Acxiom Corporation (ACXM) reported lackluster second-quarter fiscal 2015 results with non-GAAP earnings of $13.9 million or 18 cents per share, down from $17.2 million or 23 cents per share in the year-ago period. The year-over-year decrease in adjusted earnings was primarily due to the relatively poor performance of the IT Infrastructure Management business. The adjusted earnings, however, marginally beat the Zacks Consensus Estimate by a penny.
The company reported GAAP loss of $1.5 million or loss of 2 cents per share versus net income of $9.8 million or 13 cents in the year-ago quarter. The year-over-year decrease in GAAP earnings was largely driven by one-time expenses associated with business separation, acquisition costs and restructuring activities.
Revenues
Total revenue for second-quarter fiscal 2015 came in at $260.0 million, down 2.9% year over year, due to a combination of two factors that include European business restructuring activities and decline in IT Infrastructure Management revenue. Revenues for the reported quarter well exceeded the Zacks Consensus Estimate of $252 million.
By segments, sales from the Marketing and Data Services segment increased 1.6% year over year to $204.2 million. IT Infrastructure Management Services segment revenues were down 16.5% to $55.8 million. Operating income for the reported quarter declined to $3.3 million from $19.2 million in the prior-year quarter due to expenses associated with business separation and transformation activities, non-cash compensation, acquired intangible asset amortization, and lower IT Infrastructure Management revenue.
Significant Developments in the Quarter
Acxiom is continuing to reposition its portfolio by divesting assets that no longer fit its corporate strategy and focus on other attractive markets. The company has almost completed the separation of its business units for better accountability and transparency. At the same time, Acxiom is implementing a new data structure, which tracks revenue and costs by product in addition to client and work order to simplify workflow.
The company is on track to restructure its datacenter and network infrastructure to support real-time scalable and cost-efficient business operations, while simultaneously improving upon security capabilities. This multi-year effort is expected to realize benefits in the later half of next year.
Additionally, Acxiom signed 15 new Audience Operating Systems (AOS) agreements during the quarter with customers in several key industries. AOS revenue was $7.5 million in the quarter, up 36% from approximately $5.5 million on a sequential basis. At the same time, the company inked several Marketing and Data Services agreements during the quarter.
The company is well integrating LiveRamp with its core operations. By merging the respective matching capabilities of LiveRamp and AOS, Acxiom has reduced annual expenses by $10 million. LiveRamp is also contributing significantly to the overall revenue, adding $7.5 million for the quarter. LiveRamp added over 20 new customers during the quarter, bringing its client roster tally to approximately 115 at quarter end.
Balance Sheet and Cash Flow
Acxiom ended the quarter with cash and cash equivalents of $109.8 million and long-term debt of $270.9 million.
Net cash provided by operating activities aggregated $25.8 million during the quarter compared with $42.3 million in the prior-year period. Free cash flow to equity stood at $33 million for the trailing four quarters compared with $69 million in the prior-year period due to higher restructuring and capital spending.
During the reported quarter, Acxiom repurchased approximately 529,000 shares for $9.9 million. Since Aug 2011, the company has repurchased 12.9 million shares or about 16% of the outstanding stock for $202 million under the share repurchase program.
Outlook
For fiscal 2015, management modified its earlier guidance to include the impact of the LiveRamp acquisition. Revenues are expected to be down approximately 4% year over year, driven by the impact of lost IT infrastructure management customers and the exit of analog paper survey business in Europe.
Earning per share is expected in the range of 73 cents to 78 cents, down from the earlier projection of 75 cents to 85 cents. The year-over-year decline in earnings is expected to be driven by lost IT infrastructure management customers and dilution from the acquisition of LiveRamp and other expenses.
Acxiom currently has a Zacks Rank #3 (Hold). Other stocks in the industry that are worth reckoning include Fair Isaac Corporation (FICO), Barracuda Networks, Inc (CUDA) and GTT Communications, Inc. (GTT), each carrying a Zacks Rank #2 (Buy).
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