Acxiom (NASDAQ:ACXM)
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Acxiom® Corporation
(Nasdaq: ACXM) today announced financial results for the third quarter
of fiscal 2007 ended December 31, 2006. Acxiom will hold a conference
call at 4:30 p.m. CST today to discuss this information further.
Interested parties are invited to listen to the call, which will be
broadcast via the Internet at www.acxiom.com.
Third-quarter earnings per diluted share of $.31 included a $.02 benefit
related to a lower-than-expected income tax rate and a $.01 expense
related to organizational changes in Europe. Third-quarter earnings were
equal to the $.31 per diluted share reported in the same quarter a year
ago. Operating income for the quarter decreased 3 percent to $51.3
million. Third-quarter revenue totaled $352.8 million, an increase of 2
percent over the same quarter last year.
“Our earnings continue to improve on a
sequential basis but are not in line with our expectations due to slower
than expected revenue growth,” Company Leader
Charles D. Morgan said. “We continue to
execute our company-wide initiatives to create more value for our
clients and drive more rapid revenue growth. We expect to see more from
those efforts over the next several quarters.”
Details of Acxiom’s third-quarter performance
include:
Revenue of $352.8 million, up 2 percent from $347.4 million in the
third quarter a year ago. Declines in revenue in the traditional IT
outsourcing business and from one large client undergoing a merger
negatively impacted the growth rate by 4 percentage points for the
quarter and 5 percentage points year-to-date.
Income from operations of $51.3 million, a 3 percent decrease compared
to $52.7 million in the third quarter last year.
Diluted earnings per share of $.31, equal to the third quarter of
fiscal 2006.
Operating cash flow of $62.7 million and free cash flow available to
equity of $12.6 million. Free cash flow available to equity is a
non-GAAP financial measure, and a reconciliation to the comparable
GAAP measure, operating cash flow, is attached to this press release.
Gross margin of 28.4 percent compared to 31.4 percent in the same
quarter last year.
Computer, communications and other equipment expense equaling 20.2
percent of revenue compared to 21.2 percent of revenue in the third
quarter of fiscal 2006.
Interest expense in the quarter was $14.9 million compared with $8.6
million in the same quarter a year ago. The increase reflects the $600
million term loan completed in September 2006. Proceeds from the term
loan were used to retire debt and buy back approximately 11 million
shares of Acxiom stock.
“While our overall revenue growth number for
the quarter was disappointing, there are several areas of our business
that turned in encouraging performances –
including our digital and risk businesses and our direct-to-market U.S.
data business,” Morgan said. “We
also showed strong growth in several key industries –
including auto and insurance, which were both up 10 percent, year over
year. We have continued to make investments to support future revenue
growth, as evidenced by our recent acquisition of Equitec, which brings
us strong marketing and merchandizing optimization expertise in the
retail industry.”
Morgan noted that General Motors awarded significant new business to
Acxiom in the quarter and that the company has also recently completed
new contracts with JPMorgan Chase & Co.; The Container Store; Colonial
Penn® Life Insurance
Company; and Sears Holdings. He also reported that Acxiom has been
awarded significant business from a large European corporation in a deal
pursued in partnership with EMC and Accenture.
Outlook
The Company’s expectations are communicated
in the Financial Road Map, which includes a chart summarizing the
one-year and long-term goals as well as an explanation of the
assumptions and definitions that accompany these goals. Acxiom’s
current Financial Road Map reflects the Company’s
revised expectations for fiscal year 2007, and the long-term goals
reflect expected performance in fiscal 2010.
Acxiom anticipates fiscal 2007 earnings per diluted share between $0.92
and $0.97. This range is based on revising the income tax rate from 39
percent to 37 percent as a result of Congress’
extension of the Research and Experimentation tax credit and doesn’t
reflect any European restructuring charges that may be incurred during
the fourth quarter.
These financial projections are based on the assumptions and limitations
set forth in the Financial Road Map. These projections are forward
looking, and actual results may differ materially. These projections may
be impacted by mergers, acquisitions, divestitures or other business
combinations that may be completed in the future as well as the other
factors set forth below.
About Acxiom
Acxiom Corporation (Nasdaq: ACXM) integrates data, services and
technology to create and deliver customer and information management
solutions for many of the largest, most respected companies in the
world. The core components of Acxiom’s
innovative solutions are Customer Data Integration (CDI) technology,
data, database services, IT outsourcing, consulting and analytics, and
privacy leadership. Founded in 1969, Acxiom is headquartered in Little
Rock, Arkansas, with locations throughout the United States and Europe,
and in Australia, China and Canada.
For more information, visit www.acxiom.com.
This release and today’s conference call
contain forward-looking statements that are subject to certain risks and
uncertainties that could cause actual results to differ materially. Such
statements may include but are not necessarily limited to the following:
that we expect that our emphasis on revenue growth will lead to
increased rates of revenue growth, that we expect that continued focus
on expense controls will lead to continued improvement in operating
margins, that the projected revenue, operating margin, return on assets
and return on invested capital, operating cash flow and free cash flow,
borrowings, dividends and other metrics referred to in the Financial
Road Map attached to this release will be within the estimated ranges;
that the Company has identified categories of opportunity that provide
upside to the ranges of the Financial Road Map, that the estimations of
revenue, earnings, cash flow, growth rates, restructuring charges and
expense reductions will be within the estimated ranges; and that the
business pipeline and our anticipated cost structure will allow us to
continue to meet or exceed revenue, cash flow and other projections. The
following are important factors, among others, that could cause actual
results to differ materially from these forward-looking statements: The
possibility that certain contracts may not be closed, or may not be
closed within the anticipated time frames; the possibility that clients
may attempt to reduce the amount of business they do with the Company;
the possibility that in the event that a change of control of the
Company was sought that certain of the clients of the Company would
invoke certain provisions in their contracts resulting in a decline in
the revenue and profit of the Company; the possibility that certain
contracts may not generate the anticipated revenue or profitability; the
possibility that negative changes in economic or other conditions might
lead to a reduction in demand for our products and services; the
possibility of an economic slowdown or that economic conditions in
general will not be as expected; the possibility that the historical
seasonality of our business may change; the possibility that significant
customers may experience extreme, severe economic difficulty; 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 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 won’t
be able to properly motivate our sales force or other associates; the
possibility that we won’t be able to achieve
cost reductions and avoid unanticipated costs; the possibility that we
won’t 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 we may be
subjected to pricing pressure due to market conditions and/or
competitive products and services; the possibility that there will be
changes in consumer or business information industries and markets that
negatively impact the Company; the possibility that changes in
accounting pronouncements may occur and may impact these projections;
the possibility that we won’t be able to
protect proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms; the possibility that we may
encounter difficulties when entering new markets or industries; the
possibility that there will be changes in the legislative, accounting,
regulatory and consumer environments affecting our business, including
but not limited to litigation, legislation, regulations and customs
relating to our ability to collect, manage, aggregate and use data; the
possibility that data suppliers might withdraw data from us, leading to
our inability to provide certain products and services; 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 postal rates may increase, thereby leading to reduced
volumes of business; the possibility that our clients may cancel or
modify their agreements with us; the possibility that we will not
successfully complete customer contract requirements on time or meet the
service levels specified in the contracts, which may result in contract
penalties or lost revenue; the possibility that we experience processing
errors which result in credits to customers, re-performance of services
or payment of damages to customers; the possibility that the services of
the United States Postal Service, their global counterparts and other
delivery systems may be disrupted; and the possibility that we may be
affected by other competitive factors.
With respect to the Financial Road Map, all of the above factors apply,
along with the following which were assumptions made in creating the
Financial Road Map: that the U.S. and global economies will continue to
improve at a moderate pace; that global growth will continue to be
strong and that globalization trends will continue to grow at an
increasing pace; that Acxiom’s computer,
communications and other equipment expenses will continue to fall as a
percentage of revenue; that the Customer Information Infrastructure
(CII) grid-based environment will continue to be implemented
successfully over the next 3-4 years and that the new CII infrastructure
will continue to provide increasing operational efficiencies; that the
acquisitions of companies operating primarily outside of the United
States will be successfully integrated and that significant efficiencies
will be realized from this integration; relating to operating cash flow
and free cash flow, that sufficient operating and capital lease
arrangements will continue to be available to the Company to provide for
the financing of most of its computer equipment and that software
suppliers will continue to provide financing arrangements for most of
the software purchases; relating to revolving credit line balance, that
free cash flow will meet expectations and that the Company will use free
cash flow to pay down bank debt, buy back stock and fund dividends;
relating to annual dividends, that the Board of Directors will continue
to approve quarterly dividends and will vote to increase dividends over
time; relating to diluted shares, that the Company will meet its cash
flow expectations and that potential dilution created through the
issuance of equity instruments will be mitigated by continued stock
repurchases in accordance with the Company’s
stock repurchase program. 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 our periodic reports and
registration statements filed with the United States Securities and
Exchange Commission. We believe that we have 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.
We undertake no obligation to update the information contained in this
press release, including the Financial Road Map or any other
forward-looking statement.
Acxiom is a registered trademark of Acxiom Corporation.
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Three Months Ended
December 31,
$
%
2006
2005
Variance
Variance
Revenue:
Services
265,798
263,266
2,532
1.0%
Data
87,043
84,165
2,878
3.4%
Total revenue
352,841
347,431
5,410
1.6%
Operating costs and expenses:
Cost of revenue
Services
199,704
189,502
10,202
5.4%
Data
53,004
48,799
4,205
8.6%
Total cost of revenue
252,708
238,301
14,407
6.0%
Services gross margin
24.9%
28.0%
Data gross margin
39.1%
42.0%
Total gross margin
28.4%
31.4%
Selling, general and administrative
49,065
57,625
(8,560)
(14.9%)
Gains, losses and other items, net
(225)
(1,202)
977
0.0%
Total operating costs and expenses
301,548
294,724
6,824
2.3%
Income from operations
51,293
52,707
(1,414)
(2.7%)
Other income (expense):
Interest expense
(14,911)
(8,635)
(6,276)
72.7%
Other, net
1,157
(71)
1,228
(1729.6%)
Total other income (expense)
(13,754)
(8,706)
(5,048)
58.0%
Earnings before income taxes
37,539
44,001
(6,462)
(14.7%)
Income taxes
12,594
16,720
(4,126)
(24.7%)
Net earnings
24,945
27,281
(2,336)
(8.6%)
Earnings per share:
Basic
0.32
0.32
0.00
0.0%
Diluted
0.31
0.31
0.00
0.0%
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Nine Months Ended
December 31,
$
%
2006
2005
Variance
Variance
Revenue:
Services
793,789
754,958
38,831
5.1%
Data
244,076
233,267
10,809
4.6%
Total revenue
1,037,865
988,225
49,640
5.0%
Operating costs and expenses:
Cost of revenue
Services
597,161
575,734
21,427
3.7%
Data
153,638
149,808
3,830
2.6%
Total cost of revenue
750,799
725,542
25,257
3.5%
Services gross margin
24.8%
23.7%
Data gross margin
37.1%
35.8%
Total gross margin
27.7%
26.6%
Selling, general and administrative
157,818
166,227
(8,409)
(5.1%)
Gains, losses and other items, net
(225)
9,960
(10,185)
0.0%
Total operating costs and expenses
908,392
901,729
6,663
0.7%
Income from operations
129,473
86,496
42,977
49.7%
Other income (expense):
Interest expense
(31,630)
(21,213)
(10,417)
49.1%
Other, net
4,489
1,870
2,619
140.1%
Total other income (expense)
(27,141)
(19,343)
(7,798)
40.3%
Earnings before income taxes
102,332
67,153
35,179
52.4%
Income taxes
37,863
26,084
11,779
45.2%
Net earnings
64,469
41,069
23,400
57.0%
Earnings per share:
Basic
0.77
0.47
0.30
63.8%
Diluted
0.75
0.45
0.30
66.7%
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Three Months Ended
December 31,
September 30,
$
%
2006
2006
Variance
Variance
Revenue:
Services
265,798
266,099
(301)
(0.1%)
Data
87,043
82,220
4,823
5.9%
Total revenue
352,841
348,319
4,522
1.3%
Operating costs and expenses:
Cost of revenue
Services
199,704
201,384
(1,680)
(0.8%)
Data
53,004
51,062
1,942
3.8%
Total cost of revenue
252,708
252,446
262
0.1%
Services gross margin
24.9%
24.3%
Data gross margin
39.1%
37.9%
Total gross margin
28.4%
27.5%
Selling, general and administrative
49,065
54,008
(4,943)
(9.2%)
Gains, losses and other items, net
(225)
-
(225)
0.0%
Total operating costs and expenses
301,548
306,454
(4,906)
(1.6%)
Income from operations
51,293
41,865
9,428
22.5%
Other income (expense):
Interest expense
(14,911)
(8,950)
(5,961)
66.6%
Other, net
1,157
2,685
(1,528)
(56.9%)
Total other income (expense)
(13,754)
(6,265)
(7,489)
119.5%
Earnings before income taxes
37,539
35,600
1,939
5.4%
Income taxes
12,594
13,884
(1,290)
(9.3%)
Net earnings
24,945
21,716
3,229
14.9%
Earnings per share:
Basic
0.32
0.25
0.07
28.0%
Diluted
0.31
0.25
0.06
24.0%
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Three Months Ended
December 31,
December 31,
September 30,
2006
2005
2006
Basic earnings per share:
Numerator - net earnings
24,945
27,281
21,716
Denominator - weighted-average shares outstanding
77,717
85,203
86,000
Basic earnings per share
0.32
0.32
0.25
Diluted earnings per share:
Numerator - net earnings
Net earnings
24,945
27,281
21,716
Denominator:
Weighted-average shares outstanding
77,717
85,203
86,000
Dilutive effect of common stock options, warrants and restricted
stock
2,238
2,723
2,203
79,955
87,926
88,203
Diluted earnings per share
0.31
0.31
0.25
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Nine Months Ended
December 31,
2006
2005
Basic earnings per share:
Numerator - net earnings
64,469
41,069
Denominator - weighted-average shares outstanding
83,957
87,748
Basic earnings per share
0.77
0.47
Diluted earnings per share:
Numerator - net earnings
Net earnings
64,469
41,069
Denominator:
Weighted-average shares outstanding
83,957
87,748
Dilutive effect of common stock options, warrants and restricted
stock
2,237
2,691
86,194
90,439
Diluted earnings per share
0.75
0.45
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
December 31,
September 30,
Revenue:
2006
2005
2006
US services & data
298,978
300,086
300,204
International services & data
53,863
47,345
48,115
Total revenue
352,841
347,431
348,319
US supplemental information:
Services & data excluding IT mgmt
211,312
210,455
211,447
IT management services
87,666
89,631
88,757
298,978
300,086
300,204
International supplemental information:
Services & data excluding IT mgmt
53,863
47,345
48,115
Income from operations:
US services & data
46,832
47,766
40,090
International services & data
4,236
3,739
1,775
Corporate & other
225
1,202
-
Total income from operations
51,293
52,707
41,865
Margin:
US services & data
15.7%
15.9%
13.4%
International services & data
7.9%
7.9%
3.7%
Total margin
14.5%
15.2%
12.0%
ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
December 31,
Revenue:
2006
2005
US services & data
890,601
851,846
International services & data
147,264
136,379
Total revenue
1,037,865
988,225
US supplemental information:
Services & data excluding IT mgmt
624,001
589,653
IT management services
266,600
262,193
890,601
851,846
International supplemental information:
Services & data excluding IT mgmt
147,264
136,379
Income from operations:
US services & data
122,872
95,129
International services & data
6,376
1,327
Corporate & other
225
(9,960)
Total income from operations
129,473
86,496
Margin:
US services & data
13.8%
11.2%
International services & data
4.3%
1.0%
Total margin
12.5%
8.8%
ACXIOM CORPORATION AND SUBSIDIARIES
DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
December 31,
$
%
September 30,
$
%
2006
2005
Variance
Variance
2006
Variance
Variance
Data
68,520
66,054
2,466
3.7%
62,654
5,866
9.4%
Passthrough data
18,523
18,111
412
2.3%
19,566
(1,043)
(5.3%)
Total data revenue
87,043
84,165
2,878
3.4%
82,220
4,823
5.9%
Cost of data revenue:
Data
34,481
30,688
3,793
12.4%
31,496
2,985
9.5%
Passthrough data
18,523
18,111
412
2.3%
19,566
(1,043)
(5.3%)
Total cost of data
53,004
48,799
4,205
8.6%
51,062
1,942
3.8%
Margin:
Data
49.7%
53.5%
49.7%
Passthrough data
0.0%
0.0%
0.0%
Total data
39.1%
42.0%
37.9%
ACXIOM CORPORATION AND SUBSIDIARIES
DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
December 31,
$
%
2006
2005
Variance
Variance
Data
185,704
177,454
8,250
4.6%
Passthrough data
58,372
55,813
2,559
4.6%
Total data revenue
244,076
233,267
10,809
4.6%
Cost of data revenue:
Data
95,266
93,995
1,271
1.4%
Passthrough data
58,372
55,813
2,559
4.6%
Total cost of data
153,638
149,808
3,830
2.6%
Margin:
Data
48.7%
47.0%
Passthrough data
0.0%
0.0%
Total data
37.1%
35.8%
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
December 31,
March 31,
$
%
2006
2006
Variance
Variance
Assets
Current assets:
Cash and cash equivalents
88,014
7,705
80,309
1042.3%
Trade accounts receivable, net
276,061
261,624
14,437
5.5%
Deferred income taxes
24,452
24,587
(135)
(0.5%)
Other current assets
53,437
44,937
8,500
18.9%
Total current assets
441,964
338,853
103,111
30.4%
Property and equipment
713,235
662,948
50,287
7.6%
Less - accumulated depreciation and amortization
397,261
329,177
68,084
20.7%
Property and equipment, net
315,974
333,771
(17,797)
(5.3%)
Software, net of accumulated amortization
40,319
45,509
(5,190)
(11.4%)
Goodwill
500,639
472,401
28,238
6.0%
Purchased software licenses, net of accumulated amortization
149,982
155,518
(5,536)
(3.6%)
Unbilled and notes receivable, excluding current portions
17,466
19,139
(1,673)
(8.7%)
Deferred costs, net
130,016
112,817
17,199
15.2%
Data acquisition costs
35,241
40,828
(5,587)
(13.7%)
Other assets, net
19,504
21,662
(2,158)
(10.0%)
1,651,105
1,540,498
110,607
7.2%
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term obligations
100,801
93,518
7,283
7.8%
Trade accounts payable
41,343
44,144
(2,801)
(6.3%)
Accrued payroll and related expenses
28,318
32,139
(3,821)
(11.9%)
Other accrued expenses
79,166
81,428
(2,262)
(2.8%)
Deferred revenue
99,606
123,916
(24,310)
(19.6%)
Income taxes
7,055
4,845
2,210
45.6%
Total current liabilities
356,289
379,990
(23,701)
(6.2%)
Long-term obligations:
Long-term debt and capital leases, net of current installments
688,381
353,692
334,689
94.6%
Software and data licenses, net of current installments
20,353
22,723
(2,370)
(10.4%)
Total long-term obligations
708,734
376,415
332,319
88.3%
Deferred income taxes
77,043
77,916
(873)
(1.1%)
Commitments and contingencies
Stockholders' equity:
Common stock
11,103
10,946
157
1.4%
Additional paid-in capital
709,983
677,026
32,957
4.9%
Unearned stock-based compensation
-
(1,941)
1,941
(100.0%)
Retained earnings
461,276
410,278
50,998
12.4%
Accumulated other comprehensive income
15,670
2,205
13,465
610.7%
Treasury stock, at cost
(688,993)
(392,337)
(296,656)
75.6%
Total stockholders' equity
509,039
706,177
(197,138)
(27.9%)
1,651,105
1,540,498
110,607
7.2%
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
2006
2005
Cash flows from operating activities:
Net earnings
24,945
27,281
Non-cash operating activities:
Depreciation and amortization
54,396
59,712
Loss (gain) on disposal or impairment of assets, net
187
(524)
Deferred income taxes
(553)
4,386
Non-cash stock compensation expense
1,555
346
Changes in operating assets and liabilities:
Accounts receivable
(8,933)
(8,552)
Other assets
(769)
(6,587)
Accounts payable and other liabilities
979
4,161
Deferred revenue
(9,148)
15,191
Net cash provided by operating activities
62,659
95,414
Cash flows from investing activities:
Disposition of operations
-
3,315
Sale of assets
-
1,510
Capitalized software
(6,798)
(5,204)
Capital expenditures
(2,518)
(401)
Cash collected from the sale and license of software
-
20,000
Deferral of costs
(16,149)
(19,603)
Payments received from investments
-
2,093
Net cash paid in acquisitions
(14,400)
(2,983)
Net cash used by investing activities
(39,865)
(1,273)
Cash flows from financing activities:
Proceeds from debt
(513)
31,833
Payments of debt
(25,817)
(125,264)
Dividends paid
(4,663)
(4,259)
Sale of common stock
8,896
10,058
Acquisition of treasury stock
(6,001)
(2,430)
Tax benefit of stock options exercised
1,237
-
Net cash used by financing activities
(26,861)
(90,062)
Effect of exchange rate changes on cash
249
(135)
Net increase (decrease) in cash and cash equivalents
(3,818)
3,944
Cash and cash equivalents at beginning of period
91,832
5,962
Cash and cash equivalents at end of period
88,014
9,906
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest
14,813
7,932
Income taxes
8,196
1,070
Payments on capital leases and installment payment arrangements
16,700
17,994
Payments on software and data license liabilities
6,000
7,344
Other debt payments, excluding line of credit
3,117
1,715
Noncash investing and financing activities:
Acquisition of property and equipment under capital lease and
installment payment arrangements
10,427
14,804
Construction and other financing
4,511
402
Issuance of common stock for acquisition
3,610
-
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
December 31,
2006
2005
Cash flows from operating activities:
Net earnings
64,469
41,069
Non-cash operating activities:
Depreciation and amortization
170,379
172,350
Gain on disposal or impairment of assets, net
(1,483)
(1,451)
Deferred income taxes
(975)
12,401
Non-cash stock compensation expense
2,699
968
Changes in operating assets and liabilities:
Accounts receivable
(15,768)
(13,838)
Other assets
(2,159)
(21,747)
Accounts payable and other liabilities
(7,844)
2,790
Deferred revenue
(25,900)
9,133
Net cash provided by operating activities
183,418
201,675
Cash flows from investing activities:
Disposition of operations
-
4,844
Sale of assets
-
5,123
Capitalized software
(19,443)
(16,686)
Capital expenditures
(5,995)
(6,355)
Cash collected from the sale and license of software
10,000
20,000
Deferral of costs
(49,595)
(54,498)
Payments received from investments
2,708
2,855
Net cash paid in acquisitions
(14,400)
(144,509)
Net cash used by investing activities
(76,725)
(189,226)
Cash flows from financing activities:
Proceeds from debt
649,756
423,122
Payments of debt
(393,742)
(216,041)
Dividends paid
(13,471)
(13,068)
Sale of common stock
25,801
31,609
Acquisition of treasury stock
(299,301)
(231,865)
Tax benefit of stock options exercised
4,081
-
Net cash used by financing activities
(26,876)
(6,243)
Effect of exchange rate changes on cash
492
(485)
Net increase in cash and cash equivalents
80,309
5,721
Cash and cash equivalents at beginning of period
7,705
4,185
Cash and cash equivalents at end of period
88,014
9,906
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest
31,375
18,405
Income taxes
31,027
(376)
Payments on capital leases and installment payment arrangements
57,556
53,890
Payments on software and data license liabilities
21,151
23,610
Other debt payments, excluding line of credit
6,632
5,506
Noncash investing and financing activities:
Issuance of options for acquisition
-
7,541
Software licenses and maintenance acquired under software obligation
15,266
8,380
Acquisition of property and equipment under capital lease and
installment payment arrangements
44,454
70,377
Construction and other financing
18,167
7,200
Issuance of common stock for acquisition
3,610
-
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF FREE CASH FLOW AVAILABLE TO EQUITY
AND RECONCILIATION TO OPERATING CASH FLOW
(Unaudited)
(Dollars in thousands)
06/30/05
09/30/05
12/31/05
03/31/06
FY2006
06/30/06
09/30/06
12/31/06
YTD FY2007
Net cash provided by operating activities
61,476
44,785
95,414
74,158
275,833
56,350
64,409
62,659
183,418
Less:
Tax benefit of stock options and warrants
-
-
-
(19,097)
(19,097)
-
-
-
-
Subtotal
61,476
44,785
95,414
55,061
256,736
56,350
64,409
62,659
183,418
Plus:
Proceeds received from the disposition of operations
-
1,529
3,315
-
4,844
-
-
-
-
Proceeds received from the disposition of assets
-
3,613
1,510
-
5,123
-
-
-
-
Payments received from investments
721
41
2,093
905
3,760
783
1,925
-
2,708
Less:
Capitalized software
(5,673)
(5,809)
(5,204)
(5,217)
(21,903)
(5,719)
(6,926)
(6,798)
(19,443)
Capital expenditures
(2,929)
(3,025)
(401)
(493)
(6,848)
(217)
(3,260)
(2,518)
(5,995)
Deferral of costs
(16,192)
(18,703)
(19,603)
(15,956)
(70,454)
(16,887)
(16,559)
(16,149)
(49,595)
Payments on capital leases and installment payment arrangements
(19,929)
(15,967)
(17,994)
(18,342)
(72,232)
(18,905)
(21,951)
(16,700)
(57,556)
Payments on software and data license liabilities
(10,938)
(5,328)
(7,344)
(5,459)
(29,069)
(7,847)
(7,304)
(6,000)
(21,151)
Other required debt payments
(1,357)
(2,434)
(1,715)
(3,796)
(9,302)
(1,711)
(1,804)
(3,117)
(6,632)
Subtotal
5,179
(1,298)
50,071
6,703
60,655
5,847
8,530
11,377
25,754
Plus:
Tax benefit of stock options and warrants
-
-
-
19,097
19,097
1,079
1,765
1,237
4,081
Subtotal
5,179
(1,298)
50,071
25,800
79,752
6,926
10,295
12,614
29,835
Plus:
Cash collected from sale of software
-
-
20,000
-
20,000
5,000
5,000
-
10,000
Total
5,179
(1,298)
70,071
25,800
99,752
11,926
15,295
12,614
39,835
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
Q3 FY06 to
Q3 FY07
Q2 FY07 to
Q3 FY07
06/30/05
09/30/05
12/31/05
03/31/06
FY2006
06/30/06
09/30/06
12/31/06
%
$
%
$
Revenue:
Services
238,499
253,193
263,266
257,591
1,012,549
261,892
266,099
265,798
1.0%
2,532
-0.1%
(301)
Data
71,772
77,330
84,165
86,752
320,019
74,813
82,220
87,043
3.4%
2,878
5.9%
4,823
Total revenue
310,271
330,523
347,431
344,343
1,332,568
336,705
348,319
352,841
1.6%
5,410
1.3%
4,522
Operating costs and expenses:
Cost of revenue
Services
194,349
191,883
189,502
196,428
772,162
196,073
201,384
199,704
5.4%
10,202
-0.8%
(1,680)
Data
48,885
52,124
48,799
52,142
201,950
49,572
51,062
53,004
8.6%
4,205
3.8%
1,942
Total cost of revenue
243,234
244,007
238,301
248,570
974,112
245,645
252,446
252,708
6.0%
14,407
0.1%
262
Selling, general and administrative
53,700
54,902
57,625
51,642
217,869
54,745
54,008
49,065
-14.9%
(8,560)
-9.2%
(4,943)
Gains, losses and other items, net
(1,637)
12,799
(1,202)
(456)
9,504
0
0
(225)
-81.3%
977
0.0%
(225)
Total operating costs and expenses
295,297
311,708
294,724
299,756
1,201,485
300,390
306,454
301,548
2.3%
6,824
-1.6%
(4,906)
Income from operations
14,974
18,815
52,707
44,587
131,083
36,315
41,865
51,293
-2.7%
(1,414)
22.5%
9,428
% Margin
4.8%
5.7%
15.2%
12.9%
9.8%
10.8%
12.0%
14.5%
Other income (expense)
Interest expense
(5,162)
(7,416)
(8,635)
(7,531)
(28,744)
(7,769)
(8,950)
(14,911)
72.7%
(6,276)
66.6%
(5,961)
Other, net
891
1,050
(71)
135
2,005
647
2,685
1,157
-1729.6%
1,228
-56.9%
(1,528)
Total other income (expense)
(4,271)
(6,366)
(8,706)
(7,396)
(26,739)
(7,122)
(6,265)
(13,754)
58.0%
(5,048)
119.5%
(7,489)
Earnings before income taxes
10,703
12,449
44,001
37,191
104,344
29,193
35,600
37,539
-14.7%
(6,462)
5.4%
1,939
Income taxes
4,064
5,300
16,720
14,132
40,216
11,385
13,884
12,594
-24.7%
(4,126)
-9.3%
(1,290)
Net earnings
6,639
7,149
27,281
23,059
64,128
17,808
21,716
24,945
-8.6%
(2,336)
14.9%
3,229
Diluted earnings (loss) per share
0.07
0.08
0.31
0.26
0.71
0.20
0.25
0.31
0.0%
0.00
24.0%
0.06
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - INTERNAL FORMAT
(Unaudited)
(Dollars in thousands, except earnings per share)
Q3 FY06 to
Q3 FY07
Q2 FY07 to
Q3 FY07
06/30/05
09/30/05
12/31/05
03/31/06
FY2006
06/30/06
09/30/06
12/31/06
%
$
%
$
Revenue
310,271
330,523
347,431
344,343
1,332,568
336,705
348,319
352,841
1.6%
5,410
1.3%
4,522
Operating costs and expenses:
Salaries and benefits
126,264
127,325
129,888
132,579
516,056
135,917
139,557
139,724
7.6%
9,836
0.1%
167
Computer, communications and
other equipment
77,647
76,250
73,614
71,730
299,241
73,119
72,685
71,132
-3.4%
(2,482)
-2.1%
(1,553)
Data costs
41,831
44,752
42,021
44,593
173,197
43,372
44,196
43,761
4.1%
1,740
-1.0%
(435)
Other operating costs and expenses
51,192
50,582
50,403
51,310
203,487
47,982
50,016
47,156
-6.4%
(3,247)
-5.7%
(2,860)
Gains, losses and other items, net
(1,637)
12,799
(1,202)
(456)
9,504
-
-
(225)
-81.3%
977
0.0%
(225)
Total operating costs and expenses
295,297
311,708
294,724
299,756
1,201,485
300,390
306,454
301,548
2.3%
6,824
-1.6%
(4,906)
Income (loss) from operations
14,974
18,815
52,707
44,587
131,083
36,315
41,865
51,293
-2.7%
(1,414)
22.5%
9,428
Operating Margin
4.8%
5.7%
15.2%
12.9%
9.8%
10.8%
12.0%
14.5%
Other income (expense):
Interest expense
(5,162)
(7,416)
(8,635)
(7,531)
(28,744)
(7,769)
(8,950)
(14,911)
72.7%
(6,276)
66.6%
(5,961)
Other, net
891
1,050
(71)
135
2,005
647
2,685
1,157
-1729.6%
1,228
-56.9%
(1,528)
(4,271)
(6,366)
(8,706)
(7,396)
(26,739)
(7,122)
(6,265)
(13,754)
58.0%
(5,048)
119.5%
(7,489)
Earnings (loss) before income taxes
10,703
12,449
44,001
37,191
104,344
29,193
35,600
37,539
-14.7%
(6,462)
5.4%
1,939
Income taxes
4,064
5,300
16,720
14,132
40,216
11,385
13,884
12,594
-24.7%
(4,126)
-9.3%
(1,290)
Net earnings (loss)
6,639
7,149
27,281
23,059
64,128
17,808
21,716
24,945
-8.6%
(2,336)
14.9%
3,229
Diluted earnings (loss) per share
0.07
0.08
0.31
0.26
0.71
0.20
0.25
0.31
0.0%
0.00
24.0%
0.06
ACXIOM CORPORATION AND SUBSIDIARIES
MARGIN ANALYSIS
(Unaudited)
Q3 FY06 to
Q3 FY07
Q2 FY07 to
Q3 FY07
06/30/05
09/30/05
12/31/05
03/31/06
FY2006
06/30/06
09/30/06
12/31/06
%
$
%
$
Gross profit
67,037
86,516
109,130
95,773
358,456
91,060
95,873
100,133
-8.2%
(8,997)
4.4%
4,260
Gross margin
21.6%
26.2%
31.4%
27.8%
26.9%
27.0%
27.5%
28.4%
Operating margin
4.8%
5.7%
15.2%
12.9%
9.8%
10.8%
12.0%
14.5%
Services gross profit
44,150
61,310
73,764
61,163
240,387
65,819
64,715
66,094
-10.4%
(7,670)
2.1%
1,379
Services gross margin
18.5%
24.2%
28.0%
23.7%
23.7%
25.1%
24.3%
24.9%
Data gross profit
22,887
25,206
35,366
34,610
118,069
25,241
31,158
34,039
-3.8%
(1,327)
9.2%
2,881
Data gross margin
31.9%
32.6%
42.0%
39.9%
36.9%
33.7%
37.9%
39.1%
ACXIOM CORPORATION AND SUBSIDIARIES
EXPENSE TREND ANALYSIS
(Unaudited)
06/30/05
09/30/05
12/31/05
03/31/06
FY2006
06/30/06
09/30/06
12/31/06
YTD FY2007
Salaries and benefits % of revenue
40.7%
38.5%
37.4%
38.5%
38.7%
40.4%
40.1%
39.6%
40.0%
Computer, communications and other equipment % of revenue
25.0%
23.1%
21.2%
20.8%
22.5%
21.7%
20.9%
20.2%
20.9%
Data costs % of revenue
13.5%
13.5%
12.1%
13.0%
13.0%
12.9%
12.7%
12.4%
12.7%
Other operating costs and expenses % of revenue
16.5%
15.3%
14.5%
14.9%
15.3%
14.3%
14.4%
13.4%
14.0%
Total operating costs and expenses % of revenue
95.2%
94.3%
84.8%
87.1%
90.2%
89.2%
88.0%
85.5%
87.5%
SG&A % of revenue
17.3%
16.6%
16.6%
15.0%
16.3%
16.3%
15.5%
13.9%
15.2%
ACXIOM CORPORATION
Financial Road Map
(as of December 31, 2006)
Actual
Actual
Actual
Target
Long-Term Goals
Years Ending March 31,
Fiscal 2006
Q3 Fiscal 2007
YTD Fiscal 2007
Fiscal 2007
Fiscal 2010
U.S. Revenue Growth
13.6%
-0.4%
4.5%
4% to 5%
8% to 11% (CAGR)
U.S. Revenue
$1,148 million
$299 million
$891 million
$1,195 to $1,205 mil
-
International Revenue Growth
-13.0%
13.8%
8.0%
5% to 8%
5% to 8% (CAGR)
International Revenue
$185 million
$54 million
$147 million
$195 to $200 mil
-
U.S. Operating Margin
11.6%
15.7%
13.8%
13% to 14%
16% to 18%
Adjusted U.S. Operating Margin
12.4%2
International Operating Margin
-1.1%
7.9%
4.3%
4% to 5%
12% to 15%
Adjusted International Operating Margin
2.5%2
Return on Assets 1
8.5%
10.9%
10.9%
10% to 11%
14% to 17%
Adjusted Return on Assets 1
9.5%2
Return on Invested Capital 1
11.4%2
13.2%
13.2%
12% to 13%
16% to 19%
Operating Cash Flow
$276 million
$63 million
$183 million
$245 to $255 mil
$320 to $360 mil
Free Cash Flow to Equity
$100 million
$13 million
$40 million
$50 to $60 mil
$140 to $160 mil
Revolving Credit Line Balance
$252 million
$0 million
$0 million
< $250 mil
< $250 mil
Dividends Per Share
$0.20
$0.06
$0.16
$0.22
$0.24 to $0.28
1 ROA and ROIC are calculated on a trailing 4 quarters basis.
2 Results exclude unusual charges of $9.1 million for U.S. and
$6.7 million for International in the quarter ended September 30,
2005. These charges are excluded when calculating performance
compared to the Road Map since they were not considered in setting
the Road Map target. All other time periods are as reported for
GAAP.
Reconciliation of Non-GAAP Measurements
(Dollars in thousands)
Actual
Actual
Actual
Target
Long-Term Goals
Years Ending March 31,
Fiscal 2006
Q3 Fiscal 2007
YTD Fiscal 2007
Fiscal 2007
Fiscal 2010
U.S. Operating Margin
U.S. Revenue
1,147,641
298,978
890,601
U.S. Operating Income
133,072
47,057
123,097
U.S. Operating Income Margin
11.6%
15.7%
13.8%
Gains, losses and nonrecurring items, net
6,147
0
0
ValueAct Defense
2,216
0
0
Lawsuit Expenses
761
0
0
Adjusted U.S. Operating Income (1)
142,196
47,057
123,097
Adjusted U.S. Operating Income Margin (1)
12.4%
15.7%
13.8%
International Operating Margin
International Revenue
184,927
53,863
147,264
International Operating Income
(1,991)
4,236
6,376
International Operating Income Margin
-1.1%
7.9%
4.3%
Gains, losses and nonrecurring items, net
6,652
0
0
Adjusted International Operating Income (1)
4,661
4,236
6,376
Adjusted International Operating Income Margin (1)
2.5%
7.9%
4.3%
Free Cash Flow to Equity
Low
High
Low
High
Net cash provided by operating activities
275,833
62,659
183,418
245,000
255,000
320,000
360,000
Plus:
Proceeds received from disposition of assets
5,123
0
0
0
0
0
0
Proceeds received from disposition of operations
4,844
0
0
0
0
0
0
Cash received from investments
3,760
0
2,708
3,000
3,000
0
0
Tax benefit of stock option and warrant exercise
0
1,237
4,081
5,000
5,000
10,000
10,000
Proceeds received from sale of software
20,000
0
10,000
10,000
10,000
0
0
33,727
1,237
16,789
18,000
18,000
10,000
10,000
Less:
Capitalized software
(21,903)
(6,798)
(19,443)
(26,000)
(26,000)
(20,000)
(25,000)
Capital expenditures
(6,848)
(2,518)
(5,995)
(9,000)
(9,000)
(10,000)
(10,000)
Deferral of costs
(70,454)
(16,149)
(49,595)
(66,000)
(66,000)
(65,000)
(75,000)
Capital lease and installment payments
(72,232)
(16,700)
(57,556)
(75,000)
(75,000)
(65,000)
(70,000)
Software and data license liability payments
(29,069)
(6,000)
(21,151)
(27,000)
(27,000)
(25,000)
(25,000)
Other debt payments
(9,302)
(3,117)
(6,632)
(10,000)
(10,000)
(5,000)
(5,000)
(209,808)
(51,282)
(160,372)
(213,000)
(213,000)
(190,000)
(210,000)
Free cash flow to equity
99,752
12,614
39,835
50,000
to
60,000
140,000
to
160,000
Free cash flow to equity as defined by the Company may not be
comparable to similarly titled measures reported by other
companies. Management of the Company has included free cash flow
to equity in this Financial Road Map representing the amount
of money available for the Company's discretionary spending.
Management believes that it provides investors with a useful
alternative measure of liquidity by allowing an assessment of the
amount of cash available for general corporate and strategic
purposes after funding operating activities and capital
expenditures, capitalized software expenses, deferred costs and
required debt repayments. The above table reconciles free cash
flow to equity to cash provided by operating activities, the
nearest comparable GAAP measure.
Notes
1 Results exclude unusual charges of $9.1 million for U.S. and
$6.7 million for International in the quarter ended September 30,
2005. These charges are excluded when calculating performance
compared to the Road Map since they were not considered in setting
the Road Map target. All other time periods are as reported for
GAAP.
Reconciliation of Non-GAAP Measurements
(Dollars in thousands)
Actual
Actual
Actual
Target
Long-Term Goals
Fiscal 2006
Q3 Fiscal 2007
YTD Fiscal 2007
Fiscal 2007
Fiscal 2010
ROA
ROIC
ROA
ROIC
Return on Assets (ROA) and
Return on Invested Capital (ROIC)
ROA
Adjusted
ROA
ROIC
ROA
ROIC
ROA
ROIC
Low
High
Low
High
Low
High
Low
High
Numerator:
Income from operations (3)
131,083
131,083
131,083
174,060
174,060
174,060
174,060
163,200
178,700
163,200
178,700
268,600
337,600
268,600
337,600
Unusual Charges, Net (1)
15,776
15,776
0
0
0
0
0
0
0
0
Add implied interest on operating leases
11,696
10,369
10,369
10,400
10,400
9,000
9,000
131,083
146,859
158,554
174,060
184,429
174,060
184,429
163,200
178,700
173,600
189,100
268,600
337,600
277,600
346,600
Denominator:
Average total assets
1,549,933
1,549,933
1,549,933
1,592,493
1,592,493
1,592,493
1,592,493
1,622,400
1,627,800
1,622,400
1,627,800
1,860,000
1,960,000
1,860,000
1,960,000
Less average cash (2)
(8,616)
(47,929)
(47,929)
(71,700)
(74,200)
(10,000)
(10,000)
Less average non-interest bearing current liabilities
(288,063)
(271,317)
(271,317)
(263,400)
(266,400)
(261,000)
(285,000)
Plus average present value of operating leases
135,190
128,525
128,525
128,600
128,600
114,000
114,000
1,549,933
1,549,933
1,388,444
1,592,493
1,401,773
1,592,493
1,401,773
1,622,400
1,627,800
1,415,900
1,415,800
1,860,000
1,960,000
1,703,000
1,779,000
Return on invested capital
8.5%
9.5%
11.4%
10.9%
13.2%
10.9%
13.2%
10%
to
11%
12%
to
13%
14%
to
17%
16%
to
19%
Notes
1. Results exclude unusual charges of $9.1 million for U.S. and
$6.7 million for International in the quarter ended September 30,
2005. These charges are excluded when calculating performance
compared to the Road Map since they were not considered in setting
the Road Map target. All other time periods are as reported for
GAAP.
2. Future cash balances above $10.0 million are assumed to be
invested at money market rates and are excluded from this
operating cash adjustment.
3. Trailing four quarters.
Return on Invested Capital (ROIC) as defined by the
Company, may not be comparable to similarly titled measures
reported by other companies. Management of the Company has
included ROIC in this Financial Road Map because it measures the
capital efficiency of our business. ROIC does not consider whether
the business is financed with debt or equity; rather ROIC
calculates a return on all capital invested in the business. The
above table reconciles ROIC to a ROA calculation using GAAP
numbers. The Company uses ROIC in a number of ways, including
pricing analysis, capital expenditure evaluation, and merger and
acquisition valuation.
General Road Map Definitions
1. Revenue Growth is defined as the percentage growth
compared to the previous corresponding fiscal year or comparable
period.
2. Operating Margin is defined as the income from
operations as a percentage of revenue.
3. Operating Cash Flow is as shown on the Company's cash
flow statement.
4. Free Cash Flow to Equity is defined as cash flow from
operating activities plus or minus cash flow from investing
activities (excluding net cash paid for acquisitions), less
required payments of debt (total debt payments excluding payments
on the line of credit).
5. Revolving Credit Line Balance is defined as actual funds
borrowed under the Company’s revolving
line of credit facility at the end of the period.
6. Dividends Per Share is defined as the sum of the
dividends for that period.
7. Return on Assets (ROA) is defined as income from
operations divided by average total assets for the trailing four
quarters.
8. Return on Invested Capital (ROIC) is defined as trailing
four quarters income from operations adjusted for the implied
interest expense included in operating leases divided by the
trailing four quarters' average invested capital. The implied
interest adjustment for operating leases is calculated by
multiplying the average quarterly balances of the present value of
operating leases [(beginning balance +
ending balance)/2] x an 8% implied
interest rate on the leases. Average invested capital is defined
as the trailing four-quarter average of the ending quarterly
balances for total assets less operating cash, less non-interest
bearing liabilities (current liabilities less the current portion
of long-term debt), plus the present value of operating leases.