Top-Line Declines at Acxiom - Analyst Blog

Acxiom Corp. (ACXM) reported revenues of $283.8 million in the third quarter of fiscal 2010, down 5.7% from a year ago. The year-ago figure excludes an Information Products pass-through contract of approximately $20.1 million. This contract was modified in the fourth quarter of fiscal 2009, and the company no longer recognizes pass-through revenue from this contract. 

Net income was $14.3 million compared to a loss of $11.4 million in the year-ago quarter. Earnings per share (EPS) came in at 21 cents, easily beating the Zacks Consensus Estimate of 15 cents.

Services revenues came in at $218.3 million, down 5.5% from the year-ago quarter. Services revenue was primarily down in multi-channel marketing services line of business, specifically in the traditional database marketing services partially offset by increases in consulting and information management. The decline in multi-channel marketing services was driven largely by the financial services vertical. Over the last year, revenue declines have occurred in financial services due to consumer consolidation, contract renegotiations for reduced scope and volume reductions. 

The consulting line of business was up by over 15% with increases across most industry verticals. Products revenue came in at $65.5 million, down 6.3% year over year. Both domestic and international operations were down $2.2 million. The US products revenue reductions were primarily in the financial services and employment screening business. The employment screening business still remains challenged by the lack of hiring in the US. The decrease in international operations is being driven mostly by decline in the UK data business. 

Gross margin came in at 26% compared to 24.0% in the year-ago quarter. Operating expenses declined 4.7% year over year to $253.9 million. Operating margin improved to 10.5% in the third quarter, from 7.8% in the second quarter.

During the quarter, the company acquired a 51% interest in DMS (Direct Marketing Services), a premier provider of direct marketing services in the Middle East-North Africa (MENA) market. This acquisition will enable Acxiom to enter the markets of Saudi Arabia and United Arab Emirates. 

During the quarter, Acxiom generated $74.5 million of cash from operations and used $9.5 million in capital expenditures. As of December 31, 2009, Acxiom had cash and equivalents of $200.6 million, up from $167.6 million in March 2009. Total debt was $525.3 million, a decrease of $52.9 million since March 31, 2009. 

The biggest concern is the sensitivity of the company’s sales to a slowdown in the economy. Information technology (IT) spending still remains heavily focused on cost savings. While the recent cost cutting measures undertaken by the management are holding up the margins, the declining top-line remains a concern. 

On a positive note, management stated that marketing departments of various companies now see the need to reinvest after a period of cutbacks, when the marketing was seen as a discretionary expense rather than a necessary investment. 

Headquartered in Little Rock, Arkansas, Acxiom integrates data, services and technology to create and deliver customer and information management solutions for companies. The company has locations throughout the United States and Europe, as well as in Australia and China.
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