SECURITIES AND EXCHANGE COMMISSION
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[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20162017
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[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ----- to -----
Commission file number 0-13163
Acxiom Corporation
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Acxiom Corporation |
(Exact Name of Registrant as Specified in Its Charter) |
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(State or Other Jurisdiction of
Incorporation or Organization) | Identification No.) |
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P.O. Box 8190, 601
301 E. Third Street,Little Rock,Dave Ward Drive
(Address of Principal Executive Offices) | 72203-8190
72032 (Zip Code) |
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(Registrant's Telephone Number, Including Area Code) |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated
filer” andfiler,” “smaller reporting company”
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer [X] | Accelerated filer [ ] |
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Non-accelerated filer [ ] | Smaller reporting company [ ] |
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(Do not check if a smaller reporting company) | Emerging growth company [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The number of shares of common stock, $ 0.10 par value per share, outstanding as of
November 4, 2016October 31, 2017 was
77,468,461.79,136,883.
ACXIOM CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | |
| | September 30, | | March 31, | |
| | 2016 | | 2016 | |
ASSETS | | | (Unaudited) | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 175,409 | | $ | 189,629 | |
Trade accounts receivable, net | | | 130,509 | | | 138,650 | |
Refundable income taxes | | | 5,347 | | | 9,834 | |
Other current assets | | | 42,916 | | | 37,897 | |
Total current assets | | | 354,181 | | | 376,010 | |
| | | | | | | |
Property and equipment, net of accumulated depreciation and amortization | | | 174,936 | | | 183,043 | |
Software, net of accumulated amortization | | | 45,048 | | | 55,735 | |
Goodwill | | | 487,055 | | | 492,745 | |
Purchased software licenses, net of accumulated amortization | | | 8,792 | | | 10,116 | |
Deferred income taxes | | | 10,038 | | | 6,885 | |
Other assets, net | | | 22,007 | | | 25,315 | |
| | $ | 1,102,057 | | $ | 1,149,849 | |
LIABILITIES AND EQUITY | | | | | | | |
Current liabilities: | | | | | | | |
Current installments of long-term debt | | $ | 32,281 | | $ | 32,243 | |
Trade accounts payable | | | 36,300 | | | 37,717 | |
Accrued expenses | | | | | | | |
Payroll | | | 35,413 | | | 61,309 | |
Other | | | 46,581 | | | 48,254 | |
Deferred revenue | | | 33,394 | | | 44,477 | |
Total current liabilities | | | 183,969 | | | 224,000 | |
| | | | | | | |
Long-term debt | | | 142,341 | | | 157,897 | |
Deferred income taxes | | | 53,532 | | | 53,964 | |
Other liabilities | | | 14,727 | | | 15,020 | |
Commitments and contingencies | | | | | | | |
Equity: | | | | | | | |
Common stock | | | 13,190 | | | 13,039 | |
Additional paid-in capital | | | 1,115,194 | | | 1,082,220 | |
Retained earnings | | | 609,617 | | | 598,501 | |
Accumulated other comprehensive income | | | 7,616 | | | 8,590 | |
Treasury stock, at cost | | | (1,038,129) | | | (1,003,382) | |
Total equity | | | 707,488 | | | 698,968 | |
| | $ | 1,102,057 | | $ | 1,149,849 | |
|
| | | | | | | | |
| | September 30, 2017 | | March 31, 2017 |
ASSETS | | (Unaudited) | | |
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Current assets: | | |
| | |
|
Cash and cash equivalents | | $ | 169,507 |
| | $ | 170,343 |
|
Trade accounts receivable, net | | 141,285 |
| | 142,768 |
|
Refundable income taxes | | 9,718 |
| | 7,098 |
|
Other current assets | | 47,394 |
| | 48,310 |
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Total current assets | | 367,904 |
| | 368,519 |
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| | | | |
Property and equipment, net of accumulated depreciation and amortization | | 151,055 |
| | 155,974 |
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Software, net of accumulated amortization | | 41,087 |
| | 47,638 |
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Goodwill | | 592,845 |
| | 592,731 |
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Purchased software licenses, net of accumulated amortization | | 6,765 |
| | 7,972 |
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Deferred income taxes | | 12,309 |
| | 10,261 |
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Other assets, net | | 44,807 |
| | 51,443 |
|
| | $ | 1,216,772 |
| | $ | 1,234,538 |
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LIABILITIES AND EQUITY | | |
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Current liabilities: | | |
| | |
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Current installments of long-term debt | | $ | 2,089 |
| | $ | 39,819 |
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Trade accounts payable | | 46,966 |
| | 40,208 |
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Accrued payroll and related expenses | | 28,455 |
| | 53,238 |
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Other accrued expenses | | 57,914 |
| | 59,861 |
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Deferred revenue | | 29,411 |
| | 37,087 |
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Total current liabilities | | 164,835 |
| | 230,213 |
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| | | | |
Long-term debt | | 228,045 |
| | 189,241 |
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Deferred income taxes | | 54,256 |
| | 58,374 |
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Other liabilities | | 16,540 |
| | 17,730 |
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Commitments and contingencies | |
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Equity: | | |
| | |
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Common stock | | 13,478 |
| | 13,288 |
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Additional paid-in capital | | 1,197,083 |
| | 1,154,429 |
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Retained earnings | | 600,215 |
| | 602,609 |
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Accumulated other comprehensive income | | 9,410 |
| | 7,999 |
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Treasury stock, at cost | | (1,067,090 | ) | | (1,039,345 | ) |
Total equity | | 753,096 |
| | 738,980 |
|
| | $ | 1,216,772 |
| | $ | 1,234,538 |
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
| | | | | | | |
| | For the Three months ended | |
| | September 30, | |
| | 2016 | | 2015 | |
| | | | | | | |
Revenues | | $ | 217,267 | | $ | 207,345 | |
Cost of revenue | | | 120,105 | | | 121,312 | |
Gross profit | | | 97,162 | | | 86,033 | |
Operating expenses: | | | | | | | |
Research and development | | | 19,029 | | | 19,078 | |
Sales and marketing | | | 37,847 | | | 34,259 | |
General and administrative | | | 32,866 | | | 31,519 | |
Impairment of goodwill and other assets | | | — | | | 729 | |
Gains, losses and other items, net | | | 300 | | | 2,504 | |
Total operating expenses | | | 90,042 | | | 88,089 | |
Income (loss) from operations | | | 7,120 | | | (2,056) | |
Other income (expense): | | | | | | | |
Interest expense | | | (1,689) | | | (1,956) | |
Other, net | | | (207) | | | 59 | |
Total other expense | | | (1,896) | | | (1,897) | |
Income (loss) from continuing operations before income taxes | | | 5,224 | | | (3,953) | |
Income taxes (benefit) | | | (1,916) | | | (2,608) | |
Net earnings (loss) from continuing operations | | | 7,140 | | | (1,345) | |
Earnings from discontinued operations, net of tax | | | — | | | 12,068 | |
Net earnings | | $ | 7,140 | | $ | 10,723 | |
| | | | | | | |
Basic earnings (loss) per share: | | | | | | | |
Net earnings (loss) from continuing operations | | $ | 0.09 | | $ | (0.02) | |
Net earnings from discontinued operations | | | — | | | 0.15 | |
Net earnings | | $ | 0.09 | | $ | 0.14 | |
| | | | | | | |
Diluted earnings (loss) per share: | | | | | | | |
Net earnings (loss) from continuing operations | | $ | 0.09 | | $ | (0.02) | |
Net earnings from discontinued operations | | | — | | | 0.15 | |
Net earnings | | $ | 0.09 | | $ | 0.14 | |
Some earnings per share amounts may not add due to rounding.
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| | | | | | | | |
| | For the three months ended |
| | September 30, |
| | 2017 | | 2016 |
Revenues | | $ | 225,240 |
| | $ | 217,267 |
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Cost of revenue | | 115,072 |
| | 120,105 |
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Gross profit | | 110,168 |
| | 97,162 |
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Operating expenses: | | | | |
Research and development | | 24,013 |
| | 19,029 |
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Sales and marketing | | 50,118 |
| | 37,847 |
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General and administrative | | 31,924 |
| | 32,866 |
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Gains, losses and other items, net | | 3,660 |
| | 300 |
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Total operating expenses | | 109,715 |
| | 90,042 |
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Income from operations | | 453 |
| | 7,120 |
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Other income (expense): | | | | |
Interest expense | | (2,524 | ) | | (1,689 | ) |
Other, net | | 192 |
| | (207 | ) |
Total other expense | | (2,332 | ) | | (1,896 | ) |
Income (loss) before income taxes | | (1,879 | ) | | 5,224 |
|
Income taxes (benefit) | | 1,457 |
| | (1,916 | ) |
Net earnings (loss) | | $ | (3,336 | ) | | $ | 7,140 |
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| | | | |
Basic earnings (loss) per share | | $ | (0.04 | ) | | $ | 0.09 |
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| | | | |
Diluted earnings (loss) per share | | $ | (0.04 | ) | | $ | 0.09 |
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
| | | | | | | |
| | For the Six months ended | |
| | September 30, | |
| | 2016 | | 2015 | |
| | | | | | | |
Revenues | | $ | 432,068 | | $ | 404,240 | |
Cost of revenue | | | 242,924 | | | 239,021 | |
Gross profit | | | 189,144 | | | 165,219 | |
Operating expenses: | | | | | | | |
Research and development | | | 37,681 | | | 39,089 | |
Sales and marketing | | | 75,195 | | | 63,753 | |
General and administrative | | | 60,372 | | | 63,262 | |
Impairment of goodwill and other assets | | | — | | | 729 | |
Gains, losses and other items, net | | | 614 | | | 3,311 | |
Total operating expenses | | | 173,862 | | | 170,144 | |
Income (loss) from operations | | | 15,282 | | | (4,925) | |
Other income (expense): | | | | | | | |
Interest expense | | | (3,501) | | | (3,841) | |
Other, net | | | 100 | | | 363 | |
Total other expense | | | (3,401) | | | (3,478) | |
Income (loss) from continuing operations before income taxes | | | 11,881 | | | (8,403) | |
Income taxes (benefit) | | | 765 | | | (1,876) | |
Net earnings (loss) from continuing operations | | | 11,116 | | | (6,527) | |
Earnings from discontinued operations, net of tax | | | — | | | 16,211 | |
Net earnings | | $ | 11,116 | | $ | 9,684 | |
| | | | | | | |
Basic earnings (loss) per share: | | | | | | | |
Net earnings (loss) from continuing operations | | $ | 0.14 | | $ | (0.08) | |
Net earnings from discontinued operations | | | — | | | 0.21 | |
Net earnings | | $ | 0.14 | | $ | 0.12 | |
| | | | | | | |
Diluted earnings (loss) per share: | | | | | | | |
Net earnings (loss) from continuing operations | | $ | 0.14 | | $ | (0.08) | |
Net earnings from discontinued operations | | | — | | | 0.21 | |
Net earnings | | $ | 0.14 | | $ | 0.12 | |
Some earnings per share amounts may not add due to rounding.
|
| | | | | | | | |
| | For the six months ended |
| | September 30, |
| | 2017 | | 2016 |
Revenues | | $ | 437,754 |
| | $ | 432,068 |
|
Cost of revenue | | 229,032 |
| | 242,924 |
|
Gross profit | | 208,722 |
| | 189,144 |
|
Operating expenses: | | | | |
Research and development | | 47,576 |
| | 37,681 |
|
Sales and marketing | | 98,558 |
| | 75,195 |
|
General and administrative | | 64,280 |
| | 60,372 |
|
Gains, losses and other items, net | | 3,562 |
| | 614 |
|
Total operating expenses | | 213,976 |
| | 173,862 |
|
Income (loss) from operations | | (5,254 | ) | | 15,282 |
|
Other income (expense): | | | | |
Interest expense | | (4,866 | ) | | (3,501 | ) |
Other, net | | (480 | ) | | 100 |
|
Total other expense | | (5,346 | ) | | (3,401 | ) |
Income (loss) before income taxes | | (10,600 | ) | | 11,881 |
|
Income taxes (benefit) | | (5,964 | ) | | 765 |
|
Net earnings (loss) | | $ | (4,636 | ) | | $ | 11,116 |
|
| | | | |
Basic earnings (loss) per share | | $ | (0.06 | ) | | $ | 0.14 |
|
| | | | |
Diluted earnings (loss) per share | | $ | (0.06 | ) | | $ | 0.14 |
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
| | | | | | | |
| | For the Three months ended | |
| | September 30, | |
| | 2016 | | 2015 | |
| | | | | | | |
Net earnings | | $ | 7,140 | | $ | 10,723 | |
Other comprehensive income (loss): | | | | | | | |
Change in foreign currency translation adjustment | | | (65) | | | (2,392) | |
Unrealized gain (loss) on interest rate swap | | | 91 | | | (81) | |
Other comprehensive income (loss) | | | 26 | | | (2,473) | |
Comprehensive income | | $ | 7,166 | | $ | 8,250 | |
|
| | | | | | | | |
| | For the three months ended |
| | September 30, |
| | 2017 | | 2016 |
Net earnings (loss) | | $ | (3,336 | ) | | $ | 7,140 |
|
Other comprehensive income: | | | | |
Change in foreign currency translation adjustment | | 759 |
| | (65 | ) |
Unrealized gain on interest rate swap | | — |
| | 91 |
|
Other comprehensive income | | 759 |
| | 26 |
|
Comprehensive income (loss) | | $ | (2,577 | ) | | $ | 7,166 |
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
| | | | | | | |
| | For the Six months ended | |
| | September 30, | |
| | 2016 | | 2015 | |
| | | | | | | |
Net earnings | | $ | 11,116 | | $ | 9,684 | |
Other comprehensive income (loss): | | | | | | | |
Change in foreign currency translation adjustment | | | (1,070) | | | (1,674) | |
Unrealized gain (loss) on interest rate swap | | | 96 | | | (70) | |
Other comprehensive loss | | | (974) | | | (1,744) | |
Comprehensive income | | $ | 10,142 | | $ | 7,940 | |
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| | | | | | | | |
| | For the six months ended |
| | September 30, |
| | 2017 | | 2016 |
Net earnings (loss) | | $ | (4,636 | ) | | $ | 11,116 |
|
Other comprehensive income (loss): | | | | |
Change in foreign currency translation adjustment | | 1,411 |
| | (1,070 | ) |
Unrealized gain on interest rate swap | | — |
| | 96 |
|
Other comprehensive income (loss) | | 1,411 |
| | (974 | ) |
Comprehensive income (loss) | | $ | (3,225 | ) | | $ | 10,142 |
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
SIX MONTHS ENDED SEPTEMBER 30, 20162017
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | | | | | | | |
| | Common Stock | | Additional | | | | | other | | Treasury Stock | | | | |
| | Number | | | | | paid-in | | Retained | | comprehensive | | Number | | | | | Total | |
| | of shares | | Amount | | Capital | | earnings | | income | | of shares | | Amount | | Equity | |
| | | | | | | | | | | | | | | | | | | | | | | |
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 | |
Employee stock awards, benefit plans and other issuances | | 718,518 | | | 72 | | | 11,433 | | | — | | | — | | (191,496) | | | (4,205) | | | 7,300 | |
Tax impact of stock options and restricted stock | | — | | | — | | | 1,116 | | | — | | | — | | — | | | — | | | 1,116 | |
Non-cash stock-based compensation | | 27,236 | | | 2 | | | 20,502 | | | — | | | — | | — | | | — | | | 20,504 | |
Restricted stock units vested | | 767,672 | | | 77 | | | (77) | | | — | | | — | | — | | | — | | | — | |
Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | (1,314,840) | | | (30,542) | | | (30,542) | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | | — | | | — | | | — | | | (1,070) | | — | | | — | | | (1,070) | |
Unrealized gain on interest rate swap | | — | | | — | | | — | | | — | | | 96 | | — | | | — | | | 96 | |
Net earnings | | — | | | — | | | — | | | 11,116 | | | — | | — | | | — | | | 11,116 | |
Balances at September 30, 2016 | | 131,903,532 | | $ | 13,190 | | $ | 1,115,194 | | $ | 609,617 | | $ | 7,616 | | (54,537,018) | | $ | (1,038,129) | | $ | 707,488 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | | | other | | Treasury Stock | | |
| | Number | | | | paid-in | | Retained | | comprehensive | | Number | | | | Total |
| | of shares | | Amount | | Capital | | earnings | | income | | of shares | | Amount | | Equity |
Balances at March 31, 2017 | | 132,875,373 |
| | $ | 13,288 |
| | $ | 1,154,429 |
| | $ | 602,609 |
| | $ | 7,999 |
| | (54,582,392 | ) | | $ | (1,039,345 | ) | | $ | 738,980 |
|
Cumulative-effect adjustment from adoption of ASU 2016-09 | | — |
| | — |
| | 384 |
| | 2,242 |
| | — |
| | — |
| | — |
| | $ | 2,626 |
|
Employee stock awards, benefit plans and other issuances | | 596,881 |
| | 60 |
| | 11,604 |
| | — |
| | — |
| | (306,841 | ) | | (7,969 | ) | | $ | 3,695 |
|
Non-cash stock-based compensation | | 330,951 |
| | 33 |
| | 30,763 |
| | — |
| | — |
| | — |
| | — |
| | $ | 30,796 |
|
Restricted stock units vested | | 975,014 |
| | 97 |
| | (97 | ) | | — |
| | — |
| | — |
| | — |
| | $ | — |
|
Acquisition of treasury stock | | — |
| | — |
| | — |
| | — |
| | — |
| | (860,000 | ) | | (19,776 | ) | | $ | (19,776 | ) |
Comprehensive income (loss): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
|
|
Foreign currency translation | | — |
| | — |
| | — |
| | — |
| | 1,411 |
| | — |
| | — |
| | $ | 1,411 |
|
Net loss | | — |
| | — |
| | — |
| | (4,636 | ) | | — |
| | — |
| | — |
| | $ | (4,636 | ) |
Balances at September 30, 2017 | | 134,778,219 |
| | $ | 13,478 |
| | $ | 1,197,083 |
| | $ | 600,215 |
| | $ | 9,410 |
| | (55,749,233 | ) | | $ | (1,067,090 | ) | | $ | 753,096 |
|
See accompanying notes to condensed consolidated financial statements
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | |
| | For the Six months ended September 30, | |
| | 2016 | | 2015 | |
| | | | | | | |
Cash flows from operating activities: | | | | | | | |
Net earnings | | $ | 11,116 | | $ | 9,684 | |
Earnings from discontinued operations, net of tax | | | — | | | (16,211) | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | |
Depreciation and amortization | | | 41,150 | | | 42,410 | |
Loss (gain) on disposal or impairment of assets | | | (629) | | | 161 | |
Impairment of goodwill and other assets | | | — | | | 729 | |
Deferred income taxes | | | (6,539) | | | 284 | |
Non-cash stock-based compensation expense | | | 20,504 | | | 15,483 | |
Changes in operating assets and liabilities: | | | | | | | |
Accounts receivable, net | | | (1,564) | | | (9,281) | |
Other assets | | | 3,679 | | | (2,021) | |
Accounts payable and other liabilities | | | (21,780) | | | (10,336) | |
Deferred revenue | | | (9,705) | | | 2,452 | |
Net cash provided by operating activities | | | 36,232 | | | 33,354 | |
| | | | | | | |
Cash flows from investing activities: | | | | | | | |
Capitalized software development costs | | | (7,875) | | | (6,733) | |
Capital expenditures | | | (20,539) | | | (23,120) | |
Data acquisition costs | | | (267) | | | (711) | |
Net cash received from disposition | | | 16,988 | | | — | |
Net cash used in investing activities | | | (11,693) | | | (30,564) | |
| | | | | | | |
Cash flows from financing activities: | | | | | | | |
Payments of debt | | | (16,111) | | | (71,138) | |
Sale of common stock, net of stock acquired for withholding taxes | | | 7,300 | | | 4,102 | |
Excess tax benefits from stock-based compensation | | | 1,415 | | | (552) | |
Acquisition of treasury stock | | | (30,542) | | | (27,261) | |
Net cash used in financing activities | | | (37,938) | | | (94,849) | |
Net cash used in continuing operations | | | (13,399) | | | (92,059) | |
| | | | | | | |
Cash flows from discontinued operations: | | | | | | | |
Net cash provided by operating activities | | | — | | | 9,715 | |
Net cash provided by investing activities | | | — | | | 122,831 | |
Net cash used in financing activities | | | — | | | (206) | |
Net cash provided by discontinued operations | | | — | | | 132,340 | |
Net cash provided by (used in) continuing and discontinued operations | | | (13,399) | | | 40,281 | |
Effect of exchange rate changes on cash | | | (821) | | | (346) | |
| | | | | | | |
Net change in cash and cash equivalents | | | (14,220) | | | 39,935 | |
Cash and cash equivalents at beginning of period | | | 189,629 | | | 141,010 | |
Cash and cash equivalents at end of period | | $ | 175,409 | | $ | 180,945 | |
|
| | | | | | | | |
| | For the six months ended |
| | September 30, |
| | 2017 | | 2016 |
Cash flows from operating activities: | | | | |
Net earnings (loss) | | $ | (4,636 | ) | | $ | 11,116 |
|
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | | |
| | |
|
Depreciation and amortization | | 42,519 |
| | 41,150 |
|
Loss (gain) on disposal or impairment of assets | | 2,411 |
| | (629 | ) |
Accelerated deferred debt costs | | 720 |
| | — |
|
Deferred income taxes | | (3,238 | ) | | (6,539 | ) |
Non-cash stock compensation expense | | 30,796 |
| | 20,504 |
|
Changes in operating assets and liabilities: | | | | |
|
Accounts receivable, net | | 2,616 |
| | (1,564 | ) |
Other assets | | (3,548 | ) | | 3,679 |
|
Accounts payable and other liabilities | | (26,842 | ) | | (21,780 | ) |
Deferred revenue | | (8,037 | ) | | (9,705 | ) |
Net cash provided by operating activities | | 32,761 |
| | 36,232 |
|
| | | | |
Cash flows from investing activities: | | |
| | |
|
Capitalized software development costs | | (7,144 | ) | | (7,875 | ) |
Capital expenditures | | (14,518 | ) | | (20,539 | ) |
Data acquisition costs | | (423 | ) | | (267 | ) |
Net cash received from disposition | | 4,000 |
| | 16,988 |
|
Net cash used in investing activities | | (18,085 | ) | | (11,693 | ) |
| | | | |
Cash flows from financing activities: | | |
| | |
|
Proceeds from debt | | 230,000 |
| | — |
|
Payments of debt | | (226,150 | ) | | (16,111 | ) |
Fees for debt refinancing | | (4,001 | ) | | — |
|
Sale of common stock, net of stock acquired for withholding taxes | | 3,695 |
| | 7,300 |
|
Excess tax benefits from stock-based compensation | | — |
| | 1,415 |
|
Acquisition of treasury stock | | (19,776 | ) | | (30,542 | ) |
Net cash used in financing activities | | (16,232 | ) | | (37,938 | ) |
| | | | |
Effect of exchange rate changes on cash | | 720 |
| | (821 | ) |
| | | | |
Net change in cash and cash equivalents | | (836 | ) | | (14,220 | ) |
Cash and cash equivalents at beginning of period | | 170,343 |
| | 189,629 |
|
Cash and cash equivalents at end of period | | $ | 169,507 |
| | $ | 175,409 |
|
| | | | |
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
| | | | | | | |
| | For the Six months ended September 30, | |
| | 2016 | | 2015 | |
Supplemental cash flow information: | | | | | | | |
Cash paid during the period for: | | | | | | | |
Interest | | $ | 3,962 | | $ | 4,337 | |
Income taxes, net of refunds | | | 197 | | | 5,266 | |
Prepayment of debt | | | — | | | 55,000 | |
Payments on capital leases and installment payment arrangements | | | — | | | 63 | |
Payments on capital leases and installment payment arrangements of discontinued operations | | | — | | | 206 | |
Other debt payments | | | 16,111 | | | 16,075 | |
|
| | | | | | | | |
| | For the six months ended |
| | September 30, |
| | 2017 | | 2016 |
Supplemental cash flow information: | | |
| | |
|
Cash paid during the period for: | | |
| | |
|
Interest | | $ | 4,762 |
| | $ | 3,962 |
|
Income taxes, net of refunds | | 824 |
| | 197 |
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
These condensed consolidated financial statements have been prepared by Acxiom Corporation (“Registrant,” “Acxiom”, we, us or the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC” or the “Commission”). In the opinion of the Registrant’s management, all adjustments necessary for a fair presentation of the results for the periods included have been made, and the disclosures are adequate to make the information presented not misleading. All such adjustments are of a normal recurring nature. Certain note information has been omitted because it has not changed significantly from that reflected in Notes 1 through
1819 of the Notes to Consolidated Financial Statements filed as part of Item 8 of the Registrant’s annual report on Form 10-K for the fiscal year ended March 31,
20162017 (“
20162017 Annual Report”), as filed with the Commission on May
27, 2016.26, 2017. This quarterly report and the accompanying condensed consolidated financial statements should be read in connection with the
20162017 Annual Report. The financial information contained in this quarterly report is not necessarily indicative of the results to be expected for any other period or for the full fiscal year ending March 31,
2017.2018.
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 condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Actual results could differ from those estimates. Certain of the accounting policies used in the preparation of these condensed consolidated financial statements are complex and require management to make judgments and/or significant estimates regarding amounts reported or disclosed in these financial statements. Additionally, the application of certain of these accounting policies is governed by complex accounting principles and their interpretation. A discussion of the Company’s significant accounting principles and their application is included in Note 1 of the Notes to Consolidated Financial Statements and in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s
20162017 Annual Report.
Unless otherwise indicated, information in these notes to the condensed consolidated financial statements relates to continuing operations.
Accounting Pronouncements Adopted During the Current Year
In August 2016,January 2017, the Financial Accounting Standards Board (“FASB”("FASB") issued Accounting Standards Update (“ASU”("ASU") 2016-15, StatementNo. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" ("ASU 2017-01"), which amended the existing FASB Accounting Standards Codification. The standard provides additional guidance to assist entities with evaluation of whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. ASU 2017-01 is effective for the Company beginning in fiscal 2019, with early adoptions permitted. We adopted the standard in the current fiscal year, on a prospective basis, and do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related disclosures.
In November 2016, the FASB issued ASU 2016-18, "Statement of Cash
Flows: Clarification of Certain Cash Receipts and Cash Payments (“Flows (Topic 230): Restricted Cash" ("ASU
2016-15”2016-18").
The newThis standard
eliminates theis intended to reduce diversity in
practice related to the
classificationpresentation of
certainrestricted cash
receipts and
paymentsrestricted cash equivalents in the statement of cash
flows by adding or clarifying guidanceflows. The standard requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on
eight specificthe statement of cash
flow issues, including payments for debt prepayments or extinguishments.flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU
2016-152016-18 is effective for annual
and interim reporting periods beginning after December 15, 2017 (fiscal 2019 for the Company)
and early, including interim periods within those fiscal years; earlier adoption is permitted.
ASU 2016-15 provides for retrospective application for all periods presented. We
early adopted the
new standard during the current fiscal
quarter ended September 30, 2016.year. Early adoption did not result in any changes to our existing accounting policies, presentation of items in our condensed consolidated
financial statements
of cash flows,and related disclosures, or any changes resulting from the retrospective application to all periods reported.
Recent Accounting Pronouncements Not Yet Adopted
In March 2016, the FASB issued ASU No. 2016-09, Compensation"Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment AccountingAccounting" ("ASU 2016-09") which is intended to improve the accounting for stock-based payment transactions as part of itsthe FASB's simplification initiative. The objective of the simplification initiative is to identify, evaluate, and improve areas of U.S. 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 severalchanges five aspects of the accounting for share-basedstock-based payment award transactions including thethat will affect public companies,
including: (1) accounting for income tax consequences,taxes; (2) classification of awards as either equity or liabilities, and classificationexcess tax benefits on the statement of cash flows.flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The inclusion of excess tax benefits and deficiencies as a component of income tax expense will increase volatility within our provision for income taxes as the amount of excess tax benefits or deficiencies from stock-based compensation awards depends on our stock price at the date the awards vest or the date of option exercises. This guidance also requires excess tax benefits to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur.
We adopted ASU No. 2016-09 during the current fiscal year, which required us to reflect any adjustments as of April 1, 2017. We elected to account for forfeitures as they occur rather than estimating expected forfeitures. We recorded the cumulative impact of adoption through an increase in retained earnings of $2.2 million, of which $2.6 million related to deferred tax assets from certain federal and state research tax credit carryforwards attributable to excess tax benefits from stock-based compensation that had not been previously recognized, offset by $0.4 million related to elimination of the forfeiture pool. We elected to prospectively adopt the effect on the statement of cash flows and accordingly, did not restate the Condensed Consolidated Statement of Cash Flows for the six months ended September 30, 2016.
Recent Accounting Pronouncements Not Yet Adopted
In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for
annual periods beginning after December 15, 20162019 (fiscal 20182021 for the Company), including interim periods within those fiscal years. Earlieryears; earlier adoption is permitted.permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact ofdoes not expect the adoption of this guidance to have a material impact on its consolidated financial condition, results of operationsstatements and cash flows.
related disclosures.
In February 2016, the FASB issued ASU No. 2016-02,
Leases"Leases (Topic 842)
" ("ASU 2016-02"), as a comprehensive new standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. The new standard will require lessees to recognize
a right-of-use asset and a lease
assets and lease liabilitiesliability on the balance sheet for
thoseall leases
with the exception of short-term leases. For lessees, leases will continue to be classified as
either operating
leases under previous guidance, ASC 840, Leases. ASU 2016-02 creates a new Topic, ASC 842, Leases. This new Topic retains a distinction betweenor finance
leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantiallyin the income statement. Lessor accounting is similar to the
classification criteria for distinguishing between capitalcurrent model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases
andas operating,
leases in the previous leases guidance.direct financing or sales-type leases. 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 evaluatingcontinuing to evaluate the impact of the adoption of this guidance on its consolidated financial
condition, results of operationsstatements and
cash flows.related disclosures.
In May 2014, the FASB issued update ASU No. 2014-09, Revenue"Revenue from Contracts with Customers:Customers (Topic 606)" ("ASU 2014-09") and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively (ASU 2014-09 and the subsequent amendments, collectively, "Topic 606"). Topic 606 to supersedesupersedes 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 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.GAAP. 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 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 other areas.others. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts. The effective date for the update has been deferred untilCompany is the first quarter of 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. The Company has completed its preliminary assessment phase of the new standard and commencedis continuing assessment as we complete
implementation design activities. We plan to adopt Topic 606 in the
design phase. The Company cannot currently estimatefirst quarter of fiscal 2019 pursuant to the
financial statementaforementioned adoption method (ii), and we do not believe there will be a material impact
to our revenues upon adoption. We are continuing to evaluate the impact to our revenues related to our pending adoption of
adoption.Topic 606 and our preliminary assessments are subject to change. We are also continuing to evaluate the provisions of Topic 606 related to costs of obtaining customer contracts.
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.EARNINGS2. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS’ EQUITY:
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): | | | | | | | | | | | | | |
| | For the quarter ended | | For the six months ended | |
| | September 30, | | September 30, | |
| | 2016 | | 2015 | | 2016 | | 2015 | |
Basic earnings (loss) per share: | | | | | | | | | | | | | |
Net income (loss) from continuing operations | | $ | 7,140 | | $ | (1,345) | | $ | 11,116 | | $ | (6,527) | |
Net earnings from discontinued operations, net of tax | | | — | | | 12,068 | | | — | | | 16,211 | |
Net earnings | | $ | 7,140 | | $ | 10,723 | | $ | 11,116 | | $ | 9,684 | |
| | | | | | | | | | | | | |
Basic weighted-average shares outstanding | | | 77,446 | | | 77,960 | | | 77,459 | | | 77,939 | |
Basic earnings (loss) per share: | | | | | | | | | | | | | |
Continuing operations | | $ | 0.09 | | $ | (0.02) | | $ | 0.14 | | $ | (0.08) | |
Discontinued operations | | | — | | | 0.15 | | | — | | | 0.21 | |
Net earnings | | $ | 0.09 | | $ | 0.14 | | $ | 0.14 | | $ | 0.12 | |
| | | | | | | | | | | | | |
Diluted earnings (loss) per share: | | | | | | | | | | | | | |
Basic weighted-average shares outstanding | | | 77,446 | | | 77,960 | | | 77,459 | | | 77,939 | |
Dilutive effect of common stock options, warrants, and restricted stock as computed under the treasury stock method | | | 1,831 | | | — | | | 1,858 | | | — | |
Diluted weighted-average shares outstanding | | | 79,277 | | | 77,960 | | | 79,317 | | | 77,939 | |
Diluted earnings (loss) per share: | | | | | | | | | | | | | |
Continuing operations | | $ | 0.09 | | $ | (0.02) | | $ | 0.14 | | $ | (0.08) | |
Discontinued operations | | | — | | | 0.15 | | | — | | | 0.21 | |
Net earnings | | $ | 0.09 | | $ | 0.14 | | $ | 0.14 | | $ | 0.12 | |
Some earnings per share amounts may not add due to rounding.
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Basic earnings (loss) per share: | | | | |
| | | | |
|
Net earnings (loss) | | $ | (3,336 | ) | | $ | 7,140 |
| | $ | (4,636 | ) | | $ | 11,116 |
|
| | | | | | | | |
Basic weighted-average shares outstanding | | 79,235 |
| | 77,446 |
| | 78,954 |
| | 77,459 |
|
| | |
| | |
| | |
| | |
|
Basic earnings (loss) per share | | $ | (0.04 | ) | | $ | 0.09 |
| | $ | (0.06 | ) | | $ | 0.14 |
|
| | | | | | | | |
Diluted earnings (loss) per share: | | |
| | |
| | |
| | |
|
Basic weighted-average shares outstanding | | 79,235 |
| | 77,446 |
| | 78,954 |
| | 77,459 |
|
Dilutive effect of common stock options, warrants, and restricted stock as computed under the treasury stock method | | — |
| | 1,831 |
| | — |
| | 1,858 |
|
Diluted weighted-average shares outstanding | | 79,235 |
| | 79,277 |
| | 78,954 |
| | 79,317 |
|
| | |
| | |
| | |
| | |
|
Diluted earnings (loss) per share | | $ | (0.04 | ) | | $ | 0.09 |
| | $ | (0.06 | ) | | $ | 0.14 |
|
Due to the net loss
from continuing operations incurred by the Company during the
quarterthree and six months ended September 30,
2015,2017, the dilutive effect of options, warrants and restricted stock units covering
1.42.2 million and 2.5 million shares of common stock,
respectively, was excluded
in each period from the diluted loss 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 price amounts): | | | | | | | | | | | | | |
| | For the quarter ended | | For the six months ended | |
| | September 30, | | September 30, | |
| | 2016 | | 2015 | | 2016 | | 2015 | |
Number of shares outstanding under options, warrants and restricted stock units | | | 39 | | | 1,946 | | | 263 | | | 1,915 | |
Range of exercise prices for options | | $ | 20.27 - $32.85 | | $ | 2.58 - $62.06 | | $ | 20.27 - $32.85 | | $ | 2.58 - $62.06 | |
|
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Number of shares outstanding under options, warrants and restricted stock units | | 1,308 |
| | 39 |
| | 324 |
| | 263 |
|
Range of exercise prices for options | | $32.85 |
| | $20.27-$32.85 |
| | $32.85 |
| | $20.27-$32.85 |
|
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was subsequently modified and expanded, most recently on July 28, 2016. Under the modified common stock
repurchase program, the Company may purchase up to $400.0 million of its common stock through the period ending June 30, 2018. During the six months ended September 30, 2016,2017, the Company repurchased 1.30.9 million shares of its common stock for $30.5$19.8 million. Through September 30, 2016,2017, the Company had repurchased 16.8a total of 17.7 million shares of its stock for $285.7$305.5 million, leaving remaining capacity of $114.3$94.5 million under the stock repurchase program.
Accumulated Other Comprehensive Income
The following table presents the accumulated balances for each component of
Accumulated other comprehensive income
(dollars in thousands):accumulated balances of $9.4 million and $8.0 million at September 30, 2017 and March 31, 2017, respectively, reflect accumulated foreign currency translation adjustments. | | | | | | | |
| | September 30, | | March 31, | |
| | 2016 | | 2016 | |
Foreign currency translation | | $ | 7,634 | | $ | 8,705 | |
Unrealized loss on interest rate swap | | | (18) | | | (115) | |
| | $ | 7,616 | | $ | 8,590 | |
3. SHARE-BASED COMPENSATION:
Share-based Compensation Plans
The Company has stock option and equity compensation plans for which a total of
28.934.5 million shares of the Company’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. At September 30,
2016,2017, there were a total of
2.26.2 million shares available for future grants under the plans.
During the quarter ended June 30, 2017, the Board voted to amend the Amended and Restated 2005 Equity Compensation Plan to increase the number of shares available under the plan from 28.4 million shares to 32.9 million shares, bringing the total number of shares reserved for issuance since inception of the plans from 30.0 million shares at March 31, 2017 to 34.5 million shares at September 30, 2017. That amendment received shareholder approval at the August 8, 2017 annual shareholders' meeting.
Stock option activity for the six-month periodsix months ended September 30, 20162017 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, 2016 | | 3,604,102 | | $ | 14.52 | | | | | | |
Exercised | | (498,180) | | $ | 13.82 | | | | $ | 4,848 | |
Forfeited or cancelled | | (47,833) | | $ | 16.24 | | | | | | |
Outstanding at September 30, 2016 | | 3,058,089 | | $ | 14.60 | | 5.4 | | $ | 36,961 | |
Exercisable at September 30, 2016 | | 2,353,864 | | $ | 14.49 | | 4.6 | | $ | 28,685 | |
|
| | | | | | | | | | | | | |
| | | | | | 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, 2017 | | 3,033,071 |
| | $ | 13.14 |
| | | | |
Performance units converted to options | | 299,641 |
| | $ | 21.32 |
| | | | |
|
Exercised | | (396,912 | ) | | $ | 16.31 |
| | | | $ | 4,039 |
|
Forfeited or canceled | | (63,540 | ) | | $ | 20.20 |
| | | | |
|
Outstanding at September 30, 2017 | | 2,872,260 |
| | $ | 13.40 |
| | 6.1 | | $ | 32,439 |
|
Exercisable at September 30, 2017 | | 2,174,071 |
| | $ | 13.65 |
| | 5.4 | | $ | 24,016 |
|
The aggregate intrinsic value
in the table aboveat period end represents the total pre-tax intrinsic value (the difference between Acxiom’s closing stock price on the last trading day of the
quarterperiod and the exercise price for each in-the-money option) that would have been
realizedreceived by the option holders had option holders exercised their options on September 30,
2016.2017. This amount changes based upon changes in the fair market value of Acxiom’s common stock.
A summary of stock options outstanding and exercisable as of September 30, 2016 is presented below:
2017 was: | | | | | | | | | | | | | | | | | | |
| | | | | | 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 | |
| | | | | | | | | | | | | | | | | | |
$ | 0.85 | - | $ | 9.99 | | 581,070 | | 6.6 | years | | $ | 1.86 | | 403,973 | | $ | 1.80 | |
$ | 10.00 | - | $ | 19.99 | | 1,611,798 | | 5.3 | years | | $ | 15.22 | | 1,294,109 | | $ | 14.59 | |
$ | 20.00 | - | $ | 24.99 | | 845,669 | | 4.6 | years | | $ | 21.77 | | 646,008 | | $ | 21.95 | |
$ | 25.00 | - | $ | 32.85 | | 19,552 | | 7.1 | years | | $ | 32.85 | | 9,774 | | $ | 32.85 | |
| | | | | | 3,058,089 | | 5.4 | years | | $ | 14.60 | | 2,353,864 | | $ | 14.49 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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 |
$ | 0.61 |
| | — | | $ | 9.99 |
| | 746,976 |
| | 6.8 years | | $ | 1.68 |
| | 473,841 |
| | $ | 1.74 |
|
$ | 10.00 |
| | — | | $ | 19.99 |
| | 1,305,746 |
| | 5.1 years | | $ | 14.99 |
| | 1,109,428 |
| | $ | 14.50 |
|
$ | 20.00 |
| | — | | $ | 24.99 |
| | 799,986 |
| | 7.0 years | | $ | 21.29 |
| | 576,139 |
| | $ | 21.31 |
|
$ | 25.00 |
| | — | | $ | 32.85 |
| | 19,552 |
| | 6.1 years | | $ | 32.85 |
| | 14,663 |
| | $ | 32.85 |
|
| | | | | | 2,872,260 |
| | 6.1 years | | $ | 13.40 |
| | 2,174,071 |
| | $ | 13.65 |
|
Total expense related to stock options for the six months ended September 30,
20162017 and
20152016 was approximately
$3.5$2.8 million and
$5.9$3.5 million, respectively. Future expense for these options is expected to be approximately
$6.1$8.5 million
in total over the next four years.
Performance Stock Option Unit Activity
On June 29, 2016, the Company granted 633,604 performance-based stock option units with a value at the date of grant of $4.9 million, determined using a Monte Carlo simulation model. All of the units granted in the current period vest and become exercisable in three equal tranches, each being subject to attainment of performance criteria and a subsequent service period established by the compensation committee of the board of directors (“Comp Committee”). Each of the three tranches may vest in a number of stock options, from zero to 300% of the initial award, each having an exercise price of $21.40, based on the attainment of certain revenue growth and operating margin targets for the years ending March 31, 2017, 2018, and 2019 respectively. Each tranche is subject to a service period following the respective performance periods, such that each tranche will cliff vest in two separate 50% increments over two years beginning with the Comp Committee meeting that immediately follows the end of the respective performance period.
Performance stock option unit activity for the
six-month periodsix months ended September 30,
20162017 was:
| | | | | | | | | | | |
| | | | | | | Weighted-average | | | | |
| | | | | Weighted-average | | remaining | | | Aggregate | |
| | Number | | | exercise price | | contractual term | | | intrinsic value | |
| | of shares | | | per share | | (in years) | | | (in thousands) | |
Outstanding at March 31, 2016 | | — | | $ | — | | | | | | |
Granted | | 633,604 | | $ | 21.40 | | | | | | |
Outstanding at September 30, 2016 | | 633,604 | | $ | 21.40 | | 1.6 | | $ | 3,326 | |
Exercisable at September 30, 2016 | | — | | $ | — | | — | | $ | — | |
|
| | | | | | | | | | | | | | |
| | | | | | Weighted-average | | |
| | | | Weighted-average | | remaining | | Aggregate |
| | Number | | exercise price | | contractual term | | intrinsic value |
| | of shares | | per share | | (in years) | | (in thousands) |
Outstanding at March 31, 2017 | | 555,123 |
| | $ | 21.41 |
| | | | |
Performance units converted to options | | (183,322 | ) | | $ | 21.41 |
| | | | |
Forfeited or canceled | | (11,291 | ) | | $ | 21.32 |
| | | | |
Outstanding at September 30, 2017 | | 360,510 |
| | $ | 21.41 |
| | 2.1 |
| | $ | 1,168 |
|
Exercisable at September 30, 2017 | | — |
| | $ | — |
| | — |
| | $ | — |
|
Of the performance stock option units outstanding at March 31, 2017, 183,322 reached maturity of the relevant performance period at March 31, 2017. During the quarter ended June 30, 2017, the units vested at an approximate 163% attainment level resulting in issuance of 299,641 stock options having a weighted average exercise price of $21.32.
Total expense related to performance stock option units for the six months ended September 30,
2017 and 2016 was
$0.8 million and $0.3
million.million, respectively. Future expense for these performance stock option units is expected to be approximately
$4.6$2.8 million
in total over the next
fivefour years.
Stock Appreciation Right
(SAR)("SAR") Activity
SAR activity for the six-month period ended September 30, 2016 was: | | | | | | | | | | | |
| | | | | | | Weighted-average | | | | |
| | | | | Weighted-average | | remaining | | | Aggregate | |
| | Number | | | exercise price | | contractual term | | | intrinsic value | |
| | of shares | | | per share | | (in years) | | | (in thousands) | |
Outstanding at March 31, 2016 | | 245,404 | | $ | 40.00 | | | | | | |
Outstanding at September 30, 2016 | | 245,404 | | $ | 40.00 | | 0.5 | | $ | — | |
Exercisable at September 30, 2016 | | — | | $ | — | | — | | $ | — | |
Total expense related to SARs for the six months ended September 30, 20162017 was:
|
| | | | | | | | | | | | | | |
| | | | | | Weighted-average | | |
| | | | Weighted-average | | remaining | | Aggregate |
| | Number | | exercise price | | contractual term | | intrinsic value |
| | of shares | | per share | | (in years) | | (in thousands) |
Outstanding at March 31, 2017 | | 245,404 |
| | $ | 40.00 |
| | | | |
Forfeited or canceled | | (245,404 | ) | | $ | 40.00 |
| | | | |
Outstanding at September 30, 2017 | | — |
| | $ | — |
| | — |
| | $ | — |
|
All of the SAR units outstanding at March 31, 2017 reached maturity of the relevant performance period on March 31, 2017. The units achieved a 100% performance attainment level. However, application of the vesting multiplier resulted in zero shares granted and
2015 was $0.1 million in both periods. Future expense for these SARs is expected to be approximately $0.1 million overcancellation of all the
next year.units during the quarter ended June 30, 2017. Restricted Stock Unit Activity
During the six months ended September 30,
2016,2017, the Company granted time-vesting restricted stock units covering
1,257,2151,424,678 shares of common stock with a
fair value at the date of grant of
$27.3$37.2 million. Of the restricted stock units granted in the current period,
1,045,041217,758 vest in equal annual increments over four years,
24,160 vest in one year, and 188,0141,005,876 vest 25% at the one-year anniversary and
then over75% in equal quarterly increments
duringover the
subsequent three
subsequent years. Valuationyears, 174,368 vest 50% at the one-year anniversary and 50% in equal quarterly increments over the following year, and 26,676 vest in one year. Grant date fair value of these units is equal to the quoted market price for the shares on the date of grant.
Non-vested time-vesting restricted stock unit activity for the
six-month periodsix months ended September 30,
20162017 was:
| | | | | | | | |
| | | | Weighted average | | | |
| | | | fair value per | | Weighted-average | |
| | Number | | share at grant | | remaining contractual | |
| | of shares | | date | | term (in years) | |
Outstanding at March 31, 2016 | | 2,279,895 | | $ | 19.69 | | 2.12 | |
Granted | | 1,257,215 | | $ | 21.74 | | | |
Vested | | (772,762) | | $ | 20.28 | | | |
Forfeited or cancelled | | (95,560) | | $ | 19.38 | | | |
Outstanding at September 30, 2016 | | 2,668,788 | | $ | 20.50 | | 2.64 | |
|
| | | | | | | | | |
| | | | Weighted-average | | |
| | | | fair value per | | Weighted-average |
| | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) |
Outstanding at March 31, 2017 | | 3,307,577 |
| | $ | 22.57 |
| | 2.45 |
Granted | | 1,424,678 |
| | $ | 26.09 |
| | |
Vested | | (691,507 | ) | | $ | 20.44 |
| | |
Forfeited or canceled | | (196,056 | ) | | $ | 22.51 |
| | |
Outstanding at September 30, 2017 | | 3,844,692 |
| | $ | 24.26 |
| | 2.59 |
During the six months ended September 30, 2016,2017, the Company granted performance-based restricted stock units covering 254,419421,918 shares of common stock withhaving a fair value at the date of grant of $6.3 million, determined using a Monte Carlo simulation model. All of$11.3 million. Of the performance-based restricted stock units granted in the current period, 217,784 units - having a fair value at the date of grant of $6.1 million, determined using a Monte Carlo simulation model - vest subject to attainment of performance criteria established by the Comp Committee.compensation committee of the board of directors (“compensation committee”) and continuous employment through the vesting date. The 217,784 units granted in the current period may vest in a number of shares from zero to 200% of the award, based on the total shareholder return of Acxiom common stock compared to total shareholder return of a group of peer companies (“TSR”) established by the Comp Committee of the board of directorscompensation committee for the period from April 1, 20162017 to March 31, 2020.
Of the performance-based restricted stock units granted in the current period, 87,184 units - having a fair value at the date of grant of $2.1 million, based on the quoted market price for the shares on the date of grant - vest over two periods, each being subject to attainment of performance criteria established by the compensation committee and continuous employment through the vesting date. At the end of the first year, the performance units may vest in a number of shares, from zero to 75% of the initial award. At the end of the second year, the performance units may vest in a number of shares, from zero to 150% of the initial award, less the number of shares awarded at completion of year one. The units will vest based on the attainment of certain growth initiatives for the period from October 1, 2017 to September 30, 2019.
The remaining 116,950 performance-based restricted stock units granted in the current period - having a fair value at the date of grant of $3.1 million, based on the quoted market price for the shares on the date of grant - vest in three equal tranches, each being subject to attainment of performance criteria established by the compensation committee and continuous employment through the vesting date. Each of the three tranches may vest in a number of shares, from zero to 300% of the initial award, based on the attainment of certain revenue growth and operating margin targets for the years ending March 31, 2018, 2019, and 2020, respectively.
Non-vested performance-based restricted stock unit activity for the six-month periodsix months ended September 30, 20162017 was:
| | | | | | | | |
| | | | Weighted average | | | |
| | | | fair value per | | Weighted-average | |
| | Number | | share at grant | | remaining contractual | |
| | of shares | | date | | term (in years) | |
Outstanding at March 31, 2016 | | 516,818 | | $ | 18.62 | | 1.67 | |
Granted | | 254,419 | | $ | 24.66 | | | |
Forfeited or cancelled | | (26,142) | | $ | 17.57 | | | |
Outstanding at September 30, 2016 | | 745,095 | | $ | 20.72 | | 1.63 | |
|
| | | | | | | | | |
| | | | Weighted-average | | |
| | | | fair value per | | Weighted-average |
| | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) |
Outstanding at March 31, 2017 | | 732,711 |
| | $ | 20.89 |
| | 1.13 |
Granted | | 421,918 |
| | $ | 26.70 |
| | |
Additional performance shares | | 94,775 |
| | $ | 19.46 |
| | |
Vested | | (252,760 | ) | | $ | 19.46 |
| | |
Forfeited or canceled | | (13,498 | ) | | $ | 18.91 |
| | |
Outstanding at September 30, 2017 | | 983,146 |
| | $ | 23.64 |
| | 1.62 |
Of the performance-based restricted stock units outstanding at March 31, 2017, 157,985 related to a performance period ended March 31, 2017. During the quarter ended June 30, 2017, the units vested at a 160% attainment level based on performance results approved by the compensation committee, resulting in issuance of 252,760 shares of common stock, of which 94,775 were the additional performance shares referenced in the table above.
Of the performance-based restricted stock units outstanding at September 30, 2017, 277,792 will reach maturity of the relevant performance period at March 31, 2018. The units are expected to vest at an approximate 200% attainment level, resulting in issuance of approximately 555,584 shares of common stock, before consideration of the TSR multiplier, in the first quarter of fiscal 2019.
Total expense related to
all restricted stock
units infor the six months ended September 30,
20162017 and
20152016 was approximately
$15.4$18.6 million and
$8.5$15.4 million, respectively. Future expense for
these restricted stock units is expected to be approximately
$59.1$22.6 million
overfor the
next four years. six months ending March 31, 2018, $33.8 million in fiscal 2019, $23.3 million in fiscal 2020, $11.2 million in fiscal 2021, and $1.5 million in fiscal 2022.
Other Performance Unit Activity
Other performance-based
stock unit activity for the
six-month periodsix months ended September 30,
20162017 was:
| | | | | | | | |
| | | | Weighted average | | | |
| | | | fair value per | | Weighted-average | |
| | Number | | share at grant | | remaining contractual | |
| | of shares | | date | | term (in years) | |
Outstanding at March 31, 2016 | | 635,655 | | $ | 4.07 | | 1.30 | |
Outstanding at September 30, 2016 | | 635,655 | | $ | 4.07 | | 0.80 | |
|
| | | | | | | | | |
| | | | Weighted-average | | |
| | | | fair value per | | Weighted-average |
| | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) |
Outstanding at March 31, 2017 | | 597,193 |
| | $ | 4.14 |
| | 0.30 |
Vested | | (24,573 | ) | | $ | 2.94 |
| | |
Forfeited or canceled | | (461,509 | ) | | $ | 3.92 |
| | |
Outstanding at September 30, 2017 | | 111,111 |
| | $ | 5.33 |
| | 0.50 |
Of the other performance-based stock units outstanding at March 31, 2017, 201,464 reached maturity of the relevant performance period on March 31, 2017. The units achieved a 100% performance attainment level. However, application of the share price adjustment factor resulted in zero shares granted and cancellation of all the units during the quarter ended June 30, 2017.
Of the other performance-based stock units outstanding at March 31, 2017, 284,618 reached maturity of the relevant performance period on June 30, 2017. The units achieved an approximate 9% performance attainment level, resulting in issuance of 24,573 shares of common stock during the quarter ended September 30, 2017.
Total expense related to other performance units for the six months ended September 30,
2017 and 2016
and 2015 was
$0.5$0.2 million and
$0.4$0.5 million, respectively. Future expense for these performance units is expected to be approximately
$0.8$0.1 million over the next two years.one year.As part of Contentsthe Company’s acquisition of Arbor in fiscal 2017, $38.3 million of the acquisition consideration otherwise payable with respect to shares of restricted Arbor common stock held by certain key employees was subject to holdback by the Company pursuant to agreements with those employees (each, a “Holdback Agreement”). The consideration holdback vests in 30 equal monthly increments following the date of close, subject to the Arbor key employees' continued employment through each monthly vesting date. At each vesting date, 1/30th of the $38.3 million holdback consideration vests and is settled in shares of Company common stock. The number of shares is based on the then-current market price of the Company common stock.
Total expense related to the Holdback Agreement for the six months ended September 30, 2017 was approximately $7.7 million.
4.DISCONTINUED OPERATIONS AND DISPOSITIONS:
4. DISPOSITION:
Disposition of Impact email business
In
August 2016,fiscal 2017, the Company completed the sale of its Impact email business to Zeta Interactive for total consideration of $22.0 million, including a $4.0 million subordinated promissory note with interest accruing at a rate of 6.0% per annum. The note
is payable onwas paid in full during the
12 month anniversary of the closing date, and is included in other current assets in the condensed consolidated balance sheet.quarter ended September 30, 2017. The Company also entered into a separate multi-year contract to provide Zeta Interactive with Connectivity and Audience Solutions services. Prior to the disposition, the Impact email business was included in the
marketingMarketing Services segment results.
The business did not meet the requirements of a discontinued business; therefore, all financial results are included in continuing operations. The Company recorded a gain on sale of $0.6 million, included in gains, losses and other items, net. The transaction also generated a $4.1 million income tax benefit.
Revenue and income from operations from the disposed Impact email business are shown below (dollars in thousands):
| | | | | | | | | | | | |
| | For the quarter ended | | For the six months ended |
| | September 30, | | September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
Revenues | | $ | 8,056 | | $ | 15,812 | | $ | 20,375 | | $ | 31,523 |
| | | | | | | | | | | | |
Income from continuing operations before income taxes | | $ | 249 | | $ | 2,962 | | $ | 120 | | $ | 6,275 |
IT Infrastructure Management business (“ITO”)
During fiscal 2016, the Company completed the sale of its ITO business to Charlesbank Capital Partners and M/C Partners. 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 operations in the condensed consolidated financial statements.
Summary results of operations of ITO for the six months ended September 30, 2015, are segregated and included in earnings from discontinued operations, net of tax, in the condensed consolidated statements of operations.
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Revenues | | $ | — |
| | $ | 8,056 |
| | $ | — |
| | $ | 20,375 |
|
Income from operations | | $ | — |
| | $ | 249 |
| | $ | — |
| | $ | 120 |
|
The following table is a reconciliation of the major classes of line items constituting earnings from discontinued operations, net of tax (dollars in thousands):
| | | | | | | |
| | For the quarter ended | | For the six months ended | |
| | September 30, | | September 30, | |
| | 2015 | | 2015 | |
Major classes of line items constituting earnings from discontinued operations, net of tax: | | | | | | | |
Revenues | | $ | 16,830 | | $ | 69,410 | |
Cost of revenue | | | 10,269 | | | 50,837 | |
Gross profit | | | 6,561 | | | 18,573 | |
Operating expenses: | | | | | | | |
Sales and marketing | | | 194 | | | 1,192 | |
General and administrative | | | 2,285 | | | 6,053 | |
Gain on sale of discontinued operations | | | (10,360) | | | (10,360) | |
Total operating expenses | | | (7,881) | | | (3,115) | |
Income from discontinued operations | | | 14,442 | | | 21,688 | |
Interest expense | | | (117) | | | (681) | |
Other, net | | | (227) | | | (230) | |
Earnings from discontinued operations before income taxes | | | 14,098 | | | 20,777 | |
Income taxes | | | 2,030 | | | 4,566 | |
Earnings from discontinued operations, net of tax | | $ | 12,068 | | $ | 16,211 | |
ITO was 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, are 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 are included in cash flows from operating activities in the condensed consolidated statements of cash flows. Revenues and expenses related to the agreements are included in income (loss) from operations in the condensed consolidated statements of operations. The related cash inflows and outflows and revenues and expenses for all periods reported are shown below (dollars in thousands):
| | | | | | | | | | | | | |
| | For the quarter ended | | For the six months ended | |
| | September 30, | | September 30, | |
| | 2016 | | 2015 | | 2016 | | 2015 | |
| | | | | | | | | | | | | |
Cash inflows | | $ | 1,870 | | $ | 699 | | $ | 3,711 | | $ | 699 | |
Cash outflows | | $ | 930 | | $ | 149 | | $ | 2,445 | | $ | 149 | |
| | | | | | | | | | | | | |
Revenues | | $ | 1,836 | | $ | 1,166 | | $ | 3,566 | | $ | 1,166 | |
Expenses | | $ | 912 | | $ | 1,156 | | $ | 2,312 | | $ | 1,156 | |
5.OTHER5. OTHER CURRENT AND NONCURRENT ASSETS:
Other current assets consist of the following (dollars in thousands):
| | | | | | | |
| | September 30, | | March 31, | |
| | 2016 | | 2016 | |
Prepaid expenses | | $ | 26,590 | | $ | 25,365 | |
Note receivable | | | 4,000 | | | — | |
Assets of non-qualified retirement plan | | | 12,326 | | | 12,532 | |
Other current assets | | $ | 42,916 | | $ | 37,897 | |
|
| | | | | | | | |
| | September 30, 2017 | | March 31, 2017 |
Prepaid expenses and other | | $ | 27,995 |
| | $ | 25,714 |
|
Escrow deposit | | 5,880 |
| | 5,880 |
|
Note receivable | | — |
| | 4,000 |
|
Assets of non-qualified retirement plan | | 13,519 |
| | 12,716 |
|
Other current assets | | $ | 47,394 |
| | $ | 48,310 |
|
Other noncurrent assets consist of the following (dollars in thousands):
| | | | | | | |
| | September 30, | | March 31, | |
| | 2016 | | 2016 | |
Acquired intangible assets, net | | $ | 16,685 | | $ | 19,203 | |
Deferred data acquisition costs | | | 1,141 | | | 1,644 | |
Deferred expenses | | | 745 | | | 883 | |
Prepaid expenses | | | 1,400 | | | 1,404 | |
Other miscellaneous noncurrent assets | | | 2,036 | | | 2,181 | |
Noncurrent assets | | $ | 22,007 | | $ | 25,315 | |
6.GOODWILL:
|
| | | | | | | | |
| | September 30, 2017 | | March 31, 2017 |
Acquired intangible assets, net | | $ | 38,735 |
| | $ | 43,884 |
|
Deferred data acquisition costs | | 988 |
| | 1,116 |
|
Other miscellaneous noncurrent assets | | 5,084 |
| | 6,443 |
|
Noncurrent assets | | $ | 44,807 |
| | $ | 51,443 |
|
6. OTHER ACCRUED EXPENSES:
Other accrued expenses consist of the following (dollars in thousands):
|
| | | | | | | | |
| | September 30, 2017 | | March 31, 2017 |
Accrued purchase consideration | | $ | 5,880 |
| | $ | 5,880 |
|
Liabilities of non-qualified retirement plan | | 13,519 |
| | 12,716 |
|
Other accrued expenses | | 38,515 |
| | 41,265 |
|
Other accrued expenses | | $ | 57,914 |
| | $ | 59,861 |
|
7. GOODWILL:
The following table summarizes Goodwill activity, by segment, for the six months endedSeptember 30, 20162017 (dollars in thousands).: | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | Marketing | | Audience | | | | | | |
| | Services | | Solutions | | Connectivity | | Total | |
Balance at March 31, 2016 | | $ | 124,586 | | $ | 273,430 | | $ | 94,729 | | $ | 492,745 | |
Allant adjustment | | | — | | | 19 | | | — | | | 19 | |
Impact email disposition | | | (5,684) | | | — | | | — | | | (5,684) | |
Change in foreign currency translation adjustment | | | (17) | | | — | | | (8) | | | (25) | |
Balance at September 30, 2016 | | $ | 118,885 | | $ | 273,449 | | $ | 94,721 | | $ | 487,055 | |
|
| | | | | | | | | | | | | | | | |
| | Marketing Services | | Audience Solutions | | Connectivity | | Total |
Balance at March 31, 2017 | | $ | 118,890 |
| | $ | 273,448 |
| | $ | 200,393 |
| | $ | 592,731 |
|
Arbor adjustment | | — |
| | — |
| | (21 | ) | | (21 | ) |
Change in foreign currency translation adjustment | | 94 |
| | — |
| | 41 |
| | 135 |
|
Balance at September 30, 2017 | | $ | 118,984 |
| | $ | 273,448 |
| | $ | 200,413 |
| | $ | 592,845 |
|
Goodwill by component included in each segment as of September 30,
20162017 was:
| | | | | | | | | | | | | |
| | Marketing | | Audience | | | | | | | |
| | Services | | Solutions | | Connectivity | | Total | |
U.S. | | $ | 110,910 | | $ | 273,449 | | $ | 91,164 | | $ | 475,523 | |
APAC | | | 7,975 | | | — | | | 3,557 | | | 11,532 | |
Balance at September 30, 2016 | | $ | 118,885 | | $ | 273,449 | | $ | 94,721 | | $ | 487,055 | |
|
| | | | | | | | | | | | | | | | |
| | Marketing Services | | Audience Solutions | | Connectivity | | Total |
U.S. | | $ | 110,910 |
| | $ | 273,448 |
| | $ | 196,812 |
| | $ | 581,170 |
|
APAC | | 8,074 |
| | — |
| | 3,601 |
| | 11,675 |
|
Balance at September 30, 2017 | | $ | 118,984 |
| | $ | 273,448 |
| | $ | 200,413 |
| | $ | 592,845 |
|
Long-term debt consists of the following (dollars in thousands):
| | | | | | | |
| | September 30, | | March 31, | |
| | 2016 | | 2016 | |
Term loan credit agreement | | $ | 170,000 | | $ | 185,000 | |
Other debt and long-term liabilities | | | 6,744 | | | 7,856 | |
Total long-term debt and capital leases | | | 176,744 | | | 192,856 | |
| | | | | | | |
Less current installments | | | 32,281 | | | 32,243 | |
Less deferred debt financing costs | | | 2,122 | | | 2,716 | |
Long-term debt, excluding current installments and deferred debt financing costs | | $ | 142,341 | | $ | 157,897 | |
|
| | | | | | | | |
| | September 30, 2017 | | March 31, 2017 |
Term loan credit agreement | | $ | — |
| | $ | 155,000 |
|
Revolving credit borrowings | | 230,000 |
| | 70,000 |
|
Other debt | | 4,463 |
| | 5,612 |
|
Total long-term debt | | 234,463 |
| | 230,612 |
|
| | | | |
Less current installments | | 2,089 |
| | 39,819 |
|
Less deferred debt financing costs | | 4,329 |
| | 1,552 |
|
Long-term debt, excluding current installments and deferred debt financing costs | | $ | 228,045 |
| | $ | 189,241 |
|
On June 20, 2017, the Company entered into a Sixth Amended and Restated Credit Agreement (the "restated credit agreement") as part of refinancing its prior credit agreement. On that day, the Company used an initial draw of $230 million to pay off the outstanding $225 million term and revolving loan balances, with interest, along with $4.0 million in fees related to the restated credit agreement. The Company’s amended andfees are being amortized over the term of the agreement.
The Company's 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, letterletters of credit participationsparticipation, and swing-line loans up to(the “revolving loans”) in an aggregate amount of $300$600 million and (2) a provision allowing the Company to request an increase of the aggregate amount of the revolving loans in an amount not to exceed $150 million. The term loanrestated credit agreement is secured by the accounts receivable of the Company and its domestic subsidiaries, as well as by the outstanding stock of certain subsidiaries of the Company. The restated credit agreement contains customary representations, warranties, affirmative and negative covenants, and default and acceleration provisions. The restated credit agreement matures, and is fully due and payable, in quarterly installments of $7.5 million through September 2017, followed by quarterly installments of $11.3 million throughon June 2018, with a final payment of $106.3 million due October 9, 2018. 20, 2022 and allows for prepayments before maturity.
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 September 30, 2016,2017, the revolving loan borrowing bears interest at LIBOR plus a credit spread was 1.75%of 2%. There were no revolving credit borrowings outstanding at September 30, 2016 or March 31, 2016. The weighted-average interest rate on term loanrevolving credit borrowings at September 30, 20162017 was 2.4%3.3%. OutstandingThere were no material outstanding letters of credit at September 30, 2016 were $0.8 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.
2017 or March 31, 2017.
Under the terms of the
term loan,restated credit agreement, the Company is required to maintain certain debt-to-cash flow and
debt serviceinterest coverage ratios, among other restrictions. At September 30,
2016,2017, 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 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 September 30, 2016 was 0.85%. 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 September 30, 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 September 30, 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 condensed consolidated statement of operations. The fair market value of the derivative was zero at inception and an immaterial unrealized loss since inception is recorded in other comprehensive income (loss). The fair value of the interest rate swap agreement recorded in accumulated other comprehensive income may be
recognized in the condensed 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 September 30, 2016.
8.ALLOWANCE9. ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Trade accounts receivable are presented net of allowances for doubtful accounts, returns and credits of
$5.9$6.0 million at September 30,
20162017 and
$7.3$6.1 million at March 31,
2016.9.SEGMENT2017.
The Company reports segment information consistent with the way management internally disaggregates its operations to assess performance and to allocate resources.
Revenues 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.
|
Research and development expenses are primarily directly recorded to each segment group based on identified products supported. | ·
| | Gains, losses and other items, net are not allocated to the segment groups.
|
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.
The following table presents information by business segment (dollars in thousands):
| | | | | | | | | | | | | |
| | For the quarter ended | | For the six months ended | |
| | September 30, | | September 30, | |
| | 2016 | | 2015 | | 2016 | | 2015 | |
Revenues: | | | | | | | | | | | | | |
Marketing Services | | $ | 105,679 | | $ | 112,979 | | $ | 215,394 | | $ | 220,705 | |
Audience Solutions | | | 78,526 | | | 72,122 | | | 152,270 | | | 140,672 | |
Connectivity | | | 33,062 | | | 22,244 | | | 64,404 | | | 42,863 | |
Total segment revenues | | $ | 217,267 | | $ | 207,345 | | $ | 432,068 | | $ | 404,240 | |
| | | | | | | | | | | | | |
Gross profit(1): | | | | | | | | | | | | | |
Marketing Services | | $ | 34,480 | | $ | 37,545 | | $ | 71,946 | | $ | 73,579 | |
Audience Solutions | | | 47,998 | | | 39,170 | | | 89,910 | | | 75,994 | |
Connectivity | | | 19,843 | | | 13,499 | | | 37,418 | | | 25,452 | |
Total segment gross profit | | $ | 102,321 | | $ | 90,214 | | $ | 199,274 | | $ | 175,025 | |
| | | | | | | | | | | | | |
Income (loss) from operations(1): | | | | | | | | | | | | | |
Marketing Services | | $ | 19,837 | | $ | 17,908 | | $ | 39,982 | | $ | 34,761 | |
Audience Solutions | | | 29,972 | | | 25,190 | | | 55,068 | | | 49,277 | |
Connectivity | | | 1,663 | | | (1,068) | | | 1,954 | | | (1,859) | |
Total segment income from operations | | $ | 51,472 | | $ | 42,030 | | $ | 97,004 | | $ | 82,179 | |
| | | | | | | | | | | | | |
| (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.
|
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Revenues: | | | | | | | | |
Marketing Services | | $ | 94,042 |
| | $ | 105,679 |
| | $ | 185,636 |
| | $ | 215,394 |
|
Audience Solutions | | 78,814 |
| | 78,526 |
| | 154,548 |
| | 152,270 |
|
Connectivity | | 52,384 |
| | 33,062 |
| | 97,570 |
| | 64,404 |
|
Total segment revenues | | $ | 225,240 |
| | $ | 217,267 |
| | $ | 437,754 |
| | $ | 432,068 |
|
| | | | | | | | |
Gross profit(1): | | |
| | |
| | |
| | |
|
Marketing Services | | $ | 34,320 |
| | $ | 34,480 |
| | $ | 65,678 |
| | $ | 71,946 |
|
Audience Solutions | | 48,321 |
| | 47,998 |
| | 95,531 |
| | 89,910 |
|
Connectivity | | 35,292 |
| | 19,843 |
| | 62,817 |
| | 37,418 |
|
Total segment gross profit | | $ | 117,933 |
| | $ | 102,321 |
| | $ | 224,026 |
| | $ | 199,274 |
|
| | | | | | | | |
Income from operations(1): | | |
| | |
| | |
| | |
|
Marketing Services | | $ | 21,874 |
| | $ | 19,837 |
| | $ | 41,658 |
| | $ | 39,982 |
|
Audience Solutions | | 29,497 |
| | 29,972 |
| | 58,039 |
| | 55,068 |
|
Connectivity | | 5,715 |
| | 1,663 |
| | 5,667 |
| | 1,954 |
|
Total segment income from operations | | $ | 57,086 |
| | $ | 51,472 |
| | $ | 105,364 |
| | $ | 97,004 |
|
(1) Gross profit and Income 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, segment Gross profit and Income from operations do not reflect non-cash stock compensation expense and purchased intangible asset amortization.
The following table reconciles total
operating segment gross profit to gross profit and total operating segment income from operations to income (loss) from
operations: | | | | | | | | | | | | | |
| | For the quarter ended | | For the six months ended | |
| | September 30, | | September 30, | |
| | 2016 | | 2015 | | 2016 | | 2015 | |
| | | | | | | | | | | | | |
Total segment gross profit | | $ | 102,321 | | $ | 90,214 | | $ | 199,274 | | $ | 175,025 | |
| | | | | | | | | | | | | |
Less: | | | | | | | | | | | | | |
Purchased intangible asset amortization | | | 3,890 | | | 3,754 | | | 7,967 | | | 7,508 | |
Non-cash stock compensation | | | 1,269 | | | 349 | | | 2,163 | | | 778 | |
Accelerated amortization | | | — | | | 78 | | | — | | | 1,520 | |
Gross profit | | $ | 97,162 | | $ | 86,033 | | $ | 189,144 | | $ | 165,219 | |
| | | | | | | | | | | | | |
Total segment income from operations | | $ | 51,472 | | $ | 42,030 | | $ | 97,004 | | $ | 82,179 | |
| | | | | | | | | | | | | |
Less: | | | | | | | | | | | | | |
Corporate expenses (principally general and administrative) | | | 26,769 | | | 23,563 | | | 51,158 | | | 49,041 | |
Separation and transformation costs included in general and administrative | | | 1,455 | | | 6,098 | | | 1,455 | | | 9,512 | |
Gains, losses and other items, net | | | 300 | | | 2,504 | | | 614 | | | 3,311 | |
Impairment of goodwill and other | | | — | | | 729 | | | — | | | 729 | |
Purchased intangible asset amortization | | | 3,890 | | | 3,754 | | | 7,967 | | | 7,508 | |
Non-cash stock compensation | | | 11,938 | | | 7,360 | | | 20,528 | | | 15,483 | |
Accelerated amortization | | | — | | | 78 | | | — | | | 1,520 | |
Income (loss) from operations | | $ | 7,120 | | $ | (2,056) | | $ | 15,282 | | $ | (4,925) | |
operations (dollars in thousands): 22
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Total segment gross profit | | $ | 117,933 |
| | $ | 102,321 |
| | $ | 224,026 |
| | $ | 199,274 |
|
| | | | | | | | |
Less: | | | | | | | | |
Purchased intangible asset amortization | | 6,021 |
| | 3,890 |
| | 11,987 |
| | 7,967 |
|
Non-cash stock compensation | | 1,744 |
| | 1,269 |
| | 3,317 |
| | 2,163 |
|
Gross profit | | $ | 110,168 |
| | $ | 97,162 |
| | $ | 208,722 |
| | $ | 189,144 |
|
| | | | | | | | |
Total segment income from operations | | $ | 57,086 |
| | $ | 51,472 |
| | $ | 105,364 |
| | $ | 97,004 |
|
| | | | | | | | |
Less: | | | | | | | | |
Corporate expenses (principally general and administrative) | | 25,753 |
| | 26,769 |
| | 51,720 |
| | 51,158 |
|
Separation and transformation costs included in general and administrative | | 5,442 |
| | 1,455 |
| | 12,561 |
| | 1,455 |
|
Gains, losses and other items, net | | 3,660 |
| | 300 |
| | 3,562 |
| | 614 |
|
Purchased intangible asset amortization | | 6,021 |
| | 3,890 |
| | 11,987 |
| | 7,967 |
|
Non-cash stock compensation | | 15,757 |
| | 11,938 |
| | 30,788 |
| | 20,528 |
|
Income (loss) from operations | | $ | 453 |
| | $ | 7,120 |
| | $ | (5,254 | ) | | $ | 15,282 |
|
10.RESTRUCTURING,11. RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
The following table summarizes the restructuring activity for the six months ended September 30,
20162017 (dollars in thousands):
| | | | | | | | | | |
| | Associate-related | | Ongoing | | | |
| | reserves | | contract costs | | Total | |
| | | | | | | | | | |
March 31, 2016 | | $ | 2,855 | | $ | 3,524 | | $ | 6,379 | |
Restructuring charges and adjustments | | | 1,208 | | | — | | | 1,208 | |
Payments | | | (3,268) | | | (1,011) | | | (4,279) | |
September 30, 2016 | | $ | 795 | | $ | 2,513 | | $ | 3,308 | |
| | | | | | | | | | |
|
| | | | | | | | | | | | |
| | Associate-related reserves | | Lease accruals | | Total |
March 31, 2017 | | $ | 2,400 |
| | $ | 4,308 |
| | $ | 6,708 |
|
Restructuring charges and adjustments | | 1,495 |
| | 2,067 |
| | 3,562 |
|
Payments | | (2,586 | ) | | (681 | ) | | (3,267 | ) |
September 30, 2017 | | $ | 1,309 |
| | $ | 5,694 |
| | $ | 7,003 |
|
The above balances are included in
other accrued expenses and other liabilities on the condensed consolidated balance sheet.
In the six months ended September 30, 2016,2017, the Company recorded a total of $1.2$3.6 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The expense included severance and other associate-related charges of which $0.7$1.5 million, representedlease accruals and adjustments of $1.0 million, and leasehold improvement write-offs of $1.1 million.
The associate-related accruals of $1.5 million relate to the fiscal 2016 restructuring plans. The remaining 0.5 million related to termination of associates in the United StatesStates. Of the amount accrued, $0.4 million remained accrued as of September 30, 2017. These costs are expected to be paid out in fiscal 2018.
The lease accruals and was fully settled duringadjustments of $1.0 million result from the currentCompany's exit from certain leased office facilities. Of the amount accrued, together with the deferred rent credits of $1.4 million related to the space, $2.4 million remained accrued as of September 30, 2017.
In fiscal
quarter.2017, the Company recorded a total of $8.9 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The expense included severance and other associate-related charges of $3.8 million, lease accruals and adjustments of $3.0 million, and leasehold improvement write-offs of $2.1 million. Of the associate-related accruals of $3.8 million, $0.3 million remained accrued as of September 30, 2017. These costs are expected to be paid out in fiscal 2018. The lease accruals and adjustments of $3.0 million resulted from the Company's exit from certain leased office facilities ($1.5 million) and adjustments to estimates related to the fiscal 2015 lease accruals ($1.5 million). Of the amount accrued for fiscal 2017 lease accruals, $2.5 million remained accrued as of September 30, 2017.
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 condensed 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 Of 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, $0.5$0.3 million remained accrued as of September 30, 2016.2017. These costsamounts are expected to be paid out in fiscal 2017.
2018. 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 condensed 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.
TheOf 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, $0.3 million remained accrued as of September 30, 2016.2017. These costsamounts are expected to be paid out in fiscal 2017.
The2018. Of the lease accruals of $6.5 million, were determined in accordance with$0.8 million remained accrued as of September 30, 2017.
With respect to the accounting standards that govern exit costs. These accounting standards requirefiscal 2015, 2017, and 2018 lease accruals described above, the Company to accrue for lease costs that will continue to be incurred without economic benefit to the Company upon the date that the Company ceases using the leased properties. 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 course 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 paid outsatisfied over the remainder of the leased properties’properties' terms, which
continue through November 2025. Actual sublease termsreceipts 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, $2.5 million remained accrued as of September 30, 2016.
Gains, Losses and Other Items
Gains, losses and other items for each of the periods presented are as follows (dollars in thousands):
| | | | | | | | | | | | | |
| | For the quarter ended | | For the six months ended | |
| | September 30, | | September 30, | |
| | 2016 | | 2015 | | 2016 | | 2015 | |
Restructuring plan charges and adjustments | | $ | 929 | | $ | 2,499 | | $ | 1,208 | | $ | 3,302 | |
Gain on disposition of Impact email business | | | (629) | | | — | | | (629) | | | — | |
Other | | | — | | | 5 | | | 35 | | | 9 | |
| | $ | 300 | | $ | 2,504 | | $ | 614 | | $ | 3,311 | |
11.COMMITMENTS
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Restructuring plan charges and adjustments | | $ | 3,660 |
| | $ | 929 |
| | $ | 3,562 |
| | $ | 1,208 |
|
Gain on disposition of Impact email business | | — |
| | (629 | ) | | — |
| | (629 | ) |
Other | | — |
| | — |
| | — |
| | 35 |
|
| | $ | 3,660 |
| | $ | 300 |
| | $ | 3,562 |
| | $ | 614 |
|
12. COMMITMENTS AND CONTINGENCIES:
The Company is involved in various claims and legal proceedings. 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 reflected in the Company’s condensed consolidated financial statements. In management’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’s consolidated financial condition or results of operations. The Company maintains insurance coverage above certain limits. There are currently no matters pending against the Company or its subsidiaries for which the potential exposure is considered material to the Company’s condensed consolidated financial statements.
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
2423 years of
$81.6$89.3 million.
In connection with the
disposal of certain assets, the Company guaranteed a lease for the buyer of the assets. This Company guaranteed the lease as required by the asset disposition agreement. Should the third party default, the Company would be required to perform under this guarantee. At September 30, 2016, the Company’s maximum potential future payments under this guarantee totaled $0.2 million. In connection with the Acxiom Impact
email disposition during
the current fiscal
quarter (see Note 4),2017, the Company assigned a facility lease to the buyer of the business. The Company guaranteed the facility lease as required by the asset disposition agreement. Should the assignee default, the Company would be required to perform under the terms of the facility lease, which
runscontinues through September 2021. At September 30,
2016,2017, the Company’s maximum potential future rent payments under this guarantee totaled
$3.0$2.4 million.
In determining the quarterly provision for income taxes,
the Company makes its best estimate of the effective income tax rate expected to be applicable for the full fiscal year. The estimated annual effective income tax rate for the current fiscal year is impacted by the sale of the Impact email business,nondeductible stock-based compensation, state income taxes, research tax credits, and losses in foreign jurisdictions, and nondeductible share-based compensation.jurisdictions. State income taxes are influenced by the geographic and legal entity mix of the Company’s U.S. income as well as the diversity of rules among the states. The Company does not record a tax benefit for certain foreign losses due to uncertainty of future benefit. 13.FINANCIALutilization.
As a result of adopting ASU 2016–09 during the first quarter of the current fiscal year, all excess tax benefits and deficiencies from stock–based compensation are recognized as income tax benefit and expense in the Company’s Condensed Consolidated Statement of Operations in the reporting period in which they occur. For the three months and six months ended September 30, 2017, the Company recognized discrete income tax benefits of $0.5 million and $2.0 million, respectively, related to net excess tax benefits.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of each class of 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.
|
value. | ·
| | 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 approximates fair value. The estimated fair value of other long-term debt was determined based upon the present value of the expected cash flows considering expected maturities and using interest rates currently available to the Company for long-term borrowings with similar terms. At September 30, 2016, the estimated 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.
|
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 revolving credit agreement is adjusted for changes in market rates and therefore the carrying value approximates fair value. The estimated fair value of other long-term debt was determined based upon the present value of the expected cash flows considering expected maturities and using interest rates currently available to the Company for long-term borrowings with similar terms. At September 30, 2017, the estimated fair value of long-term debt approximates its carrying value.
Under applicable accounting standards financial assets and liabilities 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 the hierarchy in the accounting standards, which is Level 1 - quoted prices in active markets for identical assets or liabilities, Level 2 - significant other observable inputs and Level 3 - significant unobservable inputs.
The following table presents the
balances of assets and liabilities measured at fair value as of September 30,
20162017 (dollars in thousands):
| | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total | |
Assets: | | | | | | | | | | | | | |
Other current assets | | $ | 12,326 | | $ | — | | $ | — | | $ | 12,326 | |
Total assets | | $ | 12,326 | | $ | — | | $ | — | | $ | 12,326 | |
| | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | |
Other accrued expenses | | $ | — | | $ | 19 | | $ | — | | $ | 19 | |
Total liabilities | | $ | — | | $ | 19 | | $ | — | | $ | 19 | |
|
| | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | | |
Other current assets | | $ | 13,519 |
| | $ | — |
| | $ | — |
| | $ | 13,519 |
|
Total assets | | $ | 13,519 |
| | $ | — |
| | $ | — |
| | $ | 13,519 |
|
Table of Contents
PART I. FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our operating segments, summary financial 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.
Introduction and Overview
Acxiom Corporation is a global technology and enablement services company with a vision to
powertransform data into value for everyone. Through a
world where all marketing is relevant. Wesimple, open approach to connecting systems and data, 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
to 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-channelomnichannel 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 3,000many 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.
Our operating segments provide management with a comprehensive view of our key businesses based on how we manage our operations and measure results. Additional information related to our operating segments and geographic information is contained in Note
9 –10 - Segment Information of the Notes to Condensed Consolidated Financial Statements.
Connectivity
As shown in the illustration below, our Connectivity segment enables our clients to build an omnichannel view of the consumer and activate that understanding across the marketing ecosystem.
Through integrations with more than 550 leading digital marketing platforms and data providers, we have become a key point of entry into the digital ecosystem, helping our clients eliminate data silos and unlock greater value from the marketing tools they use every day. We provide a foundational identity resolution layer enabling our clients to identify and reach consumers across channels and measure the impact of marketing on sales, using the marketing platform of their choice.
Today, our primary Connectivity offering is LiveRamp IdentityLink, an identity resolution service that ties data back to real people and makes it possible to onboard that data for people-based marketing initiatives across digital channels. Leveraging AbiliTec and the LiveRamp identity graph, IdentityLink first resolves a client’s first-, second-,
and third-party exposure, and transaction data to persistent anonymous consumer identifiers that represent real people in a privacy-safe way. This omnichannel view of the consumer can then be onboarded to and between any of the 550 plus partners in our ecosystem to support targeting, personalization and measurement use cases.
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Targeting | Personalization | Measurement |
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Example | Example | Example |
Clients can upload known data from first-, second-, and third-party data sources, resolve it to an omnichannel privacy-safe link with IdentityLink, then onboard to one of 550+ LiveRamp partners to deploy targeted ads to known customers. | Clients can deliver highly relevant content the moment viewers visit their website landing page, no login required. Leveraging IdentityLink, clients can resolve customer segment data to devices and digital IDs, onboard that data to a personalization platform and provide one-to-one experiences without compromising user privacy. | Clients can connect exposure data with first- and third-party purchase data across channels by resolving all customer devices back to the customers to which they belong. Then, clients can onboard that data to a measurement platform to clearly establish cause, effect and impact. |
IdentityLink operates in an Acxiom SafeHaven® certified environment with technical, operational, and personnel controls designed to ensure our clients’ data is kept private and secure.
IdentityLink is sold to brands and the companies brands partner to execute their marketing including marketing technology providers, data providers, publishers and agencies.
IdentityLink for Brands and Agencies. IdentityLink allows brands and their agencies to execute people-based marketing by creating an omnichannel understanding of the consumer and activating that understanding across their choice of best-of-breed digital marketing platforms.
IdentityLink for Marketing Technology Providers. IdentityLink provides marketing technology providers with the ability 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.
IdentityLink for Data Owners. IdentityLink allows data owners to easily connect their data to the digital ecosystem and better monetize it. Data can be distributed directly to clients or made available through the IdentityLink Data Store feature. This adds value for brands as it allows them to augment their understanding of consumers, and increase both their reach to and understanding of customers and prospects.
IdentityLink for Publishers. IdentityLink allows publishers 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.
Our Connectivity revenue consists primarily of monthly recurring subscription fees sold on an annual basis. To a lesser extent, we generate revenue from data providers and certain digital publishers in the form of revenue-sharing agreements.
Audience Solutions (“AS”)
Our AS 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. AS 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 over 100 online publishers and digital marketing platforms, including Facebook, Google, Twitter, 4INFO, AOL, eBay and MSN, marketers can use InfoBase data to create and target specific audiences. Data can be accessed directly or through the Acxiom Audience Cloud, a web-based, self-service tool that makes it easy to build and distribute third-party custom data segments.
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.
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 AS revenue includes licensing fees, which are typically in the form of recurring monthly billings, as well as transactional revenue based on volume or one-time usage. In addition, AS 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 AS offerings.
Marketing Services (“MS”)
Our MS 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 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 MS segment includes the following service offerings: Marketing Database Services and Strategy and Analytics. The MS segment also included Impact Email Platform and Services until the disposition of the business in August 2016.
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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 servicesServices. 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.
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.
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Strategy and Analytics. Our Strategy and Analytics offering 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.. Our Strategy and Analytics offering 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 |
Strategy and Analytics revenue consists primarily of project-based fees.
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| | Impact Email Platform and Services. Until the August 2016 disposition, Acxiom Impact™ provided email and cross-channel data-driven marketing solutions for enterprise marketers, including a proprietary marketing platform and agency services.
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Impact Email Platform and Services. Until the August 2016 disposition, Acxiom Impact™ provided email and cross-channel data-driven marketing solutions for enterprise marketers, including a proprietary marketing platform and agency services.
Acxiom ImpactTM revenue consisted 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 (“AS”)
Our AS 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. AS 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.
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| | 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 who 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 AS 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, AS 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 AS 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 400 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:
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| | Data Onboarding. Data Onboardingenables 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 recognitionidentity resolution 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.
Summary Results and Notable Events
A summary of the quarter ended September 30,
20162017 is presented below:
Revenues were $225.2 million, a 3.7% increase from $217.3 million in the same quarter a year ago.
Cost of revenue was $115.1 million, a 4.2% decrease from $120.1 million in the same quarter a year ago.
Gross margin increased to 48.9% from 44.7% in the same quarter a year ago.
Total operating expenses were $109.7 million, a 21.8% increase from $90.0 million in the same quarter a year ago.
Cost of revenue and operating expenses for the quarters ended September 30, 2017 and 2016 include the following items:
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◦ | | Revenues increased 4.8% to $217.3 million.
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| | Cost of revenue of $120.1 million, a 1.0% decrease from $121.3 million in the same quarter a year ago.
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| | Gross margin increased to 44.7% from 41.5%.
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| | Total operating expenses of $90.0 million, a 2.2% increase from $88.1 million in the same quarter a year ago.
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| | Cost of revenue and operating expenses for the quarters ended September 30, 2016 and 2015 include the following items:
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| | Non-cash stock compensation of $11.9$15.8 million and $7.4$11.9 million, respectively (cost of revenue and operating expenses) |
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◦ | | Purchased intangible asset amortization of $3.9$6.0 million and $3.8$3.9 million, respectively (cost of revenue) |
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◦ | Separation and transformation costs of $5.4 million and $1.5 million, respectively (operating expenses) |
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◦ | Restructuring charges and other adjustments of $0.3$3.7 million and $3.2$0.3 million, respectively (operating expenses) |
Net loss was $3.3 million or $.04 per share compared to net earnings of $7.1 million or $.09 per share in the same quarter a year ago.
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| | Separation and transformation costs of $1.5 million and $6.1 million, respectively (operating expenses)
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Net cash provided by operating activities of $27.8 million, a $7.7 million decrease compared to $35.5 million in fiscal 2016. | ·
| | Net earnings from continuing operations of $7.1 million or $.09 per share compared to net loss from continuing operations of $1.3 million or $.02 per share in the same quarter a year ago.
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The Company repurchased 0.9 million shares of its common stock for $19.8 million under the Company's common stock repurchase program. | ·
| | The Company repurchased 0.4 million shares of its common stock for $10.3 million under the Company’s common stock repurchase program.
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| | The Company completed the sale of its Acxiom Impact business. The business did not meet the requirements of a discontinued business; therefore, all financial results are included in continuing operations. The Company recorded a gain on sale of $0.6 million, included in gains, losses andThis summary highlights financial results as well as other items, net. The transaction also generated a $4.1 million income tax benefit.
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The summary above is intended to identify to the reader some of the more significant events and transactions of the Company during the quarterquarters ended September 30, 2017 and 2016. However, this summary is not intended to be a full discussion of the Company’s results for the quarter.results. This summary should be read in conjunction with the following discussion of Results of Operations and Capital Resources and Liquidity and with the Company’s condensed consolidated financial statements and footnotes accompanying this quarterly report.
A summary of selected financial information for each of the periods reported is presented below (dollars in thousands, except per share amounts):
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| | For the Three months ended | | For the Six months ended | |
| | September 30, | | September 30, | |
| | | | | | | | % | | | | | | | | % | |
| | 2016 | | 2015 | | Change | | 2016 | | 2015 | | Change | |
Revenues | | $ | 217,267 | | $ | 207,345 | | 5 | | $ | 432,068 | | $ | 404,240 | | 7 | |
Cost of revenue | | | 120,105 | | | 121,312 | | (1) | | | 242,924 | | | 239,021 | | 2 | |
Gross profit | | | 97,162 | | | 86,033 | | 13 | | | 189,144 | | | 165,219 | | 15 | |
Operating expenses | | | 90,042 | | | 88,089 | | 2 | | | 173,862 | | | 170,144 | | 2 | |
Income/(loss) from operations | | | 7,120 | | | (2,056) | | 446 | | | 15,282 | | | (4,925) | | 410 | |
Net earnings (loss) from continuing operations | | | 7,140 | | | (1,345) | | 631 | | | 11,116 | | | (6,527) | | 270 | |
Diluted earnings (loss) per share from continuing operations | | $ | 0.09 | | $ | (0.02) | | 622 | | $ | 0.14 | | $ | (0.08) | | 267 | |
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| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | | | | | % | | | | | | % |
| | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Revenues | | $ | 225,240 |
| | $ | 217,267 |
| | 4 |
| | $ | 437,754 |
| | $ | 432,068 |
| | 1 |
|
Cost of revenue | | 115,072 |
| | 120,105 |
| | (4 | ) | | 229,032 |
| | 242,924 |
| | (6 | ) |
Gross profit | | 110,168 |
| | 97,162 |
| | 13 |
| | 208,722 |
| | 189,144 |
| | 10 |
|
Total operating expenses | | 109,715 |
| | 90,042 |
| | 22 |
| | 213,976 |
| | 173,862 |
| | 23 |
|
Income (loss) from operations | | 453 |
| | 7,120 |
| | (94 | ) | | (5,254 | ) | | 15,282 |
| | (134 | ) |
Net earnings (loss) | | (3,336 | ) | | 7,140 |
| | (147 | ) | | (4,636 | ) | | 11,116 |
| | (142 | ) |
Diluted earnings (loss) per share | | $ | (0.04 | ) | | $ | 0.09 |
| | (147 | ) | | $ | (0.06 | ) | | $ | 0.14 |
| | (143 | ) |
The following table presents the Company’s revenueCompany's revenues by reporting segment for each of the periods reported is presented below (dollars in thousands):
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| | For the Three months ended | | For the Six months ended | |
| | September 30, | | September 30, | |
| | | | | | | | % | | | | | | | | % | |
| | 2016 | | 2015 | | Change | | 2016 | | 2015 | | Change | |
Marketing Services | | $ | 105,679 | | $ | 112,979 | | (7) | | $ | 215,394 | | $ | 220,705 | | (2) | |
Audience Solutions | | | 78,526 | | | 72,122 | | 9 | | | 152,270 | | | 140,672 | | 8 | |
Connectivity | | | 33,062 | | | 22,244 | | 49 | | | 64,404 | | | 42,863 | | 50 | |
Total revenues | | $ | 217,267 | | $ | 207,345 | | 5 | | $ | 432,068 | | $ | 404,240 | | 7 | |
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| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | | | | | % | | | | | | % |
Revenues | | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Marketing Services | | $ | 94,042 |
| | $ | 105,679 |
| | (11 | ) | | $ | 185,636 |
| | $ | 215,394 |
| | (14 | ) |
Audience Solutions | | 78,814 |
| | 78,526 |
| | — |
| | 154,548 |
| | 152,270 |
| | 1 |
|
Connectivity | | 52,384 |
| | 33,062 |
| | 58 |
| | 97,570 |
| | 64,404 |
| | 51 |
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Total revenues | | $ | 225,240 |
| | $ | 217,267 |
| | 4 |
| | $ | 437,754 |
| | $ | 432,068 |
| | 1 |
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Total revenues were $217.3$225.2 million, an increase of 4.8%3.7%, or $9.9$8.0 million, from $207.3$217.3 million in the same quarter a year ago. Excluding the unfavorable impact of exchange rates ($1.5 million), total revenues increased 5.5%. TheStrong revenue growth in Connectivity ($19.3 million) was duepartially offset by items totaling $8.9 million: the disposition of the Acxiom Impact business ($8.1 million) and the transition of the Australia operations business to strong ASa Connectivity focused business ($0.8 million reduction in MS and Connectivity results. Several items mitigatedAS).
Total revenues were $437.8 million, an increase of 1.3%, or $5.7 million for the
six months ended September 30, 2017. Strong revenue growth
including:in Connectivity ($33.2 million) was partially offset by items totaling $23.0 million: the
exit from Brazil during fiscal year 2016disposition of the Acxiom Impact business ($
0.820.4 million), the transition of the Australia operations business to a Connectivity focused business ($
1.31.7 million reduction in MS and AS), and the
disposition of the Acxiom Impact business ($7.8 million reduction due to one less month of revenue in the current quarter and lost business).For the six months ended September 30, 2016, total revenues were $432.1 million, an increase of 6.9%, or $27.8 million, from $404.2 million in the same quarter a year ago. Excluding the unfavorable impact of exchange rates ($2.10.9 million), total revenues increased 7.4%. The revenue growth was due to strong AS and Connectivity results. Again, several items mitigated the revenue growth, including: the exit from Brazil in the prior year ($1.6 million), the transition of the Australia operations business to a Connectivity focused business ($2.4 million reduction in MS and AS), and the disposition of the Acxiom Impact business ($11.1 million reduction due to one less month of revenue in the current period and lost business).
MS revenue for the quarter ended September 30,
20162017 was
$105.7$94.0 million,
a $7.3an $11.6 million, or
6.5%11.0%, decrease compared to the same quarter a year ago. On a geographic basis, U.S. MS revenue decreased
$5.3$10.7 million, or
5.1%11.0%, due
largely to the sale of Acxiom Impact ($
7.8 million, of which $5.2 million was due to the disposition).8.1 million) and other volume and contract reductions. International MS revenue decreased
$2.0$0.9 million, or
20.2%11.2%.
Excluding the unfavorable impact of exchange rates ($0.9 million), International MS revenue decreased $1.1 million. By line of business,
increases in Marketing Database
($2.0revenue decreased $2.2 million (U.S. $0.8 million, Europe $0.9 million and APAC $0.5 million)
were offset by declines in, Strategy and Analytics
($0.6 million)revenue declined $1.5 million (primarily U.S.) and
Impact declined due to the sale of Acxiom
Impact ($8.7 million).Impact.
MS revenue for the six months ended September 30,
20162017 was
$215.4$185.6 million, a
$5.3$29.8 million, or
2.4%13.8%, decrease compared to the same period a year ago. On a geographic basis, U.S. MS revenue decreased
$1.4$28.5 million, or
0.7%. New business and client upsell were offset by14.2%, due to the
sale of Acxiom Impact
disposition($20.4 million) and
lost Impact business.other volume and contract reductions. International MS revenue decreased
$3.9$1.3 million, or
20.3%. Excluding the unfavorable impact of exchange rates ($1.4 million), International MS revenue decreased $2.5 million, primarily in Asia ($2.1 million), Australia and New Zealand (“ANZ”) ($0.9 million) and Brazil ($0.9 million due to exit of the business)8.5%. By line of business,
increases in Marketing Database
($10.1revenue decreased $6.5 million (U.S. $4.7 million, Europe $1.6 million and APAC $0.2 million)
were offset by declines in, Strategy and Analytics
($1.7 million)revenue declined $2.6 million (primarily U.S.) and
Impact declined due to the sale of Acxiom
Impact ($13.7 million).Impact.
AS revenue for the quarter ended September 30, 20162017 was $78.5$78.8 million, a $6.4$0.3 million, or 8.9%0.4%, increase compared to the same quarter a year ago. On a geographic basis, U.S. AS revenue increased $6.0decreased $0.3 million, or 9.2%0.5%, due to increasesdecreases in Consumer Data and Recognition, offset by an increase in Digital Data business with existing customers.business. International AS revenue increased $0.4$0.6 million, or 6.3%. International AS revenue increases in8.7%, primarily from Europe ($1.6 million) was partially offset by decreases in Brazil ($0.4 million) and APAC ($0.8 million) due to restructuring.Digital
Data. By line of business, AS revenue growth in Digital Data ($
7.24.5 million), through our publisher and digital partner network,
and Recognition ($0.5 million), werewas offset by declines in
Recognition ($2.5 million) and Consumer Data ($
1.51.8 million)
due primarily tofrom contract reductions and lower
volumes in the U.S., and restructuring in Brazil and APAC.volumes. As the
digital dataDigital Data business model evolves, some revenue sharing arrangements will convert to license arrangements and certain publishers will decide to seek alternative data relationships.
In fact, one significant publisher relationship recently converted to a license-based arrangement. As a result, we would expect modest declines in Digital Data in our fiscal 2018 third quarter and more significant revenue declines in our fiscal 2018 fourth quarter. These
changes could impact AS growth rates in the future.trends may continue into fiscal 2019.
AS revenue for the six months ended September 30, 20162017 was $152.3$154.5 million, an $11.6a $2.3 million, or 8.2%1.5%, increase compared to the same period a year ago. On a geographic basis, U.S. AS revenue increased $11.4
$2.1 million, or 9.1%1.5%, due to increasesan increase in Digital Data business with existing customers.offset by decreases in Consumer Data and Recognition. International AS revenue increased $0.2 million, or 1.2%. International AS revenue increases1.1%, primarily in Europe ($2.3 million) was partially offset by decreases in Brazil ($0.6 million) and APAC ($1.5 million) due to restructuring.Europe. By line of business, AS revenue growth in Digital Data ($12.212.9 million), through our publisher and digital partner network, and Consumer Data ($0.6 million), werewas offset by declines in Consumer Data ($8.1 million) and Recognition ($1.5 million) due primarily to lower volumes in the U.S. ($1.0 million), and ANZ ($0.92.6 million).
As the Digital Data business model evolves, some revenue sharing arrangements will convert to license arrangements and certain publishers will decide to seek alternative data relationships. In fact, one significant publisher relationship recently converted to a license-based arrangement. As a result, we would expect modest declines in Digital Data in our fiscal 2018 third quarter and more significant revenue declines in our fiscal 2018 fourth quarter. These trends may continue into fiscal 2019.
Connectivity revenue for the quarter ended September 30,
20162017 was
$33.1$52.4 million, a
$10.8$19.3 million, or
48.6%58.4%, increase compared to the same quarter a year ago.
LiveRamp growthThe increase was
offset by a $2.0 million decrease in revenue from the revenue-sharing arrangements due to
a lost customer.LiveRamp growth. On a geographic basis, U.S. Connectivity revenue increased
$10.2$17.5 million, or
49.5%57.1%, from the same quarter a year ago.
International Connectivity revenue increased $1.8 million, or 76.6%.
Connectivity revenue for the six months ended September 30,
20162017 was
$64.4$97.6 million, a
$21.5$33.2 million, or
50.3%51.5%, increase compared to the same period a year
agoago. The increase was due to LiveRamp
growth from new and existing customers.growth. On a geographic basis, U.S. Connectivity revenue increased
$20.2$30.1 million, or
51.1%50.5%, from the same period a year ago.
International Connectivity revenue increased $3.0 million, or 63.5%.
Cost of revenue and Gross profit
The following table presents the Company’s cost of revenue and gross profit for each of the periods reported is presented below (dollars in thousands):
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| | For the Three months ended | | For the Six months ended | |
| | September 30, | | September 30, | |
| | | | | | | | % | | | | | | | | % | |
| | 2016 | | 2015 | | Change | | 2016 | | 2015 | | Change | |
Cost of revenue | | $ | 120,105 | | $ | 121,312 | | (1) | | $ | 242,924 | | $ | 239,021 | | 2 | |
Gross profit | | $ | 97,162 | | $ | 86,033 | | 13 | | $ | 189,144 | | $ | 165,219 | | 15 | |
Gross margin | | | 44.7 | % | | 41.5 | % | 8 | | | 43.8 | % | | 40.9 | % | 7 | |
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| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | | | | | % | | | | | | % |
| | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Cost of revenue | | $ | 115,072 |
| | $ | 120,105 |
| | (4 | ) | | $ | 229,032 |
| | $ | 242,924 |
| | (6 | ) |
Gross profit | | $ | 110,168 |
| | $ | 97,162 |
| | 13 |
| | $ | 208,722 |
| | $ | 189,144 |
| | 10 |
|
Gross margin % | | 48.9 |
| | 44.7 |
| | 9 |
| | 47.7 |
| | 43.8 |
| | 9 |
|
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 including client services, account management, agency, strategy and analytics, IT, data acquisition, and
productsproduct operations. Finally, cost of revenue includes amortization of internally developed
software.software and other acquisition related intangibles.
Cost of revenue was
$120.1$115.1 million for the quarter ended September 30,
2016,2017, a
$1.2$5.0 million,
decrease, or
1.0%4.2%,
decrease from the same quarter a year ago,
and grossdue primarily to the disposition of Acxiom Impact ($7.2 million). Gross margins increased to
44.7% in the current year48.9% compared to
41.5%44.7% in the prior year. The gross margin increase is due to the
AS and Connectivity revenue increases and
MS cost efficiencies. U.S. gross margins increased to
46.1%50.4% in the current year from
42.9%46.1% in the prior year
again due to the
AS and Connectivity revenue
growth.growth and MS efficiencies. International gross margins increased to
28.5% in the current year32.5% from
27.0% in the prior year due to AS revenue growth and cost reductions.28.5%.
Cost of revenue was
$242.9$229.0 million for the six months ended September 30,
2016,2017, a
$3.9$13.9 million,
increase, or
1.6%5.7%,
decrease from the same period a year ago,
and grossdue primarily to the disposition of Acxiom Impact ($18.2 million). Gross margins increased to
43.8% in the current year47.7% compared to
40.9%43.8% in the prior year. The gross margin increase is due to the
AS and Connectivity revenue increases and
MS cost efficiencies. U.S. gross margins increased to
44.9%49.1% in the current year from
42.3% in44.9% for the
prior year due to the AS and Connectivity revenue growth.same reasons. International gross margins increased to
30.6% in the current year32.2% from
26.5% in the prior year due to AS revenue growth and cost reductions.30.6%.The following table presents the Company’s operating expenses for each of the periods reported is presented below (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| | For the Three months ended | | For the Six months ended | |
| | September 30, | | September 30, | |
| | | | | | | | % | | | | | | | | % | |
| | 2016 | | 2015 | | Change | | 2016 | | 2015 | | Change | |
Research and development | | $ | 19,029 | | $ | 19,078 | | (0) | | $ | 37,681 | | $ | 39,089 | | (4) | |
Sales and marketing | | | 37,847 | | | 34,259 | | 11 | | | 75,195 | | | 63,753 | | 18 | |
General and administrative | | | 32,866 | | | 31,519 | | 4 | | | 60,372 | | | 63,262 | | (5) | |
Impairment of goodwill and other assets | | | — | | | — | | - | | | — | | | 729 | | (100) | |
Gains, losses and other items, net | | | 300 | | | 3,233 | | (91) | | | 614 | | | 3,311 | | (82) | |
Total operating expenses | | $ | 90,042 | | $ | 88,089 | | 2 | | $ | 173,862 | | $ | 170,144 | | 2 | |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | | | | | % | | | | | | % |
Operating expenses | | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Research and development | | $ | 24,013 |
| | $ | 19,029 |
| | 26 |
| | $ | 47,576 |
| | $ | 37,681 |
| | 26 |
|
Sales and marketing | | 50,118 |
| | 37,847 |
| | 32 |
| | 98,558 |
| | 75,195 |
| | 31 |
|
General and administrative | | 31,924 |
| | 32,866 |
| | (3 | ) | | 64,280 |
| | 60,372 |
| | 6 |
|
Gains, losses and other items, net | | 3,660 |
| | 300 |
| | 1,120 |
| | 3,562 |
| | 614 |
| | 480 |
|
Total operating expenses | | $ | 109,715 |
| | $ | 90,042 |
| | 22 |
| | $ | 213,976 |
| | $ | 173,862 |
| | 23 |
|
| | | | | | | | | | | | |
Research and development (“R&D”): Includes operating expenses for the Company’s engineering and product/project management functions supporting research, new development, and related product enhancement.
R&D expenses were
$19.1$24.0 million for the quarter ended September 30,
2016,2017, an increase of $5.0 million, or
flat26.2%, compared to the same quarter a year ago, and
is 8.8%are 10.7% of total revenues compared to
9.2%8.8% in the prior year.
Connectivity investmentsThe increase is due primarily to non-cash stock compensation of $2.1 million,
were offset by a $1.9and Connectivity and AS investments of $3.4 million
reductionand $0.5 million, respectively. The increase in non-cash stock
based compensation.compensation is largely related to the Arbor and Circulate acquisitions.
R&D expenses were
$37.7$47.6 million for the six months ended September 30,
2016, a decrease2017, an increase of
$1.4$9.9 million, or
3.6%26.3%, compared to the same period a year ago, and
is 8.7%are 10.9% of total revenues compared to
9.7%8.7% in the prior year.
The increase is due primarily to non-cash stock compensation of $4.2 million, and Connectivity
and AS investments
($4.5 million) wereof $6.9 million and $1.3 million, respectively, offset
partially by a
$3.4decrease in MS of $2.6 million
reductionrelated mostly to the U.S. Impact disposition. The increase in non-cash stock
based compensation
is largely related to the Arbor and
cost reductions in MS ($2.5 million). Circulate acquisitions.
Sales and marketing (“S&M”): Includes operating expenses for the Company’s sales, marketing, and product marketing functions.
S&M expenses were
$37.8$50.1 million for the quarter ended September 30,
2016,2017, an increase of
$3.6$12.3 million, or
10.5%32.4%, compared to the same quarter a year ago, and
is 17.4%are 22.3% of total revenues compared to
16.5%17.4% in the prior year. The increase is due to
headcountprimarily to non-cash stock compensation of $4.1 million (largely related to the Arbor and Circulate acquisitions), and Connectivity investments
in U.S. Connectivityof $8.1 million and
AS salescorporate marketing of $1.0 million. The increases were partially offset by
reductionsa decrease in
International operations.MS ($1.3 million) due primarily to lower variable compensation.
S&M expenses were
$75.2$98.6 million for the six months ended September 30,
2016,2017, an increase of
$11.4$23.4 million, or
17.9%31.1%, compared to the same period a year ago, and
is 17.4%are 22.5% of total revenues compared to
15.8%17.4% in the prior year. The increase is due to
headcountprimarily to non-cash stock compensation of $8.0 million (largely related to the Arbor and Circulate acquisitions), and Connectivity investments
in U.S. Connectivityof $15.3 million, corporate marketing of $4.0 million, and AS
salesinvestments of $1.4 million. The increases were partially offset by
reductionsa decrease in
International operations.MS ($5.3 million) due primarily to lower variable compensation.
General and administrative (G&A): Represents operating expenses for all corporate functions, including finance, human resources, legal, corporate IT, and the corporate office.
G&A expenses were $32.9$31.9 million for the quarter ended September 30, 2016, an increase2017, a decrease of $1.3$0.9 million, or 4.3%2.9%, compared to the same quarter a year ago, and is 15.1%are 14.2% of total revenues compared to 15.2%15.1% in the prior year.
The decrease is due primarily to a decrease in non-cash stock compensation and incentive compensation accruals and other cost savings offset by a $4.0 million increase in separation and transformation costs. Prior year non-cash stock compensation costs were impacted by adjustments to increase expected performance levels for certain performance based awards.
G&A expenses were $64.3 million for the six months ended September 30, 2017, an increase of $3.9 million, or 6.5%, compared to the same period a year ago, and are 14.7% of total revenues compared to 14.0% in the prior year. The increase is due primarily to an
increase in non-cash stock based compensation of $4.3$11.1 million
and third party-legal costs offset by a $4.6 million decline in separation and transformation costs. G&A expenses were $60.4 million for the six months ended September 30, 2016, a decrease of $2.9 million, or 4.6%, compared to the same period a year ago, and is 14.0% of total revenues compared to 15.6% in the prior year. The decrease is due to an $8.0 million declineincrease in separation and transformation costs offset partially by an increasea decrease in non-cash stock compensation an incentive compensation accruals and other cost savings. Prior year non-cash stock compensation costs were impacted by adjustments to increase expected performance levels for certain performance based compensation of $4.6 million
awards.
Gains, losses, and other items, net: Represents restructuring costs and other adjustments.
Gains, losses and other items, net of
$0.3$3.7 million for the quarter ended September 30,
2016 decreased $2.92017 increased $3.4 million
or 90.7%, compared to the same quarter a year ago.
The current year includes the $0.6 million gain on sale of the Acxiom Impact business.Gains, losses and other items, net of $0.6$3.6 million for the six months ended September 30, 2016 decreased $2.72017 increased $2.9 million or 81.5%, compared to the same period a year ago. The current year includes a $2.1 million charge related to the $0.6 million gain on salerestructuring of the Acxiom Impact business.
Redwood City, California lease and $1.5 million in severance and other associate-related charges.
Income (Loss) from Operations and Profit (Loss) Margins
The following table presents the Company’s income (loss) from operations, andas well as operating margin by segment, for each of the periods reported is presented below (dollars in thousands):
| | | | | | | | | | | | | | |
| | For the Three months ended | | | For the Six months ended | |
| | September 30, | | | September 30, | |
| | 2016 | | 2015 | | | 2016 | | 2015 | |
Operating income (loss) and margin: | | | | | | | | | | | | | | |
Marketing Services | | $ | 19,837 | | $ | 17,908 | | | $ | 39,982 | | $ | 34,761 | |
| | | 18.8% | | | 15.9% | | | | 18.6% | | | 15.7% | |
Audience Solutions | | | 29,972 | | | 25,190 | | | | 55,068 | | | 49,277 | |
| | | 38.2% | | | 34.9% | | | | 36.2% | | | 35.0% | |
Connectivity | | | 1,663 | | | (1,068) | | | | 1,954 | | | (1,859) | |
| | | 5.0% | | | (4.8%) | | | | 3.0% | | | (4.3%) | |
Less: | | | | | | | | | | | | | | |
Corporate | | | 28,224 | | | 29,739 | | | | 52,613 | | | 60,073 | |
Purchased intangible asset amortization | | | 3,890 | | | 3,754 | | | | 7,967 | | | 7,508 | |
Non-cash stock compensation | | | 11,938 | | | 7,360 | | | | 20,528 | | | 15,483 | |
Gains, losses and other items, net | | | 300 | | | 3,233 | | | | 614 | | | 4,040 | |
Income (loss) from operations | | $ | 7,120 | | $ | (2,056) | | | $ | 15,282 | | $ | (4,925) | |
Total operating margin | | | 3.3 | % | | (1.0) | % | | | 3.5 | % | | (1.2) | % |
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Operating income (loss) and margin: | | | | | | | | |
Marketing Services | | $ | 21,874 |
| | $ | 19,837 |
| | $ | 41,658 |
| | $ | 39,982 |
|
| | 23.3 | % | | 18.8 | % | | 22.4 | % | | 18.6 | % |
Audience Solutions | | 29,497 |
| | 29,972 |
| | 58,039 |
| | 55,068 |
|
| | 37.4 | % | | 38.2 | % | | 37.6 | % | | 36.2 | % |
Connectivity | | 5,715 |
| | 1,663 |
| | 5,667 |
| | 1,954 |
|
| | 10.9 | % | | 5.0 | % | | 5.8 | % | | 3.0 | % |
Less: | | |
| | |
| | |
| | |
|
Corporate expenses | | 25,753 |
| | 26,769 |
| | 51,720 |
| | 51,158 |
|
Purchased intangible asset amortization | | 6,021 |
| | 3,890 |
| | 11,987 |
| | 7,967 |
|
Non-cash stock compensation | | 15,757 |
| | 11,938 |
| | 30,788 |
| | 20,528 |
|
Restructuring charges | | 3,660 |
| | 300 |
| | 3,562 |
| | 614 |
|
Separation and transformation costs | | 5,442 |
| | 1,455 |
| | 12,561 |
| | 1,455 |
|
Income (loss) from operations | | $ | 453 |
| | $ | 7,120 |
| | $ | (5,254 | ) | | $ | 15,282 |
|
Total operating margin | | 0.2 | % | | 3.3 | % | | (1.2 | )% | | 3.5 | % |
Income from operations was
$7.1$0.5 million for the quarter ended September 30,
20162017 compared to
a loss of $2.1$7.1 million for the same quarter a year ago.
Operating margin was 0.2% compared to 3.3%. The
increasedecrease in income from operations of
$9.2$6.7 million was due primarily to
an increase in each of the operating segment’s income from operations and lower gains, losses and other items, net offset by an increaseincreases in non-cash stock
compensation. Incomecompensation, largely related to the Arbor and Circulate acquisitions, and separation and transformation costs, offset partially by the increase in Connectivity income from operations.
Loss from operations was
$15.3$5.3 million for the six months ended September 30,
20162017 compared to
a lossincome of
$4.9$15.3 million for the same period a year ago.
Operating margin was 1.2% compared to 3.5%. The
increase in income from operationsdecrease of
$20.2$20.5 million was due primarily to
an increase in each of the operating segment’s income from operations, lower corporate costs, and lower gains, losses and other items, net offset by an increaseincreases in non-cash stock
compensation. compensation, largely related to the Arbor and Circulate acquisitions, and separation and transformation costs, offset partially by increases in operating segments' income from operations.
MS income from operations was
$19.8$21.9 million,
an 18.8%a 23.3% margin, for the quarter ended September 30,
20162017 compared to
$17.9$19.8 million,
a 15.9%an 18.8% margin, for the same quarter a year ago. U.S. margins increased to
19.6%25.3% in the current quarter from
15.9%19.6% due to R&D
and S&M cost
reductions.reductions, including R&D reductions related to the Impact disposition. International operating margins decreased to
8.8%a negative 1.6% from
14.6% due to the decrease in gross profit.8.8%.
MS income from operations was
$40.0$41.7 million,
an 18.6%a 22.4% margin, for the six months ended September 30,
20162017 compared to
$34.8$40.0 million,
a 15.7%an 18.6% margin, for the same period a year ago. U.S. margins increased to
19.3%24.5% in the current
yearperiod from
16.7%19.3% due to R&D
and S&M cost
reductions.reductions, including R&D reductions related to the Impact disposition. International operating margins
increaseddecreased to
9.2%a negative 2.5% from
4.8% due to S&M reductions.9.2%.
AS income from operations was
$30.0$29.5 million, a
38.2%37.4% margin, for the quarter ended September 30,
20162017 compared to
$25.2$30.0 million, a
34.9%38.2% margin, for the same quarter a year ago. U.S. margins
increaseddecreased to
40.2%39.2% in the current quarter from
39.5%40.2% due to
gross profit improvements of $6.9 million offset partially by investments in S&M
of $3.9 million.and R&D. International operating margins increased to
17.9%21.0% from
negative 9.3% due to expanding gross profit of $1.9 million. 17.9%.
AS income from operations was
$55.1$58.0 million, a
36.2%37.6% margin, for the six months ended September 30,
20162017 compared to
$49.3$55.1 million, a
35.0%36.2% margin, for the same period a year ago. U.S. margins
decreasedincreased to
38.0%39.4% in the current period from
39.2%38.0% due to
S&M investments partially offset bythe increase in gross profit
improvements of $11.3 million.offset partially by investments in S&M and R&D. International operating
marginmargins increased
$2.9 million to
$3.0 million due to expanding gross profit of $2.7 million. 20.7% from 19.4%. Connectivity income from operations was $1.7$5.7 million, a 5.0%10.9% margin, for the quarter ended September 30, 20162017 compared to a loss of $1.1$1.7 million, a negative 4.8%5.0% margin, for the same quarter a year ago. A $6.3$15.4 million increase in gross profit was partially offset by R&D and S&M investments.
Connectivity income from operations was
$2.0$5.7 million, a
3.0%5.8% margin, for the six months ended September 30,
20162017 compared to
a loss of $1.9$2.0 million, a
negative 4.3%3.0% margin, for the same period a year ago.
GrossA $25.4 million increase in gross profit
increased $12.0 million and was partially offset by R&D and S&M investments.
Other Expense, Income Taxes and Other Items
Interest expense was $1.7
Corporate expenses were $25.8 million for the quarter ended September 30, 20162017 compared to $2.0$26.8 million for the same quarter a year ago, and is 11.4% of total revenues compared to 12.3% in the prior year.
Corporate expenses were $51.7 million for the six months ended September 30, 2017 compared to $51.2 million for the same period a year ago, and is 11.8% of total revenues in both periods.
Other Expense, Income Taxes and Other Items
Interest expense was $2.5 million for the quarter ended September 30, 2017 compared to $1.7 million for the same quarter a year ago. The
decreaseincrease is primarily related to
$70 million of borrowings in the
term loan. The average balance decreased approximately $46 millionthird quarter of fiscal year 2017 related to the Arbor and
Circulate acquisitions and an increase in the average rate
increasedof approximately
2072 basis points.
Interest expense was
$3.5$4.9 million for the six months ended September 30,
20162017 compared to
$3.8$3.5 million for the same period a year ago. The
decreaseincrease is primarily related to
$70 million of borrowings in the
term loan. The average balance decreased approximately $65 millionthird quarter of fiscal year 2017 related to the Arbor and
Circulate acquisitions and an increase in the average rate
increasedof approximately
2073 basis points.
On June 20, 2017, the Company refinanced its debt facility to consist of a $600 million revolving credit facility, of which $230 million was outstanding at September 30, 2017.
Other
expenseincome was $0.2 million for the quarter ended September 30,
20162017 compared to other
incomeexpense of
$0.1$0.2 million for the same quarter a year ago. Other
income and expense
primarily consists of foreign currency transaction gains and losses in each period reported.Other income was $0.1$0.5 million for the six monthssix-month period ended September 30, 20162017 compared to $0.4other income of $0.1 million for the same period a year ago. Other income and expense primarily consists of foreign currency transaction gains and losses in each period reported.
The current year to date period includes $0.7 million for accelerated deferred debt costs related to the debt refinancing.
Income tax expense was $1.5 million on pretax loss of $1.9 million for the quarter ended September 30, 2017 compared to income tax benefit wasof $1.9 million on pretax income of $5.2 million for the same quarter last year. The effective tax rate for the current quarter was impacted by nondeductible share–based compensation related to the Arbor and Circulate acquisitions. In the quarter ended September 30, 2017, the Company also recognized a tax benefit of $0.5 million related to net excess tax benefits from share–based compensation. During the quarter ended September 30, 2016, compared to income tax benefit of $2.6 million on a pretax loss of $4.0 million for the same quarter last year. During the current quarter, the Company recorded a $4.1 million income tax benefit related to the disposition of the Acxiom Impact business. During
Income tax benefit was $6.0 million on pretax loss of $10.6 million for the
quartersix months ended September 30,
2015, the Company recorded a $1.0 million tax benefit in connection with the completion of a U.S.2017 compared to income tax
examination covering the fiscal years ended March 31, 2013 and 2012. In addition, the quarter ended September 30, 2015 was impacted by the expirationexpense of
the federal research tax credit, which was permanently reinstated in December of 2015.Income tax expense was $0.8 million on pretax income of $11.9 million for the same period last year. The effective tax rate for the six months ended September 30, 2016 compared2017 was impacted by nondeductible share–based compensation related to incomethe Arbor and Circulate acquisitions. In the six months ended September 30, 2017, the Company also recognized tax benefitbenefits of $1.9$2.0 million on a pretax loss of $8.4 million for the same period last year.related to net excess tax benefits from share–based compensation. During the six months ended September 30, 2016, the Company recorded a $4.1 million income tax benefit related to the disposition of the Acxiom Impact. During the same period last year, the Company recorded a $1.0 million tax benefit in connection with the completion of a U.S. income tax examination covering the fiscal years ended March 31, 2013 and 2012. In addition, the six months ended September 30, 2015 was impacted by the expiration of the federal research tax credit, which was permanently reinstated in December of 2015.
The effective tax rates for all periods were impacted by state income taxes, nondeductible share-based compensation, and losses in foreign jurisdictions. The Company does not record the income tax benefit of certain of those losses due to uncertainty of future benefit.
Impact business.
Capital Resources and Liquidity
Working Capital and Cash Flow
Working capital at September 30,
20162017 totaled
$170.2$203.1 million,
an $18.2a $64.8 million increase when compared to
$152.0$138.3 million at March 31,
2016,2017, due primarily to
net cash received of $17.0 million from the
disposition ofdebt refinancing, as the
Acxiom Impact business. amended credit agreement does not require periodic principal debt service.
The Company’s cash is primarily located in the United States. Approximately
$15.1$16.5 million of the total cash balance of
$175.4$169.5 million, or approximately
8.6%9.7%, is located outside of the United States. The Company has no current plans to repatriate this cash to the United States.
Accounts receivable days sales outstanding from continuing operations, was 5558 days at September 30, 20162017 compared to 5657 days at March 31, 2016,2017, and is calculated as follows (dollars in thousands):
| | | | | | | |
| | September 30, | | March 31, | |
| | 2016 | | 2016 | |
Numerator – trade accounts receivable, net | | $ | 130,509 | | $ | 138,650 | |
Denominator: | | | | | | | |
Quarter revenue | | | 217,267 | | | 224,655 | |
Number of days in quarter | | | 92 | | | 91 | |
Average daily revenue | | $ | 2,362 | | $ | 2,469 | |
Days sales outstanding | | | 55 | | | 56 | |
|
| | | | | | | | |
| | September 30, 2017 | | March 31, 2017 |
Numerator – trade accounts receivable, net | | $ | 141,285 |
| | $ | 142,768 |
|
Denominator: | | |
| | |
|
Quarter revenue | | 225,240 |
| | 224,867 |
|
Number of days in quarter | | 92 |
| | 90 |
|
Average daily revenue | | $ | 2,448 |
| | $ | 2,499 |
|
Days sales outstanding | | 58 |
| | 57 |
|
Net cash provided by operating activities was
$36.2$32.8 million for the six months ended September 30,
2016,2017, compared to
$33.4$36.2 million in the same period a year ago. The
$2.9$3.4 million
increasedecrease resulted primarily from
improved cash earnings. the net loss of $4.6 million in the current period compared to net earnings of $11.1 in the prior year period.
Investing activities used cash of
$11.7$18.1 million during the six months ended September 30,
20162017 compared to
$30.6$11.7 million in the same period a year ago. Investing activities primarily consisted of capital expenditures ($
20.514.5 million compared to
$23.1$20.5 million in the prior period), capitalization of software ($7.1 million compared to $7.9 million in the prior period) and
capitalization of software ($7.9 million compared to $6.7 million in the prior period). Current year investing activities were offset by the $17.0 million net cash received in the disposition of the U.S. Impact
business.business ($4.0 million compared to $17.0 million in the prior period).
Financing activities used cash of
$37.9$16.2 million during the six months ended September 30,
20162017 compared to
$94.8$37.9 million in the same period a year ago.
FinancingProceeds from the debt refinancing of $230.0 million were used to pay off the outstanding $225 million term and revolving loan balances, with interest, along with $4.0 million in fees related to the restated credit agreement. Other financing activities
in the current year period primarily consisted of treasury stock purchases of
$30.5$19.8 million
(1.3(0.9 million shares of the
Company’sCompany's common stock pursuant to the board of
directors’directors' approved stock repurchase plan)
and payments of debt of $16.1 million. Financing activitiescompared to $30.5 million in the prior
year also included a $55.0period (1.3 million
required term loan debt prepayment as a result of the ITO disposition.shares).
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was subsequently modified and expanded, most recently on July 28, 2016 (see Note
14)2 - Earnings Per Share). Under the modified common stock repurchase program, the Company may purchase up to $400 million of its common stock through the period ending June 30, 2018. During the six months ended September 30,
2016,2017, the Company repurchased
1.30.9 million shares of its common stock for
$30.5$19.8 million. Through September 30,
2016,2017, the Company had repurchased a total of
16.817.7 million shares of its stock for
$285.7$305.5 million, leaving remaining capacity of
$114.3$94.5 million under the program.
Credit and Debt Facilities
See Note
78 “Long-Term Debt” of the Notes to Condensed Consolidated Financial Statements
(unaudited) for further details related to the Company’s amended and restated credit
agreement and interest rate swap agreement.
Based on our current expectations, we believe our liquidity and capital resources will be sufficient to operate our business. However, we may take advantage of opportunities to generate additional liquidity or refinance existing debt through capital market transactions. 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.
Off-Balance Sheet Items and Commitments
In connection with the disposal of certain assets, the Company guaranteed a lease for the buyer of the assets. This Company guaranteed the lease as required by the asset disposition agreement. Should the third party default, the Company would be required to perform under this guarantee. At September 30, 2016, the Company’s maximum potential future payments under this guarantee totaled $0.2 million.
In connection with the Acxiom Impact disposition, during the current fiscal quarter (see Note 4), the Company assigned a facility lease to the buyer of the business. The Company guaranteed the facility lease as required by the
asset disposition agreement. Should the assignee default, the Company would be required to perform under the terms of the facility lease, which runscontinues through September 2021. At September 30, 2016,2017, the Company’sCompany's maximum potential future rent payments undersubject to this guarantee totaled $3.0$2.4 million.
Outstanding
There were no material outstanding letters of credit
which reduce the borrowing capacity under the Company’s revolving credit facility, were $0.8 million at September 30,
2016.2017 or March 31, 2017.
The following table presents the Company’s contractual cash obligations, exclusive of interest, and purchase commitments at September 30, 2016.2017. The table does not include the future payment of liabilities related to uncertain tax positions of $4.8$5.5 million as the Company is not able to predict the periods in which the payments will be made. The columnamounts for 2017 represents2018 represent the remaining six months ending March 31, 2017.2018. All other columnsperiods represent fiscal years ending March 31 (dollars in thousands). | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, | |
| | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total | |
Term loan | | $ | 15,000 | | $ | 37,500 | | $ | 117,500 | | $ | — | | $ | — | | $ | — | | $ | 170,000 | |
Other debt and long-term liabilities | | | 1,132 | | | 2,319 | | | 1,583 | | | 1,362 | | | 348 | | | — | | | 6,744 | |
Total long-term debt and capital leases | | | 16,132 | | | 39,819 | | | 119,083 | | | 1,362 | | | 348 | | | — | | | 176,744 | |
Operating lease payments | | | 8,397 | | | 13,542 | | | 11,400 | | | 11,159 | | | 10,848 | | | 26,269 | | | 81,615 | |
Total contractual cash obligations | | $ | 24,529 | | $ | 53,361 | | $ | 130,483 | | $ | 12,521 | | $ | 11,196 | | $ | 26,269 | | $ | 258,359 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, | |
| | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total | |
Total purchase commitments | | $ | 22,309 | | $ | 18,797 | | $ | 15,586 | | $ | 14,462 | | $ | 7,015 | | $ | — | | $ | 78,169 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Revolving credit borrowings | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 230,000 |
| | $ | 230,000 |
|
Other debt | | 1,170 |
| | 1,583 |
| | 1,362 |
| | 348 |
| | — |
| | — |
| | 4,463 |
|
Total long-term debt | | 1,170 |
| | 1,583 |
| | 1,362 |
| | 348 |
| | — |
| | 230,000 |
| | 234,463 |
|
Operating leases | | 10,239 |
| | 19,152 |
| | 14,530 |
| | 14,156 |
| | 13,823 |
| | 17,373 |
| | 89,273 |
|
Total contractual cash obligations | | $ | 11,409 |
| | $ | 20,735 |
| | $ | 15,892 |
| | $ | 14,504 |
| | $ | 13,823 |
| | $ | 247,373 |
| | $ | 323,736 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
|
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| Thereafter |
| Total |
Total purchase commitments |
| $ | 23,826 |
|
| $ | 19,981 |
|
| $ | 15,521 |
|
| $ | 7,787 |
|
| $ | 834 |
|
| $ | — |
|
| $ | 67,949 |
|
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 will 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 future interest payments on debt for the remainder of fiscal
20172018 of
$3.9$5.3 million.
The following are contingencies or guarantees under which the Company could be required, in certain circumstances, to make cash payments as of September 30, 20162017 (dollars in thousands): | | | | |
Lease guarantees
| | $
| | | | | | Lease guarantees | $ | 2,404 |
| Surety bonds | $ | 405 |
|
3,225 | |
Outstanding letters of credit
| | | 776 | |
Surety bonds
| | | 405 | |
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” contained in Part I, Item 1A, of the Company’s
20162017 Annual Report.
The Company has a presence in the United Kingdom, France, Germany, Poland, Australia,
China and
China.Japan. Most of the Company’s 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).income. Exchange rate movements of foreign currencies may have an impact on the Company’s 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.
Critical Accounting Policies
We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. These accounting principles require management to make certain judgments and assumptions that 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. The consolidated financial statements in the Company’s
20162017 Annual Report include a summary of significant accounting policies used in the preparation of Acxiom’s consolidated financial statements. In addition, the Management’s Discussion and Analysis filed as part of the
20162017 Annual Report contains a discussion of the policies
whichthat management has identified as the most critical because they require management’s use of complex and/or significant judgments. None of the Company’s critical accounting policies have materially changed since the date of the last annual report.
Accounting Pronouncements Adopted During the Current Year
See “Accounting Pronouncements Adopted During the Current Year” under Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements
(Unaudited) for a discussion of certain accounting standards that have been issued and were adopted during the current fiscal year.
New Accounting Pronouncements Not Yet Adopted
See “Recent Accounting Pronouncements Not Yet Adopted” under Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements
(Unaudited) for a discussion of certain accounting standards that have been issued but not yet adopted.
Forward-looking Statements
This document contains forward-looking statements. These statements, which are not statements of historical fact, may contain estimates, assumptions, projections and/or expectations regarding the Company’s financial position, results of operations, market position, product development, growth opportunities, economic conditions, and other similar forecasts and statements of expectation. Forward-looking statements are often identified by words or phrases such as “anticipate,” “estimate,” “plan,” “expect,” “believe,” “intend,” “foresee,” or the negative of these terms or other similar variations thereof. These forward-looking statements are not guarantees of future performance and are subject to a number of factors and uncertainties that could cause the Company’s actual results and experiences to differ materially from the anticipated results and expectations expressed in the forward-looking statements.
Forward-looking statements may include but are not limited to the following:
| ·
| | management’s expectations about the macro economy;
|
| ·
| | statements containing a projection of revenues, expenses, income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure, or other financial items;
|
management’s expectations about the macro economy; | ·
| | statements of the plans and objectives of management for future operations;
|
| ·
| | statements of future economic performance, including, but not limited to, those statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q;
|
statements of the plans and objectives of management for future operations, including, but not limited to, those statements contained under the heading “Acxiom’s Growth Strategy” in Part I, Item 1 of the Company's 2017 Annual Report on Form 10-K; | ·
| | statements containing any assumptions underlying or relating to any of the above statements; and
|
| ·
| | statements containing a projection or estimate.
|
statements of future economic performance, including, but not limited to, those statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 2017 Annual Report on Form 10-K;
statements containing any assumptions underlying or relating to any of the above statements; and
statements containing a projection or estimate.
Among the factors that may cause actual results and expectations to differ from anticipated results and expectations expressed in such forward-looking statements are the following:
| ·
| | the risk factors described in Part I, “Item 1A. Risk Factors” included in the Company’s 2016 Annual Report and those described from time to time in our future reports filed with the SEC;
|
| ·
| | the possibility that in the event a change of control of the Company is sought that certain clients may attempt to invoke provisions in their contracts allowing for termination upon a change in control, which may result in a decline in revenue and profit;
|
| ·
| | the possibility that the integration of acquired businesses may not be as successful as planned;
|
the risk factors described in Part I, “Item 1A. Risk Factors” included in the Company's 2017 Annual Report and those described from time to time in our future reports filed with the SEC; | ·
| | the possibility that the fair value of certain of our assets may not be equal to the carrying value of those assets now or in future time periods;
|
| ·
| | the possibility that sales cycles may lengthen;
|
the possibility that, in the event a change of control of the Company is sought, certain clients may attempt to invoke provisions in their contracts allowing for termination upon a change in control, which may result in a decline in revenue and profit; | ·
| | the possibility that we will not be able to properly motivate our sales force or other associates;
|
| ·
| | the possibility that we may not be able to attract and retain qualified technical and leadership associates, or that we may lose key associates to other organizations;
|
the possibility that the integration of acquired businesses may not be as successful as planned; | ·
| | the possibility that we may be unable to quickly and seamlessly integrate our new executive officers;
|
| ·
| | the possibility that we will not be able to continue to receive credit upon satisfactory terms and conditions;
|
the possibility that the fair value of certain of our assets may not be equal to the carrying value of those assets now or in future time periods; | ·
| | the possibility that competent, competitive products, technologies or services will be introduced into the marketplace by other companies;
|
| ·
| | the possibility that there will be changes in consumer or business information industries and markets that negatively impact the Company;
|
the possibility that sales cycles may lengthen; | ·
| | the possibility that we will not be able to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms;
|
| ·
| | the possibility that there will be changes in the legislative, accounting, regulatory and consumer environments affecting our business, including but not limited to litigation, legislation, regulations and customs relating to our ability to collect, manage, aggregate and use data;
|
the possibility that we will not be able to properly motivate our sales force or other associates; | ·
| | the possibility that data suppliers might withdraw data from us, leading to our inability to provide certain products and services;
|
| ·
| | the possibility that data purchasers will reduce their reliance on us by developing and using their own, or alternative, sources of data generally or with respect to certain data elements or categories;
|
the possibility that we may not be able to attract and retain qualified technical and leadership associates, or that we may lose key associates to other organizations; | ·
| | the possibility that we may enter into short-term contracts which would affect the predictability of our revenues;
|
| ·
| | the possibility that the amount of ad hoc, volume-based and project work will not be as expected;
|
the possibility that we will not be able to continue to receive credit upon satisfactory terms and conditions; | ·
| | the possibility that we may experience a loss of data center capacity or interruption of telecommunication links or power sources;
|
| ·
| | the possibility that we may experience failures or breaches of our network and data security systems, leading to potential adverse publicity, negative customer reaction, or liability to third parties;
|
the possibility that competent, competitive products, technologies or services will be introduced into the marketplace by other companies; | ·
| | the possibility that our clients may cancel or modify their agreements with us;
|
| ·
| | the possibility that we will not successfully complete customer contract requirements on time or meet the service levels specified in the contracts, which may result in contract penalties or lost revenue;
|
the possibility that there will be changes in consumer or business information industries and markets that negatively impact the Company; | ·
| | the possibility that we experience processing errors which result in credits to customers, re-performance of services or payment of damages to customers; and
|
| ·
| | general and global negative economic conditions.
|
the possibility that we will not be able to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms;
the possibility that there will be changes in the legislative, accounting, regulatory and consumer environments affecting our business, including but not limited to litigation, legislation, regulations and customs impairing our ability to collect, manage, aggregate and use data;
the possibility that data suppliers might withdraw data from us, leading to our inability to provide certain products and services;
the possibility that data purchasers will reduce their reliance on us by developing and using their own, or alternative, sources of data generally or with respect to certain data elements or categories;
the possibility that we may enter into short-term contracts which would affect the predictability of our revenues;
the possibility that the amount of ad hoc, volume-based and project work will not be as expected;
the possibility that we may experience a loss of data center capacity or interruption of telecommunication links or power sources;
the possibility that we may experience failures or breaches of our network and data security systems, leading to potential adverse publicity, negative customer reaction, or liability to third parties;
the possibility that our clients may cancel or modify their agreements with us;
the possibility that we will not successfully complete customer contract requirements on time or meet the service levels specified in the contracts, which may result in contract penalties or lost revenue;
the possibility that we may experience processing errors that result in credits to customers, re-performance of services or payment of damages to customers; and
general and global negative economic conditions.
With respect to the provision of products or services outside our primary base of operations in the United States, all of the above factors apply, along with the difficulty of doing business in numerous sovereign jurisdictions due to differences in scale, competition, culture, laws and regulations.
Other factors are detailed from time to time in periodic reports and registration statements filed with the SEC. The Company believes that it has the product and technology offerings, facilities, associates and competitive and financial resources for continued business success, but future revenues, costs, margins and profits are all influenced by a number of factors, including those discussed above, all of which are inherently difficult to forecast.
In light of these risks, uncertainties and assumptions, the Company cautions readers not to place undue reliance on any
forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Acxiom’s earnings are affected by
We believe there have been no material changes in
short-term interest rates primarily as a result of its term loan agreement and its revolving credit agreement, both of which bear interest at a floating rate. Acxiom currently uses an interest-rate swap agreement to mitigateour market risk exposures for the
changes in interest rate risk on $50 million of its floating-rate debt. Risk can be estimated by measuring the impact of a near-term adverse movement of one percentage point in short-term market interest rates. If short-term market interest rates increase one percentage point during the next four quarters compared to the previous four quarters, there would be no material adverse impact on Acxiom’s results of operations. Acxiom has no material future earnings or cash flow expenses from changes in interest rates related to its other long-term debt obligations, as substantially all of Acxiom’s remaining long-term debt instruments have fixed rates. At bothsix months ended September 30,
2016 and2017, as compared with those discussed in our Annual Report on Form 10-K for the fiscal year ended March 31,
2016, the fair value of the Company’s fixed rate long-term debt approximated carrying value. The Company has a presence in the United Kingdom, France, Germany, Poland, Australia, and China. 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. Therefore, exchange rate movements of foreign currencies may have an impact on Acxiom’s future costs or on future cash flows from foreign investments. Acxiom 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.
2017. Item 4. Controls and Procedures
(a)Evaluation of Disclosure Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and President (our principal executive officer) and our Chief Financial Officer and Executive Vice President (our principal financial and accounting officer), evaluated the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended). Based on this evaluation, our principal executive officer and our principal financial and accounting officer concluded that as of September 30,
2016,2017, our disclosure controls and procedures were effective.
| (b)
| | Changes in Internal Control over Financial Reporting
|
(b) Changes in Internal Control over Financial Reporting.
There have been no changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 30,
20162017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are currently no matters pending against the Company or its subsidiaries for which the potential exposure is considered material to the Company’s condensed consolidated financial statements.
The risks described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2016,2017, which was filed with the Securities and Exchange Commission on May 27, 2016,26, 2017, remain current in all material respects. Those risk factors do not identify all risks that we face. Our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. If any of the identified risks or others not specified in our SEC filings materialize, our business, financial condition, or results of operations could be materially adversely affected. In these circumstances, the market price of our common stock could decline.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| (c)The table below provides information regarding purchases by Acxiom of its common stock during the periods indicated.
|
| | | | | | | | | | |
| | | | | | | | Maximum Number (or Approximate | |
| | Total Number | | Average Price | | Total Number of Shares | | Dollar Value) of Shares that May Yet | |
| | of Shares | | Paid | | Purchased as Part of Publicly | | Be Purchased Under the | |
Period | | Purchased | | Per Share | | Announced Plans or Programs | | Plans or Programs | |
7/1/16 - 7/31/16 | | — | | n/a | | — | | $ | 124,585,732 | |
8/1/16 - 8/31/16 | | — | | n/a | | — | | | 124,585,732 | |
9/1/16 - 9/30/16 | | 389,002 | | 26.57 | | 389,002 | | | 114,250,978 | |
Total | | 389,002 | | n/a | | 389,002 | | $ | 114,250,978 | |
(b)Not applicable.
(c)The table below provides information regarding purchases by Acxiom of its common stock during the periods indicated.
|
| | | | | | | | | | | | |
| | | | | | | | Maximum Number (or Approximate |
| | Total Number | | Average Price | | Total Number of Shares | | Dollar Value) of Shares that May Yet |
| | of Shares | | Paid | | Purchased as Part of Publicly | | Be Purchased Under the |
Period | | Purchased | | Per Share | | Announced Plans or Programs | | Plans or Programs |
July 2017 | | — |
| | n/a | | — |
| | $ | 114,250,978 |
|
August 2017 | | 600,000 |
| | 22.77 | | 600,000 |
| | 100,590,458 |
|
September 2017 | | 260,000 |
| | 23.52 | | 260,000 |
| | 94,474,907 |
|
Total | | 860,000 |
| | 23.00 | | 860,000 |
| | $ | 94,474,907 |
|
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was subsequently modified and expanded, most recently on July 28, 2016. Under the modified common stock repurchase program, the Company may purchase up to $400.0 million of its common stock through the period ending June 30, 2018. Through September 30, 2016,2017, the Company had repurchased 16.8a total of 17.7 million shares of its stock for $285.7$305.5 million, leaving remaining capacity of $114.3$94.5 million under the stock repurchase program.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
The following exhibits are filed with this quarterly report:
| | |
| 31.1
| | |
10.1 |
| |
|
| | |
10.2 |
| |
|
| | |
31.1 |
| | |
| | |
31.2 | 31.2
| | |
| | |
32.1 | 32.1
| | |
| | |
32.2 | 32.2
| | |
| | |
101 | 101
| | The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016,2017, formatted in XBRL: (i) Condensed Consolidated Balance Sheets at September 30, 2016,2017, and March 31, 2016,2017, (ii) Condensed Consolidated Statements of Operations for the three monthsThree Months ended September 30, 20162017 and 2015,2016, (iii) Condensed Consolidated Statements of Operations for the six monthsSix Months ended September 30, 2017 and 2016, and 2015, (iv)Condensed Consolidated Statements of Comprehensive Income (Loss) for the three monthsThree Months ended September 30, 20162017 and 2015,2016, (v) Condensed Consolidated Statements of Comprehensive Income (Loss) for the six monthsSix Months ended September 30, 20162017 and 2015,2016, (vi) Condensed Consolidated Statement of Stockholders’ Equity for the six monthsSix Months ended September 30, 2016,2017, (vii) Condensed Consolidated Statements of Cash Flows for the six monthsSix Months ended September 30, 2017 and 2016, and 2015, and (viii)(vi) the Notes to Condensed Consolidated Financial Statements, tagged in detail. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |
| Acxiom Corporation
| |
| | |
| | Acxiom Corporation |
| | |
| | |
Dated: November 8, 20163, 2017 | | |
| | |
| By: | /s/ Warren C. Jenson |
| | (Signature) |
| | Warren C. Jenson |
| | Chief Financial Officer & Executive Vice President |
| | (principal financial and accounting officer) |
EXHIBIT INDEX
| | |
Exhibit
Number
| | Description
|
31.1
| | Certification of Chief Executive Officer and President (principal executive officer) pursuant to SEC Rule 13a-14(a)/15d-14(a), as adopted pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act of 2002
|
| | |
31.2
| | Certification of Chief Financial Officer and Executive Vice President (principal financial and accounting officer) pursuant to SEC Rule 13a-14(a)/15d-14(a), as adopted pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act of 2002
|
| | |
32.1
| | Certification of Chief Executive Officer and President (principal executive officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
| | |
32.2
| | Certification of Chief Financial Officer and Executive Vice President (principal financial and accounting officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
| | |
101
| | The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL: (i) Condensed Consolidated Balance Sheets at September 30, 2016, and March 31, 2016, (ii) Condensed Consolidated Statements of Operations for the three months ended September 30, 2016 and 2015, (iii) Condensed Consolidated Statements of Operations for the six months ended September 30, 2016 and 2015, (iv) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2016 and 2015, (v) Condensed Consolidated Statements of Comprehensive Income (Loss) for the six months ended September 30, 2016 and 2015, (vi) Condensed Consolidated Statement of Stockholders’ Equity for the six months ended September 30, 2016, (vii) Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2016 and 2015, and (viii) the Notes to Condensed Consolidated Financial Statements, tagged in detail..
|