Tax Change Improves Acxiom's Bottom Line

by Sarah Campbell-Miller  on Tuesday, Feb. 6, 2018 4:03 pm   3 min read

Acxiom Corp. of Conway on Tuesday reported a third-quarter profit of $22.9 million, up from a profit of $1.1 million in the same quarter a year ago, thanks primarily to the recent changes in federal tax law.

The data services company also announced that it would consolidate its three business segments into two segments and begin reporting results that way in the first quarter of fiscal 2019, which will begin on April 1.

The exceptional profit came after three consecutive quarters of net losses. Acxiom's earnings per share for the quarter were 28 cents, up from 1 cent per share in the third quarter of fical 2017. Third-quarter revenue was $235 million, up 5 percent year-over-year.

Acxiom (Nasdaq: ACXM) also reported that operating income was $11 million, up from $9 million in the same quarter a year ago.

"We again delivered a solid quarter, led by the strong performance of our connectivity division," CEO Scott Howe said in a news release. "While revenue in audience solutions was softer than expected, we continue to be pleased with our ongoing ability to generate meaningful cash flows in both marketing services and audience solutions. On a trailing, 12-month basis, these businesses have generated over $200 million in segment income."

The company repurchased 729,000 shares at a cost of about $20 million during the quarter. 

Revenue from Acxiom's Connectivity and Audience Solutions segments rose during the third quarter, while revenue from its Marketing Services segment fell. Income, meanwhile, increased for Connectivity and Marketing Services but decreased for Audience Solutions.

The company also reduced its revenue projection for the fiscal year. Instead of previous guidance of $920 million to $930 million, the new projection is between $910 million and $915 million (earnings per share of between 19 and 23 cents). The change was atributed to "lower expected revenue from Audience Solutions."

Consolidating Segments

Acxiom also announced on Tuesday plans to realign its portfolio into two distinct business units: LiveRamp and Acxiom Marketing Solutions. The company said doing this would allow it to best meet client needs in a rapidly evolving marketplace, create a strong foundation for continued growth and enhance value for shareholders.

Acxiom expects to report its results under the realigned business units in the first quarter of fiscal 2019. The results the company released Tuesday are for fiscal 2018. 

All of Audience Solutions' identity assets, including IdentityLinkT, AbiliTec intellectual property and Acxiom's TV integrations will be consolidated into LiveRamp, creating what the company said will be the world's first truly end-to-end identity platform for people-based marketing.

The remaining Audience Solutions' lines of business for data and data services will be combined with Marketing Services to create Acxiom Marketing Solutions, which the company said will be the world's deepest bench of experts for turning customer insights into engaging experiences that drive tangible business outcomes.

"Audience Solutions, historically, has been built around identity, data and data services, where Audience Solutions can go out and obtain data from all kinds of different sources and put it together in a fashion that allows our customers to make better business decisions," Jerry Jones, executive vice president and chief ethics and legal officer, told Arkansas Business.

He said, with LiveRamp's core cabability of "being able to pull things together in the online world," Acxiom believes combining it with Audience Solutions' identity solutions will "create an exceptionally strong business" and that the two are a natural fit. 

Jones also said Audience Solutions and Marketing Services, historically, have had a close working relationship. So combining Audience Solutions' data and data services with Marketing Services to create Acxiom Marketing Solutions is also a natural fit, he said.

Most Marketing Services customers already use data provided by Audience Solutions, so the realignment will allow Acxiom to serve those clients more quickly and with less friction, Jones added. 

James Arra and Anneka Gupta will continue to serve as co-presidents of LiveRamp, and Rick Erwin and Dennis Self will serve as co-presidents of Acxiom Marketing Solutions. All business unit presidents will continue to report to Howe.

Jones said employees on some teams will be moved around, but the company doesn't know yet whether positions will be cut as a result of the realignment. He added that Acxiom is holding town hall-type meetings with employees about the changes. 

He also said the company expects to gain efficiencies, increased profitability and more transparency. Acxiom also hopes the decision will allow it to accelerate innovation, Jones said.

The company also said Tuesday that it had undergone a comprehensive review of its businesses over the last three quarters to "drive cleaner lines of sight, clearer accountabilities and to maximize its strategic flexibility."

Acxiom "intends to actively explore options to further strengthen Acxiom Marketing Solutions and deliver greater value to its clients" and said "options may include a strategic partnership, acquisition, tax-free merger, joint venture, tax-free spin-off, sale or other potential strategic combinations."



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