Item 1. Financial Statements
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2018
|
|
March 31,
2018
|
ASSETS
|
|
(Unaudited)
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
95,099
|
|
|
$
|
142,279
|
|
Trade accounts receivable, net
|
|
163,767
|
|
|
167,188
|
|
Refundable income taxes
|
|
11,761
|
|
|
9,733
|
|
Other current assets
|
|
40,167
|
|
|
41,145
|
|
Total current assets
|
|
310,794
|
|
|
360,345
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation and amortization
|
|
151,407
|
|
|
156,533
|
|
Software, net of accumulated amortization
|
|
31,719
|
|
|
34,984
|
|
Goodwill
|
|
595,795
|
|
|
595,995
|
|
Purchased software licenses, net of accumulated amortization
|
|
6,670
|
|
|
7,703
|
|
Deferred income taxes
|
|
11,488
|
|
|
12,225
|
|
Deferred commissions, net
|
|
18,137
|
|
|
—
|
|
Other assets, net
|
|
40,958
|
|
|
41,468
|
|
|
|
$
|
1,166,968
|
|
|
$
|
1,209,253
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Current installments of long-term debt
|
|
$
|
1,327
|
|
|
$
|
1,583
|
|
Trade accounts payable
|
|
47,668
|
|
|
46,688
|
|
Accrued payroll and related expenses
|
|
21,939
|
|
|
42,499
|
|
Other accrued expenses
|
|
58,938
|
|
|
55,865
|
|
Deferred revenue
|
|
31,621
|
|
|
31,720
|
|
Total current liabilities
|
|
161,493
|
|
|
178,355
|
|
|
|
|
|
|
Long-term debt
|
|
227,435
|
|
|
227,837
|
|
Deferred income taxes
|
|
42,258
|
|
|
40,243
|
|
Other liabilities
|
|
13,726
|
|
|
13,723
|
|
Commitments and contingencies
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
Common stock
|
|
13,773
|
|
|
13,609
|
|
Additional paid-in capital
|
|
1,256,442
|
|
|
1,235,679
|
|
Retained earnings
|
|
638,043
|
|
|
628,331
|
|
Accumulated other comprehensive income
|
|
8,899
|
|
|
10,767
|
|
Treasury stock, at cost
|
|
(1,195,101
|
)
|
|
(1,139,291
|
)
|
Total equity
|
|
722,056
|
|
|
749,095
|
|
|
|
$
|
1,166,968
|
|
|
$
|
1,209,253
|
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Revenues
|
|
$
|
226,960
|
|
|
$
|
212,514
|
|
Cost of revenue
|
|
117,271
|
|
|
113,960
|
|
Gross profit
|
|
109,689
|
|
|
98,554
|
|
Operating expenses:
|
|
|
|
|
Research and development
|
|
24,536
|
|
|
23,563
|
|
Sales and marketing
|
|
54,850
|
|
|
48,440
|
|
General and administrative
|
|
34,718
|
|
|
32,356
|
|
Gains, losses and other items, net
|
|
1,286
|
|
|
(98
|
)
|
Total operating expenses
|
|
115,390
|
|
|
104,261
|
|
Loss from operations
|
|
(5,701
|
)
|
|
(5,707
|
)
|
Other income (expense):
|
|
|
|
|
Interest expense
|
|
(2,838
|
)
|
|
(2,342
|
)
|
Other, net
|
|
524
|
|
|
(672
|
)
|
Total other expense
|
|
(2,314
|
)
|
|
(3,014
|
)
|
Loss before income taxes
|
|
(8,015
|
)
|
|
(8,721
|
)
|
Income taxes (benefit)
|
|
(5,000
|
)
|
|
(7,421
|
)
|
Net loss
|
|
$
|
(3,015
|
)
|
|
$
|
(1,300
|
)
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
Diluted loss per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Net loss
|
|
$
|
(3,015
|
)
|
|
$
|
(1,300
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
Change in foreign currency translation adjustment
|
|
(1,868
|
)
|
|
652
|
|
Comprehensive loss
|
|
$
|
(4,883
|
)
|
|
$
|
(648
|
)
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
THREE MONTHS ENDED
JUNE 30, 2018
(Unaudited)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional
|
|
|
|
other
|
|
Treasury Stock
|
|
|
|
|
Number
|
|
|
|
paid-in
|
|
Retained
|
|
comprehensive
|
|
Number
|
|
|
|
Total
|
|
|
of shares
|
|
Amount
|
|
Capital
|
|
earnings
|
|
income (loss)
|
|
of shares
|
|
Amount
|
|
Equity
|
Balances at March 31, 2018
|
|
136,079,676
|
|
|
$
|
13,609
|
|
|
$
|
1,235,679
|
|
|
$
|
628,331
|
|
|
$
|
10,767
|
|
|
(58,304,917
|
)
|
|
$
|
(1,139,291
|
)
|
|
$
|
749,095
|
|
Cumulative-effect adjustment from adoption of ASU 2014-09
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,727
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
12,727
|
|
Employee stock awards, benefit plans and other issuances
|
|
233,784
|
|
|
23
|
|
|
4,093
|
|
|
—
|
|
|
—
|
|
|
(391,898
|
)
|
|
(10,044
|
)
|
|
$
|
(5,928
|
)
|
Non-cash stock-based compensation
|
|
149,416
|
|
|
15
|
|
|
16,796
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
16,811
|
|
Restricted stock units vested
|
|
1,259,681
|
|
|
126
|
|
|
(126
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Acquisition of treasury stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,853,071
|
)
|
|
(45,766
|
)
|
|
$
|
(45,766
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,868
|
)
|
|
—
|
|
|
—
|
|
|
$
|
(1,868
|
)
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,015
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
(3,015
|
)
|
Balances at June 30, 2018
|
|
137,722,557
|
|
|
$
|
13,773
|
|
|
$
|
1,256,442
|
|
|
$
|
638,043
|
|
|
$
|
8,899
|
|
|
(60,549,886
|
)
|
|
$
|
(1,195,101
|
)
|
|
$
|
722,056
|
|
See accompanying notes to condensed consolidated financial statements
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Cash flows from operating activities:
|
|
|
|
|
Net loss
|
|
$
|
(3,015
|
)
|
|
$
|
(1,300
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
21,529
|
|
|
21,110
|
|
Loss on disposal or impairment of assets
|
|
48
|
|
|
163
|
|
Accelerated deferred debt costs
|
|
—
|
|
|
720
|
|
Deferred income taxes
|
|
(1,335
|
)
|
|
2,497
|
|
Non-cash stock compensation expense
|
|
20,360
|
|
|
15,038
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable, net
|
|
4,329
|
|
|
11,960
|
|
Deferred costs and other assets, net
|
|
(2,995
|
)
|
|
(3,377
|
)
|
Accounts payable and other liabilities
|
|
(21,704
|
)
|
|
(37,073
|
)
|
Deferred revenue
|
|
(33
|
)
|
|
(4,787
|
)
|
Net cash provided by operating activities
|
|
17,184
|
|
|
4,951
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Capitalized software development costs
|
|
(3,606
|
)
|
|
(3,388
|
)
|
Capital expenditures
|
|
(4,399
|
)
|
|
(6,888
|
)
|
Data acquisition costs
|
|
(179
|
)
|
|
(190
|
)
|
Equity investments
|
|
(2,500
|
)
|
|
—
|
|
Net cash used in investing activities
|
|
(10,684
|
)
|
|
(10,466
|
)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from debt
|
|
—
|
|
|
230,000
|
|
Payments of debt
|
|
(592
|
)
|
|
(225,572
|
)
|
Fees for debt refinancing
|
|
(300
|
)
|
|
(4,001
|
)
|
Sale of common stock, net of stock acquired for withholding taxes
|
|
(5,928
|
)
|
|
(2,539
|
)
|
Acquisition of treasury stock
|
|
(45,766
|
)
|
|
—
|
|
Net cash used in financing activities
|
|
(52,586
|
)
|
|
(2,112
|
)
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
(1,094
|
)
|
|
430
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
(47,180
|
)
|
|
(7,197
|
)
|
Cash and cash equivalents at beginning of period
|
|
142,279
|
|
|
170,343
|
|
Cash and cash equivalents at end of period
|
|
$
|
95,099
|
|
|
$
|
163,146
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Supplemental cash flow information:
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
Interest
|
|
$
|
2,607
|
|
|
$
|
2,375
|
|
Income taxes, net of refunds
|
|
1,100
|
|
|
354
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
These condensed consolidated financial statements have been prepared by Acxiom Corporation (“Registrant,” “Acxiom,” we, us or the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Registrant’s management, all adjustments necessary for a fair presentation of the results for the periods included have been made, and the disclosures are adequate to make the information presented not misleading. All such adjustments are of a normal recurring nature. Certain note information has been omitted because it has not changed significantly from that reflected in Notes 1 through 18 of the Notes to Consolidated Financial Statements filed as part of Item 8 of the Registrant’s annual report on Form 10-K for the fiscal year ended March 31, 2018 (“2018 Annual Report”), as filed with the SEC on May 25, 2018. This quarterly report and the accompanying condensed consolidated financial statements should be read in connection with the 2018 Annual Report. The financial information contained in this quarterly report is not necessarily indicative of the results to be expected for any other period or for the full fiscal year ending March 31, 2019.
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Actual results could differ from those estimates. Certain of the accounting policies used in the preparation of these condensed consolidated financial statements are complex and require management to make judgments and/or significant estimates regarding amounts reported or disclosed in these financial statements. Additionally, the application of certain of these accounting policies is governed by complex accounting principles and their interpretation. A discussion of the Company’s significant accounting principles and their application is included in Note 1 of the Notes to Consolidated Financial Statements and in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s 2018 Annual Report.
Accounting Pronouncements Adopted During the Current Year
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively. Topic 606 supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the new guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted Topic 606 as of April 1, 2018 using the modified retrospective method. See Note 2 for further details.
In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 719): Scope of Modification Accounting" ("ASU 2017-09"). ASU 2017-09 clarifies when changes to the terms or conditions of a stock-based payment award must be accounted for as modifications. ASU 2017-09 will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a stock-based payment award if the award's fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. ASU 2017-09 is effective for the Company beginning in fiscal 2019. We adopted the standard in the current fiscal quarter, and adoption of this guidance did not have a material impact on our condensed financial statements and related disclosures.
Recent Accounting Pronouncements Not Yet Adopted
In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill
allocated to that reporting unit. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 (fiscal 2021 for the Company), including interim periods within those fiscal years; earlier adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its condensed financial statements and related disclosures.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), as a comprehensive new standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. The new standard will require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases except short-term leases. For lessees, leases will continue to be classified as either operating or financing in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. Subsequently, the FASB has issued various ASU's to provide further clarification around aspects of Topic 842. ASU 2016-02 is effective for annual periods beginning after December 15, 2018 (fiscal 2020 for the Company), including interim periods within those fiscal years, with early adoption permitted. We will adopt the new standard on April 1, 2019 using the modified retrospective approach. The Company is continuing to evaluate the impact of the adoption of this guidance on its condensed consolidated financial statements and related disclosures.
The Company does not anticipate that the adoption of any other recent accounting pronouncements will have a material impact on the Company's consolidated financial position, results of operations or cash flows.
2. TOPIC 606 ADOPTION IMPACT AND REVENUE FROM CONTRACTS WITH CUSTOMERS:
On April 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of April 1, 2018. Results for reporting periods beginning after April 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic reporting under Topic 605.
Under Topic 606, revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The Company determines revenue recognition through the following steps:
|
|
•
|
Identification of the contract, or contracts, with a customer
|
|
|
•
|
Identification of the performance obligations in the contract
|
|
|
•
|
Determination of the transaction price
|
|
|
•
|
Allocation of the transaction price to the performance obligations in the contract
|
|
|
•
|
Recognition of revenue when, or as, the Company satisfies a performance obligation
|
We recorded a net increase to our opening retained earnings of
$12.7 million
, net of tax, due to the cumulative impact of adopting Topic 606, with the impact primarily related to the capitalization of costs of obtaining customer contracts.
The details of the significant changes and quantitative impact of the changes are disclosed below.
Costs of Obtaining Customer Contracts
The Company previously recognized commission payments made for obtaining a contract as an operating expense when incurred. Under Topic 606, the Company capitalizes incremental costs to acquire contracts and amortizes them over the expected period of benefit, which we have determined as a range of
two
to
five years
. As of
June 30, 2018
, the remaining unamortized contract costs were
$18.1 million
and are included in deferred commissions, net, in the condensed consolidated balance sheet. Net capitalized costs of
$2.9 million
were recorded as a reduction to operating expense for the
three months ended June 30, 2018
.
No
impairment was recognized for the
three months ended June 30, 2018
.
Contingent Revenue
The Company previously limited revenue recognition to the amount that was not contingent on the provision of future services. This was typically from fees paid over the contract term for services delivered at the beginning of the contract term.
Impacts on Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheet
|
|
Impact of changes in accounting policies
|
|
|
As reported June 30, 2018
|
|
Adjustments
|
|
Balances without adoption of Topic 606
|
Trade accounts receivable, net
|
|
$
|
163,767
|
|
|
$
|
(1,943
|
)
|
|
$
|
161,824
|
|
Refundable income taxes
|
|
11,761
|
|
|
540
|
|
|
12,301
|
|
Deferred income taxes
|
|
11,488
|
|
|
(64
|
)
|
|
11,424
|
|
Deferred commissions, net
|
|
18,137
|
|
|
(18,137
|
)
|
|
—
|
|
Others
|
|
961,815
|
|
|
—
|
|
|
961,815
|
|
Total assets
|
|
$
|
1,166,968
|
|
|
$
|
(19,604
|
)
|
|
$
|
1,147,364
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
$
|
31,621
|
|
|
$
|
(232
|
)
|
|
$
|
31,389
|
|
Deferred income taxes
|
|
42,258
|
|
|
(4,761
|
)
|
|
37,497
|
|
Others
|
|
371,033
|
|
|
—
|
|
|
371,033
|
|
Total liabilities
|
|
444,912
|
|
|
(4,993
|
)
|
|
439,919
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
638,043
|
|
|
(14,611
|
)
|
|
623,432
|
|
Other equity
|
|
84,013
|
|
|
—
|
|
|
84,013
|
|
Total equity
|
|
722,056
|
|
|
(14,611
|
)
|
|
707,445
|
|
Total liabilities and equity
|
|
$
|
1,166,968
|
|
|
$
|
(19,604
|
)
|
|
$
|
1,147,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Operations
|
|
Impact of changes in accounting policies
|
|
|
As reported for the three months ended June 30, 2018
|
|
Adjustments
|
|
Balances without adoption of Topic 606
|
Revenues
|
|
$
|
226,960
|
|
|
$
|
296
|
|
|
$
|
227,256
|
|
Cost of revenue
|
|
117,271
|
|
|
—
|
|
|
117,271
|
|
Gross profit
|
|
$
|
109,689
|
|
|
$
|
296
|
|
|
$
|
109,985
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
Sales and marketing
|
|
$
|
54,850
|
|
|
$
|
2,939
|
|
|
$
|
57,789
|
|
Other operating expenses
|
|
60,540
|
|
|
—
|
|
|
60,540
|
|
Total operating expenses
|
|
115,390
|
|
|
2,939
|
|
|
118,329
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(5,701
|
)
|
|
(2,643
|
)
|
|
(8,344
|
)
|
Total other expense
|
|
(2,314
|
)
|
|
—
|
|
|
(2,314
|
)
|
Loss before income taxes
|
|
(8,015
|
)
|
|
(2,643
|
)
|
|
(10,658
|
)
|
Income taxes
|
|
(5,000
|
)
|
|
(695
|
)
|
|
(5,695
|
)
|
Net loss
|
|
$
|
(3,015
|
)
|
|
$
|
(1,948
|
)
|
|
$
|
(4,963
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Comprehensive Loss
|
|
Impact of changes in accounting policies
|
|
|
As reported for the three months ended June 30, 2018
|
|
Adjustments
|
|
Balances without adoption of Topic 606
|
Net loss
|
|
$
|
(3,015
|
)
|
|
$
|
(1,948
|
)
|
|
$
|
(4,963
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
Change in foreign currency translation adjustment
|
|
(1,868
|
)
|
|
—
|
|
|
(1,868
|
)
|
Comprehensive loss
|
|
$
|
(4,883
|
)
|
|
$
|
(1,948
|
)
|
|
$
|
(6,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Cash Flows
|
|
Impact of changes in accounting policies
|
|
|
As reported for the three months ended June 30, 2018
|
|
Adjustments
|
|
Balances without adoption of Topic 606
|
Net loss
|
|
$
|
(3,015
|
)
|
|
$
|
(1,948
|
)
|
|
$
|
(4,963
|
)
|
Adjustments for:
|
|
|
|
|
|
|
Deferred income taxes
|
|
(1,335
|
)
|
|
(695
|
)
|
|
(2,030
|
)
|
Others
|
|
41,937
|
|
|
—
|
|
|
41,937
|
|
Changes in:
|
|
|
|
|
|
|
Accounts receivable, net
|
|
4,329
|
|
|
(256
|
)
|
|
4,073
|
|
Deferred costs and other assets
|
|
(2,995
|
)
|
|
2,939
|
|
|
(56
|
)
|
Accounts payable and other liabilities
|
|
(21,704
|
)
|
|
—
|
|
|
(21,704
|
)
|
Deferred revenue
|
|
(33
|
)
|
|
(40
|
)
|
|
(73
|
)
|
Net cash from operating activities
|
|
17,184
|
|
|
—
|
|
|
17,184
|
|
Net cash from investing activities
|
|
(10,684
|
)
|
|
—
|
|
|
(10,684
|
)
|
Net cash from financing activities
|
|
(52,586
|
)
|
|
—
|
|
|
(52,586
|
)
|
Effect of exchange rate changes on cash
|
|
(1,094
|
)
|
|
—
|
|
|
(1,094
|
)
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
(47,180
|
)
|
|
—
|
|
|
(47,180
|
)
|
Cash and cash equivalents at beginning of period
|
|
142,279
|
|
|
—
|
|
|
142,279
|
|
Cash and cash equivalents at end of period
|
|
$
|
95,099
|
|
|
$
|
—
|
|
|
$
|
95,099
|
|
Disaggregation of Revenue
In the following table, revenue is disaggregated by primary geographical market and major service offerings. The table also includes a reconciliation of the disaggregated revenue within the reportable segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
June 30, 2018
|
(dollars in thousands)
|
Primary Geographical Markets
|
|
Acxiom Marketing Solutions
|
|
LiveRamp
|
|
Total
|
United States
|
|
$
|
150,307
|
|
|
$
|
56,222
|
|
|
$
|
206,529
|
|
Europe
|
|
11,115
|
|
|
4,908
|
|
|
16,023
|
|
APAC
|
|
3,080
|
|
|
1,328
|
|
|
4,408
|
|
|
|
$
|
164,502
|
|
|
$
|
62,458
|
|
|
$
|
226,960
|
|
|
|
|
|
|
|
|
Major Offerings/Services
|
|
|
|
|
|
|
Audience Creation
|
|
$
|
45,452
|
|
|
$
|
—
|
|
|
$
|
45,452
|
|
Data Analytics
|
|
9,025
|
|
|
—
|
|
|
9,025
|
|
Data Management
|
|
110,025
|
|
|
—
|
|
|
110,025
|
|
Subscription
|
|
—
|
|
|
51,329
|
|
|
51,329
|
|
Marketplace and Other
|
|
—
|
|
|
11,129
|
|
|
11,129
|
|
|
|
$
|
164,502
|
|
|
$
|
62,458
|
|
|
$
|
226,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
June 30, 2017
|
(dollars in thousands)
|
Primary Geographical Markets
|
|
Acxiom Marketing Solutions
|
|
LiveRamp
|
|
Total
|
United States
|
|
$
|
152,129
|
|
|
$
|
42,118
|
|
|
$
|
194,247
|
|
Europe
|
|
10,735
|
|
|
3,802
|
|
|
14,537
|
|
APAC
|
|
2,893
|
|
|
837
|
|
|
3,730
|
|
|
|
$
|
165,757
|
|
|
$
|
46,757
|
|
|
$
|
212,514
|
|
|
|
|
|
|
|
|
Major Offerings/Services
|
|
|
|
|
|
|
Audience Creation
|
|
$
|
51,303
|
|
|
$
|
—
|
|
|
$
|
51,303
|
|
Data Analytics
|
|
8,858
|
|
|
—
|
|
|
8,858
|
|
Data Management
|
|
105,596
|
|
|
—
|
|
|
105,596
|
|
Subscription
|
|
—
|
|
|
37,052
|
|
|
37,052
|
|
Marketplace and Other
|
|
—
|
|
|
9,705
|
|
|
9,705
|
|
|
|
$
|
165,757
|
|
|
$
|
46,757
|
|
|
$
|
212,514
|
|
Transaction Price Allocated to the Remaining Performance Obligations
We have performance obligations, primarily related to AMS offerings, associated with fixed commitments in customer contracts for future services that have not yet been recognized in our condensed consolidated financial statements. The amount of fixed revenue not yet recognized was
$1.1 billion
as of
June 30, 2018
. The Company expects to recognize revenue on approximately
75%
of these remaining performance obligations by March 31, 2021 with the balance recognized thereafter.
3. LOSS PER SHARE AND STOCKHOLDERS’ EQUITY:
Loss Per Share
A reconciliation of the numerator and denominator of basic and diluted loss per share is shown below (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Basic loss per share:
|
|
|
|
|
|
Net loss
|
|
$
|
(3,015
|
)
|
|
$
|
(1,300
|
)
|
|
|
|
|
|
Basic weighted-average shares outstanding
|
|
76,935
|
|
|
78,672
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
Diluted loss per share:
|
|
|
|
|
|
|
Basic weighted-average shares outstanding
|
|
76,935
|
|
|
78,672
|
|
Dilutive effect of common stock options, warrants, and restricted stock as computed under the treasury stock method
|
|
—
|
|
|
—
|
|
Diluted weighted-average shares outstanding
|
|
76,935
|
|
|
78,672
|
|
|
|
|
|
|
|
|
Diluted loss per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
Due to the net loss incurred by the Company during the quarters ended June 30, 2018 and 2017, the dilutive effect of options, warrants and restricted stock units covering
2.4 million
and
2.8 million
shares of common stock, respectively, was excluded from the diluted loss per share calculation since the impact on the calculation was anti-dilutive.
Additional options and warrants to purchase shares of common stock and restricted stock units that were outstanding during the periods presented but were not included in the computation of diluted loss per share because the effect was anti-dilutive are shown below (shares in thousands):
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Number of shares outstanding under options, warrants and restricted stock units
|
|
119
|
|
|
20
|
|
Range of exercise prices for options
|
|
$32.85
|
|
|
$32.85
|
|
Stockholders’ Equity
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was subsequently modified and expanded, most recently on March 30, 2018. Under the modified common stock repurchase program, the Company may purchase up to
$500.0 million
of its common stock through the period
ending
December 31, 2019
. During the
three months ended
June 30, 2018
, the Company repurchased
1.9 million
shares of its common stock for
$45.8 million
. Through
June 30, 2018
, the Company had repurchased a total of
22.0 million
shares of its stock for
$420.4 million
, leaving remaining capacity of
$79.6 million
under the stock repurchase program.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income accumulated balances of
$8.9 million
and
$10.8 million
at
June 30, 2018
and
March 31, 2018
, respectively, reflect accumulated foreign currency translation adjustments.
4. SHARE-BASED COMPENSATION:
Share-based Compensation Plans
The Company has stock option and equity compensation plans for which a total of
34.5 million
shares of the Company’s common stock have been reserved for issuance since the inception of the plans. At
June 30, 2018
, there were a total of
5.1 million
shares available for future grants under the plans.
Stock Option Activity
Stock option activity for the
three months ended
June 30, 2018
was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
|
|
|
|
|
|
|
Weighted-average
|
|
remaining
|
|
Aggregate
|
|
|
Number of
|
|
exercise price
|
|
contractual term
|
|
Intrinsic value
|
|
|
shares
|
|
per share
|
|
(in years)
|
|
(in thousands)
|
Outstanding at March 31, 2018
|
|
2,565,287
|
|
|
$
|
13.61
|
|
|
|
|
|
Exercised
|
|
(125,437
|
)
|
|
$
|
8.80
|
|
|
|
|
$
|
2,426
|
|
Forfeited or canceled
|
|
(25,831
|
)
|
|
$
|
14.25
|
|
|
|
|
|
|
Outstanding at June 30, 2018
|
|
2,414,019
|
|
|
$
|
13.86
|
|
|
5.1
|
|
$
|
38,910
|
|
Exercisable at June 30, 2018
|
|
2,169,170
|
|
|
$
|
14.58
|
|
|
4.8
|
|
$
|
33,397
|
|
The aggregate intrinsic value at period end represents the total pre-tax intrinsic value (the difference between Acxiom’s closing stock price on the last trading day of the period and the exercise price for each in-the-money option) that would have been received by the option holders had option holders exercised their options on
June 30, 2018
. This amount changes based upon changes in the fair market value of Acxiom’s common stock.
A summary of stock options outstanding and exercisable as of
June 30, 2018
was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding
|
|
Options exercisable
|
Range of
|
|
|
|
Weighted-average
|
|
Weighted-average
|
|
|
|
Weighted-average
|
exercise price
|
|
Options
|
|
remaining
|
|
exercise price
|
|
Options
|
|
exercise price
|
per share
|
|
outstanding
|
|
contractual life
|
|
per share
|
|
exercisable
|
|
per share
|
$
|
0.61
|
|
|
—
|
|
$
|
9.99
|
|
|
545,583
|
|
|
5.2 years
|
|
$
|
1.62
|
|
|
390,000
|
|
|
$
|
1.71
|
|
$
|
10.00
|
|
|
—
|
|
$
|
19.99
|
|
|
1,176,361
|
|
|
4.4 years
|
|
$
|
14.95
|
|
|
1,092,595
|
|
|
$
|
14.74
|
|
$
|
20.00
|
|
|
—
|
|
$
|
24.99
|
|
|
672,523
|
|
|
6.2 years
|
|
$
|
21.30
|
|
|
667,023
|
|
|
$
|
21.30
|
|
$
|
25.00
|
|
|
—
|
|
$
|
32.85
|
|
|
19,552
|
|
|
5.4 years
|
|
$
|
32.85
|
|
|
19,552
|
|
|
$
|
32.85
|
|
|
|
|
|
|
|
2,414,019
|
|
|
5.1 years
|
|
$
|
13.86
|
|
|
2,169,170
|
|
|
$
|
14.58
|
|
Total expense related to stock options for the
three months ended
June 30, 2018
and
2017
was approximately
$1.0 million
and
$1.4 million
, respectively. Future expense for these options is expected to be approximately
$6.3 million
in total over the next
three years
.
Performance Stock Option Unit Activity
Performance stock option unit activity for the
three months ended
June 30, 2018
was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
|
|
|
|
|
|
|
Weighted-average
|
|
remaining
|
|
Aggregate
|
|
|
Number
|
|
exercise price
|
|
contractual term
|
|
intrinsic value
|
|
|
of shares
|
|
per share
|
|
(in years)
|
|
(in thousands)
|
Outstanding at March 31, 2018
|
|
329,404
|
|
|
$
|
21.42
|
|
|
|
|
|
Forfeited or canceled
|
|
(186,538
|
)
|
|
$
|
21.41
|
|
|
|
|
|
Outstanding at June 30, 2018
|
|
142,866
|
|
|
$
|
21.43
|
|
|
1.9
|
|
|
$
|
1,217
|
|
Exercisable at June 30, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Of the performance stock option units outstanding at
March 31, 2018
,
164,702
reached maturity of the relevant performance period at
March 31, 2018
. The units attained a
0%
attainment level. As a result, they were cancelled in the current fiscal quarter.
Total expense related to performance stock option units for the
three months ended
June 30, 2018
and
2017
was
$0.3 million
and
$0.5 million
, respectively. Future expense for these performance stock option units is expected to be approximately
$1.1 million
in total over the next
three years
.
Restricted Stock Unit Activity
During the
three months ended
June 30, 2018
, the Company granted time-vesting restricted stock units covering
1,703,482
shares of common stock with a fair value at the date of grant of
$46.6 million
. Of the restricted stock units granted in the current period,
98,156
vest in equal annual increments over
four years
,
1,586,724
vest
25%
at the one-year anniversary and
75%
in equal quarterly increments over the subsequent
three
years, and
18,602
vest in
one year
. Grant date fair value of these units is equal to the quoted market price for the shares on the date of grant.
Time-vesting restricted stock unit activity for the
three months ended
June 30, 2018
was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
|
|
|
|
|
|
|
fair value per
|
|
Weighted-average
|
|
|
Number
|
|
share at grant
|
|
remaining contractual
|
|
|
of shares
|
|
date
|
|
term (in years)
|
Outstanding at March 31, 2018
|
|
3,449,001
|
|
|
$
|
24.35
|
|
|
2.32
|
Granted
|
|
1,703,482
|
|
|
$
|
27.34
|
|
|
|
Vested
|
|
(692,206
|
)
|
|
$
|
23.14
|
|
|
|
Forfeited or canceled
|
|
(227,978
|
)
|
|
$
|
24.98
|
|
|
|
Outstanding at June 30, 2018
|
|
4,232,299
|
|
|
$
|
25.72
|
|
|
2.82
|
During the
three months ended
June 30, 2018
, the Company granted performance-based restricted stock units covering
216,727
shares of common stock having a fair value at the date of grant of
$6.7 million
, determined using a Monte Carlo simulation model. The units vest subject to attainment of market conditions established by the compensation committee of the board of directors (“compensation committee”) and continuous employment through the vesting date. The
216,727
units may vest in a number of shares from
25%
to
200%
of the award, based on the total shareholder return of Acxiom common stock compared to total shareholder return of a group of peer companies established by the compensation committee for the period from April 1, 2018 to March 31, 2021.
Non-vested performance-based restricted stock unit activity for the
three months ended
June 30, 2018
was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
|
|
|
|
|
|
|
fair value per
|
|
Weighted-average
|
|
|
Number
|
|
share at grant
|
|
remaining contractual
|
|
|
of shares
|
|
date
|
|
term (in years)
|
Outstanding at March 31, 2018
|
|
682,763
|
|
|
$
|
25.23
|
|
|
1.54
|
Granted
|
|
216,727
|
|
|
$
|
31.07
|
|
|
|
Vested
|
|
(20,965
|
)
|
|
$
|
19.07
|
|
|
|
Forfeited or canceled
|
|
(129,123
|
)
|
|
$
|
24.13
|
|
|
|
Outstanding at June 30, 2018
|
|
749,402
|
|
|
$
|
27.28
|
|
|
1.78
|
Total expense related to restricted stock for the
three months ended
June 30, 2018
and
2017
was approximately
$10.9 million
and
$8.8 million
, respectively. Future expense for restricted stock units is expected to be approximately
$33.5 million
for the
nine months
ending March 31, 2019,
$35.9 million
in fiscal 2020,
$25.0 million
in fiscal 2021,
$13.6 million
in fiscal 2022, and
$1.4 million
in fiscal 2023.
Other Performance Unit Activity
Other performance-based stock unit activity for the
three months ended
June 30, 2018
was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
|
|
|
|
|
|
|
fair value per
|
|
Weighted-average
|
|
|
Number
|
|
share at grant
|
|
remaining contractual
|
|
|
of shares
|
|
date
|
|
term (in years)
|
Outstanding at March 31, 2018
|
|
111,111
|
|
|
$
|
5.33
|
|
|
-
|
Vested
|
|
(45,364
|
)
|
|
$
|
5.33
|
|
|
|
Forfeited or canceled
|
|
(65,747
|
)
|
|
$
|
5.33
|
|
|
|
Outstanding at June 30, 2018
|
|
—
|
|
|
$
|
—
|
|
|
-
|
The
111,111
performance-based units outstanding at March 31, 2018 reached maturity of the relevant performance period on March 31, 2018. The units achieved a 100% performance attainment level. However, application of the share price adjustment factor resulted in a
59%
reduction in shares vested in the current fiscal quarter.
During the quarter ended June 30, 2018, the Company withheld approximately
$10.0 million
related to employee tax withholding for stock-based compensation awards.
Consideration Holdback
As part of the Company’s acquisition of Arbor in fiscal 2017,
$38.3 million
of the acquisition consideration otherwise payable with respect to shares of restricted Arbor common stock held by certain key employees was subject to holdback by the Company pursuant to agreements with those employees (each, a “Holdback Agreement”). Total expense related to the Holdback Agreements for the
three months ended
June 30, 2018
and
2017
was
$3.8 million
in each period. Through
June 30, 2018
, the Company had recognized a total of
$24.3 million
expense related to the Holdback Agreements. Future expense related to the Holdback Agreements is expected to be approximately
$14.0 million
over the next
two
fiscal years.
Pacific Data Partners ("PDP") Assumed Performance Plan
In connection with the fiscal 2018 acquisition of PDP, the Company assumed the outstanding performance compensation plan under the 2018 Equity Compensation Plan of Pacific Data Partners, LLC ("PDP PSU plan"). Total expense related to the PDP PSU plan for the
three months ended
June 30, 2018
was
$3.9 million
. Through
June 30, 2018
, the Company had recognized a total of
$5.9 million
related to the PDP PSU plan. Future expense is expected to be approximately
$11.9 million
in fiscal
2019
,
$15.7 million
in fiscal
2020
,
$15.8 million
in fiscal
2021
, and
$15.7 million
in fiscal
2022
, based on expectations of full attainment. At
March 31, 2018
, the recognized, but unpaid, portion balance related to the PDP PSU plan in other accrued expenses in the condensed consolidated balance sheet was
$5.3 million
.
5. OTHER CURRENT AND NONCURRENT ASSETS:
Other current assets consist of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
March 31,
2018
|
Prepaid expenses and other
|
|
$
|
25,823
|
|
|
$
|
27,594
|
|
Assets of non-qualified retirement plan
|
|
14,344
|
|
|
13,551
|
|
Other current assets
|
|
$
|
40,167
|
|
|
$
|
41,145
|
|
Other noncurrent assets consist of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
March 31,
2018
|
Acquired intangible assets, net
|
|
$
|
31,453
|
|
|
$
|
33,922
|
|
Deferred data acquisition costs
|
|
879
|
|
|
1,036
|
|
Other miscellaneous noncurrent assets
|
|
8,626
|
|
|
6,510
|
|
Noncurrent assets
|
|
$
|
40,958
|
|
|
$
|
41,468
|
|
6. OTHER ACCRUED EXPENSES:
Other accrued expenses consist of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
March 31,
2018
|
Liabilities of non-qualified retirement plan
|
|
14,344
|
|
|
13,551
|
|
Other accrued expenses
|
|
44,594
|
|
|
42,314
|
|
Other accrued expenses
|
|
$
|
58,938
|
|
|
$
|
55,865
|
|
7. GOODWILL AND INTANGIBLE ASSETS:
Goodwill by operating segment for the
three months ended
June 30, 2018
(dollars in thousands) was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LiveRamp
|
|
Acxiom Marketing Solutions
|
|
Total
|
Balance at March 31, 2018
|
|
$
|
203,639
|
|
|
$
|
392,356
|
|
|
$
|
595,995
|
|
Reallocation of segments
|
|
1,377
|
|
|
(1,377
|
)
|
|
—
|
|
Change in foreign currency translation adjustment
|
|
(62
|
)
|
|
(138
|
)
|
|
(200
|
)
|
Balance at June 30, 2018
|
|
$
|
204,954
|
|
|
$
|
390,841
|
|
|
$
|
595,795
|
|
Goodwill by component included in each segment as of
June 30, 2018
was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LiveRamp
|
|
Acxiom Marketing Solutions
|
|
Total
|
U.S.
|
|
$
|
201,449
|
|
|
$
|
382,981
|
|
|
$
|
584,430
|
|
APAC
|
|
3,505
|
|
|
7,860
|
|
|
11,365
|
|
Balance at June 30, 2018
|
|
$
|
204,954
|
|
|
$
|
390,841
|
|
|
$
|
595,795
|
|
The amounts allocated to intangible assets from acquisitions include developed technology, customer relationships, trade names, and publisher relationships. Amortization lives for those intangibles range from
two
years to
ten
years. The following table shows the amortization activity of intangible assets (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
March 31, 2018
|
Developed technology, gross (Software)
|
|
$
|
54,150
|
|
|
$
|
54,150
|
|
Accumulated amortization
|
|
(47,119
|
)
|
|
(43,533
|
)
|
Net developed technology
|
|
$
|
7,031
|
|
|
$
|
10,617
|
|
|
|
|
|
|
Customer relationship/Trade name, gross (Other assets, net)
|
|
$
|
43,346
|
|
|
$
|
43,364
|
|
Accumulated amortization
|
|
(29,421
|
)
|
|
(27,953
|
)
|
Net customer/trade name
|
|
$
|
13,925
|
|
|
$
|
15,411
|
|
|
|
|
|
|
Publisher relationship, gross (Other assets, net)
|
|
$
|
23,800
|
|
|
$
|
23,800
|
|
Accumulated amortization
|
|
(6,280
|
)
|
|
(5,289
|
)
|
Net publisher relationship
|
|
$
|
17,520
|
|
|
$
|
18,511
|
|
|
|
|
|
|
Total intangible assets, gross
|
|
$
|
121,296
|
|
|
$
|
121,314
|
|
Total accumulated amortization
|
|
(82,820
|
)
|
|
(76,775
|
)
|
Total intangible assets, net
|
|
$
|
38,476
|
|
|
$
|
44,539
|
|
Intangible assets by operating segment as of
June 30, 2018
was (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LiveRamp
|
|
Acxiom Marketing Solutions
|
|
Total
|
Developed technology
|
|
7,031
|
|
|
—
|
|
|
7,031
|
|
Customer/Trade name
|
|
13,921
|
|
|
4
|
|
|
13,925
|
|
Publisher relationship
|
|
17,520
|
|
|
—
|
|
|
17,520
|
|
Balance at June 30, 2018
|
|
$
|
38,472
|
|
|
$
|
4
|
|
|
$
|
38,476
|
|
Total amortization expense related to intangible assets for the
three months ended
June 30, 2018
and
2017
was
$6.1 million
and
$6.0 million
, respectively. The following table presents the estimated future amortization expenses related to purchased and other intangible assets. The amount for 2019 represents the remaining nine months ending March 31, 2019. All other periods represent fiscal years ending March 31 (dollars in thousands):
|
|
|
|
|
Fiscal Year:
|
|
2019
|
$
|
9,917
|
|
2020
|
11,950
|
|
2021
|
8,025
|
|
2022
|
5,150
|
|
2023
|
3,434
|
|
|
$
|
38,476
|
|
8. LONG-TERM DEBT:
Long-term debt consists of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
March 31,
2018
|
Revolving credit borrowings
|
|
$
|
230,000
|
|
|
$
|
230,000
|
|
Other debt
|
|
2,701
|
|
|
3,293
|
|
Total long-term debt
|
|
232,701
|
|
|
233,293
|
|
|
|
|
|
|
Less current installments
|
|
1,327
|
|
|
1,583
|
|
Less deferred debt financing costs
|
|
3,939
|
|
|
3,873
|
|
Long-term debt, excluding current installments and deferred debt financing costs
|
|
$
|
227,435
|
|
|
$
|
227,837
|
|
The revolving loan borrowings under the Company's Sixth Amended and Restated Credit Agreement (the "restated credit agreement") bear interest at
LIBOR
or at an alternative base rate plus a credit spread. At
June 30, 2018
, the revolving loan borrowing bears interest at LIBOR plus a credit spread of
1.75%
. The weighted-average interest rate on revolving credit borrowings at
June 30, 2018
was
3.9%
. There were no material outstanding letters of credit at
June 30, 2018
or March 31, 2018.
Under the terms of the restated credit agreement, the Company is required to maintain certain debt-to-cash flow and interest coverage ratios, among other restrictions. At
June 30, 2018
, the Company was in compliance with these covenants and restrictions.
9. ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Trade accounts receivable are presented net of allowances for doubtful accounts, returns and credits of
$5.2 million
at
June 30, 2018
and
$6.8 million
at
March 31, 2018
.
10. SEGMENT INFORMATION:
The Company reports segment information consistent with the way management internally disaggregates its operations to assess performance and to allocate resources.
During the first quarter of fiscal 2019, the Company realigned its portfolio into
two
distinct business segments: LiveRamp, the identity infrastructure for powering exceptional customer experiences, and Acxiom Marketing Solutions, the leading provider of services for creating a unified approach to data-driven marketing. This realignment allows Acxiom to best meet client needs in a rapidly evolving marketplace, create a strong foundation for continued growth and enhance value for shareholders.
This structure configured Acxiom’s three previous segments into two, aligning key Audience Solutions’ assets to each. All identity assets including IdentityLink, AbiliTec® intellectual property and Acxiom’s TV integrations were consolidated under LiveRamp. The remaining Audience Solutions’ lines of business for data and data services were combined with Marketing Services to create Acxiom Marketing Solutions.
As a result of this organizational realignment, information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed.
Revenues and cost of revenue are generally directly attributed to the segments. Certain revenue contracts are allocated among the segments based on the relative value of the underlying products and services. Cost of revenue, excluding non-cash stock compensation expense and purchased intangible asset amortization, is directly charged in most cases and allocated in certain cases based upon proportional usage.
Operating expenses, excluding non-cash stock compensation expense and purchased intangible asset amortization, are attributed to the segment groups as follows:
|
|
•
|
Research and development expenses are primarily directly recorded to each segment group based on identified products supported.
|
|
|
•
|
Sales and marketing expenses are primarily directly recorded to each segment group based on products supported and sold.
|
|
|
•
|
General and administrative expenses are generally not allocated to the segments unless directly attributable.
|
|
|
•
|
Gains, losses and other items, net are not allocated to the segment groups.
|
We do not track our assets by operating segments. Consequently, it is not practical to show assets by operating segment.
The following table presents information by business segment (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Revenues:
|
|
|
|
|
LiveRamp
|
|
$
|
62,458
|
|
|
$
|
46,757
|
|
Acxiom Marketing Solutions
|
|
164,502
|
|
|
165,757
|
|
Total segment revenues
|
|
$
|
226,960
|
|
|
$
|
212,514
|
|
|
|
|
|
|
Gross profit
(1)
:
|
|
|
|
|
|
|
LiveRamp
|
|
$
|
44,200
|
|
|
$
|
28,229
|
|
Acxiom Marketing Solutions
|
|
73,174
|
|
|
77,864
|
|
Total segment gross profit
|
|
$
|
117,374
|
|
|
$
|
106,093
|
|
|
|
|
|
|
Income (loss) from operations
(1)
:
|
|
|
|
|
|
|
LiveRamp
|
|
$
|
9,203
|
|
|
$
|
(97
|
)
|
Acxiom Marketing Solutions
|
|
47,458
|
|
|
48,374
|
|
Total segment income from operations
|
|
$
|
56,661
|
|
|
$
|
48,277
|
|
(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
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Total segment gross profit
|
|
$
|
117,374
|
|
|
$
|
106,093
|
|
|
|
|
|
|
Less:
|
|
|
|
|
Purchased intangible asset amortization
|
|
6,054
|
|
|
5,966
|
|
Non-cash stock compensation
|
|
1,631
|
|
|
1,573
|
|
Gross profit
|
|
$
|
109,689
|
|
|
$
|
98,554
|
|
|
|
|
|
|
Total segment income from operations
|
|
$
|
56,661
|
|
|
$
|
48,277
|
|
|
|
|
|
|
Less:
|
|
|
|
|
Corporate expenses (principally general and administrative)
|
|
27,840
|
|
|
25,966
|
|
Separation and transformation costs included in general and administrative
|
|
6,822
|
|
|
7,119
|
|
Gains, losses and other items, net
|
|
1,286
|
|
|
(98
|
)
|
Purchased intangible asset amortization
|
|
6,054
|
|
|
5,966
|
|
Non-cash stock compensation
|
|
20,360
|
|
|
15,031
|
|
Loss from operations
|
|
$
|
(5,701
|
)
|
|
$
|
(5,707
|
)
|
11. RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
The following table summarizes the restructuring activity for the
three months ended
June 30, 2018
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Associate-related
reserves
|
|
Lease
accruals
|
|
Total
|
March 31, 2018
|
|
$
|
2,751
|
|
|
$
|
5,292
|
|
|
$
|
8,043
|
|
Restructuring charges and adjustments
|
|
1,286
|
|
|
—
|
|
|
1,286
|
|
Payments
|
|
(2,923
|
)
|
|
(335
|
)
|
|
(3,258
|
)
|
June 30, 2018
|
|
$
|
1,114
|
|
|
$
|
4,957
|
|
|
$
|
6,071
|
|
The above balances are included in other accrued expenses and other liabilities on the condensed consolidated balance sheets.
Restructuring Plans
In the
three months ended
June 30, 2018
, the Company recorded a total of
$1.3 million
in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The expense related to fiscal year 2018 restructuring plans primarily for associates in the United States required to render service until termination to receive the termination benefits. These costs are expected to be paid out in fiscal 2019.
In fiscal 2018, the Company recorded a total of
$6.4 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
, and lease accruals and adjustments of
$2.6 million
.
The associate-related accruals of
$3.8 million
related to the termination of associates in the United States and Europe. Of all amounts accrued for fiscal year 2018 associate-related plans,
$0.7 million
remained accrued as of June 30, 2018. These costs are expected to be paid out in fiscal 2019. The lease accruals and adjustments of
$2.6 million
result from the Company's exit from certain leased office facilities.
In fiscal 2017, the Company recorded a total of
$8.9 million
in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The expense included severance and other associate-related charges of
$3.8 million
, lease accruals and adjustments of
$3.0 million
, and leasehold improvement write-offs of
$2.1 million
. Of the associate-related accruals of
$3.8 million
,
$0.2 million
remained accrued as of
June 30, 2018
. These costs are expected to be paid out in fiscal 2019. 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
June 30, 2018
.
In fiscal 2016, the Company recorded a total of
$12.0 million
in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The expense included severance and other associate-related charges of
$8.6 million
, lease termination charges and accruals of
$3.0 million
, and leasehold improvement write-offs of
$0.4 million
. Of the associate-related accruals of
$8.6 million
,
$0.1 million
remained accrued as of
June 30, 2018
. These amounts are expected to be paid out in fiscal 2019.
In fiscal 2015, the Company recorded a total of
$21.8 million
in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The expense included severance and other associate-related charges of
$13.3 million
, lease accruals of
$6.5 million
, and the write-off of leasehold improvements of
$2.0 million
. Of the associate-related accruals of
$13.3 million
,
$0.3 million
remained accrued as of
June 30, 2018
. These amounts are expected to be paid out in fiscal 2019. Of the lease accruals of
$6.5 million
,
$0.3 million
remained accrued as of
June 30, 2018
.
With respect to the fiscal 2015, 2017, and 2018 lease accruals described above, the Company intends to sublease the facilities to the extent possible. The liabilities will be satisfied over the remainder of the leased properties' terms, which continue 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 could require future adjustments to the liabilities, which would impact net earnings (loss) in the period the adjustment is recorded.
Gains, Losses and Other Items
Gains, losses and other items for each of the periods presented are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Restructuring plan charges and adjustments
|
|
$
|
1,286
|
|
|
$
|
(100
|
)
|
Other
|
|
—
|
|
|
2
|
|
|
|
$
|
1,286
|
|
|
$
|
(98
|
)
|
12. COMMITMENTS AND CONTINGENCIES:
Legal Matters
The Company is involved in various claims and legal proceedings. Management routinely assesses the likelihood of adverse judgments or outcomes to these matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. The Company records accruals for these matters to the extent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. These accruals are reflected in the Company’s condensed consolidated financial statements. In management’s opinion, the Company has made appropriate and adequate accruals for these matters, and management believes the probability of a material loss beyond the amounts accrued to be remote. However, the ultimate liability for these matters is uncertain, and if accruals are not adequate, an adverse outcome could have a material effect on the Company’s consolidated financial condition or results of operations. The Company maintains insurance coverage above certain limits. There are currently no matters pending against the Company or its subsidiaries for which the potential exposure is considered material to the Company’s condensed consolidated financial statements.
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
22 years
years of
$76.5 million
.
In connection with the disposition of Acxiom Impact during fiscal 2017, the Company assigned a facility lease to the buyer of the business. The Company guaranteed the facility lease as required by the asset disposition agreement. Should the assignee default, the Company would be required to perform under the terms of the facility lease, which continues through September 2021. At
June 30, 2018
, the Company’s maximum potential future rent payments under this guarantee totaled
$2.0 million
.
13. INCOME TAX:
In determining the quarterly provision for income taxes, the Company makes its best estimate of the effective income tax rate expected to be applicable for the full fiscal year. The estimated effective income tax rate for the current fiscal year is impacted by the reduction in the U.S. federal corporate income tax rate (discussed below), non-deductible stock-based compensation, state income taxes, research tax credits, and losses in foreign jurisdictions. State income taxes are influenced by the geographic and legal entity mix of the Company's U.S. income as well as the diversity of rules among the states. The Company does not record a tax benefit for certain foreign losses due to uncertainty of future utilization.
On December 22, 2017, the U.S. enacted significant tax law changes 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 reduced the U.S. federal corporate income tax rate from 35% to 21%, among other provisions. We believe we have properly estimated our federal and state income tax liabilities for the impacts of the Tax Act, including provisional amounts under SAB No. 118 related to the rate change, the impact of increased bonus depreciation, and the effects on executive compensation deductions. The Tax Act may be subject to technical amendments, as well as interpretations and implementing of regulations by the Department of Treasury and Internal Revenue Service, any of which could increase or decrease one or more impacts of the legislation. As such, we will continue to analyze the effects of the Tax Act and may record adjustments to provisional amounts during the measurement period ending no later than December 31, 2018. As of June 30, 2018, we have not changed the provisional estimates recognized in fiscal 2018. Any impacts to our income tax expense as a result of additional guidance will be recorded in the period in which the guidance is issued.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.
Cash and cash equivalents, trade receivables, unbilled and notes receivable, short-term borrowings and trade payables - The carrying amount approximates fair value because of the short maturity of these instruments.
Long-term debt - The interest rate on the revolving credit agreement is adjusted for changes in market rates and therefore the carrying value approximates fair value. The estimated fair value of other long-term debt was determined based upon the present value of the expected cash flows considering expected maturities and using interest rates currently available to the Company for long-term borrowings with similar terms. At
June 30, 2018
, the estimated fair value of long-term debt approximates its carrying value.
Under applicable accounting standards financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company assigned assets and liabilities to the hierarchy in the accounting standards, which is Level 1 - quoted prices in active markets for identical assets or liabilities, Level 2 - significant other observable inputs and Level 3 - significant unobservable inputs.
The following table presents the balances of assets measured at fair value as of
June 30, 2018
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
14,344
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,344
|
|
Total assets
|
|
$
|
14,344
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,344
|
|
15. SUBSEQUENT EVENT
On July 2, 2018, the Company entered into a definitive agreement to sell Acxiom Marketing Solutions ("AMS") to The Interpublic Group of Companies, Inc. (“IPG”) for
$2.3 billion
in cash, subject to customary closing adjustments. The transaction is subject to standard regulatory review, Acxiom shareholder approval and other customary closing conditions. In addition:
|
|
•
|
As required regulatory approvals are being sought and received, Acxiom intends to solicit shareholder approval for the transaction;
|
|
|
•
|
Once shareholder approval has been received, which is expected in the second quarter of fiscal 2019, the Company expects to report the results of AMS as discontinued operations;
|
|
|
•
|
The transaction is expected to close in the third quarter of fiscal 2019; and
|
|
|
•
|
The Company expects to report a gain on the sale.
|
The Company expects to realize approximately
$1.7 billion
in net cash proceeds, after taxes and fees. Following the closing, the Company intends to:
|
|
•
|
Retire its existing
$230 million
debt balance;
|
|
|
•
|
Initiate a
$500 million
cash tender offer for its common stock;
|
|
|
•
|
Increase its outstanding share repurchase authorization by up to an additional
$500 million
, and extend the duration of its program to December 31, 2020;
|
|
|
•
|
Use the remainder of the proceeds to fund its growth initiatives, strategic acquisition opportunities and meet its ongoing cash needs;
|
|
|
•
|
Transfer the Acxiom brand name and associated trademarks to IPG; and
|
|
|
•
|
Rename the Company LiveRamp Holdings, Inc. and, shortly thereafter, begin trading its common stock under the new ticker symbol “RAMP”.
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our operating segments, summary financial results and notable events. This overview is followed by a summary of our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.
Introduction and Overview
Acxiom Corporation is a global technology and services company with a vision to transform data into value for everyone. Through a simple, open approach to connecting systems and data, we provide the data foundation for the world’s best marketers. By making it safe and easy to activate, validate, enhance, and unify data, we provide marketers with the ability to deliver relevant messages at scale and 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.
Acxiom is a Delaware corporation founded in 1969 in Conway, Arkansas. Our common stock is listed on the NASDAQ Global Select Market under the symbol “ACXM.” We serve a global client base from locations in the United States, Europe, and the Asia-Pacific (“APAC”) region. Our client list includes many of the world’s largest and best-known brands across most major industry verticals, including but not limited to financial, insurance and investment services, automotive, retail, telecommunications, high tech, healthcare, travel, entertainment, non-profit, and government.
Operating Segments
During the first quarter of fiscal 2019, the Company realigned its portfolio into two distinct business segments: LiveRamp, the identity infrastructure for powering exceptional customer experiences, and Acxiom Marketing Solutions, the leading provider of services for creating a unified approach to data-driven marketing. This realignment allows Acxiom to best meet client needs in a rapidly evolving marketplace, create a strong foundation for continued growth and enhance value for shareholders.
This structure configured Acxiom’s three previous segments into two, aligning key Audience Solutions’ assets to each. All identity assets including IdentityLink, AbiliTec® intellectual property and Acxiom’s TV integrations were consolidated under LiveRamp. The remaining Audience Solutions’ lines of business for data and data services were combined with Marketing Services to create Acxiom Marketing Solutions.
As a result of this organizational realignment, information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed.
Our operating segments provide management with a comprehensive view of our key businesses based on how we manage our operations and measure results. Additional information related to our operating segments and geographic information is contained in Note 10 - Segment Information of the Notes to Condensed Consolidated Financial Statements.
LiveRamp
LiveRamp is the leading independent provider of identity and data connectivity for powering exceptional customer experiences. Through integrations with approximately 600 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 the foundational identity technology that enables our clients to engage consumers across any channel and measure the impact of marketing on sales. In addition, we operate as a neutral, open platform that enables all parts of the marketing ecosystem to connect and use data in responsible, ethical ways at scale.
IdentityLink
IdentityLink™ is our category leading identity resolution platform that connects people, data, and devices across the physical and digital world, powering privacy-compliant, people-based marketing that allows consumers to better connect with the brands and products they love. Leveraging the LiveRamp deterministic identity graph, IdentityLink first resolves a client’s data (first-, second-, or third-party) to consumer identifiers that represent real people in a way that protects consumer privacy. This omnichannel view of the consumer can then be delivered to any of the 600 partners in our ecosystem through a process called "data onboarding" in order to support targeting, personalization and measurement use cases
.
|
|
|
|
Targeting
|
Personalization
|
Measurement
|
|
|
|
Example
|
Example
|
Example
|
Clients can deploy targeted ads to known customers by using IdentityLink to upload data from first-, second-, and third-party data sources, resolve it to an omnichannel privacy-compliant link and then onboard to one of 600 LiveRamp partners.
|
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.
|
Consumer privacy and data protection are at the center of how we design our products and services. Accordingly, IdentityLink operates in a SafeHaven® certified environment with technical, operational, and personnel controls designed to ensure our clients’ data is kept private and secure.
IdentityLink is sold to brands and the companies with which they partner to execute their marketing, including marketing technology providers, publishers and data providers.
|
|
•
|
IdentityLink for Brands and Agencies.
IdentityLink allows brands and their agencies to execute people-based marketing by creating an omnichannel view of the consumer and activating for use across their choice of best-of-breed digital marketing platforms.
|
|
|
•
|
IdentityLink for Platforms and Publishers.
IdentityLink provides marketing technology providers and digital publishers with the ability to offer people-based targeting, measurement and personalization within their platforms. This adds value for brands by increasing reach, as well as the speed at which they can activate their marketing data.
|
|
|
•
|
IdentityLink for Data Owners.
IdentityLink allows data owners to easily connect their data to the digital ecosystem and better monetize it. Data can be distributed directly to clients or made available through the
IdentityLink Data Store
feature. This adds value for brands as it allows them to augment their understanding of consumers, and increase both the extent of their reach to and depth of their understanding of customers and prospects.
|
We charge for IdentityLink on an annual subscription basis. Our subscription pricing is based primarily on data volume supported by our platform.
IdentityLink Data Store
As we have scaled the LiveRamp network and technology, we have found additional ways to leverage our platform, deliver more value to clients and create incremental revenue streams. Leveraging LiveRamp’s common identity system and broad integration network, the IdentityLink Data Store is a data marketplace that seamlessly connects data owners’ audience data across the marketing ecosystem. The IdentityLink Data Store allows data owners to easily monetize their data across hundreds of marketing platforms and publishers with a single contract. At the same time, the Data Store provides a single gateway where data buyers, including platforms and publishers, in addition to brands and their agencies, can access high-quality third-party data from more than 150 data owners, supporting all industries and encompassing all types of data. Data providers include sources and
brands exclusive to LiveRamp, emerging platforms with access to previously unavailable deterministic data, and data partnerships enabled by IdentityLink. LiveRamp thoroughly vets all data sources to ensure any data listed on the Data Store is privacy safe and sourced ethically.
We generate revenue from the IdentityLink Data Store through revenue-sharing arrangements with data owners that are monetizing their data assets on our marketplace. This revenue is typically transactional in nature, tied to data volume purchased on the Data Store.
LiveRamp Revenue Model
LiveRamp recognizes revenue from the following sources: (i)
subscription revenue,
which consists of subscription fees from clients accessing our IdentityLink platform; and (ii)
marketplace and other revenue
, which primarily consists of revenue generated from data owners as well as certain publishers and addressable TV providers in the form of revenue-sharing arrangements. Our subscription pricing is tiered based on data volume supported by our platform. The majority of our subscription revenue is derived from subscriptions that are one year in duration and invoiced on a monthly basis, although some of our clients are entering into multi-year subscriptions that are invoiced annually.
Acxiom Marketing Solutions ("AMS")
Our AMS segment designs, builds and manages the unified foundation of data and technology that helps clients grow revenue, win new customers, increase customer loyalty, and optimize marketing spend in a privacy-safe environment. 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. In addition, we help our clients validate the accuracy of their data, enhance it with additional insight, and keep it up to date, enabling brands to reach desired audiences with highly relevant messages. Leveraging our suite of data services, clients can identify, segment, and differentiate their audiences for more effective and targeted marketing. Finally, we 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. Together, these solutions and services allow our clients to generate higher return on marketing investments and, at the same time, drive better, more relevant customer experiences.
The AMS segment includes the following service offerings: Data Management, Audience Creation and Data Analytics.
|
|
•
|
Data Management.
Our Data Management offering provides solutions that unify consumer data across an enterprise within a Unified Data Layer - a data environment that enables clients to execute relevant, people-based marketing across channels and devices. Our consumer marketing solutions, which we design, build, and manage for our clients, make it possible for our clients to collect and analyze information from all sources, thereby increasing customer acquisition, retention, and loyalty. Through our growing partner network, clients are able to integrate their data with best-of-breed marketing applications while respecting and protecting consumer privacy. We provide the connective tissue across the martech and adtech systems our clients use to establish an integrated, omnichannel consumer data foundation that can power all forms of marketing - from email, direct mail, display and search, to social, mobile, and more. We deploy a flexible, open, and modular approach that enables our clients to easily expand their marketing stack over time.
|
Data Management 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.
|
|
•
|
Audience Creation.
Our Audience Creation offering comprises global third-party data products and services, including InfoBase®, digital data and global data. With data on over 2.5 billion addressable consumers, InfoBase provides the most comprehensive, accurate, and descriptive consumer data in the market. Example InfoBase audience data elements:
|
Clients can enhance their understanding of consumers and their preferences by appending InfoBase data to their own consumer profiles or purchase InfoBase data in list form for digital and offline customer acquisition. In addition, we sell our consumer data indirectly through more than 100 different digital publishers and martech platforms, including Google, OATH, Adobe and The Trade Desk, providing marketers with the ability to create and target specific audiences on those platforms. Our global data offerings are ethically sourced and developed using hundreds of data sources, each carefully evaluated, screened, and monitored for appropriate data collection and privacy policy practices including proper consumer notice and choice.
Our Audience Creation 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, when our data is sold through indirect digital channels, we generate data revenue from certain digital publishers and martech platforms in the form of revenue sharing agreements.
|
|
•
|
Data Analytics.
Our Data Analytics offering includes analytical and closed-loop measurement services that provide our clients with actionable insights to fuel people-based marketing across the full customer lifecycle. Our independent services help brands measure marketing ROI, attribute marketing impact, deepen audience insights, and predict likely consumer behavior.
|
Data Analytics revenue primarily consists of recurring monthly billings, as well as transactional revenue based on volume or one-time usage.
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 industry-leading technology and services that power data-driven customer experiences in ways that are ethical, secure, and protect consumer privacy.
Summary Results and Notable Events
A summary of the quarter ended
June 30, 2018
is presented below:
|
|
•
|
Revenues were $227.0 million, a 6.8% increase from $212.5 million in the same quarter a year ago.
|
|
|
•
|
Cost of revenue was $117.3 million, a 2.9% increase from $114.0 million in the same quarter a year ago.
|
|
|
•
|
Gross margin increased to 48.3% from 46.4% in the same quarter a year ago.
|
|
|
•
|
Total operating expenses were $115.4 million, a 10.7% increase from $104.3 million in the same quarter a year ago.
|
|
|
•
|
Cost of revenue and operating expenses for the quarters ended June 30, 2018 and 2017 include the following items:
|
|
|
◦
|
Non-cash stock compensation of $20.4 million and $15.0 million, respectively (cost of revenue and operating expenses)
|
|
|
◦
|
Purchased intangible asset amortization of $6.1 million and $6.0 million, respectively (cost of revenue)
|
|
|
◦
|
Separation and transformation costs of $6.8 million and $7.1 million, respectively (operating expenses)
|
|
|
•
|
Net loss was $3.0 million or $0.04 per diluted share compared to a net loss of $1.3 million or $0.02 per diluted share in the same quarter a year ago.
|
|
|
•
|
Net cash provided by operating activities of $17.2 million, a $12.2 million increase compared to $5.0 million in the same quarter a year ago.
|
|
|
•
|
The Company repurchased 1.9 million shares of its common stock for $45.8 million under the Company's common stock repurchase program.
|
This summary highlights financial results as well as other significant events and transactions of the Company during the quarter ended
June 30, 2018
. However, this summary is not intended to be a full discussion of the Company’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’s condensed consolidated financial statements and footnotes accompanying this report.
Recent Developments
On July 2, 2018, the Company entered into a definitive agreement to sell AMS to The Interpublic Group of Companies, Inc. (“IPG”) for
$2.3 billion
in cash, subject to customary closing adjustments. The transaction is subject to standard regulatory review, Acxiom shareholder approval and other customary closing conditions. In addition:
|
|
•
|
As required regulatory approvals are being sought and received, Acxiom intends to solicit shareholder approval for the transaction;
|
|
|
•
|
Once shareholder approval has been received, which is expected in the second quarter of fiscal 2019, the Company expects to report the results of AMS as discontinued operations;
|
|
|
•
|
The transaction is expected to close in the third quarter of fiscal 2019; and
|
|
|
•
|
The Company expects to report a gain on the sale.
|
The Company expects to realize approximately
$1.7 billion
in net cash proceeds, after taxes and fees. Following the closing, the Company intends to:
|
|
•
|
Retire its existing
$230 million
debt balance;
|
|
|
•
|
Initiate a
$500 million
cash tender offer for its common stock;
|
|
|
•
|
Increase its outstanding share repurchase authorization by up to an additional
$500 million
, and extend the duration of its program to December 31, 2020;
|
|
|
•
|
Use the remainder of the proceeds to fund its growth initiatives, strategic acquisition opportunities and meet its ongoing cash needs;
|
|
|
•
|
Transfer the Acxiom brand name and associated trademarks to IPG; and
|
|
|
•
|
Rename the Company LiveRamp Holdings, Inc. and, shortly thereafter, begin trading its common stock under the new ticker symbol “RAMP”.
|
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
|
|
|
June 30,
|
|
|
|
|
|
|
%
|
|
|
2018
|
|
2017
|
|
Change
|
Revenues
|
|
$
|
226,960
|
|
|
$
|
212,514
|
|
|
7
|
|
Cost of revenue
|
|
117,271
|
|
|
113,960
|
|
|
3
|
|
Gross profit
|
|
109,689
|
|
|
98,554
|
|
|
11
|
|
Total operating expenses
|
|
115,390
|
|
|
104,261
|
|
|
11
|
|
Loss from operations
|
|
(5,701
|
)
|
|
(5,707
|
)
|
|
—
|
|
Net loss
|
|
(3,015
|
)
|
|
(1,300
|
)
|
|
132
|
|
Diluted loss per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
|
100
|
|
Revenues
The Company's revenues by reporting segment for the periods reported is presented below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
|
|
|
|
%
|
Revenues
|
|
2018
|
|
2017
|
|
Change
|
LiveRamp
|
|
$
|
62,458
|
|
|
$
|
46,757
|
|
|
34
|
|
Acxiom Marketing Solutions
|
|
164,502
|
|
|
165,757
|
|
|
(1
|
)
|
Total revenues
|
|
$
|
226,960
|
|
|
$
|
212,514
|
|
|
7
|
|
Total revenues were
$227.0 million
, an increase of 6.8%, or $14.4 million, from
$212.5 million
in the same quarter a year ago. The impact of exchange rates was positive by approximately $1.3 million. Strong revenue growth in LiveRamp of $15.7 million was partially offset by a decline in AMS of $1.3 million. AMS was impacted by a decline of approximately $9 million from Facebook due to contract termination, offset partially by new logo wins and other volume and contract increases.
LiveRamp revenue for the quarter ended
June 30, 2018
was $62.5 million, a $15.7 million, or 33.6%, increase compared to the same quarter a year ago. The increase was due to LiveRamp subscription growth of 38.4%. Marketplace and Other revenue growth of 15.0% was negatively impacted by an approximately $2 million decrease in revenue from the revenue-sharing arrangements due to a lost customer. On a geographic basis, U.S. LiveRamp revenue increased $14.1 million, or 33.5%, from the same quarter a year ago. International LiveRamp revenue increased $1.6 million, or 34.4%.
AMS revenue for the quarter ended
June 30, 2018
was $164.5 million, a $1.3 million, or 0.8%, decrease compared to the same quarter a year ago. On a geographic basis, U.S. AMS revenue decreased $1.8 million, or 1.2%, due to Facebook reductions, offset partially by new logo wins and other volume and contract increases. International AMS revenue increased $0.6 million, or 4.2%. Excluding the favorable impact of exchange rates ($1.0 million), International AMS revenue decreased $0.4 million. By lines of business, Data Management revenue increased $4.4 million, Audience Creation revenue decreased $5.9 million and Data Analytics revenue increased $0.2 million.
Cost of revenue and Gross profit
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
|
|
|
June 30,
|
|
|
|
|
|
|
%
|
|
|
2018
|
|
2017
|
|
Change
|
Cost of revenue
|
|
$
|
117,271
|
|
|
$
|
113,960
|
|
|
(1
|
)
|
Gross profit
|
|
$
|
109,689
|
|
|
$
|
98,554
|
|
|
11
|
|
Gross margin %
|
|
48.3
|
%
|
|
46.4
|
%
|
|
4
|
|
Cost of revenue: Includes all direct costs of sales such as data and other third-party costs directly associated with revenue. Cost of revenue also includes 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 related intangibles.
Cost of revenue was
$117.3 million
for the quarter ended
June 30, 2018
, a $3.3 million, or 2.9%, increase from the same quarter a year ago. Gross margins increased to 48.3% compared to 46.4% in the prior year. The gross margin increase is due to the LiveRamp revenue increases and cost efficiencies. U.S. gross margins increased to 49.6% in the current year from 47.7% in the prior year again due to the LiveRamp revenue growth and cost efficiencies. International gross margins increased to 35.4% from 31.9%.
Operating Expenses
The Company’s operating expenses for each of the periods reported is presented below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
|
|
|
|
%
|
Operating expenses
|
|
2018
|
|
2017
|
|
Change
|
Research and development
|
|
$
|
24,536
|
|
|
$
|
23,563
|
|
|
4
|
|
Sales and marketing
|
|
54,850
|
|
|
48,440
|
|
|
13
|
|
General and administrative
|
|
34,718
|
|
|
32,356
|
|
|
7
|
|
Gains, losses and other items, net
|
|
1,286
|
|
|
(98
|
)
|
|
(1,412
|
)
|
Total operating expenses
|
|
$
|
115,390
|
|
|
$
|
104,261
|
|
|
11
|
|
|
|
|
|
|
|
|
Research and development (“R&D”): Includes operating expenses for the Company’s engineering and product/project management functions supporting research, new development, and related product enhancement.
R&D expenses were
$24.5 million
for the quarter ended
June 30, 2018
, an increase of $1.0 million, or 4.1%, compared to the same quarter a year ago, and are 10.8% of total revenues compared to 11.1% in the prior year. The increase is due primarily to LiveRamp investments of $1.8 million.
Sales and marketing (“S&M”): Includes operating expenses for the Company’s sales, marketing, and product marketing functions.
S&M expenses were
$54.9 million
for the quarter ended
June 30, 2018
, an increase of $6.4 million, or 13.2%, compared to the same quarter a year ago, and are 24.2% of total revenues compared to 22.8% in the prior year. The increase is due to primarily to LiveRamp investments of $9.6 million, which includes an increase in non-cash stock compensation of $4.7 million. The increase in non-cash stock compensation was due primarily to the PDP acquisition.
General and administrative (G&A): Represents operating expenses for all corporate functions, including finance, human resources, legal, corporate IT, and the corporate office.
G&A expenses were
$34.7 million
for the quarter ended
June 30, 2018
, an increase of $2.4 million, or 7.3%, compared to the same quarter a year ago, and are 15.3% of total revenues compared to 14.2% in the prior year. The increase is primarily headcount related to support business growth.
Gains, losses, and other items, net: Represents restructuring costs and other adjustments.
Gains, losses and other items, net of $1.3 million for the quarter ended
June 30, 2018
increased $1.4 million compared to the same quarter a year ago from workforce reduction related severance costs.
Loss from Operations and Operating Margin
The Company’s loss 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
|
|
|
June 30,
|
|
|
2018
|
|
2017
|
Operating income (loss) and margin:
|
|
|
|
|
LiveRamp
|
|
$
|
9,203
|
|
|
$
|
(97
|
)
|
|
|
|
|
|
|
|
Acxiom Marketing Solutions
|
|
47,458
|
|
|
48,374
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
Corporate expenses
|
|
27,840
|
|
|
25,967
|
|
Purchased intangible asset amortization
|
|
6,054
|
|
|
5,966
|
|
Non-cash stock compensation
|
|
20,360
|
|
|
15,031
|
|
Separation and transformation costs
|
|
6,822
|
|
|
7,119
|
|
Gains, losses and other items, net
|
|
1,286
|
|
|
(98
|
)
|
Loss from operations
|
|
$
|
(5,701
|
)
|
|
$
|
(5,707
|
)
|
Total operating margin
|
|
(2.8
|
)%
|
|
(2.7
|
)%
|
Loss from operations was $5.7 million for the quarter ended
June 30, 2018
compared to
$5.7 million
for the same quarter a year ago. Operating margin was a negative 2.8% compared to a negative
2.7%
.
LiveRamp income from operations was $9.2 million, a 14.7% margin, for the quarter ended
June 30, 2018
compared to loss from operations of $0.1 million, a negative 0.2% margin, for the same quarter a year ago. A $16.0 million increase in gross profit was partially offset by R&D and S&M investments.
AMS income from operations was $47.5 million, a 28.8% margin, for the quarter ended
June 30, 2018
compared to $48.4 million, a 29.2% margin, for the same quarter a year ago. U.S. margins decreased to 30.7% in the current quarter from 31.3% due to the decrease in Audience Creation revenue. International operating margins increased to 9.5% from 6.0% due to the revenue increase.
Corporate expenses were
$27.8 million
for the quarter ended
June 30, 2018
compared to
$26.0 million
for the same quarter a year ago, and are 12.3% of total revenues compared to 12.2% in the prior year.
Other Expense, Income Taxes and Other Items
Interest expense was $2.8 million for the quarter ended
June 30, 2018
compared to $2.3 million for the same quarter a year ago. The increase is primarily related to an increase in the average rate of approximately 60 basis points.
Other income was $0.5 million for the quarter ended
June 30, 2018
compared to other expense of $0.7 million for the same quarter a year ago. Other income and expense primarily consists of interest income and foreign currency transaction gains and losses in each period reported. The prior year quarter includes $0.7 million expense for accelerated deferred debt costs related to the debt refinancing.
Income tax benefit was $5.0 million on pretax loss of $8.0 million for the quarter ended
June 30, 2018
compared to income tax benefit of $7.4 million on pretax loss of $8.7 million for the same quarter last year. The effective tax rates for both periods were impacted by non-deductible stock-based compensation related to the Arbor and Circulate acquisitions. In the quarter ended June 30, 2018, the Company recognized a discrete tax benefit of $1.3 million related to net excess tax benefits from stock-based compensation compared to $1.5 million for the same quarter last year. The quarter ended June 30, 2018 was also impacted by the Tax Act's permanent reduction in the U.S. federal corporate income tax rate.
Capital Resources and Liquidity
Working Capital and Cash Flow
Working capital at
June 30, 2018
totaled
$149.3 million
, a $32.7 million decrease when compared to
$182.0 million
at
March 31, 2018
, due primarily to the repurchase of 1.9 million shares of common stock for $45.8 million.
The Company’s cash is primarily located in the United States. Approximately
$22.4 million
of the total cash balance of
$95.1 million
, or approximately
23.6%
, is located outside of the United States. The Company has no current plans to repatriate this cash to the United States.
Accounts receivable days sales outstanding was
66
days at
June 30, 2018
compared to 61 days at March 31, 2018, and is calculated as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
March 31, 2018
|
Numerator – trade accounts receivable, net
|
|
$
|
163,767
|
|
|
$
|
167,188
|
|
Denominator:
|
|
|
|
|
|
|
Quarter revenue
|
|
226,960
|
|
|
244,781
|
|
Number of days in quarter
|
|
91
|
|
|
90
|
|
Average daily revenue
|
|
$
|
2,494
|
|
|
$
|
2,720
|
|
Days sales outstanding
|
|
66
|
|
|
61
|
|
Net cash provided by operating activities was
$17.2 million
for the
three months ended
June 30, 2018
, compared to
$5.0 million
in the same period a year ago. The $12.2 million increase resulted primarily from favorable changes in working capital.
Investing activities used cash of
$10.7 million
during the
three months ended
June 30, 2018
compared to
$10.5 million
in the same period a year ago. Investing activities consisted primarily of capital expenditures (
$4.4 million
compared to
$6.9 million
in the prior period), capitalization of software (
$3.6 million
compared to
$3.4 million
in the prior period), and $2.5 million in the current year for a long-term investment.
Financing activities used cash of
$52.6 million
during the
three months ended
June 30, 2018
compared to
$2.1 million
in the same period a year ago. The current year primarily consisted of treasury stock purchases of $45.8 million (1.9 million shares of the Company's common stock pursuant to the board of directors' approved stock repurchase plan). The prior year consisted primarily of proceeds from the debt refinancing of $230.0 million which 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.
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was subsequently modified and expanded, most recently on
March 30, 2018
(see Note 3 - Earnings Per Share). Under the modified common stock repurchase program, the Company may purchase up to
$500.0 million
of its common stock through the period ending
December 31, 2019
. During the
three months ended
June 30, 2018
, the Company repurchased
1.9 million
shares of its common stock for
$45.8 million
. Through
June 30, 2018
, the Company had repurchased a total of
22.0 million
shares of its stock for
$420.4 million
, leaving remaining capacity of
$79.6 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 resources will be sufficient to operate our business. However, we may take advantage of opportunities to generate additional liquidity or refinance existing debt through capital market transactions. The amount, nature, and timing of any capital market transactions will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature, and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions.
Off-Balance Sheet Items and Commitments
In connection with the August 2016 disposition of Acxiom Impact, the Company assigned a facility lease to the buyer of the business. The Company guaranteed the facility lease as required by the asset disposition agreement. Should the assignee default, the Company would be required to perform under the terms of the facility lease, which continues through September 2021. At
June 30, 2018
, the Company's maximum potential future rent payments subject to this guarantee totaled
$2.0 million
.
There were no material outstanding letters of credit at
June 30, 2018
or March 31, 2018.
Contractual Commitments
The following table presents the Company’s contractual cash obligations, exclusive of interest, and purchase commitments at
June 30, 2018
. The table does not include the future payment of liabilities related to uncertain tax positions of
$2.2 million
as the Company is not able to predict the periods in which the payments will be made. The amounts for 2019 represent the remaining
nine months ending March 31, 2019
. All other periods represent fiscal years ending March 31 (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ending March 31,
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
Term loan
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
230,000
|
|
|
$
|
—
|
|
|
$
|
230,000
|
|
Other debt
|
|
991
|
|
|
1,362
|
|
|
348
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,701
|
|
Total long-term debt
|
|
991
|
|
|
1,362
|
|
|
348
|
|
|
—
|
|
|
230,000
|
|
|
—
|
|
|
232,701
|
|
Operating leases
|
|
12,482
|
|
|
16,063
|
|
|
15,464
|
|
|
14,539
|
|
|
8,099
|
|
|
9,836
|
|
|
76,483
|
|
Total contractual cash obligations
|
|
$
|
13,473
|
|
|
$
|
17,425
|
|
|
$
|
15,812
|
|
|
$
|
14,539
|
|
|
$
|
238,099
|
|
|
$
|
9,836
|
|
|
$
|
309,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ending March 31,
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
Total purchase commitments
|
|
$
|
33,891
|
|
|
$
|
18,226
|
|
|
$
|
9,298
|
|
|
$
|
1,539
|
|
|
$
|
338
|
|
|
$
|
—
|
|
|
$
|
63,292
|
|
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 2019 of
$9.2 million
.
The following are contingencies or guarantees under which the Company could be required, in certain circumstances, to make cash payments as of
June 30, 2018
(dollars in thousands):
|
|
|
|
|
Lease guarantees
|
$
|
1,972
|
|
Surety bonds
|
$
|
405
|
|
While the Company does not have any other material contractual commitments for capital expenditures, certain levels of investments in facilities and computer equipment continue to be necessary to support the growth of the business. In some cases, the Company also licenses software and sells hardware to clients. Management believes that the Company’s existing available debt and cash flow from operations will be sufficient to meet the Company’s working capital and capital expenditure requirements for the foreseeable future. The Company also evaluates acquisitions from time to time, which may require up-front payments of cash.
For a description of certain risks that could have an impact on results of operations or financial condition, including liquidity and capital resources, see “Risk Factors” contained in Part I, Item 1A, of the Company’s 2018 Annual Report.
Non-U.S. Operations
The Company has a presence in the United Kingdom, France, Germany, Poland, Australia, and China. Most of the Company’s exposure to exchange rate fluctuation is due to translation gains and losses as there are no material transactions that cause exchange rate impact. In general, each of the foreign locations is expected to fund its own operations and cash flows, although funds may be loaned or invested from the U.S. to the foreign subsidiaries subject to limitations in the Company’s revolving credit facility. These advances are considered 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. 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 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 2018 Annual Report include a summary of significant accounting policies used in the preparation of Acxiom’s consolidated financial statements. In addition, the Management’s Discussion and Analysis filed as part of the 2018 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.
Accounting Pronouncements Adopted During the Current Year
See “Accounting Pronouncements Adopted During the Current Year” under Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements for a discussion of certain accounting standards that have been issued and were adopted during the current fiscal year.
New Accounting Pronouncements Not Yet Adopted
See “Recent Accounting Pronouncements Not Yet Adopted” under Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements for a discussion of certain accounting standards that have been issued but not yet adopted.
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 “Growth Strategy” in Part I, Item 1 of the Company's 2018 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 2018 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 2018 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;
|
|
|
•
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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;
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the possibility that we may experience processing errors that result in credits to customers, re-performance of services or payment of damages to customers;
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general and global negative economic conditions; and
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our tax rate and other effects of the changes to U.S. federal tax law.
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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.