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 segmentsummarizes the Company's activity of allowance for credit losses, returns and credits (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at beginning of period | | Additions (reductions) charged to costs and expenses | | Other changes | | Bad debts written off, net of amounts recovered | | Balance at end of period |
For the nine months ended December 31, 2023 | | $ | 9,344 | | | $ | 307 | | | $ | 63 | | | $ | (1,699) | | | $ | 8,015 | |
| | | | | | | | | | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Revenues: | | | | | | | | |
Marketing Services | | $ | 94,457 |
| | $ | 101,177 |
| | $ | 280,093 |
| | $ | 316,571 |
|
Audience Solutions | | 84,436 |
| | 83,399 |
| | 238,984 |
| | 235,669 |
|
Connectivity | | 55,978 |
| | 38,736 |
| | 153,548 |
| | 103,140 |
|
Total segment revenues | | $ | 234,871 |
| | $ | 223,312 |
| | $ | 672,625 |
| | $ | 655,380 |
|
| | | | | | | | |
Gross profit(1): | | |
| | |
| | |
| | |
|
Marketing Services | | $ | 35,798 |
| | $ | 37,494 |
| | $ | 101,476 |
| | $ | 109,440 |
|
Audience Solutions | | 52,821 |
| | 53,120 |
| | 148,352 |
| | 143,030 |
|
Connectivity | | 37,914 |
| | 23,091 |
| | 100,730 |
| | 60,509 |
|
Total segment gross profit | | $ | 126,533 |
| | $ | 113,705 |
| | $ | 350,558 |
| | $ | 312,979 |
|
| | | | | | | | |
Income from operations(1): | | |
| | |
| | |
| | |
|
Marketing Services | | $ | 22,063 |
| | $ | 21,127 |
| | $ | 63,721 |
| | $ | 61,109 |
|
Audience Solutions | | 33,112 |
| | 34,572 |
| | 91,151 |
| | 89,640 |
|
Connectivity | | 6,808 |
| | 1,877 |
| | 12,475 |
| | 3,831 |
|
Total segment income from operations | | $ | 61,983 |
| | $ | 57,576 |
| | $ | 167,347 |
| | $ | 154,580 |
|
(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 include non-cash stock compensation expense and purchased intangible asset amortization.
The following table reconciles total segment gross profit to gross profit and total operating segment income from operations to income from operations (dollars in thousands):
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Total segment gross profit | | $ | 126,533 |
| | $ | 113,705 |
| | $ | 350,558 |
| | $ | 312,979 |
|
| | | | | | | | |
Less: | | | | | | | | |
Purchased intangible asset amortization | | 5,971 |
| | 4,621 |
| | 17,958 |
| | 12,588 |
|
Non-cash stock compensation | | 1,611 |
| | 2,240 |
| | 4,927 |
| | 4,403 |
|
Gross profit | | $ | 118,951 |
| | $ | 106,844 |
| | $ | 327,673 |
| | $ | 295,988 |
|
| | | | | | | | |
Total segment income from operations | | $ | 61,983 |
| | $ | 57,576 |
| | $ | 167,347 |
| | $ | 154,580 |
|
| | | | | | | | |
Less: | | | | | | | | |
Corporate expenses (principally general and administrative) | | 23,862 |
| | 24,184 |
| | 75,582 |
| | 75,342 |
|
Separation and transformation costs included in general and administrative | | 5,214 |
| | 4,118 |
| | 17,775 |
| | 5,573 |
|
Gains, losses and other items, net | | (41 | ) | | 2,111 |
| | 3,521 |
| | 2,725 |
|
Purchased intangible asset amortization | | 5,971 |
| | 4,621 |
| | 17,958 |
| | 12,588 |
|
Non-cash stock compensation | | 15,919 |
| | 13,427 |
| | 46,707 |
| | 33,955 |
|
Income from operations | | $ | 11,058 |
| | $ | 9,115 |
| | $ | 5,804 |
| | $ | 24,397 |
|
11.13. RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
The following table summarizesRestructuring activities result in various costs, including asset write-offs, right of use ("ROU") asset group impairments, exit charges including severance, contract termination fees, and decommissioning and other costs.
A reconciliation of the beginning and ending restructuring activityliabilities is shown below for the nine months ended December 31, 2017 (dollars in thousands):
|
| | | | | | | | | | | | |
| | Associate-related reserves | | Lease accruals | | Total |
March 31, 2017 | | $ | 2,400 |
| | $ | 4,308 |
| | $ | 6,708 |
|
Restructuring charges and adjustments | | 1,476 |
| | 2,068 |
| | 3,544 |
|
Payments | | (2,842 | ) | | (1,187 | ) | | (4,029 | ) |
December 31, 2017 | | $ | 1,034 |
| | $ | 5,189 |
| | $ | 6,223 |
|
2023. The above balances are included in other accrued expenses and other liabilities on the condensed consolidated balance sheet.
Restructuring Plans
In the nine months ended December 31, 2017, the Company recorded a total of $3.5 million in restructuring charges and adjustments are included in gains, losses and other items, net in the condensed consolidated statementstatements of operations. The reserve balances are included in other accrued expenses and other liabilities in the condensed consolidated balance sheets (dollars in thousands).
| | | | | | | | | | | | | | | | | | | | |
| | Employee-related reserves | | Lease accruals | | Total |
Balances at March 31, 2023 | | $ | 759 | | | $ | 4,873 | | | $ | 5,632 | |
Restructuring charges and adjustments | | 2,754 | | | 398 | | | 3,152 | |
Payments | | (1,474) | | | (1,599) | | | (3,073) | |
Balances at December 31, 2023 | | $ | 2,039 | | | $ | 3,672 | | | $ | 5,711 | |
Employee-related Restructuring Plans
During the nine months ended December 31, 2023, the Company recorded a total of $2.8 million in employee-related restructuring charges and adjustments. The expense included severance and other associate-relatedemployee-related charges of $1.5 million, lease 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 termination of associates in the United States.States and APAC of $2.7 million and adjustments to the fiscal 2021 employee-related restructuring plans for employees in the United States and Europe of $0.1 million. Of the amount accrued, $0.3fiscal 2024 employee-related restructuring plans, $1.9 million remained accrued as of December 31, 2017. These costs2023 and are expected to be paid out during fiscal 2024.
In fiscal 2023, the Company recorded a total of $7.8 million in employee-related restructuring charges and adjustments. The expense included severance and other employee-related charges primarily in the United States. The fiscal 2018.2023 employee-related restructuring plans were paid out during fiscal 2023 and 2024.
In fiscal 2021, the Company recorded a total of $1.7 million in employee-related restructuring charges and adjustments. The lease accrualsexpense included severance and adjustments of $1.0 million result fromother employee-related charges in the Company's exit from certain leased office facilities.United States and Europe. Of the amount accrued, together with the deferred rent creditsemployee-related charges of $1.4$1.7 million, related to the space, $2.1$0.1 million remained accrued as of December 31, 2017.2023 and are expected to be paid out during fiscal 2024.
Lease-related Impairments and Restructuring Plans
During the nine months ended December 31, 2023, the Company recorded a total of $1.9 million in additional impairment charges and adjustments related to the fiscal 2023 global real estate footprint reduction initiatives. The charges primarily related to the leased office space in San Francisco and were driven by declines in the expected sublease terms and rates available in the market. The impairment charges included impairments of the operating lease ROU assets of $1.7 million, and the associated furniture, equipment, and leasehold improvements of $0.2 million. Additionally, the Company recorded $0.4 million in additional lease-related restructuring charges and adjustments that covered other obligations related to the leased office spaces.
In fiscal 2023, the Company initiated a restructuring plan to lower its operating expenses by reducing its global real estate footprint. As part of this plan, we exited a total of eight leased office spaces. Of those, five were located in the United States: one in Boston, one in Philadelphia, one in Phoenix, and two floors of leased office space in San Francisco. The three remaining spaces were located in Europe: one in the Netherlands, one floor of leased office space in London, England, and one floor of leased office space in Paris, France.
Based on a comparison of undiscounted cash flows to the ROU asset group of each exited lease, the Company determined that each of the ROU asset groups was impaired, driven largely by the difference between the existing lease terms and rates on the Company’s leases and the expected sublease terms and rates available in the market. This resulted in impairment charges totaling $24.6 million during the second, third, and fourth quarters of fiscal 2023, reflecting the excess of the ROU asset group book value over its fair value, which was determined based on estimates of future discounted cash flows and is classified as Level 3 in the fair value hierarchy. The lease impairment charges included impairments of the operating lease ROU assets of $20.5 million, and the associated furniture, equipment, and leasehold improvements of $4.1 million. Additionally, the Company recorded $2.9 million in lease-related restructuring charges and adjustments that covered other obligations related to the leased office spaces in San Francisco and Phoenix. Of the combined fiscal 2023 and 2024 lease-related restructuring charges of $3.3 million, $2.2 million remain accrued as of December 31, 2023 and will be satisfied over the remainder of the San Francisco lease term, which continues through April 2029.
In fiscal 2017, the Company recordedmade the strategic decision to exit and sub-lease 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, $0.2 million remained accrued as of December 31, 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, $2.3 million remained accrued as of December 31, 2017.
In fiscal 2016, the Company recordedfacility under 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.staggered-exit plan. 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. Of the associate-related accruals of $8.6 million, $0.2 million remained accrued as of December 31, 2017. These amounts are expected to be paid outfull exit was completed in fiscal 2018. The lease termination charges and accruals of $3.0 million were fully paid during fiscal 2016.
In fiscal 2015,2019. We intend to continue subleasing 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. Of the associate-related accruals of $13.3 million, $0.3 million remained accrued as of December 31, 2017. These amounts are expected to be paid out in fiscal 2018. Of the lease accruals of $6.5 million, $0.8 million remained accrued as of December 31, 2017.
With respect to the fiscal 2015, 2017, and 2018 lease accruals described above, the Company intends to sublease the facilitiesfacility to the extent possible. The liabilitiesliability will be satisfied over the remainder of the leased properties' terms,property's term, which continuecontinues through November 2025. Actual sublease receipts may differ from the estimates originally made by
the Company. Any future changes in the estimates or in the actual sublease income couldmay require future adjustments to the liabilities, which would impact net earnings (loss) in the period the adjustment is recorded. Through December 31, 2023, the Company has recorded a total of $7.3 million of restructuring charges and adjustments related to this lease. Of the amount accrued for this facility lease, $1.5 million remained accrued at December 31, 2023.
Gains, Losses and Other Items, Net
Gains,The following table summarizes the activity included in gains, losses and other items, net in the condensed consolidated statements of operations for each of the periods presented are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended December 31, | | Nine Months Ended December 31, |
| | 2023 | | 2022 | | 2023 | | 2022 | | |
Employee-related restructuring plan charges | | $ | 1,283 | | | $ | 5,803 | | | $ | 2,754 | | | $ | 7,449 | | | |
Lease-related restructuring plan charges and adjustments | | — | | | 582 | | | 398 | | | 2,637 | | | |
| | | | | | | | | | |
ROU asset group impairments and adjustments | | — | | | 5,358 | | | 1,946 | | | 15,528 | | | |
Goodwill impairment (see Note 8) | | — | | | — | | | 2,875 | | | — | | | |
Other | | 1,219 | | | — | | | 1,219 | | | (21) | | | |
| | | | | | | | | | |
| | $ | 2,502 | | | $ | 11,743 | | | $ | 9,192 | | | $ | 25,593 | | | |
|
| | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Restructuring plan charges and adjustments | | $ | (18 | ) | | $ | 899 |
| | $ | 3,545 |
| | $ | 2,107 |
|
Gain on disposition of Impact email business | | — |
| | (155 | ) | | — |
| | (784 | ) |
Arbor and Circulate acquisition-related costs | | — |
| | 1,365 |
| | — |
| | 1,365 |
|
Other | | (23 | ) | | 2 |
| | (24 | ) | | 36 |
|
| | $ | (41 | ) | | $ | 2,111 |
| | $ | 3,521 |
| | $ | 2,724 |
|
12.14. COMMITMENTS AND CONTINGENCIES:
Legal Matters
The Company is involved in various claims and legal proceedings.proceedings that arise in the ordinary course of business. Management routinely assesses the likelihood of adverse judgments or outcomes to these matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. The Company records accruals for these matters to the extent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. These accruals are reflected in the Company’sCompany's condensed consolidated financial statements.statements and are adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertinent to a particular matter. 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 condensed consolidated financial condition or results of operations. The Company maintains insurance coverage above certain limits. There are currently no matters pending against
Commitments
The following table presents the Company’s purchase commitments at December 31, 2023. Purchase commitments primarily include contractual commitments for the purchase of data, hosting services, software-as-a-service arrangements and leasehold improvements. The table does not include the future payment of liabilities related to uncertain tax positions of $25.5 million as the Company or its subsidiaries foris not able to predict the periods in which the potential exposure is considered material topayments will be made. The amount for 2024 represents the Company’s condensed consolidated financial statements. remaining three months ending March 31, 2024. All other periods represent fiscal years ending March 31 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | | | Total |
Purchase commitments | | $ | 23,774 | | | $ | 89,013 | | | $ | 16,660 | | | $ | 4,085 | | | $ | 3,375 | | | | | $ | 136,907 | |
Commitments
The Company leases data processing equipment, office furniture and equipment, land and office space under noncancellable operating leases. The Company has a future commitment for lease payments over the next 23 years of $84.5 million.
In connection with the Impact email disposition during fiscal 2017,While the Company assigned a facility leasedoes not have any other material contractual commitments for capital expenditures, certain levels of investments in facilities and computer equipment continue to be necessary to support the buyergrowth of the 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 continues through September 2021. At December 31, 2017, the Company’s maximum potential future rent payments under this guarantee totaled $2.3 million.
13.
15. INCOME TAX:
On December 22, 2017, the United States (“U.S.”) enacted significant changes to U.S. tax law following the passage of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”). The Tax Act included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, a one-time repatriation tax on deferred foreign income (“Transition Tax”), and numerous other changes to business-related deductions.
The permanent reduction to the U.S. federal corporate income tax rate from 35% to 21% is effective January 1, 2018 (the “Effective Date”). Because the Effective Date does not fall on the first day of our fiscal year, we are required to apply a blended tax rate for the entire fiscal year by applying a prorated percentage of the number of
days before and after the Effective Date. As a result of the Tax Act, we have determined that our U.S. federal statutory corporate income tax rate will be 31.5% for the fiscal year ending March 31, 2018.
We recorded a $20.3 million benefit for the remeasurement of net deferred tax liabilities, which was included in income tax expense (benefit) in the Company's Condensed Consolidated Statements of Operations. We remeasured our deferred taxes to reflect the reduced Federal tax rate that will apply when these deferred taxes are settled or realized in future periods. To calculate the remeasurement of deferred taxes we estimated the periods during which the existing deferred taxes will be settled or realized. The remeasurement of deferred taxes included in our condensed consolidated financial statements will be subject to further revisions if our current estimates are different from our actual future operating results.
Given the Company's aggregate deficit related to foreign earnings and profits, we have determined that the Company will not incur a Transition Tax liability.
On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”) which provides guidance on accounting for the tax effects of the Tax Act. The SEC staff (the “Staff”) recognized that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year. The adjustments to net deferred tax liabilities are provisional amounts estimated based on information available as of December 31, 2017. These amounts are subject to change as we obtain information necessary to complete the calculations. We will recognize any changes to the provisional amounts as we refine our estimates of the cumulative temporary differences, including those related to immediate deduction for qualified property, and our interpretations of the application of the Tax Act.
We continue to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) on the Company, which are not effective until fiscal year 2019. The Company has not recorded any impact associated with either GILTI or BEAT in the tax rate for the third quarter of fiscal year 2018.
Within the calculation of its annual effective tax rate the Company has used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, and the FASB and/or various other taxing jurisdictions. For example, the Company anticipates that the U.S. state jurisdictions will continue to determine and announce their conformity to the Tax Act, which could have an impact on the annual effective tax rate.
In determining the quarterly provision for income taxes, the Company makesapplies its best estimate of theestimated annual effective income tax rate expected to be applicableits year-to-date ordinary income or loss and adjusts for discrete tax items in the full fiscal year.period. The estimated annual effective income tax rate for the current fiscal year is impactedprimarily driven by nondeductible stock-based compensation, state income taxes,capitalization of research tax credits, and lossesdevelopment expenditures in foreign jurisdictions. State income taxes are influencedaccordance with Internal Revenue Code ("IRC") Section 174, as modified by the geographicTax Cuts and legal entity mixJobs Act of 2017, and the valuation allowance. Realization of the Company’s U.S.Company's net deferred tax assets is dependent upon its generation of sufficient taxable income of the proper character in future years in appropriate tax jurisdictions to obtain benefit from the reversal of deductible temporary differences as well as net operating loss and tax credit carryforwards. As of December 31, 2023, the diversity of rules among the states. The Company does not recordcontinues to maintain a full valuation allowance on its net deferred tax benefit forassets except in certain foreign losses duejurisdictions.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Act”). Under the Act, share repurchases made after December 31, 2022 are subject to uncertaintya 1% excise tax. In determining the total taxable value of future utilization.
Asshares repurchased, a resultdeduction is allowed for the fair market value of adopting ASU 2016–09any newly issued shares during the first quarter of the current fiscal year, all excessyear. The excise tax benefits and deficiencies from stock–based compensation are recognized asother corporate income tax benefit and expensechanges included in the Company’s Condensed Consolidated Statement of Operations in the reporting period in which they occur. For the three monthsAct did not have, and nine months ended December 31, 2017, the Company recognized discrete income tax expense of $0.1 million and benefit of $1.9 million, respectively, relatedare not expected to net excess tax benefits and deficiencies. have, a material impact on our condensed consolidated financial statements.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS:INSTRUMENTS AND FAIR VALUE MEASUREMENTS:
The following methods and assumptions were used to estimate the fair value of each class ofCompany measures certain financial instruments for which it is practicable to estimate that value.
Cash and cash equivalents, trade receivables, unbilled and notes receivable, short-term borrowings and trade payables - The carrying amount approximates fair value because of the short maturity of these instruments.
Long-term debt - The interest rate on the revolving credit agreement is adjusted for changes in market rates and therefore the carrying value approximatesassets at fair value. The estimated fairFair value of other long-term debt was
is determined based upon the present value ofexit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the expected cash flows considering expected maturities and using interest rates currently availableprincipal market or the most advantageous market. Inputs used in the valuation techniques to the Company for long-term borrowings with similar terms. At December 31, 2017, the estimatedderive fair value of long-term debt approximates its carrying value.
Under applicable accounting standards financial assets and liabilitiesvalues are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company assigned assets and liabilities to thea three-level hierarchy, in the accounting standards, which is as follows:
•Level 1 - quotedQuoted prices in active markets for identical assets or liabilities, liabilities.
•Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant otherinputs are observable inputs and or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 - Unobservable inputs to the valuation methodology that are significant unobservable inputs.to the measurement of fair value of assets or liabilities.
The following table presentsdetails the balancesfair value measurements within the fair value hierarchy of the Company's financial assets and liabilities at December 31, 2023 and March 31, 2023 that are measured at fair value as of December 31, 2017on a recurring basis (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Cash and Cash Equivalents | | Short-Term Investments | | Other Current Assets | | Total |
Cash | | $ | 28,526 | | | $ | — | | | $ | — | | | $ | 28,526 | |
Level 1: | | | | | | | | |
Money market funds | | 470,420 | | | — | | | — | | | 470,420 | |
Assets of non-qualified retirement plan | | — | | | — | | | 13,672 | | | 13,672 | |
U.S. Treasury securities | | — | | | 24,764 | | | — | | | 24,764 | |
Certificates of deposit | | — | | | 7,500 | | | — | | | 7,500 | |
Total | | $ | 498,946 | | | $ | 32,264 | | | $ | 13,672 | | | $ | 544,882 | |
| | | | | | | | |
| | | | | | | | |
| | March 31, 2023 |
| | Cash and Cash Equivalents | | Short-Term Investments | | Other Current Assets | | Total |
Cash | | $ | 22,603 | | | $ | — | | | $ | — | | | $ | 22,603 | |
Level 1: | | | | | | | | |
Money market funds | | 439,853 | | | — | | | — | | | 439,853 | |
Assets of non-qualified retirement plan | | — | | | — | | | 12,110 | | | 12,110 | |
U.S. Treasury securities | | 1,992 | | | 25,307 | | | — | | | 27,299 | |
Certificates of deposit | | — | | | 7,500 | | | — | | | 7,500 | |
Total | | $ | 464,448 | | | $ | 32,807 | | | $ | 12,110 | | | $ | 509,365 | |
For certain financial instruments, including accounts receivable and accounts payable, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.
|
| | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | | |
Other current assets | | $ | 14,111 |
| | $ | — |
| | $ | — |
| | $ | 14,111 |
|
Total assets | | $ | 14,111 |
| | $ | — |
| | $ | — |
| | $ | 14,111 |
|
The Company held $2.6 million and $1.6 million of strategic investments without readily determinable fair values at December 31, 2023 and March 31, 2023, respectively (see Note 6). Strategic investments consist of non-controlling equity investments in privately held companies. These investments are accounted for under the cost method of accounting and are included in other assets on the condensed consolidated balance sheets. There were no impairment charges for the nine months ended December 31, 2023. During the nine months ended December 31, 2022, the Company recorded a $4.0 million impairment of a strategic investment that is recorded in other expense in the condensed consolidated statement of operations.
Certain of the Company's non-financial assets were measured at fair value on a nonrecurring basis during the nine months ended December 31, 2023, and 2022, respectively, including property and equipment and right-of-use assets that were reduced to fair value when they were impaired as a result of the Company's lease-related restructuring plans and goodwill that was reduced to fair value related to the restructuring of operations in the APAC region. For additional information on the Company's fair value measurement in connection with the impairment of certain property and equipment and right-of-use assets associated with office facilities, see Note 4 and Note 7. For additional information on the Company's fair value measurement in connection with the impairment of goodwill, see Note 8.
17. SUBSEQUENT EVENT:
On January 31, 2024, the Company completed the acquisition of Habu, Inc. ("Habu"), a data clean room software provider that works with global brands and companies to securely share first-party customer data with business partners and publishers to enable more effective and personalized marketing, for approximately $174 million in cash. The aggregate value of merger consideration with respect to assumed unvested stock options and consideration holdback amounts under holdback agreements with certain key employees is expected to equal approximately $26 million and will be reported as non-cash stock compensation over the applicable vesting periods. In connection with the acquisition, the Company assumed approximately $16 million of unvested restricted stock units to induce certain employees of Habu to accept employment with the Company.
The initial accounting for this acquisition is incomplete due to the timing of the acquisition, including the disclosure of the major classes of assets acquired and liabilities assumed and supplemental pro forma disclosures.
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 CorporationLiveRamp Holdings, Inc. ("LiveRamp", "we", "us", or the "Company") is a global technology company that helps companies build enduring brand and enablementbusiness value by collaborating responsibly with data. A groundbreaking leader in consumer privacy, data ethics and foundational identity, LiveRamp offers a connected customer view with unmatched clarity and context while protecting brand and consumer trust. Our best-in-class enterprise platform enables data collaboration, where companies can share first-party consumer data with trusted business partners securely and in a privacy conscious manner. We offer flexibility to collaborate wherever data lives to support a wide range of data collaboration use cases—within organizations, between brands, and across our global network of premier partners. Global innovators, from iconic consumer brands and tech platforms to retailers, financial services, company with a visionand healthcare leaders, turn to transformLiveRamp to deepen customer engagement and loyalty, activate new partnerships, and maximize the value of their first-party data into value for everyone. Through a simple, open approach to connecting systemswhile staying on the forefront of rapidly evolving compliance 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 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 omnichannel customer experiences.privacy requirements.
AcxiomLiveRamp is a Delaware corporation foundedheadquartered in 1969 in Conway, Arkansas.San Francisco, California. Our common stock is listed on the NASDAQ Global Select MarketNew York Stock Exchange under the symbol “ACXM.“RAMP.” We serve a global clientcustomer base from locations in the United States, Europe, and the Asia-Pacific (“APAC”) region. Our clientdirect customer list includes many of the world’s largestbest-known and best-knownmost innovative brands across most major industry verticals, including but not limited to financial, insurance and investment services, retail, automotive, retail, telecommunications, high tech, consumer packaged goods, healthcare, travel, entertainment non-profit, and government.non-profit. Through our expansive partner ecosystem we serve thousands of additional companies, unlocking access to unique customer moments and creating powerful network effects.
Operating SegmentsSegment
The Company operates as one operating segment. An operating segment is defined as a component of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker. Our chief operating segments provide managementdecision maker evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. Since we operate as one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.
Sources of Revenues
LiveRamp recognizes revenue from the following sources: (i) Subscription revenue,which consists primarily of subscription fees from customers accessing our platform; and (ii) Marketplace and Other revenue, which primarily consists of revenue-sharing fees generated from data transactions through our LiveRamp Data Marketplace, transactional usage-based revenue from arrangements with a comprehensive viewcertain publishers and addressable TV providers, and professional services.
LiveRamp Data Collaboration Platform
As depicted in the graphic below, we power the industry’s leading enterprise platform for data collaboration. We enable organizations to access and leverage data more effectively across the applications they use to interact with their customers. At the core of our key businesses based on how we manage our operationsplatform is an omnichannel, deterministic identity resolution technology that offers unparalleled accuracy, breadth, and measure results. Additional information relateddepth. Leveraging deep expertise in data collaboration, the LiveRamp Data Collaboration platform (formerly branded as Safe Haven) enables an organization to our operating segmentsunify customer and geographic information is contained in Note 10 - Segment Information of the Notes to Condensed Consolidated Financial Statements.
Connectivity
As shown in the illustration below, our Connectivity segment enables our clientsprospect data (first-, second-, or third-party) to build an omnichannela single 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 peoplecustomer in a privacy-safe way.way that protects consumer privacy. This omnichannelsingle customer view of the consumer can then be onboarded toenhanced and betweenactivated across any of the 550 plusover 500 partners in our ecosystem in order to support a variety of people-based marketing solutions, including:
•Data Collaboration. We enable second-party data collaboration between organizations and their trusted partners in a neutral, manageable environment. Our platform provides customers with collaborative opportunities to safely and securely build a more accurate, dynamic view of their customers leveraging partner data. Advanced measurement and analytics use cases can be performed on this shared data without either party giving up control or compromising privacy.
•Activation. We enable organizations to leverage their customer and prospect data in the digital and TV ecosystems and across the customer experience applications they use through a safe and secure data matching process called data onboarding. Our technology ingests a customer’s first-party data, removes all offline data (directly identifiable information or "DII"), and replaces them with pseudonymized IDs called RampID™, a durable identifier for connecting to the digital ecosystem. RampID can then be distributed through direct integrations to the top platforms our customers work with, including leading marketing cloud providers, publishers and social networks, personalization tools, and connected TV services.
•Measurement & Analytics. We power more accurate, more complete measurement with the measurement vendors and partners our customers use. Our platform allows our customers to combine disparate data files (typically ad exposure and customer events, such as transactions), replacing customer identifiers with RampID. Our customers then can use that aggregated view of each customer for measurement of reach and frequency, sales lift, closed loop offline to online conversion and cross-channel attribution.
•Identity. We provide enterprise-level identity solutions that enable organizations to: 1) resolve and connect disparate identities, 2) enrich data sets with hygiene capabilities and additional audience data from the LiveRamp Data Marketplace providers, and 3) translate data between different systems. Our approach to identity is built from two complementary graphs, combining offline data and online data and providing accuracy with a focus on privacy. LiveRamp technology for DII gives brands and platforms the ability to connect and update what they know about consumers, resolving DII across enterprise databases and systems to deliver better customer experiences. Our digital identity graph powered by our Authenticated Traffic Solution (or "ATS") associates pseudonymous device IDs, TV IDs and other online customer IDs from premium publishers, platforms or data providers, around a RampID. This allows marketers to perform personalized segmentation, targeting, personalization and measurement in use cases.cases that require a consistent view of the user. There are currently more than 165 supply-side platforms and demand-side platforms live or committed to bid on RampID or ATS. In addition, to date more than 18,000 publisher domains, and 70% of the comScore 100 largest digital publishers, have adopted ATS.
•Data Marketplace. Our Data Marketplace provides customers with simplified access to industry-leading third-party data providers globally. The LiveRamp Data Collaboration Platform allows for the search, discovery and distribution of data from data providers to improve targeting, measurement, and customer intelligence. Our customers may license data through the LiveRamp Data Marketplace and connect via RampID to enrich their first-party data, leveraging across technology and media platforms, agencies, analytics environments, and TV partners. Our platform provides tools for data providers to manage the organization, distribution, and operation of their data and services across our network of customers and partners. Today we work with approximately 200 data providers across all verticals and many data types (see below for discussion on Marketplace and Other).
|
| | |
Targeting | Personalization | Measurement |
|
| |
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
Subscription
We primarily charge for our platform services on an Acxiom SafeHaven® certified environment with technical, operational,annual basis. Our subscription pricing is based primarily on data volume, which is a function of data input records and personnel controls designed to ensure our clients’ data is kept private and secure.connection points.
IdentityLink isOur solutions are sold to brandsenterprise marketers and the companies brandsthey partner with to execute their marketing, including agencies, marketing technology providers, data providers, publishers and agencies.data providers. Today, we work with 895 direct customers world-wide and serve thousands of additional customers indirectly through our reseller partnership arrangements.
IdentityLink for •Brands and Agencies.IdentityLink allows We work with over 500 of the largest brands and their agencies toin the world, helping them execute people-based marketing by creating an omnichannelomni-channel 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 We provide marketing technology providers with the abilityidentity foundation required to offer people-based targeting, measurement and personalization within their platforms. This adds value for brands by increasing audience 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•Publishers. We enable publishers of consumers, and increase both their reach to and understanding of customers and prospects.
IdentityLink for Publishers. IdentityLink allows publishersany size to offer people-based marketing on their properties. This adds value for brands by providing direct access to their customers and prospects in the publisher’spublisher'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.•Data Sellers. Leveraging our recognitionvast network of integrations, we allow data sellers to easily connect to the digital ecosystem and data assets, clients can identify, segment, and differentiatemonetize 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.own data. Data can be accessed directlydistributed to customers or made available through the Acxiom Audience Cloud, a web-based, self-service tool that makesLiveRamp Data Marketplace feature. This adds value for brands as 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 performaugment their understanding of consumers and increase their understanding of customers and prospects.
Marketplace and Other
As we have scaled the LiveRamp network and technology, we have found additional ways to leverage our platform, deliver more effectivevalue to customers and create incremental revenue streams. Leveraging our common identity system and broad integration network, the Data Marketplace seamlessly connects data sellers’ 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.
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 clientsThe Data Marketplace enables data sellers to collect and analyze information from all sources, thereby increasing customer acquisition, retention, and loyalty. Through our growing partner network, clients are able to integrateeasily monetize 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.
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.
Strategy and Analytics revenue consists primarily of project-based fees.
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.
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 numberhundreds of marketing platforms and publishers. At the same time, it provides a single platform where data buyers, including platforms and publishers, in addition to brands and their agencies, access third-party data from data sellers supporting all industries and encompassing all types of data. Data providers in the digital marketing ecosystem, enabling our clientsinclude sources andbrands exclusive to innovate through their preferred choice of technology,LiveRamp, emerging platforms with access to previously unavailable deterministic data, and services providers. Our industry-leading identity resolution anddata partnerships enabled by our platform.
We generate revenue from the Data Marketplace primarily through revenue-sharing arrangements with data sellers that are monetizing their data assets power best-in-class consumer identificationvia our marketplace platform service. We also generate Marketplace and linking across channelsOther revenue through transactional usage-based arrangements with certain publishers and devices. And,addressable TV providers.
To complement our integratedproduct offering, we provide professional services and enhanced support entitlements to help customers leverage our platform and drive business outcomes. Our services offering provides the expertise requiredincludes product implementation, data science analytics, audience measurement and general advisory.We generate revenue from services primarily from project fees paid by subscribers to manage large setsour platform. Service projects are sold on an ad hoc basis as well as bundled with platform subscriptions. Services revenue is less than 5% of data legally, ethically, securely, and in a way that protects consumer privacy.total Company revenue.
Summary Results and Notable Events
A financial summary of the quarter ended December 31, 20172023 compared to the same period in fiscal 2023 is presented below:
•Revenues were $234.9$173.9 million, a 5.2%9.6% increase from $223.3 million in the same quarter a year ago.$158.6 million.
•Cost of revenue was $115.9$44.9 million, a 0.5% decrease3.8% increase from $116.5 million in the same quarter a year ago.$43.3 million.
•Gross margin increased to 50.6%74.2% from 47.8% in the same quarter a year ago.72.7%.
•Total operating expenses were $107.9$113.7 million, a 10.4% increasean 18.3% decrease from $97.7 million in the same quarter a year ago.$139.3 million.
•Cost of revenue and operating expenses for the quarters ended December 31, 2017fiscal 2024 and 2016 include2023 included the following items:
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◦ | Non-cash stock compensation of $15.9 million and $13.4 million, respectively (cost of revenue and operating expenses) |
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◦ | Purchased intangible asset amortization of $6.0 million and $4.6 million, respectively (cost of revenue) |
| |
◦ | Separation and transformation costs of $5.2 million and $4.1 million, respectively (operating expenses) |
| |
◦ | Restructuring charges and other adjustments of $0.0 million and $2.1 million, respectively (operating expenses) |
◦Non-cash stock compensation of $17.5 million and $29.6 million, respectively (cost of revenue of $0.8 million and $1.2 million, respectively, and operating expenses of $16.7 million and $28.4 million, respectively)
◦Purchased intangible asset amortization of $1.2 million and $4.2 million, respectively (cost of revenue)
◦Transformation costs of $1.9 million in fiscal 2023 (general and administrative)
◦Restructuring charges of $2.5 million and $11.7 million, respectively (gains, losses, and other items, net)
•Total other income, net was $6.6 million, an increase of $7.3 million from total other expense, net of $0.7 million.
•Net earnings increased to $22.9were $14.0 million, or $0.28$0.21 per diluted share compared to net earningsloss of $1.1$29.7 million, or $0.01$0.46 per diluted share in the same quarter a year ago. The increase is primarily due to recent changes as a result of the Tax Act, including a $20.3 million one-time benefit for the remeasurement of net deferred tax liabilities.share.
•Net cash provided by operating activities of $43.6was $16.6 million a $5.3 million decrease compared to $48.9 million in the same quarter a year ago.$15.8 million.
•The Company repurchased 0.70.3 million shares of its common stock for $19.7$10.0 million compared to 2.3 million shares for $49.9 million under the Company's common stock repurchase program.
This summary highlightsand the following discussion and analysis highlight financial results as well as other significant events and transactions of the Company during the fiscal quarter ended December 31, 2017.2023 compared to the same period in fiscal 2023, unless otherwise stated. However, this summary is not intended to be a full discussion of the Company’sCompany's 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’sCompany's condensed consolidated financial statements and footnotes accompanying this report.
Recent Development
On January 31, 2024, the Company completed the acquisition of Habu, Inc. ("Habu"), a data clean room software provider that works with global brands and companies to securely share first-party customer data with business partners and publishers to enable more effective and personalized marketing, for approximately $174 million in cash. The aggregate value of merger consideration with respect to assumed unvested stock options and consideration holdback amounts under holdback agreements with certain key employees is expected to equal approximately $26 million and will be reported as non-cash stock compensation over the applicable vesting periods. In connection with the acquisition, the Company assumed approximately $16 million of unvested restricted stock units to induce certain employees of Habu to accept employment with the Company.
Key Performance Metrics
In addition to measures of financial performance presented in our condensed consolidated financial statements, we monitor the key metrics set forth below to help us evaluate revenue growth trends, establish budgets and measure the effectiveness of our sales and marketing efforts. The below data is presented in millions, except for percentages.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | % Change |
| | December 31, 2023 | | | | December 31, 2022 | | December 31, 2023 from December 31, 2022 | | December 31, 2022 from December 31, 2021 |
| | | | | | | | | | |
Subscription net retention | | 101 | % | | | | 101 | % | | — | % | | (8.2) | % |
Annualized recurring revenue | | $ | 446.9 | | | | | $ | 421.8 | | | 6.0 | % | | 10.6 | % |
Remaining performance obligation | | $ | 546.2 | | | | | $ | 405.7 | | | 34.6 | % | | 6.8 | % |
Current remaining performance obligation | | $ | 382.4 | | | | | $ | 324.4 | | | 17.9 | % | | 12.1 | % |
Subscription CRPO | | $ | 339.3 | | | | | $ | 295.0 | | | 15.0 | % | | 11.8 | % |
Subscription Net Retention
Subscription net retention (“SNR”) is defined as the current quarter subscription revenue (net) from customers who have been on our platform for one year or more, divided by the prior year quarter subscription revenue (net), inclusive of upsell, churn (lost contract), downsell (contract reduction), and variable revenue changes. SNR excludes revenue from new customers that have not been on our platform for one year or more. We believe our SNR is an important metric that provides insight into the long-term value of our subscription agreements and our ability to retain and grow revenue from our subscription customer base. SNR rate is an operational metric and there is no comparable GAAP financial measure to which we can reconcile this particular key metric.
SNR at December 31, 2023 compared to December 31, 2022 was flat. Increasing levels of downsell and churn activity continue to substantially offset customer upsell revenue. The levels of downsell and churn activity were driven in part by budget and economic pressures on our customers.
Annualized Recurring Revenue
Annualized Recurring Revenue (“ARR”) is defined as the last month of quarter recurring revenue annualized. Recurring revenue is fixed and contracted subscription revenue and does not include any variable or non-recurring revenue amounts. We believe ARR provides important information about our future revenue potential, our ability to acquire new customers, and our ability to maintain and expand our relationship with existing customers. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or replace these items. Our use of ARR has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate ARR differently, which reduces its usefulness as a comparative measure.
Our ARR growth of 6.0% was primarily attributable to new customer revenue. The lower growth rate compared to the 10.6% growth in the previous year is due to similar reasons as those impacting SNR results, namely downsell and churn from customers, due in part to budget pressures, offsetting existing customer upsell activity in the current period as well as lower contribution from new customer activity.
Remaining Performance Obligations and Current Remaining Performance Obligations
Remaining performance obligations (“RPO”) is defined as all future revenue under contract that has not yet been recognized as revenue. Future invoicing is determined to be certain when we have an executed non-cancellable contract or a significant penalty that is due upon cancellation, and invoicing is not dependent on a future event such as the delivery of a specific new product or feature, or the achievement of contractual contingencies. Current RPO
("CRPO") represents RPO to be recognized over the next twelve months. Subscription CRPO represents CRPO associated with subscription-only RPO to be recognized over the next twelve months.
While the Company believes RPO, CRPO, and Subscription CRPO are leading indicators of revenue as they represent sales activity not yet recognized in revenue, they are not necessarily indicative of future revenue growth as they are influenced by several factors, including seasonality of contract renewal timing and average contract terms. The Company monitors RPO, CRPO, and Subscription CRPO to manage the business and evaluate performance. RPO increased due to several large, multi-year renewals. CRPO and Subscription CRPO growth was due to new customer additions, as well as the multi-year renewals.
Results of Operations
A summary of selected financial information for each of the periods reported is presented below (dollars in thousands, except per share amounts):
|
| | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | | | | | % | | | | | | % |
| | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Revenues | | $ | 234,871 |
| | $ | 223,312 |
| | 5 |
| | $ | 672,625 |
| | $ | 655,380 |
| | 3 |
|
Cost of revenue | | 115,920 |
| | 116,468 |
| | (1 | ) | | 344,952 |
| | 359,392 |
| | (4 | ) |
Gross profit | | 118,951 |
| | 106,844 |
| | 11 |
| | 327,673 |
| | 295,988 |
| | 11 |
|
Total operating expenses | | 107,893 |
| | 97,729 |
| | 10 |
| | 321,869 |
| | 271,591 |
| | 19 |
|
Income from operations | | 11,058 |
| | 9,115 |
| | 21 |
| | 5,804 |
| | 24,397 |
| | (76 | ) |
Net earnings | | 22,941 |
| | 1,073 |
| | 2,038 |
| | 18,305 |
| | 12,189 |
| | 50 |
|
Diluted earnings per share | | $ | 0.28 |
| | $ | 0.01 |
| | 2,700 |
| | $ | 0.22 |
| | $ | 0.15 |
| | 47 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | | | | | % | | | | | | % |
| | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Revenues | | $ | 173,869 | | | $ | 158,615 | | | 10 | | | $ | 487,809 | | | $ | 447,957 | | | 9 | |
Cost of revenue | | 44,934 | | | 43,287 | | | 4 | | | 131,767 | | | 126,612 | | | 4 | |
Gross profit | | 128,935 | | | 115,328 | | | 12 | | | 356,042 | | | 321,345 | | | 11 | |
Total operating expenses | | 113,734 | | | 139,277 | | | (18) | | | 330,363 | | | 400,018 | | | (17) | |
Income (loss) from operations | | 15,201 | | | (23,949) | | | 163 | | | 25,679 | | | (78,673) | | | 133 | |
Total other income (expense), net | | $ | 6,607 | | | $ | (736) | | | NA | | 17,887 | | | 2,211 | | | NA |
Net earnings (loss) from continuing operations | | $ | 13,379 | | | $ | (30,520) | | | 144 | | | $ | 16,269 | | | $ | (88,174) | | | 118 | |
Diluted earnings (loss) per share | | $ | 0.21 | | | $ | (0.46) | | | 145 | | | $ | 0.25 | | | $ | (1.31) | | | 119 | |
Revenues
The Company's revenues by reporting segment for each of the periods reported is presented below (dollars in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | | | | | % | | | | | | % |
Revenues | | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Marketing Services | | $ | 94,457 |
| | $ | 101,177 |
| | (7 | ) | | $ | 280,093 |
| | $ | 316,571 |
| | (12 | ) |
Audience Solutions | | 84,436 |
| | 83,399 |
| | 1 |
| | 238,984 |
| | 235,669 |
| | 1 |
|
Connectivity | | 55,978 |
| | 38,736 |
| | 45 |
| | 153,548 |
| | 103,140 |
| | 49 |
|
Total revenues | | $ | 234,871 |
| | $ | 223,312 |
| | 5 |
| | $ | 672,625 |
| | $ | 655,380 |
| | 3 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | | | | | % | | | | | | % |
| | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Revenues: | | | | | | | | | | | | |
Subscription | | $ | 132,351 | | | $ | 126,427 | | | 5 | | | $ | 379,938 | | | $ | 361,862 | | | 5 | |
Marketplace and Other | | 41,518 | | | 32,188 | | | 29 | | | 107,871 | | | 86,095 | | | 25 | |
Total revenues | | $ | 173,869 | | | $ | 158,615 | | | 10 | | | $ | 487,809 | | | $ | 447,957 | | | 9 | |
Total revenues were $234.9 million, an increase of 5.2%, or $11.6 million, from $223.3 million in the same quarter a year ago. Strong revenue growth in Connectivity ($17.2 million) was partially offset by a decline in MS of $6.7 million due to non-recurring transactions in the prior year of $4.8 million as well as volume and contract reductions. The impact of exchange rates was positive by approximately $1.5 million.
Total revenues were $672.6 million, an increase of 2.6%, or $17.2 million for the nine months ended December 31, 2017. Strong revenue growth in Connectivity ($50.4 million) was partially offset by items totaling $22.8 million: the disposition of the Acxiom Impact business ($20.4 million) and the transition of the Australia operations to a Connectivity focused business ($2.4 million reduction in MS and AS).
MS revenue for the quarter ended December 31, 2017 was $94.52023 were $173.9 million, a $6.7$15.3 million or 6.6%, decrease compared to the same quarter a year ago. On a geographic basis, U.S. MS revenue decreased $5.3 million, or 5.7%, due to non-recurring transactions in the prior year of $4.8 million and volume and contract reductions. International MS revenue decreased $1.4 million, or 16.8%. By line of business, Marketing Database revenue decreased $6.8 million (U.S. $4.5 million, Europe $1.1 million and APAC $0.6 million), while Strategy and Analytics was flat quarter over quarter.
MS revenue for the nine months ended December 31, 2017 was $280.1 million, a $36.5 million, or 11.5%, decrease compared to the same period a year ago. On a geographic basis, U.S. MS revenue decreased $33.8 million, or 11.5%, due to the sale of Acxiom Impact ($20.4 million) and other volume and contract reductions. International MS revenue decreased $2.7 million, or 11.4%. By line of business, Marketing Database revenue decreased $13.3 million (U.S. $9.9 million, Europe $2.7 million and APAC $0.7 million), Strategy and Analytics revenue declined $2.6 million (primarily U.S.) and Impact declined due to the sale of Acxiom Impact.
AS revenue for the quarter ended December 31, 2017 was $84.4 million, a $1.0 million, or 1.2%,9.6% increase compared to the same quarter a year ago. On a geographic basis, U.S. AS revenue increased $0.2 million, or 0.2%,
due to increases of $1.3 million in Consumer Data and Recognition, offset by a reduction in Digital Data business. International AS revenue increased $0.9 million, or 9.4%, primarily from Europe Digital Data. By line of business, AS revenue growth in Recognition ($1.2 million) and Global Data Sales ($1.1 million) was offset by a reduction in Digital Data ($1.2 million) through our publisher and digital partner network. 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 more significant revenue declines in our fiscal 2018 fourth quarter. These trends may continue into fiscal 2019.
AS revenue for the nine months ended December 31, 2017 was $239.0 million, a $3.3 million, or 1.4%, increase compared to the same period a year ago. On a geographic basis, U.S. AS revenue increased $2.3 million, or 1.1%, due to an increase of $8.3 million in Digital Data business offset by decreases in Consumer Data and Recognition. International AS revenue increased $1.1 million, or 4.3%, primarily in Europe. By line of business, AS revenue growth in Digital Data ($11.7 million), through our publisher and digital partner network, was offset by declines in Consumer Data ($8.9 million) and Recognition ($1.6 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.
Connectivity revenue for the quarter ended December 31, 2017 was $56.0 million, a $17.2 million, or 44.5%, increase compared to the same quarter a year ago. The increase was due to LiveRamprevenue growth in both Subscription and Marketplace and Other. Subscription revenue growth was $5.9 million, or 4.7%, primarily due to upsell to existing customers, new logo deals and higher variable revenue. Subscription revenue in the prior year quarter also included a one-time $4.0 million positive revenue impact stemming from a customer contract settlement. Marketplace and Other revenue growth was $9.3 million, or 29.0%, primarily due to Data Marketplace and Services volume growth. On a geographic basis, U.S. Connectivity revenue increased $14.6$15.2 million, or 40.4%, from the same quarter a year ago.10.3%. International Connectivity revenue increased $2.6$0.1 million, or 100.2%0.5%. The differences in exchange rates in the current year quarter compared to those in the prior year quarter favorably impacted international revenue growth by approximately 3 percentage points.
Connectivity revenueTotal revenues for the nine months ended December 31, 2017 was $153.52023 were $487.8 million, a $50.4$39.9 million or 48.9%,8.9% increase compared to the same period a year ago. The increase was due to LiveRamprevenue growth in both Subscription and Marketplace and Other. Subscription revenue growth was $18.1 million, or 5.0%, primarily due to upsell to existing customers, new logo deals and higher variable revenue. Subscription revenue in the prior year also included a one-time $4.0 million positive revenue impact stemming from a customer contract settlement. Marketplace and Other revenue growth was $21.8 million, or 25.3%, primarily due to Data Marketplace and Services volume growth. On a geographic basis, U.S. Connectivity revenue increased $44.7$39.3 million, or 46.7%, from the same period a year ago.9.4%. International Connectivity revenue increased $5.7$0.6 million, or 76.6%1.9%. The differences in exchange rates in the current year compared to those in the prior year favorably impacted international revenue growth by approximately 3 percentage points.
Cost of revenueRevenue and Gross profitProfit
The Company’s cost of revenue and gross profit for each of the periods reported is presented below (dollars in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | | | | | % | | | | | | % |
| | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Cost of revenue | | $ | 115,920 |
| | $ | 116,468 |
| | (1 | ) | | $ | 344,952 |
| | $ | 359,392 |
| | (4 | ) |
Gross profit | | $ | 118,951 |
| | $ | 106,844 |
| | 11 |
| | $ | 327,673 |
| | $ | 295,988 |
| | 11 |
|
Gross margin % | | 50.6 |
| | 47.8 |
| | 6 |
| | 48.7 |
| | 45.2 |
| | 8 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | | | | | % | | | | | | % |
| | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Cost of revenue | | $ | 44,934 | | $ | 43,287 | | 4 | | | $ | 131,767 | | $ | 126,612 | | 4 | |
Gross profit | | $ | 128,935 | | $ | 115,328 | | 12 | | | $ | 356,042 | | $ | 321,345 | | 11 | |
Gross margin (%) | | 74.2 | % | | 72.7 | % | | 2 | | | 73.0 | % | | 71.7 | % | | 2 | |
Cost of revenue: Includes allrevenue includes third-party direct costs of sales such asincluding identity graph data, other data and other third-partycloud-based hosting costs, directly associated with revenue.as well as costs of IT, security and product operations functions. Cost of revenue also includes expenses for each of the Company’s operations functions including client services, account management, agency, strategy and analytics, IT, data acquisition, and product operations. Finally, cost of revenue includes amortization of internally developed software and other acquisition relatedacquisition-related intangibles.
Cost of revenue was $115.9$44.9 million for the quarter ended December 31, 2017,2023, a $0.5$1.6 million, or 0.5%3.8%, decreaseincrease from the same quarter a year ago. Gross margins increased to 50.6% compared to 47.8%74.2% from 72.7% in the prior year. The gross margin increase isyear quarter due to the Connectivity revenue increases and MSa $3.0 million decrease in intangible asset amortization offset partially by an increase in cost efficiencies.of revenue primarily from services support costs. U.S. gross margins increased to 51.7% in the current year76.4% from 49.0% in the prior year again due to the Connectivity revenue growth and MS efficiencies.74.2% while International gross margins increaseddecreased to 40.3%39.6% from 35.8%51.6%.
Cost of revenue was $345.0$131.8 million for the nine months ended December 31, 2017,2023, a $14.4$5.2 million, or 4.0%4.1%, decreaseincrease from the same period a year ago, due primarily to the disposition of Acxiom Impact ($18.2 million).ago. Gross margins increased to 48.7% compared to 45.2%73.0% from 71.7% in the prior year. The gross margin increase isyear due to the Connectivity revenue increases and MSa $7.8 million decrease in intangible amortization offset partially by an increase in cost efficiencies.of revenue primarily from services support costs. U.S. gross margins increased to 50.0% in the current year75.0% from 46.3% for the same reasons.73.1%, and International gross margins increaseddecreased to 35.2%43.1% from 32.5%53.2%.
Operating Expenses
The Company’s operating expenses for each of the periods reported is presented below (dollars in thousands):
| | | | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | | | | | % | | | | | | % |
Operating expenses | | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
| | For the three months ended | | | | For the three months ended | | For the nine months ended |
| | December 31, | | | | December 31, | | December 31, |
| | | | | | % | | | | | | | | % | | | | | | % |
| | 2023 | | | | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Operating expenses: | |
Research and development | |
Research and development | |
Research and development | | $ | 23,318 |
| | $ | 20,950 |
| | 11 |
| | $ | 70,894 |
| | $ | 58,631 |
| | 21 |
|
Sales and marketing | | 53,730 |
| | 43,048 |
| | 25 |
| | 152,288 |
| | 118,243 |
| | 29 |
|
General and administrative | | 30,886 |
| | 31,620 |
| | (2 | ) | | 95,166 |
| | 91,993 |
| | 3 |
|
Gains, losses and other items, net | | (41 | ) | | 2,111 |
| | (102 | ) | | 3,521 |
| | 2,724 |
| | 29 |
|
Total operating expenses | | $ | 107,893 |
| | $ | 97,729 |
| | 10 |
| | $ | 321,869 |
| | $ | 271,591 |
| | 19 |
|
| | | | | | | | | | | | |
Research and development (“R&D”): Includes expense 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 $23.3$37.8 million for the quarter ended December 31, 2017, an increase2023, a decrease of $2.4$5.4 million, or 11.3%12.5%, compared to the same quarter a year ago, and are 9.9%21.7% of total revenues compared to 9.4%27.2% in the prior year.same quarter a year ago. The increasedecrease is primarily due primarily to non-cash stockstock-based compensation of $0.6 million,expense (decreased $3.7 million), hosting and Connectivitysoftware expenses (decreased $0.7 million) and AS investments of $1.9 million andprofessional services (decreased $0.4 million, respectively. The increase in non-cash stock compensation is largelymillion). Headcount related to the Arbor and Circulate acquisitions.expenses were approximately flat.
R&D expenses were $70.9$106.0 million for the nine months ended December 31, 2017, an increase2023, a decrease of $12.3$30.9 million, or 20.9%22.6%, compared to the same period a year ago, and are 10.5%21.7% of total revenues compared to 8.9%30.6% in the prior year. The increasedecrease is primarily due to stock-based compensation expense (decreased $17.3 million), headcount related costs (employee-related expenses decreased $8.0 million primarily to non-cash stock compensationas a result of $4.0 million,the headcount reduction that occurred in the quarter ended December 31, 2022) and Connectivity and AS investments of $8.8 million and $1.6 million, respectively, offset partially by aprofessional services (decreased $1.3 million). The decrease in MS of $2.8 million related mostlystock-based compensation is primarily due to the U.S. Impact disposition. The increase in non-cash stock compensation is largely relatedprior year-end accelerated vesting of awards that would have otherwise vested over the first six months of fiscal 2024 to the Arbor and Circulate acquisitions.take advantage of cash tax savings opportunities.
Sales and marketing (“S&M”): Includes expense includes operating expenses for the Company’s sales, marketing, and product marketing functions.
S&M expenses were $53.7$46.2 million for the quarter ended December 31, 2017, an increase2023, a decrease of $10.7$1.5 million, or 24.8%3.1%, compared to the same quarter a year ago, and are 22.9%26.6% of total revenues compared to 19.3%30.1% in the prior year.same quarter a year ago. The increasedecrease is primarily due to primarilystock-based compensation expense (decreased $1.8 million) and professional services (decreased $0.4 million), offset partially by an increase in headcount related costs due to non-cash stock compensation of $3.9 million (largely related to the Arbor and Circulate acquisitions), and Connectivity investments of $8.3 million. The increases were partially offset by a decrease in MS ($2.5 million) due primarily to lower variableincentive compensation.
S&M expenses were $152.3$135.2 million for the nine months ended December 31, 2017, an increase2023, a decrease of $34.0$9.7 million, or 28.8%6.7%, compared to the same period a year ago, and are 22.6%27.7% of total revenues compared to 18.0%32.4% in the prior year. The increasedecrease is primarily due to stock-based compensation expense (decreased $5.3 million), professional services (decreased $1.8 million), and administrative expenses (decreased $1.5 million from lower bad debt expense). The decrease in stock-based compensation is primarily to non-cash stock compensation of $11.9 million (largely relateddue to the Arbor and Circulate acquisitions), and Connectivity investmentsprior year-end accelerated vesting of $23.6 million, corporate marketingawards that would have otherwise vested over the first six months of $4.2 million, and AS investmentsfiscal 2024 to take advantage of $2.2 million. The increases were partially offset by a decrease in MS ($7.8 million) due primarily to lower variable compensation.cash tax savings opportunities.
General and administrative (G&A): Represents("G&A") expense represents operating expenses for all corporate functions, includingthe Company's finance, human resources, legal, corporate IT, and theother corporate office.administrative functions.
G&A expenses were $30.9$27.2 million for the quarter ended December 31, 2017,2023, a decrease of $0.7$9.4 million, or 2.3%25.7%, compared to the same quarter a year ago, and are 13.2%15.7% of total revenues compared to 14.2%23.1% in the prior year.same quarter a year ago. The decrease is primarily due primarily to a decreasedecreases in non-cash stockstock-based compensation of $1.5 million, incentive compensation accruals,expense (decreased $6.3 million) and other cost savingstransformation costs (decreased $4.1 million), offset partially by a $1.1 millionan increase in separation and transformation costs.headcount related costs due to incentive compensation.
G&A expenses were $95.2$79.9 million for the nine months ended December 31, 2017, an increase2023, a decrease of $3.2$12.6 million, or 3.4%13.6%, compared to the same period a year ago, and are 14.1%16.4% of total revenues compared to 14.0%20.7% in the prior
year. The increasedecrease is primarily due primarily to a $12.2 million increasedecreases in separationstock-based compensation expense (decreased $10.4 million) and transformation costs (decreased $3.5 million), offset partially by ahigher employee-related expenses due to increased incentive compensation costs. The decrease in non-cash stockstock-based compensation is primarily due to the prior year-end accelerated vesting of $4.5 million, incentive compensation accruals,awards that would have otherwise vested over the first six months of fiscal 2024 to take advantage of cash tax savings opportunities and other cost savings. Prior year non-cash stock compensation costs were impacted by adjustments to increase expected performance levels for certain performance based awards.current period forfeitures.
Gains, losses, and other items, net: Represents restructuring costs and other adjustments.
Gains, losses, and other items, net of $0.0represents restructuring costs and other adjustments.
Gains, losses and other items, net was $2.5 million for the quarter ended December 31, 2017 decreased $2.22023, a decrease of $9.2 million compared to the same quarter a year ago. The current quarter amount includes $1.3 million related to termination benefits for employees whose positions were or will be eliminated and $1.2 million of third party merger costs associated with the Habu acquisition. The prior year quarter amount included $5.9 million in lease impairments and restructuring and $5.8 million related to termination benefits for employees whose positions were eliminated.
Gains, losses and other items, net of $3.5was $9.2 million for the nine months ended December 31, 2017 increased $0.82023, a decrease of $16.4 million compared to the same period a year ago. The current year amount includes a $2.1$2.8 million charge related to the restructuringimpairment of the Redwood City, California lease and $1.5APAC goodwill, $2.3 million in severancelease impairments and other associate-related charges.restructuring, $2.8 million related to termination benefits for employees whose positions were or will be eliminated, and $1.2 million of third party merger costs associated with the Habu acquisition. The prior year amount included $15.5 million in lease impairments and restructuring, and $7.4 million related to termination benefits for employees whose positions were eliminated.
Income (Loss) from Operations and Profit MarginsOperating Margin
The Company’s income from operations, as 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 nine months ended |
| | December 31, | | December 31, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Operating income and margin: | | | | | | | | |
Marketing Services | | $ | 22,063 |
| | $ | 21,127 |
| | $ | 63,721 |
| | $ | 61,109 |
|
| | 23.4 | % | | 20.9 | % | | 22.7 | % | | 19.3 | % |
Audience Solutions | | 33,112 |
| | 34,572 |
| | 91,151 |
| | 89,640 |
|
| | 39.2 | % | | 41.5 | % | | 38.1 | % | | 38.0 | % |
Connectivity | | 6,808 |
| | 1,877 |
| | 12,475 |
| | 3,831 |
|
| | 12.2 | % | | 4.8 | % | | 8.1 | % | | 3.7 | % |
Less: | | |
| | |
| | |
| | |
|
Corporate expenses | | 23,862 |
| | 24,184 |
| | 75,582 |
| | 75,342 |
|
Purchased intangible asset amortization | | 5,971 |
| | 4,621 |
| | 17,958 |
| | 12,588 |
|
Non-cash stock compensation | | 15,919 |
| | 13,427 |
| | 46,707 |
| | 33,955 |
|
Restructuring charges | | (41 | ) | | 2,111 |
| | 3,521 |
| | 2,725 |
|
Separation and transformation costs | | 5,214 |
| | 4,118 |
| | 17,775 |
| | 5,573 |
|
Income from operations | | $ | 11,058 |
| | $ | 9,115 |
| | $ | 5,804 |
| | $ | 24,397 |
|
Total operating margin | | 4.7 | % | | 4.1 | % | | 0.9 | % | | 3.7 | % |
Income from operations was $11.1$15.2 million for the quarter ended December 31, 20172023 compared to $9.1a loss from operations of $23.9 million forin the same quarter a year ago. Operating margin was 4.7%positive 8.7% compared to 4.1%negative 15.1%. The increase in income from operations of $1.9 million was due primarily to the increase in Connectivity income from operations, offset partiallyMargins were positively impacted by increases in non-cash stock compensation, largelyrevenue growth, and operating expense reductions related to the Arborprior year headcount reduction, reduced stock-based compensation due to prior year accelerated vesting of awards, and Circulate acquisitions,lower gains, losses and separation and transformation costs.other items.
Income from operations was $5.8$25.7 million for the nine months ended December 31, 20172023 compared to $24.4a loss from operations of $78.7 million forin the same period a year ago. Operating margin was 0.9%positive 5.3% compared to 3.7%. The decrease of $18.6 million was due primarily to increases in non-cash stock 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 $22.1 million, a 23.4% margin, for the quarter ended December 31, 2017 compared to $21.1 million, a 20.9% margin, for the same quarter a year ago. U.S. margins increased to 25.8%negative 17.6% in the current quarter from 22.2% due to S&M cost reductions. Internationalprior year. Margins were positively impacted by revenue growth, and operating margins decreased to a negative 7.5% from 6.6% due to the revenue decrease.
MS income from operations was $63.7 million, a 22.7% margin, for the nine months ended December 31, 2017 compared to $61.1 million, a 19.3% margin, for the same period a year ago. U.S. margins increased to 24.9% in the
current period from 20.2% due to R&D and S&M cost reductions, including R&Dexpense reductions related to the Impact disposition. International operating margins decreased to a negative 4.2% from 8.3%.
AS income from operations was $33.1 million, a 39.2% margin, for the quarter ended December 31, 2017 compared to $34.6 million, a 41.5% margin, for the same quarter aprior year ago. U.S. margins decreased to 39.8% in the current quarter from 42.9%headcount reduction, reduced stock-based compensation due to flat revenueprior year accelerated vesting of awards, and investments in S&Mlower gains, losses and R&D. International operating margins increased to 34.8% from 30.2%. other items.
ASTotal Other Income (Expense) and Income Taxes
Total other income from operations was $91.2 million, a 38.1% margin, for the nine months ended December 31, 2017 compared to $89.6 million, a 38.0% margin, for the same period a year ago. U.S. margins decreased to 39.6% in the current period from 39.7% due to the increase in gross profit offset by investments in S&M and R&D. International operating margins increased to 26.3% from 23.5%.
Connectivity income from operations was $6.8 million, a 12.2% margin, for the quarter ended December 31, 2017 compared to $1.9 million, a 4.8% margin, for the same quarter a year ago. A $14.8 million increase in gross profit was partially offset by R&D and S&M investments.
Connectivity income from operations was $12.5 million, an 8.1% margin, for the nine months ended December 31, 2017 compared to $3.8 million, a 3.7% margin, for the same period a year ago. A $40.2 million increase in gross profit was partially offset by R&D and S&M investments.
Corporate expenses were $23.9$6.6 million for the quarter ended December 31, 20172023 compared to $24.2total other expense of $0.7 million forin the same quarter a year ago, and are 10.2% of total revenues compared to 10.8% in the prior year.
Corporate expenses were $75.6ago. Total other income was $17.9 million for the nine months ended December 31, 20172023 compared to $75.3$2.2 million forin the same period a year ago,ago. The quarter and year-to-date increases are 11.2%primarily attributable to higher interest rates on invested cash and short-term investments, and a $4.1 million impairment of total revenues compared to 11.5%a strategic investment in the prior year.
Other Expense, Income Taxes and Other Items
Interesttax expense was $2.6$8.4 million on pretax income of $21.8 million for the quarter ended December 31, 2023, resulting in a 39% effective tax rate. This compares to a prior year income tax expense of $5.8 million on pretax loss of $24.7 million, or a negative 24% effective tax rate. Tax expense for both periods reflects the impact of the capitalization of research and development expenditures in accordance with Internal Revenue Code ("IRC") Section 174, as modified by the Tax Cuts and Jobs Act of 2017, compared to $1.7 million for the same quarter a year ago. The increase is primarily related to $70 million of borrowings in the third quarter of fiscal year 2017 related to the Arborvaluation allowance, and Circulate acquisitions and an increase in the average rate of approximately 96 basis points.nondeductible stock-based compensation.
InterestIncome tax expense was $7.4$27.3 million on pretax income of $43.6 million for the nine months ended December 31, 2023, resulting in an 63% effective tax rate. This compares to a prior year income tax expense of $11.7 million on pretax loss of $76.5 million, or a negative 15% effective tax rate. Tax expense for both periods reflects the impact of the capitalization of research and development expenditures in accordance with IRC Section 174, as modified by the Tax Cuts and Jobs Act of 2017, compared to $5.2the valuation allowance, and nondeductible stock-based compensation.
Discontinued Operations
Earnings from discontinued operations, net of tax, was $0.6 million for the same period a year ago. The increase is primarily related to $70 million of borrowings in the third quarter of fiscal year 2017 related to the Arbor and Circulate acquisitions and an increase in the average rate of approximately 81 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 December 31, 2017.
Other income was $0.4 million for the quarterthree months ended December 31, 20172023 compared to $0.0$0.8 million forin the same quarter a year ago. Other expenseEarnings from discontinued operations, net of tax, was $0.1$1.0 million for the nine months ended December 31, 20172023 compared to other income of $0.1$0.8 million forin 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 benefit was $14.0 million on pretax income of $8.9 million for the quarter ended December 31, 2017 compared to income tax expense of $6.3 million on pretax income of $7.4 million for the same quarter last year. The decrease in the year-over-year effective tax rate for the quarter ended December 31, 2017 is primarily attributable to the $20.3 million discrete benefit for the remeasurement of net deferred tax liabilities as a result of the Tax Act. In addition, the effective tax rate for the quarter ended December 31, 2017 reflects the Tax Act's permanent reduction in the U.S. federal corporate income tax rate. The effective tax rate for the current quarter was also impacted by nondeductible share-based compensation related to the Arbor and Circulate acquisitions.
Income tax benefit was $20.0 million on pretax loss of $1.7 million for the nine months ended December 31, 2017 compared to income tax expense of $7.1 million on pretax income of $19.3 million for the same period last year. The increase in the year-over-year effective tax rate for the nine months ended December 31, 2017 is primarily attributable to the $20.3 million discrete benefit for the remeasurement of net deferred tax liabilities as a result of the Tax Act. In addition, the effective tax rate for the nine months ended December 31, 2017 reflects the Tax Act's permanent reduction in the U.S. federal corporate income tax rate. The effective tax rate for the nine months ended
December 31, 2017 was impacted by nondeductible share-based compensation related to the Arbor and Circulate acquisitions. In the nine months ended December 31, 2017,During fiscal 2019, the Company also recognized tax benefitscompleted the sale of $1.9 million related to net excess tax benefits from share-based compensation. During the nine months ended December 31, 2016, the Company recorded a $4.1 million income tax benefit related to the disposition of the Acxiom Impact business.
As a result of the Tax Act, we have determined that our U.S. federal statutory corporate income tax rate will be 31.5% for the fiscal year ending March 31, 2018, and we expect the U.S. federal statutory rate to be 21% for fiscal years beginning after March 31, 2018.
Over the last three quarters, Acxiom has undergone a comprehensive review of its businesses to drive cleaner lines of sight, clearer accountabilities and to maximize its strategic flexibility. Following this review, the Company intends to reorganize its business and actively explore options to further strengthen Acxiom Marketing Solutions a("AMS") business, unit combining MS and linesthe business qualified for treatment as discontinued operations. Significant income taxes were incurred and paid on the gain from the sale of businessAMS. During fiscal 2024 and fiscal 2023, the Company recovered certain previously paid state income taxes arising from AS, and deliver greater value to its clients. These options may include a strategic partnership, acquisition, tax-free merger, joint venture, tax-free spin-off,the sale or other potential strategic combinations.of AMS.
Capital Resources and Liquidity
Working Capital and Cash Flow
Working capital at December 31, 2017 totaled $209.4 million, a $71.0 million increase when compared to $138.3 million at March 31, 2017, due primarily to the debt refinancing, as the amended credit agreement does not require periodic principal debt service, and a decrease in accrued payroll.
The Company’s cash isand cash equivalents are primarily located in the United States. Approximately $18.3At December 31, 2023, approximately $18.0 million of the total cash balance of $177.8$498.9 million, or approximately 10.3%3.6%, iswas located outside of the United States. ��The Company has no current plans to repatriate this cash to the United States.
AccountsNet accounts receivable daysbalances were $199.4 million at December 31, 2023, an increase of $42.0 million, compared to $157.4 million at March 31, 2023. Days sales outstanding ("DSO"), a measurement of the time it takes to collect receivables, was 61106 days at December 31, 20172023, compared to 5795 days at March 31, 2017,2023. DSO can fluctuate due to the timing and nature of contracts that lead to up-front billings related to deferred revenue on services not yet performed, and Marketplace and Other contracts, which are billed on a gross basis, recognized on a net basis, but for which the amount that is calculateddue to data sellers is not reflected as follows (dollars in thousands):
|
| | | | | | | | |
| | December 31, 2017 | | March 31, 2017 |
Numerator – trade accounts receivable, net | | $ | 155,634 |
| | $ | 142,768 |
|
Denominator: | | |
| | |
|
Quarter revenue | | 234,871 |
| | 224,867 |
|
Number of days in quarter | | 92 |
| | 90 |
|
Average daily revenue | | $ | 2,553 |
| | $ | 2,499 |
|
Days sales outstanding | | 61 |
| | 57 |
|
Net cash provided by operating activities was $76.4 million for the nine months endedan offset to accounts receivable. Compared to March 31, 2023, DSO at December 31, 2017,2023 was negatively impacted by approximately 8 days by the increased impact of Data Marketplace gross accounts receivable. All customer accounts are actively managed, and no losses in excess of amounts reserved are currently expected.
Working capital at December 31, 2023 totaled $560.9 million, a $21.2 million increase when compared to $85.2$539.7 million at March 31, 2023.
Subsequent to December 31, 2023, the Company closed its acquisition of Habu, which included the payment of approximately $174 million in the same period a year ago. The $8.8 million decrease resulted primarily from unfavorable changes in working capital. cash at closing.
Investing activities used cash of $34.9 million during the nine months ended December 31, 2017 compared to $162.1 million in the same period a year ago, due primarily to the $137.4 million of net cash paid in the Arbor and Circulate acquisitions in the prior year. Investing activities also consisted of capital expenditures ($27.0 million compared to $30.1 million in the prior period), capitalization of software ($10.3 million compared to $11.2 million in the prior period), net cash received in the disposition of the U.S. Impact business ($4.0 million compared to $17.0 million in the prior period), and $1.0 million in the current year for a long-term investment.
Financing activities used cash of $35.1 million during the nine months ended December 31, 2017 compared to cash provided of $26.7 million in the same period a year ago. Proceeds 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 consisted of treasury stock purchases of $39.4 million (1.6 million shares ofManagement believes that the Company's common stock pursuant to the board of directors' approved stock repurchase plan) compared to $30.5 million in the prior period (1.3 million shares). Financing activities in the prior year included proceeds from debt of $70.0 million to partially fund the Arbor and Circulate acquisitions.
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 2 - Earnings Per Share). 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 nine months ended December 31, 2017, the Company repurchased 1.6 million shares of its common stock for $39.4 million. Through December 31, 2017, the Company had repurchased a total of 18.4 million shares of its stock for $325.2 million, leaving remaining capacity of $74.8 million under the stock repurchase program.
Credit and Debt Facilities
See Note 8 “Long-Term Debt” of the Notes to Condensed Consolidated Financial Statements for further details related to the Company’s amended and restated credit agreement.
Based on our current expectations, we believe our liquidity and capital resourcesexisting available cash will be sufficient to operatemeet the Company's working capital and capital expenditure requirements for the foreseeable future. However, in light of the risk of recession, the military conflicts in Europe and the Middle East, cost increases, rising interest rates, capital markets volatility, bank failures and general inflationary pressures, our business. However, weliquidity position may change due to the inability to collect from our customers, inability to raise new capital via issuance of equity or debt, and disruption in completing repayments or disbursements to our creditors. We have historically taken and may continue to take advantage of opportunities to generate additional liquidity or refinance existing debt through capital market transactions. These impacts have caused significant disruptions to the global financial markets, which could increase the cost of capital and adversely impact our ability to raise additional capital, which could negatively affect our liquidity in the future. The amount, nature, and timing of any capital market transactions will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature, and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions. If we are unable to raise funds as and when we need them, we may be forced to curtail our operations.
Off-Balance Sheet ItemsCash Flows
The following table summarizes our cash flows for the periods reported (dollars in thousands): | | | | | | | | | | | | | | |
| | |
| | For the nine months ended |
| | December 31, |
| | 2023 | | 2022 |
| | | | |
Net cash provided by operating activities | | $ | 78,013 | | | $ | 3,776 | |
Net cash used in investing activities | | $ | (2,099) | | | $ | (4,693) | |
Net cash used in financing activities | | $ | (43,220) | | | $ | (145,796) | |
Net cash provided by discontinued operations | | $ | 985 | | | $ | 836 | |
Operating Activities
Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our customers, and Commitmentsrelated payments to our suppliers and employees. The timing of cash receipts from customers and payments to suppliers can significantly impact our cash flows from operating activities. Our collection and payment cycles can vary from period to period.
In connection with the Acxiom Impact disposition,nine months ended December 31, 2023, net cash provided by operating activities of $78.0 million resulted primarily from net earnings adjusted for non-cash items of $77.2 million and changes in operating assets and liabilities of $0.8 million. Net cash provided by changes in operating assets and liabilities was primarily related to a $29.2 million Internal Revenue Service refund related to fiscal 2021, an increase in deferred revenue of $9.7 million, and an increase in other assets of $8.8 million, offset partially by an increase in accounts receivable of $41.0 million. The change in accounts receivable is primarily due to revenue growth and the timing of cash receipts from customers.
In the nine months ended December 31, 2022, net cash provided by operating activities of $3.8 million resulted primarily from net loss adjusted for non-cash items of $33.6 million offset by changes in operating assets and liabilities of $29.8 million. Net cash used by changes in operating assets and liabilities was primarily related to an increase in accounts receivable of $27.2 million and a decrease in accounts payable and other liabilities of $9.3 million, offset partially by a decrease in income taxes of $7.0 million. The change in accounts receivable is primarily due to revenue growth and the timing of cash receipts from customers. The change in accounts payable and other liabilities is primarily due to the payment of annual incentive compensation and the timing of payments to suppliers.
Investing Activities
Our primary investing activities have historically consisted of capital expenditures. Capital expenditures may vary from period to period due to the timing of the expansion of our operations, the addition of new headcount, new facilities, and acquisitions.
In the nine months ended December 31, 2023, net cash used in investing activities consisted of capital expenditures of $2.5 million, purchases of strategic investments of $1.0 million, and purchases of investments of $24.4 million partially offset by the proceeds from the sale of investments of $25.8 million.
In the nine months ended December 31, 2022, net cash used in investing activities consisted of capital expenditures of $4.6 million and purchases of investments of $3.5 million, offset partially by proceeds from the sale of investments of $3.0 million and the sale of a strategic investment of $0.4 million.
Financing Activities
Our financing activities have consisted of acquisition of treasury stock, proceeds from our equity compensation plans, and shares repurchased for tax withholdings upon vesting of stock-based awards.
In the nine months ended December 31, 2023, net cash used in financing activities was $43.2 million, consisting of the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $45.3 million (1.7 million shares) and $5.1 million for shares repurchased for tax withholdings upon vesting of stock-based awards. These uses of cash were partially offset by proceeds of $7.2 million from the sale of common stock from our equity compensation plans.
In the nine months ended December 31, 2022, net cash used in financing activities was $145.8 million, consisting of the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $150.0 million (6.1 million shares), and $2.1 million for shares repurchased for tax withholdings upon vesting of stock-based awards. These uses of cash were partially offset by proceeds of $6.3 million from the sale of common stock from our equity compensation plans.
Common Stock Repurchase Program
On December 20, 2022, the Company's board of directors approved an amendment to the existing common stock repurchase program, which was initially adopted in 2011. The amendment authorized an additional $100.0 million in share repurchases, increasing the total amount authorized for repurchase under the common stock repurchase program to $1.1 billion. In addition, it extended the common stock repurchase program duration through December 31, 2024.
During the nine months ended December 31, 2023, the Company assignedrepurchased 1.7 million shares of its common stock for $45.3 million under the modified common stock repurchase program. Through December 31, 2023, the Company had repurchased a facility leasetotal of 37.3 million shares of its common stock for $927.5 million under the program, leaving remaining capacity of $172.5 million.
Pursuant to the buyerInflation Reduction Act 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 continues through September 2021. At2022 (the "Act"), share repurchases made after December 31, 2017, the Company's maximum potential future rent payments2022 are subject to this guarantee totaled $2.3 million.a 1% excise tax. In determining the total taxable value of shares repurchased, a deduction is allowed for the fair market value of any newly issued shares during the fiscal year. The excise tax and other corporate income tax changes included in the Act did not have, and are not expected to have, a material impact on our condensed consolidated financial statements.
There were no material outstanding letters of credit at December 31, 2017 or March 31, 2017.
Contractual Commitments
The following table presentstables present the Company’s contractual cash obligations exclusive of interest, and purchase commitments at December 31, 2017.2023 (dollars in thousands). Operating leases primarily consist of our various office facilities. Purchase commitments primarily include contractual commitments for the purchase of data, hosting services, software-as-a-service arrangements, and leasehold improvements. The table doestables do not include the future payment of liabilities related to uncertain tax positions of $5.1$25.5 million as the Company is not able to predict the periods in which the payments will be made. The amounts for 20182024 represent the remaining three months ending March 31, 2018.2024. All other periods represent fiscal years ending March 31 (dollars in thousands).
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Revolving credit borrowings | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 230,000 |
| | $ | 230,000 |
|
Other debt | | 588 |
| | 1,583 |
| | 1,362 |
| | 348 |
| | — |
| | — |
| | 3,881 |
|
Total long-term debt | | 588 |
| | 1,583 |
| | 1,362 |
| | 348 |
| | — |
| | 230,000 |
| | 233,881 |
|
Operating leases | | 5,113 |
| | 19,447 |
| | 14,537 |
| | 14,181 |
| | 13,839 |
| | 17,393 |
| | 84,510 |
|
Total contractual cash obligations | | $ | 5,701 |
| | $ | 21,030 |
| | $ | 15,899 |
| | $ | 14,529 |
| | $ | 13,839 |
| | $ | 247,393 |
| | $ | 318,391 |
|
:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | | Total |
Operating leases | | $ | 2,702 | | | $ | 9,965 | | | $ | 8,675 | | | $ | 8,265 | | | $ | 8,454 | | | $ | 12,828 | | | $ | 50,889 | |
| | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
|
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| Thereafter |
| Total |
Total purchase commitments |
| $ | 13,080 |
|
| $ | 22,149 |
|
| $ | 16,096 |
|
| $ | 8,262 |
|
| $ | 1,284 |
|
| $ | 338 |
|
| $ | 61,209 |
|
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 2018 of $2.7 million.
The following are contingencies or guarantees under which the Company could be required, in certain circumstances, to make cashFuture minimum payments as of December 31, 20172023 related to restructuring plans as a result of the Company's exit from certain leased office facilities are (dollars in thousands): Fiscal 2024: $675; Fiscal 2025: $2,698; and Fiscal 2026: $1,799.
|
| | | |
Lease guarantees | $ | 2,260 |
|
Surety bonds | $ | 405 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | | | Total |
Purchase commitments | | $ | 23,774 | | | $ | 89,013 | | | $ | 16,660 | | | $ | 4,085 | | | $ | 3,375 | | | | | $ | 136,907 | |
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 2017Company's Annual Report.Report on Form 10-K for the fiscal year ended March 31, 2023 ("2023 Annual Report"), as filed with the SEC on May 24, 2023.
Non-U.S. Operations
The Company has a presence in the United Kingdom, France, Germany, Poland,Netherlands, Italy, Spain, Brazil, India, Australia, China, Singapore and 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.subsidiaries. These advances are considered 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. ExchangeTherefore, 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.GAAP as set forth in the FASB ASC, and we consider the various staff accounting bulletins and other applicable guidance issued by the SEC. 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 20172023 Annual Report include a summary of significant accounting policies used in the preparation of Acxiom’sthe Company’s consolidated financial statements. In addition, the Management’s Discussion and Analysis of Financial Condition and Results of Operations filed as part of the 20172023 Annual Report contains a discussion of the policies that 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.
2023 Annual Report other than as described in the Accounting Pronouncements Adopted Duringduring the Current Year
See “Accounting Pronouncements Adopted During the Current Year” under section of Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements for a discussion of certainaccompanying this report.
Recent Accounting Pronouncements
For information on recent accounting standards that have been issuedpronouncements, see “Accounting Pronouncements Adopted During the Current Year" 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 for a discussion of certain accounting standards that have been issued but not yet adopted.accompanying this report.
Forward-looking Statements
This Quarterly Report on Form 10-Q 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, income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure, or other financial items;
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 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 2017 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, 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 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 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 we will not be able to continue to receive credit upon satisfactory terms and conditions;
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 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;
general and global negative economic conditions; and
our tax rate and other effects of the changes to U.S. federal tax law.
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 aboutAbout Market Risk
We believe there have been no material changes in our market risk exposures for the nine months ended December 31, 2017,2023, as compared with those discussed in ourthe Company's 2023 Annual Report on Form 10-K for the fiscal year ended March 31, 2017.Report.
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)amended (the "Exchange Act")). Based on this evaluation, our principal executive officer and our principal financial and accounting officer concluded that as of December 31, 2017,2023, our disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting.
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 20172023 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 exposureThe information required by this item is considered materialset forth under Note 14, “Commitments and Contingencies,” to the Company’sour unaudited condensed consolidated financial statements.statements in Part I, Item 1 of this Quarterly Report and is incorporated herein by reference.
Item 1A. Risk Factors
The risks described in Part I, Item 1A, “Risk Factors” in ourthe Company's 2023 Annual Report, on Form 10-K for the year ended March 31, 2017, which was filed with the Securities and Exchange Commission on May 26, 2017, remain current in all material respects. ThoseThe risk factors in our 2023 Annual Report 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
(a)a.Not applicable.
(b)b.Not applicable.
(c)c.The table below provides information regarding purchases by AcxiomLiveRamp 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 |
October 2017 | | — |
| | n/a | | — |
| | $ | 94,474,907 |
|
November 2017 | | 339,883 |
| | 26.54 | | 339,883 |
| | 85,455,426 |
|
December 2017 | | 389,081 |
| | 27.36 | | 389,081 |
| | 74,809,780 |
|
Total | | 728,964 |
| | 26.98 | | 728,964 |
| | $ | 74,809,780 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
October 1, 2023 - October 31, 2023 | | 346,761 | | | $ | 28.84 | | | 346,761 | | | $ | 172,502,429 | |
November 1, 2023 - November 30, 2023 | | — | | | $ | — | | | — | | | $ | 172,502,429 | |
December 1, 2023 - December 31, 2023 | | — | | | $ | — | | | — | | | $ | 172,502,429 | |
Total | | 346,761 | | | $ | 28.84 | | | 346,761 | | | |
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.December 20, 2022. Under the modified common stock repurchase program, the Company may purchase up to $400.0 million$1.1 billion of its common stock through the period ending June 30, 2018.December 31, 2024. Through December 31, 2017,2023, the Company had repurchased a total of 18.437.3 million shares of its common stock for $325.2$927.5 million, leaving remaining capacity of $74.8$172.5 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
a. Not applicable.
b. Not applicable.
c. During the three months ended December 31, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
Item 6. Exhibits
The following exhibits are filed with this quarterly report:
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101 | | | |
101 |
| | The following financial information from our Quarterly Report on Form 10-Q for the quarter ended December 31, 2017,2023, formatted in inline XBRL: (i) Condensed Consolidated Balance Sheets at December 31, 2017,2023 and March 31, 2017,2023, (ii) Condensed Consolidated Statements of Operations for the Three and Nine Months endedEnded December 31, 20172023 and 2016, 2022,(iii) Condensed Consolidated Statements of Operations for the Nine Months ended December 31, 2017 and 2016, (iv) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months endedEnded December 31, 20172023 and 2016,2022, (iv) Condensed Consolidated Statements of Equity for the Three and Nine Months Ended December 31, 2023, (v) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Nine Months ended December 31, 2017 and 2016, (vi) Condensed Consolidated Statement of Equity for the Three and Nine Months endedEnded December 31, 2017, (vii)2022, (vi) Condensed Consolidated Statements of Cash Flows for the Nine Months endedEnded December 31, 20172023 and 2016,2022, and (vi)(vii) the Notes to Condensed Consolidated Financial Statements, tagged in detail. |
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104 | | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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.
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| LIVERAMP HOLDINGS, INC. |
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Dated: February 8, 2024 | By: | /s/ Lauren Dillard |
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| Acxiom Corporation |
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Dated: February 7, 2018 | | |
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| By: | /s/ Warren C. Jenson |
| | (Signature) |
| | Warren C. JensonLauren Dillard |
| | Executive Vice President and Chief Financial Officer & Executive Vice President |
| | (principal financial and accounting officer) |