Acxiom (ACXM) Beats On Q4 Earnings, FY17 Outlook Bullish

Leading analytics and software-as-a-service provider Acxiom Corporation (NASDAQ:ACXM) reported relatively healthy fourth-quarter fiscal 2016 results with successful execution of operational plans. The solid quarterly performance capped off an eventful year for the company and strengthened its prospects for a similar performance in fiscal 2017.

Adjusted earnings (with stock-based compensation adjustments) of 8 cents per share for fourth-quarter fiscal 2016 comfortably beat the Zacks Consensus Estimate by 3 cents.

GAAP loss for the reported quarter narrowed to $1.6 million or loss of 2 cents per share from a loss of $6.0 million or 8 cents per share in the year-ago period. The year-over-year improvement was primarily due to higher revenues.

For fiscal 2016, Acxiom reported a net income of $6.7 million or 9 cents per share as against a loss of $11.0 million or loss of 14 cents per share in fiscal 2015.

Quarter Details

Total revenue for fourth-quarter fiscal 2016 was $224.7 million, up 9.2% compared with the prior-year quarter. The year-over-year increase in revenues was due to an overall growth in each of the operating segments. Quarterly revenues exceeded the Zacks Consensus Estimate of $214 million.

While domestic revenues of $205 million were up 11% year over year, international revenues of $20 million increased 2% on a constant currency basis. For fiscal 2016, Acxiom recorded revenues of $850.1 million compared with $804.9 million in fiscal 2015.

Sale from the Marketing Services segment increased 3.4% year over year to $113.3 million due to expansion of the business. Segment sales from the U.S. markets were approximately $104 million, up about 4%.

The Audience Solutions segment revenue increased to $80.1 million from $76.8 million in the year-ago quarter due to solid revenue from the use of data in the digital ecosystem.

The Connectivity segment continued to show strong momentum, as revenues were up an impressive 61.9% year over year to $31.2 million, driven by new customer additions and 40 new partner integrations.

Gross profit for the reported quarter improved to $101.0 million from $78.0 million in the year-ago quarter, resulting in a gross margin of 45.0%, up from 37.9%. The improvement was largely driven by growth in the Connectivity segment.

Other Significant Developments in the Quarter

During fourth-quarter fiscal 2016, Acxiom strengthened its Connectivity segment by signing over 50 deals and adding more than15 new direct customers, resulting in a direct customer count of about 285.

The company collaborated with technology firm Adobe Systems Inc. (NASDAQ:ADBE) to offer an integrated marketing program for its clients. The strategic partnership will enable Acxiom to offer Adobe Marketing Cloud clients greater flexibility to execute seamless cross-channel marketing campaign for their consumers.

During the quarter, Acxiom also formed a strategic alliance with the social media firm Twitter, Inc. (NYSE:TWTR) to facilitate advertisers to gauge the efficacy of advertising campaigns on offline sales. The collaboration intends to analyze exposure and client sales data to determine audience delivery (advertising reach), audience response (conversion rates), and campaign lift (sales increase). A detailed analysis report and key insights from the study will be provided thereafter to advertisers to help them understand the effectiveness of their campaigns. Such focused initiatives are likely to further augment revenues in the long run.

Balance Sheet and Cash Flow

At fiscal-end 2016, Acxiom had cash and cash equivalents of $189.6 million compared with $141.0 million in the prior-year period. Long-term debt was $157.9 million at fiscal-end 2016 compared with $244.7 million in the year-ago period.

Net cash provided by operating activities aggregated $43.3 million during the quarter compared with $29.4 million in the prior-year period, bringing the respective tallies for the years to $113.6 million and $61.1 million. Free cash flow to equity was $17 million for the reported quarter.

During the quarter under review, Acxiom repurchased approximately 731,000 shares for $15 million. Since Aug 2011, the company has repurchased 15.5 million shares for $255 million under its share repurchase program.

Outlook

For fiscal 2017, Acxiom expects revenues to be within $870 million and $890 million. Non-GAAP earnings are expected to be in the vicinity of 55 cents per share.

We remain impressed by the bullish guidance of this Zacks Rank #3 (Hold) stock. Another player in the same industry worth considering includes RELX NV (NYSE:RENX) , carrying a Zacks Rank #2 (Buy).

ACXIOM CORP (ACXM): Free Stock Analysis Report

ADOBE SYSTEMS (ADBE): Free Stock Analysis Report

TWITTER INC (TWTR): Free Stock Analysis Report

RELX NV (RENX): Free Stock Analysis Report

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