Costs |
•Accounting for Income Taxes · | Accounting for Income Taxes |
•Business Combinations
Revenue Recognition
The Company'sCompany’s policy follows the guidance from ASC 605, 606, Revenue Recognitionfrom Contracts with Customers.
The Company provides marketing databaseLiveRamp recognizes revenue from the following sources: (i) Subscription revenue, which consists primarily of subscription fees from clients accessing our LiveRamp platform; and (ii) Marketplace and Other revenue, which primarily consists of revenue-sharing fees generated from access to data through our LiveRamp Data Marketplace, professional services under long-term arrangements. Theseincluding product implementation, data science analytics and audience measurement, and transactional usage-based revenue from arrangements may requirewith certain publishers and addressable TV providers.
We determine revenue recognition through the Companyfollowing steps:
•Identification of the contract, or contracts, with a customer;
•Identification of the performance obligations in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to perform setup activities suchthe performance obligations in the contract; and
•Recognition of revenue when, or as, the designperformance obligations are satisfied.
Identification of the contract
We consider the terms and buildconditions of the contract and our customary business practices when identifying our contracts under ASC 606. We determine we have a database,contract or contract modification with a customer when the contract is approved and may include other productsthe parties are committed to performing their respective obligations, we can identify each party's rights regarding the services to be transferred, we can identify the payment terms for the services, we have determined the contract has commercial substance, and services purchasedwe have determined that collection of at least some of the same time,contract consideration is probable. At contract inception we evaluate whether two or within close proximity of one another (referred to as multiple element arrangements). Each element within a multiple element arrangement ismore contracts should be combined and accounted for as a separate unitsingle contract and whether the single or combined contract includes one or multiple performance obligations. We apply judgment in determining the customer's ability to pay, which is based on a variety of factors, including the customer's historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.
Identification of the performance obligations
As part of accounting providedfor arrangements with multiple performance obligations, we must assess whether each performance obligation is distinct. A good or service that is promised to a customer is distinct if the following criteriacustomer can benefit from the good or service either on its own or together with other resources that are met: the delivered products or services have valuereadily available to the customer, onand a standalone basis; and for an arrangement that includes a general right of return relativecompany's promise to transfer the good or service to the delivered productscustomer is separately identifiable from other promises in the contract. We have determined that our subscriptions to the platform are a distinct performance obligation and access to data for revenue-sharing and usage-based arrangements is a distinct performance obligation because, once a customer has access to the platform, the service is fully functional and does not require any additional development, modification, or services, delivery or performancecustomization.
Determination of the undelivered product or servicetransaction price
The transaction price is consideredthe amount of consideration we expect to be entitled to in exchange for transferring services to a customer, excluding sales taxes that are collected on behalf of government agencies. Variable consideration is assessed and included in the transaction price if, in our judgment, it is probable and is substantially controlled by us. We considerthat a deliverable to have standalone value ifsignificant future reversal of cumulative revenue under the product or service is sold separately by us or another vendor or could be resold bycontract will not occur. None of our contracts contain a significant financing component.
Allocation of the customer. Further, our revenue arrangements generally do not include a general right of return relatedtransaction price to the delivered products. Whereperformance obligations in the aforementioned criteria for a separate unit of accounting are not met,contract
If the deliverable is combined with the undelivered element(s) and treated ascontract contains a single unit of accounting for purposes ofperformance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the arrangement consideration and revenue recognition.
For our multiple-element arrangements, we allocate revenuetransaction price to each element based on a selling price hierarchy at the arrangement's inception. The relative selling price for each unit of accounting in a multiple-element arrangement is established using vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if available, or management's best estimate of stand-alone selling price (BESP). In most cases, the Company has neither VSOE nor TPE and therefore uses BESP. The total arrangement consideration is allocated to each separate unit of accounting for each of the deliverables using the relative selling prices of each unitdistinct performance obligation based on the aforementionedstandalone selling price hierarchy.("SSP") of each service. We limit the amount of revenue recognized for delivered elements to an amount that is not contingent upon future delivery of additional products or services or meeting any specified performance conditions.
The objective of BESP is togenerally determine the price at which the Company would transact a sale if the product or service were soldSSP based on a stand-alone basis. Management's BESP is determined by considering multiple factors including actual contractual selling prices when the itemobligation is sold on a stand-alonestandalone basis, as well as market conditions, competition, internal costs, profit objectives and pricing practices. As pricing and marketing strategies evolve, we may modify our pricing practices in the future, which could result in changes to BESP,SSP.
Recognition of revenue when, or toas, the development of VSOE or TPE for individual products or services. As a result, future revenue recognition for multiple-element arrangements could differ from recognition in the current period. Our relative selling pricesperformance obligations are analyzed on an annual basis or more frequently if we experience significant changes in selling prices.satisfied
Revenues are recognized when: (1) persuasive evidence of an arrangement exists; (2) we deliver the products and services; (3) the sale price is fixedwhen or determinable; and (4) collection is reasonably assured. Revenues that are not recognized at the time of sale because the foregoing conditions are not met are recognized when those conditions are subsequently met. Where applicable, we reduce revenue for certain incentive programs where we have the ability to sufficiently estimate the effects of these items. In some cases, the arrangements also contain provisions requiring customer acceptanceas control of the setup activities priorpromised services is transferred to commencement of the ongoing services arrangement. Up-front fees billed during the setup phase for these arrangements are deferred and setup costs that are direct and incremental to the contract are capitalized. Revenue recognition does not begin until after customer acceptance in cases where contracts contain acceptance provisions. Once the setup phase is complete and customer acceptance occurs, the Company recognizes revenue and the related costs for each element as delivered. In situations where the arrangement does not require customer acceptance before the Company begins providing services,customers. Subscription revenue is generally recognized for each element as delivered and no costs are deferred.
The Company evaluates its marketing database arrangements to determine whetherratably over the arrangement contains a lease. Ifsubscription period beginning on the arrangement is determined to contain a lease, applicable accounting standards require the Company to account for the lease component separately from the remaining components of the arrangement. In cases where marketing database arrangements are determined to include a lease, the lease is evaluated to determine whether it is a capital lease or operating lease and accounted for accordingly. These lease revenues are not significant to the Company's consolidated financial statements.
Sales of third-party software, hardware and certain other equipment are recognized when delivered. If such sales are part of a multiple-element arrangement, they are recognized as a separate element unless collection of the sales price is dependent upon delivery of other products or services. Additionally, the Company evaluates revenue from the sale of data, software, hardware and equipment in accordance with accounting standards to determine whether such revenue should be recognized on a gross or a net basis. All of the factors in the accounting standards are considered with the primary factor being whether the Company is the primary obligor in the arrangement. "Out-of-pocket" expenses incurred by, and reimbursed to, the Company in connection with customer contracts are recorded as gross revenue.
The Company also performs services on a project basis outside of, or in addition to, the scope of long-term arrangements. The Company recognizes revenue from these services asdate the services are performed.
All taxes assessed on revenue-producingmade available to customers. Marketplace and other revenue is typically transactional in nature, tied to a revenue share or volumes purchased. We report revenue from Data Marketplace and other similar transactions described above are presented on a net basis or excluded from revenues.
Revenues from the licensing ofbecause our performance obligation is to facilitate a transaction between data are recognized upon deliveryproviders and data buyers, for which we earn a portion of the data togross fee. Consequently, the customer. Revenue fromportion of the licensing of data to the customer in circumstances where the license agreement contains a volume cap is recognized in proportion to the total records to be delivered under the arrangement. Revenue from the sale of data on a per-record basis is recognized as the records are delivered.
Revenues from onboarding customer data into digital marketing applications are recognized as the services are delivered over the contract.
Accounts receivable include amountsgross amount billed to clientsdata buyers that is remitted to data providers is not reflected as revenues. We generate revenue from Services primarily from project fees paid by subscribers to our platform. Service projects are sold on an ad hoc basis as well as unbilled amounts recognized in accordancebundled with the Company's revenue recognition policies. Unbilled amounts included in accounts receivable were $14.3 million at March 31, 2016 and 2015, respectively.platform subscriptions.
Included in the Company's consolidated balance sheets are deferred revenues resulting from billings and/or client payments in advance of revenue recognition. Deferred revenue at March 31, 2016 was $44.5 million and $33.6 million at March 31, 2015.
Software, Purchased Software Licenses, and Research and Development Costs
Costs of internally developed software are capitalized in accordance with ASC 350-40, Internal Use Software.
The standard generally requires that research and development costs incurred prior to the beginning of the application development stage of software products are charged to operations as such costs are incurred. Once the application development stage has begun, costs are capitalized until the software is availableAccounting for general release.
Costs of internally developed software are amortized on a straight-line basis over the remaining estimated economic life of the software product, generally two to five years. The Company recorded amortization expense related to internally developed software of $30.7 million, $29.0 million, and $9.7 million for fiscal 2016, 2015 and 2014, respectively. Of the amortization expense recorded in fiscal 2016 and 2015, $10.0 million and $7.5 million, respectively, relate to internally developed software acquired as part of the LiveRamp acquisition. Amortization expense in fiscal 2016 and fiscal 2015 also included $1.8 million and $4.3 million, respectively, of accelerated amortization expense resulting from adjusting the remaining lives of certain capitalized software products as a result of the LiveRamp acquisition.
Costs of purchased software licenses are amortized using a units-of-production basis over the estimated economic life of the license, generally not to exceed five years. The Company recorded amortization expense related to purchased software licenses of $3.8 million, $5.0 million and $4.0 million in 2016, 2015 and 2014, respectively. Some of these licenses are, in effect, volume purchase agreements for software licenses needed for internal use and to provide services to customers over the terms of the agreements. Therefore, amortization lives are periodically reevaluated and, if justified, adjusted to reflect current and future expected usage based on units-of-production amortization.
Capitalized software, including both purchased and internally developed, is reviewed when facts and circumstances indicate the carrying amount may not be recoverable and, if necessary, the Company reduces the carrying value of each product to its fair value.
Valuation of Goodwill
As discussed, during the first quarter of fiscal 2016, the Company changed its organizational structure which resulted in a change of operating segments and reporting units. During the third quarter of fiscal 2016, the Company further expanded its operating segments and reporting units. As a result, goodwill was reallocated to the new reporting units using a relative fair value approach.
Goodwill is measured and tested for impairment on an annual basis in the first quarter of the Company's fiscal year in accordance with ASC 350, Intangibles—Goodwill and Other, or more frequently if indicators of impairment exist. Triggering events for interim impairment testing include indicators such as adverse industry or economic trends, restructuring actions, downward revisions to projections of financial performance, or a sustained decline in market capitalization. The performance of the impairment test involves a two-step process. The first step requires comparing the estimated fair value of a reporting unit to its net book value, including goodwill. A potential impairment exists if the estimated fair value of the reporting unit is lower than its net book value. The second step of the impairment test involves assigning the estimated fair value of the reporting unit to its identifiable assets, with any residual fair value being assigned to goodwill. If the carrying value of an individual indefinite-lived intangible asset (including goodwill) exceeds its estimated fair value, such asset is written down by an amount equal to the excess, and a corresponding amount is recorded as a charge to operations for the period in which the impairment test is completed. Completion of the Company's annual impairment test during the quarter ended June 30, 2015 indicated no potential impairment of its goodwill balances.
During the second quarter of fiscal 2016, a triggering event occurred which required the Company to test the recoverability of goodwill associated with its Brazil Marketing Services and Audience Solutions reporting unit. The triggering event was the announced closure of the Company's Brazil operation. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in this unit for impairment. The results of the impairment testing indicated complete impairment of the goodwill as well as impairment for certain other long-lived assets. The amount of impairment was $0.7 million, of which $0.5 million was goodwill and $0.2 million related to other long-lived assets, primarily property and equipment.
During the third quarter of fiscal 2016, management determined that results for the APAC component were lower than had been projected in the previous goodwill test in part due to an economic slowdown in Asia. Management further determined that the failure of the APAC component to meet expectations, combined with the expectation that future projections would also be lowered, constituted a triggering event, requiring an interim goodwill impairment test. The impairment test indicated a reduced fair value, but the fair value was still in excess of the carrying value resulting in no impairment.
During the fourth quarter of fiscal 2016, a triggering event occurred which required the Company to test the recoverability of goodwill associated with its APAC Marketing Services and Audience Solutions reporting units. The triggering event was the Company's decision to focus efforts in Australia exclusively on the Connectivity business; as a result, the Company plans to wind-down the Marketing Services and Audience Solutions operations in Australia. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in these units for impairment. The results of the two-step test indicated complete impairment of the APAC Audience Solutions goodwill as well as impairment for certain other long-lived assets. The amount of impairment was $6.1 million, of which $5.4 million was goodwill and $0.7 million related to other long-lived assets, primarily property and equipment. The impairment test also indicated a reduced fair value for the APAC Marketing Services component, but the fair value was still in excess of the carrying value resulting in no impairment. Management believes that the estimated valuations it arrived at were reasonable and consistent with what other marketplace participants would use in valuing the APAC component. However, management cannot give any assurances that the values will not change in the future. For example, if the APAC projections are not achieved in the future or if there are strategic changes related to the reporting unit, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach. The Company continues to monitor potential triggering events including changes in the APAC business climate, the volatility of the APAC capital markets, and APAC operating performance and projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in impairment charges.
In order to estimate the fair value for each of the components, management uses an income approach based on a discounted cash flow model together with valuations based on an analysis of public company market multiples and a similar transactions analysis.
The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital ("WACC"). The WACC considers market and industry data as well as company-specific risk factors for each reporting unit in determining the appropriate discount rate to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Management, considering industry and company-specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.
The public company market multiple method is used to estimate values for each of the components by looking at market value multiples to revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) for selected public companies that are believed to be representative of companies that marketplace participants would use to arrive at comparable multiples for the individual component being tested. These multiples are then used to develop an estimated value for each respective component.
The similar transactions method compares multiples based on acquisition prices of other companies believed to be those that marketplace participants would use to compare to the individual component being tested. Those multiples are then used to develop an estimated value for that component.
In order to arrive at an estimated value for each component, management uses a weighted-average approach to combine the results of each analysis. Management believes that using multiple valuation approaches and then weighting them appropriately is a technique that a marketplace participant would use.
As a final test of the annual valuation results, the total of the values of the components is reconciled to the actual market value of Acxiom common stock as of the valuation date. Management believes this control premium is reasonable compared to historical control premiums observed in actual transactions.
During fiscal 2015, we did not recognize any goodwill impairment losses.
During fiscal 2014, triggering events occurred which required the Company to test the recoverability of goodwill associated with its European reporting unit and its 2Touch reporting unit (which is now included in discontinued operations). The triggering event was the initiation of a restructuring of the European unit. The restructuring included exiting the analog paper survey business in Europe. The triggering event related to 2Touch was a potential exit from that business. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in those units for impairment. In the case of 2Touch, the step one fair value indicated that all of the goodwill and other long-lived assets were impaired. Therefore there was no need to perform detailed step two calculations in order to conclude that all of the goodwill and other long-lived assets of this unit should be written off. In the case of the European unit, the Company first tested certain data assets within the unit, and concluded that $4.6 million of these data assets were impaired and should be written off. Then the Company performed step one of the two-step goodwill test, which indicated the goodwill was impaired. Step two of the goodwill recoverability test required the Company to perform a hypothetical purchase price allocation, under which the estimated fair value was allocated to the unit's tangible and intangible assets based on their estimated fair values. This hypothetical purchase price allocation indicated that all of the unit's goodwill should be written off. The amount of impairment for the European unit was $25.0 million, of which $20.3 million was goodwill and $4.6 million related to data assets. The amount of impairment for the 2Touch unit was $3.9 million, of which $3.0 million was goodwill and $0.9 million was other assets, primarily property and equipment.
Management believes that the estimated valuations it arrived at are reasonable and consistent with what other marketplace participants would use in valuing the Company's components. However, management cannot give any assurance that these market values will not change in the future. For example, if discount rates demanded by the market increase, this could lead to reduced valuations under the income approach. If the Company's projections are not achieved in the future, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach. If the market price of the Company's stock decreases, this could cause the Company to reassess the reasonableness of the implied control premium, which might cause management to assume a higher discount rate under the income approach which could lead to reduced valuations. If future similar transactions exhibit lower multiples than those observed in the past, this could lead to reduced valuations under the similar transactions approach. And finally, if there is a general decline in the stock market and particularly in those companies selected as comparable to the Company's components, this could lead to reduced valuations under the public company market multiple approach. The Company's next annual impairment test will be performed during the first quarter of fiscal 2017. The fair value of the Company's components could deteriorate which could result in the need to record impairment charges in future periods. The Company continues to monitor potential triggering events including changes in the business climate in which it operates, attrition of key personnel, the volatility in the capital markets, the Company's market capitalization compared to its book value, the Company's recent operating performance, and the Company's financial projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in impairment charges.
Restructuring
The Company records costs associated with employee terminations and other exit activity in accordance with ASC 420, Exit or Disposal Cost Obligations, depending on whether the costs relate to exit or disposal activities under the accounting standards, or whether they are other post-employment termination benefits. Under applicable accounting standards for exit or disposal costs, the Company records employee termination benefits as an operating expense when the benefit arrangement is communicated to the employee and no significant future services are required. Under the accounting standards related to post employment termination benefits the Company records employee termination benefits when the termination benefits are probable and can be estimated. The
Company recognizes the present value of facility lease termination obligations, net of estimated sublease income and other exit costs, when the Company has future payments with no future economic benefit or a commitment to pay the termination costs of a prior commitment. In future periods the Company will record accretion expense to increase the liability to an amount equal to the estimated future cash payments necessary to exit the leases. This requires judgment and management estimation in order to determine the expected time frame for securing a subtenant, the amount of sublease income to be received and the appropriate discount rate to calculate the present value of the future cash flows. Should actual lease exit costs differ from estimates, the Company may be required to adjust the restructuring charge which will impact net income in the period any adjustment is recorded.
Income Taxes
The Company makes estimates and judgments in determining the provision for income taxes for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain deferred tax assets and liabilities that arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Significant changes in these estimates may result in an increase or decrease to the tax provision in a subsequent period. The Company assesses the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company increases the provision for taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. The Company believes that the deferred tax assets recorded on the consolidated balance sheets will be ultimately recovered. However, should a change occur in the Company's ability to recover its deferred tax assets, its tax provision would increase in the period in which the Company determined that the recovery was not likely.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process pursuant to ASC 740, Income Taxes. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If the Company determines that a tax position will more likely than not be sustained on audit, the second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has tomust determine the probability of various possible outcomes.
The Company re-evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.
Business Combinations
We apply the provisions of ASC 805, Business Combinations, in accounting for acquisitions. ASC 805 requires us to determine if assets or a business was acquired. If a business was acquired, it requires us to recognize separately from goodwill the fair value of the assets acquired and the liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of the fair value of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments resulting from new information about facts and circumstances that existed at the acquisition date and falls within the measurement period to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
Key Performance Metrics
In addition to measures of financial performance presented in our consolidated financial statements, we monitor the key metrics set forth below to help us evaluate revenue growth trends, establish budgets and measure the effectiveness of our sales and marketing efforts. The below data is presented in millions, except for percentages.
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| | March 31, | | March 31, | | 2023 | | 2022 |
| | 2023 | | 2022 | | % Change | | % Change |
| | | | | | | | |
Subscription net retention | | 97 | % | | 111 | % | | (12.6) | % | | 9.9 | % |
Annualized recurring revenue | | $ | 423.8 | | | $ | 399.5 | | | 6.1 | % | | 18.5 | % |
Remaining performance obligation | | $ | 470.9 | | | $ | 394.2 | | | 19.5 | % | | 6.3 | % |
Current remaining performance obligation | | $ | 337.6 | | | $ | 308.5 | | | 9.4 | % | | 20.6 | % |
Subscription CRPO | | $ | 295.4 | | | $ | 279.5 | | | 5.7 | % | | 18.3 | % |
Subscription Net Retention
Subscription net retention (“SNR”) is defined as the current quarter subscription revenue (net) from customers who have been on our platform for one year or more, divided by the prior year quarter subscription revenue (net), inclusive of upsell, churn (lost contract), downsell (contract reduction), and variable revenue changes. SNR excludes revenue from new customers that have not been on our platform for one year or more. We believe our SNR is an important metric that provides insight into the long-term value of our subscription agreements and our ability to retain and grow revenue from our subscription customer base. SNR rate is an operational metric and there is no comparable GAAP financial measure to which we can reconcile this particular key metric.
The decline of SNR in fiscal year 2023 was primarily attributable to downsell and churn activity offsetting customer upsell revenue, as well as lower contribution from variable usage. The increase in downsell and churn activity was driven in part by budget and economic pressures on our customers.
Annualized Recurring Revenue
Annualized Recurring Revenue (“ARR”) is defined as the last month of quarter recurring revenue annualized. Recurring revenue is fixed and contracted subscription revenue and does not include any variable or non-recurring revenue amounts. We believe ARR provides important information about our future revenue potential, our ability to acquire new clients, and our ability to maintain and expand our relationship with existing clients. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or replace these items. Our use of ARR has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate ARR differently, which reduces its usefulness as a comparative measure.
Our ARR growth of 6.1%, or $24.3 million, was primarily attributable to new client revenue as growth from upsell was more than offset by downsell and churn. Our ARR growth declined from 18.5% to 6.1% this year. The decline is due to similar reasons as those resulting in SNR declines, namely, lower contribution from new and upsell activity as well as downsell and churn from customers due in part to budget pressures.
Remaining Performance Obligations and Current Remaining Performance Obligations
Remaining performance obligations (“RPO”) is defined as all future revenue under contract that has not yet been recognized as revenue. Future invoicing is determined to be certain when we have an executed non-cancellable contract or a significant penalty that is due upon cancellation, and invoicing is not dependent on a future event such as the delivery of a specific new product or feature, or the achievement of contractual contingencies. Current RPO ("CRPO") represents RPO to be recognized over the next twelve months. Subscription CRPO represents CRPO associated with subscription-only RPO to be recognized over the next twelve months.
While the Company believes RPO, CRPO, and Subscription CRPO are leading indicators of revenue as they represent sales activity not yet recognized in revenue, they are not necessarily indicative of future revenue growth as they are influenced by several factors, including seasonality of contract renewal timing and average contract terms. The Company monitors RPO, CRPO, and Subscription CRPO to manage the business and evaluate performance. RPO increased due to several large, multi-year renewals, including one with one of our largest customers. CRPO and Subscription CRPO growth was due to new customer additions. The decline in CRPO and Subscription CRPO annual growth rates was primarily attributable to lower relative contribution of new customer additions in fiscal year 2023 compared to fiscal year 2022.
Based on the year-over-year decline in annual growth rates for these key metrics, the Company expects subscription revenue growth in fiscal year 2024 to be lower than rates of growth experienced in fiscal year 2023.
Additionally, recent lower revenue growth trends in Marketplace & Other could continue during fiscal year 2024 if recent macroeconomic conditions continue to negatively impact global advertising spend.
Results of Operations
A summary of selected financial information for each of the years in the three-year period ended March 31, 2016periods reported is presented below (dollars in thousands, except per share amounts):
| | 2016 | | | 2015 | | | 2014 | | | % Change 2016-2015 | | | % Change 2015-2014 | |
Revenues | | $ | 850,088 | | | $ | 804,911 | | | $ | 805,153 | | | | 6 | % | | | (0 | %) |
Cost of revenue | | | 488,382 | | | | 494,037 | | | | 505,517 | | | | (1 | ) | | | (2 | ) |
Gross profit | | | 361,706 | | | | 310,874 | | | | 299,636 | | | | 16 | | | | 4 | |
Operating expenses | | | 374,769 | | | | 343,558 | | | | 298,079 | | | | 9 | | | | 15 | |
Income (loss) from operations | | | (13,063 | ) | | | (32,684 | ) | | | 1,557 | | | | 60 | | | | (2,199 | ) |
Net loss from continuing operations | | | (8,648 | ) | | | (26,542 | ) | | | (17,340 | ) | | | 67 | | | | (53 | ) |
Diluted loss per share from continuing operations | | $ | (0.11 | ) | | $ | (0.34 | ) | | $ | (0.23 | ) | | | 68 | | | | (48 | ) |
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| | | | Year ended March 31, |
| | | | | | | | | | | | % |
| | | | | | | | 2023 | | 2022 | | Change |
Revenues | | | | | | | | $ | 596,583 | | | $ | 528,657 | | | 13 | |
Cost of revenue | | | | | | | | 170,084 | | | 147,427 | | | 15 | |
Gross profit | | | | | | | | 426,499 | | | 381,230 | | | 12 | |
Total operating expenses | | | | | | | | 552,299 | | | 446,768 | | | 24 | |
Loss from operations | | | | | | | | (125,800) | | | (65,538) | | | (92) | |
Total other income, net | | | | | | | | 6,946 | | | 30,463 | | | NA |
Net loss from continuing operations | | | | | | | | $ | (124,106) | | | $ | (33,833) | | | (267) | |
Diluted loss per share | | | | | | | | $ | (1.87) | | | $ | (0.50) | | | (277) | |
Revenues
The following table presents the Company's revenues by reporting segment for each of the yearsperiods reported is presented below (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | Year ended March 31, |
| | | | | | | | | | | | % |
| | | | | | | | 2023 | | 2022 | | Change |
Revenues: | | | | | | | | | | | | |
Subscription | | | | | | | | $ | 482,807 | | | $ | 428,617 | | | 13 | |
Marketplace and Other | | | | | | | | 113,776 | | | 100,040 | | | 14 | |
Total revenues | | | | | | | | $ | 596,583 | | | $ | 528,657 | | | 13 | |
Total revenues for the three-year periodtwelve months ended March 31, 2016 (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | | | % Change 2016-2015 | | | % Change 2015-2014 | |
Revenues | | | | | | | | | | | | | | | |
Marketing Services | | $ | 449,772 | | | $ | 446,103 | | | $ | 465,572 | | | | 1 | % | | | (4 | %) |
Audience Solutions | | | 297,846 | | | | 303,836 | | | | 325,932 | | | | (2 | ) | | | (7 | ) |
Connectivity | | | 102,470 | | | | 54,972 | | | | 13,649 | | | | 86 | | | | 303 | |
Total revenues | | $ | 850,088 | | | $ | 804,911 | | | $ | 805,153 | | | | 6 | % | | | (0 | %) |
| | | | | | | | | | | | | | | | | | | | |
Total revenues2023 were $850.1$596.6 million, in fiscal 2016, a $45.2$67.9 million or 5.6%, increase from fiscal 2015. Excluding the unfavorable impact of exchange rates ($8.1 million), total revenues increased 6.6%.
Total revenues were $804.9 million in fiscal 2015, a $0.2 million decrease, or flat, from fiscal 2014. Excluding the unfavorable impact of exchange rates ($2.3 million), total revenues increased $2.1 million.
Marketing Services ("MS") revenue was $449.8 million in fiscal 2016, a $3.7 million, or 0.8%,12.8% increase compared to fiscal 2015.the same period a year ago. The increase was primarily due to Subscription revenue growth of $54.2 million, or 12.6%, primarily due to new logo deals and upsell to existing customers, and a $4.0 million increase in revenue stemming from a customer contract settlement. Marketplace and Other revenue growth was $13.7 million, or 13.7%, primarily due to Data Marketplace growth. On a geographic basis, U.S. MS revenue increased $11.3$60.5 million, or 2.8%, from fiscal 2015, due to increases in new and existing client business offset by a few contract terminations.12.2%. International MS revenue decreased $7.6increased $7.5 million, or 16.6%22.7%. Excluding the unfavorable impact ofThe differences in exchange rates ($2.9 million), International MS revenue decreased $4.7 million, primarily due to contract and volume reductions in Europe ($2.9 million) and APAC ($1.8 million). By line of business, increases in Marketing Database ($12.2 million) were offset by declines in Acxiom Impact ($7.8 million). Marketing Database increases were primarily in the U.S. and were partially offset by reductions in APAC of $0.7 million. Acxiom Impact declines were primarily from lost contracts and volume reductionscurrent year compared to those in the U.S. ($4.4 million), Europe ($2.0 million) and APAC ($1.5 million).prior year negatively impacted international revenue growth by approximately 9 percentage points.
MS revenue was $446.1 million in fiscal 2015 a $19.5 million, or 4.2%, decrease compared to fiscal 2014. On a geographic basis, U.S. MS revenue decreased $18.3 million, or 4.4%, from fiscal 2014, due to contract terminations, partially offset by increases in new business and client upsell. International MS revenue decreased $1.1 million, or 2.4%. Excluding the unfavorable impact of exchange rates ($0.1 million), International MS revenue decreased $1.0 million, primarily due to contract and volume reductions in APAC.
Audience Solutions ("AS") revenue was $297.8 million in fiscal 2016, a $6.0 million, or 2.0%, decrease compared to fiscal 2015. On a geographic basis, U.S. AS revenue increased $2.9 million, or 1.1%, from fiscal 2015, due to increases in new business and client upsell offset by a contract termination. International AS revenue decreased $8.9 million, or 20.4%. International AS revenue was impacted by unfavorable exchange rates ($4.7 million) and the exit from the Europe transactional data business in fiscal year 2015 ($5.1 million). By line of business, AS revenue increases in Digital Data through the publisher and digital partner network ($16.4 million) were offset by declines in Enrichment ($11.6 million) and Recognition ($10.0 million). Enrichment and Recognition revenue was impacted by the exit from the Europe business, unfavorable exchange rates, lower volumes in Australia and a terminated contract in the U.S.
AS revenue was $303.8 million in fiscal 2015, a $22.1 million, or 6.8%, decrease compared to fiscal 2014. On a geographic basis, U.S. AS revenue decreased $4.9 million, or 1.8%, from fiscal 2014, due to contract terminations offset partially by increases in new business and client upsell. International AS revenue decreased $17.2 million, or 28.3%. International AS revenue was impacted by unfavorable exchange rates ($1.9 million) and the exit from the Europe transactional data business in fiscal year 2015. By line of business, AS revenue increases in Digital Data through the publisher and digital partner network ($8.4 million) were offset by declines in Enrichment ($25.6 million) and Recognition ($5.0 million). Enrichment revenue was impacted by the unfavorable exchange rates, restructuring in Europe, lower volumes in Australia, and contract terminations. Recognition was impacted by lower volumes in the U.S and Australia.
Connectivity revenue was $102.5 million in fiscal 2016, a $47.5 million, or 86.4%, increase compared to fiscal 2015. The increase was related to LiveRamp new customer additions, and a full year of LiveRamp operations in fiscal 2016 versus nine months in fiscal 2015. On a geographic basis, U.S. Connectivity revenue increased $46.8 million, or 96.6%, from fiscal 2015. International Connectivity revenue increased $0.7 million, or 10.3%.
Connectivity revenue was $55.0 million in fiscal 2015, a $41.3 million, or 302.7%, increase compared to fiscal 2014. The increase was related to the LiveRamp acquisition in July 2014, and new customer additions since the acquisition. On a geographic basis, U.S. Connectivity revenue increased $39.5 million, or 443.3%, from fiscal 2014. International Connectivity revenue increased $1.8 million, or 37.8%.
Cost of revenueRevenue and Gross profitProfit
The following table presents the Company'sCompany’s cost of revenue and gross profit for each of the years in the three-year period ended March 31, 2016periods reported is presented below (dollars in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | Year ended March 31, |
| | | | | | | | | | | | % |
| | | | | | | | 2023 | | 2022 | | Change |
Cost of revenue | | | | | | | | $ | 170,084 | | $ | 147,427 | | 15 | |
Gross profit | | | | | | | | $ | 426,499 | | $ | 381,230 | | 12 | |
Gross margin (%) | | | | | | | | 71.5 | % | | 72.1 | % | | (1) | |
| | 2016 | | | 2015 | | | 2014 | | | % Change 2016-2015 | | | % Change 2015-2014 | |
Cost of revenue | | $ | 488,382 | | | $ | 494,037 | | | $ | 505,517 | | | | (1 | %) | | | (2 | %) |
Gross profit | | | 361,706 | | | | 310,874 | | | | 299,636 | | | | 16 | | | | 4 | |
Gross margin | | | 42.5 | % | | | 38.6 | % | | | 37.2 | % | | | 10 | % | | | 4 | % |
Cost of revenue: Includes allrevenue includes third-party direct costs of sales such asincluding identity graph data, other data and other third partycloud-based hosting costs, directly associated with revenue.as well as costs of IT, security and product operations functions. Cost of revenue also includes operating expenses for each of the Company's operations functions such as client services, account management, agency, strategy and analytics, IT, data acquisition, and products operations. Finally, cost of revenue includes amortization of internally developed software.acquisition-related intangibles.
As described in Note 1 – Significant Accounting Policies, the Company previously classified all account management functions (which include activities supporting existing client relationships and managing client service activities, as well as responsibilities for existing client contract extensions and up-sell) and all IT project management activities as cost of revenue. As the Company is now disaggregating its operating results into more granular categories of costs, and as a result of activities during fiscal 2015 to clarify and segregate account management roles between those supporting existing client relationships and those focused on existing contract extensions and upsell and IT project management roles between client-facing and internal projects, certain costs are presented in a new category. Account management costs supporting contract extension and upsell are now classified as sales and marketing, and internal IT project management costs are now classified as general and administrative.
Cost of revenue was $488.4$170.1 million in fiscal 2016,for the twelve months ended March 31, 2023, a $5.7$22.7 million, or 1.1%15.4%, decreaseincrease from fiscal 2015, and gross margin increasedthe same period a year ago. Gross margins decreased to 42.5%71.5% compared to 38.6% in the prior year. The gross margin increase is due to the Connectivity revenue increases and cost efficiencies. U.S. gross margins increased to 43.8% in fiscal 2016 from 39.0%72.1% in the prior year due to the Connectivity revenue increases and ASoffset by an increase in cost of revenue growth and cost reductions. Internationalprimarily from cloud infrastructure costs. U.S. gross margins decreased to 30.4%72.8% in fiscal 2016the current year from 35.5%73.4% in the prior year due to the revenue reductions in Europe and APAC, as well as recent Connectivity investments.
Cost of revenue was $494.4 million in fiscal 2015, an $11.5 million, or 2.3%, decrease from fiscal 2014, andyear. International gross marginmargins increased to 38.6% compared to 37.2%53.6% from 52.2%.
Operating Expenses
The following table presents the Company'sCompany’s operating expenses for each of the years in the three-year period ended March 31, 2016periods reported is presented below (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | | | % Change 2016-2015 | | | % Change 2015-2014 | |
Research and development | | $ | 74,247 | | | $ | 74,201 | | | $ | 62,807 | | | | 0 | % | | | 18 | % |
Sales and marketing | | | 146,176 | | | | 116,494 | | | | 93,607 | | | | 26 | | | | 24 | |
General and administrative | | | 135,385 | | | | 130,263 | | | | 99,544 | | | | 4 | | | | 31 | |
Impairment of goodwill and other | | | 6,829 | | | | - | | | | 24,953 | | | | - | | | | - | |
Gains, losses and other items, net | | | 12,132 | | | | 22,600 | | | | 17,168 | | | | (46 | ) | | | 32 | |
Total operating expenses | | $ | 374,769 | | | $ | 343,558 | | | $ | 298,079 | | | | 9 | % | | | 15 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | Year ended March 31, |
| | | | | | | | | | | | % |
| | | | | | | | 2023 | | 2022 | | Change |
Operating expenses: | | | | | | | | | | | | |
Research and development | | | | | | | | $ | 189,195 | | | $ | 157,935 | | | 20 | |
Sales and marketing | | | | | | | | 202,437 | | | 182,763 | | | 11 | |
General and administrative | | | | | | | | 125,351 | | | 104,591 | | | 20 | |
Gains, losses and other items, net | | | | | | | | 35,316 | | | 1,479 | | | 2,288 | |
Total operating expenses | | | | | | | | $ | 552,299 | | | $ | 446,768 | | | 24 | |
Research and development ("(“R&D"&D”): Includes expense includes operating expenses for the Company'sCompany’s engineering and product/project management functions supporting research, new development, and related product enhancement.
R&D expenses were $74.2$189.2 million in fiscal 2016,for the twelve months ended March 31, 2023, an increase of $31.3 million, or flat19.8% compared to fiscal 2015,the same period a year ago, and is 8.7%are 31.7% of total revenues compared to 9.2%29.9% in fiscal 2015.the same period a year ago. The net change includes cost savings realized by the combination of the LiveRampincrease is primarily due to stock-based compensation expense (increased $23.3 million), headcount costs (employee-related expenses increased $8.0 million), travel, entertainment and AOS development teamsevents costs (increased $3.3 million) and hosting expenses (increased $2.0 million), offset partially by additional investmenta decrease in AS R&Dprofessional services (decreased $4.3 million). $10.5 million of approximately $9.0 million.
R&D expenses were $74.2 millionthe increase in fiscal 2015, an increase of $11.4 million, or 18.1%, compared to fiscal 2014, and is 9.2% of total revenues compared to 7.8% in fiscal 2014. The increasestock-based compensation is due to the acquisitioncurrent year vesting acceleration of LiveRamp during fiscal 2015.awards that would have otherwise vested over the subsequent six months to take advantage of cash tax savings opportunities.
Sales and marketing ("(“S&M"&M”): Includes expense includes operating expenses for the Company'sCompany’s sales, marketing, and product marketing functions.
As described in Note 1 – Significant Accounting Policies, the Company previously classified all account management functions (which include activities supporting existing client relationships and managing client service activities, as well as responsibilities for existing client contract extensions and up-sell) and all IT project management activities as cost of revenue. As the Company is now disaggregating its operating results into more granular categories of costs, and as a result of activities during fiscal 2015 to clarify and segregate account management roles between those supporting existing client relationships and those focused on existing contract extensions and upsell and IT project management roles between client-facing and internal projects, certain costs are presented in a new category. Account management costs supporting contract extension and upsell are now classified as sales and marketing.
S&M expenses were $146.2$202.4 million in fiscal 2016,for the twelve months ended March 31, 2023, an increase of $29.7$19.7 million, or 25.5%10.8%, compared to fiscal 2015,the same period a year ago, and is 17.2%are 33.9% of total revenues compared to 14.5%34.6% in fiscal 2015.the same period a year ago. The increase is primarily due to headcount investments in U.S. Connectivitycosts (employee-related expenses increased $21.3 million), travel and AS sales, the full year impact of the LiveRamp acquisition, as well as higher incentive compensationentertainment costs from increased revenue. These increases were partially offset by reductions in International operations, partially(increased $3.9 million primarily due to exchange rates.higher levels of customer-related travel and events after the COVID-19 pandemic), advertising and events costs (increased $3.7 million), and stock-based compensation expense (increased $0.8 million), offset partially by a decrease in professional services (decreased $9.4 million) and administrative expenses (decreased $1.7 million).
S&M expenses were $116.5 million in fiscal 2015, an increase of $22.9 million, or 24.5%, compared to fiscal 2014.
General and administrative (G&A): Represents("G&A") expense represents operating expenses for all corporate functions, includingthe Company's finance, human resources, legal, corporate IT, and theother corporate office.administrative functions.
G&A expenses were $135.4$125.4 million in fiscal 2016,for the twelve months ended March 31, 2023, an increase of $5.1$20.8 million, or 3.9%,19.8% compared to fiscal 2015,the same period a year ago, and is 15.9%are 21.0% of total revenues compared to 16.2%19.8% in fiscal 2015. The increase is due to higher incentive compensation levels, higher legal and third party fees, and increased facility costs with new offices, offset partially from cost savings primarily in corporate information technology as well as lower separation and transformation costs.
G&A expenses were $130.3 million in fiscal 2015, an increase of $30.7 million, or 30.9%, compared to fiscal 2014, and is 16.2% of total revenues compared to 12.4% in fiscal 2014.the same period a year ago. The increase is primarily due to a $25.0 million increase in business separation activitiesstock-based compensation expense (increased $12.2 million) and transformation costs related to separation(increased $9.0 million), offset partially by a decrease in employee-related expenses of $1.6 million which reflects lower year-over-year incentive compensation costs. $4.6 million of the former Marketingincrease in stock-based compensation is due to the current year vesting acceleration of awards that would have otherwise vested over the subsequent six months to take advantage of cash tax savings opportunities. Transformation costs are third party costs incurred during the year associated with the assessment of strategic and Data Services business from ITO.operating plans, including the Company’s long-term location strategy, in response to recent macroeconomic conditions.
Impairment of goodwill and other: Represents the amount of impairment related to goodwill and other related long-lived assets.
Impairment of goodwill and other was $6.8 million in fiscal 2016, representing the impairment of APAC AS ($6.1 million) and Brazil MS and AS ($0.7 million). There was no impairment in fiscal 2015. Impairment of goodwill and other was $25.0 million in fiscal 2014, representing the impairment of the former European Marketing and Data Services unit.
Gains, losses, and other items, net: Represents restructuring costs and other adjustments.
Gains, losses, and other items, net of $12.1 million in fiscal 2016 decreased $10.5 million, or 46.3%, compared to fiscal 2015. The fiscal 2016 amount included severancerepresents restructuring costs and other associate-related charges of $8.6 million for the termination of associates in the U.S., Europe, Brazil and Australia, $3.0 million related to lease restructurings, and the write off of leasehold improvements $0.4 million.adjustments.
Gains, losses and other items, net of $22.6 million in fiscal 2015 increased $5.4 million, or 31.6%, compared to fiscal 2014. The fiscal 2015 amount included severance and other associate-related charges of $13.3was $35.3 million for the terminationtwelve months ended March 31, 2023, an increase of associates$33.8 million compared to the same period a year ago. The current year amount includes $27.5 million in the U.S., Europe, Australialease impairments and China, $6.5lease restructuring related to a downsizing of our real estate footprint, and $7.8 million related to lease restructurings, andtermination benefits for employees whose positions were eliminated. The prior year period included $1.0 million related to the write-offearly termination of leasehold improvements of $2.0 million.a data provider agreement.
The following table summarizes the restructuring activity included in gains, losses and other items, net in the consolidated statements of operations for the fiscal years ended March 31, 2016, 2015 and 2014 (dollars in thousands):
| | Associate-related reserves | | | Lease accruals | | | Total | |
March 31, 2013 | | $ | 3,689 | | | $ | 2,791 | | | $ | 6,480 | |
Restructuring charges and adjustments | | | 12,910 | | | | 56 | | | | 12,966 | |
Payments | | | (10,057 | ) | | | (1,334 | ) | | | (11,391 | ) |
March 31, 2014 | | $ | 6,542 | | | $ | 1,513 | | | $ | 8,055 | |
Restructuring charges and adjustments | | | 13,284 | | | | 6,500 | | | | 19,784 | |
Payments | | | (12,615 | ) | | | (2,785 | ) | | | (15,400 | ) |
March 31, 2015 | | $ | 7,211 | | | $ | 5,228 | | | $ | 12,439 | |
Restructuring charges and adjustments | | | 8,630 | | | | 3,002 | | | | 11,632 | |
Payments | | | (12,986 | ) | | | (4,706 | ) | | | (17,692 | ) |
March 31, 2016 | | $ | 2,855 | | | $ | 3,524 | | | $ | 6,379 | |
| | | | | | | | | | | | |
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Income (Loss)Loss from Operations and Profit (Loss) MarginsOperating Margin
The following table presents the Company's income (loss) from operations and margin by segment for each of the years in the three-year period ended March 31, 2016 (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | |
Operating income (loss) and margin: Marketing Services | | $ | 74,371 | | | $ | 81,247 | | | $ | 83,771 | |
| | | 16.5 | % | | | 18.2 | % | | | 18.0 | % |
Audience Solutions | | | 109,598 | | | | 115,078 | | | | 119,950 | |
| | | 36.8 | % | | | 37.9 | % | | | 36.8 | % |
Connectivity | | | (3,298 | ) | | | (40,069 | ) | | | (46,767 | ) |
| | | (3.2 | %) | | | (72.9 | %) | | | (342.6 | %) |
Less: Corporate | | | 127,844 | | | | 126,570 | | | | 99,818 | |
Gains, losses and other items, net | | | 12,132 | | | | 22,600 | | | | 17,168 | |
Impairment of goodwill and other | | | 6,829 | | | | - | | | | 24,953 | |
Purchased intangible asset amortization | | | 15,466 | | | | 11,454 | | | | 252 | |
Non-cash stock compensation | | | 31,463 | | | | 28,316 | | | | 13,206 | |
Income (loss) from operations | | $ | (13,063 | ) | | $ | (32,684 | ) | | $ | 1,557 | |
Total operating margin | | | (1.5 | %) | | | (4.1 | %) | | | 0.2 | % |
Loss from operations was $13.1$125.8 million for the twelve months ended March 31, 2023 compared to $65.5 million in fiscal 2016 compared tothe same period a loss of $32.7 million in fiscal 2015.year ago. Operating margin was a negative 1.5%21.1% compared to a negative 4.1%12.4% for the twelve months ended March 31, 2023 and 2022, respectively. Margins were negatively impacted by operating expense growth of 24% relative to revenue growth of 13%. The decrease in loss from operations of $19.6 million and the improvement in operating margin of 260 basis pointsOperating expense growth was due primarily to improving Connectivity profitability.
Loss from operations was $32.7 million in fiscal 2015 compared to income from operations of $1.6 million in fiscal 2014. Operating margin was a negative 4.1% compared to a positive 0.2%. The increase in loss from operations of $34.4 million was due primarily to a $25.0 million increase in business separation activities and transformationimpacted by costs related to separationthe downsizing of our real estate footprint, termination benefits for employees whose positions were eliminated, and the former Marketing and Data Services business from ITO and higher intangible amortization and non-cashacceleration of stock-based compensation associated with the LiveRamp acquisition, offset by lower goodwill impairment costs.expenses outlined above.
MS income from operations was $74.4 million, a 16.5% margin, in fiscal 2016 compared to $81.2 million, an 18.2% margin, in fiscal 2015. U.S. margins decreased to 17.7% in the current period from 19.2% due to higher variable compensation. International margins decreased to 3.7% from 9.6% due to lower performance in Europe and APAC.
MS income from operations was $81.2 million, an 18.2% margin, in fiscal 2015 compared to $83.8 million, an 18.0% margin, in fiscal 2014. U.S. margins increased to 19.2% in fiscal 2015 from 19.1% due to lower variable compensation offset partially by ongoing R&D investments. International margins increased to 9.6% from 6.6% due to S&M cost reductions.
AS income from operations was $109.6 million, a 36.8% margin, in fiscal 2016 compared to $115.1 million, a 37.9% margin, in fiscal 2015. U.S. margins decreased to 40.1% in the current period from 43.4% due to ongoing R&D and S&M investments. International margins increased to 11.6% from 4.9% due to S&M cost reductions.
AS income from operations was $115.1 million, a 37.9% margin, in fiscal 2015 compared to $120.0 million, a 36.8% margin, in fiscal 2014. U.S. margins decreased to 43.4% in fiscal 2015 from 44.0% due to ongoing S&M investments. International margins decreased to 4.9% from 6.2% due to lower revenue.
Connectivity loss from operations was $3.3 million, a negative 3.2% margin, in fiscal 2016 compared to a loss of $40.1 million, a negative 72.9% margin, in fiscal 2015. The improvement is due to revenue from new customers and upsell to existing customers and cost savings realized by the combination of the LiveRamp and AOS development teams.
Connectivity loss from operations was $40.1 million, a negative 72.9% margin, in fiscal 2015 compared to a loss of $46.8 million, a negative 342.6% margin, in fiscal 2014. The improvement is due to revenue from new customers and upsell to existing customers due to the acquisition of LiveRamp during fiscal 2015.
Other Income (Expense),and Income Taxes and Other Items
Interest expense was $7.7 million in fiscal 2016, or flat compared to fiscal 2015. On July 31, 2015, the Company used $55.0 million of proceeds from the ITO disposition to repay outstanding Company indebtedness as required by the Company's existing credit agreement. The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business. Allocated interest expense was $0.4 million in fiscal 2016 and $1.3 million in fiscal 2015. Including this allocated interest, total interest expense was $8.1 million in fiscal 2016 and $9.0 million in fiscal 2015. The decrease is due primarily to the reduction in the term loan balance.
Interest expense was $7.7 million in fiscal 2015, a decrease of $1.0 million from $8.7 million in fiscal 2014. The decrease primarily results from lower interest on capital leases and other borrowings. Interest expense on the Company's term loan also decreased from the prior fiscal year.
Other income was $0.5$6.9 million for the twelve months ended March 31, 2023 compared to $30.5 million in fiscal 2016 compared to other expense of $1.0 million in fiscal 2015 and otherthe same period a year ago. The current year includes interest income of $1.8$12.0 million on invested cash balances, offset partially by $4.1 million of impairment of a strategic investment. The prior year amount included a $30.1 million gain related to a cash distribution from our retained profits interest in fiscal 2014. a previous disposition.
Other netincome primarily consists of interest income from invested cash balances and net foreign currencyexchange transaction gains and losses as well as the strategic investment impairment in the current year.
Income tax expense was $5.3 million on a pretax loss of $118.9 million for the twelve months ended March 31, 2023, resulting in a negative 4% effective tax rate. This compares to a prior year income tax benefit of $1.2 million on pretax loss of $35.1 million, or a 4% effective tax rate. The current period tax expense reflects the impact of the capitalization of research and interestdevelopment expenditures in accordance with Internal Revenue Code ("IRC") Section 174, partially offset by the tax benefit from the vesting acceleration of stock-based awards and investment income. In addition, during fiscal 2014,the $3.8 million release of certain state tax contingency reserves. During the twelve months ended March 31, 2022, the Company recorded areleased $2.6 million gain from its investment in a real estate joint venture and $0.7 million in accelerated deferred debt coststax contingency reserves as a result of refinancing its term loan agreement.
The fiscal 2016 effective tax rate was 57.4%. Fiscal 2016 included a net $3.6 million tax benefit related to the release of a deferred tax valuation allowance in a certain foreign jurisdiction. Fiscal 2016 also included a net $4.0 million income tax benefit related to research and development tax credits. In addition, non-deductible stock compensation, primarily related to incentive stock options issued in connection with the LiveRamp acquisition, had a $1.9 million impact on tax expense.
The fiscal 2015 effective tax rate was 35.8%. Fiscal 2015 included a net $3.1 million income tax benefit principally related to new state research and development tax credits which were partially offset by other state deferred tax activity. In addition, non-deductible incentive stock options issued in connection with the LiveRamp acquisition had a $2.3 million impact on tax expense.
The fiscal 2014 effective tax rate was -227.2%. Fiscal 2014 income taxes included $7.6 million of expense related to increasing valuation allowances for net operating loss carryforwards and deferred tax assets in France and the UK, offset by a $3.1 million income tax reserve adjustment resulting from expiration of certain statutes of limitations. The fiscal 2014 effectivelimitation.
Discontinued Operations
Earnings from discontinued operations, net of tax, rate was also negatively impacted by non-deductible goodwill impairment charges.
All three fiscal period tax rates were impacted by losses in foreign jurisdictions. The Company does not record$5.4 million for the tax benefit of certain of those losses due to uncertainty of future benefit.
Losses attributable to noncontrolling interest include the noncontrolling interest in the Company's Brazilian subsidiary.twelve months ended March 31, 2023. During fiscal 2014, the Company acquired the remaining noncontrolling interest in Acxiom Brazil.
Discontinued operations
In fiscal 2016,2019, the Company completed the sale of its ITO operations. As a result,Acxiom Marketing Solutions ("AMS") business, and the ITO business qualified for treatment as discontinued operations. The results of operations, cash flows,Significant income taxes were incurred and paid on the balance sheet amounts pertaining to ITO have been classified as discontinued operations in the consolidated financial statements.
Summary results of operations of ITO for the fiscal years ended March 31, 2016, 2015 and 2014 are segregated and included in earnings from discontinued operations, net of tax, in the Company's consolidated statements of operations and are as follows (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | |
Revenues | | $ | 69,410 | | | $ | 215,148 | | | $ | 257,125 | |
| | | | | | | | | | | | |
Earnings from discontinued operations before income taxes | | $ | 10,050 | | | $ | 29,368 | | | $ | 45,919 | |
Gain on sale of discontinued operations before income taxes | | | 9,349 | | | | - | | | | - | |
Income taxes | | | 3,598 | | | | 11,973 | | | | 17,587 | |
Earnings from discontinued operations, net of tax | | $ | 15,801 | | | $ | 17,395 | | | $ | 28,332 | |
In fiscal 2015, the Company completed the sale of its U.K. call center operation, 2Touch. As a result, the 2Touch business qualified for treatment as discontinued operations. The results of operations, cash flows, and the balance sheet amounts pertaining to 2Touch have been classified as discontinued operations in the consolidated financial statements.
Summary results of operations of 2Touch for the fiscal years ended March 31, 2016, 2015 and 2014 are segregated and included in earnings from discontinued operations, net of tax, in the Company's consolidated statements of operations and are as follows (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | |
Revenues | | $ | - | | | $ | 8,484 | | | $ | 35,267 | |
| | | | | | | | | | | | |
Earnings (loss) from discontinued operations before income taxes | | $ | (450 | ) | | $ | 4 | | | $ | (2,189 | ) |
Loss on sale of discontinued operations before income taxes | | | - | | | | (1,888 | ) | | | - | |
Income taxes | | | - | | | | - | | | | - | |
Loss from discontinued operations, net of tax | | $ | (450 | ) | | $ | (1,884 | ) | | $ | (2,189 | ) |
| | | | | | | | | | | | |
Capital Resources and Liquidity
Working Capital and Cash Flow
Working capital at March 31, 2016 totaled $152.0 million, a $75.6 million decrease when compared to $227.6 million at March 31, 2015, due primarily to the impact of the disposition of ITO. $55.0 million of the proceedsgain from the sale of ITO were used to reduce long-term debt. ExcludingAMS. During fiscal 2023, the net assetsCompany recovered certain previously paid state income taxes arising from the sale of ITO at March 31, 2015 of $114.9 million, working capital increased $39.2 million.
AMS.
Capital Resources and Liquidity
The Company'sCompany’s cash isand cash equivalents are primarily located in the United States. Approximately $16.7At March 31, 2023, approximately $19.2 million of the total cash balance of $189.6$464.4 million, or approximately 8.8%4.1%, iswas located outside of the United States. The Company has no current plans to repatriate this cash to the United States.
AccountsNet accounts receivable daysbalances were $157.4 million at March 31, 2023, an increase of $9.0 million, compared to $148.3 million at March 31, 2022. Days sales outstanding from continuing operations, was 56("DSO"), a measurement of the time it takes to collect receivables, were 95 days at March 31, 2016 and2023, compared to 94 days at March 31, 2015, respectively,2022. DSO can fluctuate due to the timing and nature of contracts that lead to up-front billings related to deferred revenue on services not yet performed, and Marketplace and Other contracts, which are billed on a gross basis, recognized on a net basis, but for which the amount that is calculateddue to data sellers is not reflected as follows (dollarsan offset to accounts receivable. Compared to March 31, 2022, DSO at March 31, 2023 was negatively impacted by approximately 3 days by the increased impact of Data Marketplace gross accounts receivable. All customer accounts are actively managed, and no losses in thousands):excess of amounts reserved are currently expected.
| | March 31, 2016 | | | March 31, 2015 | |
Numerator – trade accounts receivable, net | | $ | 138,650 | | | $ | 126,896 | |
Denominator: | | | | | | | | |
Quarter revenue | | | 224,655 | | | | 205,734 | |
Number of days in quarter | | | 91 | | | | 90 | |
Average daily revenue | | $ | 2,469 | | | $ | 2,286 | |
Days sales outstanding | | | 56 | | | | 56 | |
Net cash provided by operating activities was $113.6Working capital at March 31, 2023 totaled $539.7 million, in fiscal 2016a $91.5 million decrease when compared to $61.1$631.3 million and $95.8 million in fiscal 2015 and 2014, respectively.at March 31, 2022. The $52.5 million increase in fiscal 2016 resulteddecrease was primarily from a decrease in net loss from continuing operations ($17.7 million) and the net increase in working capital. The $34.7 million decrease in fiscal 2015 primarily results from lower net earnings related to increased business separation, transformation, and restructuring costs and the impact of unfavorable working capital changes.
Investing activities used cash of $69.2 million in fiscal 2016 compared to $343.1 million and $54.9 million in fiscal 2015 and 2014, respectively. The primary decrease for fiscal 2016 compared to fiscal 2015 relates to net cash paid in acquisitions: $5.4 million for certain addressable television net assets of Allant in fiscal 2016 compared to $265.7 million for LiveRamp in fiscal 2015. Fiscal 2016 investing activities in additiondue to the net$150.0 million use of cash paid in acquisitions consisted of capital expenditures of $47.4 million, capitalization of software of $14.9 million and $1.6 million of data acquisition costs. The primary decrease for fiscal 2015 compared to fiscal 2014 relates to the net cash paid of $265.7 million for LiveRamp in fiscal 2015. Fiscal 2015 investing activities in addition to the net cash paid in acquisitions consisted of capital expenditures of $57.0 million, capitalization of software of $18.6 million and $1.9 million of data acquisition costs.
Under the Company's common stock repurchase program, the Company may purchase up to $300.0 million of its common stock through the period ending December 31, 2016. During fiscal year ended March 31, 2016, the Company repurchased 2.6 million shares of its common stock for $52.8 million. During the fiscal year ended March 31, 2015, the Company repurchased 0.5 million shares of its common stock for $9.9 million. During the fiscal year ended March 31, 2014, the Company repurchased 2.0 million shares of its common stock for $52.7 million. Through March 31, 2016, the Company has repurchased 15.5 million shares of its stock for $255.2 million, leaving remaining capacity of $44.8 million under the stock repurchase program. Cash paid for acquisition of treasury stock in the consolidated statements of cash flows may differ from the aggregate purchase price due to trades made during one fiscal periodshares.
Management believes that settle in a different period.
Financing activities used cash of $126.0 million in fiscal 2016. Fiscal 2016 financing activities included $10.4 million in proceeds from the sale of common stock and $3.6 million excess tax benefits from stock-based compensation, offset by $87.2 million in payments of debt, including the $55.0 million prepayment as a result of the ITO sale, and $52.8 million to acquire treasury stock. Financing activities used $26.8 million of cash in fiscal 2015. Fiscal 2015 financing activities included $5.0 million in proceeds from the sale of common stock and $4.6 million excess tax benefits from stock-based compensation, offset by $26.6 million in payments of debt and $9.9 million to acquire treasury stock. Financing activities provided $103.0 million of cash in fiscal 2014. In fiscal 2014, the Company refinanced its term loan resulting in proceeds, net of fees, of $80.6 million. Fiscal 2014 financing activities also included $80.5 million in proceeds from the sale of common stock and $11.3 million excess tax benefits from stock-based compensation, offset by payments of debt of $16.2 million (excluding the $215.0 million prepayment of debt under the term loan refinancing) and $52.7 million to acquire treasury stock.
Net cash provided by discontinued operations was $130.6 million in fiscal 2016, primarily from net cash received of $130.2 million for the sale of ITO. Discontinued operations provided $32.8 million and $51.1 million in fiscal years 2015 and 2014, respectively.
Credit and Debt Facilities
The Company's amended and restated credit agreement provides for (1) term loans up to an aggregate principal amount of $300 million and (2) revolving credit facility borrowings consisting of revolving loans, letter of credit participations and swing-line loans up to an aggregate amount of $300 million.
The term loan is payable in quarterly installments of $7.5 million through September 2017, followed by quarterly installments of $11.3 million through June 2018, with a final payment of $106.3 million due October 9, 2018. The revolving loan commitment expires October 9, 2018.
Term loan and revolving credit facility borrowings bear interest at LIBOR or at an alternative base rate plus a credit spread. At March 31, 2016, the LIBOR credit spread was 2.00%. There were no revolving credit borrowings outstanding at March 31, 2016 or March 31, 2015. The weighted-average interest rate on term loan borrowings at March 31, 2016 was 2.68%. Outstanding letters of credit at March 31, 2016 were $2.1 million.
The term loan allows for prepayments before maturity. The credit agreement is secured by the accounts receivable of Acxiom and its domestic subsidiaries, as well as by the outstanding stock of certain Acxiom subsidiaries.
Under the terms of the term loan, the Company is required to maintain certain debt-to-cash flow and debt service coverage ratios, among other restrictions. At March 31, 2016, the Company was in compliance with these covenants and restrictions. In addition, if certain financial ratios and other conditions are not satisfied, the revolving credit facility limits the Company's ability to pay dividends in excess of $30 million in any fiscal year (plus additional amounts in certain circumstances).
On May 19, 2015, the Company entered into an agreement to further amend its credit agreement. The effectiveness of the amendments contained in the agreement were conditioned on, among other things, the closing of the ITO disposition that occurred on July 31, 2015 (See Note 4 – Discontinued Operations). Once the ITO disposition was completed and the amendment became fully effective, certain financial covenants in the credit agreement were modified for the quarters ending on September 30, 2015, December 31, 2015 and March 31, 2016. Additionally the Company is not entitled to declare or pay any dividends during this time and share repurchases are limited to no more than $100 million depending on the Company's leverage ratio. After March 31, 2016, the financial covenants and dividend and share repurchase rights and limitations will return to the requirements in the credit agreement in effect prior to the amendment. In addition, the amendment revises certain definitions in the credit agreement to clarify the effect of acquisitions and dispositions on certain financial covenants.
On July 31, 2015, the Company used $55.0 million of proceeds from the ITO disposition to repay outstanding Company indebtedness as required by the Company's existing credit agreement. The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business. Allocated interest expense was $0.4 million, $1.3 million, and $1.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively.
On March 10, 2014, the Company entered into an interest rate swap agreement. The agreement provides for the Company to pay interest through March 10, 2017 at a fixed rate of 0.98% plus the applicable credit spread on $50.0 million notional amount, while receiving interest for the same period at the LIBOR rate on the same notional amount. The LIBOR rate as of March 31, 2016 was 0.63%. The swap was entered into as aavailable cash flow hedge against LIBOR interest rate movements on the term loan. The Company assesses the effectiveness of the hedge based on the hypothetical derivative method. There was no ineffectiveness for the period ended March 31, 2016. Under the hypothetical derivative method, the cumulative change in fair value of the actual swap is compared to the cumulative change in fair value of the hypothetical swap, which has terms that identically match the critical terms of the hedged transaction. Thus, the hypothetical swap is presumed to perfectly offset the hedged cash flows. The change in the fair value of the hypothetical swap will then be regarded as a proxy for the present value of the cumulative change in the expected future cash flows from the hedged transactions. All of the fair values are derived from an interest-rate futures model. As of March 31, 2016, the hedge relationship still qualified as an effective hedge under applicable accounting standards. Consequently, all changes in fair value of the derivative will be deferred and recorded in other comprehensive income (loss) until the related forecasted transaction is recognized in the consolidated statement of operations. The fair market value of the derivative was zero at inception and an unrealized loss of $0.1 million since inception is recorded in other comprehensive income (loss). The fair value of the interest rate swap agreement recorded in accumulated other comprehensive income (loss) may be recognized in the consolidated statement of operations if certain terms of the floating-rate debt change, if the floating-rate debt is extinguished or if the interest rate swap agreement is terminated prior to maturity. The Company has assessed the creditworthiness of the counterparty of the swap and concludes that no substantial risk of default exists as of March 31, 2016.
Based on our current expectations, we believe our liquidity and capital resources will be sufficient to operatemeet the Company's working capital and capital expenditure requirements for the foreseeable future. However, in light of the risk of recession, the military conflict between Russia and Ukraine, cost increases, rising interest rates, capital markets volatility, bank failures and general inflationary pressures, our business. However, weliquidity position may change due to the inability to collect from our customers, inability to raise new capital via issuance of equity or debt, and disruption in completing repayments or disbursements to our creditors. We have historically taken and may continue to take advantage of opportunities to generate additional liquidity or refinance existing debt through capital market transactions. These impacts have caused significant disruptions to the global financial markets, which could increase the cost of capital and adversely impact our ability to raise additional capital, which could negatively affect our liquidity in the future. The amount, nature, and timing of any capital market transactions will depend on:on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature, and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions. If we are unable to raise funds as and when we need them, we may be forced to curtail our operations.
Off-Balance Sheet ItemsCash Flows
The following table summarizes our cash flows for the periods reported (dollars in thousands): | | | | | | | | | | | | | | |
| | |
| | Year ended March 31, |
| | 2023 | | 2022 |
| | | | |
Net cash provided by operating activities | | $ | 34,441 | | | $ | 78,077 | |
Net cash provided by (used in) investing activities | | $ | (28,999) | | | $ | 7,578 | |
Net cash used in financing activities | | $ | (146,010) | | | $ | (66,981) | |
| | | | |
Operating Activities
Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our clients, and Commitmentsrelated payments to our suppliers and employees. The timing of cash receipts from clients and payments to suppliers can significantly impact our cash flows from operating activities. Our collection and payment cycles can vary from period to period.
In connection with the disposaltwelve months ended March 31, 2023, net cash provided by operating activities of $34.4 million resulted primarily from net loss adjusted for non-cash items of $55.9 million offset by net cash used in operating assets and liabilities of $21.4 million. Net cash used in operating assets and liabilities was primarily related to increases in accounts receivable of $12.1 million and accounts payable and other liabilities of $15.4 million. The change in accounts receivable is primarily due to revenue growth and the timing of cash receipts from clients. The change in accounts payable and other liabilities is primarily due to the payment of annual incentive compensation and the timing of payments to suppliers.
In the twelve months ended March 31, 2022, net cash provided by operating activities of $78.1 million resulted primarily from net loss adjusted for non-cash items of $50.3 million and net cash provided by operating assets and liabilities of $27.8 million. New cash provided by operating assets and liabilities was primarily related to a decrease in income taxes of $34.0 million primarily related to a $32.0 million Internal Revenue Service refund received related to fiscal 2020, an increase in other assets of $26.9 million, and an increase in accounts payable and other liabilities of $8.9 million, offset partially by an increase in accounts receivable of $38.6 million and an increase in deferred commissions of $8.0 million. The change in other assets was due to the acceleration of certain payments in fiscal 2020 for tax planning purposes. The change in accounts payable and other liabilities is primarily due to the payment of annual incentive compensation, and the timing of payments to suppliers. The change in accounts receivable is primarily due to revenue growth and the timing of cash receipts from clients.
Investing Activities
Our primary investing activities have historically consisted of capital expenditures. Capital expenditures may vary from period to period due to the timing of the expansion of our operations, the addition of new headcount, new facilities, and acquisitions.
In the twelve months ended March 31, 2023, net cash used in investing activities of $29.0 million consisted of purchases of short-term investments of $28.2 million, capital expenditures of $4.7 million and purchases of strategic investments of $0.5 million, offset partially by proceeds from the sale of short-term investments of $3.0 million and the sale of strategic investments of $1.4 million.
In the twelve months ended March 31, 2022, net cash provided by investing activities of $7.6 million consisted of a $31.2 million distribution received from a retained profits interest in a previous disposition, offset partially by net cash paid for the final release of the DataFleets escrow of $8.7 million, the Diablo acquisition of $8.4 million, the acquisition of technology assets from Rakam of $2.0 million, and capital expenditures of $4.5 million.
Financing Activities
Our financing activities have consisted of acquisition of treasury stock, proceeds from our equity compensation plans, and shares repurchased for tax withholdings upon vesting of stock-based awards.
In the twelve months ended March 31, 2023, net cash used in financing activities was $146.0 million, consisting of the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $150.0 million (6.1 million shares) and $2.3 million for shares repurchased for tax withholdings upon vesting of stock-based awards. These uses of cash were partially offset by proceeds of $6.3 million from the sale of common stock from our equity compensation plans.
In the twelve months ended March 31, 2022, net cash used in financing activities was $67.0 million, consisting of the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $58.6 million (1.3 million shares), and $14.6 million for shares repurchased for tax withholdings upon vesting of stock-based awards. These uses of cash were partially offset by proceeds of $6.3 million from the sale of common stock from our equity compensation plans.
Common Stock Repurchase Program
On December 20, 2022, the Company's board of directors approved an amendment to the existing common stock repurchase program, which was initially adopted in 2011. The amendment authorized an additional $100.0 million in share repurchases, increasing the total amount authorized for repurchase under the common stock repurchase program to $1.1 billion. In addition, it extended the common stock repurchase program duration through December 31, 2024.
During the twelve months ended March 31, 2023, the Company guaranteedrepurchased 6.1 million shares of its common stock for $150.0 million under the modified common stock repurchase program. Through March 31, 2023, the Company had repurchased a leasetotal of 35.6 million shares of its common stock for $882.2 million under the program, leaving remaining capacity of $217.8 million.
Pursuant to the Inflation Reduction Act of 2022, share repurchases made after December 31, 2022 will be subject to a 1% excise tax. In determining the total taxable value of shares repurchased, a deduction is allowed for the buyerfair market value of any newly issued shares during the assets. This guarantee was made byfiscal year. We do not expect the Company primarilyexcise tax to facilitate favorable financing terms for the third party. Should the third party default, the Company would be required to perform under this guarantee. At March 31, 2016 the Company's maximum potential future payments under this guarantee were $0.5 million.have a material impact on our consolidated financial statements.
Outstanding letters of credit, which reduce the borrowing capacity under the Company's revolving credit facility, were $2.1 million at March 31, 2016 and 2015, respectively.
Contractual Commitments
The following table presents Acxiom'stables present the Company’s contractual cash obligations exclusive of interest, and purchase commitments at March 31, 20162023 (dollars in thousands). Operating leases primarily consist of our various office facilities. Purchase commitments primarily include contractual commitments for the purchase of data, hosting services, software-as-a-service arrangements, and leasehold improvements. The table doestables do not include the future payment of liabilities related to uncertain tax positions of $3.2 million or the future payment, if any, against the Company's non-current interest rate swap liability of $0.1$23.4 million as the Company is not able to predict the periods in which thesethe payments will be made (dollars in thousands):made.
| | For the years ending March 31 | |
| | 2017 | | | 2018 | | | 2019 | | | 2020 | | | 2021 | | | Thereafter | | | Total | |
Term loan | | $ | 30,000 | | | $ | 37,500 | | | $ | 117,500 | | | $ | - | | | $ | - | | | $ | - | | | $ | 185,000 | |
Other debt and long-term liabilities | | | 2,243 | | | | 2,320 | | | | 1,583 | | | | 1,362 | | | | 348 | | | | - | | | | 7,856 | |
Total long-term debt and capital leases | | | 32,243 | | | | 39,820 | | | | 119,083 | | | | 1,362 | | | | 348 | | | | - | | | | 192,856 | |
Operating lease payments | | | 15,512 | | | | 12,626 | | | | 11,056 | | | | 10,076 | | | | 9,576 | | | | 24,618 | | | | 83,464 | |
Total contractual cash obligations | | $ | 47,755 | | | $ | 52,446 | | | $ | 130,139 | | | $ | 11,438 | | | $ | 9,924 | | | $ | 24,618 | | | $ | 276,320 | |
| | For the years ending March 31 | |
| | 2017 | | | 2018 | | | 2019 | | | 2020 | | | 2021 | | | Thereafter | | | Total | |
Total purchase commitments | | $ | 40,623 | | | $ | 18,633 | | | $ | 15,586 | | | $ | 14,462 | | | $ | 7,595 | | | $ | - | | | $ | 96,899 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | | Total |
Operating leases | | $ | 10,090 | | | $ | 9,116 | | | $ | 8,283 | | | $ | 8,017 | | | $ | 8,238 | | | $ | 8,346 | | | $ | 52,090 | |
| | | | | | | | | | | | | | |
Purchase commitments include contractual commitments for the purchase of data and open purchase orders for equipment, paper, office supplies, construction and other items. Purchase commitments in some cases may be satisfied by entering into future operating leases, capital leases, or other financing arrangements, rather than payment of cash. The above commitments relating to long-term obligations do not include future payments of interest. The Company estimates interest payments on debt and capital leases for fiscal 2017 of $7.9 million.
The following are contingencies or guarantees under which the Company could be required, in certain circumstances, to make cashFuture minimum payments as of March 31, 20172023 related to restructuring plans as a result of the Company's exit from certain leased office facilities are (dollars in thousands): Fiscal 2024: $2,698; Fiscal 2025: $2,698; and Fiscal 2026: $1,799.
Lease guarantee | | $ | 511 | |
Outstanding letters of credit | | | 2,138 | |
Surety bonds | | | 405 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | | | Total |
Purchase commitments | | $ | 90,433 | | | $ | 75,931 | | | $ | 6,106 | | | $ | 675 | | | $ | — | | | | | $ | 173,145 | |
While the Company does not have any other material contractual commitments for capital expenditures, certain levels of investments in facilities and computer equipment continue to be necessary to support the growth of the business. In some cases, the Company also licenses software and sells hardware to clients. Management believes that the Company's existing available debt and cash flow from operations will be sufficient to meet the Company's working capital and capital expenditure requirements for the foreseeable future. The Company also evaluates acquisitions from time to time, which may require up-front payments of cash.
For a description of certain risks that could have an impact on results of operations or financial condition, including liquidity and capital resources, see "Risk Factors"“Risk Factors” contained in Part I, Item 1A, of this Annual Report.
Key Trends and Uncertainties
The following is a summary of selected trends, events or uncertainties that the Company believes may have a significant impact on its future performance.
· | The macroeconomic environment has a direct impact on overall marketing and advertising expenditures in the U.S. and abroad. As marketing budgets are often more discretionary in nature, they are easier to reduce in the short term as compared to other corporate expenses. Future widespread economic slowdowns in any of the industries or markets our clients serve, particularly in the United States, could reduce the marketing expenditures of our clients and prospective customers. |
· | With the growth of online advertising and e-commerce, there is increasing awareness and concern among the general public, privacy advocates, mainstream media, governmental bodies and others regarding marketing and privacy matters, particularly as they relate to individual privacy interests and global reach of the online marketplace. Negative publicity and/or increased restrictions on the collection, management, aggregation and use of information could result in reduced demand for our products or services, decreased availability of certain kinds of data and/or a material increase in the cost of collecting certain kinds of data. |
· | In recent years, we have witnessed an ongoing shift from direct marketing to alternative marketing channels. We believe this trend will continue and that, in the long term, a substantial portion of overall marketing and advertising expenditures will be moved to alternative marketing channels. |
Seasonality and Inflation
Although we cannot accurately determine the amounts attributable to inflation, we are affected by inflation through increased compensation costs and other operating expenses. If inflation were to increase over the low levels of recent years, the impact in the short run would be to cause increases in costs, which we would attempt to pass on to clients, although there is no assurance that we would be able to do so. Generally, the effects of inflation in recent years have been offset by technological advances, economies of scale and other operational efficiencies.
Our traditional direct marketing operations typically experience their lowest revenue in the first quarter of the fiscal year, with higher revenue in the second, third, and fourth quarters. In order to minimize the impact of these fluctuations, we continue to seek long-term arrangements with more predictable revenues.
Non-U.S. Operations
The Company has a presence in the United Kingdom, France, Germany, Poland, Australia, and China. Most of our exposure to exchange rate fluctuation is due to translation gains and losses as there are no material transactions that cause exchange rate impact. In general, each of the foreign locations is expected to fund its own operations and cash flows, although funds may be loaned or invested from the U.S. to the foreign subsidiaries subject to limitations in the Company's revolving credit facility. These advances are considered to be long-term investments, and any gain or loss resulting from changes in exchange rates as well as gains or losses resulting from translating the foreign financial statements into U.S. dollars are included in accumulated other comprehensive income (loss). Exchange rate movements of foreign currencies may have an impact on our future costs or on future cash flows from foreign investments. The Company has not entered into any foreign currency forward exchange contracts or other derivative instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Recent Accounting Pronouncements –
See "Adoption of NewFor information on recent accounting pronouncements, see “Accounting Pronouncements Adopted During the Current Year" and “Recent Accounting Standards" and "Recent Accounting Pronouncements"Pronouncements Not Yet Adopted” under Note 1, "Summary“Basis of Presentation and Summary of Significant Accounting Policies,"” of the Notes to Consolidated Financial Statements for a discussion of certain accounting standards that have been issued during fiscal 2016 and 2015.accompanying this report.
Management's Report on Internal Control Over Financial Reporting
The management of Acxiom Corporation (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting.
The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
· | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company;
|
· | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and
|
· | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could
have a material effect on the financial statements.
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2016. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).
Based on management's assessment and those criteria, the Company's management determined that the Company's internal control over financial reporting was effective as of March 31, 2016.
KPMG LLP, the Company's independent registered public accounting firm that audited the consolidated financial statements included in this annual report, has issued an attestation report, appearing on the following page, regarding its assessment of the Company's internal control over financial reporting as of March 31, 2016.
Report of Independent Registered Public Accounting Firm
TheTo the Stockholders and Board of Directors
LiveRamp Holdings, Inc.:
Opinions on the Consolidated Financial Statements and StockholdersInternal Control Over Financial Reporting
Acxiom Corporation:
We have audited the accompanying consolidated balance sheets of Acxiom CorporationLiveRamp Holdings, Inc. and subsidiaries (the Company) as of March 31, 20162023 and 2015, and2022, the related consolidated statements of operations, comprehensive income (loss), stockholders'loss, equity, and cash flows for each of the years in the three-year period ended March 31, 2016.2023, and the related notes (collectively, the consolidated financial statements). We also have audited Acxiom Corporation'sthe Company’s internal control over financial reporting as of March 31, 2016,2023, based on criteria established in Internal controlControl – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Acxiom Corporation'sCommission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management'sManagement’s Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on thesethe Company’s consolidated financial statements and an opinion on the Company'sCompany’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidated financial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion,Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements referredthat was communicated or required to above present fairly,be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in all material respects,any way our opinion on the consolidated financial positionstatements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of Acxiom Corporationthe sufficiency of audit evidence over revenue
As discussed in Notes 1 and subsidiaries as2 to the consolidated financial statements, the Company recorded $596.6 million of total revenues for the year ended March 31, 20162023, of which $482.8 million was subscription related, and 2015,$113.8 million was marketplace and other related.
We identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter. Evaluating the nature and extent of audit evidence obtained for new revenue contracts or amendments of existing contracts required subjective auditor judgment because of the non-standard nature of the Company’s revenue contracts.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over new or amended revenue contracts. We tested certain internal controls over the Company’s revenue recognition process, including controls over the Company’s assessment of the revenue recognition requirements for new or amended revenue contracts. We tested certain new or amended contracts by reading the underlying contracts and evaluating the Company’s assessment of revenue recognition requirements. We obtained external confirmation directly from certain of the Company’s customers and compared the terms and conditions relevant to the Company’s revenue recognition to the Company’s contracts with those customers. We assessed the recorded revenue by selecting a sample of transactions and comparing the amounts recognized for consistency with underlying documentation, including contracts with customers. In addition, we evaluated the overall sufficiency of audit evidence over revenue by assessing the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2016, in conformity with U.S. generally accepted accounting principles. Also in our opinion, Acxiom Corporation maintained, in all material respects, effective internal control over financial reporting as of March 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.procedures performed.
KPMG LLP
We have served as the Company's auditor since 2003.
Dallas, Texas
May 27, 201624, 2023
ACXIOM CORPORATION
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2016 AND 2015
(Dollars in thousands)
| | 2016 | | | 2015 | |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 189,629 | | | $ | 141,010 | |
Trade accounts receivable, net | | | 138,650 | | | | 126,896 | |
Refundable income taxes | | | 9,834 | | | | 5,239 | |
Restricted cash held in escrow | | | - | | | | 31,000 | |
Other current assets | | | 37,897 | | | | 34,975 | |
Assets from discontinued operations | | | - | | | | 172,284 | |
Total current assets | | | 376,010 | | | | 511,404 | |
Property and equipment, net of accumulated depreciation and amortization | | | 183,043 | | | | 176,254 | |
Software, net of accumulated amortization of $286,387 in 2016 and $258,185 in 2015 | | | 55,735 | | | | 68,962 | |
Goodwill | | | 492,745 | | | | 497,362 | |
Purchased software licenses, net of accumulated amortization of $98,222 in 2016 and $89,955 in 2015 | | | 10,116 | | | | 9,551 | |
Deferred income taxes | | | 6,885 | | | | 381 | |
Other assets, net | | | 25,315 | | | | 30,173 | |
| | $ | 1,149,849 | | | $ | 1,294,087 | |
LIABILITIES AND EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Current installments of long-term debt | | $ | 32,243 | | | $ | 32,232 | |
Trade accounts payable | | | 37,717 | | | | 30,094 | |
Accrued expenses | | | | | | | | |
Payroll | | | 61,309 | | | | 36,659 | |
Other | | | 48,254 | | | | 62,754 | |
Acquisition escrow payable | | | - | | | | 31,000 | |
Deferred revenue | | | 44,477 | | | | 33,620 | |
Liabilities from discontinued operations | | | - | | | | 57,433 | |
Total current liabilities | | | 224,000 | | | | 283,792 | |
Long-term debt | | | 157,897 | | | | 244,753 | |
Deferred income taxes | | | 53,964 | | | | 55,440 | |
Other liabilities | | | 15,020 | | | | 6,845 | |
Commitments and contingencies | | | | | | | | |
Equity: | | | | | | | | |
Common stock, $0.10 par value (authorized 200 million shares; issued 130.4 million and 127.9 million shares at March 31, 2016 and 2015, respectively) | | | 13,039 | | | | 12,794 | |
Additional paid-in capital | | | 1,082,220 | | | | 1,034,526 | |
Retained earnings | | | 598,501 | | | | 591,798 | |
Accumulated other comprehensive income | | | 8,590 | | | | 9,413 | |
Treasury stock, at cost (53.0 million and 50.1 million shares at March 31, 2016 and 2015, respectively) | | | (1,003,382 | ) | | | (945,274 | ) |
Total equity | | | 698,968 | | | | 703,257 | |
| | $ | 1,149,849 | | | $ | 1,294,087 | |
See accompanying notes to consolidated financial statements. | | | | | | | | |
| | | | | | | | | | | | | | |
| | March 31, | | March 31, |
| | 2023 | | 2022 |
ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 464,448 | | | $ | 600,162 | |
| | | | |
Short-term Investments | | 32,807 | | | 7,500 | |
Trade accounts receivable, net | | 157,379 | | | 148,343 | |
Refundable income taxes, net | | 28,897 | | | 30,354 | |
Other current assets | | 31,028 | | | 29,475 | |
Total current assets | | 714,559 | | | 815,834 | |
| | | | |
Property and equipment, net of accumulated depreciation and amortization | | 7,085 | | | 11,531 | |
Intangible assets, net | | 9,868 | | | 26,718 | |
Goodwill | | 363,116 | | | 363,845 | |
Deferred commissions, net | | 37,030 | | | 30,594 | |
Other assets, net | | 41,045 | | | 85,214 | |
| | $ | 1,172,703 | | | $ | 1,333,736 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
Current liabilities: | | | | |
Trade accounts payable | | $ | 86,568 | | | $ | 83,197 | |
Accrued payroll and related expenses | | 33,434 | | | 39,188 | |
Other accrued expenses | | 35,736 | | | 46,067 | |
| | | | |
Deferred revenue | | 19,091 | | | 16,114 | |
Total current liabilities | | 174,829 | | | 184,566 | |
| | | | |
Other liabilities | | 71,798 | | | 86,110 | |
| | | | |
Commitments and contingencies (Note 13) | | | | |
| | | | |
Stockholders' equity: | | | | |
Preferred stock, $1.00 par value (authorized 1 million shares; issued 0 shares at March 31, 2023 and 2022, respectively) | | — | | | — | |
Common stock, $0.10 par value (authorized 200 million shares; issued 154.0 million and 149.8 million shares at March 31, 2023 and 2022, respectively) | | 15,399 | | | 14,984 | |
Additional paid-in capital | | 1,855,916 | | | 1,721,118 | |
Retained earnings | | 1,302,291 | | | 1,420,993 | |
Accumulated other comprehensive income | | 4,504 | | | 5,730 | |
Treasury stock, at cost (87.4 million and 81.2 million shares at March 31, 2023 and 2022, respectively) | | (2,252,034) | | | (2,099,765) | |
Total stockholders' equity | | 926,076 | | | 1,063,060 | |
| | $ | 1,172,703 | | | $ | 1,333,736 | |
See accompanying notes to consolidated financial statements.
ACXIOM CORPORATION
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 2016, 2015 AND 2014
(Dollars in thousands, except per share amounts)
| | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | |
Revenues | | $ | 850,088 | | | $ | 804,911 | | | $ | 805,153 | |
Cost of revenue | | | 488,382 | | | | 494,037 | | | | 505,517 | |
Gross profit | | | 361,706 | | | | 310,874 | | | | 299,636 | |
Operating expenses: | | | | | | | | | | | | |
Research and development | | | 74,247 | | | | 74,201 | | | | 62,807 | |
Sales and marketing | | | 146,176 | | | | 116,494 | | | | 93,607 | |
General and administrative | | | 135,385 | | | | 130,263 | | | | 99,544 | |
Impairment of goodwill and other assets | | | 6,829 | | | | - | | | | 24,953 | |
Gains, losses and other items, net | | | 12,132 | | | | 22,600 | | | | 17,168 | |
Total operating expenses | | | 374,769 | | | | 343,558 | | | | 298,079 | |
Income (loss) from operations | | | (13,063 | ) | | | (32,684 | ) | | | 1,557 | |
Other income (expense): | | | | | | | | | | | | |
Interest expense | | | (7,669 | ) | | | (7,672 | ) | | | (8,671 | ) |
Other, net | | | 452 | | | | (991 | ) | | | 1,814 | |
Total other expense | | | (7,217 | ) | | | (8,663 | ) | | | (6,857 | ) |
Loss from continuing operations before income taxes | | | (20,280 | ) | | | (41,347 | ) | | | (5,300 | ) |
Income taxes | | | (11,632 | ) | | | (14,805 | ) | | | 12,040 | |
Net loss from continuing operations | | | (8,648 | ) | | | (26,542 | ) | | | (17,340 | ) |
Earnings from discontinued operations, net of tax | | | 15,351 | | | | 15,511 | | | | 26,143 | |
Net earnings (loss) | | | 6,703 | | | | (11,031 | ) | | | 8,803 | |
Less: Net loss attributable to noncontrolling interest | | | - | | | | - | | | | (60 | ) |
| | | | | | | | | | | | |
Net earnings (loss) attributable to Acxiom | | $ | 6,703 | | | $ | (11,031 | ) | | $ | 8,863 | |
Basic earnings (loss) per share: | | | | | | | | | | | | |
Net loss from continuing operations | | $ | (0.11 | ) | | $ | (0.34 | ) | | $ | (0.23 | ) |
Net earnings from discontinued operations | | | 0.20 | | | | 0.20 | | | | 0.35 | |
Net earnings (loss) | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | |
| | | | | | | | | | | | |
Net earnings (loss) attributable to Acxiom stockholders | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | |
| | | | | | | | | | | | |
Diluted earnings (loss) per share: | | | | | | | | | | | | |
Net loss from continuing operations | | $ | (0.11 | ) | | $ | (0.34 | ) | | $ | (0.23 | ) |
Net earnings from discontinued operations | | | 0.20 | | | | 0.20 | | | | 0.35 | |
Net earnings (loss) | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | |
| | | | | | | | | | | | |
Net earnings (loss) attributable to Acxiom stockholders | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED MARCH 31, 2016, 2015 AND 2014
(Dollars in thousands)
| | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | |
Net earnings (loss) | | $ | 6,703 | | | $ | (11,031 | ) | | $ | 8,803 | |
Other comprehensive income (loss): | | | | | | | | | | | | |
Change in foreign currency translation adjustment | | | (907 | ) | | | (4,074 | ) | | | 1,511 | |
Unrealized gain (loss) on interest rate swap | | | 84 | | | | (175 | ) | | | 728 | |
Other comprehensive income (loss) | | | (823 | ) | | | (4,249 | ) | | | 2,239 | |
Comprehensive income (loss) | | | 5,880 | | | | (15,280 | ) | | | 11,042 | |
Less: Comprehensive loss attributable to noncontrolling interest | | | - | | | | - | | | | (60 | ) |
Comprehensive income (loss) attributable to Acxiom stockholders | | $ | 5,880 | | | $ | (15,280 | ) | | $ | 11,102 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. | | | | | | | | | | | | |
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 2016, 2015 AND 2014 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | Year ended March 31, |
| | | | | | 2023 | | 2022 | | 2021 |
Revenues | | | | | | $ | 596,583 | | | $ | 528,657 | | | 443,026 | |
Cost of revenue | | | | | | 170,084 | | | 147,427 | | | 144,004 | |
Gross profit | | | | | | 426,499 | | | 381,230 | | | 299,022 | |
Operating expenses: | | | | | | | | | | |
Research and development | | | | | | 189,195 | | | 157,935 | | | 135,111 | |
Sales and marketing | | | | | | 202,437 | | | 182,763 | | | 177,543 | |
General and administrative | | | | | | 125,351 | | | 104,591 | | | 104,201 | |
Gains, losses and other items, net | | | | | | 35,316 | | | 1,479 | | | 2,715 | |
Total operating expenses | | | | | | 552,299 | | | 446,768 | | | 419,570 | |
Loss from operations | | | | | | (125,800) | | | (65,538) | | | (120,548) | |
Total other income (expense), net | | | | | | 6,946 | | | 30,463 | | | (252) | |
Loss from continuing operations before income taxes | | | | | | (118,854) | | | (35,075) | | | (120,800) | |
Income tax expense (benefit) | | | | | | 5,252 | | | (1,242) | | | (30,532) | |
Net loss from continuing operations | | | | | | (124,106) | | | (33,833) | | | (90,268) | |
Earnings from discontinued operations, net of tax | | | | | | 5,404 | | | — | | | — | |
Net loss | | | | | | $ | (118,702) | | | $ | (33,833) | | | $ | (90,268) | |
| | | | | | | | | | |
Basic earnings (loss) per share | | | | | | | | | | |
Continuing operations | | | | | | $ | (1.87) | | | $ | (0.50) | | | (1.36) | |
Discontinued operations | | | | | | 0.08 | | | — | | | — | |
Basic loss per share | | | | | | $ | (1.79) | | | $ | (0.50) | | | $ | (1.36) | |
| | | | | | | | | | |
Diluted earnings (loss) per share | | | | | | | | | | |
Continuing operations | | | | | | $ | (1.87) | | | $ | (0.50) | | | (1.36) | |
Discontinued operations | | | | | | 0.08 | | | — | | | — | |
Diluted loss per share | | | | | | $ | (1.79) | | | $ | (0.50) | | | $ | (1.36) | |
| | | | | | | | | | |
(Dollars in thousands)
| | Common Stock | | | Additional | | | | | | Accumulated other | | | Treasury Stock | | | | | | | |
| | Number | | | | | | paid-in | | | Retained | | | comprehensive | | | Number | | | | | | Noncontrolling | | | Total | |
| | of shares | | | Amount | | | Capital | | | earnings | | | income | | | of shares | | | Amount | | | Interest | | | Equity | |
Balances at March 31, 2013 | | | 121,342,916 | | | $ | 12,134 | | | $ | 885,184 | | | $ | 593,966 | | | $ | 11,423 | | | | (47,825,035 | ) | | $ | (882,959 | ) | | $ | (380 | ) | | $ | 619,368 | |
Employee stock awards, benefit plans and other issuances | | | 4,018,507 | | | | 402 | | | | 84,422 | | | | - | | | | - | | | | (155,089 | ) | | | (4,334 | ) | | | - | | | | 80,490 | |
Tax impact of stock options, warrants and restricted stock | | | - | | | | - | | | | 11,295 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 11,295 | |
Non-cash share-based compensation from continuing operations | | | - | | | | - | | | | 13,206 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 13,206 | |
Non-cash share-based compensation from discontinued operations | | | - | | | | - | | | | 719 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 719 | |
Restricted stock units vested | | | 482,185 | | | | 48 | | | | (48 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Warrant exercises | | | - | | | | - | | | | (11,753 | ) | | | - | | | | - | | | | 769,927 | | | | 11,753 | | | | - | | | | - | |
Acquisition of treasury stock | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,993,310 | ) | | | (52,663 | ) | | | - | | | | (52,663 | ) |
Acquisition of noncontrolling interest | | | - | | | | - | | | | (1,040 | ) | | | - | | | | - | | | | - | | | | - | | | | 440 | | | | (600 | ) |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | 1,511 | | | | - | | | �� | - | | | | - | | | | 1,511 | |
Unrealized gain on interest rate swap | | | - | | | | - | | | | - | | | | - | | | | 728 | | | | - | | | | - | | | | - | | | | 728 | |
Net earnings (loss) | | | - | | | | - | | | | - | | | | 8,863 | | | | - | | | | - | | | | - | | | | (60 | ) | | | 8,803 | |
Balances at March 31, 2014 | | | 125,843,608 | | | $ | 12,584 | | | $ | 981,985 | | | $ | 602,829 | | | $ | 13,662 | | | | (49,203,507 | ) | | $ | (928,203 | ) | | $ | - | | | $ | 682,857 | |
Employee stock awards, benefit plans and other issuances | | | 1,028,524 | | | | 103 | | | | 12,153 | | | | - | | | | - | | | | (370,299 | ) | | | (7,217 | ) | | | - | | | | 5,039 | |
Tax impact of stock options, warrants and restricted stock | | | - | | | | - | | | | 4,645 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,645 | |
Non-cash share-based compensation from continuing operations | | | 33,693 | | | | 4 | | | | 28,298 | | | | - | | | | - | | | | - | | | | 14 | | | | - | | | | 28,316 | |
Non-cash share-based compensation from discontinued operations | | | - | | | | - | | | | 570 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 570 | |
Restricted stock units vested | | | 1,032,972 | | | | 103 | | | | (103 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Acquisition of treasury stock | | | - | | | | - | | | | - | | | | - | | | | - | | | | (528,918 | ) | | | (9,868 | ) | | | - | | | | (9,868 | ) |
LiveRamp replacement stock options | | | - | | | | - | | | | 6,978 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 6,978 | |
Comprehensive loss: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | (4,074 | ) | | | - | | | | - | | | | - | | | | (4,074 | ) |
Unrealized gain on interest rate swap | | | - | | | | - | | | | - | | | | - | | | | (175 | ) | | | - | | | | - | | | | - | | | | (175 | ) |
Net loss | | | - | | | | - | | | | - | | | | (11,031 | ) | | | - | | | | - | | | | - | | | | - | | | | (11,031 | ) |
Balances at March 31, 2015 | | | 127,938,797 | | | $ | 12,794 | | | $ | 1,034,526 | | | $ | 591,798 | | | $ | 9,413 | | | | (50,102,724 | ) | | $ | (945,274 | ) | | $ | - | | | $ | 703,257 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
YEARS ENDED MARCH 31, 2016, 2015 AND 2014
(Dollars in thousands)
| | Common Stock | | | Additional | | | | | | Accumulated other | | | Treasury Stock | | | | | | | |
| | Number | | | | | | paid-in | | | Retained | | | comprehensive | | | Number | | | | | | Noncontrolling | | | Total | |
| | of shares | | | Amount | | | Capital | | | earnings | | | income | | | of shares | | | Amount | | | Interest | | | Equity | |
Balances at March 31, 2015 | | | 127,938,797 | | | $ | 12,794 | | | $ | 1,034,526 | | | $ | 591,798 | | | $ | 9,413 | | | | (50,102,724 | ) | | $ | (945,274 | ) | | $ | - | | | $ | 703,257 | |
Employee stock awards, benefit plans and other issuances | | | 1,338,663 | | | | 134 | | | | 15,627 | | | | - | | | | - | | | | (294,522 | ) | | | (5,344 | ) | | | - | | | | 10,417 | |
Tax impact of stock options, warrants and restricted stock | | | - | | | | - | | | | (293 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (293 | ) |
Non-cash share-based compensation from continuing operations | | | 61,464 | | | | 6 | | | | 31,457 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 31,463 | |
Non-cash share-based compensation from discontinued operations | | | - | | | | - | | | | 1,008 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,008 | |
Restricted stock units vested | | | 1,051,182 | | | | 105 | | | | (105 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Acquisition of treasury stock | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,633,436 | ) | | | (52,764 | ) | | | - | | | | (52,764 | ) |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | (907 | ) | | | - | | | | - | | | | - | | | | (907 | ) |
Unrealized gain on interest rate swap | | | - | | | | - | | | | - | | | | - | | | | 84 | | | | - | | | | - | | | | - | | | | 84 | |
Net earnings | | | - | | | | - | | | | - | | | | 6,703 | | | | - | | | | - | | | | - | | | | - | | | | 6,703 | |
Balances at March 31, 2016 | | | 130,390,106 | | | $ | 13,039 | | | $ | 1,082,220 | | | $ | 598,501 | | | $ | 8,590 | | | | (53,030,682 | ) | | $ | (1,003,382 | ) | | $ | - | | | $ | 698,968 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements.
F-29
ACXIOM CORPORATION
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2016, 2015 AND 2014COMPREHENSIVE LOSS
(Dollars in thousands)
| | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | |
Cash flows from operating activities: | | | | | | | | | |
Net earnings (loss) | | $ | 6,703 | | | $ | (11,031 | ) | | $ | 8,803 | |
Earnings from discontinued operations, net of tax | | | (15,351 | ) | | | (15,511 | ) | | | (26,143 | ) |
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | | | | | | | | | | | | |
Depreciation and amortization | | | 85,463 | | | | 80,447 | | | | 56,900 | |
Loss (gain) on disposal of assets | | | 232 | | | | 1,700 | | | | (2,591 | ) |
Loss on early extinguishment of debt | | | - | | | | - | | | | 664 | |
Impairment of goodwill and other assets | | | 6,829 | | | | - | | | | 24,953 | |
Deferred income taxes | | | (11,664 | ) | | | (4,965 | ) | | | 10,935 | |
Non-cash stock-based compensation expense | | | 31,463 | | | | 28,316 | | | | 13,206 | |
Changes in operating assets and liabilities: | | | | | | | | | | | | |
Accounts receivable, net | | | (13,014 | ) | | | 3,744 | | | | (2,797 | ) |
Other assets | | | (13,632 | ) | | | 12,867 | | | | (9,054 | ) |
Accounts payable and other liabilities | | | 25,529 | | | | (28,129 | ) | | | 14,369 | |
Deferred revenue | | | 11,084 | | | | (6,307 | ) | | | 6,541 | |
Net cash provided by operating activities | | | 113,642 | | | | 61,131 | | | | 95,786 | |
Cash flows from investing activities: | | | | | | | | | | | | |
Capitalized software development costs | | | (14,880 | ) | | | (18,587 | ) | | | (24,517 | ) |
Capital expenditures | | | (47,423 | ) | | | (56,952 | ) | | | (25,951 | ) |
Receipts from investments | | | - | | | | - | | | | 3,823 | |
Data acquisition costs | | | (1,553 | ) | | | (1,871 | ) | | | (7,745 | ) |
Net cash paid in acquisitions | | | (5,386 | ) | | | (265,672 | ) | | | (500 | ) |
Net cash used in investing activities | | | (69,242 | ) | | | (343,082 | ) | | | (54,890 | ) |
Cash flows from financing activities: | | | | | | | | | | | | |
Proceeds from debt | | | - | | | | - | | | | 300,000 | |
Payments of debt | | | (87,231 | ) | | | (26,601 | ) | | | (231,151 | ) |
Fees for debt refinancing | | | - | | | | - | | | | (4,370 | ) |
Acquisition of noncontrolling interest | | | - | | | | - | | | | (600 | ) |
Acquisition of treasury stock | | | (52,764 | ) | | | (9,868 | ) | | | (52,663 | ) |
Sale of common stock, net of stock acquired for withholding taxes | | | 10,417 | | | | 5,039 | | | | 80,490 | |
Excess tax benefits from stock-based compensation | | | 3,551 | | | | 4,645 | | | | 11,295 | |
Net cash provided by (used in) financing activities | | | (126,027 | ) | | | (26,785 | ) | | | 103,001 | |
Net cash provided by (used in) continuing operations | | | (81,627 | ) | | | (308,736 | ) | | | 143,897 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See accompanying notes to consolidated financial statements | | | | | | | | | | | | |
| | | | | | | | | | | | |
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
YEARS ENDED MARCH 31, 2016, 2015 AND 2014
(Dollars in thousands)
| | 2016 | | | 2015 | | | 2014 | |
Cash flows from discontinued operations: | | | | | | | | | |
Net cash provided by operating activities | | | 6,323 | | | | 43,853 | | | | 69,190 | |
Net cash provided by (used in) investing activities | | | 124,506 | | | | (9,254 | ) | | | (13,347 | ) |
Net cash used in investing activities | | | (206 | ) | | | (1,820 | ) | | | (4,744 | ) |
Net cash provided by discontinued operations | | | 130,623 | | | | 32,779 | | | | 51,099 | |
Net cash provided by (used in) continuing and discontinued operations | | | 48,996 | | | | (275,957 | ) | | | 194,996 | |
Effect of exchange rate changes on cash | | | (377 | ) | | | (1,619 | ) | | | 616 | |
Net change in cash and cash equivalents | | | 48,619 | | | | (277,576 | ) | | | 195,612 | |
Cash and cash equivalents at beginning of period | | | 141,010 | | | | 418,586 | | | | 222,974 | |
Cash and cash equivalents at end of period | | $ | 189,629 | | | $ | 141,010 | | | $ | 418,586 | |
| | | | | | | | | | | | |
Supplemental cash flow information: | | | | | | | | | | | | |
Cash paid (received) during the period for: | | | | | | | | | | | | |
Interest | | $ | 8,145 | | | $ | 8,673 | | | $ | 11,762 | |
Income taxes | | | 6,100 | | | | (3,845 | ) | | | 21,702 | |
Payments on capital leases and installment payment arrangements | | | 269 | | | | 3,823 | | | | 8,379 | |
Prepayment of debt | | | 55,000 | | | | - | | | | 215,000 | |
Other debt payments | | | 32,168 | | | | 24,598 | | | | 12,516 | |
| | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. | | | | | | | | | | | | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | Year ended March 31, |
| | | | | | 2023 | | 2022 | | 2021 |
Net loss | | | | | | (118,702) | | | (33,833) | | | (90,268) | |
Other comprehensive income (loss): | | | | | | | | | | |
Change in foreign currency translation adjustment | | | | | | (1,226) | | | (1,792) | | | 1,777 | |
Comprehensive loss | | | | | | (119,928) | | | (35,625) | | | (88,491) | |
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business -
Acxiom is a global technology and enablement services company with a vision to power a world where all marketing is relevant. We provide the data foundation for the world's best marketers. By making it safe and easy to activate, validate, enhance, and unify data, we provide marketers with the ability to deliver relevant messages at scale and tie those messages back to actual results. Our products and services enable people-based marketing, allowing our clients to generate higher return on investment and drive better omni-channel customer experiences.
Acxiom is a Delaware corporation founded in 1969 in Conway, Arkansas. Our common stock is listed on the NASDAQ Global Select Market under the symbol "ACXM." We serve a global client base from locations in the United States, Europe, and the Asia-Pacific ("APAC") region. Our client list includes more than 3,000 of the world's largest and best known brands across most major industry verticals, including but not limited to financial, insurance and investment services, automotive, retail, telecommunications, high tech, healthcare, travel, entertainment, non-profit, and government.
Basis of Presentation and Principles of Consolidation -
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. We have prepared theSee accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") as set forth in the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") and we consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission.
Use of Estimates -
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with GAAP. Estimates are used in determining, among other items, the fair value of acquired assets and assumed liabilities, estimated selling price in certain revenue arrangements, projected cash flows associated with recoverability of assets, restructuring and impairment accruals, litigation and facilities lease loss accruals, amortization of software development costs, and the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions. Actual results could differ from those estimates.
Discontinued Operations -
Discontinued operations comprise those activities that have been disposed of during the period or which have been classified as held for sale at the end of the period, and represent a separate major line of business or geographical area that can be clearly distinguished for operational and financial reporting purposes. In fiscal 2016, the Company sold its IT Infrastructure Management business ("ITO") and began reporting the results of operations, cash flows and the balance sheet amounts pertaining to ITO as a component of discontinued operations in the consolidated financial statements. In fiscal 2015, Acxiom identified its U.K. call center operation, 2Touch, as a component of the Company that is reported as discontinued operations as a result of its disposal. Refer to Note 4, Discontinued Operations, for more information.
Unless otherwise indicated, information in the notes to the consolidated financial statements relates to continuing operations.
Reclassifications -
During the quarter ended June 30, 2015, the Company reviewed its classification of expenses in its statement of operations and made several changes in an effort to bring added transparency to its reporting. As a result of this review, the Company made several changes to the way it classifies operating expenses. Expenses for prior periods have been reclassified to conform to the current-year presentation. The reclassifications had no effect on loss from operations, income (loss) from continuing operations before income taxes, or net earnings (loss). The following is a summary of the reclassifications:
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Additional categories of operating costs and expenses in the Consolidated Statements of Operations: The Company has segregated research and development costs previously reported as a component of cost of revenue and has separated selling, general and administrative into sales and marketing and general and administrative. In addition, the Company added a gross profit subtotal to its Consolidated Statements of Operations.
Reclassification of operating costs and expenses: The Company previously classified all account management functions (which include activities supporting existing client relationships and managing client service activities, as well as responsibilities for existing client contract extensions and up-sell) and all IT project management activities as cost of revenue. As the Company is now disaggregating its operating results into more granular categories of costs, and as a result of activities during fiscal 2015 to clarify and segregate account management roles between those supporting existing client relationships and those focused on existing contract extensions and upsell and IT project management roles between client-facing and internal projects, certain costs are presented in a new category. Costs supporting contract extension and upsell are now classified as sales and marketing, and internal IT project management costs are now classified as general and administrative. Accordingly, prior years' amounts have been reclassified to conform to the current presentation.
After the reclassifications, operating costs and expenses are now classified in the following categories in the Consolidated Statements of Operations:
· | Cost of revenue includes all direct costs of sales such as data and other third party costs directly associated with revenue. Cost of revenue also includes operating expenses for each of the Company's operations functions such as client services, account management, agency, strategy and analytics, IT, data acquisition, and product operations. Finally, cost of revenue includes amortization of internally developed software. |
· | Research and development includes operating expenses for the Company's engineering and product/project management functions supporting research, new development, and related product enhancement. This definition expanded research and development expenses, resulting in an increase in our previously disclosed research and development expenses of $20.3 million in fiscal 2015 and $23.6 million in fiscal 2014. |
· | Sales and marketing includes operating expenses for the Company's sales, marketing, and product marketing functions. |
· | General and administrative represents operating expenses for all corporate functions, including finance, human resources, legal, corporate IT, and the corporate office. |
The following table summarizes the reclassification activity for the year ended March 31, 2015 (dollars in thousands):
| | As previously reported1 | | | Category expansion | | | Account management reclass | | | IT reclass and other | | | As currently reported | |
Cost of revenue | | $ | 639,945 | | | $ | (74,201 | ) | | $ | (62,947 | ) | | $ | (8,760 | ) | | $ | 494,037 | |
Research and development | | $ | - | | | $ | 74,201 | | | $ | - | | | $ | - | | | $ | 74,201 | |
Selling, general and administrative | | $ | 175,050 | | | $ | (175,050 | ) | | $ | - | | | $ | - | | | $ | - | |
Sales and marketing | | $ | - | | | $ | 54,807 | | | $ | 62,947 | | | $ | (1,260 | ) | | $ | 116,494 | |
General and administrative | | $ | - | | | $ | 120,243 | | | $ | - | | | $ | 10,020 | | | $ | 130,263 | |
| | | | | | | | | | | | | | | | | | | | |
1 Adjusted for discontinued operations
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The following table summarizes the reclassification activity for the fiscal year ended March 31, 2014 (dollars in thousands):
| | As previously reported1 | | | Category expansion | | | Account management reclass | | | IT reclass and other | | | As currently reported | |
Cost of revenue | | $ | 608,861 | | | $ | (62,807 | ) | | $ | (34,966 | ) | | $ | (5,571 | ) | | $ | 505,517 | |
Research and development | | $ | - | | | $ | 62,807 | | | $ | - | | | $ | - | | | $ | 62,807 | |
Selling, general and administrative | | $ | 152,614 | | | $ | (152,614 | ) | | $ | - | | | $ | - | | | $ | - | |
Sales and marketing | | $ | - | | | $ | 58,641 | | | $ | 34,966 | | | $ | - | | | $ | 93,607 | |
General and administrative | | $ | - | | | $ | 93,973 | | | $ | - | | | $ | 5,571 | | | $ | 99,544 | |
1 Adjusted for discontinued operations | | | | | |
Significant Accounting Policies
Cash and Cash Equivalents -
The Company considers all highly-liquid investments with original maturities of three months or less to be cash equivalents.
Accounts Receivable -
Accounts receivable includes amounts billed to customers as well as unbilled amounts recognized in accordance with the Company's revenue recognition policies, as stated below. Unbilled amounts included in accounts receivable, which generally arise from the delivery of data and performance of services to customers in advance of billings, were $14.3 million at both March 31, 2016 and 2015.
Accounts receivable are presented net of allowance for doubtful accounts. The Company evaluates its allowance for doubtful accounts based on a combination of factors at each reporting date. Each account or group of accounts is evaluated based on specific information known to management regarding each customer's ability or inability to pay, as well as historical experience for each customer or group of customers, the length of time the receivable has been outstanding, and current economic conditions in the customer's industry. Accounts receivable that are determined to be uncollectible are charged against the allowance for doubtful accounts.
Property and Equipment -
Property and equipment are stated at cost. Depreciation and amortization are calculated on the straight-line method over the estimated useful lives of the assets as follows: buildings and improvements, up to 30 years; data processing equipment, 2 - 5 years, and office furniture and other equipment, 3 - 7 years.
Property held under capitalized lease arrangements is included in property and equipment, and the associated liabilities are included in long-term debt. Amortization of property under capitalized leases is included in depreciation and amortization expense. Property and equipment taken out of service and held for sale is recorded at the lower of depreciated cost or net realizable value and depreciation is ceased.
Leases -
Rent expense on operating leases is recorded on a straight-line basis over the term of the lease agreement.
Software, Purchased Software Licenses, and Research and Development Costs –
Costs of internally developed software are capitalized in accordance with ASC 350-40, Internal Use Software.
The standard generally requires that research and development costs incurred prior to the beginning of the application development stage of software products are charged to operations as such costs are incurred. Once the application development stage has begun, costs are capitalized until the software is available for general release.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Costs of internally developed software are amortized on a straight-line basis over the remaining estimated economic life of the software product, generally two to five years. The Company recorded amortization expense related to internally developed software of $30.7 million, $29.0 million, and $9.7 million for fiscal 2016, 2015 and 2014, respectively. Of the amortization expense recorded in fiscal 2016 and 2015, $10.0 and $7.5 million, respectively, relate to internally developed software acquired as part of the LiveRamp acquisition. Amortization expense in fiscal 2016 and fiscal 2015 also included $1.8 million and $4.3 million, respectively, of accelerated amortization expense resulting from adjusting the remaining lives of certain capitalized software products which the Company will no longer be using as a result of the LiveRamp acquisition.
Costs of purchased software licenses are amortized using a units-of-production basis over the estimated economic life of the license, generally not to exceed five years. The Company recorded amortization expense related to purchased software licenses of $3.8 million, $5.0 million and $4.0 million in 2016, 2015 and 2014, respectively. Some of these licenses are, in effect, volume purchase agreements for software licenses needed for internal use and to provide services to customers over the terms of the agreements. Therefore, amortization lives are periodically reevaluated and, if justified, adjusted to reflect current and future expected usage based on units-of-production amortization.
Capitalized software, including both purchased and internally developed, is reviewed when facts and circumstances indicate the carrying amount may not be recoverable and, if necessary, the Company reduces the carrying value of each product to its fair value.
Goodwill -
As described in Note 17 – Segment Information, during the first quarter of fiscal 2016, the Company changed its organizational structure which resulted in a change of operating segments and reporting units. During the third quarter of fiscal 2016, the Company further expanded its operating segments and reporting units. As a result, goodwill was reallocated to the new reporting units using a relative fair value approach.
Goodwill is measured and tested for impairment on an annual basis in the first quarter of the Company's fiscal year in accordance with ASC 350, Intangibles—Goodwill and Other, or more frequently if indicators of impairment exist. Triggering events for interim impairment testing include indicators such as adverse industry or economic trends, restructuring actions, downward revisions to projections of financial performance, or a sustained decline in market capitalization. The performance of the impairment test involves a two-step process. The first step requires comparing the estimated fair value of a reporting unit to its net book value, including goodwill. A potential impairment exists if the estimated fair value of the reporting unit is lower than its net book value. The second step of the impairment test involves assigning the estimated fair value of the reporting unit to its identifiable assets, with any residual fair value being assigned to goodwill. If the carrying value of an individual indefinite-lived intangible asset (including goodwill) exceeds its estimated fair value, such asset is written down by an amount equal to the excess, and a corresponding amount is recorded as a charge to operations for the period in which the impairment test is completed. Completion of the Company's annual impairment test during the quarter ended June 30, 2015 indicated no potential impairment of its goodwill balances.
During the second quarter of fiscal 2016, a triggering event occurred which required the Company to test the recoverability of goodwill associated with its Brazil Marketing Services and Audience Solutions reporting unit. The triggering event was the announced closure of the Company's Brazil operation. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in this unit for impairment. The results of the impairment testing indicated complete impairment of the goodwill as well as impairment for certain other long-lived assets. The amount of impairment was $0.7 million, of which $0.5 million was goodwill and $0.2 million related to other long-lived assets, primarily property and equipment.
During the third quarter of fiscal 2016, management determined that results for the APAC component were lower than had been projected in the previous goodwill test in part due to an economic slowdown in Asia. Management further determined that the failure of the APAC component to meet expectations, combined with the expectation that future projections would also be lowered, constituted a triggering event, requiring an interim goodwill impairment test. The impairment test indicated a reduced fair value, but the fair value was still in excess of the carrying value resulting in no impairment.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
During the fourth quarter of fiscal 2016, a triggering event occurred which required the Company to test the recoverability of goodwill associated with its APAC Marketing Services and Audience Solutions reporting units. The triggering event was the Company's decision to focus efforts in Australia exclusively on the Connectivity business; as a result, the Company plans to wind-down the Marketing Services and Audience Solutions operations in Australia. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in these units for impairment. The results of the two-step test indicated complete impairment of the APAC Audience Solutions goodwill as well as impairment for certain other long-lived assets. The amount of impairment was $6.1 million, of which $5.4 million was goodwill and $0.7 million related to other long-lived assets, primarily property and equipment. The impairment test also indicated a reduced fair value for the APAC Marketing Services component, but the fair value was still in excess of the carrying value resulting in no impairment. Management believes that the estimated valuations it arrived at were reasonable and consistent with what other marketplace participants would use in valuing the APAC components. However, management cannot give any assurances that the values will not change in the future. For example, if the APAC projections are not achieved in the future or if there are strategic changes related to the reporting unit, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach. The Company continues to monitor potential triggering events including changes in the APAC business climate, the volatility of the APAC capital markets, and APAC operating performance and projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in impairment charges.
In order to estimate the fair value for each of the components, management uses an income approach based on a discounted cash flow model together with valuations based on an analysis of public company market multiples and a similar transactions analysis.
The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital ("WACC"). The WACC considers market and industry data as well as company-specific risk factors for each reporting unit in determining the appropriate discount rate to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Management, considering industry and company-specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.
The public company market multiple method is used to estimate values for each of the components by looking at market value multiples to revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) for selected public companies that are believed to be representative of companies that marketplace participants would use to arrive at comparable multiples for the individual component being tested. These multiples are then used to develop an estimated value for each respective component.
The similar transactions method compares multiples based on acquisition prices of other companies believed to be those that marketplace participants would use to compare to the individual component being tested. Those multiples are then used to develop an estimated value for that component.
In order to arrive at an estimated value for each component, management uses a weighted-average approach to combine the results of each analysis. Management believes that using multiple valuation approaches and then weighting them appropriately is a technique that a marketplace participant would use.
As a final test of the annual valuation results, the total of the values of the components is reconciled to the actual market value of Acxiom common stock as of the valuation date. Management believes this control premium is reasonable compared to historical control premiums observed in actual transactions.
During fiscal 2015, we did not recognize any goodwill impairment losses.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
During fiscal 2014, triggering events occurred which required the Company to test the recoverability of goodwill associated with its European reporting unit and its 2Touch reporting unit (which is now included in discontinued operations). The triggering event was the initiation of a restructuring of the European unit. The restructuring included exiting the analog paper survey business in Europe. The triggering event related to 2Touch was a potential exit from that business. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in those units for impairment. In the case of 2Touch, the step one fair value indicated that all of the goodwill and other long-lived assets were impaired. Therefore there was no need to perform detailed step two calculations in order to conclude that all of the goodwill and other long-lived assets of this unit should be written off. In the case of the European unit, the Company first tested certain data assets within the unit, and concluded that $4.6 million of these data assets were impaired and should be written off. Then the Company performed step one of the two-step goodwill test, which indicated the goodwill was impaired. Step two of the goodwill recoverability test required the Company to perform a hypothetical purchase price allocation, under which the estimated fair value was allocated to the unit's tangible and intangible assets based on their estimated fair values. This hypothetical purchase price allocation indicated that all of the unit's goodwill should be written off. The amount of impairment for the European unit was $25.0 million, of which $20.3 million was goodwill and $4.6 million related to data assets. The amount of impairment for the 2Touch unit was $3.9 million, of which $3.0 million was goodwill and $0.9 million was other assets, primarily property and equipment.
Management believes that the estimated valuations it arrived at are reasonable and consistent with what other marketplace participants would use in valuing the Company's components. However, management cannot give any assurance that these market values will not change in the future. For example, if discount rates demanded by the market increase, this could lead to reduced valuations under the income approach. If the Company's projections are not achieved in the future, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach. If the market price of the Company's stock decreases, this could cause the Company to reassess the reasonableness of the implied control premium, which might cause management to assume a higher discount rate under the income approach which could lead to reduced valuations. If future similar transactions exhibit lower multiples than those observed in the past, this could lead to reduced valuations under the similar transactions approach. And finally, if there is a general decline in the stock market and particularly in those companies selected as comparable to the Company's components, this could lead to reduced valuations under the public company market multiple approach. The Company's next annual impairment test will be performed during the first quarter of fiscal 2017. The fair value of the Company's components could deteriorate which could result in the need to record impairment charges in future periods. The Company continues to monitor potential triggering events including changes in the business climate in which it operates, attrition of key personnel, the volatility in the capital markets, the Company's market capitalization compared to its book value, the Company's recent operating performance, and the Company's financial projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in impairment charges.
Impairment of Long-lived Assets -
Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers factors such as operating losses, declining outlooks, and business conditions when evaluating the necessity for an impairment analysis. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
During fiscal 2016, in conjunction with the goodwill impairment tests noted above, the Company also tested certain other long-lived assets in the affected units for impairment. The Company recorded impairment charges of $0.9 million related to other long-lived assets, primarily property and equipment.
There were no impairment charges during fiscal 2015.
During fiscal 2014, in conjunction with the goodwill impairment test noted above, the Company also tested certain database assets and other long-lived assets in the affected units for impairment. The Company recorded impairment charges of $4.6 million related to data assets and $0.9 million related to other long-lived assets (see note 6).
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Data Acquisition Costs -
The Company defers certain costs related to the acquisition or licensing of data for the Company's proprietary databases which are used in providing data products and services. These costs are amortized over the useful life of the data, which is from two to seven years. In order to estimate the useful life of any acquired data, the Company considers several factors including 1) the type of data acquired, 2) whether the data becomes stale over time, 3) to what extent the data will be replaced by updated data over time, 4) whether the stale data continues to have value as historical data, 5) whether a license places restrictions on the use of the data, and 6) the term of the license.
Deferred Revenue -
Deferred revenue consists of amounts billed in excess of revenue recognized. Deferred revenues are subsequently recorded as revenue in accordance with the Company's revenue recognition policies.
Revenue Recognition -
The Company's policy follows the guidance from ASC 605, Revenue Recognition.
The Company provides marketing database services under long-term arrangements. These arrangements may require the Company to perform setup activities such as the design and build of a database, and may include other products and services purchased at the same time, or within close proximity of one another (referred to as multiple element arrangements). Each element within a multiple element arrangement is accounted for as a separate unit of accounting provided the following criteria are met: the delivered products or services have value to the customer on a standalone basis; and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by us. We consider a deliverable to have standalone value if the product or service is sold separately by us or another vendor or could be resold by the customer. Further, our revenue arrangements generally do not include a general right of return related to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for purposes of allocation of the arrangement consideration and revenue recognition.
For our multiple-element arrangements, we allocate revenue to each element based on a selling price hierarchy at the arrangement's inception. The relative selling price for each unit of accounting in a multiple-element arrangement is established using vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if available, or management's best estimate of stand-alone selling price (BESP). In most cases, the Company has neither VSOE nor TPE and therefore uses BESP. The total arrangement consideration is allocated to each separate unit of accounting for each of the deliverables using the relative selling prices of each unit based on the aforementioned selling price hierarchy. We limit the amount of revenue recognized for delivered elements to an amount that is not contingent upon future delivery of additional products or services or meeting any specified performance conditions.
The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. Management's BESP is determined by considering multiple factors including actual contractual selling prices when the item is sold on a stand-alone basis, as well as market conditions, competition, internal costs, profit objectives and pricing practices. As pricing and marketing strategies evolve, we may modify our pricing practices in the future, which could result in changes to BESP, or to the development of VSOE or TPE for individual products or services. As a result, future revenue recognition for multiple-element arrangements could differ from recognition in the current period. Our relative selling prices are analyzed on an annual basis or more frequently if we experience significant changes in selling prices.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Revenues are recognized when: (1) persuasive evidence of an arrangement exists; (2) we deliver the products and services; (3) the sale price is fixed or determinable; and (4) collection is reasonably assured. Revenues that are not recognized at the time of sale because the foregoing conditions are not met are recognized when those conditions are subsequently met. Where applicable, we reduce revenue for certain incentive programs where we have the ability to sufficiently estimate the effects of these items. In some cases, the arrangements also contain provisions requiring customer acceptance of the setup activities prior to commencement of the ongoing services arrangement. Up-front fees billed during the setup phase for these arrangements are deferred and setup costs that are direct and incremental to the contract are capitalized. Revenue recognition does not begin until after customer acceptance in cases where contracts contain acceptance provisions. Once the setup phase is complete and customer acceptance occurs, the Company recognizes revenue and the related costs for each element as delivered. In situations where the arrangement does not require customer acceptance before the Company begins providing services, revenue is recognized for each element as delivered and no costs are deferred.
The Company evaluates its marketing database arrangements to determine whether the arrangement contains a lease. If the arrangement is determined to contain a lease, applicable accounting standards require the Company to account for the lease component separately from the remaining components of the arrangement. In cases where marketing database arrangements are determined to include a lease, the lease is evaluated to determine whether it is a capital lease or operating lease and accounted for accordingly. These lease revenues are not significant to the Company's consolidated financial statements.
Sales of third-party software, hardware and certain other equipment are recognized when delivered. If such sales are part of a multiple-element arrangement, they are recognized as a separate element unless collection of the sales price is dependent upon delivery of other products or services. Additionally, the Company evaluates revenue from the sale of data, software, hardware and equipment in accordance with accounting standards to determine whether such revenue should be recognized on a gross or a net basis. All of the factors in the accounting standards are considered with the primary factor being whether the Company is the primary obligor in the arrangement. "Out-of-pocket" expenses incurred by, and reimbursed to, the Company in connection with customer contracts are recorded as gross revenue.
The Company also performs services on a project basis outside of, or in addition to, the scope of long-term arrangements. The Company recognizes revenue from these services as the services are performed.
All taxes assessed on revenue-producing transactions described above are presented on a net basis, or excluded from revenues.
Revenues from the licensing of data are recognized upon delivery of the data to the customer. Revenue from the licensing of data to the customer in circumstances where the license agreement contains a volume cap is recognized in proportion to the total records to be delivered under the arrangement. Revenue from the sale of data on a per-record basis is recognized as the records are delivered.
Revenues from onboarding customer data into digital marketing applications are recognized as the services are delivered over the contract.
Concentration of Credit Risk -
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts, unbilled and notes receivable. The Company's receivables are from a large number of customers. Accordingly, the Company's credit risk is affected by general economic conditions. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management, however, believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Income Taxes -
The Company and its domestic subsidiaries file a consolidated federal income tax return. The Company's foreign subsidiaries file separate income tax returns in the countries in which their operations are based.
The Company makes estimates and judgments in determining the provision for income taxes for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities that arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Significant changes in these estimates may result in an increase or decrease to the tax provision in a subsequent period. The Company assesses the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company increases the provision for taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. The Company believes that the deferred tax assets recorded on the consolidated balance sheets will be ultimately recovered. However, should a change occur in the Company's ability to recover its deferred tax assets, its tax provision would increase in the period in which the Company determined that the recovery was not likely.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process pursuant to ASC 740, Income Taxes. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If the Company determines that a tax position will more likely than not be sustained on audit, the second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of various possible outcomes.
The Company re-evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.
Foreign Currency Translation -
The reporting currency of the Company is the U.S. dollar. The functional currency of our foreign operations generally is the applicable local currency for each foreign subsidiary. The balance sheets of the Company's foreign subsidiaries are translated at period-end rates of exchange, and the statements of operations are translated at the weighted-average exchange rate for the period. Gains or losses resulting from translating foreign currency financial statements are included in accumulated other comprehensive income (loss) in the consolidated statements of stockholders' equity and comprehensive income (loss).
Advertising Expense -
The Company expenses advertising costs as incurred. Advertising expense was approximately $5.9 million, $5.0 million and $5.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively. Advertising expense is included in operating expenses on the accompanying consolidated statements of operations.
Guarantees -
The Company accounts for the guarantees of indebtedness of others under applicable accounting standards which require a guarantor to recognize, at the inception of the guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. A guarantor is also required to make additional disclosures in its financial statements about obligations under certain guarantees issued. The Company's liability for the fair value of guarantees is not material (see note 11).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF EQUITY |
(Dollars in thousands) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | | | other | | Treasury Stock | | |
| | Number | | | | paid-in | | Retained | | comprehensive | | Number | | | | Total |
| | of shares | | Amount | | Capital | | earnings | | income (loss) | | of shares | | Amount | | Equity |
Balances at March 31, 2020 | | 143,938,753 | | | $ | 14,394 | | | $ | 1,496,565 | | | $ | 1,545,094 | | | $ | 5,745 | | | (78,081,314) | | | $ | (1,974,286) | | | $ | 1,087,512 | |
Employee stock awards, benefit plans and other issuances | | 583,476 | | | 58 | | | 8,680 | | | — | | | — | | | (182,730) | | | (9,920) | | | (1,182) | |
Non-cash stock-based compensation | | 21,736 | | | 2 | | | 84,394 | | | — | | | — | | | — | | | — | | | 84,396 | |
Restricted stock units vested | | 2,186,763 | | | 219 | | | (219) | | | — | | | — | | | — | | | — | | | — | |
Liability-classified restricted stock units vested | | 1,084,237 | | | 108 | | | 40,652 | | | — | | | — | | | — | | | — | | | 40,760 | |
| | | | | | | | | | | | | | | | |
Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (1,321,666) | | | (42,312) | | | (42,312) | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | | — | | | — | | | — | | | 1,777 | | | — | | | — | | | 1,777 | |
Net loss | | — | | | — | | | — | | | (90,268) | | | — | | | — | | | — | | | (90,268) | |
Balances at March 31, 2021 | | 147,814,965 | | | $ | 14,781 | | | $ | 1,630,072 | | | $ | 1,454,826 | | | $ | 7,522 | | | (79,585,710) | | | $ | (2,026,518) | | | $ | 1,080,683 | |
Employee stock awards, benefit plans and other issuances | | 254,069 | | | 26 | | | 6,240 | | | — | | | — | | | (290,675) | | | (14,626) | | | (8,360) | |
Non-cash stock-based compensation | | 52,459 | | | 5 | | | 71,175 | | | — | | | — | | | — | | | — | | | 71,180 | |
Restricted stock units vested | | 1,131,489 | | | 113 | | | (113) | | | — | | | — | | | — | | | — | | | — | |
Acquisition-related restricted stock award | | 40,600 | | | 4 | | | (4) | | | — | | | — | | | — | | | — | | | — | |
Liability-classified restricted stock units vested | | 547,343 | | | 55 | | | 13,748 | | | — | | | — | | | — | | | — | | | 13,803 | |
| | | | | | | | | | | | | | | | |
Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (1,329,211) | | | (58,621) | | | (58,621) | |
Comprehensive loss: | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | | — | | | — | | | — | | | (1,792) | | | — | | | — | | | (1,792) | |
Net loss | | — | | | — | | | — | | | (33,833) | | | — | | | — | | | — | | | (33,833) | |
Balances at March 31, 2022 | | 149,840,925 | | | $ | 14,984 | | | $ | 1,721,118 | | | $ | 1,420,993 | | | $ | 5,730 | | | (81,205,596) | | | $ | (2,099,765) | | | $ | 1,063,060 | |
ACXIOM CORPORATION AND SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF EQUITY |
(Dollars in thousands) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | | | other | | Treasury Stock | | |
| | Number | | | | paid-in | | Retained | | comprehensive | | Number | | | | Total |
| | of shares | | Amount | | Capital | | earnings | | income (loss) | | of shares | | Amount | | Equity |
Employee stock awards, benefit plans and other issuances | | 399,146 | | | $ | 40 | | | $ | 6,219 | | | $ | — | | | $ | — | | | (101,011) | | | $ | (2,272) | | | $ | 3,987 | |
Non-cash stock-based compensation | | 47,093 | | | 5 | | | 117,346 | | | — | | | — | | | — | | | — | | | 117,351 | |
Restricted stock units vested | | 3,253,815 | | | 325 | | | (325) | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | |
Liability-classified restricted stock units vested | | 446,805 | | | 45 | | | 11,558 | | | — | | | — | | | — | | | — | | | 11,603 | |
| | | | | | | | | | | | | | | | |
Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (6,066,230) | | | (149,997) | | | (149,997) | |
Comprehensive loss: | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | | — | | | — | | | — | | | (1,226) | | | — | | | — | | | (1,226) | |
Net loss | | — | | | — | | | — | | | (118,702) | | | — | | | — | | | — | | | (118,702) | |
Balances at March 31, 2023 | | 153,987,784 | | | $ | 15,399 | | | $ | 1,855,916 | | | $ | 1,302,291 | | | $ | 4,504 | | | (87,372,837) | | | $ | (2,252,034) | | | $ | 926,076 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Loss Contingencies and Legal Expenses -
The Company records a liability for loss contingencies when the liability is probable and reasonably estimable. Legal fees associated with loss contingencies are recorded when the legal fees are incurred.
Earnings (Loss) per Share -
A reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share is shown below (in thousands, except per share amounts):
| | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | |
Net loss from continuing operations | | $ | (8,648 | ) | | $ | (26,542 | ) | | $ | (17,340 | ) |
Net earnings from discontinued operations, net of tax | | | 15,351 | | | | 15,511 | | | | 26,143 | |
Net earnings (loss) | | $ | 6,703 | | | $ | (11,031 | ) | | $ | 8,803 | |
Net loss attributable to noncontrolling interest | | | - | | | | - | | | | (60 | ) |
Net earnings (loss) attributable to Acxiom | | $ | 6,703 | | | $ | (11,031 | ) | | $ | 8,863 | |
| | | | | | | | | | | | |
Basic earnings (loss) per share: | | | | | | | | | | | | |
Basic weighted-average shares outstanding | | | 77,616 | | | | 77,106 | | | | 74,690 | |
Basic earnings (loss) per share: | | | | | | | | | | | | |
Continuing operations | | $ | (0.11 | ) | | $ | (0.34 | ) | | $ | (0.23 | ) |
Discontinued operations | | | 0.20 | | | | 0.20 | | | | 0.35 | |
Net earnings (loss) | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | |
Net loss attributable to noncontrolling interest | | | - | | | | - | | | | (0.00 | ) |
Net earnings (loss) attributable to Acxiom | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | |
| | | | | | | | | | | | |
Diluted earnings (loss) per share: | | | | | | | | | | | | |
Basic weighted-average shares outstanding | | | 77,616 | | | | 77,106 | | | | 74,690 | |
Dilutive effect of common stock options, warrants, and restricted stock as computed under the treasury stock method | | | - | | | | - | | | | - | |
Diluted weighted-average shares outstanding | | | 77,616 | | | | 77,106 | | | | 74,690 | |
Diluted earnings (loss) per share: | | | | | | | | | | | | |
Continuing operations | | $ | (0.11 | ) | | $ | (0.34 | ) | | $ | (0.23 | ) |
Discontinued operations | | | 0.20 | | | | 0.20 | | | | 0.35 | |
Net earnings (loss) | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | |
Net loss attributable to noncontrolling interest | | | - | | | | - | | | | (0.00 | ) |
Net earnings (loss) attributable to Acxiom | | $ | 0.09 | | | $ | (0.14 | ) | | $ | 0.12 | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
DueSee accompanying notes to the net loss from continuing operations in fiscal 2016, 2015 and 2014, the dilutive effect of options, warrants and restricted stock units covering 1.5 million, 1.4 million shares and 2.1 million shares, respectively, of common stock was excluded from the earnings per share calculation since the impact on the calculation was anti-dilutive. Additional options and warrants to purchase shares of common stock and restricted stock units, including performance-based restricted stock units not meeting performance criteria, that were outstanding during the periods presented but were not included in the computation of diluted earnings (loss) per share because the effect was anti-dilutive are shown below (in thousands, except per share amounts):
| | 2016 | | | 2015 | | | 2014 | |
Number of shares outstanding under options, warrants and restricted stock units | | | 1,654 | | | | 1,829 | | | | 834 | |
Range of exercise prices for options | | $ | 17.49-$62.06 | | | $ | 19.18-$62.06 | | | $ | 29.30-$62.06 | |
Share-based Compensation -
The Company records share-based compensation expense according to the provisions of ASC Topic 718, "Compensation – Stock Compensation." ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations over the service period of the award based on their fair values. Under the provisions of ASC Topic 718, the Company determines the appropriate fair value model to be used for valuing share-based payments and the amortization method for compensation cost.
The Company has stock option plans and equity compensation plans (collectively referred to as the "share-based plans") administered by the compensation committee ("compensation committee") of the board of directors under which options and restricted stock units were outstanding as of March 31, 2016.
The Company's equity compensation plan provides that all associates (employees, officers, directors, affiliates, independent contractors or consultants) are eligible to receive awards (grant of any option, stock appreciation right, restricted stock award, restricted stock unit award, performance award, performance share, performance unit, qualified performance-based award, or other stock unit award) under the plan with the terms and conditions applicable to an award set forth in applicable grant documents.
Incentive stock option awards granted under the share-based plans cannot be granted with an exercise price less than 100% of the per-share market value of the Company's shares at the date of grant and have a maximum duration of ten years from the date of grant. Board policy currently requires that nonqualified options also must be priced at or above the fair market value of the common stock at the time of grant with a maximum duration of ten years.
Restricted stock units may be issued under the equity compensation plan and represent the right to receive shares in the future by way of an award agreement which includes vesting provisions. Award agreements can further provide for forfeitures triggered by certain prohibited activities, such as breach of confidentiality. All restricted stock units will be expensed over the vesting period as adjusted for estimated forfeitures. The vesting of some restricted stock units is subject to the Company's achievement of certain performance criteria, as well as the individual remaining employed by the Company for a period of years.
The Company also has outstanding performance-based stock appreciation rights and performance-based stock units. These are expensed over the vesting period of the award.
The Company receives income tax deductions as a result of the exercise of nonqualified stock options and the vesting of other stock-based awards. The tax benefit of share-based compensation expense in excess of the book compensation expense is reflected as a financing cash inflow and operating cash outflow included in changes in operating assets and liabilities. The Company has elected the short-cut method in accounting for the tax benefits of share-based payment awards.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Hedging -
The Company has entered into an interest rate swap as a cash flow hedge against LIBOR interest rate movements on the term loan. All changes in fair value of the derivative are deferred and recorded in other comprehensive income (loss) until the related forecasted transaction is recognized in the consolidated statement of operations. The fair value of the interest rate swap agreement recorded in accumulated other comprehensive income (loss) may be recognized in the statement of operations if certain terms of the floating-rate debt change, if the floating-rate debt is extinguished or if the interest rate swap agreement is terminated prior to maturity.
Derivatives -
Derivative financial instruments are valued in the market using regression analysis. Significant inputs to the derivative valuation for interest rate swaps are observable in active markets and are classified as Level 2 in the fair value hierarchy.
Restructuring -
The Company records costs associated with employee terminations and other exit activity in accordance with ASC 420, Exit or Disposal Cost Obligations, depending on whether the costs relate to exit or disposal activities under the accounting standards, or whether they are other post-employment termination benefits. Under applicable accounting standards for exit or disposal costs, the Company records employee termination benefits as an operating expense when the benefit arrangement is communicated to the employee and no significant future services are required. Under the accounting standards related to post employment termination benefits the Company records employee termination benefits when the termination benefits are probable and can be estimated. The Company recognizes the present value of facility lease termination obligations, net of estimated sublease income and other exit costs, when the Company has future payments with no future economic benefit or a commitment to pay the termination costs of a prior commitment. In future periods the Company will record accretion expense to increase the liability to an amount equal to the estimated future cash payments necessary to exit the leases. This requires judgment and management estimation in order to determine the expected time frame for securing a subtenant, the amount of sublease income to be received and the appropriate discount rate to calculate the present value of the future cash flows. Should actual lease exit costs differ from estimates, the Company may be required to adjust the restructuring charge which will impact net earnings (loss) in the period any adjustment is recorded.
Adoption of New Accounting Standards –
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, as part of its U.S. GAAP simplification initiative. This update requires entities to present deferred tax assets (DTAs) and deferred tax liabilities (DTLs) as noncurrent in a classified balance sheet, thus simplifying the current guidance which requires entities to separately present DTAs and DTLs as current or noncurrent in a classified balance sheet. We have early adopted this standard and have applied the requirements retrospectively to all periods presented. The adoption of this standard resulted in the reclassification of $25.6 million from current deferred income tax assets in the consolidated balance sheet as of March 31, 2015 to noncurrent deferred income tax assets ($0.4 million) and noncurrent deferred income tax liabilities ($25.2 million).
In September 2015, the FASB issued update ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This update eliminates the requirement for an acquirer to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment, including the impact on prior periods, be recognized in the reporting period in which the adjustment is identified. In addition, separate presentation on the face of the income statement or disclosure in the notes is required regarding the portion of the adjustment recorded in the current period earnings (loss) that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. There was no impact on the Company's financial condition and earnings (loss) as a result of early adopting this guidance. Because adoption of the guidance is prospective, the impact of ASU 2015-16 on the Company's financial condition and earnings (loss) will depend upon the nature of any measurement period adjustments identified in future periods.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
In April 2015, the FASB issued update ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The existing recognition and measurement guidance for debt issuance costs is not affected by the new guidance. We have early adopted this standard and have applied the requirements retrospectively to all periods presented. The adoption of this standard resulted in the reclassification of $2.7 million and $3.1 million from other assets, net in the consolidated balance sheets as of March 31, 2016 and 2015, respectively, to long-term debt (see note 9).
In April 2014, the FASB issued update ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This update changed the requirements for determining whether a component is included in discontinued operations and required expanded disclosures that provide readers of financial statements with more information about the assets, liabilities, revenues, and expenses of discontinued operations. The update was effective for Acxiom at the beginning of fiscal 2016, and did not have a material impact on the Company's consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted –
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting as part of its simplification initiative. The objective of the simplification initiative is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining the usefulness of the information provided to users of financial statements. The areas for simplification in ASU 2016-09 involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 (fiscal 2018 for the Company), including interim periods within those fiscal years; earlier adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial condition, results of operations and cash flows. | | | | | | | | | | | | | | | | | | | | |
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
(Dollars in thousands) |
| | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Cash flows from operating activities: | | | | | | |
Net loss | | $ | (118,702) | | | $ | (33,833) | | | $ | (90,268) | |
Earnings from discontinued operations | | (5,404) | | | — | | | — | |
Non-cash operating activities: | | | | | | |
Depreciation and amortization | | 20,787 | | | 24,248 | | | 27,741 | |
Loss on disposal or impairment of assets | | 4,137 | | | 183 | | | 388 | |
Gain on sale of strategic investments | | (194) | | | — | | | — | |
Lease-related restructuring charges | | 27,545 | | | — | | | — | |
Gain on distribution from retained profits interest | | — | | | (30,235) | | | — | |
Provision for doubtful accounts | | 1,776 | | | 4,217 | | | 2,915 | |
Deferred income taxes | | 115 | | | (1,540) | | | (1,418) | |
Non-cash stock compensation expense | | 125,800 | | | 87,257 | | | 111,707 | |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable, net | | (12,123) | | | (38,611) | | | (24,828) | |
Deferred commissions | | (6,436) | | | (7,975) | | | (6,605) | |
Other assets | | 7,705 | | | 26,863 | | | (18,772) | |
Accounts payable and other liabilities | | (15,369) | | | 8,850 | | | (116) | |
Income taxes, net | | 596 | | | 33,969 | | | (26,215) | |
Deferred revenue | | 4,208 | | | 4,684 | | | 4,911 | |
Net cash provided by operating activities | | 34,441 | | | 78,077 | | | (20,560) | |
| | | | | | |
Cash flows from investing activities: | | | | | | |
Capital expenditures | | (4,696) | | | (4,499) | | | (2,182) | |
| | | | | | |
Cash paid in acquisitions, net of cash received | | — | | | (19,107) | | | (76,012) | |
Distribution from retained profits interest | | — | | | 31,184 | | | — | |
Purchases of investments | | (28,197) | | | — | | | (7,500) | |
Proceeds from investments | | 3,000 | | | — | | | — | |
Purchases of strategic investments | | (500) | | | — | | | (2,200) | |
Proceeds from sale of strategic investment | | 1,394 | | | — | | | — | |
Net cash provided by (used in) investing activities | | (28,999) | | | 7,578 | | | (87,894) | |
| | | | | | |
Cash flows from financing activities: | | | | | | |
Proceeds related to the issuance of common stock under stock and employee benefit plans | | 6,259 | | | 6,266 | | | 8,737 | |
Shares repurchased for tax withholdings upon vesting of stock-based awards | | (2,272) | | | (14,626) | | | (9,920) | |
Acquisition of treasury stock | | (149,997) | | | (58,621) | | | (42,312) | |
Net cash used in financing activities | | (146,010) | | | (66,981) | | | (43,495) | |
Net cash provided by (used in) continuing operations | | (140,568) | | | 18,674 | | | (151,949) | |
| | | | | | |
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) as a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under previous guidance, ASC 840, Leases. ASU 2016-02 creates a new Topic, ASC 842, Leases. This new Topic retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. ASU 2016-02 is effective for annual periods beginning after December 15, 2018 (fiscal 2020 for the Company), including interim periods within those fiscal years; earlier adoption is permitted. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial condition, results of operations and cash flows.
In May 2014, the FASB issued update ASU 2014-09, Revenue from Contracts with Customers: Topic 606, to supersede nearly all existing revenue recognition guidance under U.S. GAAP, as well as some cost guidance and guidance on certain gains and losses. The FASB also issued updates ASU 2016-08, Revenue from Contracts with Customers – Principal versus Agent Considerations, and ASU 2016-10, Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing. The core principle of the new guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in | | | | | | | | | | | | | | | | | | | | |
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
(Dollars in thousands) |
| | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Cash flows from discontinued operations: | | | | | | |
From operating activities | | 5,404 | | | — | | | — | |
Net cash provided by discontinued operations | | 5,404 | | | — | | | — | |
Effect of exchange rate changes on cash | | (550) | | | (199) | | | 1,010 | |
| | | | | | |
Net change in cash and cash equivalents | | (135,714) | | | 18,475 | | | (150,939) | |
Cash and cash equivalents at beginning of period | | 600,162 | | | 581,687 | | | 732,626 | |
Cash and cash equivalents at end of period | | $ | 464,448 | | | $ | 600,162 | | | $ | 581,687 | |
| | | | | | |
Supplemental cash flow information: | | | | | | |
Cash paid (received) for income taxes, net - continuing operations | | $ | 5,801 | | | $ | (32,916) | | | $ | (2,911) | |
Cash (received) for income taxes, net - discontinued operations | | (8,332) | | | — | | | — | |
Cash paid for operating lease liabilities | | 8,243 | | | 10,108 | | | 10,883 | |
Operating lease assets obtained in exchange for operating lease liabilities | | 69 | | | 56,182 | | | 372 | |
Operating lease assets, and related lease liabilities, relinquished in lease terminations | | (6,781) | | | — | | | — | |
Purchases of property, plant and equipment remaining unpaid at period end | | 47 | | | 696 | | | — | |
F-44See accompanying notes to consolidated financial statements.
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The effective date for the update has been deferred until fiscal 2019 for the Company, with early application allowed for fiscal 2018. Adoption of the update may be applied using either of two methods: (i) retrospective application to each prior reporting period presented with the option to elect certain practical expedients; or (ii) retrospective application with the cumulative effect recognized at the date of initial application and providing certain additional disclosures. We are currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
The Company does not anticipate that the adoption of any other recent accounting pronouncements will have a material impact on the Company's consolidated financial position, results of operations or cash flows.
2.RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
The following table summarizes the restructuring activity included in gains, losses and other items, net in the consolidated statements of operations for the fiscal years ended March 31, 2016, 2015 and 2014 (dollars in thousands):
| | Associate-related reserves | | | Lease accruals | | | Total | |
March 31, 2013 | | $ | 3,689 | | | $ | 2,791 | | | $ | 6,480 | |
Restructuring charges and adjustments | | | 12,910 | | | | 56 | | | | 12,966 | |
Payments | | | (10,057 | ) | | | (1,334 | ) | | | (11,391 | ) |
March 31, 2014 | | $ | 6,542 | | | $ | 1,513 | | | $ | 8,055 | |
Restructuring charges and adjustments | | | 13,284 | | | | 6,500 | | | | 19,784 | |
Payments | | | (12,615 | ) | | | (2,785 | ) | | | (15,400 | ) |
March 31, 2015 | | $ | 7,211 | | | $ | 5,228 | | | $ | 12,439 | |
Restructuring charges and adjustments | | | 8,630 | | | | 3,002 | | | | 11,632 | |
Payments | | | (12,986 | ) | | | (4,706 | ) | | | (17,692 | ) |
March 31, 2016 | | $ | 2,855 | | | $ | 3,524 | | | $ | 6,379 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Restructuring Plans
In fiscal 2016, the Company recorded a total of $12.0 million in restructuring charges and adjustments included in gains, losses and other items, net in the consolidated statement of operations. The expense included severance and other associate-related charges of $8.6 million, lease termination charges and accruals of $3.0 million, and leasehold improvement write offs of $0.4 million.
The associate-related accruals of $8.6 million relate to the termination of associates in the United States, Europe, Brazil and Australia. Of the amount accrued for 2016, $2.4 million remained accrued as of March 31, 2016. These costs are expected to be paid out in fiscal 2017.
The lease termination charges and accruals of $3.0 million included a $1.4 million lease early-termination fee in France, a lease accrual of $0.2 million, and a $1.4 million increase to the fiscal 2015 lease restructuring plans. The fiscal 2016 lease early-termination fee and lease accrual were fully paid during fiscal 2016.
In fiscal 2015, the Company recorded a total of $21.8 million in restructuring charges and adjustments included in gains, losses and other items, net in the consolidated statement of operations. The expense included severance and other associate-related charges of $13.3 million, lease accruals of $6.5 million, and the write-off of leasehold improvements of $2.0 million.
The associate-related accruals of $13.3 million related to the termination of associates in the United States, Europe, Australia, and China and included an increase of $0.7 million to the fiscal 2014 restructuring plan. Of the amount accrued for 2015, $0.5 million remained accrued as of March 31, 2016. These costs are expected to be paid out in fiscal 2017.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The lease accruals of $6.5 million were determined under the accounting standards which govern exit costs. The Company has ceased using certain leased office facilities. The Company intends to attempt to sublease the facilities to the extent possible. The Company established a liability for the fair value of the remaining lease payments, partially offset by the estimated sublease payments to be received over the term of the leases. The fair value of these liabilities is based on a net present value model using a credit-adjusted risk-free rate. The liability will be satisfied over the remainder of the leased properties' terms, which continue through November 2025. Actual sublease payments may differ from the estimates originally made by the Company. Any future changes in the estimates or in the actual sublease income could require future adjustments to the liabilities, which would impact net earnings (loss) in the period the adjustment is recorded. Of the amount accrued for 2015, $3.5 million remained accrued as of March 31, 2016.
In fiscal 2014, the Company recorded a total of $13.0 million in restructuring charges and adjustments included in gains, losses and other items, net in the consolidated statement of operations. The expense includes severance and other associate-related charges of $13.0 million and relates to the termination of associates in the United States, Australia, China, and Europe. These costs were paid out by the end of fiscal 2015.
Gains, Losses and Other Items
Gains, losses and other items for each of the years presented are as follows (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | |
Restructuring plan charges and adjustments | | $ | 11,632 | | | $ | 19,784 | | | $ | 12,966 | |
Other restructuring charges | | | 381 | | | | 1,976 | | | | - | |
Legal contingencies | | | - | | | | - | | | | 4,202 | |
LiveRamp acquisition-related costs (see note 3) | | | - | | | | 820 | | | | - | |
Other | | | 119 | | | | 20 | | | | - | |
| | $ | 12,132 | | | $ | 22,600 | | | $ | 17,168 | |
3.ACQUISITIONS:
Addressable Television Net Assets from Allant ("Allant")
On December 1, 2015, the Company acquired certain addressable television net assets from The Allant Group, Inc. The acquisition provides the Company additional consumer insight capabilities that enable clients to more effectively reach their television channel customer base and audiences. The Company paid approximately $5.4 million in cash. The Company has omitted pro forma disclosures related to this acquisition as the pro forma effect of this acquisition is not material. The results of operation for the acquisition are included in the Company's consolidated results beginning December 1, 2015.
The following table presents the purchase price allocation related to assets acquired and liabilities assumed (dollars in thousands):
| | December 1, 2015 | |
Assets acquired: | | | |
Accounts receivable | | $ | 499 | |
Developed technology | | | 2,700 | |
Other intangible assets | | | 1,400 | |
Goodwill | | | 1,377 | |
| | | 5,976 | |
Accounts payable | | | (590 | ) |
Net cash paid | | $ | 5,386 | |
The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on preliminary calculations and valuations using management's estimates and assumptions and were based on the information that was available as of the date of acquisition. The Company expects to finalize the valuation as soon as practical.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015(Unaudited)
1. ORGANIZATION AND 2014SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business -
LiveRamp Holdings, Inc. ("LiveRamp", "we", "us", or the "Company") is a global technology company that helps companies build enduring brand and business value by collaborating responsibly with data. A groundbreaking leader in consumer privacy, data ethics and foundational identity, LiveRamp is setting a new standard for building a connected customer view with unmatched clarity and context while protecting brand and consumer trust. Our best-in-class enterprise platform enables data collaboration, where companies can share first-party consumer data with trusted business partners securely and in a privacy conscious manner. We offer flexibility to collaborate wherever data lives to support a wide range of data collaboration use cases—within organizations, between brands, and across our global network of premier partners. Global innovators, from iconic consumer brands and tech platforms to retailers, financial services, and healthcare leaders, turn to LiveRamp to deepen customer engagement and loyalty, activate new partnerships, and maximize the value of their first-party data while staying on the forefront of rapidly evolving compliance and privacy requirements.
On July 1, 2014,
LiveRamp is a Delaware corporation headquartered in San Francisco, California. Our common stock is listed on the New York Stock Exchange under the symbol “RAMP.” We serve a global client base from locations in the United States, Europe, and the Asia-Pacific (“APAC”) region. Our direct client list includes many of the world’s best-known and most innovative brands across most major industry verticals, including but not limited to financial, insurance and investment services, retail, automotive, telecommunications, high tech, consumer packaged goods, healthcare, travel, entertainment and non-profit. Through our expansive partner ecosystem we serve thousands of additional companies, unlocking access to unique customer moments and creating powerful network effects.
Basis of Presentation and Principles of Consolidation -
The accompanying consolidated financial statements include the accounts of the Company acquiredand its subsidiaries, after elimination of all significant intercompany accounts and transactions. We have prepared the accompanying consolidated financial statements in U.S. dollars in accordance with accounting principles generally accepted in the U.S. (“GAAP”) as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification and Updates (“ASC” and "ASU"), and we consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission ("SEC"). Our fiscal year ends on March 31. References to fiscal 2023, for example, are to the fiscal year ended March 31, 2023.
Use of Estimates -
In preparing consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the outstanding shares of LiveRamp, Inc. ("LiveRamp"), a leading service provider for onboarding customer data into digital marketing applications. The Company acquired LiveRamp to, among other things, provide clients with solutions for bringing offline customer data online with better matching, more connectivity,SEC, we must make estimates and faster onboarding. The Company has includedjudgments that affect the financial results of LiveRampamounts reported in the consolidated financial statements and accompanying notes. Estimates are used in determining, among other items, revenue recognition criteria, allowance for credit losses, operating lease assets and liabilities, including the incremental borrowing rate and terms and provision of each lease, the fair value of acquired assets and assumed liabilities, restructuring and impairment accruals, litigation and facilities lease loss accruals, stock-based compensation, and the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions. Actual results could differ from those estimates.
As of March 31, 2023, the impacts to the Company's business due to COVID-19, geopolitical developments and macroeconomic factors, such as rising interest rates, inflation, bank failures, changes in foreign currency exchange rates and supply chain disruptions, continue to evolve. As a result, many of the Company's estimates and assumptions, including the allowance for credit losses, consider macroeconomic factors in the market, which require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the Company's estimates may change materially in future periods.
Operating Segments -
The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by our Chief Operating Decision Maker ("CODM"). Our Chief Executive Officer is our CODM. Our CODM evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. Since we operate as one operating segment, all required financial segment information can be found in the consolidated financial statements.
Earnings (Loss) per Share -
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period.
A reconciliation of the numerator and denominator of basic and diluted loss per share is shown below (in thousands, except per share amounts): | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | Year ended March 31, |
| | | | | | 2023 | | 2022 | | 2021 |
Net loss from continuing operations | | | | | | $ | (124,106) | | | $ | (33,833) | | | $ | (90,268) | |
Earnings from discontinued operations, net of tax | | | | | | 5,404 | | | — | | | — | |
Net loss | | | | | | $ | (118,702) | | | $ | (33,833) | | | $ | (90,268) | |
| | | | | | | | | | |
Basic weighted-average shares outstanding | | | | | | 66,352 | | | 68,211 | | | 66,304 | |
Dilutive effect of common stock options and restricted stock as computed under the treasury stock method (1) | | | | | | — | | | — | | | — | |
Diluted weighted-average shares outstanding | | | | | | 66,352 | | | 68,211 | | | 66,304 | |
| | | | | | | | | | |
Net earnings (loss) per common share, basic and diluted | | | | | | | | | | |
Continuing operations | | | | | | $ | (1.87) | | | $ | (0.50) | | | $ | (1.36) | |
Discontinued operations | | | | | | 0.08 | | | — | | | — | |
Net loss | | | | | | $ | (1.79) | | | $ | (0.50) | | | $ | (1.36) | |
(1) The number of common stock options and restricted stock units as computed under the treasury stock method that would have otherwise been dilutive but are excluded from the table above because their effect would have been anti-dilutive due to the net loss position of the Company was 0.7 million, 1.3 million, and 2.7 million for the years ended March 31, 2023, 2022, and 2021, respectively.
Restricted stock units that were outstanding during the years presented but were not included in the computation of diluted loss per share because their effect would have been anti-dilutive (other than due to the net loss position of the Company) are shown below (shares in thousands): | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Number of shares underlying restricted stock units | | 2,376 | | | 686 | | | 90 | |
Significant Accounting Policies
Cash and Cash Equivalents -
The Company considers all highly-liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash held in bank deposit accounts and short-term, highly-liquid money-market fund investments and U.S. Treasury securities with remaining maturities of three months or less at the date of purchase.
Investments -
Investments consist of U.S. Treasury securities and certificates of deposit. Securities having remaining maturities of more than three months at the date of purchase and less than one year from the date of acquisition. LiveRamp is includedthe balance sheet are classified as short-term, and those with maturities of more than one year from the date of the balance sheet are classified as long-term in the Connectivity segment.consolidated balance sheets. These investments are carried at fair market value, with unrealized gains and losses considered to be temporary in nature reported as accumulated other comprehensive income, a separate component of stockholders' equity. The acquisition dateCompany reviews all investments for reductions in fair value that are other-than-temporary. When such reductions occur, the cost of the investment is adjusted to fair value through recording a loss on investments in the consolidated statements of operations. Gains and losses on investments are calculated on the basis of specific identification. We did not recognize any gains or losses in fiscal 2023, 2022 or 2021.
Strategic Investments -
Strategic investments consist of non-controlling equity investments in privately held companies. The Company elected the measurement alternative for these investments without readily determinable fair values and for which the Company does not have the ability to exercise significant influence. These investments are accounted for under the cost method of accounting. Under the cost method of accounting, the non-marketable equity securities are carried at cost less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, which is recorded within the statement of operations. On a quarterly basis, the Company performs a qualitative assessment to evaluate whether the investment is impaired. If there are sufficient indicators that the fair value of the investment is less than the carrying value, the carrying value of the investment is reduced and an impairment is recorded in the consolidated statements of operations as other expense, net of tax. During the twelve months ended March 31, 2023, the Company recorded a $4.0 million impairment of a strategic investment that is recorded in other expense in the consolidated statement of operations. There were no impairment charges for the twelve months ended March 31, 2022 or 2021, respectively.
Revenue Recognition -
LiveRamp recognizes revenue from the following sources: (i) Subscription revenue, which consists primarily of subscription fees from clients accessing our LiveRamp platform; and (ii) Marketplace and Other revenue, which primarily consists of revenue-sharing fees generated from access to data through our LiveRamp Data Marketplace, professional services including product implementation, data science analytics and audience measurement, and transactional usage-based revenue from arrangements with certain publishers and addressable TV providers.
We determine revenue recognition through the following steps:
•Identification of the contract, or contracts, with a customer;
•Identification of the performance obligations in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligations in the contract; and
•Recognition of revenue when, or as, the performance obligations are satisfied.
Identification of the contract
We consider the terms and conditions of the contract and our customary business practices when identifying our contracts under ASC 606. We determine we have a contract with a customer when the contract or contract modification is approved and the parties are committed to performing their respective obligations, we can identify each party's rights regarding the services to be transferred, we can identify the payment terms for the services, we have determined the contract has commercial substance, and we have determined that collection of at least some of the contract consideration is probable. At contract inception we evaluate whether two or more contracts should be combined and accounted for as a single contract and whether the single or combined contract includes one or multiple performance obligations. We apply judgment in determining the customer's ability to pay, which is based on a variety of factors, including the customer's historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.
Identification of the performance obligations
As part of accounting for arrangements with multiple performance obligations, we must assess whether each performance obligation is distinct. A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. We have determined that our subscriptions to the platform are a distinct performance obligation and access to data for revenue-sharing and usage-based arrangements is a distinct performance obligation because, once a customer has access to the platform, the service is fully functional and does not require any additional development, modification, or customization.
Determination of the transaction price
The transaction price is the amount of consideration we expect to be entitled to in exchange for transferring services to a customer, excluding sales taxes that are collected on behalf of government agencies. Variable consideration is assessed and included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of our contracts contain a significant financing component.
Allocation of the transaction price to the performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each distinct performance obligation based on the standalone selling price ("SSP") of each service. We generally determine the SSP based on contractual selling prices when the obligation is sold on a standalone basis, as well as market conditions, competition, and pricing practices. As pricing and marketing strategies evolve, we may modify our pricing practices in the future, which could result in changes to SSP.
Recognition of revenue when, or as, the performance obligations are satisfied
Revenues are recognized when or as control of the promised services is transferred to customers. Subscription revenue is generally recognized ratably over the subscription period beginning on the date the services are made available to customers. Marketplace and Other revenue is typically transactional in nature, tied to a revenue share or volumes purchased. We report revenue from Data Marketplace and other similar transactions on a net basis because our performance obligation is to facilitate a transaction between data providers and data buyers, for which we earn a portion of the gross fee. Consequently, the portion of the gross amount billed to data buyers that is remitted to data providers is not reflected as revenues. We generate revenue from Services primarily from project fees paid by subscribers to our platform. Service projects are sold on an ad hoc basis as well as bundled with platform subscriptions. Services revenue is less than 5% of total Company revenue.
Accounts Receivable
Accounts receivable include amounts billed to customers as well as unbilled amounts recognized in accordance with the Company’s revenue recognition policies. Unbilled amounts included in trade accounts receivable, net, which generally arise from the performance of services to customers in advance of billings, were $16.7 million at March 31, 2023, and $12.5 million at March 31, 2022.
Trade accounts receivable are presented net of allowances for credit losses, returns and credits based on the probability of future collections. The probability of future collections is based on specific considerations of historical loss patterns and an assessment of the continuation of such patterns based on past collection trends and known or anticipated future economic events that may impair collectability. Accounts receivable that are determined to be uncollectible are charged against the allowance for doubtful accounts. Indicators that there is no reasonable expectation of recovery include past due status greater than 360 days or bankruptcy of the debtor.
A summary of the activity of the allowance for credit losses, returns and credits was (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended: | | Balance at beginning of period | | Additions charged to costs and expenses | | Other changes | | Bad debts written off, net of amounts recovered | | Balance at end of period |
March 31, 2021 | | $ | 7,575 | | | 2,915 | | | 108 | | | (2,981) | | | $ | 7,617 | |
March 31, 2022 | | $ | 7,617 | | | 4,217 | | | (3) | | | (1,870) | | | $ | 9,961 | |
March 31, 2023 | | $ | 9,961 | | | 1,776 | | | 10 | | | (2,403) | | | $ | 9,344 | |
Deferred Revenue
Deferred revenue consists of amounts billed in excess of revenue recognized. Deferred revenues are subsequently recorded as revenue when earned in accordance with the Company’s revenue recognition policies.
Deferred Commissions, net -
The Company capitalizes incremental costs to acquire contracts and amortizes them on a straight-line basis over the expected period of benefit, which we have determined to be four years. Net capitalized costs of $6.8 million and $8.0 million were recognized as a reduction of operating expense for the years ended March 31, 2023 and 2022, respectively. We did not recognize any impairment charges in fiscal 2023, 2022, or 2021.
Property and Equipment -
Property and equipment are stated at cost. Depreciation and amortization are calculated on the straight-line method over the estimated useful lives of the assets as follows: leasehold improvements, 2 - 5 years; data processing equipment, 2 - 5 years, and office furniture and other equipment, 3 - 7 years.
Operating Leases -
Right-of-use ("ROU") assets represent the Company's right to control the use of an identified asset for a period of time, or term, in exchange for consideration, and operating lease liabilities represent its obligation to make lease payments arising from the aforementioned right.
The Company determines if an arrangement is, or contains, a lease at inception, and whether lease and non-lease components are combined or not. Operating leases with a duration of one year or less are excluded from ROU assets and lease liabilities and related expense is recorded as incurred. ROU assets and lease liabilities are initially recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease, and may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the rate implicit for each of the Company's leases is not readily determinable, the Company uses its incremental borrowing rate at commencement date in determining the present value of lease payments. The Company uses judgment in determining its incremental borrowing rate, which includes selecting a yield curve based on a hypothetical credit rating. ROU assets also include any initial direct costs and any lease payments made prior to the lease commencement date and are reduced by any lease incentives received. ROU assets are included in other assets in the consolidated balance sheets. Short-term lease liabilities are included in other accrued expenses and long-term lease liabilities are included in other liabilities in the consolidated balance sheets. ROU assets are amortized on a straight-line basis as operating lease cost in the consolidated statements of operations.
Business Combinations –
We apply the provisions of ASC 805, Business Combinations, in accounting for acquisitions. ASC 805 requires us to determine if assets or a business was acquired. If a business was acquired, it requires us to recognize separately from goodwill the fair value of the assets acquired and the liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of the fair value of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments resulting from new information about facts and circumstances that existed at the acquisition date and falls within the measurement period to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
Goodwill -
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business acquisitions accounted for LiveRampusing the acquisition method of accounting and is not amortized. Goodwill is measured and tested for impairment on an annual basis in the first quarter of the Company's fiscal year in accordance with ASC 350, Intangibles-Goodwill and Other, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Such events and changes may include significant changes in performance related to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in our business strategy.
Our test for goodwill impairment starts with a qualitative assessment to determine whether it is necessary to perform the quantitative goodwill impairment test. If qualitative factors indicate that the fair value of the reporting unit is more likely than not less than its carrying amount, then a quantitative goodwill impairment test is performed. For the purposes of impairment testing, we have determined that we have three reporting units. We completed our annual impairment test during the first quarter of fiscal 2023 and assessed whether there were any triggering events quarterly. We did not recognize any goodwill impairment charges in fiscal 2023, 2022 or 2021.
Intangible Assets -
We amortize intangible assets with finite lives over their estimated useful lives and review them for impairment whenever an impairment indicator exists. We continually monitor events and changes in circumstances that could indicate carrying amounts of our long-lived assets, including our intangible assets, may not be recoverable. When such events or changes in circumstances occur, we assess recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on any excess of the carrying amount over the fair value of the assets. We did not recognize any intangible asset impairment charges in fiscal 2023, 2022 or 2021.
During fiscal 2023, our intangible assets were amortized over their estimated useful lives ranging from two years to six years. Amortization is based on the pattern in which the economic benefits of the intangible asset will be consumed or on a straight-line basis when the consumption pattern is not apparent. The weighted average useful lives of our intangible assets were as follows: | | | | | | | | |
| | Weighted Average Useful Life (years) |
Developed technology | | 3.9 |
Customer relationships | | 5.3 |
Publisher and Data Supply relationships | | 4.0 |
Impairment of Long-lived Assets -
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers factors such as operating losses, declining outlooks, and business conditions when evaluating the necessity for an impairment analysis. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Fair Value of Financial Instruments -
We apply the provisions of ASC 820, Fair Value Measurement, to our assets and liabilities that we are required to measure at fair value pursuant to other accounting standards. The additional disclosure regarding our fair value measurements is included in Note 18 - Fair Value of Financial Instruments.
Concentration of Credit Risk and Significant Customers -
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable.
The Company's cash and cash equivalents are held in federally insured financial institutions. Although the Company's deposits may exceed federally insured limits, management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
The Company has no significant off-balance sheet risk such as foreign exchange contracts, options contracts, or other hedging arrangements.
The Company’s trade accounts receivables are from a large number of customers. Accordingly, the Company’s credit risk is affected by general economic conditions.
At March 31, 2023, there were no customers that represented more than 10% of the trade accounts receivable balance. Our ten largest clients represented approximately 29% of our revenues in fiscal year 2023. One client, The Interpublic Group of Companies, accounted for 12% of our revenues in fiscal year 2023.
Income Taxes -
The Company and its domestic subsidiaries file a consolidated federal income tax return. The Company’s foreign subsidiaries file separate income tax returns in the countries in which their operations are based.
The Company makes estimates and judgments in determining the provision for income taxes for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain deferred tax assets and liabilities that arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Significant changes in these estimates may result in an increase or decrease to the tax provision in a subsequent period. The Company assesses the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company increases the provision for taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process pursuant to ASC 740, Income Taxes. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If the Company determines that a tax position will more likely than not be sustained on audit, the second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company must determine the probability of various outcomes.
The Company re-evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.
Foreign Currency -
The reporting currency of the Company is the U.S. dollar. The functional currency of our foreign operations generally is the applicable local currency for each foreign subsidiary. The balance sheets of the Company’s foreign subsidiaries are translated at period-end rates of exchange, and the statements of operations are translated at the average exchange rate for the period. The effects of foreign currency translation adjustments are included in accumulated other comprehensive income (loss) in the consolidated statements of equity and comprehensive income (loss). We reflect net foreign exchange transaction gains and losses, resulting from the conversion of the transaction currency to functional currency, as a component of foreign currency exchange gain (loss) in total other income (expense) in the consolidated statements of operations.
Advertising Expense -
Advertising costs are expensed as incurred. Advertising expense was approximately $272.7$12.9 million, $10.5 million, and $7.0 million for the fiscal years ended March 31, 2023, 2022 and 2021, respectively. Advertising expense is included in operating expenses in the consolidated statements of operations.
Legal Contingencies -
We are currently involved in various claims and legal proceedings. Quarterly, we review the status of each significant matter and assess our potential financial exposure. We accrue a liability for an estimated loss if the potential loss from any claim or legal proceeding is considered probable, and the amount can be reasonably estimated. Note 13 - Commitments and Contingencies provides additional information regarding certain of our legal contingencies.
Stock-Based Compensation -
The Company records stock-based compensation expense according to the provisions of ASC Topic 718, Compensation – Stock Compensation. ASC Topic 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations over the service period of the award based on their fair values. Under the provisions of ASC Topic 718, the Company determines the appropriate fair value model to be used for valuing stock-based payments and the amortization method for compensation cost.
The Company has stock option plans and equity compensation plans (collectively referred to as the “stock-based plans”) administered by the compensation committee of the board of directors (“compensation committee”) under which consistedoptions and restricted stock units were outstanding as of March 31, 2023.
The Company’s equity compensation plan provides that all employees (employees, officers, directors, affiliates, independent contractors or consultants) are eligible to receive awards (grant of any option, stock appreciation right, restricted stock award, restricted stock unit award, performance award, performance share, performance unit, qualified performance-based award, or other stock unit award) under the plan with the terms and conditions applicable to an award set forth in applicable grant documents.
Incentive stock option awards granted under the stock-based plans cannot be granted with an exercise price less than 100% of the per-share market value of the Company’s shares at the date of grant and have a maximum duration of ten years from the date of grant. Board policy currently requires that non-qualified options also must be priced at or above 100% of the fair market value of the common stock at the time of grant with a maximum duration of ten years.
Restricted stock units may be issued under the equity compensation plan and represent the right to receive shares in the future by way of an award agreement that includes vesting provisions. Award agreements can further provide for forfeitures triggered by certain prohibited activities, such as breach of confidentiality. All restricted stock units are expensed over the vesting period and adjusted for forfeitures as incurred. The vesting of some restricted stock units is subject to the Company’s achievement of certain performance criteria, as well as the individual remaining employed by the Company for a period of years.
The Company receives income tax deductions because of the exercise of non-qualified stock options and the vesting of other stock-based awards. To the extent the income tax deductions differ from the corresponding stock-based compensation expense, such excess tax benefits and deficiencies are included as a component of income tax expense and reflected as an operating cash flow included in changes in operating assets and liabilities.
Restructuring –
The Company records costs associated with employee terminations and other exit activity in accordance with ASC 420, Exit or Disposal Cost Obligations, depending on whether the costs relate to exit or disposal activities under the accounting standards, or whether they are other post-employment termination benefits. Under applicable accounting standards for exit or disposal costs, the Company records employee termination benefits as an operating expense when the benefit arrangement is communicated to the employee and no significant future services are required. Under the accounting standards related to post employment termination benefits, the Company records employee termination benefits when the termination benefits are probable and can be estimated. The Company recognizes the present value of facility lease termination obligations, net of estimated sublease income and other exit costs, when the Company has future payments with no future economic benefit or a commitment to pay the termination costs of a prior commitment. In future periods, the Company will record accretion expense to increase the liability to an amount equal to the estimated future cash payments necessary to exit the leases. This requires judgment and management estimation to determine the expected time frame for securing a subtenant, the amount of sublease income to be received and the appropriate discount rate to calculate the present value of the future cash flows. Should actual lease exit costs differ from estimates, the Company may be required to adjust the restructuring charge within gains, losses and other items, net in the consolidated statement of operations in the period any adjustment is recorded.
| | | | | | | | | | | |
Accounting Pronouncements Adopted During the Current Year - |
| | | |
Standard | Description | Date of Adoption | Effect on Financial Statements or Other Significant Matters |
Accounting Standard Update (“ASU”) 2021-08
Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
| ASU 2021-08 requires companies to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with the revenue recognition guidance as if the acquirer had entered into the original contract at the same time, and on the same terms, as the acquiree. Generally, this will result in the acquirer recognizing contract assets and liabilities at the same amounts recorded by the acquiree as of the acquisition date. Under the previous standard, an acquirer generally recognizes such items at fair value on the acquisition date. This update is effective for fiscal years beginning after December 15, 2022 with early adoption permitted. | April 1, 2022 | The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures. |
| | | | | | | | | | | |
Recent accounting pronouncements not yet adopted - |
| | | |
Standard | Description | Date of Adoption | Effect on Financial Statements or Other Significant Matters |
There are no material accounting pronouncements applicable to the Company not yet adopted | | | |
2. REVENUE FROM CONTRACTS WITH CUSTOMERS:
Disaggregation of Revenue
In the following table, revenue is disaggregated by primary geographical market and major service offerings (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Year ended March 31, |
Primary Geographical Markets | | 2023 | | 2022 | | 2021 |
United States | | $ | 556,219 | | | $ | 495,765 | | | $ | 415,976 | |
Europe | | 32,210 | | | 26,373 | | | 22,515 | |
Asia-Pacific ("APAC") | | 7,470 | | | 6,519 | | | 4,535 | |
Other | | 684 | | | — | | | — | |
| | $ | 596,583 | | | $ | 528,657 | | | $ | 443,026 | |
| | | | | | |
Major Offerings/Services | | | | | | |
Subscription | | $ | 482,807 | | | $ | 428,617 | | | $ | 356,597 | |
Marketplace and Other | | 113,776 | | | 100,040 | | | 86,429 | |
| | $ | 596,583 | | | $ | 528,657 | | | $ | 443,026 | |
Transaction Price Allocated to the Remaining Performance Obligations
We have performance obligations associated with fixed commitments in customer contracts for future services that have not yet been recognized in our consolidated financial statements. The amount of fixed revenue not yet recognized was $470.9 million as of March 31, 2023, of which $337.6 million will be recognized over the next twelve months. The Company expects to recognize revenue on substantially all of these remaining performance obligations by March 31, 2027.
3. LEASES:
Right-of-use assets and lease liabilities balances consist of the following (dollars in thousands): | | | | | | | | | | | | | | |
| | | | |
| | March 31, 2023 | | March 31, 2022 |
Right-of-use assets included in other assets, net | | $ | 24,604 | | | $ | 59,459 | |
Short-term lease liabilities included in other accrued expenses | | $ | 9,929 | | | $ | 8,984 | |
Long-term lease liabilities included in other liabilities | | $ | 37,243 | | | $ | 52,241 | |
| | | | |
Supplemental balance sheet information: | | | | |
Weighted average remaining lease term | | 5.6 years | | 6.4 years |
Weighted average discount rate | | 3.5 | % | | 3.6 | % |
| | July 1, 2014 | |
Cash, net of $12.0 million cash acquired | | $ | 234,672 | |
Restricted cash held in escrow | | | 31,000 | |
Fair value of stock options issued included in purchase price | | | 6,978 | |
Total fair value of consideration transferred | | $ | 272,650 | |
| | | | |
The Company leases its office facilities under non-cancellable operating leases that expire at various dates through fiscal 2030. Certain leases contain provisions for property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services. These costs are calculated based on a variety of factors including property values, tax and utility rates, property service fees, and other factors. Operating lease costs were $11.6 million, $11.6 million, and $11.6 million for the twelve months ended March 31, 2023, 2022, and 2021, respectively.
During the twelve months ended March 31, 2023, the Company recorded $24.6 million of right-of-use asset impairment charges and $2.9 million of non-lease component restructuring charges that are included in gains, losses and other items, net in the consolidated statements of operations related to the exit from certain leased office facilities. Please refer to Note 4, Restructuring, Impairment and Other Charges for further details.
Future minimum payments under all operating leases (including operating leases with a duration of one year or less) as of March 31, 2023 are as follows (dollars in thousands):
| | | | | | | | |
| | Amount |
Fiscal 2024 | | $ | 10,090 | |
Fiscal 2025 | | 9,116 | |
Fiscal 2026 | | 8,283 | |
Fiscal 2027 | | 8,017 | |
Fiscal 2028 | | 8,238 | |
Thereafter | | 8,346 | |
Total undiscounted lease commitments | | 52,090 | |
Less: Interest and short-term leases | | 4,918 | |
Total discounted operating lease liabilities | | $ | 47,172 | |
Future minimum payments as of March 31, 2023 related to restructuring plans as a result of the Company's exit from certain leased office facilities (see Note 4) are as follows (dollars in thousands): Fiscal 2024: $2,698; Fiscal 2025: $2,698; and Fiscal 2026: $1,799.
4. RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
Restructuring activities result in various costs, including asset write-offs, right of use ("ROU") asset group impairments, exit charges including severance, contract termination fees, and decommissioning and other costs.
A reconciliation of the beginning and ending restructuring liabilities is shown below for the twelve months ended March 31, 2023, 2022 and 2021. The restructuring charges and adjustments are included in gains, losses and other items, net in the consolidated statements of operations. The reserve balances are included in other accrued expenses and other liabilities in the consolidated balance sheets (dollars in thousands).
| | | | | | | | | | | | | | | | | | | | |
| | Employee-related reserves | | Lease accruals | | Total |
Balances at March 31, 2020 | | 450 | | | 6,243 | | | 6,693 | |
Restructuring charges and adjustments | | 1,663 | | | 62 | | | 1,725 | |
Payments | | (1,288) | | | (2,387) | | | (3,675) | |
Balances at March 31, 2021 | | $ | 825 | | | $ | 3,918 | | | $ | 4,743 | |
Restructuring charges and adjustments | | — | | | (19) | | | (19) | |
Payments | | (778) | | | (872) | | | (1,650) | |
Balances at March 31, 2022 | | $ | 47 | | | $ | 3,027 | | | $ | 3,074 | |
Restructuring charges and adjustments | | 7,792 | | | 2,946 | | | 10,738 | |
Payments | | (7,080) | | | (1,100) | | | (8,180) | |
Balances at March 31, 2023 | | $ | 759 | | | $ | 4,873 | | | $ | 5,632 | |
Employee-related Restructuring Plans
During the twelve months ended March 31, 2023, the Company recorded a total of $7.8 million in employee-related restructuring charges and adjustments. The expense included severance and other employee-related charges primarily in the United States. Of the $7.8 million employee-related charges, $0.8 million remained accrued as of March 31, 2023 and are expected to be paid out during fiscal 2024.
In fiscal 2021, the Company recorded a total of $1.7 million in employee-related restructuring charges and adjustments. The expense included severance and other employee-related charges in the United States and Europe. Of the associate-related charges of $1.7 million, final amounts were paid out during fiscal 2023.
Lease-related Impairments and Restructuring Plans
In fiscal 2023, the Company initiated a restructuring plan to lower its operating expenses by reducing its global real estate footprint. As part of this plan, we exited a total of eight leased office spaces. Of that, five were in the United States: one located in Boston, one located in Philadelphia, one located in Phoenix, and two floors of leased office space in San Francisco. The three remaining spaces were in Europe: one located in the Netherlands, one floor of leased office space in London, England, and one floor of leased office space in Paris, France.
Based on a comparison of undiscounted cash flows to the ROU asset group of each exited lease, the Company determined that each of the ROU asset groups were impaired, driven largely by the difference between the existing lease terms and rates on the Company’s leases and the expected sublease terms and rates available in the market. This resulted in an impairment charge of $24.6 million which reflects the excess of the ROU asset group book value over its fair value, which was determined based on estimates of future discounted cash flows and is classified as Level 3 in the fair value hierarchy. The lease impairment charges included impairments of the stock options issued byoperating lease ROU assets of $20.5 million, and the associated furniture, equipment, and leasehold improvements of $4.1 million. Additionally, the Company was determined using a binomial lattice approach (see note 12). The total fair value of the stock options issued was $30.5recorded $2.9 million of which $7.0 million was allocatedin lease-related restructuring charges and adjustments that covered other obligations related to the purchase considerationleased office space in San Francisco and $23.5Phoenix. Of the $2.9 million was allocated to future serviceslease-related charges, $2.7 million remained accrued as of March 31, 2023 and will be expensedsatisfied over the remaining service periods on a straight-line basis, netremainder of any forfeitures.the San Francisco and Phoenix properties' lease terms, which continues through April 2029.
On the acquisition date,In fiscal 2017, the Company delivered $31.0made the strategic decision to exit and sub-lease a certain leased office facility under a staggered-exit plan. The full exit was completed in fiscal 2019. We intend to continue subleasing the facility to the extent possible. The liability will be satisfied over the remainder of the leased property's term, which continues through November 2025. Any future changes in the estimates or in the actual sublease income may require future adjustments to the liabilities, which would impact net earnings (loss) in the period the adjustment is recorded. Through March 31, 2023, the Company has recorded a total of $7.3 million of cashrestructuring charges and adjustments related to an escrow agent according tothis lease. Of the terms of the purchase agreement. The cash was restricted as to withdrawal or use by the Company. The restricted cash was delivered to the LiveRamp sellers one year from the acquisition date, during fiscal 2016. The principal escrow amount was owned by the Company until funds were delivered to the LiveRamp sellers. All interest and earnings on the principal escrow amountaccrued for this facility lease, $2.1 million remained property of the Company. Ataccrued at March 31, 2015, the restricted cash was reported as restricted cash held in escrow, with an offsetting liability reported as acquisition escrow payable, on the consolidated balance sheet.2023.
F-47Gains, Losses and Other Items, net
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The following table summarizes the activity included in gains, losses and other items, net in the consolidated statements of operations for each of the periods presented (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Year ended March 31, |
| | | | | | 2023 | | 2022 | | 2021 |
Employee-related restructuring plan charges and adjustments | | | | | | $ | 7,792 | | | $ | (19) | | | $ | 1,725 | |
Lease-related restructuring plan charges and adjustments | | | | | | 2,946 | | | — | | | — | |
Early contract terminations | | | | | | — | | | 1,042 | | | — | |
ROU asset group impairments | | | | | | 24,599 | | | — | | | — | |
Other | | | | | | (21) | | | 456 | | | 990 | |
| | | | | | $ | 35,316 | | | $ | 1,479 | | | $ | 2,715 | |
5. ACQUISITIONS:
Rakam
On December 13, 2021, the Company completed the acquisition of certain technology assets owned by Rakam, Inc. ("Rakam") for approximately $2.2 million in cash (including a holdback amount of $0.2 million included in other accrued expenses in the consolidated balance sheet - see Note 11). The technology asset is a cloud-agnostic customer data analytics platform that is deployed direct in the client's data warehouse. The purchased technology has been embedded into the Company's platform, enabling us to provide a single, unified segmentation solution and enable our clients to generate real-time insights and create custom audiences wherever their data resides.
The Company concluded the acquired assets did not meet the definition of a business under ASU 2017-01, "Clarifying the Definition of a Business," and therefore has accounted for the acquisition as an asset acquisition. The purchased asset was recorded as a $2.2 million developed technology intangible asset included in other assets, net in the consolidated balance sheet and is being amortized over a period of three years based on its estimated useful life.
In connection with acquisition, the Company extended employment agreements and granted $2.6 million of restricted stock units to two key Rakam employees that will be recorded as non-cash stock compensation (see Note 14). The restricted stock units vest over four years and were not considered part of the asset purchase price as they require future service and continued employment by those individuals to vest.
Diablo
On April 21, 2021, the Company completed the acquisition of Diablo.ai, Inc. ("Diablo"), a first-party data resolution platform and graph builder, for approximately $9.7 million in cash (including a holdback amount of $1.2 million included in other accrued expenses in the consolidated balance sheet - see Note 11). The acquisition also included $1.9 million of assumed restricted stock awards that are recorded as non-cash stock compensation over a period of three years (see Note 14). Diablo's technology has been embedded into our unified platform and plays an integral role in our global identity capability. The Company omitted pro forma disclosures related to this acquisition as the pro forma effect of this acquisition was not material. The results of operations for this acquisition are included in the Company's consolidated results beginning April 21, 2021.
The following table summarizes the fair valuesvalue of assets acquired and liabilities assumed as of the date of the acquisition (dollars in thousands): | | | | | | | | |
| | April 21, 2021 |
Assets acquired: | | |
Cash | | $ | 131 | |
Goodwill | | 6,807 | |
Intangible assets | | 3,500 | |
Total assets acquired | | 10,438 | |
Deferred income taxes | | (505) | |
Accounts payable and accrued expenses | | (65) | |
Net assets acquired | | 9,868 | |
Less: | | |
Cash acquired | | (131) | |
Net purchase price allocated | | 9,737 | |
Less: | | |
Cash held back | | (1,200) | |
Net cash paid in acquisition | | 8,537 | |
| | July 1, 2014 | |
Assets acquired: | | | |
Cash | | $ | 12,016 | |
Trade accounts receivable | | | 5,206 | |
Deferred income tax assets | | | 10,444 | |
Goodwill | | | 213,093 | |
Developed technology (Software) | | | 40,000 | |
Other intangible assets (Other assets, net) | | | 26,500 | |
Other current and noncurrent assets | | | 1,306 | |
| | | 308,565 | |
Deferred income tax liabilities | | | (18,945 | ) |
Accounts payable, accrued expenses and deferred revenue | | | (4,954 | ) |
Net assets acquired | | | 284,666 | |
Less: | | | | |
Cash acquired | | | 12,016 | |
Net purchase price allocated | | $ | 272,650 | |
Less: | | | | |
Fair value of stock options issued included in purchase price | | | 6,978 | |
Net cash paid | | $ | 265,672 | |
| | | | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill and is primarily attributed to the development of future technology and products relatedproducts. The goodwill balance is not deductible for U.S. income tax purposes. The amount allocated to intangible assets in the table is developed technology with a useful life of three years.
DataFleets
On February 17, 2021, the Company acquired DataFleets, Ltd. ("DataFleets"), a cloud data platform that enables data silos to be unified without moving data or compromising privacy. This acquisition expands LiveRamp's data protection capabilities to unlock greater data access and control for its customers. In addition, the deal opens up new use cases as well as new markets for distributed data collaboration. The Company has included the financial results of DataFleets in the consolidated financial statements as of February 17, 2021. The acquisition date fair value of the consideration for DataFleets was approximately $67.2 million, which consisted of the following (dollars in thousands):
| | | | | | | | |
Cash, net of $2.1 million cash acquired | | 58,264 | |
Restricted cash held in escrow | | 8,900 | |
Total fair value of consideration transferred | | $ | 67,164 | |
On the acquisition date, the Company delivered $8.9 million of cash to an escrow agent according to the onboardingterms of customer data into digital marketing applications, developmentthe purchase agreement. The principal escrow was owned by the Company until the funds were delivered to the DataFleets sellers in the fourth quarter of fiscal 2022. All interest and earnings on the principal escrow amount remained the property of the Company.
The total fair value of replacement stock options issued was $2.9 million for future customer relationships,services and LiveRamp's assembled workforce.is being expensed over the future requisite service periods.
In connection with the DataFleets acquisition, the Company agreed to pay $18.1 million to certain key employees (see Note 14). The consideration holdback is payable in three equal, annual increments, based on the anniversary dates of the acquisition, and is payable in shares of Company common stock. The number of shares to be issued annually will vary based on the market price of the shares on the date of issuance. The consideration holdback is not part of the purchase price, as vesting is dependent on continued employment of the key employees. It will be recorded as non-cash stock-based compensation expense over the three-year earning period.
The following table summarizes the fair values assigned tovalue of assets acquired and liabilities assumed as of the date of acquisition (dollars in thousands):
| | | | | | | | |
| | February 17, 2021 |
Assets acquired: | | |
Cash | | $ | 2,099 | |
Goodwill | | 56,436 | |
Intangible assets | | 11,400 | |
Other current and noncurrent assets | | 1,119 | |
Total assets acquired | | 71,054 | |
Deferred income taxes | | (1,716) | |
Accounts payable and accrued expenses | | (75) | |
Net assets acquired | | 69,263 | |
Less: | | |
Cash acquired | | (2,099) | |
Net purchase price allocated | | 67,164 | |
Less: | | |
Restricted cash held in escrow | | (8,900) | |
Net cash paid in acquisition | | $ | 58,264 | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill and liabilities assumed were based on preliminary calculations and valuations and on management's estimates and assumptions and were based onis primarily attributed to expectations to the information that was available asdevelopment of the date of the acquisition. Goodwillfuture technology. The goodwill balance is not expected to be deductible for U.S. income tax purposes.
The amounts allocated to other intangible assets in the table above included developed technology and customer relationships and a relationships/trade name. Intangible assets will beare being amortized on a straight-line basis over the estimated useful lives of 2 to 6 years.lives. The following table presents the components of intangible assets acquired and their estimated useful lives as of the acquisition date (dollars in thousands):
| | | | | | | | | | | | | | |
| | | | Useful life |
| | Fair value | | (in years) |
Developed technology | | $ | 11,000 | | | 4 |
Customer relationships/trade names | | 400 | | | 2 |
Total intangible assets | | $ | 11,400 | | | |
| | Fair value | | | Useful life (in years) | |
Developed technology | | $ | 40,000 | | | | 4 | |
Customer relationships | | | 25,000 | | | | 6 | |
Trade name | | | 1,500 | | | | 2 | |
Total intangible assets subject to amortization | | $ | 66,500 | | | | | |
| | | | | | | | |
The Company's consolidated statements of operations for fiscal 2015 included revenue and net loss of $27.0 million and $16.5 million, respectively, attributable to LiveRamp since the acquisition.
Following are the Company's supplemental consolidated results on an unauditedCompany has omitted pro forma basis,disclosures related to this acquisition date as if the LiveRamp acquisition had taken place at the beginning of each of the fiscal years presented (dollars in thousands, except per-share amounts):
| | 2015 | | | 2014 | |
Revenues | | $ | 811,619 | | | $ | 824,393 | |
Net loss attributable to Acxiom | | $ | (33,797 | ) | | $ | (40,268 | ) |
Diluted loss per share | | $ | (0.44 | ) | | $ | (0.54 | ) |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
These pro forma results were based on estimateseffect of this acquisition is not material.
Acuity Data
On July 16, 2020, the Company completed the acquisition of Acuity Data ("Acuity"), a team of global retail and assumptions, which we believe are reasonable. They were not the resultsconsumer packaged goods ("CPG") experts, for approximately $2.9 million in cash. The acquisition also included a three-year performance plan having a maximum potential attainment of $5.1 million that would have been realized had we been a combined company during the periods presented and are not necessarily indicative of our consolidated results of operations in future periods. The pro forma results include adjustments primarily related to purchase accounting adjustments, including amortization expense of $3.7 million and $14.9 million for fiscal years 2015 and 2014, respectively, related to acquired intangible assets,be recorded as non-cash stock-based compensation expense if achieved. The acquisition strengthens the retail analytics capabilities of approximately $5.0 millionour data collaboration platform by enabling better reporting, insights, and $21.3 millioncollaboration for fiscal years 2015retailers and 2014, respectively, related to unvested stock optionsCPG companies, bridging the gap between trade and restricted stock units issued to former LiveRamp employees,media by bringing consumers' digital signals and retail transaction data together in a privacy-conscious manner.
The following table summarizes the related income tax effects as though the acquisition occurredfair value of assets acquired and liabilities assumed as of the beginningdate of the Company's fiscal years 2015 and 2014.
Other Intangible Assets
The amounts allocated to other intangible assets from acquisitions include software, customer relationship intangibles and trademarks. Amortization lives for those intangibles range from two years to ten years. The following table shows the amortization activity of purchased intangible assetsacquisition (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | |
Developed technology assets, gross (Software) | | $ | 42,850 | | | $ | 42,524 | | | $ | 2,537 | |
Accumulated amortization | | | (17,950 | ) | | | (9,924 | ) | | | (2,349 | ) |
Net developed technology assets | | $ | 24,900 | | | $ | 32,600 | | | $ | 188 | |
| | | | | | | | | | | | |
Customer/trademark assets, gross (Other assets) | | $ | 35,466 | | | $ | 34,166 | | | $ | 7,674 | |
Accumulated amortization | | | (16,263 | ) | | | (11,265 | ) | | | (7,393 | ) |
Net customer/trademark assets | | $ | 19,203 | | | $ | 22,901 | | | $ | 281 | |
| | | | | | | | | | | | |
Total intangible assets, gross | | $ | 78,316 | | | $ | 76,690 | | | $ | 10,211 | |
Total accumulated amortization | | | (34,213 | ) | | | (21,189 | ) | | | (9,742 | ) |
Net intangible assets | | $ | 44,103 | | | $ | 55,501 | | | $ | 469 | |
| | | | | | | | | | | | |
Amortization expense | | $ | 15,467 | | | $ | 11,447 | | | $ | 340 | |
| | | | | | | | |
| | July 16, 2020 |
Assets acquired: | | |
Cash | | $ | 184 | |
Trade accounts receivable | | 156 | |
Goodwill | | 2,011 | |
Intangible assets | | 1,100 | |
Other current and noncurrent assets | | 43 | |
Total assets acquired | | 3,494 | |
Deferred income taxes | | (288) | |
Accounts payable and accrued expenses | | (89) | |
Net assets acquired | | 3,117 | |
Less: | | |
Cash acquired | | (184) | |
Net cash paid | | $ | 2,933 | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets inacquired was recorded as goodwill and is primarily attributed to the table above have remaining amortizable periods over the next five years.
4.DISCONTINUED OPERATIONS:
IT Infrastructure Management business ("ITO")
On May 20, 2015, the Company announced it had entered into a definitive agreement to sell its ITO business to Charlesbank Capital Partnersdevelopment of future technology and M/C Partners. The sale was completed on July 31, 2015. Beginning in the first quarterproducts, development of fiscal 2016, the Company began reporting the results of operations, cash flows,future customer relationships, and the balance sheet amounts pertaining to ITO as a component of discontinued operations in the consolidated financial statements. Prior to the discontinued operations classification, the ITO business unit was included in the IT Infrastructure Management segment in the Company's segment results.
At the closing of the transaction, the Company received total consideration of $131.0 million ($140.0 million stated sales price less closing adjustments and transaction costs of $9.0 million).Acuity assembled workforce. The Company may also receive uphas omitted pro forma disclosures related to a maximumthis acquisition as the pro forma effect of $50 million in contingent payments in future periods through 2020 subject to certain conditions. Due to the uncertainty of contingent payments, income will be recorded upon resolution of the contingency as a component of income from discontinued operations. In addition, the Company has the right to participate in distributions of the divested entity above a defined amount. The Company reported a gain of $9.3 million on the sale whichthis acquisition is included in earnings from discontinued operations, net of tax.not material.
The Company also entered into an agreement to amend its credit agreement (see Note 9 – Long-Term Debt). The effectiveness of the amendments contained in the agreement were conditioned on, among other things, the closing of the ITO disposition. Once the ITO disposition was completed and the amendment became fully effective, certain financial covenants in the credit agreement were modified for
6. DISCONTINUED OPERATIONS:
F-49Acxiom Marketing Solutions ("AMS") business
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
the quarters ending on September 30, 2015, December 31, 2015 and March 31, 2016. AdditionallyDuring fiscal 2019, the Company is not entitled to declare or pay any dividends during this time and share repurchases will be limited to no more than $100 million depending on the Company's leverage ratio. After March 31, 2016, the financial covenants and dividend and share repurchase limitations will return to the requirements in the credit agreement in effect prior to the amendment. In addition, the amendment revised certain definitions in the credit agreement to clarify the effect of acquisitions and dispositions on certain financial covenants.
On July 31, 2015, the Company applied $55.0 million of proceeds from the sale to repay outstanding Company indebtedness in order to comply with the Company's existing credit agreement (see Note 9 – Long-Term Debt). The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business. Allocated interest expense was $0.4 million, $1.3 million, and $1.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively. We used the remaining proceeds from the sale to fund expansion of its common stock repurchase program and for general corporate purposes.
Summary results of operations of ITO for the fiscal years ended March 31, 2016, 2015 and 2014, respectively, are segregated and included in earnings from discontinued operations, net of tax, in the consolidated statements of operations. The following table is a reconciliation of the major classes of line items constituting earnings from discontinued operations, net of tax (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | |
Major classes of line items constituting earnings from discontinued operations, net of tax: | | | | | | | | | |
Revenues | | $ | 69,410 | | | $ | 215,148 | | | $ | 257,125 | |
Cost of revenue | | | 50,837 | | | | 167,524 | | | | 186,699 | |
Gross profit | | | 18,573 | | | | 47,624 | | | | 70,426 | |
Operating expenses: | | | | | | | | | | | | |
Sales and marketing | | | 1,192 | | | | 2,771 | | | | 2,015 | |
General and administrative | | | 6,053 | | | | 10,736 | | | | 14,749 | |
Gain on sale of discontinued operations | | | (9,349 | ) | | | - | | | | - | |
Gains, losses and other items, net | | | 367 | | | | 2,037 | | | | 4,746 | |
Total operating expenses | | | (1,737 | ) | | | 15,544 | | | | 21,510 | |
Income from discontinued operations | | | 20,310 | | | | 32,080 | | | | 48,916 | |
Interest expense | | | (681 | ) | | | (2,378 | ) | | | (3,000 | ) |
Other, net | | | (230 | ) | | | (334 | ) | | | 3 | |
Earnings from discontinued operations before income taxes | | | 19,399 | | | | 29,368 | | | | 45,919 | |
Income taxes | | | 3,598 | | | | 11,973 | | | | 17,587 | |
Earnings from discontinued operations, net of tax | | $ | 15,801 | | | $ | 17,395 | | | $ | 28,332 | |
| | | | | | | | | | | | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The carrying amounts of the major classes of assets and liabilities of ITO are segregated and included in assets from discontinued operations and liabilities from discontinued operations in the consolidated balance sheets. The following table is a reconciliation of the major classes of assets and liabilities of the discontinued operations (dollars in thousands):
| | March 31, 2016 | | | March 31, 2015 | |
Trade accounts receivable, net | | $ | - | | | $ | 35,743 | |
Deferred income taxes | | | - | | | | 2,762 | |
Other current assets | | | - | | | | 10,707 | |
Property and equipment, net of accumulated depreciation and amortization | | | - | | | | 44,336 | |
Goodwill | | | - | | | | 71,508 | |
Purchased software licenses, net of accumulated amortization | | | - | | | | 3,943 | |
Other assets, net | | | - | | | | 3,173 | |
Assets from discontinued operations | | $ | - | | | $ | 172,172 | |
| | | | | | | | |
Current installments of long-term debt | | $ | - | | | $ | 653 | |
Trade accounts payable | | | - | | | | 8,857 | |
Accrued expenses | | | - | | | | 7,480 | |
Deferred revenue | | | - | | | | 3,658 | |
Long-term debt | | | - | | | | 6,684 | |
Deferred income taxes | | | - | | | | 22,716 | |
Other liabilities | | | - | | | | 6,377 | |
Liabilities from discontinued operations | | $ | - | | | $ | 56,425 | |
| | | | | | | | |
ITO is a provider of managed hosting and cloud infrastructure services, optimized for mid-tier enterprises. The Company entered into certain agreements with ITO in which support services, including data center co-location services, will be provided from the Company to ITO, and from ITO to the Company. Additionally, the Company entered into certain other agreements with ITO to provide or receive leased office space. The terms of these agreements range from several months to the longest of which continues through July 2020. The agreements generally provide cancellation provisions, without penalty, at various times throughout the term. Cash inflows and outflows related to the agreements, included in cash flows from operating activities in the consolidated statements of cash flows, were $4.7 million and $4.2 million, respectively, for the fiscal year ended March 31, 2016. Revenues and expenses related to the agreements, included in loss from continuing operations in the consolidated statements of operations, were $4.7 million and $4.6 million, respectively, for the fiscal year ended March 31, 2016.
U.K. call center operation
On May 30, 2014, the Company substantially completed the sale of its U.K. call center operation, 2Touch, to Parseq Ltd., a EuropeanAcxiom Marketing Solutions ("AMS") business, process outsourcing service provider. Some assets ofand the 2Touch operation were subject to a second closing, which occurred in March 2015, resulting in the complete disposal of the operation. The 2Touch business qualified for treatment as discontinued operations duringoperations. Significant income taxes were incurred and paid on the gain from the sale of AMS. During fiscal 2015. The results of operations, cash flows, and2023, the balance sheet amounts pertaining to 2Touch have been classified as discontinued operations in the consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Summary results of operations of the 2Touch business unit for the fiscal years ended March 31, 2016, 2015 and 2014 are segregated and included in earnings from discontinued operations,Company recovered $5.4 million, net of tax inand fees, of certain previously paid state income taxes arising from the consolidated statementssale of operations and consists of (dollars in thousands):AMS.
| | 2016 | | | 2015 | | | 2014 | |
Revenues | | $ | - | | | $ | 8,484 | | | $ | 35,267 | |
| | | | | | | | | | | | |
Earnings (loss) from discontinued operations before income taxes | | $ | (450 | ) | | $ | 4 | | | $ | (2,189 | ) |
Loss on sale of discontinued operations before income taxes | | | - | | | | (1,888 | ) | | | - | |
Income taxes | | | - | | | | - | | | | - | |
Loss from discontinued operations, net of tax | | $ | (450 | ) | | $ | (1,884 | ) | | $ | (2,189 | ) |
| | | | | | | | | | | | |
The carrying amounts of the major classes of assets and liabilities of the 2Touch business unit are segregated and included in assets from discontinued operations and liabilities from discontinued operations in the consolidated balance sheets and are as follows (dollars in thousands):
| | March 31, 2016 | | | March 31, 2015 | |
Trade accounts receivable, net | | $ | - | | | $ | 112 | |
Assets from discontinued operations | | $ | - | | | $ | 112 | |
| | | | | | | | |
Other accrued expenses | | | - | | | | 1,008 | |
Liabilities from discontinued operations | | $ | - | | | $ | 1,008 | |
| | | | | | | | |
5.
7. OTHER CURRENT AND NONCURRENT ASSETS:
Other current assets consist of the following (dollars in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | March 31, 2022 |
Prepaid expenses and other | | $ | 18,918 | | | $ | 13,947 | |
| | | | |
| | | | |
Assets of non-qualified retirement plan | | 12,110 | | | 15,528 | |
Other current assets | | $ | 31,028 | | | $ | 29,475 | |
| | March 31, 2016 | | | March 31, 2015 | |
Prepaid expenses | | $ | 25,313 | | | $ | 20,684 | |
Assets of non-qualified retirement plan | | | 12,532 | | | | 14,174 | |
Other miscellaneous assets | | | 52 | | | | 117 | |
Other current assets | | $ | 37,897 | | | $ | 34,975 | |
Other noncurrent assets consist of the following (dollars in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | March 31, 2022 |
Long-term prepaid revenue share | | $ | 9,659 | | | $ | 13,468 | |
Right-of-use assets (see Note 3) | | 24,604 | | | 59,459 | |
Deferred tax asset | | 1,253 | | | 1,224 | |
Deposits | | 3,452 | | | 4,486 | |
Strategic investments | | 1,600 | | | 5,700 | |
Other miscellaneous noncurrent assets | | 477 | | | 877 | |
Other assets, net | | $ | 41,045 | | | $ | 85,214 | |
| | March 31, 2016 | | | March 31, 2015 | |
Acquired intangible assets, net | | $ | 19,203 | | | $ | 22,901 | |
Deferred data acquisition costs | | | 1,644 | | | | 2,347 | |
Deferred expenses | | | 883 | | | | 1,976 | |
Prepaid expenses | | | 1,404 | | | | 1,556 | |
Other miscellaneous noncurrent assets | | | 2,181 | | | | 1,393 | |
Noncurrent assets | | $ | 25,315 | | | $ | 30,173 | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
6.GOODWILL:
Goodwill by operating segment and activity forDuring the yearstwelve months ended March 31, 20162023, the Company became aware of a pending sale and 2015 was as follows (dollarsthe proposed value of the transaction related to one of our strategic investments. As a result, the Company recorded a $4.0 million impairment that is recorded in thousands).
| | Marketing Services and Audience Solutions | | | Marketing Services | | | Audience Solutions | | | Connectivity | | | Total | |
Balance at March 31, 2014 | | $ | 286,876 | | | $ | - | | | $ | - | | | $ | - | | | $ | 286,876 | |
| | | | | | | | | | | | | | | | | | | | |
Acquisition of LiveRamp | | | 213,093 | | | | - | | | | - | | | | - | | | | 213,093 | |
Change in foreign currency translation adjustment | | | (2,607 | ) | | | - | | | | - | | | | - | | | | (2,607 | ) |
Balance at March 31, 2015 | | $ | 497,362 | | | $ | - | | | $ | - | | | $ | - | | | $ | 497,362 | |
| | | | | | | | | | | | | | | | | | | | |
Brazil Impairment | | | (502 | ) | | | - | | | | - | | | | - | | | | (502 | ) |
Reallocation of segments | | | (496,860 | ) | | | 124,627 | | | | 277,516 | | | | 94,717 | | | | - | |
Acquisition of Allant | | | - | | | | - | | | | 1,377 | | | | - | | | | 1,377 | |
APAC Audience Solutions Impairment | | | - | | | | | | | | (5,413 | ) | | | | | | | (5,413 | ) |
Change in foreign currency translation adjustment | | | - | | | | (41 | ) | | | (50 | ) | | | 12 | | | | (79 | ) |
Balance at March 31, 2016 | | $ | - | | | $ | 124,586 | | | $ | 273,430 | | | $ | 94,729 | | | $ | 492,745 | |
Year end balancesother expense in the table above are netconsolidated statement of accumulated impairment lossesoperations.
In conjunction with the July 2015 disposition of $120.1our former IT outsourcing business, we retained a profits interest previously recognized at $0.7 million and $114.2 millionwithin miscellaneous noncurrent assets at March 31, 2016 and 2015, respectively.
Goodwill by component2021. In the twelve months ended March 31, 2022, the Company recorded a $30.5 million gain included in each segment astotal other income in the consolidated statement of March 31, 2016 was:
| | Marketing Services | | | Audience Solutions | | | Connectivity | | | Total | |
U.S. | | $ | 116,594 | | | $ | 273,430 | | | $ | 91,164 | | | $ | 481,188 | |
APAC | | | 7,992 | | | | - | | | | 3,565 | | | | 11,557 | |
Balance at March 31, 2016 | | $ | 124,586 | | | $ | 273,430 | | | $ | 94,729 | | | $ | 492,745 | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
7.SOFTWARE COSTS:
The Company recorded amortization expenseoperations related to internally developed computer softwarea $31.2 million cash distribution received from the settlement of $30.7 million, $29.0 million, and $9.7 million for fiscal 2016, 2015 and 2014, respectively. Of the amortization expense recorded in fiscal 2016 and 2015, $10.0 million and $7.5 million, respectively, relate to internally developed software acquired as part of the LiveRamp acquisition. Amortization expense in fiscal 2016 and fiscal 2015 also included $1.8 million and $4.3 million, respectively, of accelerated amortization expense resulting from adjusting the remaining estimated useful lives of certain capitalized software products which the Company will no longer be using as a result of the LiveRamp acquisition.this retained profits interest.
The Company also recorded amortization expense related to purchased software licenses of $3.8 million, $5.0 million and $4.0 million in 2016, 2015 and 2014, respectively.
8.PROPERTY AND EQUIPMENT:
Property and equipment some of which has been pledged as collateral for long-term debt, is summarized as follows (dollars in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | March 31, 2022 |
| | | | |
Leasehold improvements | | $ | 25,262 | | | $ | 28,224 | |
Data processing equipment | | 6,537 | | | 7,001 | |
Office furniture and other equipment | | 7,594 | | | 9,776 | |
| | 39,393 | | | 45,001 | |
Less accumulated depreciation and amortization | | 32,308 | | | 33,470 | |
Property and equipment, net of accumulated depreciation and amortization | | $ | 7,085 | | | $ | 11,531 | |
| | March 31, 2016 | | | March 31, 2015 | |
Land | | $ | 6,737 | | | $ | 6,737 | |
Buildings and improvements | | | 222,868 | | | | 202,439 | |
Data processing equipment | | | 261,101 | | | | 245,538 | |
Office furniture and other equipment | | | 37,969 | | | | 51,007 | |
| | | 528,675 | | | | 505,721 | |
Less accumulated depreciation and amortization | | | 345,632 | | | | 329,467 | |
| | $ | 183,043 | | | $ | 176,254 | |
Depreciation expense on property and equipment (including amortization of property and equipment under capitalized leases) was $40.6$4.0 million, $35.5$5.4 million and $29.6$8.9 million for the fiscal yearstwelve months ended March 31, 2016, 20152023, 2022 and 2014,2021, respectively.
During the twelve months ended March 31, 2023, the Company recorded $4.1 million of impairment charges related to the exit from certain leased office facilities that are included in gains, losses and other items, net in the consolidated statements of operations. There were no impairment charges recorded during the twelve months ended March 31, 2022 and 2021.
9. GOODWILL:
Changes in goodwill for the twelve months ended March 31, 2023 and 2022 were as follows (dollars in thousands): | | | | | | | | |
| | Total |
Balance at March 31, 2021 | | $ | 357,446 | |
Acquisition of Diablo | | 7,012 | |
Change in foreign currency translation adjustment | | (613) | |
Balance at March 31, 2022 | | $ | 363,845 | |
Purchase price accounting adjustment related to acquisition of Diablo | | (205) | |
Change in foreign currency translation adjustment | | (524) | |
Balance at March 31, 2023 | | $ | 363,116 | |
Goodwill by geography as of March 31, 2023 was: | | | | | | | | |
| | Total |
U.S. | | $ | 360,155 | |
APAC | | 2,961 | |
Balance at March 31, 2023 | | $ | 363,116 | |
10. INTANGIBLE ASSETS:
The amounts allocated to intangible assets from acquisitions include developed technology, customer relationships, trade names, and publisher and data supply relationships. The following table shows the amortization activity of intangible assets (dollars in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | March 31, 2022 |
Developed technology, gross | | $ | 72,095 | | | $ | 84,146 | |
Accumulated amortization | | (63,658) | | | (67,980) | |
Net developed technology | | $ | 8,437 | | | $ | 16,166 | |
| | | | |
Customer relationship/trade name, gross | | $ | 34,384 | | | $ | 43,490 | |
Accumulated amortization | | (33,953) | | | (40,582) | |
Net customer/trade name | | $ | 431 | | | $ | 2,908 | |
| | | | |
Publisher/data supply relationships, gross | | $ | 16,000 | | | $ | 39,800 | |
Accumulated amortization | | (15,000) | | | (32,156) | |
Net publisher/data supply relationships | | $ | 1,000 | | | $ | 7,644 | |
| | | | |
Total intangible assets, gross | | $ | 122,479 | | | $ | 167,436 | |
Total accumulated amortization | | (112,611) | | | (140,718) | |
Total intangible assets, net | | $ | 9,868 | | | $ | 26,718 | |
| | | | |
Total amortization expense related to intangible assets was $16.8 million, $18.7 million and $18.0 million for the twelve months ended March 31, 2023, 2022 and 2021, respectively.
ACXIOM CORPORATION AND SUBSIDIARIESF-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
9.LONG-TERM DEBT:The following table presents the estimated future amortization expenses related to intangible assets.
Long-term debt consists | | | | | | | | |
Fiscal Year: | | |
2024 | | $ | 6,847 | |
2025 | | 3,021 | |
| | |
| | |
| | $ | 9,868 | |
11. OTHER ACCRUED EXPENSES:
Other accrued expenses consist of the following (dollars in thousands):
| | March 31, 2016 | | | March 31, 2015 | |
Term loan credit agreement | | $ | 185,000 | | | $ | 270,000 | |
Other debt and long-term liabilities | | | 7,856 | | | | 10,087 | |
Total long-term debt and capital leases | | | 192,856 | | | | 280,087 | |
Less current installments | | | 32,243 | | | | 32,232 | |
Less deferred debt financing costs | | | 2,716 | | | | 3,102 | |
Long-term debt, excluding current installments and deferred debt financing costs | | $ | 157,897 | | | $ | 244,753 | |
| | | | | | | | |
The Company's amended and restated credit agreement provides for (1) term loans up to an aggregate principal amount of $300 million and (2) revolving credit facility borrowings consisting of revolving loans, letter of credit participations and swing-line loans up to an aggregate amount of $300 million. | | | | | | | | | | | | | | |
| | March 31, 2023 | | March 31, 2022 |
Liabilities of non-qualified retirement plan | | $ | 12,110 | | | $ | 15,528 | |
Short-term lease liabilities (see Note 3) | | 9,929 | | | 8,984 | |
| | | | |
DPM acquisition consideration holdback (see Note 14) | | — | | | 6,092 | |
Acuity performance earnout liability (see Note 14) | | 1,535 | | | 2,420 | |
DataFleets consideration holdback (see Note 14) | | 324 | | | 756 | |
| | | | |
Diablo consideration holdback | | — | | | 1,200 | |
Rakam consideration holdback | | 223 | | | 223 | |
Other miscellaneous accrued expenses | | 11,615 | | | 10,864 | |
Other accrued expenses | | $ | 35,736 | | | $ | 46,067 | |
The term loan is payable in quarterly installments of $7.5 million through September 2017, followed by quarterly installments of $11.3 million through June 2018, with a final payment of $106.3 million due October 9, 2018. The revolving loan commitment expires October 9, 2018.
Term loan and revolving credit facility borrowings bear interest at LIBOR or at an alternative base rate plus a credit spread. At March 31, 2016, the LIBOR credit spread was 2.00%. There were no revolving credit borrowings outstanding at March 31, 2016 or March 31, 2015. The weighted-average interest rate on term loan borrowings at March 31, 2016 was 2.68%. Outstanding letters of credit at March 31, 2016 were $2.1 million.12. OTHER LIABILITIES:
The term loan allows for prepayments before maturity. The credit agreement is secured by the accounts receivable of Acxiom and its domestic subsidiaries, as well as by the outstanding stock of certain Acxiom subsidiaries.
Under the termsOther liabilities consist of the term loan, the Company is required to maintain certain debt-to-cash flow and debt service coverage ratios, among other restrictions. At March 31, 2016, the Company was in compliance with these covenants and restrictions. In addition, if certain financial ratios and other conditions are not satisfied, the revolving credit facility limits the Company's ability to pay dividends in excess of $30 million in any fiscal year (plus additional amounts in certain circumstances).
On May 19, 2015, the Company entered into an agreement to further amend its credit agreement. The effectiveness of the amendments contained in the agreement were conditioned on, among other things, the closing of the ITO disposition that occurred on July 31, 2015 (See Note 4 – Discontinued Operations). Once the ITO disposition was completed and the amendment became fully effective, certain financial covenants in the credit agreement were modified for the quarters ending on September 30, 2015, December 31, 2015 and March 31, 2016. Additionally the Company is not entitled to declare or pay any dividends during this time and share repurchases are limited to no more than $100 million depending on the Company's leverage ratio. After March 31, 2016, the financial covenants and dividend and share repurchase rights and limitations will return to the requirements in the credit agreement in effect prior to the amendment. In addition, the amendment revises certain definitions in the credit agreement to clarify the effect of acquisitions and dispositions on certain financial covenants.
On July 31, 2015, the Company used $55.0 million of proceeds from the ITO disposition to repay outstanding Company indebtedness as required by the Company's existing credit agreement. The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business. Allocated interest expense was $0.4 million, $1.3 million, and $1.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
On March 10, 2014, the Company entered into an interest rate swap agreement. The agreement provides for the Company to pay interest through March 10, 2017 at a fixed rate of 0.98% plus the applicable credit spread on $50.0 million notional amount, while receiving interest for the same period at the LIBOR rate on the same notional amount. The LIBOR rate as of March 31, 2016 was 0.63%. The swap was entered into as a cash flow hedge against LIBOR interest rate movements on the term loan. The Company assesses the effectiveness of the hedge based on the hypothetical derivative method. There was no ineffectiveness for the period ended March 31, 2016. Under the hypothetical derivative method, the cumulative change in fair value of the actual swap is compared to the cumulative change in fair value of the hypothetical swap, which has terms that identically match the critical terms of the hedged transaction. Thus, the hypothetical swap is presumed to perfectly offset the hedged cash flows. The change in the fair value of the hypothetical swap will then be regarded as a proxy for the present value of the cumulative change in the expected future cash flows from the hedged transactions. All of the fair values are derived from an interest-rate futures model. As of March 31, 2016, the hedge relationship still qualified as an effective hedge under applicable accounting standards. Consequently, all changes in fair value of the derivative will be deferred and recorded in other comprehensive income (loss) until the related forecasted transaction is recognized in the consolidated statement of operations. The fair market value of the derivative was zero at inception and an unrealized loss of $0.1 million since inception is recorded in other comprehensive income (loss). The fair value of the interest rate swap agreement recorded in accumulated other comprehensive income (loss) may be recognized in the consolidated statement of operations if certain terms of the floating-rate debt change, if the floating-rate debt is extinguished or if the interest rate swap agreement is terminated prior to maturity. The Company has assessed the creditworthiness of the counterparty of the swap and concludes that no substantial risk of default exists as of March 31, 2016.
The Company's future obligations, excluding interest, under its long-term debt at March 31, 2016 are as followsfollowing (dollars in thousands):
Year ending March 31, | | | |
2017 | | $ | 32,243 | |
2018 | | | 39,820 | |
2019 | | | 119,083 | |
2020 | | | 1,362 | |
2021 | | | 348 | |
| | $ | 192,856 | |
| | | | | | | | | | | | | | |
| | March 31, 2023 | | March 31, 2022 |
Uncertain tax positions | | $ | 23,427 | | | $ | 24,374 | |
Long-term lease liabilities (see Note 3) | | 37,243 | | | 52,241 | |
Lease restructuring accruals | | 5,713 | | | 3,619 | |
Deferred tax liabilities | | 298 | | | 305 | |
Other | | 5,117 | | | 5,571 | |
Other liabilities | | $ | 71,798 | | | $ | 86,110 | |
10.ALLOWANCE FOR DOUBTFUL ACCOUNTS:
A summary of the activity of the allowance for doubtful accounts, returns and credits is as follows (dollars in thousands):
| | Balance at beginning of period | | | Additions charged to costs and expenses | | | Other changes | | | Bad debts written off, net of amounts recovered | | | Balance at end of period | |
2014: | | | | | | | | | | | | | | | |
Allowance for doubtful accounts, returns and credits | | $ | 4,105 | | | $ | 1,058 | | | $ | 117 | | | $ | (405 | ) | | $ | 4,875 | |
2015: | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts, returns and credits | | $ | 4,875 | | | $ | 731 | | | $ | (288 | ) | | $ | (895 | ) | | $ | 4,423 | |
2016: | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts, returns and credits | | $ | 4,423 | | | $ | 3,673 | | | $ | 56 | | | $ | (890 | ) | | $ | 7,262 | |
Other changes in the table above result primarily from the effects of exchange rates.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
11.
13. COMMITMENTS AND CONTINGENCIES:
Legal Matters
The Company is involved in various claims and legal proceedings.proceedings that arise in the ordinary course of business. Management routinely assesses the likelihood of adverse judgments or outcomes to these matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. The Company records accruals for these matters to the extent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. These accruals are adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertinent to a particular matter. These accruals are reflected in the Company'sCompany’s consolidated financial statements. In management'smanagement’s opinion, the Company has made appropriate and adequate accruals for these matters, and management believes the probability of a material loss beyond the amounts accrued to be remote. However, the ultimate liability for these matters is uncertain, and if accruals are not adequate, an adverse outcome could have a material effect on the Company'sCompany’s consolidated financial condition or results of operations. The Company maintains insurance coverage above certain limits. There are currently no matters pending against
Commitments
The following table presents the Company’s purchase commitments at March 31, 2023. Purchase commitments primarily include contractual commitments for the purchase of data, hosting services, software-as-a-service arrangements and leasehold improvements. The table does not include the future payment of liabilities related to uncertain tax positions of $23.4 million as the Company or its subsidiaries foris not able to predict the periods in which the potential exposure is considered material to the Company's consolidated financial statements.payments will be made (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2024 | | 2025 | | 2026 | | 2027 | | | | | | Total |
Purchase commitments | | $ | 90,433 | | | $ | 75,931 | | | $ | 6,106 | | | $ | 675 | | | | | | | $ | 173,145 | |
Commitments
The Company leases data processing equipment, office furniture and equipment, land and office space under noncancellable operating leases. The Company has a future commitment for lease payments over the next 24 years of $83.5 million.
Total rental expense on operating leases was $17.1 million, $14.7 million and $16.3 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively. Future minimum lease payments under all noncancellable operating leases for the five years ending March 31, 2021, are as follows: 2017, $15.5 million; 2018, $12.6 million; 2019, $11.1 million; 2020, $10.1 million; and 2021, $9.6 million.
In connection with the disposal of certain assets,While the Company guaranteed a leasedoes not have any other material contractual commitments for capital expenditures, certain levels of investments in facilities and computer equipment continue to be necessary to support the buyergrowth of the assets. This guarantee was made by the Company primarily to facilitate favorable financing terms for the third party. Should the third party default, the Company would be required to perform under this guarantee. At March 31, 2016 the Company's maximum potential future payments under this guarantee were $0.5 million.business.
12.
14. STOCKHOLDERS' EQUITY:EQUITY AND STOCK-BASED COMPENSATION:
The Company has authorized 200 million shares of $0.10 par value common stock and 1 million shares of $1.00 par value preferred stock. The board of directors of the Company may designate the relative rights and preferences of the preferred stock when and if issued. Such rights and preferences could include liquidation preferences, redemption rights, voting rights and dividends, and the shares could be issued in multiple series with different rights and preferences. The Company currentlyThere has no plans fornot been any preferred stock activity in the issuance of any shares of preferred stock.periods presented.
At March 31, 2016 the Company had outstanding 4,942 warrants to purchase shares of its common stock. The outstanding warrants carry an exercise price of $13.24 and expire March 17, 2019.
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was subsequently modified and expanded, most recently on May 19, 2015.December 20, 2022 to authorize an additional $100.0 million in share repurchases and extend the term of the existing common stock repurchase program. Under the modified common stock repurchase program, the Company may purchase up to $300.0 million$1.1 billion of its common stock through the period ending December 31, 2016.2024. During the fiscal year ended March 31, 2016,2023, the Company repurchased 2.66.1 million shares of its common stock for $52.8 million.$150.0 million under the stock repurchase program. During the fiscal year ended March 31, 2015,2022, the Company repurchased 0.51.3 million shares of its common stock for $9.9 million.$58.6 million under the stock repurchase program. During the fiscal year ended March 31, 2014,2021, the Company repurchased 2.01.3 million shares of its common stock for $52.7 million.$42.3 million under the stock repurchase program. Through March 31, 2016,2023, the Company has repurchased 15.535.6 million shares of its common stock for $255.2$882.2 million, leaving remaining capacity of $44.8$217.8 million under the stock repurchase program.
The Company paid no dividends on its common stock for any of the years reported.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Share-basedStock-based Compensation Plans
The Company has stock option, and equity compensation, and stock purchase plans at March 31, 2016, for which a total of 28.945.0 million shares of the Company'sCompany’s common stock have been reserved for issuance since the inception of the plans. These plans provide that the exercise prices of qualified options will be at or above the fair market value of the common stock at the time of the grant. Board policy requires that nonqualified options also be priced at or above the fair market value of the common stock at the time of grant.
On May 13, 2013 the Company's compensation committee, acting on behalf of the full board of directors, approved an amendment to one of the Company's equity compensation plans which would permit the issuance of an additional 4,000,000 shares under the plan. That amendment received shareholder approval at the August 6, 2013 annual shareholders' meeting. On May 23, 2013, the board terminated one of the Company's equity compensation plans under which 1.7 million shares remained available for future grant. This plan termination did not require shareholder approval. On May 8, 2015, the Company's compensation committee, acting on behalf of the full board of directors, approved an amendment to one of the Company's equity compensation plans which would permit the issuance of an additional 4.1 million shares under the plan. That amendment received stockholder approval at the August 18, 2015 annual stockholders' meeting. At March 31, 2016,2023, there were a total of 5.35.4 million shares available for future grants under the plans.plans, of which 1.1 million shares relate to the Company's qualified employee stock purchase plan.
During fiscal 2023, the board of directors voted to amend the Amended and Restated 2005 Equity Compensation Plan (the "2005 Plan") to increase the number of shares available under the plan by 4.5 million shares. The amendment received shareholder approval at the August 9, 2022 annual shareholders' meeting (the "2022 Annual Meeting"), bringing the plan shares from 37.9 million shares at June 30, 2022 to 42.4 million shares beginning in the quarter ended September 30, 2022. The board of directors also voted to amend the LiveRamp Holdings, Inc. Employee Stock Purchase Plan (the "ESPP") to increase the number of shares available under the plan by 1.0 million shares. The amendment received shareholder approval at the 2022 Annual Meeting bringing the ESPP shares from 0.4 million shares at June 30, 2022 to 1.4 million shares beginning in the quarter ended September 30, 2022. These actions bring the total number of shares reserved for issuance since inception of all plans from 39.5 million shares at June 30, 2022 to 45.0 million shares beginning in the quarter ended September 30, 2022.
During fiscal 2023, the board of directors voted to further amend the Company's 2005 Plan. The 2005 Plan was amended to provide that, in the event of a participant’s retirement on or after age 65 with at least five years of service, awards held by the participant at retirement will continue to vest in accordance with their terms. This amendment to the 2005 Plan impacted stock-based compensation expense by accelerating $5.4 million of expense recognition into fiscal 2023 that would have otherwise been recognized over future reporting periods through the quarter ending December 31, 2025.
Stock-based Compensation Expense
The Company's stock-based compensation activity for the twelve months ended March 31, 2023, 2022, and 2021, by award type, was (dollars in thousands): | | | | | | | | | | | | | | | | | | | | |
| | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Stock options | | $ | 968 | | | $ | 1,935 | | | $ | 2,308 | |
| | | | | | |
Restricted stock units | | 111,943 | | | 56,008 | | | 78,164 | |
Diablo restricted stock awards | | 1,126 | | | 794 | | | — | |
| | | | | | |
Data Plus Math ("DPM") acquisition consideration holdback | | 2,031 | | | 8,122 | | | 8,030 | |
Pacific Data Partners assumed performance plan | | — | | | 9,101 | | | 18,388 | |
Acuity performance plan | | 815 | | | 1,912 | | | 2,208 | |
DataFleets acquisition consideration holdback | | 5,611 | | | 6,043 | | | 755 | |
Employee stock purchase plan | | 2,051 | | | 1,803 | | | 704 | |
Directors stock-based compensation | | 1,255 | | | 1,539 | | | 1,150 | |
Total non-cash stock-based compensation included in the consolidated statements of operations | | 125,800 | | | 87,257 | | | 111,707 | |
Less expense related to liability-based equity awards | | (8,449) | | | (16,077) | | | (27,311) | |
| | | | | | |
Total non-cash stock-based compensation included in the consolidated statements of equity | | $ | 117,351 | | | $ | 71,180 | | | $ | 84,396 | |
The effect of stock-based compensation expense on income, by financial statement line item, was (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Cost of revenue | | $ | 6,317 | | | $ | 4,111 | | | $ | 5,300 | |
Research and development | | 55,407 | | | 32,112 | | | 38,960 | |
Sales and marketing | | 29,429 | | | 28,586 | | | 40,401 | |
General and administrative | | 34,647 | | | 22,448 | | | 27,046 | |
Total non-cash stock-based compensation included in the consolidated statements of operations | | $ | 125,800 | | | $ | 87,257 | | | $ | 111,707 | |
In March 2023 and March 2021, the Company accelerated the vesting of certain time-vesting restricted stock units that would have otherwise vested over the following six months, respectively, to take advantage of cash tax savings opportunities.
•In March 2023, this resulted in the vesting of time-vesting restricted stock units covering approximately 1.5 million shares of common stock. The Company recognized $22.6 million of compensation costs related to the accelerated vesting of these units, which is included in loss from operations in the consolidated statement of operations. Of the $22.6 million compensation costs, $0.4 million represented incremental compensation cost due to the modification and $22.1 million represented accelerated original grant date fair value compensation cost.
•In March 2021, this resulted in the vesting of time-vesting and performance-based restricted stock units covering approximately 0.7 million shares of common stock. The Company recognized $21.4 million of compensation costs related to the accelerated vesting of these units, which is included in loss from operations in the consolidated statement of operations. Of the $21.4 million compensation costs, $8.4 million represented incremental compensation cost due to the modification and $13.0 million represented accelerated original grant date fair value compensation cost.
The following table provides the expected future expense for all of the Company's outstanding equity awards at March 31, 2023, by award type. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2024 | | 2025 | | 2026 | | | | | | Total |
Stock options | | $ | 583 | | | $ | 125 | | | $ | — | | | | | | | $ | 708 | |
Restricted stock units | | 49,579 | | | 59,676 | | | 15,304 | | | | | | | 124,559 | |
| | | | | | | | | | | | |
Acuity performance plan | | 165 | | | — | | | — | | | | | | | 165 | |
DataFleets acquisition consideration holdback | | 2,266 | | | — | | | — | | | | | | | 2,266 | |
Employee stock purchase plan | | 361 | | | — | | | — | | | | | | | 361 | |
Expected future expense | | $ | 52,954 | | | $ | 59,801 | | | $ | 15,304 | | | | | | | $ | 128,059 | |
Stock OptionOptions Activity of Continuing Operations
The Company granted 445,785 stock options, having a per-share weighted-average fair value of $6.48, in
In fiscal 2016. This valuation was determined using a customized binomial lattice approach with the following weighted-average assumptions: dividend yield of 0.0%; risk-free interest rate of 2.2%; expected option life of 4.5 years; expected volatility of 40%; and a suboptimal exercise multiple of 1.4. The dividend yield was determined to be 0.0% since Acxiom is currently not paying dividends and there are no plans to pay dividends. The risk-free rate was determined by reference to the U.S. Treasury securities with a term equal to the life of the options. The expected option life is an output of the lattice model. The expected volatility was determined by considering both the historical volatility of Acxiom common stock, as well as the implied volatility of traded Acxiom options. The suboptimal exercise multiple was determined using actual historical exercise activity of Acxiom options.
The Company granted 415,639 stock options in fiscal 2015, exclusive of replacement options granted2022, in connection with the LiveRamp acquisition. The per-share weighted-average fair valueacquisition of DataFleets, the Company replaced all unvested outstanding stock options granted during 2015 was $8.05. This valuation was determined using a customized binomial lattice approachheld by DataFleets employees immediately prior to the acquisition with the following weighted-average assumptions: dividend yield of 0.0%; risk-free interest rate of 2.5%; expected option life of 4.4 years; expected volatility of 43%; and a suboptimal exercise multiple of 1.4.
The Company granted 312,778 stock options in fiscal 2014. The per-share weighted-average fair value of the stock options granted during 2014 was $7.00. This valuation was determined using a customized binomial lattice approach with the following weighted-average assumptions: dividend yield of 0.0%; risk-free interest rate of 2.1%; expected option life of 4.3 years; expected volatility of 35%; and a suboptimal exercise multiple of 1.3.
As part of the Company's acquisitionto acquire shares of LiveRamp common stock having substantially the same terms and conditions as were applicable under the original options. In total, the Company issued 1,473,66842,154 replacement stock options to LiveRamp employees who had outstanding unvested stock options to purchase LiveRamp stock.at a weighted-average exercise price of $0.70 per share. The acquisition-date fair value of the replacement stock options was $2.9 million and was determined using a customized binomial lattice model withmodel. All of the following assumptions: dividend yield of 0.0% since Acxiom does not currently pay dividends; risk-free interest rates of from 1.57% to 2.54%, based onreplacement options require post-combination service. As a result, the rate of U.S. Treasury securities with a term equal to the remaining term of each option; remaining terms of each option of from 6.1 to 9.7 years; expected volatility of 43%, based on both the historical volatility of Acxiom stock, as well as the implied volatility of traded Acxiom options;$2.9 million acquisition-date fair value is considered future compensation cost and a suboptimal exercise multiple of 1.4, based on actual historical exercise activity of Acxiom options.
The number of shares of each replacement option and the exercise price of each replacement option was determined by converting LiveRamp options into equivalent Acxiom options by multiplying the number of shares subject to LiveRamp options by the exchange ratio of .63774 and by dividing the exercise price for each LiveRamp option by the exchange ratio of .63774. Once the value of each replacement option was determined, the percentage of that value which was attributed to employee service prior to the acquisition date was allocated to the purchase price of LiveRamp, and the remaining value will be expensed by the Companyrecognized as stock-based compensation cost over the remaining vestingservice period of each option. The total included in the purchase price was $7.0 million (see note 3) and the total to be expensed in the future was $23.5 million, net of any forfeitures.
replacement options.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Stock option activity duringfor the yeartwelve months ended March 31, 2016 was as follows:2023 was: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Weighted average | | |
| | | | Weighted average | | remaining | | Aggregate |
| | Number of | | exercise price | | contractual term | | Intrinsic value |
| | shares | | per share | | (In years) | | (In thousands) |
Outstanding at March 31, 2022 | | 730,004 | | | $ | 16.28 | | | | | |
| | | | | | | | |
Exercised | | (200,559) | | | $ | 11.06 | | | | | $ | 3,681 | |
Forfeited or canceled | | (4,534) | | | $ | 2.48 | | | | | |
Outstanding at March 31, 2023 | | 524,911 | | | $ | 18.39 | | | 1.6 | | $ | 1,857 | |
Exercisable at March 31, 2023 | | 514,870 | | | $ | 18.73 | | | 1.5 | | $ | 1,646 | |
| | Number of shares | | | Weighted-average exercise price per share | | | Weighted-average remaining contractual term (in years) | | | Aggregate intrinsic value (in thousands) | |
Outstanding at March 31, 2015 | | | 4,870,219 | | | $ | 15.10 | | | | | | | |
Granted | | | 445,785 | | | $ | 17.84 | | | | | | | |
Exercised | | | (923,958 | ) | | $ | 8.51 | | | | | | $ | 10,746 | |
Forfeited or cancelled | | | (787,944 | ) | | $ | 27.05 | | | | | | | | |
Outstanding at March 31, 2016 | | | 3,604,102 | | | $ | 14.52 | | | | 5.20 | | | $ | 25,883 | |
Exercisable at March 31, 2016 | | | 2,486,647 | | | $ | 14.62 | | | | 3.90 | | | $ | 17,777 | |
The aggregate intrinsic value for options exercised in fiscal 2016, 2015,2023, 2022, and 20142021 was $10.7$3.7 million, $8.3$4.3 million, and $50.5$23.2 million, respectively. The aggregate intrinsic value at period end represents the total pre-tax intrinsic value (the difference between Acxiom'sLiveRamp’s closing stock price on the last trading day of the period and the exercise price for each in-the-money option) that would have been received by the option holders had option holdersthey exercised their options on March 31, 2016.2023. This amount changes based upon changes in the fair market value of Acxiom'sLiveRamp’s common stock.
Following is aA summary of stock options outstanding and exercisable as of March 31, 2016:2023 was:
| | | Options outstanding | | | Options exercisable | |
Range of exercise price per share | | | Options outstanding | | Weighted- average remaining contractual life | | Weighted-average exercise price per share | | | Options exercisable | | | Weighted-average exercise price per share | |
| | | | | | | | | | | | | | |
$ | 0.63 - $ 8.90 | | | | 690,255 | | 6.83 years | | $ | 1.80 | | | | 387,703 | | | $ | 1.82 | |
$ | 11.08 - $ 14.21 | | | | 1,052,358 | | 4.66 years | | $ | 13.32 | | | | 985,021 | | | $ | 13.32 | |
$ | 15.31 - $ 19.76 | | | | 819,902 | | 5.54 years | | $ | 17.16 | | | | 404,855 | | | $ | 16.54 | |
$ | 20.27 - $ 24.53 | | | | 1,021,945 | | 4.35 years | | $ | 21.87 | | | | 699,204 | | | $ | 22.18 | |
$ | 27.77 - $ 32.85 | | | | 19,642 | | 7.58 years | | $ | 32.83 | | | | 9,864 | | | $ | 32.80 | |
| | | | | 3,604,102 | | 5.20 years | | $ | 14.52 | | | | 2,486,647 | | | $ | 14.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Options outstanding | | Options exercisable |
Range of | | | | Weighted average | | Weighted average | | | | Weighted average |
exercise price | | Options | | remaining | | exercise price | | Options | | exercise price |
per share | | outstanding | | contractual life | | per share | | exercisable | | per share |
$ | — | | | — | | $ | 9.99 | | | 40,973 | | | 5.7 years | | $ | 0.98 | | | 30,932 | | | $ | 1.01 | |
$ | 10.00 | | | — | | $ | 19.99 | | | 182,603 | | | 2.1 years | | $ | 17.49 | | | 182,603 | | | $ | 17.49 | |
$ | 20.00 | | | — | | $ | 24.99 | | | 301,335 | | | 0.8 years | | $ | 21.31 | | | 301,335 | | | $ | 21.31 | |
| | | | | | | | | | | | | | |
| | | | | | 524,911 | | | 1.6 years | | $ | 18.39 | | | 514,870 | | | $ | 18.73 | |
Total expense related to stock options was approximately $9.8 million in fiscal 2016, $12.0 million in fiscal 2015, and $2.2 million in fiscal 2014. Of the fiscal 2016 and 2015 expense, $6.7 million and $9.4 million, respectively, relates to LiveRamp replacement stock options. Future expense for all options is expected to be approximately $9.7 million in total over the next four years.
Diablo Restricted Stock Awards
Stock Appreciation Right (SAR) Activity
During fiscal 2015,2022, in connection with the acquisition of Diablo, the Company granted 245,404 performance-based SARsreplaced the unvested outstanding restricted stock shares held by a Diablo employee immediately prior to the acquisition with a value atrestricted shares of LiveRamp common stock having substantially the datesame terms and conditions as were applicable under the original restricted stock agreement. The conversion calculation resulted in issuance of grant of $0.5 million and40,600 replacement restricted stock shares having an exercise priceacquisition-date fair value of $40. All of the performance-based SARs granted in fiscal 2015$1.9 million. The restricted shares vest subject to attainment of performance criteria established bypost-combination service requirements. As a result, the acquisition-date fair value is considered future compensation committee. The units granted in fiscal 2015 may vest in a number of SARs up to 100%cost and was recognized as stock-based compensation cost over the vesting period of the award, based onawards.
Changes in the attainment of certain revenue targetsCompany's restricted stock for the period from April 1, 2014 to March 31, 2017. At vesting, the SARs will be automatically exercised, and the award recipient may receive a number of common stock shares equal to the number of SARs that are being exercised multiplied by the quotient of (a) the final Company stock market value (up to a maximum share value of $70) minus the SAR exercise price, divided by (b) the fair market value of a share of stock at the exercise date. The SARs contain an accelerated exercise provision if the closing market price of the Company's stock exceeds the $70 maximum share value for 20 consecutive trading days during the performance period. The grant date value of the performance-based SARs is determined using a Monte Carlo simulation model.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Stock appreciation right (SAR) activity during the yeartwelve months ended March 31, 20162023 was:
| | Number of shares | | | Weighted-average exercise price per share | | | Weighted-average remaining contractual term (in years) | | | Aggregate intrinsic value (in thousands) | |
Outstanding at March 31, 2015 | | | 245,404 | | | $ | 40.00 | | | | | | | |
Outstanding at March 31, 2016 | | | 245,404 | | | $ | 40.00 | | | | 1.00 | | | $ | - | |
Exercisable at March 31, 2016 | | | - | | | $ | - | | | | - | | | $ | - | |
Total expense related to SARs in fiscal 2016 and 2015 was approximately $0.2 million in both periods. Future expense for these SARs is expected to be approximately $0.2 million over the next fiscal year. | | | | | | | | | | | | | | | | | | | | |
| | | | Weighted average | | |
| | | | fair value per | | Weighted average |
| | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) |
Unvested restricted stock awards at March 31, 2022 | | 24,766 | | | $ | 47.29 | | | |
Diablo replacement restricted stock award | | — | | | $ | 47.29 | | | |
Vested | | (24,766) | | | $ | 47.29 | | | |
Unvested restricted stock awards at March 31, 2023 | | — | | | $ | — | | | n/a |
Restricted Stock Unit Activity of Continuing Operations
Non-vested time-vesting restricted stock units activity during the year ended March 31, 2016 was:
| | Number of shares | | | Weighted average fair value per share at grant date | | | Weighted-average remaining contractual term (in years) | |
Outstanding at March 31, 2015 | | | 2,053,179 | | | $ | 20.44 | | | | 1.95 | |
Granted | | | 1,427,561 | | | $ | 18.89 | | | | | |
Vested | | | (975,744 | ) | | $ | 20.16 | | | | | |
Forfeited or cancelled | | | (225,101 | ) | | $ | 19.41 | | | | | |
Outstanding at March 31, 2016 | | | 2,279,895 | | | $ | 19.69 | | | | 2.12 | |
During fiscal 2016, the Company granted time-vesting restricted stock units covering 1,427,561 shares of common stock with a value at the date of grant of $27.0 million. Of the restricted stock units granted in the current period, 1,041,572 vest in equal annual increments over four years, 70,799 vest in equal annual increments over two years, 72,650 vest in one year, and 242,540 vest in equal quarterly increments starting 15 months after the date of grant.
During fiscal 2015, the Company granted time-vesting restricted stock units covering 1,770,303 shares of common stock with a value at the date of grant of $37.6 million, of which units covering 1,075,392 shares, with a value at date of grant of $23.7 million, were granted to former LiveRamp employees subsequent to the acquisition of LiveRamp (see note 3). Of the restricted stock units granted in fiscal 2015, 773,735 vest in equal annual increments over four years, 927,052 vest in equal annual increments over two years, and 69,516 vest in one year.
During fiscal 2014, the Company granted time-vesting restricted stock units covering 502,008 shares of common stock with a value at the date of grant of $12.1 million. Of the restricted stock units granted in fiscal 2014, 421,111 vest in equal annual increments over four years, 25,000 vest in equal annual increments over two years, and 55,897 vest in one year.
Valuation of time-vesting restricted stock units for all periods presented is equal to the quoted market price for the shares on the date of grant. The total fair value of time-vesting restricted stock unitsawards vested in fiscal 2016, 2015,during the twelve months ended March 31, 2023 and 20142022 was $17.6 million, $8.4$0.6 million and $10.3$0.8 million, respectively, and is measured as the quoted market price of the Company's common stock on the vesting date for the number of shares vested.
F-60Restricted Stock Unit Activity
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Non-vested performance-basedTime-vesting restricted stock units activity during("RSUs") -
During the yeartwelve months ended March 31, 2016 was:
| | Number of shares | | | Weighted average fair value per share at grant date | | | Weighted-average remaining contractual term (in years) | |
Outstanding at March 31, 2015 | | | 389,310 | | | $ | 21.12 | | | | 1.57 | |
Granted | | | 367,807 | | | $ | 18.42 | | | | | |
Forfeited or cancelled | | | (240,299 | ) | | $ | 22.35 | | | | | |
Outstanding at March 31, 2016 | | | 516,818 | | | $ | 18.62 | | | | 1.67 | |
During fiscal 2016,2023, the Company granted performance-based restricted stock unitstime-vesting RSUs covering 367,8074,352,078 shares of common stock withand having a fair value at the date of grant of $6.8$107.2 million. All of the performance-based restricted stock unitsThe RSUs granted in the current year primarily vest over three years. Grant date fair value of these units is equal to the quoted market price for the shares on the date of grant.
During fiscal 2022, the Company granted time-vesting RSUs covering 3,037,440 shares of common stock and having a fair value at the date of grant of $143.4 million. The RSUs granted in fiscal 2022 primarily vest over four years. Grant date fair value of these units is equal to the quoted market price for the shares on the date of grant. Included in the RSUs granted in fiscal 2022 were units related to the Diablo and Rakam acquisitions (see Note 5). Following the closing of the Diablo acquisition, the Company granted new awards of RSUs covering 98,442 shares of common stock, and having a grant date fair value of $4.7 million, to select employees to induce them to accept employment with the Company. In connection with the Rakam acquisition, the Company extended employment agreements and granted new awards of RSUs, covering 55,927 shares of common stock having a grant date fair value of $2.6 million, to two key Rakam employees.
During fiscal 2021, the Company granted time-vesting RSUs covering 2,228,445 shares of common stock and having a fair value at the date of grant of $99.8 million. The RSUs granted in fiscal 2021 primarily vest over four years. Grant date fair value of these units is equal to the quoted market price for the shares on the date of grant. Included in the RSUs granted in fiscal 2021 were units related to the DataFleets acquisition. Following the closing of the DataFleets acquisition, the Company granted new awards of RSUs covering 193,595 shares of common stock, and having a grant date fair value of $13.5 million, to select employees and contractors to induce them to accept employment with the Company.
RSU activity for the twelve months ended March 31, 2023 was: | | | | | | | | | | | | | | | | | | | | |
| | | | Weighted-average | | |
| | | | fair value per | | Weighted-average |
| | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) |
Outstanding at March 31, 2022 | | 4,176,682 | | | $ | 47.00 | | | 2.85 |
Granted | | 4,352,078 | | | $ | 24.63 | | | |
Vested | | (1,614,868) | | | $ | 46.68 | | | |
Units vested under the Company's March 2023 acceleration plan | | (1,508,196) | | | $ | 30.42 | | | |
Forfeited or canceled | | (1,395,937) | | | $ | 37.07 | | | |
Outstanding at March 31, 2023 | | 4,009,759 | | | $ | 32.57 | | | 2.20 |
The total fair value of RSUs vested during the twelve months ended March 31, 2023, 2022, and 2021 was $71.5 million, $30.3 million, and $126.9 million, respectively, and is measured as the quoted market price of the Company's common stock on the vesting date for the number of shares vested.
Performance-based restricted stock units ("PSUs") -
Fiscal 2023 plan:
During the twelve months ended March 31, 2023, the Company granted PSUs covering 406,501 shares of common stock having a fair value at the date of grant of $10.0 million. The grants were made under two separate performance plans.
Under the total shareholder return ("TSR") performance plan, units covering 121,951 shares of common stock were granted having a fair value at the date of grant of $3.7 million, determined using a Monte Carlo simulation model. The units vest subject to attainment of market conditions established by the compensation committee of the board of directors (“compensation committee”) and continuous employment through the vesting date. The units may vest in a number of shares from 0% to 200% of the award, based on the TSR of LiveRamp common stock compared to the TSR of the Russell 2000 market index for the period from April 1, 2022 to March 31, 2025.
Under the operating metrics performance plan, units covering 284,550 shares of common stock were granted having a fair value at the date of grant of $6.3 million, which was equal to the quoted market price for the shares on the date of grant. The units vest subject to attainment of performance criteria established by the compensation committee.committee and continuous employment through the vesting date. The units granted in the current period may vest in a number of shares from zero0% to 200% of the award, at the end of the performance period, based on the average attainment of an earnings-per-share targetannual revenue growth and EBITDA margin targets for fiscal 2018, with a modifier basedyears 2023, 2024, and 2025. To the extent that shares are earned, 50% vest immediately and 50% vest on the total shareholder returnone-year anniversary of Acxiom common stock compared to total shareholder return of a group of peer companies established by the compensation committee for the period from April 1, 2015 to March 31, 2018. The value of the performance-based restricted stock units is determined using a Monte Carlo simulation model.attainment approval.
Fiscal 2022 plans:
During fiscal 2015,2022, the Company granted performance-based restricted stock unitsPSUs covering 263,609249,152 shares of common stock withhaving a fair value at the date of grant of $5.0$12.6 million. AllThe grants were made under three separate performance plans.
Under a special incentive performance plan, units covering 36,425 shares of common stock were granted having a fair value at the performance-based restricted stockdate of grant of $1.7 million, which was equal to the quoted market price for the shares on the date of grant. The units granted in fiscal 2015 vest subject to attainment of performance criteria established by the compensation committee.committee and continuous employment through the vesting date. The units granted in fiscal 2015 may vest in a number of shares from zero0% to 100% of the award, based on the attainment of key productivity metrics for the period beginning at the date of grant and continuing through December 31, 2023. Attainment will be measured and vesting evaluated on a quarterly basis beginning on January 1, 2023 and continuing through the end of the performance period. Through March 31, 2023, measurements have resulted in an accumulated 63% achievement, or 22,948 total earned units, under this plan. At March 31, 2023, there remains a maximum potential of 13,477 additional units eligible for attainment under the plan.
Under the fiscal 2022 TSR performance plan, units covering 63,815 shares of common stock were granted having a fair value at the date of grant of $3.8 million, determined using a Monte Carlo simulation model. The units vest subject to attainment of market conditions established by the compensation committee and continuous employment through the vesting date. The units may vest in a number of shares from 0% to 200% of the award, based on the attainmentTSR of an earnings-per-share target for fiscal 2017, with a modifier based on the total shareholder return of AcxiomLiveRamp common stock compared to total shareholder returnthe TSR of a group of peer companies established by the compensation committeeRussell 2000 market index for the period from April 1, 20142021 to March 31, 2017. The value of2024.
Under the fiscal 2022 operating metrics performance units is determined using a Monte Carlo simulation model.
During fiscal 2014, the Company granted performance-based restricted stockplan, units covering 230,319148,912 shares of common stock withwere granted having a fair value at the date of grant of $5.7 million. All$7.1 million, which was equal to the quoted market price for the shares on the date of the performance-based restricted stockgrant. The units granted in fiscal 2014 vest subject to attainment of performance criteria established by the compensation committee. Allcommittee and continuous employment through the vesting date. The units may vest in a number of shares from 0% to 200% of the outstanding performance-based restricted stock units granted during fiscal 2014 were forfeited dueaward, based on the attainment of trailing twelve-month revenue growth and EBITDA margin targets for the period from April 1, 2021 to not achievingMarch 31, 2024. Performance will be measured and vesting evaluated on a quarterly basis beginning with the earnings-per-share target for fiscal 2016. The valueperiod ending June 30, 2022 and continuing through the end of the performance period. To the extent that shares are earned in a given quarter, 50% vest immediately and 50% vest on the one-year anniversary of attainment approval, except that all earned but unvested shares will vest fully at the end of the measurement period. Through March 31, 2023, metrics measurements have resulted in an accumulated 50% achievement, or 58,312 total earned units, isunder this plan. As of March 31, 2023, there remains a maximum potential of 174,930 additional units eligible for attainment under the plan. Quarterly measurements of attainment will continue through March 31, 2024.
Fiscal 2021 plans:
During the fiscal 2021, the Company granted PSUs covering 246,524 shares of common stock having a fair value at the date of grant of $10.7 million. The grants were made under two separate performance plans.
Under the fiscal 2021 TSR performance plan, units covering 73,950 shares of common stock were granted having a fair value at the date of grant of $4.2 million, determined using a Monte Carlo simulation model.
There were no performance-based restricted stock The units vested in fiscal 2016 and 2014. During fiscal 2015, 517,565 performance-based restricted stock units vested. Of the units vested, 109,273 vested duevest subject to attainment of performance and shareholder return targetsmarket conditions established by the compensation committee and continuous employment through the vesting date. The units may vest in fiscal 2012. The remaining 408,292 units represent inducement awards granteda number of shares from 0% to certain200% of the Company's chief executive officers.
award, based on the total shareholder return of LiveRamp common stock compared to total shareholder return of the Russell 2000 market index for the period from April 1, 2020 to March 31, 2023. Remaining units under the fiscal 2021 TSR PSU plan, covering 59,634 shares of common stock, reached maturity of their relevant performance period at March 31, 2023. The expense related to restricted stockfinal performance measurement resulted in fiscal 2016, 2015 and 2014 was $19.4 million, $15.2 million and $11.0 million, respectively. Future expense for restricted stock0% attainment. The units isare expected to be approximately $19.9 millioncancelled in the first quarter of fiscal 2017, $11.7 million in2024 upon compensation committee approval.
Under the fiscal 2018, $5.4 million in fiscal 2019 and $1.4 million in fiscal 2020.
Other Performance Unit Activity
During fiscal 2016, the Company2021 operating metrics performance plan, units covering 172,574 shares of common stock were granted 323,080 performance-based units withhaving a fair value at the date of grant of $0.9 million. All$6.5 million, which was equal to the quoted market price for the shares on the date of the performance-basedgrant. The units granted vest subject to attainment of performance criteria established by the compensation committee.committee and continuous employment through the vesting date. The units granted in the current period may vest in a number of units upshares from 0% to 100%200% of the award, based on the attainment of certain Company common stock share price targets for the period from July 1, 2015 to June 30, 2017. At vesting, the award recipient may receive a number of common stock shares equal to the number of units vested multiplied by a share price factor. The share price factor modifies the final number of common shares awarded based on the Company's stock price on the date of vestingtrailing twelve-month revenue growth and ranges from 0% at a $25 Company stock price, or below, to 100% at a $55 Company stock price. The grant date value of the performance-based units is determined using a Monte Carlo simulation model.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
During fiscal 2015, the Company granted 312,575 performance-based units with a value at the date of grant of $1.6 million. All of the performance-based units granted in fiscal 2015 vest subject to attainment of performance criteria established by the compensation committee.
Of the units granted in fiscal 2015, 201,464 may vest in a number of units up to 100% of the award, based on the attainment of certain revenueEBITDA margin targets for the period from April 1, 20142020 to March 31, 2017. At2023. The operating metrics plan performance was measured and vesting evaluated on a quarterly basis beginning with the award recipient may receive a numberperiod ended June 30, 2021 and continuing through the end of common stock shares equalthe performance period. Through the March 31, 2023 final measurement date, an accumulated 50% achievement, or 71,666 total units were earned under this plan. Of the earned amount, one-half vested immediately, while the remaining one-half vests one year later. The remaining 69,588 units are expected to be cancelled in the numberfirst quarter of unitsfiscal 2024 upon compensation committee approval.
PSU activity for the twelve months ended March 31, 2023 was: | | | | | | | | | | | | | | | | | | | | |
| | | | Weighted-average | | |
| | | | fair value per | | Weighted-average |
| | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) |
Outstanding at March 31, 2022 | | 584,468 | | | $ | 51.26 | | | 1.01 |
Granted | | 406,501 | | | $ | 24.65 | | | |
| | | | | | |
Vested | | (134,671) | | | $ | 45.96 | | | |
| | | | | | |
Forfeited or canceled | | (146,709) | | | $ | 61.20 | | | |
Outstanding at March 31, 2023 | | 709,589 | | | $ | 34.97 | | | 1.38 |
The total fair value of PSUs vested multiplied by a share price factor. The share price factor modifiesin the final number of common shares awarded based ontwelve months ended March 31, 2023, 2022 and 2021 was $3.0 million, $6.7 million and $8.4 million, respectively, and is measured as the Company's stock price on the date of vesting and ranges from 0% at a $40 Company stock price, or below, to 100% at a $70 Company stock price. The units also contain an accelerated exercise provision if the closingquoted market price of the Company'sCompany’s common stock exceeds the $70 maximum share value for 20 consecutive trading days during the performance period. The grant date value of the performance-based units is determined using a Monte Carlo simulation model.
The remaining 111,111 units granted in fiscal 2015 may vest in a number of units up to 100% of the award, based on the attainment of certain revenue targetsvesting date for the period from April 1, 2015 to March 31, 2018. At vesting, the award recipient may receive a number of common stock shares equal to the number of units vested multiplied by a share price factor. The share price factor modifies the final number of common shares awarded based on the Company's stock price on the date of vesting and ranges from 0% at a $25 Company stock price, or below, to 100% at a $45 Company stock price. The units also contain an accelerated exercise provision if the closing market pricevested.
Other Stock Compensation Activity
Acquisition-related Performance Plan
As part of the Company's fiscal 2021 acquisition of Acuity, the Company will be obligated to pay up to an additional $5.1 million, settled in a variable number of shares of Company common stock, exceedsand subject to certain performance conditions and continued employment of each participant. Performance will be measured and vesting evaluated in three annual increments on the $45 maximum share value for 20 consecutive trading days during the performance period. The grant date valueanniversary of the performance-based units is determined using a Monte Carlo simulation model.
Other performance unit activity duringclosing date (which date may be changed by the year endedboard of directors to an earlier date). Through March 31, 2016 was:
| | Number of shares | | | Weighted average fair value per share at grant date | | | Weighted-average remaining contractual term (in years) | |
Outstanding at March 31, 2015 | | | 312,575 | | | $ | 5.23 | | | | |
Granted | | | 323,080 | | | $ | 2.94 | | | | |
Outstanding at March 31, 2016 | | | 635,655 | | | $ | 4.07 | | | | 1.30 | |
The2023, the Company has recognized a total of $4.9 million as stock-based compensation expense related to the Acuity performance earnout plan. At March 31, 2023, the recognized, but unpaid, balance in other performance unitsaccrued expense in fiscal 2016 and 2015the consolidated balance sheet was $0.9 and $0.3$1.5 million. The final annual settlement of $1.7 million respectively. Future expense for these performance units is expected to occur in the second quarter of fiscal 2024.
Acquisition-related Consideration Holdback
As part of the Company's fiscal 2021 acquisition of DataFleets, $18.1 million of the acquisition consideration otherwise payable with respect to shares of DataFleets common stock held by certain key employees was subject to holdback by the Company pursuant to agreements with those employees (each, a "Holdback Agreement"). Each Holdback Agreement specifies that the consideration holdback will vest in three equal annual increments on the anniversary of the closing date (which date may be approximately $1.4changed by the board of directors to an earlier date). Vesting is subject to the DataFleets key employees' continued employment through each annual vesting date and will be settled in shares of Company common stock. Through March 31, 2023, the Company has recognized a total of $12.4 million overas stock-based compensation expense related to the next two years.DataFleets consideration holdback. At March 31, 2023, the recognized, but unpaid, balance related to the DataFleets consideration holdback in other accrued expenses in the consolidated balance sheet was $0.3 million. The final annual settlement of $2.6 million is expected to occur in the fourth quarter of fiscal 2024.
As part of the Company's fiscal 2020 acquisition of Data Plus Math ("DPM"), $24.4 million of the acquisition consideration otherwise payable with respect to shares of DPM common stock held by certain key employees was subject to holdback by the Company pursuant to agreements with those employees (each, a "Holdback Agreement"). Each Holdback Agreement specifies that the consideration holdback will vest in three equal annual increments on the anniversary of the closing date (which date may be changed by the board of directors to an earlier date). Vesting is subject to the DPM key employees' continued employment through each annual vesting date and will be settled in shares of Company common stock. The final annual settlement was paid during the first quarter of fiscal 2023.
Qualified Employee Stock Purchase Plan ("ESPP")
In addition
Under the Company's ESPP, all eligible employees are permitted to authorize payroll deductions of up to the share-based plans, the Company maintains a qualified employee stock purchase plan ("ESPP") that permits substantially all employeesapplicable ESPP and statutory limits to purchase shares of common stock. The ESPP provides for offering periods that are generally every six months. ESPP purchases generally occur on May 31st and November 30th each year. At each purchase date, employees are able to purchase shares at 85% of the lower of (1) the closing market price per share of common stock at a discount fromon the employee's enrollment into the applicable offering period and (2) the closing market price. Atprice per share of common stock on the purchase date.
The Company calculates the fair value of the ESPP purchase right using the Black-Scholes option-pricing model. Stock-based compensation expense associated with the ESPP was $2.1 million, $1.8 million and $1.0 million for the twelve months ended March 31, 2016 there were approximately 0.8 million shares available for issuance under the ESPP. 2023, 2022, and 2021, respectively.
During the combined fiscal yearstwelve months ended March 31, 2023, 197,255 shares of 2016, 2015 and 2014, 125,698 sharescommon stock were purchased under the plan. TheESPP at a weighted-average price of $20.38 per share, resulting in cash proceeds of $4.0 million over the relevant offering periods. During the twelve months ended March 31, 2022, 103,447 shares of common stock were purchased under the ESPP at a weighted-average price of $41.44 per share, resulting in cash proceeds of $4.3 million over the relevant offering periods. During the twelve months ended March 31, 2021, 44,980 shares of common stock were purchased under the ESPP at a weighted-average price of $41.53 per share, resulting in cash proceeds of $1.9 million over the relevant offering periods.
At March 31, 2023, there was approximately $0.4 million of total unrecognized stock-based compensation expense related to the Company, representingESPP, which is expected to be recognized on a straight-line basis over the discount toremaining term of the market price, for fiscal 2016 and 2015 was approximately $0.2 million and $0.1 million, respectively.current offering period.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Accumulated Other Comprehensive Income
The accumulated balances for each component of
Accumulated other comprehensive income was (dollars in thousands):accumulated balances of $4,504 and $5,730 at March 31, 2023 and March 31, 2022, respectively, reflect accumulated foreign currency translation adjustments.
| | March 31, 2016 | | | March 31, 2015 | |
Foreign currency translation | | $ | 8,705 | | | $ | 9,612 | |
Unrealized loss on interest rate swap | | | (115 | ) | | | (199 | ) |
| | $ | 8,590 | | | $ | 9,413 | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS15. INCOME TAX:
MARCH 31, 2016, 2015 AND 2014
13.INCOME TAXES:
Total income tax expense (benefit) was allocated as follows (dollars in thousands): | | | | | | | | | | | | | | | | | | | | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Continuing operations | | $ | 5,252 | | | $ | (1,242) | | | $ | (30,532) | |
Discontinued operations | | (7,070) | | | — | | | — | |
| | | | | | |
| | | | | | |
| | $ | (1,818) | | | $ | (1,242) | | | $ | (30,532) | |
| | 2016 | | | 2015 | | | 2014 | |
Loss from continuing operations | | $ | (11,632 | ) | | $ | (14,805 | ) | | $ | 12,040 | |
Earnings from discontinued operations | | | 3,598 | | | | 11,973 | | | | 17,587 | |
Stockholders' equity: | | | | | | | | | | | | |
Tax shortfall (excess tax benefits) from stock-based compensation | | | 293 | | | | (4,645 | ) | | | (11,295 | ) |
| | $ | (7,741 | ) | | $ | (7,477 | ) | | $ | 18,332 | |
Income tax expense (benefit) attributable to loss from continuing operations consists of (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | |
Current: | | | | | | | | | |
U.S. Federal | | $ | (2,410 | ) | | $ | (7,744 | ) | | $ | 1,157 | |
Non-U.S. | | | 535 | | | | 164 | | | | 890 | |
State | | | 1,907 | | | | (2,260 | ) | | | (942 | ) |
| | | 32 | | | | (9,840 | ) | | | 1,105 | |
Deferred: | | | | | | | | | | | | |
U.S. Federal | | | (3,789 | ) | | | (1,064 | ) | | | 2,421 | |
Non-U.S. | | | (3,220 | ) | | | 326 | | | | 7,641 | |
State | | | (4,655 | ) | | | (4,227 | ) | | | 873 | |
| | | (11,664 | ) | | | (4,965 | ) | | | 10,935 | |
Total | | $ | (11,632 | ) | | $ | (14,805 | ) | | $ | 12,040 | |
| | | | | | | | | | | | | | | | | | | | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Current: | | | | | | |
U.S. Federal | | $ | 6,325 | | | $ | (1,227) | | | $ | (28,060) | |
Non-U.S. | | 1,086 | | | 305 | | | 17 | |
State | | (2,274) | | | 1,220 | | | (1,071) | |
| | 5,137 | | | 298 | | | (29,114) | |
Deferred: | | | | | | |
U.S. Federal | | 155 | | | (895) | | | (1,205) | |
Non-U.S. | | (83) | | | (608) | | | (44) | |
State | | 43 | | | (37) | | | (169) | |
| | 115 | | | (1,540) | | | (1,418) | |
Total | | $ | 5,252 | | | $ | (1,242) | | | $ | (30,532) | |
Loss
Income (loss) before income tax attributable to U.S. and non-U.S. continuing operations consists of (dollars in thousands): | | | | | | | | | | | | | | | | | | | | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
U.S. | | $ | (122,994) | | | $ | (37,415) | | | $ | (122,257) | |
Non-U.S. | | 4,140 | | | 2,340 | | | 1,457 | |
Total | | $ | (118,854) | | | $ | (35,075) | | | $ | (120,800) | |
| | 2016 | | | 2015 | | | 2014 | |
U.S. | | $ | (6,952 | ) | | $ | (24,459 | ) | | $ | 872 | |
Non-U.S. | | | (13,328 | ) | | | (16,888 | ) | | | (6,172 | ) |
Total | | $ | (20,280 | ) | | $ | (41,347 | ) | | $ | (5,300 | ) |
EarningsIncome (loss) before income taxes, as shown above, areis based on the location of the entity to which such earnings (loss)income (losses) are attributable. However, since such earnings (loss)income (losses) may be subject to taxation in more than one country, the income tax provisionexpense (benefit) shown above as U.S. or non-U.S. may not correspond to the earningsincome (loss) shown above.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Below is a reconciliation of expected income tax benefit, computed usingby applying the U.S. federal statutory income tax rate of 35% of21.0% to loss before income taxes, to actual income tax expense (benefit) from continuing operations (dollars in thousands):
| | 2016 | | | 2015 | | | 2014 | |
Computed expected tax benefit | | $ | (7,098 | ) | | $ | (14,472 | ) | | $ | (1,855 | ) |
Increase (reduction) in income taxes resulting from: | | | | | | | | | | | | |
State income taxes, net of federal benefit | | | (1,796 | ) | | | (441 | ) | | | (371 | ) |
Research and other tax credits | | | (4,027 | ) | | | (6,369 | ) | | | (5,251 | ) |
Impairment of goodwill and intangibles | | | - | | | | - | | | | 5,368 | |
Share-based compensation | | | 1,857 | | | | 2,276 | | | | - | |
Non-U.S. subsidiaries taxed at other than 35% | | | 2,468 | | | | 4,354 | | | | 5,875 | |
Adjustment to valuation allowances | | | (3,585 | ) | | | (776 | ) | | | 7,604 | |
Other, net | | | 549 | | | | 623 | | | | 670 | |
| | $ | (11,632 | ) | | $ | (14,805 | ) | | $ | 12,040 | |
Due | | | | | | | | | | | | | | | | | | | | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Computed expected income tax benefit | | $ | (24,959) | | | $ | (7,366) | | | $ | (25,368) | |
Increase (reduction) in income taxes resulting from: | | | | | | |
State income taxes, net of federal benefit | | (2,440) | | | 691 | | | (979) | |
Research and other tax credits | | (4,363) | | | (3,107) | | | (4,635) | |
| | | | | | |
Nondeductible expenses | | 669 | | | 673 | | | 1,104 | |
| | | | | | |
Stock-based compensation | | 3,486 | | | 5,576 | | | (2,024) | |
Non-U.S. subsidiaries taxed at other rates | | 491 | | | (364) | | | 194 | |
Adjustment to valuation allowances | | 33,197 | | | 2,520 | | | 2,230 | |
| | | | | | |
| | | | | | |
Other, net | | (829) | | | 135 | | | (1,054) | |
| | $ | 5,252 | | | $ | (1,242) | | | $ | (30,532) | |
On March 27, 2020, the U.S. enacted The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act included several significant changes and clarifications to existing tax law, including changes to the treatment of net operating losses (“NOLs”). Under the CARES Act, NOLs arising in management's assessmenttax years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the realizabilityfive tax years preceding the tax year of deferred tax assetsthe loss. The Company carried back its fiscal 2021 NOL, resulting in certain foreign jurisdictions,an expected refund of approximately $28 million, which is included in Refundable income taxes, net on the consolidated balance sheets. The Company released $3.6also carried back its fiscal 2020 NOL, resulting in a refund of approximately $33 million, in valuation allowanceswhich was received in fiscal 2016 and increased valuation allowances by $7.6 million in fiscal 2014.2022.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at March 31, 20162023 and 20152022 are presented below (dollars in thousands). In accordance with income tax accounting standards, as of March 31, 2016, the Company has not recognized deferred income taxes on approximately $12.7 million of undistributed earnings of foreign subsidiaries that are indefinitely reinvested outside the respective parent's country. Calculation of the deferred income tax related to these earnings is not practicable.
| | | | | | | | | | | | | | |
| | Year ended March 31, |
| | 2023 | | 2022 |
Deferred tax assets: | | | | |
Accrued expenses | | $ | 5,287 | | | $ | 5,682 | |
| | | | |
Lease liabilities | | 11,613 | | | 14,090 | |
Net operating loss carryforwards | | 22,504 | | | 25,737 | |
Stock-based compensation | | 3,335 | | | 8,022 | |
Nonqualified deferred compensation | | 2,797 | | | 3,119 | |
Property and equipment | | 585 | | | 496 | |
Tax credit carryforwards | | 7,779 | | | 7,588 | |
Capitalized research and development | | 26,357 | | | 385 | |
Other | | 253 | | | 1,351 | |
Total deferred tax assets | | 80,510 | | | 66,470 | |
Less valuation allowance | | (61,152) | | | (37,399) | |
Net deferred tax assets | | 19,358 | | | 29,071 | |
Deferred tax liabilities: | | | | |
Prepaid expenses | | (2,411) | | | (2,296) | |
| | | | |
| | | | |
Right-of-use assets | | (6,011) | | | (13,691) | |
Intangible assets | | (829) | | | (4,603) | |
Deferred commissions | | (9,153) | | | (7,562) | |
| | | | |
Total deferred tax liabilities | | (18,404) | | | (28,152) | |
Net deferred tax assets | | $ | 954 | | | $ | 919 | |
| | 2016 | | | 2015 | |
Deferred tax assets: | | | | | | |
Accrued expenses | | $ | 11,525 | | | $ | 10,041 | |
Deferred revenue | | | 1,612 | | | | 2,715 | |
Net operating loss and tax credit carryforwards | | | 57,370 | | | | 60,893 | |
Share-based compensation | | | 12,706 | | | | 11,993 | |
Other | | | 5,242 | | | | 6,838 | |
Total deferred tax assets | | | 88,455 | | | | 92,480 | |
Less valuation allowance | | | (46,602 | ) | | | (49,922 | ) |
Net deferred tax assets | | | 41,853 | | | | 42,558 | |
Deferred tax liabilities: | | | | | | | | |
Intangible assets | | $ | (65,084 | ) | | $ | (75,104 | ) |
Capitalized software costs | | | (14,143 | ) | | | (15,862 | ) |
Property and equipment | | | (9,705 | ) | | | (6,651 | ) |
Total deferred tax liabilities | | | (88,932 | ) | | | (97,617 | ) |
Net deferred tax liabilities | | $ | (47,079 | ) | | $ | (55,059 | ) |
At March 31, 2016,2023, the Company has U.S. state net operating loss carryforwards of approximately $5.6$118.1 million, of which $16.6 million will not expire and $70.9 million for U.S. federal and state income tax purposes, respectively. These net operating loss carryforwardsthe remainder will expire in various amounts and will completely expire if not used by 2036.2043. The Company has foreign net operating loss carryforwards of approximately $130.9$89.8 million. Of this amount, $130.0 million do not have expiration dates. The remainder expires in various amounts and will completely expire if not used by 2025. The Company has federal and state credit carryforwards of $3.5 million and $17.5 million, respectively, of which $0.9 million and $1.5 million, respectively, will be credited to additional paid-in capital when realized. Of the credits, $5.1$79.4 million will not expire. The remainder expires in various amounts and will completely expire if not used by 2036.2031. The Company has U.S. state credit carryforwards of $9.8 million, of which $8.8 million will not expire and the remainder will expire in various amounts and will completely expire if not used by 2037.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realizationRealization of the Company’s net deferred tax assets is dependent upon theits generation of futuresufficient taxable income duringof the periodsproper character in which thosefuture years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences become deductible.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
and the use of net operating loss and credit carryforwards.
Based upon the Company'sweight of available evidence, including the Company’s history of profitability and taxable income and the reversal of taxable temporary differences in the U.S.,losses from continuing operations, management believes that with the exception of carryforwards in certain states it is not more likely than not the Company will realize the benefits of theseits deductible differences. Thetemporary differences and net operating loss and credit carryforwards. Accordingly, the Company has established a full valuation allowancesallowance against $6.0 million ofits net U.S. federal and state deferred tax assets related to lossas of March 31, 2023 and credit carryforwards in the states where activity does not support the deferred tax asset.2022, respectively.
Based upon the Company's history of losses in certain non-U.S. jurisdictions, the Company has not recorded a benefit for current foreign losses in these jurisdictions. In addition, Managementmanagement believes it is not more likely than not the Company will realize the benefits of certain foreign net operating loss carryforwards and has established valuation allowances in the amount of $40.6$20.8 million against all of its foreign deferred tax assets in such jurisdictions. No valuation allowance has been established against deferred tax assets in non-U.S. jurisdictions in which historical profits and forecasted continuing profits exist.
The earningscurrent year increase in the valuation allowance is primarily attributable to the impact of subsidiariesthe capitalization of research and development expenditures in such jurisdictionsaccordance with IRC Section 174, as modified by the Tax Cuts and the differences in income taxes computed using the U.S. statutory tax rate and the effective tax rate in such jurisdictions are not significant.Jobs Act of 2017.
The following table sets forth changes in the total gross unrecognized tax benefits for the fiscal years ended March 31, 2016, 20152023, 2022 and 20142021 (dollars in thousands): | | | | | | | | | | | | | | | | | | | | |
| | Year ended March 31, |
| | 2023 | | 2022 | | 2021 |
Balance at beginning of period | | $ | 23,817 | | | $ | 25,026 | | | $ | 23,400 | |
Increases related to prior year tax positions | | 93 | | | 411 | | | — | |
Decreases related to prior year tax positions | | (522) | | | — | | | (139) | |
Increases related to current year tax positions | | 2,229 | | | 990 | | | 1,765 | |
Settlements with taxing authorities | | (166) | | | — | | | — | |
Lapse of statute of limitations | | (3,827) | | | (2,610) | | | — | |
Balance at end of period | | $ | 21,624 | | | $ | 23,817 | | | $ | 25,026 | |
| | 2016 | | | 2015 | | | 2014 | |
Balance at beginning of period | | $ | 9,711 | | | $ | 2,457 | | | $ | 3,646 | |
Increases related to prior year tax positions | | | 1,717 | | | | 292 | | | | 946 | |
Decreases related to prior year tax positions | | | (1,227 | ) | | | (83 | ) | | | - | |
Increases related to current year tax positions | | | 2,035 | | | | 4,339 | | | | 902 | |
Increases resulting from acquisitions | | | - | | | | 2,887 | | | | - | |
Settlements with taxing authorities | | | (1,330 | ) | | | - | | | | - | |
Lapse of statute of limitations | | | - | | | | (181 | ) | | | (3,037 | ) |
Balance at end of period | | $ | 10,906 | | | $ | 9,711 | | | $ | 2,457 | |
The total amount of grossGross unrecognized tax benefits as of March 31, 20162023 was $10.9$21.6 million, of which up to $8.8$18.6 million would reduce the Company'sCompany’s effective tax rate in future periods if and when realized. The Company reports accrued interest and penalties related to unrecognized tax benefits in income tax expense. The combined amount of accrued interest and penalties related to tax positions on tax returns was approximately $0.3$4.8 million as of March 31, 2016. There was no material change in accrued2023. Accrued interest and penalties increased by $0.5 million during fiscal year 2016.2023. The Company does not anticipate anya material reduction of unrecognized tax benefits within the next 12 months.
The Company files a consolidated U.S. federal income tax return and tax returns in various state and local jurisdictions. The Company'sCompany’s subsidiaries also file tax returns in various foreign jurisdictions in which it operates.they operate. In the U.S., the statute of limitations for Internal Revenue Service examinations remains open for the Company'sCompany’s federal income tax returns for fiscal years subsequent to 2012.after 2015. The Company’s federal income tax return for fiscal year 2019 is currently under Internal Revenue Service examination. The status of other U.S. state and local and foreign tax examinations varies by jurisdiction. The Company does not anticipate any material adjustments to its consolidated financial statements resulting from tax examinations currently in progress.
F-66On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”). Under the Inflation Reduction Act, share repurchases made after December 31, 2022 will be subject to a 1% excise tax. In determining the total taxable value of shares repurchased, a deduction is allowed for the fair market value of any newly issued shares during the fiscal year. The excise tax and other corporate income tax changes included in the Inflation Reduction Act are not expected to have a material impact on our consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
14.16. RETIREMENT PLANS:
The Company has a qualified 401(k) retirement savings plan whichthat covers substantially all U.S. employees. The Company also offers a supplemental nonqualifiednon-qualified deferred compensation plan ("(“SNQDC Plan"Plan”) for certain highly-compensated employees. The Company matches 50%100% of the first 6% of each participating employee's annual aggregate contributions. The Company may also contribute additional amounts to the plans at the discretion of the board of directors.
Company contributions for the above plans amounted to approximately $6.1$11.6 million, $5.3$10.1 million, and $4.6$9.4 million in fiscal years 2016, 20152023, 2022, and 2014,2021, respectively. Included in both other current assets and other accrued liabilities are the assets and liabilities of the SNQDC Plan in the amount of $12.5$12.1 million and $14.2$15.5 million at March 31, 20162023 and 2015,2022, respectively.
The Company has one small defined benefit pension plan covering certain employees in Germany. Both the projected benefit obligation and accumulated benefit obligation were $0.4 million and $0.5 million as of March 31, 2016 and 2015, respectively. There were no plan assets as of either March 31, 2016 or March 31, 2015, resulting in an excess of benefit obligations over plan assets of $0.4 million at March 31, 2016 and $0.5 million at March 31, 2015.
15.
17. FOREIGN OPERATIONS:
The Company attributes revenue to each geographic region based on the location of the Company'sCompany’s operations. The following table shows financial information by geographic area for the years 2016, 2015 and 2014 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Year ended March 31, |
Revenue | | 2023 | | 2022 | | 2021 |
United States | | $ | 556,219 | | | $ | 495,765 | | | $ | 415,976 | |
Foreign | | | | | | |
Europe | | 32,210 | | | 26,373 | | | 22,515 | |
APAC | | 7,470 | | | 6,519 | | | 4,535 | |
Other | | 684 | | | — | | | — | |
All Foreign | | 40,364 | | | 32,892 | | | 27,050 | |
| | | | | | |
| | $ | 596,583 | | | $ | 528,657 | | | $ | 443,026 | |
Revenue
| | 2016 | | | 2015 | | | 2014 | |
United States | | $ | 770,043 | | | $ | 709,133 | | | $ | 692,773 | |
Foreign | | | | | | | | | | | | |
Europe | | $ | 52,562 | | | $ | 59,958 | | | $ | 73,294 | |
APAC | | | 25,138 | | | | 32,658 | | | | 34,540 | |
Other | | | 2,345 | | | | 3,162 | | | | 4,546 | |
All Foreign | | $ | 80,045 | | | $ | 95,778 | | | $ | 112,380 | |
| | $ | 850,088 | | | $ | 804,911 | | | $ | 805,153 | |
Long-lived assets excluding financial instruments (dollars in thousands)
| | March 31, 2016 | | | March 31, 2015 | |
United States | | $ | 748,123 | | | $ | 749,591 | |
Foreign | | | | | | | | |
Europe | | $ | 11,899 | | | $ | 11,466 | |
APAC | | | 13,817 | | | | 20,682 | |
Other | | | - | | | | 944 | |
All Foreign | | $ | 25,716 | | | $ | 33,092 | |
| | $ | 773,839 | | | $ | 782,683 | |
: | | | | | | | | | | | | | | |
| | March 31, |
| | 2023 | | 2022 |
United States | | $ | 452,555 | | | $ | 509,014 | |
Foreign | | | | |
Europe | | 1,643 | | | 4,174 | |
APAC | | 3,946 | | | 4,714 | |
All Foreign | | 5,589 | | | 8,888 | |
| | $ | 458,144 | | | $ | 517,902 | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
16.18. FAIR VALUE OF FINANCIAL INSTRUMENTS:INSTRUMENTS AND FAIR VALUE MEASUREMENTS:
The following methods and assumptions were used to estimate the fair value of each class ofCompany measures certain financial instruments for which it is practicable to estimate that value.
Cash and cash equivalents, trade receivables, unbilled and notes receivable, short-term borrowings and trade payables - The carrying amount approximates fair value because of the short maturity of these instruments.
Long-term debt - The interest rate on the term loan and revolving credit agreement is adjusted for changes in market rates and therefore the carrying value of these loans approximatesassets at fair value. The estimated fairFair value of other long-term debt wasis determined based upon the present value ofexit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the expected cash flows considering expected maturities and using interest rates currently availableprincipal market or the most advantageous market. Inputs used in the valuation techniques to the Company for long-term borrowings with similar terms. At March 31, 2016, the estimatedderive fair value of long-term debt approximates its carrying value.
Derivative instruments included in other liabilities - The carrying value is adjusted to fair value through other comprehensive income (loss) at each balance sheet date. The fair value is determined from an interest-rate futures model.
Under applicable accounting standards financial assets and liabilitiesvalues are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company assigned assets and liabilities to thea three-level hierarchy, in the accounting standards, which is as follows:
•Level 1 - quotedQuoted prices in active markets for identical assets or liabilities, liabilities.
•Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant otherinputs are observable inputs and or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 - Unobservable inputs to the valuation methodology that are significant unobservable inputs.to the measurement of fair value of assets or liabilities.
The following table presentsdetails the balancesfair value measurements within the fair value hierarchy of the Company's financial assets and liabilities at March 31, 2023 and March 31, 2022 that are measured at fair value as of March 31, 2016 and 2015on a recurring basis (dollars in thousands):
As of March 31, 2016 | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | | | | |
Other current assets | | $ | 12,532 | | | $ | - | | | $ | - | | | $ | 12,532 | |
Total assets | | $ | 12,532 | | | $ | - | | | $ | - | | | $ | 12,532 | |
| | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Other accrued expenses | | $ | - | | | $ | 115 | | | $ | - | | | $ | 115 | |
Total liabilities | | $ | - | | | $ | 115 | | | $ | - | | | $ | 115 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| | Cash and Cash Equivalents | | Short-Term Investments | | Other Current Assets | | Total |
Cash | | $ | 22,603 | | | $ | — | | | $ | — | | | $ | 22,603 | |
Level 1: | | | | | | | | |
Money market funds | | 439,853 | | | — | | | — | | | 439,853 | |
Assets of non-qualified retirement plan | | — | | | — | | | 12,110 | | | 12,110 | |
U.S. Treasury securities | | 1,992 | | | 25,307 | | | — | | | 27,299 | |
Certificates of deposit | | — | | | 7,500 | | | — | | | 7,500 | |
Total | | $ | 464,448 | | | $ | 32,807 | | | $ | 12,110 | | | $ | 509,365 | |
| | | | | | | | |
| | | | | | | | |
| | March 31, 2022 |
| | Cash and Cash Equivalents | | Short-Term Investments | | Other Current Assets | | Total |
Cash | | $ | 23,402 | | | | | | | $ | 23,402 | |
Level 1: | | | | | | | | |
Money market funds | | 576,760 | | | — | | | — | | | 576,760 | |
Assets of non-qualified retirement plan | | — | | | — | | | 15,528 | | | 15,528 | |
| | | | | | | | |
Certificates of deposit | | — | | | 7,500 | | | — | | | 7,500 | |
Total | | $ | 600,162 | | | $ | 7,500 | | | $ | 15,528 | | | $ | 623,190 | |
As of March 31, 2015 | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | | | | |
Other current assets | | $ | 14,174 | | | $ | - | | | $ | - | | | $ | 14,174 | |
Total assets | | $ | 14,174 | | | $ | - | | | $ | - | | | $ | 14,174 | |
| | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Other noncurrent liabilities | | $ | - | | | $ | 199 | | | $ | - | | | $ | 199 | |
Total liabilities | | $ | - | | | $ | 199 | | | $ | - | | | $ | 199 | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
17.SEGMENT INFORMATION:
For certain financial instruments, including accounts receivable and accounts payable, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.
The Company reports segment information consistent withheld $1.6 million and $5.7 million of strategic investments without readily determinable fair values at March 31, 2023 and March 31, 2022, respectively (see Note 7). These investments are included in other assets on the way management internally disaggregates its operations to assess performance and to allocate resources.
consolidated balance sheets. During the first quarter of fiscal 2016,twelve months ended March 31, 2023, the Company realigned its organizational structurerecorded a $4.0 million impairment of a strategic investment that is recorded in other expense in the consolidated statement of operations. There were no impairment charges for the twelve months ended March 31, 2022.
Certain of the Company's non-financial assets were measured at fair value on a nonrecurring basis during the twelve months ended March 31, 2023, including property and equipment and right-of-use assets that were reduced to better reflect its business strategy. On May 20, 2015, the Company entered into a definitive agreement to sell its ITO business to Charlesbank Capital Partners and M/C Partners to more sharply focus on growing our Marketing & Data Services businesses. The sale was completed on July 31, 2015. Asfair value when they were impaired as a result of this transaction and the organizational realignment,Company's lease-related restructuring plans. For additional information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed. Thus, beginning in fiscal year 2016, the Company began reporting its financial performance based on the following new segments: Marketing ServicesCompany's fair value measurement in connection with the impairment of certain property and Audience Solutions,equipment and Connectivity. During the third quarter of fiscal 2016, the operationalright-of-use assets associated with office facilities, see Note 3 and financial activities to separate Marketing Services and Audience Solutions were completed and as a result are now reported as separate operating segments. Prior period amounts have been adjusted to conform to the way the Company internally managed and monitored segment performance during the current fiscal year.Note 8.
Revenue and cost of revenue are generally directly attributed to the segments. Certain revenue contracts are allocated among the segments based on the relative value of the underlying products and services. Cost of revenue, excluding non-cash stock compensation expense and purchased intangible asset amortization, is directly charged in most cases and allocated in certain cases based upon proportional usage.
Operating expenses, excluding non-cash stock compensation expense and purchased intangible asset amortization, are attributed to the segment groups as follows:
· | Research and development expenses are primarily directly recorded to each segment group based on identified products supported. |
· | Sales and marketing expenses are primarily directly recorded to each segment group based on products supported and sold. |
· | General and administrative expenses are generally not allocated to the segments unless directly attributable. |
· | Gains, losses and other items, net are not allocated to the segment groups. |
We do not track our assets by operating segments. Consequently, it is not practical to show assets by operating segment.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The following table presents information by business segment (dollars in thousands). The prior-year segment information has been restated to conform to the new segment presentation:
| | | | | | |
| | 2016 | | | 2015 | | | 2014 | |
Revenues: | | | | | | | | | |
Marketing Services | | $ | 449,772 | | | $ | 446,103 | | | $ | 465,572 | |
Audience Solutions | | | 297,846 | | | | 303,836 | | | | 325,932 | |
Connectivity | | | 102,470 | | | | 54,972 | | | | 13,649 | |
Total segment revenues | | $ | 850,088 | | | $ | 804,911 | | | $ | 805,153 | |
| | | | | | | | | | | | |
Gross profit(1): | | | | | | | | | | | | |
Marketing Services | | $ | 152,258 | | | $ | 156,395 | | | $ | 150,533 | |
Audience Solutions | | | 167,715 | | | | 158,386 | | | | 162,369 | |
Connectivity | | | 61,199 | | | | 13,322 | | | | (11,688 | ) |
Total segment gross profit | | $ | 381,172 | | | $ | 328,103 | | | $ | 301,214 | |
| | | | | | | | | | | | |
Income (loss) from operations(1): | | | | | | | | | | | | |
Marketing Services | | $ | 74,371 | | | $ | 81,247 | | | $ | 83,771 | |
Audience Solutions | | | 109,598 | | | | 115,078 | | | | 119,950 | |
Connectivity | | | (3,298 | ) | | | (40,069 | ) | | | (46,767 | ) |
Total segment income from operations | | $ | 180,671 | | | $ | 156,256 | | | $ | 156,954 | |
| | | | | | | | | | | | |
Depreciation and amortization: | | | | | | | | | | | | |
Marketing Services | | $ | 9,988 | | | $ | 12,280 | | | $ | 7,763 | |
Audience Solutions | | | 12,909 | | | | 12,652 | | | | 14,991 | |
Connectivity | | | 19,932 | | | | 16,469 | | | | 3,061 | |
Corporate | | | 42,634 | | | | 39,046 | | | | 31,085 | |
Total depreciation and amortization | | $ | 85,463 | | | $ | 80,447 | | | $ | 56,900 | |
(1) Gross profit and Income (loss) from operations reflect only the direct and allocable controllable costs of each segment and do not include allocations of corporate expenses (primarily general and administrative expenses) and gains, losses, and other items, net. Additionally, Gross profit and Income (loss) from operations do not reflect non-cash stock compensation expense and purchased intangible asset amortization. | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The following table reconciles total operating segment gross profit to gross profit and total operating segment income from operations to loss from operations:
| | | | | | |
| | 2016 | | | 2015 | | | 2014 | |
| | | | | | | | | |
Total segment gross profit | | $ | 381,172 | | | $ | 328,103 | | | $ | 301,214 | |
Less: | | | | | | | | | | | | |
Purchased intangible asset amortization | | | 15,466 | | | | 11,454 | | | | - | |
Non-cash stock compensation | | | 2,150 | | | | 1,459 | | | | 1,578 | |
Corporate expenses | | | 1,850 | | | | 4,316 | | | | - | |
Gross profit | | $ | 361,706 | | | $ | 310,874 | | | $ | 299,636 | |
| | | | | | | | | | | | |
Total segment income from operations | | $ | 180,671 | | | $ | 156,256 | | | $ | 156,954 | |
Less: | | | | | | | | | | | | |
Corporate expenses | | | 127,844 | | | | 126,570 | | | | 99,818 | |
Gains, losses and other items, net | | | 12,132 | | | | 22,600 | | | | 17,168 | |
Impairment of goodwill and other | | | 6,829 | | | | - | | | | 24,953 | |
Purchased intangible asset amortization | | | 15,466 | | | | 11,454 | | | | 252 | |
Non-cash stock compensation | | | 31,463 | �� | | | 28,316 | | | | 13,206 | |
Income (loss) from operations | | $ | (13,063 | ) | | $ | (32,684 | ) | | $ | 1,557 | |
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
18.UNAUDITED SELECTED QUARTERLY FINANCIAL DATA:
The following tables contain selected unaudited statement of operations information for each quarter of 2016 and 2015. The following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. Unaudited quarterly results are as follows:
(dollars in thousands except per-share amounts) | | Quarter ended June 30, 2015 | | | Quarter ended September 30, 2015 | | | Quarter ended December 31, 2015 | | | Quarter ended March 31, 2016 | |
Revenue | | $ | 196,895 | | | $ | 207,345 | | | $ | 221,193 | | | $ | 224,655 | |
Gross profit | | | 79,186 | | | | 86,033 | | | | 95,458 | | | | 101,029 | |
Loss from operations | | | (2,869 | ) | | | (2,056 | ) | | | (374 | ) | | | (7,764 | ) |
Earnings (loss) from discontinued operations, net of tax | | | 4,143 | | | | 12,068 | | | | (971 | ) | | | 111 | |
Net earnings (loss) | | | (1,039 | ) | | | 10,723 | | | | (1,410 | ) | | | (1,571 | ) |
| | | | | | | | | | | | | | | | |
Basic earnings (loss) per share: | | | | | | | | | | | | | | | | |
Continuing operations | | | (0.07 | ) | | | (0.02 | ) | | | (0.01 | ) | | | (0.02 | ) |
Discontinued operations | | | 0.05 | | | | 0.15 | | | | (0.01 | ) | | | 0.00 | |
Net earnings (loss) | | | (0.01 | ) | | | 0.14 | | | | (0.02 | ) | | | (0.02 | ) |
| | | | | | | | | | | | | | | | |
Diluted earnings (loss) per share: | | | | | | | | | | | | | | | | |
Continuing operations | | | (0.07 | ) | | | (0.02 | ) | | | (0.01 | ) | | | (0.02 | ) |
Discontinued operations | | | 0.05 | | | | 0.15 | | | | (0.01 | ) | | | 0.00 | |
Net earnings (loss) | | | (0.01 | ) | | | 0.14 | | | | (0.02 | ) | | | (0.02 | ) |
(dollars in thousands except per-share amounts) | | Quarter ended June 30, 2014 | | | Quarter ended September 30, 2014 | | | Quarter ended December 31, 2014 | | | Quarter ended March 31, 2015 | |
Revenue | | $ | 186,683 | | | $ | 204,248 | | | $ | 208,246 | | | $ | 205,734 | |
Gross profit | | | 71,119 | | | | 79,290 | | | | 82,439 | | | | 78,026 | |
Loss from operations | | | (13,086 | ) | | | (6,443 | ) | | | (2,290 | ) | | | (10,865 | ) |
Earnings from discontinued operations, net of tax | | | 3,137 | | | | 5,557 | | | | 3,819 | | | | 2,998 | |
Net earnings (loss) | | | (7,604 | ) | | | (1,544 | ) | | | 4,156 | | | | (6,039 | ) |
| | | | | | | | | | | | | | | | |
Basic earnings (loss) per share: | | | | | | | | | | | | | | | | |
Continuing operations | | | (0.14 | ) | | | (0.09 | ) | | | 0.00 | | | | (0.12 | ) |
Discontinued operations | | | 0.04 | | | | 0.07 | | | | 0.05 | | | | 0.04 | |
Net earnings (loss) | | | (0.10 | ) | | | (0.02 | ) | | | 0.05 | | | | (0.08 | ) |
Diluted earnings (loss) per share: | | | | | | | | | | | | | | | | |
From continuing operations | | | (0.14 | ) | | | (0.09 | ) | | | 0.00 | | | | (0.12 | ) |
From discontinued operations | | | 0.04 | | | | 0.07 | | | | 0.05 | | | | 0.04 | |
Net earnings (loss) | | | (0.10 | ) | | | (0.02 | ) | | | 0.05 | | | | (0.08 | ) |
| | | | | | | | | | | | | | | | |
Some earnings (loss) per share amounts may not add due to rounding. | |
F-72