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EX-32.2 - EXHIBIT 32.2 - LiveRamp Holdings, Inc.a2019q1exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - LiveRamp Holdings, Inc.a2019q1exhibit321.htm
EX-31.2 - EXHIBIT 31.2 - LiveRamp Holdings, Inc.a2019q1exhibit312.htm
EX-31.1 - EXHIBIT 31.1 - LiveRamp Holdings, Inc.a2019q1exhibit311.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One) 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2018
 
OR 
[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ----- to -----
 
Commission file number 0-13163
Acxiom Corporation
(Exact Name of Registrant as Specified in Its Charter)
 
DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
71-0581897
(I.R.S. Employer
Identification No.)
 
 
301 E. Dave Ward Drive
Conway, Arkansas
(Address of Principal Executive Offices)
72032
(Zip Code)
 
 
(501) 342-1000
(Registrant's Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes  [X]               No  [ ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
Yes  [X]               No  [ ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer [X]
Accelerated filer   [ ]
 
 
Non-accelerated filer [ ]
Smaller reporting company [ ]
 
 
(Do not check if a smaller reporting company)
Emerging growth company [ ]
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  [ ]               No  [X]
 
The number of shares of common stock, $ 0.10 par value per share, outstanding as of August 6, 2018 was 77,354,458.




ACXIOM CORPORATION AND SUBSIDIARIES
INDEX
REPORT ON FORM 10-Q
June 30, 2018
 
 
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
 
 
June 30,
2018
 
March 31,
2018
ASSETS
 
(Unaudited)
 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
95,099

 
$
142,279

Trade accounts receivable, net
 
163,767

 
167,188

Refundable income taxes
 
11,761

 
9,733

Other current assets
 
40,167

 
41,145

Total current assets
 
310,794

 
360,345

 
 
 
 
 
Property and equipment, net of accumulated depreciation and amortization
 
151,407

 
156,533

Software, net of accumulated amortization
 
31,719

 
34,984

Goodwill
 
595,795

 
595,995

Purchased software licenses, net of accumulated amortization
 
6,670

 
7,703

Deferred income taxes
 
11,488

 
12,225

Deferred commissions, net
 
18,137

 

Other assets, net
 
40,958

 
41,468

 
 
$
1,166,968

 
$
1,209,253

LIABILITIES AND EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Current installments of long-term debt
 
$
1,327

 
$
1,583

Trade accounts payable
 
47,668

 
46,688

Accrued payroll and related expenses
 
21,939

 
42,499

Other accrued expenses
 
58,938

 
55,865

Deferred revenue
 
31,621

 
31,720

Total current liabilities
 
161,493

 
178,355

 
 
 
 
 
Long-term debt
 
227,435

 
227,837

Deferred income taxes
 
42,258

 
40,243

Other liabilities
 
13,726

 
13,723

Commitments and contingencies
 


 


Equity:
 
 

 
 

Common stock
 
13,773

 
13,609

Additional paid-in capital
 
1,256,442

 
1,235,679

Retained earnings
 
638,043

 
628,331

Accumulated other comprehensive income
 
8,899

 
10,767

Treasury stock, at cost
 
(1,195,101
)
 
(1,139,291
)
Total equity
 
722,056

 
749,095

 
 
$
1,166,968

 
$
1,209,253

 
See accompanying notes to condensed consolidated financial statements.


3


ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Revenues
 
$
226,960

 
$
212,514

Cost of revenue
 
117,271

 
113,960

Gross profit
 
109,689

 
98,554

Operating expenses:
 
 
 
 
Research and development
 
24,536

 
23,563

Sales and marketing
 
54,850

 
48,440

General and administrative
 
34,718

 
32,356

Gains, losses and other items, net
 
1,286

 
(98
)
Total operating expenses
 
115,390

 
104,261

Loss from operations
 
(5,701
)
 
(5,707
)
Other income (expense):
 
 
 
 
Interest expense
 
(2,838
)
 
(2,342
)
Other, net
 
524

 
(672
)
Total other expense
 
(2,314
)
 
(3,014
)
Loss before income taxes
 
(8,015
)
 
(8,721
)
Income taxes (benefit)
 
(5,000
)
 
(7,421
)
Net loss
 
$
(3,015
)
 
$
(1,300
)
 
 
 
 
 
Basic loss per share
 
$
(0.04
)
 
$
(0.02
)
 
 
 
 
 
Diluted loss per share
 
$
(0.04
)
 
$
(0.02
)
 

See accompanying notes to condensed consolidated financial statements.


4


ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(Dollars in thousands)
 
 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Net loss
 
$
(3,015
)
 
$
(1,300
)
Other comprehensive income (loss):
 
 
 
 
Change in foreign currency translation adjustment
 
(1,868
)
 
652

Comprehensive loss
 
$
(4,883
)
 
$
(648
)
 
See accompanying notes to condensed consolidated financial statements.


5


ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
THREE MONTHS ENDED JUNE 30, 2018
(Unaudited)
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
Common Stock
 
Additional
 
 
 
other
 
Treasury Stock
 
 
 
 
Number
 
 
 
paid-in
 
Retained
 
comprehensive
 
Number
 
 
 
Total 
 
 
of shares
 
Amount
 
Capital
 
earnings
 
income (loss)
 
of shares
 
Amount
 
Equity
Balances at March 31, 2018
 
136,079,676

 
$
13,609

 
$
1,235,679

 
$
628,331

 
$
10,767

 
(58,304,917
)
 
$
(1,139,291
)
 
$
749,095

Cumulative-effect adjustment from adoption of ASU 2014-09
 

 

 

 
12,727

 

 

 

 
$
12,727

Employee stock awards, benefit plans and other issuances
 
233,784

 
23

 
4,093

 

 

 
(391,898
)
 
(10,044
)
 
$
(5,928
)
Non-cash stock-based compensation
 
149,416

 
15

 
16,796

 

 

 

 

 
$
16,811

Restricted stock units vested
 
1,259,681

 
126

 
(126
)
 

 

 

 

 
$

Acquisition of treasury stock
 

 

 

 

 

 
(1,853,071
)
 
(45,766
)
 
$
(45,766
)
Comprehensive income:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 


Foreign currency translation
 

 

 

 

 
(1,868
)
 

 

 
$
(1,868
)
Net loss
 

 

 

 
(3,015
)
 

 

 

 
$
(3,015
)
Balances at June 30, 2018
 
137,722,557

 
$
13,773

 
$
1,256,442

 
$
638,043

 
$
8,899

 
(60,549,886
)
 
$
(1,195,101
)
 
$
722,056

 
See accompanying notes to condensed consolidated financial statements


6


ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(3,015
)
 
$
(1,300
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
21,529

 
21,110

Loss on disposal or impairment of assets
 
48

 
163

Accelerated deferred debt costs
 

 
720

Deferred income taxes
 
(1,335
)
 
2,497

Non-cash stock compensation expense
 
20,360

 
15,038

Changes in operating assets and liabilities:
 
 
 
 

Accounts receivable, net
 
4,329

 
11,960

Deferred costs and other assets, net
 
(2,995
)
 
(3,377
)
Accounts payable and other liabilities
 
(21,704
)
 
(37,073
)
Deferred revenue
 
(33
)
 
(4,787
)
Net cash provided by operating activities
 
17,184

 
4,951

 
 
 
 
 
Cash flows from investing activities:
 
 

 
 

Capitalized software development costs
 
(3,606
)
 
(3,388
)
Capital expenditures
 
(4,399
)
 
(6,888
)
Data acquisition costs
 
(179
)
 
(190
)
Equity investments
 
(2,500
)
 

Net cash used in investing activities
 
(10,684
)
 
(10,466
)
 
 
 
 
 
Cash flows from financing activities:
 
 

 
 

Proceeds from debt
 

 
230,000

Payments of debt
 
(592
)
 
(225,572
)
Fees for debt refinancing
 
(300
)
 
(4,001
)
Sale of common stock, net of stock acquired for withholding taxes
 
(5,928
)
 
(2,539
)
Acquisition of treasury stock
 
(45,766
)
 

Net cash used in financing activities
 
(52,586
)
 
(2,112
)
 
 
 
 
 
Effect of exchange rate changes on cash
 
(1,094
)
 
430

 
 
 
 
 
Net change in cash and cash equivalents
 
(47,180
)
 
(7,197
)
Cash and cash equivalents at beginning of period
 
142,279

 
170,343

Cash and cash equivalents at end of period
 
$
95,099

 
$
163,146

 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.

7


ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(Dollars in thousands)

 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Supplemental cash flow information:
 
 

 
 

Cash paid during the period for:
 
 

 
 

Interest
 
$
2,607

 
$
2,375

Income taxes, net of refunds
 
1,100

 
354

 
 
 
 
 

See accompanying notes to condensed consolidated financial statements.




8



ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.    BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
These condensed consolidated financial statements have been prepared by Acxiom Corporation (“Registrant,” “Acxiom,” we, us or the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  In the opinion of the Registrant’s management, all adjustments necessary for a fair presentation of the results for the periods included have been made, and the disclosures are adequate to make the information presented not misleading.  All such adjustments are of a normal recurring nature.  Certain note information has been omitted because it has not changed significantly from that reflected in Notes 1 through 18 of the Notes to Consolidated Financial Statements filed as part of Item 8 of the Registrant’s annual report on Form 10-K for the fiscal year ended March 31, 2018 (“2018 Annual Report”), as filed with the SEC on May 25, 2018.  This quarterly report and the accompanying condensed consolidated financial statements should be read in connection with the 2018 Annual Report.  The financial information contained in this quarterly report is not necessarily indicative of the results to be expected for any other period or for the full fiscal year ending March 31, 2019.
 
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).  Actual results could differ from those estimates.  Certain of the accounting policies used in the preparation of these condensed consolidated financial statements are complex and require management to make judgments and/or significant estimates regarding amounts reported or disclosed in these financial statements.  Additionally, the application of certain of these accounting policies is governed by complex accounting principles and their interpretation.  A discussion of the Company’s significant accounting principles and their application is included in Note 1 of the Notes to Consolidated Financial Statements and in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s 2018 Annual Report.
 
Accounting Pronouncements Adopted During the Current Year
 
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively. Topic 606 supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the new guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted Topic 606 as of April 1, 2018 using the modified retrospective method. See Note 2 for further details.

In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 719): Scope of Modification Accounting" ("ASU 2017-09"). ASU 2017-09 clarifies when changes to the terms or conditions of a stock-based payment award must be accounted for as modifications. ASU 2017-09 will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a stock-based payment award if the award's fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. ASU 2017-09 is effective for the Company beginning in fiscal 2019. We adopted the standard in the current fiscal quarter, and adoption of this guidance did not have a material impact on our condensed financial statements and related disclosures.

Recent Accounting Pronouncements Not Yet Adopted
 
In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill

9


allocated to that reporting unit. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 (fiscal 2021 for the Company), including interim periods within those fiscal years; earlier adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its condensed financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), as a comprehensive new standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. The new standard will require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases except short-term leases. For lessees, leases will continue to be classified as either operating or financing in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. Subsequently, the FASB has issued various ASU's to provide further clarification around aspects of Topic 842. ASU 2016-02 is effective for annual periods beginning after December 15, 2018 (fiscal 2020 for the Company), including interim periods within those fiscal years, with early adoption permitted. We will adopt the new standard on April 1, 2019 using the modified retrospective approach. The Company is continuing to evaluate the impact of the adoption of this guidance on its condensed consolidated financial statements and related disclosures.
 
The Company does not anticipate that the adoption of any other recent accounting pronouncements will have a material impact on the Company's consolidated financial position, results of operations or cash flows.

2.    TOPIC 606 ADOPTION IMPACT AND REVENUE FROM CONTRACTS WITH CUSTOMERS:

On April 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of April 1, 2018. Results for reporting periods beginning after April 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic reporting under Topic 605.

Under Topic 606, revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The Company determines revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, the Company satisfies a performance obligation

We recorded a net increase to our opening retained earnings of $12.7 million, net of tax, due to the cumulative impact of adopting Topic 606, with the impact primarily related to the capitalization of costs of obtaining customer contracts.

The details of the significant changes and quantitative impact of the changes are disclosed below.

Costs of Obtaining Customer Contracts
The Company previously recognized commission payments made for obtaining a contract as an operating expense when incurred. Under Topic 606, the Company capitalizes incremental costs to acquire contracts and amortizes them over the expected period of benefit, which we have determined as a range of two to five years. As of June 30, 2018, the remaining unamortized contract costs were $18.1 million and are included in deferred commissions, net, in the condensed consolidated balance sheet. Net capitalized costs of $2.9 million were recorded as a reduction to operating expense for the three months ended June 30, 2018. No impairment was recognized for the three months ended June 30, 2018.

Contingent Revenue
The Company previously limited revenue recognition to the amount that was not contingent on the provision of future services. This was typically from fees paid over the contract term for services delivered at the beginning of the contract term.


10


Impacts on Financial Statements
Condensed Consolidated Balance Sheet
 
Impact of changes in accounting policies
 
 
As reported June 30, 2018
 
Adjustments
 
Balances without adoption of Topic 606
Trade accounts receivable, net
 
$
163,767

 
$
(1,943
)
 
$
161,824

Refundable income taxes
 
11,761

 
540

 
12,301

Deferred income taxes
 
11,488

 
(64
)
 
11,424

Deferred commissions, net
 
18,137

 
(18,137
)
 

Others
 
961,815

 

 
961,815

   Total assets
 
$
1,166,968

 
$
(19,604
)
 
$
1,147,364

 
 
 
 
 
 
 
Deferred revenue
 
$
31,621

 
$
(232
)
 
$
31,389

Deferred income taxes
 
42,258

 
(4,761
)
 
37,497

Others
 
371,033

 

 
371,033

   Total liabilities
 
444,912

 
(4,993
)
 
439,919

 
 
 
 
 
 
 
Retained earnings
 
638,043

 
(14,611
)
 
623,432

Other equity
 
84,013

 

 
84,013

Total equity
 
722,056

 
(14,611
)
 
707,445

   Total liabilities and equity
 
$
1,166,968

 
$
(19,604
)
 
$
1,147,364



Condensed Consolidated Statement of Operations
 
Impact of changes in accounting policies
 
 
As reported for the three months ended June 30, 2018
 
Adjustments
 
Balances without adoption of Topic 606
Revenues
 
$
226,960

 
$
296

 
$
227,256

Cost of revenue
 
117,271

 

 
117,271

Gross profit
 
$
109,689

 
$
296

 
$
109,985

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
   Sales and marketing
 
$
54,850

 
$
2,939

 
$
57,789

   Other operating expenses
 
60,540

 

 
60,540

     Total operating expenses
 
115,390

 
2,939

 
118,329

 
 
 
 
 
 
 
Loss from operations
 
(5,701
)
 
(2,643
)
 
(8,344
)
     Total other expense
 
(2,314
)
 

 
(2,314
)
Loss before income taxes
 
(8,015
)
 
(2,643
)
 
(10,658
)
Income taxes
 
(5,000
)
 
(695
)
 
(5,695
)
Net loss
 
$
(3,015
)
 
$
(1,948
)
 
$
(4,963
)



11


Condensed Consolidated Statement of Comprehensive Loss
 
Impact of changes in accounting policies
 
 
As reported for the three months ended June 30, 2018
 
Adjustments
 
Balances without adoption of Topic 606
Net loss
 
$
(3,015
)
 
$
(1,948
)
 
$
(4,963
)
Other comprehensive loss:
 
 
 
 
 
 
Change in foreign currency translation adjustment
 
(1,868
)
 

 
(1,868
)
Comprehensive loss
 
$
(4,883
)
 
$
(1,948
)
 
$
(6,831
)


Condensed Consolidated Statement of Cash Flows
 
Impact of changes in accounting policies
 
 
As reported for the three months ended June 30, 2018
 
Adjustments
 
Balances without adoption of Topic 606
Net loss
 
$
(3,015
)
 
$
(1,948
)
 
$
(4,963
)
Adjustments for:
 
 
 
 
 
 
Deferred income taxes
 
(1,335
)
 
(695
)
 
(2,030
)
Others
 
41,937

 

 
41,937

Changes in:
 
 
 
 
 
 
Accounts receivable, net
 
4,329

 
(256
)
 
4,073

Deferred costs and other assets
 
(2,995
)
 
2,939

 
(56
)
Accounts payable and other liabilities
 
(21,704
)
 

 
(21,704
)
Deferred revenue
 
(33
)
 
(40
)
 
(73
)
Net cash from operating activities
 
17,184

 

 
17,184

Net cash from investing activities
 
(10,684
)
 

 
(10,684
)
Net cash from financing activities
 
(52,586
)
 

 
(52,586
)
Effect of exchange rate changes on cash
 
(1,094
)
 

 
(1,094
)
 
 
 
 
 
 
 
Net change in cash and cash equivalents
 
(47,180
)
 

 
(47,180
)
Cash and cash equivalents at beginning of period
 
142,279

 

 
142,279

Cash and cash equivalents at end of period
 
$
95,099

 
$

 
$
95,099



12


Disaggregation of Revenue
In the following table, revenue is disaggregated by primary geographical market and major service offerings. The table also includes a reconciliation of the disaggregated revenue within the reportable segments.

Reportable Segments
June 30, 2018
(dollars in thousands)
Primary Geographical Markets
 
Acxiom Marketing Solutions
 
LiveRamp
 
Total
United States
 
$
150,307

 
$
56,222

 
$
206,529

Europe
 
11,115

 
4,908

 
16,023

APAC
 
3,080

 
1,328

 
4,408

 
 
$
164,502

 
$
62,458

 
$
226,960

 
 
 
 
 
 
 
Major Offerings/Services
 
 
 
 
 
 
Audience Creation
 
$
45,452

 
$

 
$
45,452

Data Analytics
 
9,025

 

 
9,025

Data Management
 
110,025

 

 
110,025

Subscription
 

 
51,329

 
51,329

Marketplace and Other
 

 
11,129

 
11,129

 
 
$
164,502

 
$
62,458

 
$
226,960



Reportable Segments
June 30, 2017
(dollars in thousands)
Primary Geographical Markets
 
Acxiom Marketing Solutions
 
LiveRamp
 
Total
United States
 
$
152,129

 
$
42,118

 
$
194,247

Europe
 
10,735

 
3,802

 
14,537

APAC
 
2,893

 
837

 
3,730

 
 
$
165,757

 
$
46,757

 
$
212,514

 
 
 
 
 
 
 
Major Offerings/Services
 
 
 
 
 
 
Audience Creation
 
$
51,303

 
$

 
$
51,303

Data Analytics
 
8,858

 

 
8,858

Data Management
 
105,596

 

 
105,596

Subscription
 

 
37,052

 
37,052

Marketplace and Other
 

 
9,705

 
9,705

 
 
$
165,757

 
$
46,757

 
$
212,514



13


Transaction Price Allocated to the Remaining Performance Obligations
We have performance obligations, primarily related to AMS offerings, associated with fixed commitments in customer contracts for future services that have not yet been recognized in our condensed consolidated financial statements. The amount of fixed revenue not yet recognized was $1.1 billion as of June 30, 2018. The Company expects to recognize revenue on approximately 75% of these remaining performance obligations by March 31, 2021 with the balance recognized thereafter.

3.    LOSS PER SHARE AND STOCKHOLDERS’ EQUITY:
 
Loss Per Share
 
A reconciliation of the numerator and denominator of basic and diluted loss per share is shown below (in thousands, except per share amounts): 
 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Basic loss per share:
 
 
 
 

Net loss
 
$
(3,015
)
 
$
(1,300
)
 
 
 
 
 
Basic weighted-average shares outstanding
 
76,935

 
78,672


 
 

 
 

Basic loss per share
 
$
(0.04
)
 
$
(0.02
)
 
 
 
 
 
Diluted loss per share:
 
 

 
 

Basic weighted-average shares outstanding
 
76,935

 
78,672

Dilutive effect of common stock options, warrants, and restricted stock as computed under the treasury stock method
 

 

Diluted weighted-average shares outstanding
 
76,935

 
78,672


 
 

 
 

Diluted loss per share
 
$
(0.04
)
 
$
(0.02
)
 
Due to the net loss incurred by the Company during the quarters ended June 30, 2018 and 2017, the dilutive effect of options, warrants and restricted stock units covering 2.4 million and 2.8 million shares of common stock, respectively, was excluded from the diluted loss per share calculation since the impact on the calculation was anti-dilutive.

Additional options and warrants to purchase shares of common stock and restricted stock units that were outstanding during the periods presented but were not included in the computation of diluted loss per share because the effect was anti-dilutive are shown below (shares in thousands): 
 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Number of shares outstanding under options, warrants and restricted stock units
 
119

 
20

Range of exercise prices for options
 
$32.85

 
$32.85

 
Stockholders’ Equity
 
On August 29, 2011, the board of directors adopted a common stock repurchase program.  That program was subsequently modified and expanded, most recently on March 30, 2018.  Under the modified common stock repurchase program, the Company may purchase up to $500.0 million of its common stock through the period

14


ending December 31, 2019. During the three months ended June 30, 2018, the Company repurchased 1.9 million shares of its common stock for $45.8 million.  Through June 30, 2018, the Company had repurchased a total of 22.0 million shares of its stock for $420.4 million, leaving remaining capacity of $79.6 million under the stock repurchase program.
 
Accumulated Other Comprehensive Income
 
Accumulated other comprehensive income accumulated balances of $8.9 million and $10.8 million at June 30, 2018 and March 31, 2018, respectively, reflect accumulated foreign currency translation adjustments.
 
4.    SHARE-BASED COMPENSATION:
 
Share-based Compensation Plans

The Company has stock option and equity compensation plans for which a total of 34.5 million shares of the Company’s common stock have been reserved for issuance since the inception of the plans.  At June 30, 2018, there were a total of 5.1 million shares available for future grants under the plans.
 
Stock Option Activity
Stock option activity for the three months ended June 30, 2018 was: 
 
 
 
 
 
 
Weighted-average
 
 
 
 
 
 
Weighted-average
 
remaining
 
Aggregate
 
 
Number of
 
exercise price
 
contractual term
 
Intrinsic value
 
 
shares
 
per share
 
(in years)
 
(in thousands)
Outstanding at March 31, 2018
 
2,565,287

 
$
13.61

 
 
 
 
Exercised
 
(125,437
)
 
$
8.80

 
 
 
$
2,426

Forfeited or canceled
 
(25,831
)
 
$
14.25

 
 
 
 

Outstanding at June 30, 2018
 
2,414,019

 
$
13.86

 
5.1
 
$
38,910

Exercisable at June 30, 2018
 
2,169,170

 
$
14.58

 
4.8
 
$
33,397


The aggregate intrinsic value at period end represents the total pre-tax intrinsic value (the difference between Acxiom’s closing stock price on the last trading day of the period and the exercise price for each in-the-money option) that would have been received by the option holders had option holders exercised their options on June 30, 2018.  This amount changes based upon changes in the fair market value of Acxiom’s common stock.

A summary of stock options outstanding and exercisable as of June 30, 2018 was:
 
 
 
 
 
 
Options outstanding
 
Options exercisable
Range of
 
 
 
Weighted-average
 
Weighted-average
 
 
 
Weighted-average
exercise price
 
Options
 
remaining
 
exercise price
 
Options
 
exercise price
per share
 
outstanding
 
contractual life
 
per share
 
exercisable
 
per share
$
0.61

 
 
$
9.99

 
545,583

 
5.2 years
 
$
1.62

 
390,000

 
$
1.71

$
10.00

 
 
$
19.99

 
1,176,361

 
4.4 years
 
$
14.95

 
1,092,595

 
$
14.74

$
20.00

 
 
$
24.99

 
672,523

 
6.2 years
 
$
21.30

 
667,023

 
$
21.30

$
25.00

 
 
$
32.85

 
19,552

 
5.4 years
 
$
32.85

 
19,552

 
$
32.85

 
 
 
 
 
 
2,414,019

 
5.1 years
 
$
13.86

 
2,169,170

 
$
14.58

 
Total expense related to stock options for the three months ended June 30, 2018 and 2017 was approximately $1.0 million and $1.4 million, respectively. Future expense for these options is expected to be approximately $6.3 million in total over the next three years.
 

15


Performance Stock Option Unit Activity
Performance stock option unit activity for the three months ended June 30, 2018 was:
 
 
 
 
 
 
Weighted-average
 
 
 
 
 
 
Weighted-average
 
remaining
 
Aggregate
 
 
Number
 
exercise price
 
contractual term
 
intrinsic value
 
 
of shares
 
per share
 
(in years)
 
(in thousands)
Outstanding at March 31, 2018
 
329,404

 
$
21.42

 
 
 
 
Forfeited or canceled
 
(186,538
)
 
$
21.41

 
 
 
 
Outstanding at June 30, 2018
 
142,866

 
$
21.43

 
1.9

 
$
1,217

Exercisable at June 30, 2018
 

 
$

 

 
$

 
Of the performance stock option units outstanding at March 31, 2018, 164,702 reached maturity of the relevant performance period at March 31, 2018.  The units attained a 0% attainment level. As a result, they were cancelled in the current fiscal quarter.
 
Total expense related to performance stock option units for the three months ended June 30, 2018 and 2017 was $0.3 million and $0.5 million, respectively.  Future expense for these performance stock option units is expected to be approximately $1.1 million in total over the next three years.
 
Restricted Stock Unit Activity
During the three months ended June 30, 2018, the Company granted time-vesting restricted stock units covering 1,703,482 shares of common stock with a fair value at the date of grant of $46.6 million. Of the restricted stock units granted in the current period, 98,156 vest in equal annual increments over four years, 1,586,724 vest 25% at the one-year anniversary and 75% in equal quarterly increments over the subsequent three years, and 18,602 vest in one year. Grant date fair value of these units is equal to the quoted market price for the shares on the date of grant. 
 
Time-vesting restricted stock unit activity for the three months ended June 30, 2018 was:
 
 
 
 
Weighted-average
 
 
 
 
 
 
fair value per 
 
Weighted-average
 
 
Number 
 
share at grant
 
remaining contractual
 
 
of shares
 
date
 
term (in years)
Outstanding at March 31, 2018
 
3,449,001

 
$
24.35

 
2.32
Granted
 
1,703,482

 
$
27.34

 
 
Vested
 
(692,206
)
 
$
23.14

 
 
Forfeited or canceled
 
(227,978
)
 
$
24.98

 
 
Outstanding at June 30, 2018
 
4,232,299

 
$
25.72

 
2.82

During the three months ended June 30, 2018, the Company granted performance-based restricted stock units covering 216,727 shares of common stock having a fair value at the date of grant of $6.7 million, determined using a Monte Carlo simulation model.  The units vest subject to attainment of market conditions established by the compensation committee of the board of directors (“compensation committee”) and continuous employment through the vesting date.  The 216,727 units may vest in a number of shares from 25% to 200% of the award, based on the total shareholder return of Acxiom common stock compared to total shareholder return of a group of peer companies established by the compensation committee for the period from April 1, 2018 to March 31, 2021. 


16


Non-vested performance-based restricted stock unit activity for the three months ended June 30, 2018 was:
 
 
 
 
Weighted-average
 
 
 
 
 
 
fair value per
 
Weighted-average
 
 
Number
 
share at grant
 
remaining contractual 
 
 
of shares
 
date
 
term (in years)
Outstanding at March 31, 2018
 
682,763

 
$
25.23

 
1.54
Granted
 
216,727

 
$
31.07

 
 
Vested
 
(20,965
)
 
$
19.07

 
 
Forfeited or canceled
 
(129,123
)
 
$
24.13

 
 
Outstanding at June 30, 2018
 
749,402

 
$
27.28

 
1.78

Total expense related to restricted stock for the three months ended June 30, 2018 and 2017 was approximately $10.9 million and $8.8 million, respectively.  Future expense for restricted stock units is expected to be approximately $33.5 million for the nine months ending March 31, 2019, $35.9 million in fiscal 2020, $25.0 million in fiscal 2021, $13.6 million in fiscal 2022, and $1.4 million in fiscal 2023.

Other Performance Unit Activity
Other performance-based stock unit activity for the three months ended June 30, 2018 was: 
 
 
 
 
Weighted-average
 
 
 
 
 
 
fair value per
 
Weighted-average
 
 
Number
 
share at grant
 
remaining contractual
 
 
of shares
 
date
 
term (in years)
Outstanding at March 31, 2018
 
111,111

 
$
5.33

 
-
Vested
 
(45,364
)
 
$
5.33

 
 
Forfeited or canceled
 
(65,747
)
 
$
5.33

 
 
Outstanding at June 30, 2018
 

 
$

 
-
 
The 111,111 performance-based units outstanding at March 31, 2018 reached maturity of the relevant performance period on March 31, 2018. The units achieved a 100% performance attainment level. However, application of the share price adjustment factor resulted in a 59% reduction in shares vested in the current fiscal quarter.

During the quarter ended June 30, 2018, the Company withheld approximately $10.0 million related to employee tax withholding for stock-based compensation awards.

Consideration Holdback
As part of the Company’s acquisition of Arbor in fiscal 2017, $38.3 million of the acquisition consideration otherwise payable with respect to shares of restricted Arbor common stock held by certain key employees was subject to holdback by the Company pursuant to agreements with those employees (each, a “Holdback Agreement”). Total expense related to the Holdback Agreements for the three months ended June 30, 2018 and 2017 was $3.8 million in each period.  Through June 30, 2018, the Company had recognized a total of $24.3 million expense related to the Holdback Agreements. Future expense related to the Holdback Agreements is expected to be approximately $14.0 million over the next two fiscal years.

Pacific Data Partners ("PDP") Assumed Performance Plan
In connection with the fiscal 2018 acquisition of PDP, the Company assumed the outstanding performance compensation plan under the 2018 Equity Compensation Plan of Pacific Data Partners, LLC ("PDP PSU plan"). Total expense related to the PDP PSU plan for the three months ended June 30, 2018 was $3.9 million. Through June 30, 2018, the Company had recognized a total of $5.9 million related to the PDP PSU plan. Future expense is expected to be approximately $11.9 million in fiscal 2019, $15.7 million in fiscal 2020, $15.8 million in fiscal 2021, and $15.7 million in fiscal 2022, based on expectations of full attainment. At March 31, 2018, the recognized, but unpaid, portion balance related to the PDP PSU plan in other accrued expenses in the condensed consolidated balance sheet was $5.3 million.


17



5.    OTHER CURRENT AND NONCURRENT ASSETS:
 
Other current assets consist of the following (dollars in thousands): 
 
 
June 30, 2018
 
March 31,
2018
Prepaid expenses and other
 
$
25,823

 
$
27,594

Assets of non-qualified retirement plan
 
14,344

 
13,551

Other current assets
 
$
40,167

 
$
41,145

 
Other noncurrent assets consist of the following (dollars in thousands): 
 
 
June 30, 2018
 
March 31,
2018
Acquired intangible assets, net
 
$
31,453

 
$
33,922

Deferred data acquisition costs
 
879

 
1,036

Other miscellaneous noncurrent assets
 
8,626

 
6,510

Noncurrent assets
 
$
40,958

 
$
41,468

  
6.    OTHER ACCRUED EXPENSES:
 
Other accrued expenses consist of the following (dollars in thousands):
 
 
June 30, 2018
 
March 31,
2018
Liabilities of non-qualified retirement plan
 
14,344

 
13,551

Other accrued expenses
 
44,594

 
42,314

Other accrued expenses
 
$
58,938

 
$
55,865


7.    GOODWILL AND INTANGIBLE ASSETS:
 
Goodwill by operating segment for the three months ended June 30, 2018 (dollars in thousands) was as follows:
 
 
LiveRamp
 
Acxiom Marketing Solutions
 
Total
Balance at March 31, 2018
 
$
203,639

 
$
392,356

 
$
595,995

Reallocation of segments
 
1,377

 
(1,377
)
 

Change in foreign currency translation adjustment
 
(62
)
 
(138
)
 
(200
)
Balance at June 30, 2018
 
$
204,954

 
$
390,841

 
$
595,795

 
Goodwill by component included in each segment as of June 30, 2018 was: 
 
 
LiveRamp
 
Acxiom Marketing Solutions
 
Total
U.S.
 
$
201,449

 
$
382,981

 
$
584,430

APAC
 
3,505

 
7,860

 
11,365

Balance at June 30, 2018
 
$
204,954

 
$
390,841

 
$
595,795



18



The amounts allocated to intangible assets from acquisitions include developed technology, customer relationships, trade names, and publisher relationships.  Amortization lives for those intangibles range from two years to ten years.  The following table shows the amortization activity of intangible assets (dollars in thousands):
 
 
June 30, 2018
 
March 31, 2018
Developed technology, gross (Software)
 
$
54,150

 
$
54,150

Accumulated amortization
 
(47,119
)
 
(43,533
)
Net developed technology
 
$
7,031

 
$
10,617

 
 
 
 
 
Customer relationship/Trade name, gross (Other assets, net)
 
$
43,346

 
$
43,364

Accumulated amortization
 
(29,421
)
 
(27,953
)
Net customer/trade name
 
$
13,925

 
$
15,411

 
 
 
 
 
Publisher relationship, gross (Other assets, net)
 
$
23,800

 
$
23,800

Accumulated amortization
 
(6,280
)
 
(5,289
)
Net publisher relationship
 
$
17,520

 
$
18,511

 
 
 
 
 
Total intangible assets, gross
 
$
121,296

 
$
121,314

Total accumulated amortization
 
(82,820
)
 
(76,775
)
Total intangible assets, net
 
$
38,476

 
$
44,539

 
Intangible assets by operating segment as of June 30, 2018 was (dollars in thousands):
 
 
LiveRamp
 
Acxiom Marketing Solutions
 
Total
Developed technology
 
7,031

 

 
7,031

Customer/Trade name
 
13,921

 
4

 
13,925

Publisher relationship
 
17,520

 

 
17,520

Balance at June 30, 2018
 
$
38,472

 
$
4

 
$
38,476

 
Total amortization expense related to intangible assets for the three months ended June 30, 2018 and 2017 was $6.1 million and $6.0 million, respectively.  The following table presents the estimated future amortization expenses related to purchased and other intangible assets. The amount for 2019 represents the remaining nine months ending March 31, 2019. All other periods represent fiscal years ending March 31 (dollars in thousands): 
Fiscal Year:
    
2019
$
9,917

2020
11,950

2021
8,025

2022
5,150

2023
3,434

 
$
38,476

  

19



8.    LONG-TERM DEBT:
 
Long-term debt consists of the following (dollars in thousands): 
 
 
June 30, 2018
 
March 31,
2018
Revolving credit borrowings
 
$
230,000

 
$
230,000

Other debt
 
2,701

 
3,293

Total long-term debt
 
232,701

 
233,293

 
 
 
 
 
Less current installments
 
1,327

 
1,583

Less deferred debt financing costs
 
3,939

 
3,873

Long-term debt, excluding current installments and deferred debt financing costs
 
$
227,435

 
$
227,837

 
The revolving loan borrowings under the Company's Sixth Amended and Restated Credit Agreement (the "restated credit agreement") bear interest at LIBOR or at an alternative base rate plus a credit spread. At June 30, 2018, the revolving loan borrowing bears interest at LIBOR plus a credit spread of 1.75%.  The weighted-average interest rate on revolving credit borrowings at June 30, 2018 was 3.9%.  There were no material outstanding letters of credit at June 30, 2018 or March 31, 2018.

Under the terms of the restated credit agreement, the Company is required to maintain certain debt-to-cash flow and interest coverage ratios, among other restrictions.  At June 30, 2018, the Company was in compliance with these covenants and restrictions. 

9.    ALLOWANCE FOR DOUBTFUL ACCOUNTS:
 
Trade accounts receivable are presented net of allowances for doubtful accounts, returns and credits of $5.2 million at June 30, 2018 and $6.8 million at March 31, 2018.
 
10.     SEGMENT INFORMATION:
 
The Company reports segment information consistent with the way management internally disaggregates its operations to assess performance and to allocate resources.

During the first quarter of fiscal 2019, the Company realigned its portfolio into two distinct business segments: LiveRamp, the identity infrastructure for powering exceptional customer experiences, and Acxiom Marketing Solutions, the leading provider of services for creating a unified approach to data-driven marketing. This realignment allows Acxiom to best meet client needs in a rapidly evolving marketplace, create a strong foundation for continued growth and enhance value for shareholders.

This structure configured Acxiom’s three previous segments into two, aligning key Audience Solutions’ assets to each. All identity assets including IdentityLink, AbiliTec® intellectual property and Acxiom’s TV integrations were consolidated under LiveRamp. The remaining Audience Solutions’ lines of business for data and data services were combined with Marketing Services to create Acxiom Marketing Solutions.

As a result of this organizational realignment, information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed.

Revenues and cost of revenue are generally directly attributed to the segments. Certain revenue contracts are allocated among the segments based on the relative value of the underlying products and services. Cost of revenue, excluding non-cash stock compensation expense and purchased intangible asset amortization, is directly charged in most cases and allocated in certain cases based upon proportional usage. 
 

20


Operating expenses, excluding non-cash stock compensation expense and purchased intangible asset amortization, are attributed to the segment groups as follows:

Research and development expenses are primarily directly recorded to each segment group based on identified products supported.

Sales and marketing expenses are primarily directly recorded to each segment group based on products supported and sold.

General and administrative expenses are generally not allocated to the segments unless directly attributable.

Gains, losses and other items, net are not allocated to the segment groups.
 
We do not track our assets by operating segments. Consequently, it is not practical to show assets by operating segment.

The following table presents information by business segment (dollars in thousands): 
 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Revenues: 
 
 
 
 
LiveRamp
 
$
62,458

 
$
46,757

Acxiom Marketing Solutions
 
164,502

 
165,757

Total segment revenues
 
$
226,960

 
$
212,514

 
 
 
 
 
Gross profit(1):
 
 

 
 

LiveRamp
 
$
44,200

 
$
28,229

Acxiom Marketing Solutions
 
73,174

 
77,864

Total segment gross profit
 
$
117,374

 
$
106,093

 
 
 
 
 
Income (loss) from operations(1):
 
 

 
 

LiveRamp
 
$
9,203

 
$
(97
)
Acxiom Marketing Solutions
 
47,458

 
48,374

Total segment income from operations
 
$
56,661

 
$
48,277

(1) Gross profit and income from operations reflect only the direct and allocable controllable costs of each segment and do not include allocations of corporate expenses (primarily general and administrative expenses) and gains, losses, and other items, net. Additionally, segment gross profit and income from operations do not include non-cash stock compensation expense and purchased intangible asset amortization.


21


The following table reconciles total segment gross profit to gross profit and total operating segment income from operations to income from operations (dollars in thousands): 
 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Total segment gross profit
 
$
117,374

 
$
106,093

 
 
 
 
 
Less:
 
 
 
 
Purchased intangible asset amortization
 
6,054

 
5,966

Non-cash stock compensation
 
1,631

 
1,573

Gross profit
 
$
109,689

 
$
98,554

 
 
 
 
 
Total segment income from operations
 
$
56,661

 
$
48,277

 
 
 
 
 
Less:
 
 
 
 
Corporate expenses (principally general and administrative)
 
27,840

 
25,966

Separation and transformation costs included in general and administrative
 
6,822

 
7,119

Gains, losses and other items, net
 
1,286

 
(98
)
Purchased intangible asset amortization
 
6,054

 
5,966

Non-cash stock compensation
 
20,360

 
15,031

Loss from operations
 
$
(5,701
)
 
$
(5,707
)
  

11.    RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
 
The following table summarizes the restructuring activity for the three months ended June 30, 2018 (dollars in thousands): 
 
 
Associate-related
reserves
 
Lease
accruals
 
Total
March 31, 2018
 
$
2,751

 
$
5,292

 
$
8,043

Restructuring charges and adjustments
 
1,286

 

 
1,286

Payments
 
(2,923
)
 
(335
)
 
(3,258
)
June 30, 2018
 
$
1,114

 
$
4,957

 
$
6,071

 
The above balances are included in other accrued expenses and other liabilities on the condensed consolidated balance sheets.
 
Restructuring Plans
 
In the three months ended June 30, 2018, the Company recorded a total of $1.3 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The expense related to fiscal year 2018 restructuring plans primarily for associates in the United States required to render service until termination to receive the termination benefits. These costs are expected to be paid out in fiscal 2019.

In fiscal 2018, the Company recorded a total of $6.4 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The expense included severance and other associate-related charges of $3.8 million, and lease accruals and adjustments of $2.6 million.

The associate-related accruals of $3.8 million related to the termination of associates in the United States and Europe. Of all amounts accrued for fiscal year 2018 associate-related plans, $0.7 million remained accrued as of June 30, 2018. These costs are expected to be paid out in fiscal 2019. The lease accruals and adjustments of $2.6 million result from the Company's exit from certain leased office facilities.

22



In fiscal 2017, the Company recorded a total of $8.9 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations.  The expense included severance and other associate-related charges of $3.8 million, lease accruals and adjustments of $3.0 million, and leasehold improvement write-offs of $2.1 million. Of the associate-related accruals of $3.8 million, $0.2 million remained accrued as of June 30, 2018. These costs are expected to be paid out in fiscal 2019. The lease accruals and adjustments of $3.0 million resulted from the Company's exit from certain leased office facilities ($1.5 million) and adjustments to estimates related to the fiscal 2015 lease accruals ($1.5 million). Of the amount accrued for fiscal 2017 lease accruals, $2.3 million remained accrued as of June 30, 2018.

In fiscal 2016, the Company recorded a total of $12.0 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations.  The expense included severance and other associate-related charges of $8.6 million, lease termination charges and accruals of $3.0 million, and leasehold improvement write-offs of $0.4 million. Of the associate-related accruals of $8.6 million, $0.1 million remained accrued as of June 30, 2018. These amounts are expected to be paid out in fiscal 2019.

In fiscal 2015, the Company recorded a total of $21.8 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations.  The expense included severance and other associate-related charges of $13.3 million, lease accruals of $6.5 million, and the write-off of leasehold improvements of $2.0 million.  Of the associate-related accruals of $13.3 million, $0.3 million remained accrued as of June 30, 2018.  These amounts are expected to be paid out in fiscal 2019. Of the lease accruals of $6.5 million, $0.3 million remained accrued as of June 30, 2018.

With respect to the fiscal 2015, 2017, and 2018 lease accruals described above, the Company intends to sublease the facilities to the extent possible. The liabilities will be satisfied over the remainder of the leased properties' terms, which continue through November 2025. Actual sublease receipts may differ from the estimates originally made by the Company. Any future changes in the estimates or in the actual sublease income could require future adjustments to the liabilities, which would impact net earnings (loss) in the period the adjustment is recorded.
 
Gains, Losses and Other Items
 
Gains, losses and other items for each of the periods presented are as follows (dollars in thousands): 
 
 
For the three months ended
 
 
June 30,
 
 
2018
 
2017
Restructuring plan charges and adjustments
 
$
1,286

 
$
(100
)
Other
 

 
2

 
 
$
1,286

 
$
(98
)

12.     COMMITMENTS AND CONTINGENCIES:
 
Legal Matters
 
The Company is involved in various claims and legal proceedings. Management routinely assesses the likelihood of adverse judgments or outcomes to these matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. The Company records accruals for these matters to the extent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. These accruals are reflected in the Company’s condensed consolidated financial statements. In management’s opinion, the Company has made appropriate and adequate accruals for these matters, and management believes the probability of a material loss beyond the amounts accrued to be remote. However, the ultimate liability for these matters is uncertain, and if accruals are not adequate, an adverse outcome could have a material effect on the Company’s consolidated financial condition or results of operations. The Company maintains insurance coverage above certain limits. There are currently no matters pending against the Company or its subsidiaries for which the potential exposure is considered material to the Company’s condensed consolidated financial statements. 
 

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Commitments
 
The Company leases data processing equipment, office furniture and equipment, land and office space under noncancellable operating leases.  The Company has a future commitment for lease payments over the next 22 years years of $76.5 million.
 
In connection with the disposition of Acxiom Impact during fiscal 2017, the Company assigned a facility lease to the buyer of the business. The Company guaranteed the facility lease as required by the asset disposition agreement. Should the assignee default, the Company would be required to perform under the terms of the facility lease, which continues through September 2021. At June 30, 2018, the Company’s maximum potential future rent payments under this guarantee totaled $2.0 million.
  
13.    INCOME TAX:

In determining the quarterly provision for income taxes, the Company makes its best estimate of the effective income tax rate expected to be applicable for the full fiscal year. The estimated effective income tax rate for the current fiscal year is impacted by the reduction in the U.S. federal corporate income tax rate (discussed below), non-deductible stock-based compensation, state income taxes, research tax credits, and losses in foreign jurisdictions. State income taxes are influenced by the geographic and legal entity mix of the Company's U.S. income as well as the diversity of rules among the states. The Company does not record a tax benefit for certain foreign losses due to uncertainty of future utilization.

On December 22, 2017, the U.S. enacted significant tax law changes following the passage of H.R. 1, "An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 "the Tax Act") (previously known as "The Tax Cuts and Jobs Act"). The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%, among other provisions. We believe we have properly estimated our federal and state income tax liabilities for the impacts of the Tax Act, including provisional amounts under SAB No. 118 related to the rate change, the impact of increased bonus depreciation, and the effects on executive compensation deductions. The Tax Act may be subject to technical amendments, as well as interpretations and implementing of regulations by the Department of Treasury and Internal Revenue Service, any of which could increase or decrease one or more impacts of the legislation. As such, we will continue to analyze the effects of the Tax Act and may record adjustments to provisional amounts during the measurement period ending no later than December 31, 2018. As of June 30, 2018, we have not changed the provisional estimates recognized in fiscal 2018. Any impacts to our income tax expense as a result of additional guidance will be recorded in the period in which the guidance is issued.


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14.    FAIR VALUE OF FINANCIAL INSTRUMENTS:
 
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Cash and cash equivalents, trade receivables, unbilled and notes receivable, short-term borrowings and trade payables - The carrying amount approximates fair value because of the short maturity of these instruments.

Long-term debt - The interest rate on the revolving credit agreement is adjusted for changes in market rates and therefore the carrying value approximates fair value. The estimated fair value of other long-term debt was determined based upon the present value of the expected cash flows considering expected maturities and using interest rates currently available to the Company for long-term borrowings with similar terms. At June 30, 2018, the estimated fair value of long-term debt approximates its carrying value.

Under applicable accounting standards financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company assigned assets and liabilities to the hierarchy in the accounting standards, which is Level 1 - quoted prices in active markets for identical assets or liabilities, Level 2 - significant other observable inputs and Level 3 - significant unobservable inputs.
 
The following table presents the balances of assets measured at fair value as of June 30, 2018 (dollars in thousands): 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
Other current assets
 
$
14,344

 
$

 
$

 
$
14,344

Total assets
 
$
14,344

 
$

 
$

 
$
14,344



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15.     SUBSEQUENT EVENT

On July 2, 2018, the Company entered into a definitive agreement to sell Acxiom Marketing Solutions ("AMS") to The Interpublic Group of Companies, Inc. (“IPG”) for $2.3 billion in cash, subject to customary closing adjustments. The transaction is subject to standard regulatory review, Acxiom shareholder approval and other customary closing conditions. In addition:

As required regulatory approvals are being sought and received, Acxiom intends to solicit shareholder approval for the transaction;
Once shareholder approval has been received, which is expected in the second quarter of fiscal 2019, the Company expects to report the results of AMS as discontinued operations;
The transaction is expected to close in the third quarter of fiscal 2019; and
The Company expects to report a gain on the sale.

The Company expects to realize approximately $1.7 billion in net cash proceeds, after taxes and fees. Following the closing, the Company intends to:

Retire its existing $230 million debt balance;
Initiate a $500 million cash tender offer for its common stock;
Increase its outstanding share repurchase authorization by up to an additional $500 million, and extend the duration of its program to December 31, 2020;
Use the remainder of the proceeds to fund its growth initiatives, strategic acquisition opportunities and meet its ongoing cash needs;
Transfer the Acxiom brand name and associated trademarks to IPG; and
Rename the Company LiveRamp Holdings, Inc. and, shortly thereafter, begin trading its common stock under the new ticker symbol “RAMP”.


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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our operating segments, summary financial results and notable events. This overview is followed by a summary of our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.

Introduction and Overview

Acxiom Corporation is a global technology and services company with a vision to transform data into value for everyone. Through a simple, open approach to connecting systems and data, we provide the data foundation for the world’s best marketers. By making it safe and easy to activate, validate, enhance, and unify data, we provide marketers with the ability to deliver relevant messages at scale and tie those messages back to actual results. Our products and services enable people-based marketing, allowing our clients to generate higher return on investment and drive better omnichannel customer experiences.
 
Acxiom is a Delaware corporation founded in 1969 in Conway, Arkansas. Our common stock is listed on the NASDAQ Global Select Market under the symbol “ACXM.” We serve a global client base from locations in the United States, Europe, and the Asia-Pacific (“APAC”) region. Our client list includes many of the world’s largest and best-known brands across most major industry verticals, including but not limited to financial, insurance and investment services, automotive, retail, telecommunications, high tech, healthcare, travel, entertainment, non-profit, and government.
 
Operating Segments

During the first quarter of fiscal 2019, the Company realigned its portfolio into two distinct business segments: LiveRamp, the identity infrastructure for powering exceptional customer experiences, and Acxiom Marketing Solutions, the leading provider of services for creating a unified approach to data-driven marketing. This realignment allows Acxiom to best meet client needs in a rapidly evolving marketplace, create a strong foundation for continued growth and enhance value for shareholders.

This structure configured Acxiom’s three previous segments into two, aligning key Audience Solutions’ assets to each. All identity assets including IdentityLink, AbiliTec® intellectual property and Acxiom’s TV integrations were consolidated under LiveRamp. The remaining Audience Solutions’ lines of business for data and data services were combined with Marketing Services to create Acxiom Marketing Solutions.

As a result of this organizational realignment, information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed.

Our operating segments provide management with a comprehensive view of our key businesses based on how we manage our operations and measure results. Additional information related to our operating segments and geographic information is contained in Note 10 - Segment Information of the Notes to Condensed Consolidated Financial Statements.

LiveRamp
 
LiveRamp is the leading independent provider of identity and data connectivity for powering exceptional customer experiences. Through integrations with approximately 600 leading digital marketing platforms and data providers, we have become a key point of entry into the digital ecosystem, helping our clients eliminate data silos and unlock greater value from the marketing tools they use every day. We provide the foundational identity technology that enables our clients to engage consumers across any channel and measure the impact of marketing on sales. In addition, we operate as a neutral, open platform that enables all parts of the marketing ecosystem to connect and use data in responsible, ethical ways at scale.


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IdentityLink

IdentityLink™ is our category leading identity resolution platform that connects people, data, and devices across the physical and digital world, powering privacy-compliant, people-based marketing that allows consumers to better connect with the brands and products they love. Leveraging the LiveRamp deterministic identity graph, IdentityLink first resolves a client’s data (first-, second-, or third-party) to consumer identifiers that represent real people in a way that protects consumer privacy. This omnichannel view of the consumer can then be delivered to any of the 600 partners in our ecosystem through a process called "data onboarding" in order to support targeting, personalization and measurement use cases.

identitylink.jpg



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Targeting
Personalization
Measurement
acxm20170331x10k002a08.jpg

acxm20170331x10k003a04.jpg

acxm20170331x10k004a10.jpg
Example
Example
Example
Clients can deploy targeted ads to known customers by using IdentityLink to upload data from first-, second-, and third-party data sources, resolve it to an omnichannel privacy-compliant link and then onboard to one of 600 LiveRamp partners.
Clients can deliver highly relevant content the moment viewers visit their website landing page, no login required. Leveraging IdentityLink, clients can resolve customer segment data to devices and digital IDs, onboard that data to a personalization platform and provide one-to-one experiences without compromising user privacy.
Clients can connect exposure data with first- and third-party purchase data across channels by resolving all customer devices back to the customers to which they belong. Then, clients can onboard that data to a measurement platform to clearly establish cause, effect and impact.
 
Consumer privacy and data protection are at the center of how we design our products and services. Accordingly, IdentityLink operates in a SafeHaven® certified environment with technical, operational, and personnel controls designed to ensure our clients’ data is kept private and secure.

IdentityLink is sold to brands and the companies with which they partner to execute their marketing, including marketing technology providers, publishers and data providers.

IdentityLink for Brands and Agencies. IdentityLink allows brands and their agencies to execute people-based marketing by creating an omnichannel view of the consumer and activating for use across their choice of best-of-breed digital marketing platforms.

IdentityLink for Platforms and Publishers. IdentityLink provides marketing technology providers and digital publishers with the ability to offer people-based targeting, measurement and personalization within their platforms. This adds value for brands by increasing reach, as well as the speed at which they can activate their marketing data.

IdentityLink for Data Owners. IdentityLink allows data owners to easily connect their data to the digital ecosystem and better monetize it. Data can be distributed directly to clients or made available through the IdentityLink Data Store feature. This adds value for brands as it allows them to augment their understanding of consumers, and increase both the extent of their reach to and depth of their understanding of customers and prospects.

We charge for IdentityLink on an annual subscription basis. Our subscription pricing is based primarily on data volume supported by our platform.


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IdentityLink Data Store

As we have scaled the LiveRamp network and technology, we have found additional ways to leverage our platform, deliver more value to clients and create incremental revenue streams. Leveraging LiveRamp’s common identity system and broad integration network, the IdentityLink Data Store is a data marketplace that seamlessly connects data owners’ audience data across the marketing ecosystem. The IdentityLink Data Store allows data owners to easily monetize their data across hundreds of marketing platforms and publishers with a single contract. At the same time, the Data Store provides a single gateway where data buyers, including platforms and publishers, in addition to brands and their agencies, can access high-quality third-party data from more than 150 data owners, supporting all industries and encompassing all types of data. Data providers include sources and
brands exclusive to LiveRamp, emerging platforms with access to previously unavailable deterministic data, and data partnerships enabled by IdentityLink. LiveRamp thoroughly vets all data sources to ensure any data listed on the Data Store is privacy safe and sourced ethically.

We generate revenue from the IdentityLink Data Store through revenue-sharing arrangements with data owners that are monetizing their data assets on our marketplace. This revenue is typically transactional in nature, tied to data volume purchased on the Data Store.

LiveRamp Revenue Model

LiveRamp recognizes revenue from the following sources: (i) subscription revenue, which consists of subscription fees from clients accessing our IdentityLink platform; and (ii) marketplace and other revenue, which primarily consists of revenue generated from data owners as well as certain publishers and addressable TV providers in the form of revenue-sharing arrangements. Our subscription pricing is tiered based on data volume supported by our platform. The majority of our subscription revenue is derived from subscriptions that are one year in duration and invoiced on a monthly basis, although some of our clients are entering into multi-year subscriptions that are invoiced annually.

Acxiom Marketing Solutions ("AMS")

Our AMS segment designs, builds and manages the unified foundation of data and technology that helps clients grow revenue, win new customers, increase customer loyalty, and optimize marketing spend in a privacy-safe environment. We help architect the foundation for data-driven marketing by delivering solutions that integrate customer and prospect data across the enterprise, thereby enabling our clients to establish a single view of the customer. In addition, we help our clients validate the accuracy of their data, enhance it with additional insight, and keep it up to date, enabling brands to reach desired audiences with highly relevant messages. Leveraging our suite of data services, clients can identify, segment, and differentiate their audiences for more effective and targeted marketing. Finally, we support our clients in navigating the complexities of consumer privacy regulation, making it easy and safe for them to use innovative technology, maintain choice in channels and media, and stay agile in this competitive era of the consumer. Together, these solutions and services allow our clients to generate higher return on marketing investments and, at the same time, drive better, more relevant customer experiences.

The AMS segment includes the following service offerings: Data Management, Audience Creation and Data Analytics.

Data Management. Our Data Management offering provides solutions that unify consumer data across an enterprise within a Unified Data Layer - a data environment that enables clients to execute relevant, people-based marketing across channels and devices. Our consumer marketing solutions, which we design, build, and manage for our clients, make it possible for our clients to collect and analyze information from all sources, thereby increasing customer acquisition, retention, and loyalty. Through our growing partner network, clients are able to integrate their data with best-of-breed marketing applications while respecting and protecting consumer privacy. We provide the connective tissue across the martech and adtech systems our clients use to establish an integrated, omnichannel consumer data foundation that can power all forms of marketing - from email, direct mail, display and search, to social, mobile, and more. We deploy a flexible, open, and modular approach that enables our clients to easily expand their marketing stack over time.

Data Management services are generally provided under long-term contracts. Our revenue consists primarily of recurring monthly billings, and to a lesser extent, other volume and variable based billings.


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Audience Creation. Our Audience Creation offering comprises global third-party data products and services, including InfoBase®, digital data and global data. With data on over 2.5 billion addressable consumers, InfoBase provides the most comprehensive, accurate, and descriptive consumer data in the market. Example InfoBase audience data elements:
inforbaseauddataelementsa.jpg
Clients can enhance their understanding of consumers and their preferences by appending InfoBase data to their own consumer profiles or purchase InfoBase data in list form for digital and offline customer acquisition. In addition, we sell our consumer data indirectly through more than 100 different digital publishers and martech platforms, including Google, OATH, Adobe and The Trade Desk, providing marketers with the ability to create and target specific audiences on those platforms. Our global data offerings are ethically sourced and developed using hundreds of data sources, each carefully evaluated, screened, and monitored for appropriate data collection and privacy policy practices including proper consumer notice and choice.

Our Audience Creation revenue includes licensing fees, which are typically in the form of recurring monthly billings, as well as transactional revenue based on volume or one-time usage. In addition, when our data is sold through indirect digital channels, we generate data revenue from certain digital publishers and martech platforms in the form of revenue sharing agreements.

Data Analytics. Our Data Analytics offering includes analytical and closed-loop measurement services that provide our clients with actionable insights to fuel people-based marketing across the full customer lifecycle. Our independent services help brands measure marketing ROI, attribute marketing impact, deepen audience insights, and predict likely consumer behavior.

Data Analytics revenue primarily consists of recurring monthly billings, as well as transactional revenue based on volume or one-time usage.

Summary

Together, our products and services form the “power grid” for data, the critical foundation for people-based marketing that brands need to engage consumers across today’s highly fragmented landscape of channels and devices. We provide industry-leading technology and services that power data-driven customer experiences in ways that are ethical, secure, and protect consumer privacy.


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Summary Results and Notable Events
 
A summary of the quarter ended June 30, 2018 is presented below:
Revenues were $227.0 million, a 6.8% increase from $212.5 million in the same quarter a year ago.
Cost of revenue was $117.3 million, a 2.9% increase from $114.0 million in the same quarter a year ago.
Gross margin increased to 48.3% from 46.4% in the same quarter a year ago.
Total operating expenses were $115.4 million, a 10.7% increase from $104.3 million in the same quarter a year ago.
Cost of revenue and operating expenses for the quarters ended June 30, 2018 and 2017 include the following items:
Non-cash stock compensation of $20.4 million and $15.0 million, respectively (cost of revenue and operating expenses)
Purchased intangible asset amortization of $6.1 million and $6.0 million, respectively (cost of revenue)
Separation and transformation costs of $6.8 million and $7.1 million, respectively (operating expenses)
Net loss was $3.0 million or $0.04 per diluted share compared to a net loss of $1.3 million or $0.02 per diluted share in the same quarter a year ago.
Net cash provided by operating activities of $17.2 million, a $12.2 million increase compared to $5.0 million in the same quarter a year ago.
The Company repurchased 1.9 million shares of its common stock for $45.8 million under the Company's common stock repurchase program.
 
This summary highlights financial results as well as other significant events and transactions of the Company during the quarter ended June 30, 2018.  However, this summary is not intended to be a full discussion of the Company’s results.  This summary should be read in conjunction with the following discussion of Results of Operations and Capital Resources and Liquidity and with the Company’s condensed consolidated financial statements and footnotes accompanying this report.


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Recent Developments

On July 2, 2018, the Company entered into a definitive agreement to sell AMS to The Interpublic Group of Companies, Inc. (“IPG”) for $2.3 billion in cash, subject to customary closing adjustments. The transaction is subject to standard regulatory review, Acxiom shareholder approval and other customary closing conditions. In addition:

As required regulatory approvals are being sought and received, Acxiom intends to solicit shareholder approval for the transaction;
Once shareholder approval has been received, which is expected in the second quarter of fiscal 2019, the Company expects to report the results of AMS as discontinued operations;
The transaction is expected to close in the third quarter of fiscal 2019; and
The Company expects to report a gain on the sale.

The Company expects to realize approximately $1.7 billion in net cash proceeds, after taxes and fees. Following the closing, the Company intends to: