Acxiom Shareholders,
By almost any measure, Fiscal 2017 was a year of tremendous execution and progress. We
posted double-digit revenue growth for the first time in over a decade, delivered meaningful
bottom-line improvement, won new clients at an unprecedented rate and achieved exceptional
results for our clients. Importantly, we also delivered on our promises to you, our owners.
Over the past five years, Acxiom has undergone a remarkable transformation and we are a much
stronger and better positioned company today than we were when we began this journey. We are
at the forefront of a massive shift towards data-driven, people-based marketing. We are aligned
against a single, clear strategy. We move faster and are more innovative, relevant and influential.
And our recent progress gives me confidence we have rounded the corner.
Our vision at Acxiom is to transform data into value for everyone. In a space plagued by
fragmentation and complexity, transformation means many things. Connections, curation,
enhancement and activation are just a few relevant examples. Data is at the core of everything
we do – and it is not only about people, but increasingly about channels, devices and locations.
Value is what we deliver to clients in the form of better experiences, insights, decisions, and
importantly, ROI. And we want to do this for everyone. While clients and partners are our primary
focus, we also recognize that consumers must have visibility and choice. The industry needs a
common data and identity foundation off which to innovate, and we are better positioned than
anyone else to provide this.
Each of our divisions made good progress against this vision in FY17, and I really like the
business momentum we have generated. At the same time, we recognize we are not yet the
company we aspire to be and there is still much work to be done. Our efforts in the coming year
will focus on the following core strategic imperatives:
(cid:120) Nail the basics. One of the top priorities for FY18 is to sustain our recent progress and
success across each area of our business. We must continue to focus on deepening the
moats around our core capabilities in identity resolution, connectivity and data
stewardship to extend our top-line momentum. This is incredibly important, as our
continued growth funds future investment in our products, facilities and people.
Correspondingly, we will also strive to further improve Acxiom’s culture and workplace so
that we attract and retain amazingly talented associates.
(cid:120) Accelerate progress against our biggest future growth levers. We made solid strides
against our key growth initiatives in FY17. With the launch of IdentityLink™, our
Connectivity division broadened its focus beyond data onboarding to solve one of the
industry’s biggest challenges: creating an omnichannel view of the consumer. In doing
so, we expanded our client base and opportunity set to include both brands and the
companies’ brands work with. At the same time, our Audience Solutions division
cemented its position as our second engine of growth and transformed itself into a more
modern and efficient data-as-a-service business. And finally, our Marketing Services
division continues to provide the critical infrastructure and services that enable people-
based marketing. Nailing the basics will ensure that we have a successful FY18.
However, as we do this, we must also look to the future to ensure that our businesses are
well positioned for longer term success. In the coming year, we will continue to invest in
strengthening our network of clients and partners and extending our global leadership in
identity resolution and data.
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Explore expansion of our capabilities beyond marketing. We view our opportunity
within marketing to be large and we believe we have a long runway for growth in this
space. However, at the same time, we also recognize that the data fragmentation, silos,
suboptimal insights and confusion that exist in marketing is prevalent in many other
industries. Like marketing, other industries have disparate data sets, lack data
refinement, curation and enhancement capabilities, and cannot activate their insights as
widely and effectively as desired. We believe we’ve built unique assets centered around
identity resolution and data connectivity that can also be applied to non-marketing use
cases. While marketing remains our overwhelming focus, over the next year, we intend to
explore opportunities to determine if this could be a future growth driver for us.
In summary, we accomplished a great deal in FY17. However, there is still a lot of work to be
done to secure and extend our market leadership, and our success in the coming year is
predicated on our ability to execute against each of our strategic imperatives. We must continue
to invest in our future growth drivers, while at the same time, remain focused on exceling at the
basics.
On behalf of the team at Acxiom, we thank all of our shareholders for your ongoing support and
confidence in our future. The opportunity ahead of us has never been bigger and we look forward
to delivering even greater value to our clients and shareholders in FY18 and beyond.
Warmest regards,
Warmest regards
Scott Howe
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
(cid:95)(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2017
OR
(cid:133)(cid:133) 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)
301 E. Dave Ward Drive,
Conway, Arkansas
(Address of Principal Executive Offices)
71-0581897
(I.R.S. Employer Identification No.)
72032
(Zip Code)
(501) 342-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.10 Par Value
Name of each exchange on which registered
The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [X]
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
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]
Non-accelerated filer [ ]
(Do not check if a smaller reporting company)
Accelerated filer [ ]
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 Act).
Yes [ ] No [X]
The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the
registrant’s Common Stock, $.10 par value per share, as of the last business day of the registrant’s most recently completed second
fiscal quarter as reported on the NASDAQ Global Select Market was approximately $1,768,143,599. (For purposes of determination of
the above stated amount only, all directors, executive officers and 10% or more shareholders of the registrant are presumed to be
affiliates.)
The number of shares of Common Stock, $.10 par value per share, outstanding as of May 22, 2017, was 78,507,559.
Table of Contents
Documents Incorporated by Reference
Part I
Availability of SEC Filings and Corporate Governance Information; Cautionary Statements
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
Financial Supplement
Page
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5
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27
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34
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F-1 - F-69
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2017 Annual Meeting of Stockholders (“2017 Proxy Statement”) of
Acxiom Corporation (“Acxiom,” the “Company,” “we”, “us”, or “our”) are incorporated by reference into Part III
of this Form 10-K.
PART I
AVAILABILITY OF SEC FILINGS AND CORPORATE GOVERNANCE INFORMATION
Our website address is www.acxiom.com, where copies of documents which we have filed with the Securities
and Exchange Commission (“SEC”) may be obtained free of charge as soon as reasonably practicable after
being filed electronically. Included among those documents are our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”).
Copies may also be obtained through the SEC’s EDGAR site, or by sending a written request for copies to
Acxiom Investor Relations, 100 Redwood Shores Parkway, Redwood City, California 94065. Copies of all our
SEC filings were available on our website during the past fiscal year covered by this Form 10-K. In addition,
at the “Corporate Governance” section of our website, we have posted copies of our Corporate Governance
Principles, the charters for the Audit/Finance, Compensation, Executive, and Governance/Nominating
Committees of the Board of Directors, the codes of ethics applicable to directors, financial personnel and all
employees, and other information relating to the governance of the Company. Although referenced herein,
information contained on or connected to our corporate website is not incorporated by reference into this
annual report on Form 10-K and should not be considered part of this report or any other filing we make with
the SEC.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K, including, without limitation, the items set forth on pages F-3 – F-23 in
Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains and may
incorporate by reference certain statements that may be deemed to be “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995, as amended (the “PSLRA”), and that are
intended to enjoy the protection of the safe harbor for forward-looking statements provided by the PSLRA.
These statements, which are not statements of historical fact, may contain estimates, assumptions,
projections and/or expectations regarding the Company’s financial position, results of operations, market
position, product development, growth opportunities, economic conditions, and other similar forecasts and
statements of expectation. Forward-looking statements are often identified by words or phrases such as
“anticipate,” “estimate,” “plan,” “expect,” “believe,” “intend,” “foresee,” or the negative of these terms or other
similar variations thereof. These forward-looking statements are not guarantees of future performance and
are subject to a number of factors and uncertainties that could cause the Company’s actual results and
experiences to differ materially from the anticipated results and expectations expressed in the forward-looking
statements.
Forward-looking statements may include but are not limited to the following:
(cid:120) management’s expectations about the macro economy;
(cid:120) statements containing a projection of revenues, income (loss), earnings (loss) per share, capital
expenditures, dividends, capital structure, or other financial items;
(cid:120) statements of the plans and objectives of management for future operations, including, but not limited
to, those statements contained under the heading “Acxiom’s Growth Strategy” in Part I, Item 1 of this
Annual Report on Form 10-K;
(cid:120) statements of future economic performance, including, but not limited to, those statements contained
in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained
in this Annual Report on Form 10-K;
3
(cid:120) statements containing any assumptions underlying or relating to any of the above statements; and
r
(cid:120) statements containing a projection or estimate.
Among the factors that may cause actual results and expectations to differ from anticipated results and
expectations expressed in such forward-looking statements are the following:
(cid:120)
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(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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the risk factors described in Part I, “Item 1A. Risk Factors” and elsewhere in this report and those
described from time to time in our future reports filed with the SEC;
the possibility that in the event a change of control of the Company is sought that certain clients may
attempt to invoke provisions in their contracts allowing for termination upon a change in control, which
may result in a decline in revenue and profit;
the possibility that the integration of acquired businesses may not be as successful as planned;
the possibility that the fair value of certain of our assets may not be equal to the carrying value of
those assets now or in future time periods;
the possibility that sales cycles may lengthen;
the possibility that we will not be able to properly motivate our sales force or other associates;
the possibility that we may not be able to attract and retain qualified technical and leadership
associates, or that we may lose key associates to other organizations;
the possibility that we will not be able to continue to receive credit upon satisfactory terms and
conditions;
the possibility that competent, competitive products, technologies or services will be introduced into
the marketplace by other companies;
the possibility that there will be changes in consumer or business information industries and markets
that negatively impact the Company;
the possibility that we will not be able to protect proprietary information and technology or to obtain
necessary licenses on commercially reasonable terms;
the possibility that there will be changes in the legislative, accounting, regulatory and consumer
environments affecting our business, including but not limited to litigation, legislation, regulations and
customs impairing our ability to collect, manage, aggregate and use data;
the possibility that data suppliers might withdraw data from us, leading to our inability to provide
certain products and services;
the possibility that data purchasers will reduce their reliance on us by developing and using their own,
or alternative, sources of data generally or with respect to certain data elements or categories;
the possibility that we may enter into short-term contracts which would affect the predictability of our
revenues;
the possibility that the amount of ad hoc, volume-based and project work will not be as expected;
the possibility that we may experience a loss of data center capacity or interruption of
telecommunication links or power sources;
4
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the possibility that we may experience failures or breaches of our network and data security systems,
leading to potential adverse publicity, negative customer reaction, or liability to third parties;
the possibility that our clients may cancel or modify their agreements with us;
the possibility that we will not successfully complete customer contract requirements on time or meet
the service levels specified in the contracts, which may result in contract penalties or lost revenue;
the possibility that we experience processing errors which result in credits to customers, re-
performance of services or payment of damages to customers; and
(cid:120) general and global negative economic conditions.
With respect to the provision of products or services outside our primary base of operations in the United
States, all of the above factors apply, along with the difficulty of doing business in numerous sovereign
jurisdictions due to differences in scale, competition, culture, laws and regulations.
Other factors are detailed from time to time in periodic reports and registration statements filed with the SEC.
The Company believes that it has the product and technology offerings, facilities, associates and competitive
and financial resources for continued business success, but future revenues, costs, margins and profits are
all influenced by a number of factors, including those discussed above, all of which are inherently difficult to
forecast.
In light of these risks, uncertainties and assumptions, the Company cautions readers not to place undue
reliance on any forward-looking statements. Forward-looking statements and such risks, uncertainties and
assumptions speak only as of the date of this Annual Report on Form 10-K, and the Company expressly
disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein,
to reflect any change in our expectations with regard thereto, or any other change based on the occurrence of
future events, the receipt of new information or otherwise, except to the extent otherwise required by law.
Item 1. Business
Acxiom Corporation is a global technology and enablement 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 omni-channel 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.
We excel in relationships with organizations that view the activation, management, and application of data as
an integral component of their business. We generate our revenue from the following business segments,
which are aligned consistently with the Company’s long-term strategy:
(cid:120) Connectivity. Our Connectivity segment enables clients to build an omni-channel view of the
customer and activate that understanding across the open marketing ecosystem.
(cid:120) Audience Solutions. Our Audience Solutions segment helps clients validate the accuracy of their
people-based data, enhance it with additional insights, and keep it up to date, enabling them to reach
audiences with highly relevant messages.
5
(cid:120) Marketing Services. Our Marketing Services segment helps clients unify data at the individual level in
a privacy-safe environment and use it to achieve data-driven results.
Across these segments, we leverage a common set of technical capabilities, each of which delivers
increasing value with scale. We provide the largest number of integrations to marketing platforms and data
providers in the digital marketing ecosystem, enabling our clients to innovate through their preferred choice of
technology, data, and services providers. Our industry-leading recognition and data assets power best-in-
class consumer identification and linking with the highest level of accuracy. And, our expertise in data
stewardship enables us to process large volumes ethically and securely in accordance with regional data
protection requirements.
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.
Industry Trends
Overwhelming Complexity in Digital Marketing Ecosystem
Marketing has evolved significantly in recent years driven by rapid innovation and an explosion of data,
channels, devices, and applications. Historically, brands interacted with consumers through a limited number
of channels, with limited visibility into the activities taking place. Today, companies interact with consumers
across a growing number of touchpoints, including online, social, mobile and point-of-sale. The billions of
interactions that take place each day between brands and consumers create a trove of valuable data that can
be collected and analyzed. However, most companies are unable to cut through the complexity to effectively
harness and leverage this data.
Increasing Fragmentation
Today, customer journeys span multiple channels and devices over time, resulting in data silos and
fragmented identities. As consumers engage with brands across various touchpoints – over the web, mobile
devices and applications, by email and television, and in physical stores – they may not be represented as
single unique individuals with complex behaviors, appearing instead as disparate data points with dozens of
different identifiers. Becky Smith who lives at 123 Main Street may appear as beckys@acme.com when she
uses Facebook, becky@yahoo.com when she signs into Yahoo Finance, cookie 123 when she browses
msn.com, cookie ABC when she browses aol.com, and so on. As a result, marketers struggle to understand
the cross-channel, cross-device habits of consumers and the different steps they take on their path to
conversion. More specifically, data silos and fragmented identities prevent brands from being able to resolve
all relevant data to a specific individual; this poses a challenge to formation of accurate, actionable insights
about a brand’s consumers or campaigns.
Marketing Waste
Every day, brands spend billions of dollars on advertising and marketing, yet many of the messages they
deliver are irrelevant, repetitive, mistimed, or simply reach the wrong audience. In addition, as the marketing
landscape continues to grow and splinter across a growing array of online and offline channels, it is
increasingly difficult to attribute marketing spend to a measurable outcome, such as an in-store visit or sale.
Wasted marketing spend is largely driven by the fragmented ecosystem of brands, data providers, marketing
applications, media providers, and agencies that are involved in the marketing process, but operate without
cohesion. Without a common understanding of consumer identity to unify otherwise siloed data, brands are
unable to define accurate audience segments and derive insights that would enable better decision making.
Heightened Privacy and Security Concerns
Diligence in the areas of consumer privacy and security is and will continue to be paramount. Consumer
understanding of the benefits of marketing technology often lags the pace of innovation, inspiring new
6
demands from government agencies and consumer advocacy groups across the world. These factors
compound the liability every company faces when managing and activating consumer data.
The New Era of People-Based Marketing
Historically, marketers were forced to cast a wide net to reach a desired audience. They might, for example,
have run a television commercial during a specific program or placed generic advertising alongside certain
types of web content, often exposing their message to millions of consumers outside their target audience.
Today, however, rich data opens the door to granular audience targeting and better, more engaging customer
experiences. For example, digital publishers like Facebook and Twitter now provide marketers with the ability
to target very specific audiences – males, over the age of 30, who live in zip code 94123, and own pets, for
instance.
Consumers are demanding personalization, and every piece of marketing content served has the potential to
be individually relevant, addressable, and measurable. By understanding which devices, email addresses,
and postal addresses relate to the same individual, marketers can deliver seamless experiences as
consumers engage a brand across touchpoints. At the same time, by targeting consumers at the individual
level, organizations can reduce marketing waste and more easily attribute their marketing spend to actual
results.
People-Based Marketing is Complex and Challenging to Navigate
Innovation has fueled the growth of a highly-fragmented technology landscape, forcing brands to contend
with thousands of marketing technologies and data silos. To make every customer experience relevant
across channels and devices, organizations need a data foundation and common network that can break
down those silos, make data portable, and accurately recognize people throughout the customer journey.
Marketing is becoming more audience-centric, automated, and optimized. However, a number of important
factors make people-based marketing in the digital era complex and challenging to navigate:
(cid:120) Recognition. For organizations to target audiences at the individual level, they must be able to
recognize consumers across all channels and devices, and link multiple identifiers and data elements
back to a persistent identifier to create a single view of the customer.
(cid:120) Scaled Data Assets. Quality, depth, and recency of data matters when deriving linkages between
identifiers. Organizations must have access to an extensive set of data and be able to match that data
with a high degree of accuracy to perform true cross-device audience targeting.
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Integrations. The fragmented marketing landscape creates a need for a common network of
integrations that make it easy and safe to match and activate data anywhere in the ecosystem.
(cid:120) Walled Gardens. Walled gardens, or marketing platforms that restrict the use of data outside of their
walls, are becoming more pervasive and can result in loss of control, lack of transparency, and
fragmented brand experiences. Organizations need a solution that enables an open ecosystem and
ensures complete control over customer data, along with the flexibility to choose a diversified
approach to meeting marketing goals.
(cid:120) Big Data Challenges. The volume of data available to optimize marketing performance is enormous
and continues to grow. Organizations will continue to struggle with the management, activation,
retrieval, and ability to unify data across channels and formats.
(cid:120) Privacy and Compliance. Preserving brand integrity and delivering positive customer experiences is
a top priority for every marketer. Organizations must be able to manage large sets of complex data
ethically, securely, within legal boundaries, and in a way that protects consumers.
(cid:120) Technical Expertise. Organizing, managing, and deriving insight from large sets of consumer data is
complicated. Consequently, brands must rely on technical expertise and know-how in the form of third
party services to remove the barriers to effectively managing their data and leveraging its full value.
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Acxiom: Solutions That Power People-Based Marketing
Our products and services provide the data foundation brands need to power people-based marketing. We
make it safe and easy to activate, validate, enhance, and unify data, enabling marketers to deliver relevant
messages at scale and link their campaigns to actual results. We help our clients generate higher return on
investment and drive better customer interactions and experiences.
As noted above, Acxiom has three business segments, each helping our clients address the inherent
challenges associated with people-based marketing in a digital era.
Connectivity
As shown in the illustration below, our Connectivity segment enables our clients to build an omni-channel
view of the customer and activate that understanding across the marketing ecosystem.
Through integrations with more than 500 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 a foundational identity resolution layer
enabling our clients to identify and reach consumers across channels and measure the impact of marketing
on sales, using the marketing platform of their choice.
Today, our primary Connectivity offering is LiveRamp IdentityLink™, an identity resolution service that ties
data back to real people and makes it possible to onboard that data for people-based marketing initiatives
across digital channels. Leveraging AbiliTec® and the LiveRamp identity graph, IdentityLink first resolves a
client’s first-, second-, and third-party, exposure, and transaction data to persistent anonymous consumer
identifiers that represent real people in a privacy-safe way. This omni-channel view of the consumer can then
be onboarded to and between any of the 500 plus partners in our ecosystem to support targeting,
personalization and measurement use cases.
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Targeting
Personalization
Measurement
Example
Example
Example
Clients can upload known data
from first-, second-, and third-
party data sources, resolve it to
an omnichannel privacy-safe
link with IdentityLink, then
onboard to one of 500+
LiveRamp partners to deploy
targeted ads to known
customers.
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.
IdentityLink operates in an Acxiom 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 brands partner to execute their marketing including
marketing technology providers, data providers, publishers and agencies.
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IdentityLink for Brands and Agencies. IdentityLink allows brands and their agencies to execute
people-based marketing by creating an omni-channel understanding of the consumer and activating
across their choice of best-of-breed digital marketing platforms
that understanding across their choice of best-of-breed digital marketing platforms.
IdentityLink for Marketing Technology Providers. IdentityLink provides marketing technology
providers 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 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 their reach against and understanding of customers
and prospects.
IdentityLink for Publishers. IdentityLink allows publishers to offer people-based marketing on their
properties. This adds value for brands by providing direct access to their customers and prospects in
the publisher’s premium inventory.
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Audience Solutions
Our Audience Solutions segment helps clients validate the accuracy of their data, enhance it with additional
insight, and keep it up to date, enabling clients to reach desired audiences with highly relevant messages.
Leveraging our recognition and data assets, clients can identify, segment, and differentiate their audiences for
more effective marketing and superior customer experiences. Audience Solutions’ offerings include
InfoBase®, our large consumer data store that serves as the basis for Acxiom’s consumer demographics
products, and AbiliTec, our patented identity resolution technology that assists our clients in reconciling and
managing variations of customer identity over time and across multiple channels.
(cid:120)
InfoBase. With more than 1,500 demographic, socio-economic and lifestyle data elements and
several thousand predictive models, our InfoBase products provide marketers with the ability to
identify and reach the right audience with the right message across both traditional and digital
channels. Through partnerships with over 100 online publishers and digital marketing platforms,
including Facebook, Google, Twitter, 4INFO, AOL, eBay and MSN, marketers can use InfoBase data
to create and target specific audiences. Data can be accessed directly or through the Acxiom
Audience Cloud, a web-based, self-service tool that makes it easy to build and distribute third-party
custom data segments.
(cid:120) AbiliTec. As shown in the illustration below, AbiliTec helps brands recognize individuals and
households using a number of different input variables and connect identities online and offline.
By identifying and linking multiple identifiers and data elements back to a persistent ID, our clients are
able to create a single view of the customer, which allows them to perform more effective audience
targeting and deliver better, more relevant customer experiences.
Marketing Services
Our Marketing Services segment helps clients unify data at the individual level in a privacy-safe environment,
so they can execute people-based marketing campaigns, tie back to real results, and drive a continual cycle
of optimization. We help architect the foundation for data-driven marketing by delivering solutions that
integrate customer and prospect data across the enterprise, thereby enabling clients to establish a single
view of the customer. We also 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. These services allow our clients to generate
higher return on marketing investments and, at the same time, drive better, more relevant customer
experiences.
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Our Marketing Services segment includes the following service offerings: Marketing Database Services and
Strategy and Analytics. The Marketing Services segment also included Impact Email Platform and Services
until the disposition of the business in August 2016.
(cid:120) Marketing Database Services. Our Marketing Database offering provides solutions that unify
consumer data across an enterprise, enabling clients to execute relevant, people-based marketing
and activate data across the marketing ecosystem. Our consumer marketing databases, which we
design, build, and manage for our clients, make it possible for 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
solutions while respecting and protecting consumer privacy.
(cid:120) Strategy and Analytics. Our Strategy and Analytics group is comprised of marketing strategists and
data scientists who leverage industry knowledge and advanced analytics to assist our clients with
identifying growth opportunities, addressing marketing data and technology needs, and adopting best
practices. In addition, we help our clients identify and address their data privacy and governance
requirements
(cid:120)
Impact Email Platform and Services. Until the August 2016 disposition, Acxiom Impact provided
email and cross-channel data-driven marketing solutions, including a proprietary marketing platform
and agency services.
Together, these products and services form the “power grid” for data that brands need to perform people-
based marketing. We provide integrations with the largest number of marketing platforms and data providers
in the digital marketing ecosystem, enabling our clients to innovate through their preferred choice of
technology, data, and services providers.
Our industry-leading recognition and data assets power best-in-class consumer identification and linking
across channels and devices. And, our integrated services offering provides the expertise required to manage
large sets of data legally, ethically, securely, and in a way that protects consumer privacy.
Competitive Strengths
Our competitive strengths include core capabilities that enable brands to execute effective people-based
marketing.
(cid:120) Most Advanced Consumer-Level Recognition. Acxiom’s proprietary, patented recognition
technology draws upon an extensive historical reference base to identify and link together multiple
consumer records and identifiers. We use the pioneering algorithms of AbiliTec and deterministic
matching to link individuals and households to the right cookies, mobile device IDs, and user accounts
at social networks. As a result, we are able match online and offline data with a high degree of speed
and accuracy.
(cid:120) Scale Leader in Data Onboarding and Connectivity. We created the category of Data Connectivity
and we are the largest provider of data onboarding services. We match records with the highest level
of accuracy and offer the most flexibility for activating data through our extensive set of integrations.
Today, we work with over 400 direct customers and onboard the data of more than 1,000 companies
through our partner and reseller relationships.
(cid:120) Extensive Coverage. We activate data across an ecosystem of more than 500 partners, representing
the largest network of connections in the digital marketing space. We use 100% deterministic
matching, resulting in the strongest combination of reach and accuracy. We offer multi-sourced insight
into approximately 700 million consumers worldwide, and our data products contain over 5,000 data
elements from hundreds of sources with permissioning rights.
(cid:120) Unique Position in Marketing Ecosystem. We are a neutral data infrastructure provider. We provide
the connectivity required to build best-of-breed integrated marketing stacks, allowing our clients to
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innovate through their preferred choice of data, technology, and services providers. We strive to make
every marketing application more valuable by providing access to more customer data. We enable the
open marketing stack and power the open garden.
(cid:120) Standard Bearer for Privacy and Security. For more than 45 years, Acxiom has been a leader in
the area of data stewardship, as evidenced by:
o The industry’s first Chief Privacy Officer role created in 1991 whose sole focus is the
protection and responsible use of consumer data
o The use of a data SafeHaven®, a privacy-compliant environment that allows marketers and
partners to connect different types of data while protecting and governing its use
o
Industry-leading expertise in safely connecting data across the online and offline worlds
o The creation of aboutthedata.com®, the first-of-its-kind consumer portal that provides
consumers with more transparency and understanding about how their data is gathered and
used for marketing purposes
(cid:120) Expertise in Big Data. We currently manage large datasets for leading marketing organizations
around the world, executing more than 1 trillion global data transactions per week. This data includes
both customer and prospect records as well as core campaign and engagement logs used for
measurement and analytics.
(cid:120) Strong Client Relationships. We serve more than 2,500 clients directly, and tens of thousands of
companies around the world use our data. We manage data for more than 40% of the Fortune 100
and have deep relationships with companies and business-to-consumer marketing leaders in key
industries, including financial services, retail, telecommunications, media, insurance, health care,
automotive, technology, and travel and entertainment.
Growth Strategy
While the terms “big data” and “data management platforms,” or “DMPs,” have recently become more
common, for more than 45 years, Acxiom has been a thought leader and innovator in solving large-scale data
problems and improving marketing results for our clients. Key elements of our growth strategy include:
(cid:120) Continue to Innovate and Extend Leadership Position in Data Connectivity. We intend to
continue to make substantial investments in our Connectivity solutions and extend our market
leadership through innovation. Our investments will focus on automation, speed, higher match rates,
expanded partner integrations, and new product development.
(cid:120) Establish the Standard for Recognition and User Identification in the Marketing Ecosystem. We
intend to establish AbiliTec as the standard for consumer-level recognition across the marketing
ecosystem, providing a single source for user identification and audience targeting.
(cid:120) Continue to Grow Our Client Base and Expand Existing Client Relationships. We plan to acquire
an increasing number of new customers through the expansion of our direct sales teams. In addition,
we intend to increase revenue from existing customers, many of whom are new Connectivity
customers who have data infrastructure needs our Audience Solutions and Marketing Services
businesses can help address.
(cid:120) Expand Global Presence. We believe significant opportunities exist for us to expand our Connectivity
offerings in key geographic markets where we already operate, such as Europe, China, Japan, and
Australia. We intend to leverage existing infrastructure and expand operations to launch and grow our
Connectivity business in those key markets.
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(cid:120) Build an Enduring Business. We are focused on operational excellence, constantly improving tools,
processes, and resource allocation to ensure we have superior products and services. We define our
culture around “PACT” – Passion, Accountability, Creativity and Teamwork – to achieve a high-
performance organization.
Privacy Considerations
The growth of the online advertising and e-commerce industries are converging, with consumers expecting a
seamless experience across all channels, in real time. This challenges marketing organizations to balance
the deluge of data and demands of the consumer with responsible, privacy-compliant methods of managing
data internally and with advertising technology intermediaries.
We have policies and operational practices governing Acxiom’s use of data that we believe reflect leading
best practices and actively promote a set of effective privacy guidelines for digital advertising and direct
marketing via all channels of addressable media, e-commerce, risk management and information industries
as a whole. We remain certified under the European Union (“EU”)-U.S. Safe Harbor and are preparing for its
potential replacement, the EU-US Privacy Shield. We also are operating as applicable under EU model
contract clauses and contractually comply with other international data protection requirements in an effort to
ensure our continued ability to process information across borders. We have a dedicated team in place to
oversee our compliance with the privacy regulations that govern our business activities in the various
countries in which we operate.
The U.S. Congress continues to debate privacy legislation, and there are many different types of privacy
legislation pending at the state level. In all of the non-U.S. locations in which we do business, laws and
regulations governing the collection and use of personal data either exist or are being contemplated.
We expect the trend of enacting and revising data protection laws to continue and that new and expanded
privacy legislation in various forms will be implemented in the U.S. and in other countries around the globe.
We are supportive of legislation that codifies the current industry guidelines of meaningful transparency for
the individual and appropriate choices regarding whether information related to that individual is shared with
independent third parties for marketing purposes. We also support legislation requiring all custodians of
sensitive information to deploy reasonable information security safeguards to protect that information.
Clients
Our client base consists primarily of Fortune 1000 companies and organizations in the financial services,
insurance, information services, direct marketing, retail, consumer packaged goods, technology, automotive,
healthcare, travel and communications industries as well as in non-profit and government sectors. We seek
to maintain long-term relationships with our clients, many of which typically operate under contracts with initial
terms of at least two years. We have historically experienced high retention rates among our clients.
Our ten largest clients represented approximately 36% of our revenues in fiscal year 2017 but no single client
accounted for more than 10% of our revenues as a whole.
Sales and Marketing
The process of buying marketing services has become more complex and therefore requires a more
collaborative decision process between client and provider. As such, our approach to sales and marketing is
strategy-led and client-intimate. Utilizing a proprietary maturity model, we employ both a diagnostic
approach, guided by gaps between a client’s current and desired state, and a prescriptive approach, focused
on proven solutions and approaches to close those gaps.
Our sales teams focus on new business development across all markets – sales to new clients and sales of
new lines of business to existing clients, as well as revenue growth within existing accounts. We organize our
client relationships around industry verticals, as we believe that understanding and speaking to the nuances
of each industry is the most effective way to positively impact our clients’ businesses.
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Our partner organization focuses on enabling key media partners, agencies and software providers who can
help drive value for our clients or who benefit from using Acxiom for data, analytics and audience
management.
The focus of our marketing efforts is to disseminate our thought leadership. We do this by promoting topical
points of view across multiple touch points and by fueling our sales efforts with prescriptive insights.
Research and Development
Research and development expense was $82.1 million in fiscal 2017, compared to $74.2 million in fiscal
2016, and $74.2 million in fiscal 2015. Management expects to maintain investment spending at similar
levels in fiscal 2018.
Competition
Competitors for our Connectivity services are typically also members of our partner ecosystem, creating a
paradigm where co-opetition is the norm. Our primary competitors are companies that sell data onboarding as
part of a suite of marketing applications or services. Walled gardens that offer a direct interface for matching
CRM data compete for a portion of our services, particularly amongst marketers that have not yet adopted in-
house platforms for programmatic marketing or attribution. Some providers of tag management, data
management, and cross-device marketing solutions have adopted positioning similar to our Connectivity
business and compete for mindshare.
Our traditional competitors for our Audience Solutions and Marketing Services offerings have been database
marketing services providers. We find that the competitive landscape is becoming more complex and now
includes a range of players. Our primary competitors tend to be database marketing services providers, data
companies and data distributors. In-house IT departments provide a secondary source of competition for
portions of our offerings. Other types of companies such as technology consultants, business process
outsourcers, analytics consultants, and management consultants participate to a lesser extent in portions of
our market space.
Different types of competitors have different core competencies and assets that they bring to bear. We
compete for both broad-based and specific solutions. Our competitors can vary depending on the type of
solution we are competing for. Generally, competition is based on the quality and reliability of the offering,
whether the strategy will deliver the desired business results for the client, historical success and market
presence. Competition for more granular offerings is based on variables that are more specific. With regard to
data products, for example, we compete with two types of firms: data providers and list providers. Competition
is based on the quality and comprehensiveness of the information provided, the ability to deliver the
information in products and formats that our clients need, and, to a lesser extent, pricing.
In local markets outside the United States, we face both global players as well as local market players. Local
market players vary between those offering a range of services and those who may compete with us in more
limited areas, such as for data products or data integration services.
We continue to focus on levers to increase our competitiveness and believe that investing in the product and
technology platform of our business is a key to our continued success. Further, we believe that enabling a
broad partner ecosystem will help us to continue to provide competitive differentiation.
Seasonality and Inflation
Although we cannot accurately determine the amounts attributable to inflation, we are affected by inflation
through increased costs of compensation and other operating expenses. If inflation were to increase over the
low levels of recent years, the impact in the short run would be to cause increases in costs, which we would
attempt to pass on to our clients, although there is no assurance that we would be able to do so. Generally,
the effects of inflation in recent years have been offset by technological advances, economies of scale and
other operational efficiencies.
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Our traditional direct marketing operations typically experience their lowest revenue in the first quarter of the
fiscal year, with higher revenue in the second, third, and fourth quarters. To minimize the impact of these
fluctuations, we continue to seek long-term arrangements with more predictable revenues.
Pricing
Given the diverse nature of the markets and industries in which our clients operate, we deploy a number of
pricing techniques designed to yield acceptable margins and returns on invested capital. In our Marketing
Services segment, the majority of revenue is generated from highly customized, outsourced solutions in
which prices are dictated by the scope, complexity, nature of assets deployed and service levels required.
These solutions are generally provided under long-term contracts and our revenue consists primarily of
recurring monthly billings, and to a lesser extent, other volume and variable based billings. In our Audience
Solutions segment, revenue is generated from 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, Audience
Solutions generates digital data revenue from certain publishers and addressable television providers in the
form of revenue-sharing agreements. Finally, our Connectivity segment primarily generates revenue from
monthly recurring subscription fees sold on an annual basis. To a lesser extent, it also generates revenue
from data providers and certain digital publishers in the form of revenue-sharing agreements. Examples of
Acxiom pricing techniques are value based recurring revenue models, transactional models, subscription or
license models, and professional services models, among others.
Employees
Acxiom employs approximately 3,260 employees (associates) worldwide. No U.S. associates are
represented by a labor union or are the subject of a collective bargaining agreement. To the best of
management’s knowledge, approximately 15 associates are elected members of work councils or trade
unions representing Acxiom associates in the European Union. Acxiom has never experienced a work
stoppage, and we believe that our employee relations are good.
Executive Officers of the Registrant
Acxiom’s executive officers, their current positions, ages and business experience are listed below. They are
elected by the board of directors annually or as necessary to fill vacancies or to fill new positions. There are
no family relationships among any of the officers or directors of the Company.
Scott E. Howe, age 49, joined the Company in 2011 as its Chief Executive Officer and President. He
currently serves on and chairs the Executive Committee of the Company’s board of directors. Prior to joining
Acxiom, he served as corporate vice president of Microsoft Advertising Business Group from 2007–2010. In
this role, he managed a multi-billion dollar business encompassing all emerging businesses related to online
advertising, including search, display, ad networks, in-game, mobile, digital cable and a variety of enterprise
software applications. In 2010, he co-founded and served as interim CEO and president of King of the Web,
Inc., a portfolio of online game shows. Mr. Howe was employed from 1999–2007 as an executive and later
as a corporate officer at aQuantive, Inc. where he managed three lines of business, including Avenue
A|Razorfish (a leading Seattle-based global consultancy in digital marketing and technology), DRIVE
Performance Media (now Microsoft Media Network), and Atlas International (an adserving technology now
owned by Facebook). Earlier in his career, he was with The Boston Consulting Group and Kidder, Peabody &
Company, Inc. He previously served on the boards of Blue Nile, Inc. (NASDAQ: NILE), a leading online
retailer of diamonds and fine jewelry, the Internet Advertising Bureau (IAB) and the Center for Medical Weight
Loss. He is a magna cum laude graduate of Princeton University, where he earned a degree in economics,
and he holds an MBA from Harvard University.
Warren C. Jenson, age 60, is the Company’s Chief Financial Officer & Executive Vice President. He also
serves as President of Acxiom International. He joined Acxiom in 2012 and is responsible for all aspects of
Acxiom’s financial management and the Company’s business operations outside the United States. Prior to
joining Acxiom, he served as COO at Silver Spring Networks, a successful start-up specializing in smart grid
networking technology, where he had responsibility for the company’s service delivery, operations and
manufacturing organizations. From 2002 - 2008 he was CFO at Electronic Arts Inc., a leading global
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interactive entertainment software company. He has more than 30 years of experience in operational finance
and has been CFO of some of the most important success stories of the last two decades including
Amazon.com, NBC and Electronic Arts. In addition, he was twice designated one of the “Best CFOs in
America” by Institutional Investor magazine, and he was also honored as Bay Area Venture CFO of the Year
in 2010. He also has significant experience in mergers, acquisitions and in the development and formulation
of strategic partnerships. His board experience includes Digital Globe (NYSE: DGI), Tapjoy, and Marshall
School of Business at the University of Southern California. Mr. Jenson received both an undergraduate
degree in accounting and a Master of Accountancy from Brigham Young University.
Jerry C. Jones, age 61, is the Company’s Chief Ethics and Legal Officer, Executive Vice President &
Assistant Secretary. He joined Acxiom in 1999 and oversees legal and privacy matters. He also assists in the
strategy and execution of mergers and alliances and the Company’s strategic initiatives. Previously, he was
employed for 19 years as an attorney with the Rose Law Firm in Little Rock, Arkansas, representing a broad
range of business interests. He is a member of the board of directors of Agilysys, Inc. (NASDAQ: AGYS), a
leading developer and marketer of proprietary enterprise software, services and solutions to the hospitality
and retail industries, where he serves on the Audit Committee and the Nominating and Governance
Committee. He also serves on the board of directors of Heifer International and on the University of Arkansas
at Little Rock Board of Visitors, and is a co-founder of uhire U.S. He is a Special Advisor to the Club de
Madrid, an organization composed of over 100 former Presidents and Prime Ministers from more than 60
democratic countries. He was a member of the board of directors of Entrust, Inc. until it was purchased by
private investors in 2009 and is former chairman of the board of the Arkansas Virtual Academy. Mr. Jones
holds a juris doctorate degree and a bachelor’s degree in public administration from the University of
Arkansas.
Richard E. Erwin, age 50, joined Acxiom in 2015 as President and General Manager of Acxiom’s Audience
Solutions Division and is responsible for driving the strategy, growth and profitability of Acxiom’s industry-
leading data products and services. With over two decades in the data-driven marketing industry, he is a
leading voice in the field of omnichannel marketing and an outspoken advocate for the value of data in the
global economy. Prior to joining Acxiom, Mr. Erwin spent 10 years at the large global information company
Experian, most recently as president of the Consumer Insights and Targeting Division of Experian Marketing
Services. During his tenure, he led the turnaround and growth of seven legacy data and analytics businesses
and established the company as a force in the digital marketing services industry. Prior to Experian, he held
numerous senior management roles in his 12-year career at RR Donnelley. He is a director of the Internet
Advertising Bureau, and a founding director of the IAB’s Data Center of Excellence. He is also highly active
as a board trustee of Shedd Aquarium in Chicago. He is a past vice chairman and treasurer of the Data
Marketing Association (DMA), and a past board director at Chicago Youth Centers and RevSpring, Inc. Mr.
Erwin received a master’s degree in business administration from Northwestern University (Kellogg) and a
bachelor’s degree in marketing from Michigan State University.
S. Travis May, age 29, is President and General Manager of Acxiom's Connectivity Division. He is
responsible for all aspects of the Connectivity line of business, which includes the LiveRamp Connect product
suite in the digital marketing ecosystem. He joined Acxiom in 2014 through its acquisition of LiveRamp, Inc.
and initially served as Senior Vice President of Products, overseeing all product management for Acxiom.
Prior to joining Acxiom, Mr. May was Vice President at LiveRamp, where he led product, partnerships, and
business operations from the company's early ideational stages through its acquisition. Prior to LiveRamp,
Mr. May was co-founder and CEO of Campus Venture Network, Inc., a software-as-a-service platform for
business plan competitions acquired by the Ewing M. Kauffman Foundation in 2009. He graduated with Phi
Beta Kappa and magna cum laude honors with degrees in economics and mathematics from Harvard
College.
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Dennis D. Self, age 51, is President and General Manager of Acxiom's Marketing Services Division. He
joined Acxiom in 2013 and provides strategic leadership to the teams that serve Acxiom’s Marketing Services
clients, including Sales and Account Management, Strategy Consulting and Analytical Services, Product
Management and Engineering, and Delivery and Operational Services. As a member of Acxiom’s Executive
Committee, he helps execute on the Company’s overall strategic imperatives. Previously, Mr. Self was Senior
Vice President for the Marketing Services Delivery organization and Chief Information Officer for Acxiom.
Prior to joining Acxiom, he served as Vice President and CIO at Gilead Sciences, Inc. from 2011-2013. Prior
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to Gilead Sciences, Inc. he served as CIO at Electronic Arts for four years. His previous experience includes
serving as an IT strategy consultant for Deloitte Consulting, HP, A.T. Kearney and Andersen Consulting. Mr.
Self holds a bachelor of science degree in Management Information Systems from Old Dominion University
and an MBA from the University of Chicago.
Terilyn Juarez Monroe, age 50, is the Company’s Chief People & Culture Officer, Senior Vice President of
Human Resources. She joined Acxiom in 2015. In her role, she oversees areas that drive a high performing
culture including: Talent Acquisition and Development, Total Rewards, Organization and Talent Performance,
Associate Relations, Engagement, Community Relations/Philanthropy, and HR Operations. In 2015, Ms.
Monroe was named one of the Top 50 Global Diversity Professionals in Industry by The Economist, a list that
recognizes the achievements of individuals who have made the practice of diversity and inclusion a focus of
their careers. Prior to joining Acxiom, Ms. Monroe served as Intuit’s Chief Diversity Officer and Director of
Engagement which included oversight for the Intuit Foundation. During Ms. Monroe’s 13-year tenure at Intuit,
she developed a breadth and depth of experience resulting from rotational assignments and increasing
leadership and business partnership responsibilities across most areas of HR. She also sat on several
organization boards and task forces throughout her tenure. Prior to joining Intuit she worked for Nortel
Networks, Bay Networks, Amdocs and Amdahl in the areas of executive communication and coaching,
strategic business planning, mergers and acquisitions, community relations, learning and development,
employee communications, and global events management. Ms. Monroe graduated from San Jose State
University with a bachelor of arts in public relations and a minor in business.
Item 1A. Risk Factors
The risks described below could materially and adversely affect our business, financial condition and results
of future operations.
Failure to keep up with rapidly changing technologies and marketing practices could cause our
products and services to become less competitive or obsolete, which could result in loss of market
share and decreased revenues and net income.
Advances in information technology are changing the way our clients use and purchase information products
and services. Maintaining the technological competitiveness of our data products, processing functionality,
software systems and services is key to our continued success. However, the complexity and uncertainty
regarding the development of new technologies and the extent and timing of market acceptance of innovative
products and services create difficulties in maintaining this competitiveness. Without the timely introduction of
new products, services and enhancements, our products and services will become technologically or
commercially obsolete over time, in which case our revenue and operating results would suffer.
Consumer needs and the business information industry as a whole are in a constant state of change. For
example, in recent years, we have seen a decline in the use of direct mail marketing and an increase in the
use of alternative marketing channels such as online advertising. Our ability to continually improve our
current processes and products in response to changes in technology and to develop new products and
services are essential in maintaining our competitive position, preserving our market share and meeting the
increasingly sophisticated requirements of our clients. If we fail to enhance our current products and services
or fail to develop new products in light of emerging technologies and industry standards, we could lose clients
to current or future competitors, which could result in impairment of our growth prospects, loss of market
share and decreased revenues.
A significant breach of the confidentiality of the information we hold or of the security of our or our
customers’, suppliers’, or other partners’ computer systems could be detrimental to our business,
reputation and results of operations.
Our business requires the storage, transmission and utilization of data, including personally identifiable
information, much of which must be maintained on a confidential basis. Although we have extensive physical
and cyber security and associated procedures, our databases have in the past been and in the future may be
subject to unauthorized access by third parties. In recent years, the frequency, severity, sophistication and
public awareness of cyber attacks or other intentional misconduct by computer hackers has significantly
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increased, and government agencies and security experts have warned about the growing risks of hackers,
cyber criminals and other potential attacks targeting information technology systems. Such third parties could
attempt to gain entry to our systems for the purpose of stealing data or disrupting the systems. Third parties
may also attempt to fraudulently induce employees or customers into disclosing sensitive information such as
user names, passwords or other information to gain access to our customers’ data or our data, including
intellectual property and other confidential business information. We believe we have taken appropriate
measures to protect our systems from intrusion, but we cannot be certain that advances in criminal
capabilities, discovery of new vulnerabilities in our systems and attempts to exploit those vulnerabilities,
physical system or facility break-ins and data thefts or other developments will not compromise or breach the
technology protecting our systems and the information we possess.
Furthermore, we face increasing cyber security risks as we receive and collect data from new sources, such
as social media, and as we and our customers continue to develop and operate in cloud-based information
technology environments. In the event that our protection efforts are unsuccessful and we experience an
unauthorized disclosure of confidential information or the security of such information or our systems are
compromised, we could suffer substantial harm. Any breach could result in one or more third parties
obtaining unauthorized access to our customers’ data or our data, including personally identifiable
information, intellectual property and other confidential business information. Such a security breach could
result in operational disruptions that impair our ability to meet our clients’ requirements, which could result in
decreased revenues. Also, whether there is an actual or a perceived breach of our security, our reputation
could suffer irreparable harm, causing our current and prospective clients to reject our products and services
in the future and deterring data suppliers from supplying us data. Further, we could be forced to expend
significant resources in response to a security breach, including repairing system damage, increasing cyber
security protection costs by deploying additional personnel and protection technologies, and litigating and
resolving legal claims, all of which could divert the attention of our management and key personnel away from
our business operations. In any event, a significant security breach could materially harm our business,
financial condition and operating results.
Our customers, suppliers and other partners are primarily responsible for the security of their information
technology environments, and we rely heavily on them and other third parties to supply clean data content
and/or to utilize our products and services in a secure manner. Each of these third parties may face risks
relating to cyber security, which could disrupt their businesses and therefore materially impact ours. While we
provide guidance and specific requirements in some cases, we do not directly control any of such parties’
cyber security operations, or the amount of investment they place in guarding against cyber security threats.
Accordingly, we are subject to any flaw in or breaches to their systems, which could materially impact our
business, operations and financial results.
Changes in legislative, judicial, regulatory, or cultural environments relating to information collection
and use may limit our ability to collect and use data. Such developments could cause revenues to
decline, increase the cost and availability of data and adversely affect the demand for our products
and services.
In the U.S., the US Congress and state legislatures, along with federal regulatory authorities have recently
increased their attention on matters concerning the collection and use of consumer data. The regulatory
framework for privacy issues worldwide is currently evolving and is likely to remain uncertain for the
foreseeable future. The occurrence of unanticipated events often rapidly drives the adoption of legislation or
regulation affecting the use of data and the manner in which we conduct our business. Restrictions could be
placed upon the collection, management, aggregation and use of information, which could result in a material
increase in the cost of collecting certain kinds of data. In all of the non-U.S. locations in which we do
business, legislation restricting the collection and use of personal data already exists or is presently
contemplated. For example, on April 14, 2016, the European Parliament formally adopted the General Data
Protection Regulation (the “GDPR”), which will establish a new framework for data protection in Europe when
it becomes effective in May 2018. The GDPR will impose more stringent operational requirements for entities
processing personal information, such as stronger safeguards for data transfers to countries outside the
European Union (“EU”), reliance on express consent from data subjects (as opposed to assumed or implied
consent), a right to require data processors to delete personal data, and stronger enforcement authorities and
mechanisms. Between now and the time that the GDPR becomes effective, we may need to modify our
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platform or our business to comply with new requirements contained in the GDPR or to address client
concerns relating to the GDPR, and any such measures may result in costs and expenses, and any failure to
achieve required data protection standards may result in lawsuits, regulatory fines, or other actions or liability,
all of which may harm our operating results. In the U.S., non-sensitive data about a consumer is generally
usable under current rules and regulations so long as the person does not affirmatively “opt-out” of the
collection of such data. In Europe, the reverse is true. If the European “opt-in” model were to be adopted in
the U.S., less data would be available and the cost of data would be higher. Decreased availability and
increased costs of information could adversely affect our ability to meet our clients’ requirements and could
result in decreased revenues. In addition to government regulation, privacy advocacy and industry groups
may propose new and different self-regulatory standards that either legally or contractually apply to us or our
clients.
In addition, with regard to transfers of personal data from our employees and clients from the EU to the U.S.,
we historically have relied upon adherence to the U.S. Department of Commerce’s Safe Harbor Privacy
Principles and compliance with the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks agreed to by the U.S.
Department of Commerce and the EU and Switzerland, which established a means for legitimizing the
transfer of personal data by U.S. companies from the European Economic Area (the “EEA”), to the United
States. The U.S.-EU Safe Harbor Framework was invalidated in October 2015 by a decision of the European
Court of Justice (the “ECJ Ruling”). Because of the ECJ Ruling, the Swiss data protection regulator has
questioned the status of the U.S.-Swiss Safe Harbor Framework. Further, a potential replacement for the
U.S.-EU Safe Harbor, the EU-U.S. Privacy Shield, is still under negotiation and though we anticipate the final
result to be materially similar to the invalid U.S.-EU Safe Harbor program, it is not yet clear what the EU-U.S.
Privacy Shield will require or whether it will formally become effective. In light of these matters, we are
engaging in measures designed to legitimize our transfers of personal data from the EEA to the United
States, and may find it necessary or desirable to make other changes to our personal data handling. We may
be unsuccessful in establishing legitimate means for our transfer of personal data from the EEA or otherwise
responding to the ECJ Ruling, and we may experience reluctance or refusal by current or prospective
European clients to use our solutions. Our response to the ECJ Ruling may cause us to assume additional
liabilities or incur additional expenses for implementing compliance requirements, and the ECJ Ruling and our
response could adversely affect our billings. Additionally, we and our clients may face a risk of enforcement
actions by data protection authorities in the EEA until the time, if any, that personal data transfers to us and
by us from the EEA are legitimized under applicable EU data protection law.
Because the interpretation and application of privacy and data protection laws, regulations and standards are
uncertain, it is possible that these laws, regulations and standards may be interpreted and applied in a
manner that is inconsistent with our data management practices or the technological features of our solutions.
If so, in addition to the possibility of fines, investigations, lawsuits and other claims and proceedings, it may be
necessary or desirable for us to fundamentally change our business activities and practices or modify our
software, which could have an adverse effect on our business. We may be unable to make such changes or
modifications in a commercially reasonable manner or at all. Any inability to adequately address privacy
concerns, even if unfounded, or any actual or perceived failure to comply with applicable privacy or data
protection laws, regulations, standards and policies, could result in additional cost and liability to us, damage
our reputation, inhibit sales and harm our business. Furthermore, the costs of compliance with, and other
burdens imposed by, the laws, regulations, standards and policies that are applicable to the businesses of our
clients may limit the use and adoption of, and reduce the overall demand for, our platform. Privacy concerns,
whether valid or not valid, may inhibit market adoption of our platform particularly in certain industries and
foreign countries.
f
Unfavorable publicity and negative public perception about our industry could adversely affect our
business and operating results.
With the growth of online advertising and e-commerce, there is increasing awareness and concern among the
general public, privacy advocates, mainstream media, governmental bodies and others regarding marketing,
advertising, and privacy matters, particularly as they relate to individual privacy interests and the global reach
of the online marketplace. See “Item 1. Business – Privacy Considerations” in this Form 10-K. Any
unfavorable publicity or negative public perception about us, our industry or even our competitors can affect
our business and results of operations, and may lead to additional regulatory scrutiny or lawmaking that
19
affects us or our industry. For example, in recent years, consumer advocates, mainstream media and elected
officials have increasingly and publicly criticized the data and marketing industry for its collection, storage and
use of personal data. This public scrutiny may lead to general distrust of our industry, consumer reluctance to
share and permit use of personal data and increased consumer opt-out rates, any of which could negatively
influence, change or reduce our current and prospective clients’ demand for our products and services and
adversely affect our business and operating results.
Industry consolidations may increase competition for our products and services, which could
negatively impact our financial condition and operating results.
We compete against numerous providers of products and services in several separate markets. See “Item 1.
Business - Competition” in this Form 10-K. Since we offer a larger variety of products and services than
many of these competitors, we have been able to successfully compete. However, the dynamics of the
marketplace would be significantly altered if several of these providers were to combine with each other to
offer a wider variety of products and services that more directly compete with our portfolio of products and
services. If our competitors were to combine forces to create a single-source provider of multiple products
and services to the markets in which we compete, we could experience increased price competition, lower
demand for our products and services, and loss of market share, each of which could negatively affect our
operating results.
Significant system disruptions, loss of data center capacity or interruption of telecommunication
links could adversely affect our business and results of operations.
Our business is heavily dependent upon highly complex data processing capability. Our ability to protect our
data centers against damage or interruption from fire, flood, tornadoes, power loss, telecommunications or
equipment failure or other disasters and events beyond our control is critical to our continued success. The
online services we provide are dependent on links to telecommunication providers. We believe we have
taken reasonable precautions to protect our data centers and telecommunication links from events that could
interrupt our operations. Any damage to our data centers or any failure of our telecommunications links that
causes loss of data center capacity or otherwise causes interruptions in our operations, however, could
materially adversely affect our ability to quickly and effectively respond to our clients’ requirements, which
could result in loss of their confidence, adversely impact our ability to attract new clients and force us to
expend significant resources to repair the damage. Such events could have a material adverse effect on our
business, financial condition and operating results.
Each of our business segments is subject to substantial competition from a diverse group of
competitors. New products and pricing strategies introduced by these competitors in the markets
where our products and services are offered could decrease our market share or cause us to lower
our prices in a manner that reduces our operating margin and the profitability of our products.
Each of our business segments faces significant competition in all its offerings and within each of its markets.
See “Item 1. Business - Competition” in this Form 10-K. Our competitors include database marketing
services providers, DMPs (Data Management Platforms), data companies and data distributors, some of
whom may have significantly greater financial, technical, marketing or other resources allocated to serving
customers. Other types of companies such as technology consultants, business process outsourcers,
analytics consultants and management consultants participate to a lesser extent in portions of our market
space. Additionally, we compete with the in-house IT departments of some of our existing and prospective
clients that have developed or are developing the in-house capacity to perform the services we provide.
Maintaining technological competitiveness in our data products, processing functionality, software systems
and services, continually improving our current processes, and developing and introducing new products and
services are necessary to maintain our competitive position. If we fail to do so, we could lose clients to
current or future competitors, which could result in decreased revenues, net income and earnings per share.
The resources we allocate to each market in which we compete vary, as do the number and size of our
competitors across these markets. These competitors may be in a better position to develop new products
and pricing strategies that more quickly and effectively respond to changes in customer requirements in these
markets. Some of our competitors may choose to sell products or services competitive to ours at lower prices
20
by accepting lower margins and profitability, or may be able to sell products or services competitive to ours at
lower prices given proprietary ownership of data, technical superiority or economies of scale. Such
introduction of competent, competitive products, pricing strategies or other technologies by our competitors
that are superior to or that achieve greater market acceptance than our products and services could
adversely affect our business. In such event, we could experience a decline in market share and be forced to
reduce our prices, resulting in lower profit margins for the Company.
Engagements with certain clients, particularly those with long-term, fixed price agreements, may
prove to be costlier than anticipated, thereby adversely impacting future operating results.
The pricing and other terms of our client contracts, are based on estimates and assumptions we make at the
time we enter into these contracts. These estimates reflect our best judgments regarding the nature of the
engagement and our expected costs to provide the contracted services and could differ from actual
results. Any increased or unexpected costs or unanticipated delays in connection with the performance of
these engagements, including delays caused by factors outside our control, could make these contracts less
profitable or unprofitable, which would have an adverse effect on our profit margin. Our exposure to this risk
increases generally in proportion to the scope of the client contract and is higher in the early stages of such a
contract. Our failure to meet a client’s expectations in any type of contract may result in an unprofitable
engagement, which could adversely affect our operating results and result in future rejection of our products
and services by current and prospective clients.
The failure to recruit and retain qualified personnel could hinder our ability to successfully manage
our business, which could have a material adverse effect on our financial position and operating
results.
Our growth strategy and future success depend in large part on our ability to attract and retain technical,
client services, sales, consulting, research and development, marketing, administrative and management
personnel. The complexity of our data products, processing functionality, software systems and services
requires highly trained professionals. While we presently have a sophisticated, dedicated and experienced
team of associates who have a deep understanding of our business and in many cases have been with
Acxiom for decades, the labor market for these individuals has historically been very competitive due to the
limited number of people available with the necessary technical skills and understanding, compensation
strategies, general economic conditions and various other factors. As the business information and
marketing industries continue to become more technologically advanced, we anticipate increased competition
for qualified personnel. The loss or prolonged absence of the services of highly trained personnel like the
Company’s current team of associates, or the inability to recruit and retain additional, qualified associates,
could have a material adverse effect on our business, financial position or operating results.
Processing errors or delays in completing service level requirements could result in loss of client
confidence, harm to our reputation and negative financial consequences.
Processing errors, or significant errors and defects in our products, can be harmful to our business and result
in increases in operating costs. Such errors may result in the issuance of credits to clients, re-performance of
work, payment of damages, future rejection of our products and services by current and prospective clients
and irreparable harm to our reputation. Likewise, the failure to meet contractual service level requirements or
to meet specified goals within contractual timeframes could result in monetary penalties or lost
revenue. Taken together, these issues could result in loss of revenue and decreases in profit margins as
service and support costs increase.
Data suppliers may withdraw data that we have previously collected or withhold data from us in the
future, leading to our inability to provide products and services to our clients, which could lead to a
decrease in revenue and loss of client confidence.
Much of the data that we use is either purchased or licensed from third-party data suppliers, and we are
dependent upon our ability to obtain necessary data licenses on commercially reasonable terms. We compile
the remainder of the data that we use from public record sources. We could suffer material adverse
consequences if our data suppliers were to withhold their data from us, which could occur either because we
21
fail to maintain sufficient relationships with the suppliers or if they decline to provide, or are prohibited from
providing, such data to us due to legal, contractual, privacy, competition or other economic concerns. For
example, data suppliers could withhold their data from us if there is a competitive reason to do so, if we
breach our contract with a supplier, if they are acquired by one of our competitors, if legislation is passed
restricting the use or dissemination of the data they provide or if judicial interpretations are issued restricting
use of such data. Additionally, we could terminate relationships with our data suppliers if they fail to adhere to
our data quality standards. If a substantial number of data suppliers were to withdraw or withhold their data
from us, or if we sever ties with our data suppliers based on their inability to meet our data standards, our
ability to provide products and services to our clients could be materially adversely impacted, which could
result in decreased revenues, net income and earnings per share.
A failure in the integrity or a reduction in the quality of our data could harm our brand and result in a
loss of revenue and an increase in legal claims.
The reliability of our solutions depends upon the integrity and quality of the data in our database. A failure in
the integrity of our database, whether inadvertently or through the actions of a third party, or a reduction in the
quality of our data could harm us by exposing us to client or third-party claims or by causing a loss of client
confidence in our solutions. We may experience an increase in risks to the integrity of our database and
quality of our data as we move toward real-time, non-identifiable, consumer-powered data through our
Enterprise Data Management Platform. We must continue to invest in our database to improve and maintain
the quality, timeliness and coverage of the data if we are to maintain our competitive position and retain our
clients’ confidence. Failure to do so could result in significant harm to our reputation and growth prospects,
as well as a loss of revenue.
The loss of a contract upon which we rely for a significant portion of our revenues could adversely
affect our operating results.
Our ten largest clients represented approximately 36% of our revenues in fiscal year 2017, but no single client
accounted for more than 10% of the revenues of the Company as a whole. The loss of, or decrease in
revenue from, any of our significant clients for any reason could have a material adverse effect on our
revenue and operating results.
While a significant amount of our total revenue is currently derived from clients who have long-term contracts
(defined as contracts with initial terms of two years or more), these contracts have been entered into at
various times, and some of them are in the latter part of their terms and are approaching their originally
scheduled expiration dates. In addition, many of these contracts contain provisions allowing the client to
terminate prior to the end of the term upon giving advance notice. Even if renewed by these clients, the terms
of the renewal contracts may not have a term as long as, or may otherwise be on terms less favorable than,
the original contract. Revenue from clients with long-term contracts is not necessarily “fixed” or guaranteed
as portions of the revenue from these clients is volume-driven or project-related. With respect to the portion
of our business that is not under long-term contract, revenues are even less predictable and are almost
completely volume-driven or project-related. Therefore, we must engage in continual sales efforts to maintain
revenue stability and future growth with all our clients or our operating results will suffer. If a significant client
fails to renew a contract, or renews the contract on terms less favorable to us than before, our business could
be negatively impacted if additional business were not obtained to replace or supplement that which was lost.
Acquisition and divestiture activities may disrupt our ongoing business and may involve increased
expenses, and we may not realize the financial and strategic goals contemplated at the time of a
transaction, all of which could adversely affect our business and growth prospects.
Historically, we have engaged in acquisitions to grow our business. To the extent we find suitable and
attractive acquisition candidates and business opportunities in the future, we may continue to acquire other
complementary businesses, products and technologies and enter into joint ventures or similar strategic
relationships. While we believe we will be able to successfully integrate newly acquired businesses into our
existing operations, there is no certainty that future acquisitions or alliances will be consummated on
acceptable terms or that we will be able to integrate successfully the services, content, products and
personnel of any such transaction into our operations. In addition, any future acquisitions, joint ventures or
22
similar relationships may cause a disruption in our ongoing business and distract our management. Further,
we may be unable to realize the revenue improvements, cost savings and other intended benefits of any such
transaction. The occurrence of any of these events could result in decreased revenues, net income and
earnings per share.
We have also divested assets in the past and may do so again in the future. As with acquisitions, divestitures
involve significant risks and uncertainties, such as:
(cid:120) disruption of our ongoing business;
(cid:120)
reductions of our revenues or earnings per share;
(cid:120) unanticipated liabilities, legal risks and costs;
(cid:120)
the potential loss of key personnel;
(cid:120) distraction of management from our ongoing business; and
(cid:120)
impairment of relationships with employees and clients because of migrating a business to new
owners.
Because acquisitions and divestitures are inherently risky, transactions we undertake may not be successful
and may have a material adverse effect on our business, results of operations, financial condition or cash
flows.
Our balance sheet includes significant amounts of goodwill, and we have experienced goodwill
impairment charges in the past. The impairment of a significant portion of this asset would negatively
affect our business, financial condition, and results of operations.
Goodwill is a significant portion of our total assets. Goodwill accounted for approximately 48% of the total
assets on our consolidated balance sheet as of March 31, 2017. We may not realize the full carrying value of
our goodwill. Goodwill is measured and tested for impairment on an annual basis in the first quarter of the
Company’s fiscal year and between annual tests if an event occurs or changes in circumstances suggest a
potential decline in the fair value of goodwill. A significant amount of judgment is involved in determining if an
indicator or change in circumstances relating to impairment has occurred. If testing indicates that impairment
has occurred, we would be required to write off the impaired portion of goodwill, resulting in a change to our
earnings. An impairment of a significant portion of goodwill could have a material adverse effect on our
operating results and financial condition.
Our business is directly dependent upon and correlates closely to the marketing levels and ongoing
business activities of our existing clients. If material adverse developments in domestic and global
economic and market conditions adversely affect our clients’ businesses, our business and results of
operations could equally suffer.
We serve clients from locations in the Asia-Pacific region, Europe and the United States. Our client list
includes many of the largest organizations in these regions 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. Our results of operations are affected directly
by the level of business activity of our clients, which in turn is affected by the level of economic activity in the
industries and markets that they serve. Future widespread economic slowdowns in any of these markets,
particularly in the United States, may negatively affect the businesses, purchasing decisions and spending of
our clients and prospective clients, which could result in reductions in our existing business as well as our
new business development. In the event of such widespread economic downturn, we will likely experience a
reduction in current projects, longer sales cycles, deferral or delay of purchase commitments for our data
products, processing functionality, software systems and services, and increased price competition, all of
which could adversely affect our revenue and operating results.
23
Our operations outside the U.S. are subject to risks that may harm the Company’s business, financial
condition or results of operations.
During the last fiscal year, we received approximately 8% of our revenues from business outside the United
States. The cost of executing our business plan in non-U.S. locations is increasingly expensive. In those
non-U.S. locations where legislation restricting the collection and use of personal data currently exists, less
data is available and at a much higher cost. In some foreign markets, the types of products and services we
offer have not been generally available and thus are not fully understood by prospective clients. Upon
entering these markets, we must educate and condition the markets, increasing the cost and difficulty of
successfully executing our business plan in these markets. Additionally, each of our foreign locations is
generally expected to fund its own operations and cash flows, although periodically funds may be loaned or
invested from the U.S. to the foreign subsidiaries. Because of such loan or investment, exchange rate
movements of foreign currencies may have an impact on our future costs of, or future cash flows from, foreign
investments. We have not entered into any foreign currency forward exchange contracts or other derivative
instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Additional risks inherent in our non-U.S. business activities generally include, among others, potentially longer
accounts receivable payment cycles, the costs and difficulties of managing international operations,
potentially adverse tax consequences, and greater difficulty enforcing intellectual property rights. The various
risks which are inherent in doing business in the U.S. are also generally applicable to doing business outside
of the U.S., but such risks may be exaggerated by factors normally associated with international operations,
such as differences in culture, laws and regulations, especially restrictions on collection, management,
aggregation and use of information. Failure to effectively manage the risks facing our non-U.S. business
activities could materially adversely affect our operating results.
In addition, when operating in foreign jurisdictions, we must comply with complex foreign and U.S. laws and
regulations, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other local laws
prohibiting corrupt payments to government officials, as well as anti-competition regulations and data
protection laws and regulations. Violations of these laws and regulations could result in fines and penalties,
criminal sanctions, restrictions on our business conduct and on our ability to offer our products and services in
one or more countries. Such violations could also adversely affect our reputation with existing and
prospective clients, which could negatively impact our operating results and growth prospects.
Our products and services have long and variable sales cycles due to their nature as enterprise-wide
solutions. Failure to accurately predict these sales cycles could impair our ability to forecast
operating results, which could result in a decline in the market value of our stock.
When purchasing our products and services, our clients and prospects are often faced with a significant
commitment of capital, the need to integrate new software and/or hardware platforms across multiple
business units and other changes in company-wide operational procedures, all of which result in cautious
deliberation and evaluation by prospective clients, longer sales cycles and delays in completing transactions.
Additional delays result from the significant up-front expenses and substantial time, effort and other resources
necessary of our clients to implement our solutions. For example, depending on the size of a prospective
client’s business and its needs, a sales cycle can range from two weeks to nine months. Because of these
longer sales cycles, revenues and operating results may vary significantly from period to period. As a result,
it is often difficult to accurately forecast our revenues on a quarterly basis as it is not always possible for us to
predict the quarter in which sales will actually be completed. This difficulty in predicting revenue, combined
with the revenue fluctuations we may experience from quarter to quarter, can adversely affect and cause
substantial fluctuations in our stock price.
Third parties may claim that we are infringing their intellectual property and we could suffer
significant litigation or licensing expenses or be prevented from selling products or services.
Additionally, third parties may infringe our intellectual property and we may suffer competitive injury
or expend significant resources enforcing our rights.
As our business is focused on data-driven results and analytics, we rely heavily on proprietary information
technology, processes and other protectable intellectual property rights. From time to time, third parties may
24
claim that one or more of our products or services infringe their intellectual property rights. We analyze and
take action in response to such claims on a case-by-case basis. Any dispute or litigation regarding patents or
other intellectual property could be costly and time-consuming due to the complexity of our technology and
the uncertainty of intellectual property litigation, which could divert the attention of our management and key
personnel away from our business operations. A claim of intellectual property infringement could force us to
enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at
all, or could subject us to significant damages or to an injunction against development and sale of certain of
our products or services.
Our proprietary portfolio consists of various intellectual property rights, including patents, copyrights,
database rights, source code, trademarks, trade secrets, know-how, confidentiality provisions and licensing
arrangements. The extent to which such rights can be protected varies from jurisdiction to jurisdiction. If we
do not enforce our intellectual property rights vigorously and successfully, our competitive position may suffer
which could harm our operating results.
Our brand and reputation are key assets and competitive strengths of our Company, and our
business may be adversely affected if events occur that could cause us to be negatively perceived in
the marketplace.
For over 45 years, Acxiom has been a thought leader and innovator in solving large-scale data problems and
improving marketing results through high-performance, highly scalable, highly secured and privacy-compliant
marketing solutions, with a track record of building strong technology and being an innovator in the marketing
services space. Our brand and reputation earned over these years are key assets of the Company. Our
ability to attract and retain clients is highly dependent upon the external perceptions of our level of data
quality, our ability to deliver consumer insights, our enterprise data management and analytical capabilities,
the competence of our current associate team, and our ability to meet contractual service level requirements
in a timely manner. Negative perceptions or publicity regarding these matters could damage our reputation
with prospective clients and the public generally. Adverse developments with respect to our industry may
also, by association, negatively impact our reputation, or result in higher regulatory or legislative scrutiny. Any
damage to our brand or reputation could have a material adverse effect on our business and operating
results.
Failure to recover significant, up-front capital investments required by certain client contracts could
be harmful to the Company’s financial condition and operating results.
Certain of our client contracts require significant investment in the early stages, which we expect to recover
through billings over the life of the contract. These contracts may involve the construction of new computer
systems and communications networks or the development and deployment of new technologies. Substantial
performance risk exists in each contract with these characteristics, and some or all elements of service
delivery under these contracts are dependent upon successful completion of the development, construction
and deployment phases. Failure to successfully meet our contractual requirements under these contracts
over their life increases the possibility that we may not recover our capital investments in these
contracts. Failure to recover our capital investments could be detrimental to the profitability of the particular
engagement as well as our operating results.
The decline in direct mail business could occur more rapidly than we are able to offset with new
revenues from investments in new products and services, which could, in turn, negatively impact
revenue, net income and profit margins.
Postal rate increases are expected to continue. As postal costs continue to rise, we expect to see increased
pressure on direct mailers to leverage digital and other forms of online communication and to mail fewer
pieces. The concerns of direct mailers are further exacerbated by the on-going financial struggles of the
United States Postal Service (“USPS”). In recent years, the USPS has incurred significant financial losses
and may, as a result, implement significant changes to the breadth or frequency of its mail delivery. USPS
cost cutting measures have included, among other things, consolidation of USPS’s mail processing network
and changes to USPS’s service standards for market-dominant mail products. These ongoing changes are
expected to increase mail processing time and slow delivery frequency, which in turn may decrease
25
marketers and the general public’s willingness to continue to use traditional mail, which may negatively
impact our direct mail clients and thus the Company’s revenue derived from our traditional direct marketing
business. Additionally, those in the traditional direct mail business, as well as the USPS, are under growing
pressure to reduce their impact on the environment. It is uncertain at this time what either marketers or the
USPS will do to lessen their impact. From a postal service perspective, the actions to be taken may involve
changing certain aspects of mail service that would negatively affect direct marketers. From a marketer’s
perspective, such actions could have the same effect as increased rates, thereby causing them to mail fewer
pieces, which may negatively impact the Company’s revenue derived from our traditional direct marketing
business.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
p
Acxiom is headquartered in Conway, Arkansas with additional locations around the United States. We also
have operations in Europe and Asia-Pacific. In general, our facilities are in good condition, and we believe
that they are adequate to meet our current needs. The table below sets forth the location, form of ownership
and general use of our principal properties currently being used by each business segment.
Held
Use
Business Segment
Ten facilities
held in fee
Data center; office space
Little Rock, Arkansas
One building held
in fee
Data center
Lease
Office space
Lease
Data center; Office space
Connectivity
Lease
Office space
Lease
Office space
Location
United States:
Conway, Arkansas
Redwood City,
California
San Francisco,
California
Downers Grove,
Illinois
New York, New
York
Marketing Services,
AAudience Solutions,
Connectivity
Marketing Services,
AAudience Solutions,
Connectivity
Marketing Services,
AAudience Solutions,
Connectivity
Marketing Services,
AAudience Solutions
Marketing Services,
AAudience Solutions,
Connectivity
Marketing Services,
AAudience Solutions
AAustin, Texas
Lease
Office space
26
Location
Held
Use
Business Segment
Europe:
London, England
Lease
Office space
Marketing Services,
AAudience Solutions,
Connectivity
Normanton, England
Lease
Data center; office space
AAudience Solutions
Paris, France
Lease
Data center; office space
AAudience Solutions,
Connectivity
Frankfurt, Germany
Lease
Office space
AAudience Solutions
Munich, Germany
Gdansk, Poland
Lease
Lease
Office space
Office space
China:
Shanghai, China
Lease
Office space
Nantong, China
Lease
Data center; office space
AAudience Solutions
Marketing Services,
AAudience Solutions
Marketing Services,
AAudience Solutions,
Connectivity
Marketing Services,
AAudience Solutions,
Connectivity
Item 3. Legal Proceedings
g
g
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.
Item 4. Mine Safety Disclosures
y
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
y,
q
g
q
y
Market Information
The outstanding shares of Acxiom’s common stock are listed and traded on the NASDAQ Global Select
Market under the symbol “ACXM.” The following table reflects the range of high and low sales prices of
Acxiom’s common stock as reported by NASDAQ for each quarter in fiscal 2017 and 2016.
Fiscal 2017
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
$ 30.40 $ 24.74
22.72
27.70
21.25
27.24
19.11
23.57
27
Fiscal 2016
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Holders
High
Low
$ 22.22 $ 17.32
19.32
23.42
16.67
21.47
15.78
19.46
As of May 22, 2017, the approximate number of record holders of the Company’s common stock was 1,926.
Dividends
The Company has not paid dividends on its common stock in the past two fiscal years. The Board of
Directors may consider paying dividends in the future but has no plans to pay dividends in the short term.
28
Performance Graph
The graph below matches Acxiom Corporation's cumulative 5-Year total shareholder return on common stock
with the cumulative total returns of the NASDAQ Composite index and the NASDAQ Computer & Data
Processing index. The graph tracks the performance of a $100 investment in our common stock and in each
index (with the reinvestment of all dividends) from 3/31/2012 to 3/31/2017.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Acxiom Corporation, the NASDAQ Composite Index
and the NASDAQ Computer & Data Processing Index
$250
$200
$150
$100
$50
$0
3/12
3/13
3/14
3/15
3/16
3/17
Acxiom Corporation
NASDAQ Composite
NASDAQ Computer & Data Processing
*$100 invested on 3/31/12 in stock or index, including reinvestment of dividends.
Fiscal year ending March 31.
Acxiom Corporation
NASDAQ Composite
NASDAQ Computer & Data Processing
100.00
100.00
100.00
138.96
107.47
103.21
234.30
141.36
146.32
125.95
165.74
163.51
146.05
166.19
197.02
193.94
202.57
233.91
3/12
3/13
3/14
3/15
3/16
3/17
The performance graph and the related chart and text, are being furnished solely to accompany this Annual
Report on Form 10-K pursuant to Item 201(e) of Regulation S-K, and are not being filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference
into any filing of ours, whether made before or after the date hereof, regardless of any general incorporation
language in such filing. The stock price performance included in this graph is not necessarily indicative of
future stock price performance.
29
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The table below provides information regarding purchases by Acxiom of its common stock during the periods
indicated.
Total Number Average Price
Total Number of Shares
Maximum Number (or Approximate
Dollar Value) of Shares that May Yet
Period
1/1/17 - 1/31/17
2/1/17 - 2/28/17
3/1/17 - 3/31/17
Total
of Shares
Purchased
—
—
—
—
Paid
Per Share
n/a
n/a
n/a
n/a
Purchased as Part of Publicly
Announced Plans or Programs
Be Purchased Under the
Plans or Programs
— $
—
—
— $
114,250,978
—
—
114,250,978
The repurchases listed above were made pursuant to a repurchase program adopted by the Board of
Directors on August 29, 2011. That program was subsequently modified and expanded, most recently on
July 28, 2016. Under the modified common stock repurchase program, the Company may purchase up to
$400.0 million of its common stock through the period ending June 30, 2018. Through March 31, 2017, the
Company had repurchased 16.8 million shares of its stock for $285.7 million, leaving remaining capacity of
$114.3 million under the stock repurchase program.
Item 6. Selected Financial Data
For information pertaining to selected financial data of Acxiom, refer to page F-2 of the Financial Supplement,
which is attached hereto and incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
g
p
y
The information required by this item appears in the Financial Supplement at pages F-3 – F-23, which is
attached hereto and incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Acxiom’s earnings are affected by changes in short-term interest rates primarily because of its term loan
agreement and its revolving credit agreement, which bear interest at a floating rate. Acxiom used an interest
rate swap agreement to mitigate the interest rate risk on $50 million of its floating-rate debt, which expired
March 31, 2017. Risk can be estimated by measuring the impact of a near-term adverse movement of one
percentage point in short-term market interest rates. If short-term market interest rates increase one
percentage point during the next four quarters compared to the previous four quarters, there would be no
material adverse impact on Acxiom’s results of operations. Acxiom has no material future earnings or cash
flow expenses from changes in interest rates related to its other long-term debt obligations, as substantially all
of Acxiom’s remaining long-term debt instruments have fixed rates. At both March 31, 2017 and 2016, the
fair value of the Company’s fixed rate long-term obligations approximated carrying value.
Acxiom has a presence in the United Kingdom, France, Germany, Poland, Australia and China. In general,
each of the foreign locations is expected to fund its own operations and cash flows, although funds may be
loaned or invested from the U.S. to the foreign subsidiaries. Therefore, exchange rate movements of foreign
currencies may have an impact on Acxiom’s future costs or on future cash flows from foreign investments.
Acxiom has not entered into any foreign currency forward exchange contracts or other derivative instruments
to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Item 8. Financial Statements and Supplementary Data
pp
y
The financial statements required by this item appear in the Financial Supplement at pages F-25 – F-69,
which is attached hereto and incorporated herein by reference.
30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
g
g
g
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of March
31, 2017. Based on their evaluation as of March 31, 2017, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance
level to ensure that the information required to be disclosed by us in the Annual Report on Form 10-K was (i)
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and
all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further the design of a control system
must reflect the fact that there are resource constraints and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, with Acxiom have been
detected.
g
Management’s Report on Internal Control Over Financial Reporting
p
g
p
The management of Acxiom Corporation (the Company) is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rules 13a-15(f) under the Securities
Exchange Act of 1934, as amended).
The Company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles, and includes those policies
and procedures that:
(cid:120) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
(cid:120) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and
(cid:120) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
The Company’s management, with participation of the Chief Executive Officer and Chief Financial Officer,
assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2017.
31
In making this assessment, the Company’s management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework
(2013).
Based on management’s assessment and those criteria, the Company’s management determined that the
Company’s internal control over financial reporting was effective as of March 31, 2017.
KPMG LLP, the Company’s independent registered public accounting firm, has audited the Company’s
internal control over financial reporting, as stated in their report, which is included herein.
Item 9B. Other Information
Not applicable.
32
Item 10. Directors, Executive Officers and Corporate Governance
p
,
PART III
Please see the information concerning our executive officers contained in Part I of this Annual Report on
Form 10-K under the caption “Executive Officers of the Registrant” which is included there pursuant to
Instruction 3 to Item 401(b) of the SEC’s Regulation S-K.
The Acxiom Board of Directors has adopted codes of ethics applicable to our principal executive, financial
and accounting officers and all other persons performing similar functions. Copies of these codes of ethics
are posted on Acxiom’s website at www.acxiom.com under the “About – Codes of Ethics” section of the site.
The remaining information required by this item appears under the captions “Election of Directors,” “Corporate
Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in Acxiom's 2017 Proxy
Statement, which information is incorporated herein by reference.
Item 11. Executive Compensation
p
The information required by this item appears under the heading “Executive Compensation” in Acxiom's 2017
Proxy Statement, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
g
p
y
Securities Authorized for Issuance Under Equity Compensation Plans
The following table contains information about our common stock which may be issued upon the exercise of
options under our existing equity compensation plans as of the end of fiscal 2017 (March 31, 2017):
Number of
securities
to be issued upon
exercise of
outstanding
options,
Weighted-average
exercise price of
outstanding options,
Number of securities
available for future
issuance
under equity
compensation
plans (excluding
securities
Plan category
Equity compensation
plans approved by
shareholders
Equity compensation
plans not approved by
shareholders
Total
warrants and rights warrants and rights reflected in column (a))
(b)
(a)
(c)
2,811,965 11 $
13.10
2,481,688
221,106 2
$
3,033,071
13.74
13.14
217,559
2,699,247
1 This figure represents stock options issued under shareholder-approved stock option plans, of which
459,275 were assumed in connection with our fiscal 2015 acquisition of LiveRamp, 283,981 were
assumed in connection with our fiscal 2017 acquisition of Arbor, and 61,499 were assumed in connection
with our fiscal 2017 acquisition of Circulate.
2
Issued pursuant to the Company’s 2011 Nonqualified Equity Compensation Plan described below, which
does not require shareholder approval under the exception provided for in NASDAQ Marketplace Rule
5635(c)(4).
Equity Compensation Plan Not Approved by Security Holders
The Company adopted the 2011 Nonqualified Equity Compensation Plan of Acxiom Corporation (the “2011
Plan”) for the purpose of making equity grants to induce new key executives to join the Company. The
awards that may be made under the 2011 Plan include stock options, stock appreciation rights, restricted
33
stock awards, RSU awards, performance awards, or other stock unit awards. To receive such an award, a
person must be newly employed with the Company with the award being provided as an inducement material
to their employment, provided the award is first properly approved by the board of directors or an independent
committee of the board. The board of directors and its compensation committee are the administrators of the
2011 Plan, and as such, determine all matters relating to awards granted under the 2011 Plan, including the
eligible recipients, whether and to what extent awards are to be granted, the number of shares to be covered
by each grant and the terms and conditions of the awards. The 2011 Plan has not been approved by the
Company’s shareholders.
The remaining information required by this item appears under the heading “Stock Ownership” in Acxiom's
2017 Proxy Statement, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
p
p
,
The information required by this item appears under the headings “Related-Party Transactions” and
“Corporate Governance - Board and Committee Matters” in Acxiom's 2017 Proxy Statement, which
information is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
p
The information required by this item appears under the heading “Ratification of Independent Registered
Public Accountant - Fees Billed for Services Rendered by Independent Auditor” in Acxiom's 2017 Proxy
Statement, which information is incorporated herein by reference.
34
PART IV
Item 15. Exhibits, Financial Statement Schedules
,
(a) The following documents are filed as a part of this report:
1. Financial Statements.
The following consolidated financial statements of the registrant and its subsidiaries included in the
Financial Supplement and the Independent Auditors' Reports thereof are attached hereto. Page
references are to page numbers in the Financial Supplement.
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of March 31, 2017 and 2016
Consolidated Statements of Operations for the years ended March 31, 2017, 2016
and 2015
Consolidated Statements of Comprehensive Income (Loss) for the years ended
March 31, 2017, 2016, and 2015
Consolidated Statements of Stockholders’ Equity for the years ended March 31,
2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended March 31, 2017, 2016
and 2015
Notes to the Consolidated Financial Statements
Page
F-24
F-25
F-26
F-27
F-28
F-29 - F-30
F-31 - F-69
2. Financial Statement Schedules.
All schedules are omitted because they are not applicable or not required or because the required
information is included in the consolidated financial statements or notes thereto.
3. Exhibits.
The following exhibits are filed with this report or are incorporated by reference to previously filed
material:
Exhibit No.
2.1 Merger Agreement, dated May 12, 2014, by and among Acxiom Corporation, Big Sky Sub
Acquisition, Inc., LiveRamp, Inc., and The Brenner Group (previously filed on May 14, 2014, as
Exhibit 2.1 to Acxiom Corporation’s Current Report on Form 8-K, and incorporated herein by
reference)
2.2 Contribution and Stock Purchase Agreement, dated as of May 19, 2015, by and among Aspen
Holdco, Inc., Acxiom Corporation, Acxiom IT Outsourcing, Inc., Acxiom Limited, Aspen Hivedown
Limited, Acxiom Global Service Center Polska sp. z.o.o., Acxiom Polska sp. z.o.o. w likwidacji, and
Acxiom ITO Polska sp. z.o.o. (previously filed on May 20, 2015, as Exhibit 2.1 to Acxiom
Corporation’s Current Report on Form 8-K, and incorporated herein by reference)
2.3
Amendment dated July 31, 2015, to the Contribution and Stock Purchase Agreement dated as of May
19, 2015, by and among Aspen Holdco, Inc., Acxiom Corporation, Acxiom IT Outsourcing, Inc.,
Acxiom Limited, Aspen Hivedown Limited, Acxiom Global Service Center Polska sp. z.o.o., Acxiom
Polska sp. z.o.o. w likwidacji, and Acxiom ITO Polska sp. z.o.o. (previously filed on August 6, 2015,
as Exhibit 2.1 to Acxiom Corporation’s Current Report on Form 8-K, and incorporated herein by
reference)
3.1
Amended and Restated Certificate of Incorporation
3.2
Amended and Restated Bylaws (previously filed on March 31, 2017, as Exhibit 3(a) to Acxiom
35
Corporation’s Current Report on Form 8-K, and incorporated herein by reference)
10.1
Amended and Restated Key Associate Stock Option Plan of Acxiom Corporation (previously filed as
Exhibit 10(e) to Acxiom’s Annual Report on Form 10-K for the fiscal year ended March 31, 2000,
Commission File No. 0-13163, and incorporated herein by reference)
10.2
2005 Stock Purchase Plan of Acxiom Corporation
10.3
10.4
10.5
10.6
10.7
10.8
10.9
First Amendment to the 2005 Stock Purchase Plan of Acxiom Corporation (previously filed as Exhibit
10.2 to Acxiom Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015,
Commission File No. 0-13163, and incorporated herein by reference)
Amended and Restated 2005 Equity Compensation Plan of Acxiom Corporation (previously filed on
August 21, 2015, as Exhibit 10.1 to Acxiom Corporation’s Current Report on Form 8-K, and
incorporated herein by reference)
Acxiom Corporation Non-Qualified Deferral Plan, amended and restated effective January 1, 2009
(previously filed as Exhibit 10.27 to Acxiom Corporation’s Annual Report on Form 10-K for the fiscal
year ended March 31, 2013, and incorporated herein by reference)
First Amendment to the Acxiom Corporation Non-Qualified Deferral Plan, effective July 1, 2009
(previously filed as Exhibit 10.28 to Acxiom Corporation’s Annual Report on Form 10-K for the fiscal
year ended March 31, 2013, and incorporated herein by reference)
Acxiom Corporation Non-Qualified Matching Contribution Plan, amended and restated effective
January 1, 2009 (previously filed as Exhibit 10.29 to Acxiom Corporation’s Annual Report on Form
10-K for the fiscal year ended March 31, 2013, and incorporated herein by reference)
First Amendment to the Acxiom Corporation Non-Qualified Matching Contribution Plan, effective July
1, 2009 (previously filed as Exhibit 10.30 to Acxiom Corporation’s Annual Report on Form 10-K for
the fiscal year ended March 31, 2013, and incorporated herein by reference)
Amended and Restated 2010 Executive Cash Incentive Plan of Acxiom Corporation (previously filed
as Exhibit 10.6 to Acxiom Corporation’s Annual Report on Form 10-K for the fiscal year ended March
31, 2015, Commission File No. 0-13163, and incorporated herein by reference)
10.10 Amended and Restated 2010 Executive Officer Severance Policy (previously filed as Exhibit 10.7 to
Acxiom Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015,
Commission File No. 0-13163, and incorporated herein by reference)
10.11 2011 Nonqualified Equity Compensation Plan of Acxiom Corporation (previously filed on July 27,
2011, as Exhibit 10.2 to Acxiom Corporation’s Current Report on Form 8-K, and incorporated herein
by reference)
10.12 LiveRamp, Inc. 2006 Equity Incentive Plan (previously filed as Exhibit 99.1 to Acxiom Corporation’s
Registration Statement on Form S-8, Commission File No. 333-197463, and incorporated herein by
reference)
10.13 Arbor Equity Compensation Plan (previously filed as Exhibit 10.2 to Acxiom Corporation’s
Registration Statement on Form S-8, Commission File No. 333-214926, and incorporated herein by
reference)
10.14 Circulate Equity Compensation Plan (previously filed as Exhibit 10.4 to Acxiom Corporation’s
Registration Statement on Form S-8, Commission File No. 333-214926, and incorporated herein by
reference)
36
10.15 Form of Performance Unit Award Agreement under the Amended and Restated 2005 Equity
Compensation Plan of Acxiom Corporation
10.16 Form of Stock Option Grant Agreement under
the Amended and Restated 2005 Equity
Compensation Plan of Acxiom Corporation
10.17 Form of Restricted Stock Unit Award Agreement under the Amended and Restated 2005 Equity
Compensation Plan of Acxiom Corporation
10.18 Form of Restricted Stock Unit Award under the 2011 Nonqualified Equity Compensation Plan of
Acxiom Corporation
10.19 Form of Restricted Stock Unit Award under the Arbor Equity Compensation Plan
10.20 Fifth Amended and Restated Credit Agreement dated as of October 9, 2013, among Acxiom
Corporation, a Delaware corporation, the lenders party thereto and JPMorgan Chase Bank, N.A.
(previously filed on October 15, 2013, as Exhibit 10.1 to Acxiom Corporation’s Current Report on
Form 8-K, and incorporated herein by reference)
10.21 Amendment No. 1 to Fifth Amended and Restated Credit Agreement, effective as of May 19, 2015,
by and among Acxiom Corporation, the lenders party thereto and JPMorgan Chase Bank, N.A.
(previously filed on May 21, 2015, as Exhibit 10.1 to Acxiom Corporation’s Current Report on Form 8-
K, and incorporated herein by reference)
10.22 Employment Agreement by and between Acxiom Corporation and Scott E. Howe dated as of July 26,
2014 (previously filed on May 27, 2014 as Exhibit 10.1 to Acxiom Corporation’s Current Report on
Form 8-K, and incorporated herein by reference)
10.23 Employment Agreement by and between Acxiom Corporation and Warren C. Jenson dated as of
March 27, 2015 (previously filed on March 27, 2015 as Exhibit 10.1 to Acxiom Corporation’s Current
Report on Form 8-K, and incorporated herein by reference)
10.24 Equity Agreement by and between Acxiom Corporation and Travis May dated as of November 11,
2014 (previously filed on August 5, 2016 as Exhibit 10.1 to Acxiom Corporation’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2016, and incorporated herein by reference)
10.25 Form of Director Indemnity Agreement
10.26 Form of Officer and Key Employee Indemnity Agreement
21
Subsidiaries of Acxiom Corporation
23
Consent of KPMG LLP
24
Powers of Attorney
31.1 Certification of Chief Executive Officer pursuant
to SEC Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to SEC Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
37
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101
The following financial information from our Annual Report on Form 10-K for the fiscal year ended
March 31, 2017, formatted in XBRL: (i) Consolidated Balance Sheets as of March 31, 2017 and 2016;
(ii) Consolidated Statements of Operations for the fiscal years ended March 31, 2017, 2016 and
2015; (iii) Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended
March 31, 2017, 2016 and 2015; (iv) Consolidated Statements of Stockholders’ Equity for the fiscal
years ended March 31, 2017, 2016 and 2015; (v) Consolidated Statements of Cash Flows for the
fiscal years ended March 31, 2017, 2016 and 2015; and (vi) Notes to the Consolidated Financial
Statements
38
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: May 26, 2017
ACXIOM CORPORATION
By: /s/ Warren C. Jenson
Warren C. Jenson
Chief Financial Officer & Executive Vice
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
John L. Battelle*
John L. Battelle
Timothy R. Cadogan*
Timothy R. Cadogan
William T. Dillard II*
William T. Dillard II
Richard P. Fox*
Richard P. Fox
Jerry D. Gramaglia*
Jerry D. Gramaglia
William J. Henderson*
William J. Henderson
Scott E. Howe*
Scott E. Howe
Clark M. Kokich*
Clark M. Kokich
Debora B. Tomlin*
Debora B. Tomlin
/s/ Warren C. Jenson
Warren C. Jenson
*By: /s/ Catherine L. Hughes
Catherine L. Hughes
Attorney-in-Fact
Director
Director
Director
Director
May 26, 2017
May 26, 2017
May 26, 2017
May 26, 2017
Director (Non-Executive Chairman of May 26, 2017
the Board)
Director
May 26, 2017
Director, CEO & President (principal
executive officer)
May 26, 2017
Director
Director
May 26, 2017
May 26, 2017
Chief Financial Officer & Executive
May 26, 2017
Vice President (principal financial and
accounting officer)
39
[THIS PAGE INTENTIONALLY LEFT BLANK]
ACXIOM CORPORATION
INDEX TO FINANCIAL SUPPLEMENT
TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED MARCH 31, 2017
,
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Report of Independent Registered Public Accounting Firm
Annual Financial Statements:
Consolidated Balance Sheets as of March 31, 2017 and 2016
Consolidated Statements of Operations for the years ended March 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income (Loss) for the years ended March 31,
2017, 2016 and 2015
Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2017, 2016
and 2015
Consolidated Statements of Cash Flows for the years ended March 31, 2017, 2016 and 2015
Notes to Consolidated Financial Statements
F-2
F-3
F-24
F-25
F-26
F-27
F-28
F-29
F-31
F-1
ACXIOM CORPORATION
SELECTED FINANCIAL DATA
(In thousands, except per share data)
Year ended March 31,
Statement of operations data:
Revenues
Net earnings (loss) from continuing
operations
Net earnings from discontinued
operations, net of tax
2017
2016
2015
2014
2013
$ 880,247 $ 850,088 $ 804,911 $ 805,153 $ 792,689
$ 4,108
$ (8,648) $ (26,542) $ (17,340) $ 30,645
Net earnings (loss)
Net earnings (loss) attributable to Acxiom $ 4,108 $ 6,703 $ (11,031) $
$ 6,703
$ 4,108
—
15,351
15,511
26,474
26,143
$ (11,031) $ 8,803 $ 57,119
8,863 $ 57,607
Basic earnings (loss) per share:
Net earnings (loss) from continuing
operations
Net earnings from discontinued operations
Net earnings (loss)
Net earnings (loss) attributable to Acxiom
Diluted earnings (loss) per share:
Net earnings (loss) from continuing
$
$
$
0.05 $
—
0.05 $
$
0.05
(0.11) $
0.20
0.09 $
$
0.09
(0.34) $
0.20
(0.14) $
(0.14) $
(0.23) $
0.35
0.12 $
$
0.12
operations
$
0.05
$
Net earnings from discontinued operations
Net earnings (loss)
$
Net earnings (loss) attributable to Acxiom $
—
0.05
$
0.05 $
(0.11) $
0.20
0.09
$
0.09 $
(0.34) $
0.20
(0.14) $
(0.14) $
(0.23) $
0.35
0.12
$
0.12 $
Acxiom has not paid cash dividends for any of the periods reported.
0.41
0.35
0.76
0.77
0.40
0.35
0.75
0.75
As of March 31,
Balance sheet data:
Current assets
Current liabilities
Total assets
Long-term debt, excluding
current installments
Total equity
2017
2016
2015
2014
2013
$ 368,519 $ 376,010 $ 511,404 $ 656,056 $ 447,715
$ 249,469 $ 224,576
$ 283,792
$ 1,234,538 $ 1,149,849 $ 1,294,087 $ 1,310,497 $ 1,174,306
$ 224,000
$ 230,427
$ 189,241
$ 275,976 $ 225,082
$ 244,753
$ 738,980 $ 698,968 $ 703,257 $ 682,857 $ 619,368
$ 157,897
The selected financial data for the periods reported above has been derived from the consolidated financial
statements and, unless otherwise indicated, reflect the Company’s continuing operations. Refer to Note 4 –
Discontinued Operations and Dispositions for additional information regarding discontinued operations.
This information should be read in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the historical financial statements and related notes contained in
this report. The historical results are not necessarily indicative of results to be expected in any future period.
F-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 and summary 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.
Unless otherwise indicated, we refer to captions such as earnings (loss), and earnings (loss) per share from
continuing operations attributable to the Company simply as “earnings (loss)”, and “earnings (loss) per share”
throughout this Management’s Discussion and Analysis. Similarly, discussion of other matters in our
consolidated financial statements relates to continuing operations unless otherwise indicated.
Introduction and Overview
Acxiom Corporation is a global technology and enablement 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 omni-channel 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
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 18 – Segment Information of the Notes to
Consolidated Financial Statements.
Connectivity
As shown in the illustration below, our Connectivity segment enables our clients to build an omni-channel
view of the consumer and activate that understanding across the marketing ecosystem.
F-3
Through integrations with more than 500 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 a foundational identity resolution layer
enabling our clients to identify and reach consumers across channels and measure the impact of marketing
on sales, using the marketing platform of their choice.
Today, our primary Connectivity offering is LiveRamp IdentityLink, an identity resolution service that ties data
back to real people and makes it possible to onboard that data for people-based marketing initiatives across
digital channels. Leveraging AbiliTec and the LiveRamp identity graph, IdentityLink first resolves a client’s
first-, second-, and third-party, exposure, and transaction data to persistent anonymous consumer identifiers
that represent real people in a privacy-safe way. This omni-channel view of the consumer can then be
onboarded to and between any of the 500 plus partners in our ecosystem to support targeting,
personalization and measurement use cases.
Targeting
Personalization
Measurement
Example
Example
Example
Clients can upload known data
from first-, second-, and third-
party data sources, resolve it to
an omnichannel privacy-safe
link with IdentityLink, then
onboard to one of 500+
LiveRamp partners to deploy
targeted ads to known
customers.
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.
IdentityLink operates in an Acxiom 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 brands partner to execute their marketing including
marketing technology providers, data providers, publishers and agencies.
(cid:120)
(cid:120)
IdentityLink for Brands and Agencies. IdentityLink allows brands and their agencies to execute
people-based marketing by creating an omni-channel understanding of the consumer and activating
across their choice of best-of-breed digital marketing platforms
that understanding across their choice of best-of-breed digital marketing platforms.
IdentityLink for Marketing Technology Providers. IdentityLink provides marketing technology
providers 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.
F-4
(cid:120)
(cid:120)
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 their reach against and understanding of
customers and prospects.
IdentityLink for Publishers. IdentityLink allows publishers to offer people-based marketing on their
properties. This adds value for brands by providing direct access to their customers and prospects in
the publisher’s premium inventory.
Our Connectivity revenue consists primarily of monthly recurring subscription fees sold on an annual basis.
To a lesser extent, we generate revenue from data providers and certain digital publishers in the form of
revenue-sharing agreements.
Audience Solutions (“AS”)
Our AS segment helps clients validate the accuracy of their data, enhance it with additional insight, and keep
it up to date, enabling clients to reach desired audiences with highly relevant messages. Leveraging our
recognition and data assets, clients can identify, segment, and differentiate their audiences for more effective
marketing and superior customer experiences. AS offerings include InfoBase, our large consumer data store
that serves as the basis for Acxiom’s consumer demographics products, and AbiliTec, our patented identity
resolution technology that assists our clients in reconciling and managing variations of customer identity over
time and across multiple channels.
InfoBase. With more than 1,500 demographic, socio-economic and lifestyle data elements and
several thousand predictive models, our InfoBase products provide marketers with the ability to
identify and reach the right audience with the right message across both traditional and digital
channels. Through partnerships with over 100 online publishers and digital marketing platforms,
including Facebook, Google, Twitter, 4INFO, AOL, eBay and MSN, marketers can use InfoBase
data to create and target specific audiences. Data can be accessed directly or through the
Acxiom Audience Cloud, a web-based, self-service tool that makes it easy to build and distribute
third-party custom data segments.
(cid:120) AbiliTec. As shown in the illustration below, AbiliTec helps brands recognize individuals and
households using a number of different input variables and connects identities online and offline.
By identifying and linking multiple identifiers and data elements back to a persistent ID, our
clients are able to create a single view of the customer, which allows them to perform more
effective audience targeting and deliver better, more relevant customer experiences.
Our AS 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, AS generates digital data revenue
from certain digital publishers and addressable television providers in the form of revenue sharing
agreements. Our Marketing Database clients are a significant channel for our AS offerings.
F-5
Marketing Services (“MS”)
Our MS segment helps clients unify data at the individual level in a privacy-safe environment, so they can
execute people-based marketing campaigns, tie back to real results, and drive a continual cycle of
optimization. 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. We also 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. These services allow our clients to generate higher return
on marketing investments and, at the same time, drive better, more relevant customer experiences.
The MS segment includes the following service offerings: Marketing Database Services and Strategy and
Analytics. The MS segment also included Impact Email Platform and Services until the disposition of the
business in August 2016.
(cid:120) Marketing Database Services. Our Marketing Database offering provides solutions that unify
consumer data across an enterprise, enabling clients to execute relevant, people-based marketing
and activate data across the marketing ecosystem. Our consumer marketing databases, 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
solutions while respecting and protecting consumer privacy.
(cid:120)
(cid:120)
Marketing Database 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.
Strategy and Analytics. Our Strategy and Analytics offering consists of marketing strategists and
data scientists who leverage industry knowledge and advanced analytics to assist our clients with
identifying growth opportunities, addressing marketing data and technology needs, and adopting best
practices. In addition, we help our clients identify and address their data privacy and governance
requirements.
Strategy and Analytics revenue consists primarily of project-based fees.
Impact Email Platform and Services. Until the August 2016 disposition, Acxiom Impact™ provided
email and cross-channel data-driven marketing solutions for enterprise marketers, including a
proprietary marketing platform and agency services.
Acxiom ImpactTM revenue consists of (1) volume-based fees for the use of the Impact email platform
and (2) project-based and retainer-based fees for associated agency services.
F-6
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 integrations with the largest number of marketing platforms and data providers in the digital
marketing ecosystem, enabling our clients to innovate through their preferred choice of technology, data, and
services providers. Our industry-leading recognition and data assets power best-in-class consumer
identification and linking across channels and devices. And, our integrated services offering provides the
expertise required to manage large sets of data legally, ethically, securely, and in a way that protects
consumer privacy.
Summary Results and Notable Events
y
During fiscal 2017, the Company acquired all of the outstanding shares of Arbor Technologies, Inc. (“Arbor”)
and Circulate.com, Inc. (“Circulate”). Arbor and Circulate help publishers connect people-based data to the
marketing ecosystem. Because of these acquisitions, Arbor and Circulate are now wholly-owned subsidiaries
of the Company included in the Connectivity segment, and increase the scale of the Company’s omni-channel
identity graph and network. The Company has included the financial results of Arbor and Circulate in the
consolidated financial statements from the dates of acquisition. The consideration paid for the outstanding
shares and vested stock options was approximately $137.4 million, net of cash acquired of approximately
$9.5 million. The consideration paid for unvested stock options has an estimated fair value of $9.2 million.
These options are not part of the purchase price and will be expensed as non-cash compensation over the
applicable vesting periods.
During fiscal 2017, the Company completed the sale of its Impact email business to Zeta Interactive for total
consideration of $22.0 million, including a $4.0 million subordinated promissory note with interest accruing at
a rate of 6.0% per annum. The note is payable on the 12-month anniversary of the closing date. The
Company also entered into a separate multi-year contract to provide Zeta Interactive with Connectivity and
Audience Solutions services. Prior to the disposition, the Impact email business was included in the
Marketing Services segment results.
During fiscal 2016, the Company completed the sale of its ITO business to Charlesbank Capital Partners and
M/C Partners. The business qualified for treatment as discontinued operations during fiscal 2016.
Accordingly, the results of operations, cash flows, and the balance sheet amounts pertaining to ITO, for all
periods reported, have been classified as discontinued operations in the consolidated financial statements.
At the closing of the transaction, the Company received total consideration of $131.0 million ($140.0 million
stated sales price less closing adjustments and transaction costs of $9.0 million). The Company may also
receive up to a maximum of $50 million in contingent payments in future periods through 2020 subject to
certain conditions. Due to the uncertainty of contingent payments, income will be recorded upon receipt of
payment as a component of income from discontinued operations. In addition, the Company has the right to
participate in distributions of the divested entity above a defined amount. The Company reported a gain of
$9.3 million on the sale which is included in earnings from discontinued operations, net of tax. The Company
used $55.0 million of proceeds from the sale to repay outstanding Company indebtedness in order to comply
with the Company’s existing credit agreement. The remaining proceeds from the sale were used to fund
expansion of its common stock repurchase program and for general corporate purposes.
A summary of the most recently completed fiscal year is presented below.
(cid:120) Revenues of $880.2 million, a 3.5% increase from $850.1 million in fiscal 2016.
(cid:120) Cost of revenue of $477.7 million, a 2.2% decrease from $488.4 million in fiscal 2016.
(cid:120) Gross margin increased to 45.7% from 42.5% in fiscal 2016.
F-7
(cid:120) Total operating expenses of $386.9 million, a 3.2% increase from $374.8 million in fiscal 2016.
(cid:120) Cost of revenue and operating expenses for fiscal 2017 and 2016 include the following items:
o Non-cash stock compensation of $49.1 million and $31.5 million, respectively (cost of
revenue and operating expenses)
o Purchased intangible asset amortization of $18.6 million and $15.5 million, respectively (cost
of revenue)
o Separation and transformation costs of $8.6 million and $20.8 million, respectively (operating
expenses)
o Restructuring and merger charges, impairment and other adjustments of $8.4 million and
$19.0 million, respectively (operating expenses)
(cid:120) Net earnings from continuing operations of $4.1 million, a $12.8 million improvement from a loss of
$8.6 million in fiscal 2016.
(cid:120) Net cash provided by operating activities of $115.8 million, a 2% increase from $113.6 million in fiscal
2016.
(cid:120) The Company acquired $30.5 million of its stock under the Company’s common stock repurchase
program.
The summary highlights significant events and transactions of the Company during the fiscal years ended
March 31, 2017 and 2016. 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 consolidated financial statements and footnotes
accompanying this report.
Critical Accounting Policies
g
We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting
principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting
Standards Codification (“ASC”) and we consider the various staff accounting bulletins and other applicable
guidance issued by the United States Securities and Exchange Commission (“SEC”). GAAP, as set forth
within the ASC, requires management to make certain estimates, judgments and assumptions. We believe
that the estimates, judgments and assumptions upon which we rely are reasonable based upon information
available to us at the time that these estimates, judgments and assumptions are made. These estimates,
judgments and assumptions can affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Note 1 to the accompanying consolidated financial
statements includes a summary of significant accounting policies used in the preparation of Acxiom’s
consolidated financial statements. Of those policies, we have identified the following as the most critical
because they are both important to the portrayal of the Company’s financial condition and operating results,
and they may require management to make judgments and estimates about inherently uncertain matters:
(cid:120) Revenue Recognition
(cid:120) Business Combinations
(cid:120) Valuation of Goodwill
(cid:120) Software, Purchased Software Licenses, and Research and Development Costs
F-8
(cid:120) Restructuring
(cid:120)
Accounting for Income Taxes
Revenue Recognition
The Company’s policy follows the guidance from ASC 605, Revenue Recognition.
The Company provides marketing database services under long-term arrangements. These arrangements
may require the Company to perform setup activities such as the design and build of a database, and may
include other products and services purchased at the same time, or within close proximity of one another
(referred to as multiple element arrangements). Each element within a multiple element arrangement is
accounted for as a separate unit of accounting provided the following criteria are met: the delivered products
or services have value to the customer on a standalone basis; and for an arrangement that includes a general
right of return relative to the delivered products or services, delivery or performance of the undelivered
product or service is considered probable and is substantially controlled by us. We consider a deliverable to
have standalone value if the product or service is sold separately by us or another vendor or could be resold
by the customer. Further, our revenue arrangements generally do not include a general right of return related
to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the
deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for
purposes of allocation of the arrangement consideration and revenue recognition.
For our multiple-element arrangements, we allocate revenue to each element based on a selling price
hierarchy at the arrangement’s inception. The relative selling price for each unit of accounting in a multiple-
element arrangement is established using vendor-specific objective evidence (VSOE), if available, third-party
evidence (TPE), if available, or management’s best estimate of stand-alone selling price (BESP). In most
cases, the Company has neither VSOE nor TPE and therefore uses BESP. The total arrangement
consideration is allocated to each separate unit of accounting for each of the deliverables using the relative
selling prices of each unit based on the aforementioned selling price hierarchy. We limit the amount of
revenue recognized for delivered elements to an amount that is not contingent upon future delivery of
additional products or services or meeting any specified performance conditions.
The objective of BESP is to determine the price at which the Company would transact a sale if the product or
service were sold on a stand-alone basis. Management’s BESP is determined by considering multiple factors
including actual contractual selling prices when the item is sold on a stand-alone basis, as well as market
conditions, competition, internal costs, profit objectives and pricing practices. As pricing and marketing
strategies evolve, we may modify our pricing practices in the future, which could result in changes to BESP,
or to the development of VSOE or TPE for individual products or services. As a result, future revenue
recognition for multiple-element arrangements could differ from recognition in the current period. Our relative
selling prices are analyzed on an annual basis or more frequently if we experience significant changes in
selling prices.
Revenues are recognized when: (1) persuasive evidence of an arrangement exists; (2) we deliver the
products and services; (3) the sale price is fixed or determinable; and (4) collection is reasonably assured.
Revenues that are not recognized at the time of sale because the foregoing conditions are not met are
recognized when those conditions are subsequently met. Where applicable, we reduce revenue for certain
incentive programs where we can sufficiently estimate the effects of these items. In some cases, the
arrangements also contain provisions requiring customer acceptance of the setup activities prior to
commencement of the ongoing services arrangement. Up-front fees billed during the setup phase for these
arrangements are deferred and setup costs that are direct and incremental to the contract are capitalized.
Revenue recognition does not begin until after customer acceptance in cases where contracts contain
acceptance provisions. Once the setup phase is complete and customer acceptance occurs, the Company
recognizes revenue and the related costs for each element as delivered. In situations where the arrangement
does not require customer acceptance before the Company begins providing services, revenue is recognized
for each element as delivered and no costs are deferred.
F-9
The Company evaluates its marketing database arrangements to determine whether the arrangement
contains a lease. If the arrangement is determined to contain a lease, applicable accounting standards
require the Company to account for the lease component separately from the remaining components of the
arrangement. In cases where marketing database arrangements are determined to include a lease, the lease
is evaluated to determine whether it is a capital lease or operating lease and accounted for accordingly.
These lease revenues are not significant to the Company’s consolidated financial statements.
Sales of third-party software, hardware and certain other equipment are recognized when delivered. If such
sales are part of a multiple-element arrangement, they are recognized as a separate element unless
collection of the sales price is dependent upon delivery of other products or services. Additionally, the
Company evaluates revenue from the sale of data, software, hardware and equipment in accordance with
accounting standards to determine whether such revenue should be recognized on a gross or a net basis. All
the factors in the accounting standards are considered with the primary factor being whether the Company is
the primary obligor in the arrangement. “Out-of-pocket” expenses incurred by, and reimbursed to, the
Company in connection with customer contracts are recorded as gross revenue.
The Company also performs services on a project basis outside of, or in addition to, the scope of long-term
arrangements. The Company recognizes revenue from these services as the services are performed.
All taxes assessed on revenue-producing transactions described above are presented on a net basis, or
excluded from revenues.
Revenues from the licensing of data are recognized upon delivery of the data to the customer. Revenue from
the licensing of data to the customer in circumstances where the license agreement contains a volume cap is
recognized in proportion to the total records to be delivered under the arrangement. Revenue from the sale
of data on a per-record basis is recognized as the records are delivered.
Revenues from Connectivity services are primarily recorded as monthly recurring subscription fees, and to a
lesser extent from data providers and certain digital publishers in the form of revenue-sharing agreements.
Accounts receivable include amounts billed to clients as well as unbilled amounts recognized in accordance
with the Company’s revenue recognition policies. Unbilled amounts included in accounts receivable were
$14.1 million and $14.3 million at March 31, 2017 and 2016, respectively.
Included in the Company’s consolidated balance sheets are deferred revenues resulting from billings and/or
client payments in advance of revenue recognition. Deferred revenue at March 31, 2017 was $37.1 million
and $44.5 million at March 31, 2016.
Business Combinations
We apply the provisions of ASC 805, Business Combinations, in accounting for its acquisitions. It requires us
to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date
fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over
the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our
best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition
date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and
subject to refinement. As a result, during the measurement period, which may be up to one year from the
acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding
offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of
assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to
our consolidated statement of operations.
Accounting for business combinations requires our management to make significant estimates and
assumptions, especially at the acquisition date, including our estimates for intangible assets. Although we
believe the assumptions and estimates we have made in the past have been reasonable and appropriate,
they are based in part on historical experience and information obtained from the management of the
acquired companies and are inherently uncertain.
F-10
Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not
limited to:
future expected cash flows from Connectivity sales;
(cid:120)
(cid:120) expected costs to develop the in-process research and development into commercially viable
products and estimated cash flows from the products when completed;
the acquired company’s brand and competitive position, as well as assumptions about the period of
time the acquired brand will continue to be used in the combined company’s product portfolio; and
discount rates.
(cid:120)
(cid:120)
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such
assumptions, estimates or actual results.
In addition, uncertain tax positions and tax related valuation allowances in connection with a business
combination are initially estimated as of the acquisition date. We reevaluate these items quarterly based upon
facts and circumstances that existed as of the acquisition date with any judgments to our preliminary
estimates being recorded to goodwill if identified within the measurement period. Subsequent to the
measurement period or our final determination of the uncertain tax positions and tax related valuation
allowances, whichever comes first, changes to these tax estimates will affect our provision for income taxes in
our consolidated statement of operations and could have a material impact on our results of operations and
financial position.
Valuation of Goodwill
Goodwill is measured and tested for impairment on an annual basis in the first quarter of the Company’s fiscal
year in accordance with ASC 350, Intangibles—Goodwill and Other, or more frequently if indicators of
impairment exist. Triggering events for interim impairment testing include indicators such as adverse industry
or economic trends, restructuring actions, downward revisions to projections of financial performance, or a
sustained decline in market capitalization. According to ASC 350, we can opt to perform a qualitative
assessment to test a reporting unit’s goodwill for impairment or we can directly perform the two-step
impairment test. Based on our qualitative assessment, if we determine that the fair value of a reporting unit is
more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, the two-
step impairment test prescribed by ASC 350 will be performed. The first step requires comparing the
estimated fair value of a reporting unit to its net book value, including goodwill. A potential impairment exists
if the estimated fair value of the reporting unit is lower than its net book value. The second step of the
impairment test involves assigning the estimated fair value of the reporting unit to its identifiable assets, with
any residual fair value being assigned to goodwill. If the carrying value of an individual indefinite-lived
intangible asset (including goodwill) exceeds its estimated fair value, such asset is written down by an amount
equal to the excess, and a corresponding amount is recorded as a charge to operations for the period in
which the impairment test is completed. Completion of the Company’s annual impairment test during the first
quarter of fiscal 2017 indicated no impairment of its goodwill balances.
During the fourth quarter of fiscal 2016, a triggering event occurred which required the Company to test the
recoverability of goodwill associated with its APAC Marketing Services and Audience Solutions reporting
units. The triggering event was the Company’s decision to focus efforts in Australia exclusively on the
Connectivity business; as a result, the Company plans to wind-down the Marketing Services and Audience
Solutions operations in Australia. In addition to testing the recoverability of goodwill, the Company also tested
certain other long-lived assets in these units for impairment. The results of the two-step test indicated
complete impairment of the APAC Audience Solutions goodwill as well as impairment for certain other long-
lived assets. The amount of impairment was $6.1 million, of which $5.4 million was goodwill and $0.7 million
related to other long-lived assets, primarily property and equipment. The impairment test also indicated a
reduced fair value for the APAC Marketing Services component, but the fair value was still in excess of the
carrying value resulting in no impairment.
During the third quarter of fiscal 2016, management determined that results for the APAC component were
lower than had been projected in the previous goodwill test in part due to an economic slowdown in Asia.
F-11
Management further determined that the failure of the APAC component to meet expectations, combined with
the expectation that future projections would also be lowered, constituted a triggering event, requiring an
interim goodwill impairment test. The impairment test indicated a reduced fair value, but the fair value was still
in excess of the carrying value resulting in no impairment.
During the second quarter of fiscal 2016, a triggering event occurred which required the Company to test the
recoverability of goodwill associated with its Brazil Marketing Services and Audience Solutions reporting unit.
The triggering event was the announced closure of the Company’s Brazil operation. In addition to testing the
recoverability of goodwill, the Company also tested certain other long-lived assets in this unit for impairment.
The results of the impairment testing indicated complete impairment of the goodwill as well as impairment for
certain other long-lived assets. The amount of impairment was $0.7 million, of which $0.5 million was
goodwill and $0.2 million related to other long-lived assets, primarily property and equipment.
To estimate the fair value for each of the components, management uses an income approach based on a
discounted cash flow model together with valuations based on an analysis of public company market
multiples and a similar transactions analysis.
The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates,
cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the
most sensitive and susceptible to change as they require significant management judgment. Discount rates
are determined by using a weighted average cost of capital (“WACC”). The WACC considers market and
industry data as well as company-specific risk factors for each reporting unit in determining the appropriate
discount rate to be used. The discount rate utilized for each reporting unit is indicative of the return an
investor would expect to receive for investing in such a business. Management, considering industry and
company-specific historical and projected data, develops growth rates and cash flow projections for each
reporting unit. Terminal value rate determination follows common methodology of capturing the present value
of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-
term growth rates.
The public company market multiple method is used to estimate values for each of the components by
looking at market value multiples to revenue and EBITDA (earnings before interest, taxes, depreciation and
amortization) for selected public companies that are believed to be representative of companies that
marketplace participants would use to arrive at comparable multiples for the individual component being
tested. These multiples are then used to develop an estimated value for each respective component.
The similar transactions method compares multiples based on acquisition prices of other companies believed
to be those that marketplace participants would use to compare to the individual component being tested.
Those multiples are then used to develop an estimated value for that component.
To arrive at an estimated value for each component, management uses a weighted-average approach to
combine the results of each analysis. Management believes that using multiple valuation approaches and
then weighting them appropriately is a technique that a marketplace participant would use.
As a final test of the annual valuation results, the total of the values of the components is reconciled to the
actual market value of Acxiom common stock as of the valuation date. Management believes this control
premium is reasonable compared to historical control premiums observed in actual transactions.
f
Management believes that the estimated valuations are reasonable and consistent with what other
marketplace participants would use in valuing the Company’s components. However, management cannot
give any assurance that these market values will not change in the future. For example, if discount rates
demanded by the market increase, this could lead to reduced valuations under the income approach. If the
Company’s projections are not achieved in the future, this could lead management to reassess their
assumptions and lead to reduced valuations under the income approach. If the market price of the
Company’s stock decreases, this could cause the Company to reassess the reasonableness of the implied
control premium, which might cause management to assume a higher discount rate under the income
approach which could lead to reduced valuations. If future similar transactions exhibit lower multiples than
those observed in the past, this could lead to reduced valuations under the similar transactions approach.
F-12
And finally, if there is a general decline in the stock market and particularly in those companies selected as
comparable to the Company’s components, this could lead to reduced valuations under the public company
market multiple approach. The Company’s next annual impairment test will be performed during the first
quarter of fiscal 2018. The fair value of the Company’s components could deteriorate which could result in
the need to record impairment charges in future periods. The Company continues to monitor potential
triggering events including changes in the business climate in which it operates, attrition of key personnel, the
volatility in the capital markets, the Company’s market capitalization compared to its book value, the
Company’s recent operating performance, and the Company’s financial projections. The occurrence of one
or more triggering events could require additional impairment testing, which could result in impairment
charges.
Software, Purchased Software Licenses, and Research and Development Costs
Costs of internally developed software are capitalized in accordance with ASC 350-40, Internal Use Software.
The standard generally requires that research and development costs incurred prior to the beginning of the
application development stage of software products are charged to operations as such costs are incurred.
Once the application development stage has begun, costs are capitalized until the software is available for
general release.
Costs of internally developed software are amortized on a straight-line basis over the remaining estimated
economic life of the software product, generally two to five years. The Company recorded amortization
expense related to internally developed computer software of $27.5 million, $30.7 million, and $29.0 million
for fiscal 2017, 2016 and 2015, respectively, including $11.8 million, $10.0 million, and $7.5 million,
respectively, related to internally developed software acquired as part of the Arbor, Circulate, and LiveRamp
acquisitions. Amortization expense in fiscal 2016 and fiscal 2015 also included $1.8 million and $4.3 million,
respectively, of accelerated amortization expense resulting from adjusting the remaining lives of certain
capitalized software products because of the LiveRamp acquisition.
Costs of purchased software licenses are amortized on a straight-line basis over the estimated economic life
of the license, generally not to exceed five years. The Company recorded amortization expense related to
purchased software licenses of $3.0 million, $3.8 million and $5.0 million in 2017, 2016 and 2015,
respectively.
Capitalized software, including both purchased and internally developed, is reviewed when facts and
circumstances indicate the carrying amount may not be recoverable and, if necessary, the Company reduces
the carrying value of each product to its fair value.
Restructuring
The Company records costs associated with employee terminations and other exit activity in accordance with
ASC 420, Exit or Disposal Cost Obligations, depending on whether the costs relate to exit or disposal
activities under the accounting standards, or whether they are other post-employment termination benefits.
Under applicable accounting standards for exit or disposal costs, the Company records employee termination
benefits as an operating expense when the benefit arrangement is communicated to the employee and no
significant future services are required. Under the accounting standards related to post employment
termination benefits the Company records employee termination benefits when the termination benefits are
probable and can be estimated. The Company recognizes the present value of facility lease termination
obligations, net of estimated sublease income and other exit costs, when the Company has future payments
with no future economic benefit or a commitment to pay the termination costs of a prior commitment. In future
periods the Company will record accretion expense to increase the liability to an amount equal to the
estimated future cash payments necessary to exit the leases. This requires judgment and management
estimation to determine the expected time frame for securing a subtenant, the amount of sublease income to
be received and the appropriate discount rate to calculate the present value of the future cash flows. Should
actual lease exit costs differ from estimates, the Company may be required to adjust the restructuring charge
which will impact net income in the period any adjustment is recorded.
F-13
Income Taxes
The Company makes estimates and judgments in determining the provision for income taxes for financial
statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and
deductions, and in the calculation of certain tax assets and liabilities that arise from differences in the timing
of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and
penalties related to uncertain tax positions. Significant changes in these estimates may result in an increase
or decrease to the tax provision in a subsequent period. The Company assesses the likelihood that it will be
able to recover its deferred tax assets. If recovery is not likely, the Company increases the provision for taxes
by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be
recoverable. The Company believes that the deferred tax assets recorded on the consolidated balance
sheets will be ultimately recovered. However, should a change occur in the Company’s ability to recover its
deferred tax assets, its tax provision would increase in the period in which the Company determined that the
recovery was not likely.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and
regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process
pursuant to ASC 740, Income Taxes. The first step is to evaluate the tax position for recognition by
determining whether the weight of available evidence indicates that it is more likely than not that the position
will be sustained on audit, including resolution of related appeals or litigation processes, if any. If the
Company determines that a tax position will more likely than not be sustained on audit, the second step
requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50%
likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts,
as the Company must determine the probability of various possible outcomes.
The Company re-evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on
factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively
settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a
change in recognition or measurement would result in the recognition of a tax benefit or an additional charge
to the tax provision.
Results of Operations
p
A summary of selected financial information for each of the years reported is presented below (dollars in
thousands, except per share amounts):
Revenues
Cost of revenue
Gross profit
Operating expenses
Income (loss) from operations
Net earnings (loss) from continuing
operations
Diluted earnings (loss) per share from
continuing operations
% Change % Change
2016-2015
2017-2016
2017
$ 880,247
477,686
402,561
386,872
15,689
2016
$ 850,088
488,382
361,706
374,769
(13,063)
2015
$ 804,911
494,037
310,874
343,558
(32,684)
4 %
(2)
11
3
220
6 %
(1)
16
9
60
67
68
4,108
(8,648)
(26,542)
148
$
0.05
$
(0.11)
$
(0.34)
146
F-14
Revenues
The Company’s revenues by reporting segment for each of the years reported is presented below (dollars in
thousands):
2017
2016
2015
% Change % Change
2016-2015
2017-2016
Revenues
Marketing Services
Audience Solutions
Connectivity
Total revenues
$ 410,840 $ 449,772 $ 446,103
303,836
54,972
$ 804,911
322,065
147,342
$ 880,247
297,846
102,470
$ 850,088
(9)%
8
44
4 %
1 %
(2)
86
6 %
Total revenues were $880.2 million in fiscal 2017, a $30.2 million, or 3.5%, increase from fiscal 2016. The
revenue growth was due to strong AS and Connectivity results. The year over year growth was negatively
impacted by several items totaling $52.6 million: the disposition of the Acxiom Impact business ($39.8
million), the unfavorable impact of exchange rates ($5.8 million), the transition of the Australia operations
business to a Connectivity focused business ($4.6 million reduction in MS and AS), and the exit from Brazil
during fiscal year 2016 ($2.3 million).
r
Total revenues were $850.1 million in fiscal 2016, a $45.2 million, or 5.6%, increase from fiscal 2015.
Excluding the unfavorable impact of exchange rates ($8.1 million), total revenues increased 6.6%.
MS revenue was $410.8 million in fiscal 2017, a $38.9 million, or 8.7%, decrease compared to fiscal 2016. On
a geographic basis, U.S. MS revenue decreased $31.2 million, or 7.6%, due largely to the sale of Acxiom
Impact ($39.8 million). International MS revenue decreased $7.7 million, or 20.3%. Excluding the unfavorable
impact of exchange rates ($3.3 million), International MS revenue decreased $4.4 million and was impacted
by the Australia restructure and Brazil exit. By line of business, increases in Marketing Database ($15.4
million) were offset by declines in Strategy and Analytics ($10.4 million) and the sale of Acxiom Impact ($39.8
million).
MS revenue was $449.8 million in fiscal 2016, a $3.7 million, or 0.8%, increase compared to fiscal 2015. On a
geographic basis, U.S. MS revenue increased $11.3 million, or 2.8%, from fiscal 2015, due to increases in
new and existing client business offset by a few contract terminations. International MS revenue decreased
$7.6 million, or 16.6%. Excluding the unfavorable impact of exchange rates ($2.9 million), International MS
revenue decreased $4.7 million, primarily due to contract and volume reductions in Europe ($2.9 million) and
APAC ($1.8 million). By line of business, increases in Marketing Database ($12.2 million) were offset by
declines in Acxiom Impact ($7.8 million). Marketing Database increases were primarily in the U.S. and were
partially offset by reductions in APAC of $0.7 million. Acxiom Impact declines were primarily from lost
contracts and volume reductions in the U.S. ($4.4 million), Europe ($2.0 million) and APAC ($1.5 million).
AS revenue was $322.1 million in fiscal 2017, a $24.2 million, or 8.1%, increase compared to fiscal 2016. On
a geographic basis, U.S. AS revenue increased $25.8 million, or 9.8%, due to increases in Digital Data
business with new and existing customers. International AS revenue decreased $1.6 million, or 4.6%.
International AS revenue increases in Europe ($2.4 million) were offset by decreases in Brazil ($1.2 million)
and ANZ ($3.2 million) due to restructuring. By line of business, AS revenue growth in Digital Data through
our publisher and digital partner network ($28.3 million) were offset by declines in Consumer Data ($3.1
million). As the digital data business model evolves, some revenue sharing arrangements will convert to
license arrangements and certain publishers will decide to seek alternative data arrangements. These
changes could impact AS growth rates in the future.
AS revenue was $297.8 million in fiscal 2016, a $6.0 million, or 2.0%, decrease compared to fiscal 2015. On
a geographic basis, U.S. AS revenue increased $2.9 million, or 1.1%, from fiscal 2015, due to increases in
new business and client upsell offset by a contract termination. International AS revenue decreased $8.9
million, or 20.4%. International AS revenue was impacted by unfavorable exchange rates ($4.7 million) and
the exit from the Europe transactional data business in fiscal year 2015 ($5.1 million). By line of business, AS
revenue increases in Digital Data through the publisher and digital partner network ($16.4 million) were offset
by declines in Enrichment ($11.6 million) and Recognition ($10.0 million). Enrichment and Recognition
F-15
revenue was impacted by the exit from the Europe business, unfavorable exchange rates, lower volumes in
Australia and a terminated contract in the U.S.
Connectivity revenue was $147.3 million in fiscal 2017, a $44.9 million, or 43.8%, increase compared to fiscal
2016. The increase was related to LiveRamp including the acquisitions of Arbor and Circulate, partially offset
by a $6.1 million decrease from the revenue-sharing arrangements due to a lost customer. On a geographic
basis, U.S. Connectivity revenue increased $41.9 million, or 44.0%, from fiscal 2016. International
Connectivity revenue increased $3.0 million, or 41.1%.
Connectivity revenue was $102.5 million in fiscal 2016, a $47.5 million, or 86.4%, increase compared to fiscal
2015. The increase was related to LiveRamp new customer additions, and a full year of LiveRamp
operations in fiscal 2016 versus nine months in fiscal 2015. On a geographic basis, U.S. Connectivity revenue
increased $46.8 million, or 96.6%, from fiscal 2015. International Connectivity revenue increased $0.7 million,
or 10.3%.
Cost of revenue and Gross profit
The Company’s cost of revenue and gross profit for each of the years reported is presented below (dollars in
thousands):
Cost of revenue
Gross profit
Gross margin
2017
$ 477,686
402,561
2016
$ 488,382
361,706
45.7 %
42.5 %
2015
$ 494,037
310,874
38.6 %
2017-2016
% Change % Change
2016-2015
(1)%
16
10 %
(2)%
11
8 %
Cost of revenue: Includes all direct costs of sales such as data and other third-party costs directly associated
with revenue. Cost of revenue also includes expenses for each of the Company’s operations functions
including client services, account management, agency, strategy and analytics, IT, data acquisition, and
products operations. Finally, cost of revenue includes amortization of internally developed software and other
acquisition related intangibles.
Cost of revenue was $477.7 million in fiscal 2017, a $10.7 million, or 2.2%, decrease from fiscal 2016, due
primarily to the disposition of Acxiom Impact ($25.4 million). Gross margins increased to 45.7% compared to
42.5% in the prior year. The gross margin increase is due to the AS and Connectivity revenue increases and
cost efficiencies. U.S. gross margins increased to 47.0% in the current year from 43.8% in the prior year due
to the AS and Connectivity revenue growth. International gross margins increased to 32.0% in the current
year from 30.4% in the prior year due to Connectivity revenue growth and cost efficiencies.
Cost of revenue was $488.4 million in fiscal 2016, a $5.7 million, or 1.1%, decrease from fiscal 2015, and
gross margin increased to 42.5% compared to 38.6% in the prior year. The gross margin increase is due to
the Connectivity revenue increases and cost efficiencies. U.S. gross margins increased to 43.8% in fiscal
2016 from 39.0% in the prior year due to the Connectivity revenue increases and AS revenue growth and cost
reductions. International gross margins decreased to 30.4% in fiscal 2016 from 35.5% in the prior year due to
the revenue reductions in Europe and APAC, as well as recent Connectivity investments.
Operating Expenses
The Company’s operating expenses for each of the years reported is presented below (dollars in thousands):
2017
2016
2015
% Change % Change
2017-2016 2016-2015
Operating expenses
Research and development
Sales and marketing
General and administrative
Impairment of goodwill and other
Gains, losses and other items, net
Total operating expenses
$ 74,247
146,176
135,385
$ 82,109
166,676
129,714
$ 74,201
116,494
130,263
—
22,600
$ 386,872 $ 374,769 $ 343,558
6,829
12,132
8,373
—
11 %
14
(4)
(81)
(42)
3 %
— %
26
4
—
(46)
9 %
F-16
Research and development (“R&D”): Includes operating expenses for the Company’s engineering and
product/project management functions supporting research, new development, and related product
enhancement.
R&D expenses were $82.1 million in fiscal 2017, an increase of $7.9 million, or 10.6%, compared to fiscal
2016, and is 9.3% of total revenues compared to 8.7% in fiscal 2016. Connectivity and AS investments ($9.5
million and $2.2 million, respectively) were partially offset by cost reductions in MS ($6.3 million).
R&D expenses were $74.2 million in fiscal 2016, or flat compared to fiscal 2015, and is 8.7% of total revenues
compared to 9.2% in fiscal 2015. The net change includes cost savings realized by the combination of the
LiveRamp and AOS development teams offset partially by additional investment in AS R&D of approximately
$9.0 million.
Sales and marketing (“S&M”): Includes operating expenses for the Company’s sales, marketing, and product
marketing functions.
S&M expenses were $166.7 million in fiscal 2017, an increase of $20.5 million, or 14.0%, compared to fiscal
2016, and is 18.9% of total revenues compared to 17.2% in fiscal 2016. The increase is due to Connectivity
and U.S. headcount investments and non-cash stock compensation.
S&M expenses were $146.2 million in fiscal 2016, an increase of $29.7 million, or 25.5%, compared to fiscal
2015, and is 17.2% of total revenues compared to 14.5% in fiscal 2015. The increase is due to headcount
investments in U.S. Connectivity and AS sales, the full year impact of the LiveRamp acquisition, as well as
higher incentive compensation costs from increased revenue. These increases were partially offset by
reductions in International operations, partially due to exchange rates.
r
General and administrative (G&A): Represents operating expenses for all corporate functions, including
finance, human resources, legal, corporate IT, and the corporate office.
G&A expenses were $129.7 million in fiscal 2017, a decrease of $5.7 million, or 4.2%, compared to fiscal
2016, and is 14.7% of total revenues compared to 15.9% in fiscal 2016. The decrease is due to a $12.2
million decline in separation and transformation costs, offset partially by an increase in non-cash stock based
compensation.
G&A expenses were $135.4 million in fiscal 2016, an increase of $5.1 million, or 3.9%, compared to fiscal
2015, and is 15.9% of total revenues compared to 16.2% in fiscal 2015. The increase is due to higher
incentive compensation levels, higher legal and third party fees, and increased facility costs with new offices,
offset partially from cost savings primarily in corporate information technology as well as lower separation and
transformation costs.
Impairment of goodwill and other: Represents the amount of impairment related to goodwill and other related
long-lived assets.
Impairment of goodwill and other was $1.3 million in fiscal 2017, representing the write-off of accumulated
foreign currency translation related to Brazil.
Impairment of goodwill and other was $6.8 million in fiscal 2016, representing the impairment of APAC AS
($6.1 million) and Brazil MS and AS ($0.7 million).
Gains, losses, and other items, net: Represents restructuring costs and other adjustments.
Gains, losses and other items, net of $8.4 million in fiscal 2017 decreased $3.8 million, or 31.0%, compared
to fiscal 2016. The fiscal 2017 amount includes a $5.1 million charge related to the restructuring of the
Redwood City, California lease, a $1.3 million charge representing the write-off of accumulated foreign
currency translation related to Brazil, a $2.2 million gain on the sale of the Little Rock, Arkansas Rivermarket
building, $1.4 million in merger related expenses related to the Arbor and Circulate acquisitions, and a $0.3
million gain on sale of the Acxiom Impact business.
F-17
Gains, losses and other items, net of $12.1 million in fiscal 2016 decreased $10.5 million, or 46.3%,
compared to fiscal 2015. The fiscal 2016 amount included severance and other associate-related charges of
$8.6 million for the termination of associates in the U.S., Europe, Brazil and Australia, $3.0 million related to
lease restructurings, and the write off of leasehold improvements $0.4 million.
Income (Loss) from Operations and Profit (Loss) Margins
The Company’s income (loss) from operations and margin by segment for each of the years reported is
presented below (dollars in thousands):
Operating income (loss) and margin:
Marketing Services
Audience Solutions
Connectivity
2017
2016
2015
$ 80,622
$ 74,371
$ 81,247
19.6 %
16.5 %
18.2 %
123,238
109,598
115,078
38.3 %
36.8 %
5,333
(3,298)
3.6 %
(3.2)%
37.9 %
(40,069)
(72.9)%
Less:
Corporate
Purchased intangible asset amortization
Non-cash stock compensation
Impairment of goodwill and other
Gains, losses and other items, net
Income (loss) from operations
Total operating margin
117,342
18,644
49,145
—
8,373
$ 15,689
127,844
15,466
31,463
6,829
12,132
$ (13,063)
126,570
11,454
28,316
—
22,600
$ (32,684)
1.8 %
(1.5)%
(4.1)%
Income from operations was $15.7 million in fiscal 2017 compared to a loss of $13.1 million in fiscal 2016.
Operating margin was 1.8% compared to a negative 1.5%. The improvement in income from operations of
$28.8 million and the improvement in operating margin of 330 basis points was due primarily to an increase in
each of the segment’s income from operations and lower business separation and transformation costs in
Corporate, lower gains, losses and other items, net, offset partially by an increase in non-cash stock based
compensation.
Loss from operations was $13.1 million in fiscal 2016 compared to a loss of $32.7 million in fiscal 2015.
Operating margin was a negative 1.5% compared to a negative 4.1%. The improvement in loss from
operations of $19.6 million and the improvement in operating margin of 260 basis points was due primarily to
improving Connectivity profitability.
MS income from operations was $80.6 million, a 19.6% margin, in fiscal 2017 compared to $74.4 million, a
16.5% margin, in fiscal 2016. U.S. margins increased to 20.9% in the current period from 17.7% due to R&D
and S&M cost reductions. International margins decreased to 3.4% from 3.7% due to the revenue decrease.
MS income from operations was $74.4 million, a 16.5% margin, in fiscal 2016 compared to $81.2 million, an
18.2% margin, in fiscal 2015. U.S. margins decreased to 17.7% in the current period from 19.2% due to
higher variable compensation. International margins decreased to 3.7% from 9.6% due to lower performance
in Europe and APAC.
AS income from operations was $123.2 million, a 38.3% margin, in fiscal 2017 compared to $109.6 million, a
36.8% margin, in fiscal 2016. U.S. margins decreased to 39.9% in the current period from 40.1% due to
ongoing R&D and S&M investments. International margins increased to 24.2% from 11.6% due to expanding
gross profit margins.
AS income from operations was $109.6 million, a 36.8% margin, in fiscal 2016 compared to $115.1 million, a
37.9% margin, in fiscal 2015. U.S. margins decreased to 40.1% in the current period from 43.4% due to
ongoing R&D and S&M investments. International margins increased to 11.6% from 4.9% due to S&M cost
reductions.
F-18
Connectivity income from operations was $5.3 million, a 3.6% margin, in fiscal 2017 compared to a loss of
$3.3 million, a negative 3.2% margin, in fiscal 2016, due to an increase in gross profit offset partially by
continued R&D and S&M investments.
Connectivity loss from operations was $3.3 million, a negative 3.2% margin, in fiscal 2016 compared to a loss
of $40.1 million, a negative 72.9% margin, in fiscal 2015. The improvement is due to revenue from new
customers and upsell to existing customers and cost savings realized by the combination of the LiveRamp
and AOS development teams.
Other Income (Expense), Income Taxes and Other Items
Interest expense was $7.4 million in fiscal 2017 compared to $7.7 million in fiscal 2016. The decrease is
primarily related to the reduction in the term loan balance offset by $0.7 million of new interest expense on
line of credit borrowings. The average balance of the term loan and line of credit decreased approximately
$40 million and the average rate remained approximately flat.
Interest expense was $7.7 million in fiscal 2016, or flat compared to fiscal 2015. On July 31, 2015, the
Company used $55.0 million of proceeds from the ITO disposition to repay outstanding Company
indebtedness as required by the Company’s existing credit agreement. The Company allocated interest
expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued
operating business. Allocated interest expense was $0.4 million in fiscal 2016 and $1.3 million in fiscal 2015.
Including this allocated interest, total interest expense was $8.1 million in fiscal 2016 and $9.0 million in fiscal
2015. The decrease is due primarily to the reduction in the term loan balance.
Other income was $0.3 million in fiscal 2017 compared to $0.5 million in fiscal 2016 and other expense of
$1.0 million in fiscal 2015. Other, net primarily consists of foreign currency transaction gains and losses, and
interest and investment income.
The fiscal 2017 effective tax rate was 52.5%. Fiscal 2017 included a $4.5 million federal and state tax benefit,
net of associated valuation allowance, related to the Acxiom Impact disposition. Fiscal 2017 also included a
net $2.3 million income tax benefit related to research and development tax credits. In addition, nondeductible
share-based compensation, primarily related to the Arbor Holdback Agreement and incentive stock options
issued in connection with the LiveRamp acquisition, had a $3.3 million unfavorable impact on income tax
expense.
The fiscal 2016 effective tax rate was 57.4%. Fiscal 2016 included a net $3.6 million tax benefit related to the
release of a deferred tax valuation allowance in a certain foreign jurisdiction. Fiscal 2016 also included a net
$4.0 million income tax benefit related to research and development tax credits. In addition, nondeductible
share-based compensation, primarily related to incentive stock options issued in connection with the
LiveRamp acquisition, had a $1.9 million unfavorable impact on income tax expense.
The fiscal 2015 effective tax rate was 35.8%. Fiscal 2015 included a net $3.1 million income tax benefit
principally related to new state research and development tax credits which were partially offset by other state
deferred tax activity. In addition, nondeductible incentive stock options issued in connection with the
LiveRamp acquisition had a $2.3 million unfavorable impact on income tax expense.
The effective tax rates for all periods were impacted by losses in foreign jurisdictions. The Company does not
record the income tax benefit of certain of those losses due to uncertainty of future utilization.
Discontinued operations
In fiscal 2016, the Company completed the sale of its ITO operations. As a result, the ITO business qualified
for treatment as discontinued operations. The results of operations, cash flows, and the balance sheet
amounts pertaining to ITO have been classified as discontinued operations in the consolidated financial
statements.
F-19
Summary results of operations of ITO for the fiscal years ended March 31, 2016 and 2015 are segregated
and included in earnings from discontinued operations, net of tax, in the Company’s consolidated statements
of operations and are as follows (dollars in thousands):
Revenues
Earnings from discontinued operations before income taxes
Gain on sale of discontinued operations before income taxes
Income taxes
Earnings from discontinued operations, net of tax
2016
$ 69,410
2015
$ 215,148
$ 10,050
$ 29,368
—
11,973
$ 15,801 $ 17,395
9,349
3,598
In fiscal 2015, the Company completed the sale of its U.K. call center operation, 2Touch. As a result, the
2Touch business qualified for treatment as discontinued operations. The results of operations, cash flows,
and the balance sheet amounts pertaining to 2Touch have been classified as discontinued operations in the
consolidated financial statements.
Summary results of operations of 2Touch for the fiscal years ended March 31, 2016 and 2015 are segregated
and included in earnings from discontinued operations, net of tax, in the Company’s consolidated statements
of operations and are as follows (dollars in thousands):
Revenues
Earnings (loss) from discontinued operations before income taxes
Loss on sale of discontinued operations before income taxes
Loss from discontinued operations, net of tax
2016
— $
2015
8,484
(450) $
—
4
(1,888)
(450) $ (1,884)
$
$
$
y
Capital Resources and Liquidity
q
p
Working Capital and Cash Flow
Working capital at March 31, 2017 totaled $138.1 million, a $13.9 million decrease when compared to $152.0
million at March 31, 2016, due primarily to net cash paid of $137.4 million for the Arbor and Circulate
acquisitions, offset partially by the $70.0 million in proceeds of debt related to these acquisitions.
The Company’s cash is primarily located in the United States. Approximately $20.0 million of the total cash
balance of $170.3 million, or approximately 11.7%, is located outside of the United States. The Company has
no current plans to repatriate this cash to the United States.
Accounts receivable days sales outstanding, from continuing operations, was 57 days at March 31, 2017 and
56 days at March 31, 2016, respectively, and is calculated as follows (dollars in thousands):
Numerator – trade accounts receivable, net
Denominator:
Quarter revenue
Number of days in quarter
Average daily revenue
Days sales outstanding
March 31, March 31,
2017
2016
$ 142,768 $ 138,650
224,867
90
2,499 $
57
$
224,655
91
2,469
56
Net cash provided by operating activities was $115.8 million in fiscal 2017 compared to $113.6 million and
$61.1 million in fiscal 2016 and 2015, respectively. The $2.2 million increase in fiscal 2017 resulted primarily
from an increase in cash earnings of $26.5 million offset by unfavorable changes in working capital. The
$52.5 million increase in fiscal 2016 resulted primarily from a decrease in net loss from continuing operations
($17.7 million) and the net increase in working capital.
Investing activities used cash of $159.3 million in fiscal 2017 compared to $69.2 million and $343.1 million in
fiscal 2016 and 2015, respectively. The increase for fiscal 2017 related primarily to the $137.4 million of net
F-20
cash paid in the Arbor and Circulate acquisitions and $1.0 million for a long-term investment, offset partially
by proceeds from the sales of assets of $25.5 million and the sale of Acxiom Impact of $17.0 million.
Additional fiscal 2017 investing activities acquisitions consisted of capital expenditures of $48.0 million,
capitalization of software of $14.5 million and $0.9 million of data acquisition costs. The primary decrease for
fiscal 2016 compared to fiscal 2015 relates to net cash paid in acquisitions: $5.4 million for certain
addressable television net assets of Allant in fiscal 2016 compared to $265.7 million for LiveRamp in fiscal
2015. Fiscal 2016 investing activities in addition to the net cash paid in acquisitions consisted of capital
expenditures of $47.4 million, capitalization of software of $14.9 million and $1.6 million of data acquisition
costs.
Financing activities provided cash of $25.8 million in fiscal 2017, due primarily to the proceeds from debt of
$70.0 million to partially fund the Arbor and Circulate acquisitions. Fiscal 2017 financing activities also
included $15.7 million in proceeds from the sale of common stock and $2.9 million excess tax benefits from
stock-based compensation, offset by $32.2 million in payments of debt and $30.5 million to acquire treasury
stock. Fiscal 2016 financing activities included $10.4 million in proceeds from the sale of common stock and
$3.6 million excess tax benefits from stock-based compensation, offset by $87.2 million in payments of debt,
including the $55.0 million prepayment as a result of the ITO sale, and $52.8 million to acquire treasury stock.
Financing activities used $26.8 million of cash in fiscal 2015. Fiscal 2015 financing activities included $5.0
million in proceeds from the sale of common stock and $4.6 million excess tax benefits from stock-based
compensation, offset by $26.6 million in payments of debt and $9.9 million to acquire treasury stock.
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was
subsequently modified and expanded, most recently on July 28, 2016 (see Note 13 – Stockholders’ Equity).
Under the modified common stock repurchase program, the Company may purchase up to $400 million of its
common stock through the period ending June 30, 2018. During the fiscal year ended March 31, 2017, the
Company repurchased 1.3 million shares of its common stock for $30.5 million. During the fiscal year ended
March 31, 2016, the Company repurchased 2.6 million shares of its common stock for $52.8 million. During
the fiscal year ended March 31, 2015, the Company repurchased 0.5 million shares of its common stock for
$9.9 million. Through March 31, 2017, the Company had repurchased 16.8 million shares of its stock for
$285.7 million, leaving remaining capacity of $114.3 million under the stock repurchase program.
Net cash provided by discontinued operations was $130.6 million in fiscal 2016, primarily from net cash
received of $130.2 million for the sale of ITO. Discontinued operations provided $32.8 million in fiscal year
2015.
Credit and Debt Facilities
See Note 10 – “Long-Term Debt” of the Notes to Consolidated Financial Statements for further details related
to the Company’s amended and restated credit agreement and interest rate swap agreement.
Based on our current expectations, we believe our liquidity and capital resources will be sufficient to operate
our business. However, we may take advantage of opportunities to generate additional liquidity or refinance
existing debt through capital market transactions. The amount, nature, and timing of any capital market
transactions will depend on our operating performance and other circumstances; our then-current
commitments and obligations; the amount, nature, and timing of our capital requirements; any limitations
imposed by our current credit arrangements; and overall market conditions.
Off-Balance Sheet Items and Commitments
In connection with the Impact email disposition, 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 runs through September 2021. At March 31, 2017, the Company’s maximum potential future rent
payments under this guarantee totaled $2.7 million.
There were no material outstanding letters of credit, which would reduce the borrowing capacity under the
Company’s revolving credit facility, at March 31, 2017. Outstanding letters of credit were $2.1 million at
March 31, 2016.
F-21
Contractual Commitments
The following tables present Acxiom’s contractual cash obligations, exclusive of interest, and purchase
commitments at March 31, 2017. The table does not include the future payment of liabilities related to
uncertain tax positions of $6.5 million as the Company is not able to predict the periods in which these
payments will be made (dollars in thousands):
For the years ending March 31,
Term loan
Revolving credit
borrowings
Other debt and long-
term liabilities
Total long-term and
other debt
Operating lease
payments
Total contractual cash
obligations
2018
2019
2020
2021
2022
Thereafter
Total
$ 37,500
$ 117,500
$
— $
— $
— $
— $155,000
—
70,000
—
—
—
—
70,000
2,319
1,583
1,362
348
—
—
5,612
39,819 189,083
1,362
348
—
—
230,612
18,669
12,467
12,032
11,673
11,326
16,677
82,844
$ 58,488 $201,550 $ 13,394 $ 12,021 $ 11,326 $ 16,677 $313,456
For the years ending March 31,
Total purchase
commitments
2018
2019
2020
2021
2022
Thereafter
Total
$ 38,357
$ 19,688
$ 15,398
$ 7,825
$
834 $
— $ 82,102
Purchase commitments include contractual commitments for the purchase of data and open purchase orders
for equipment, paper, office supplies, construction and other items. Purchase commitments in some cases
will be satisfied by entering into future operating leases, capital leases, or other financing arrangements,
rather than payment of cash. The above commitments relating to long-term obligations do not include future
payments of interest. The Company estimates interest payments on debt for fiscal 2018 of $10.5 million.
The following are contingencies or guarantees under which the Company could be required, in certain
circumstances, to make cash payments as of March 31, 2017 (dollars in thousands):
Lease guarantees
Surety bonds
$ 2,688
405
While the Company does not have any other material contractual commitments for capital expenditures,
certain levels of investments in facilities and computer equipment continue to be necessary to support the
growth of the business. In some cases, the Company also licenses software and sells hardware to clients.
Management believes that the Company’s existing available debt and cash flow from operations will be
sufficient to meet the Company’s working capital and capital expenditure requirements for the foreseeable
future. The Company also evaluates acquisitions from time to time, which may require up-front payments of
cash.
For a description of certain risks that could have an impact on results of operations or financial condition,
including liquidity and capital resources, see “Risk Factors” contained in Part I, Item 1A, of this Annual Report.
F-22
Key Trends and Uncertainties
y
The following is a summary of selected trends, events or uncertainties that the Company believes may have a
significant impact on its future performance.
(cid:120) The macroeconomic environment has a direct impact on overall marketing and advertising
expenditures in the U.S. and abroad. As marketing budgets are often more discretionary in nature,
they are easier to reduce in the short term as compared to other corporate expenses. Future
widespread economic slowdowns in any of the industries or markets our clients serve, particularly in
the United States, could reduce the marketing expenditures of our clients and prospective customers.
(cid:120) With the growth of online advertising and e-commerce, there is increasing awareness and concern
among the general public, privacy advocates, mainstream media, governmental bodies and others
regarding marketing and privacy matters, particularly as they relate to individual privacy interests and
global reach of the online marketplace. Negative publicity and/or increased restrictions on the
collection, management, aggregation and use of information could result in reduced demand for our
products or services, decreased availability of certain kinds of data and/or a material increase in the
cost of collecting certain kinds of data.
(cid:120)
In recent years, we have witnessed an ongoing shift from direct marketing to alternative marketing
channels. We believe this trend will continue and that, in the long term, a substantial portion of overall
marketing and advertising expenditures will be moved to alternative marketing channels.
Seasonality and Inflation
y
Although we cannot accurately determine the amounts attributable to inflation, we are affected by inflation
through increased compensation costs and other operating expenses. If inflation were to increase over the
low levels of recent years, the impact in the short run would be to cause increases in costs, which we would
attempt to pass on to clients, although there is no assurance that we would be able to do so. Generally, the
effects of inflation in recent years have been offset by technological advances, economies of scale and other
operational efficiencies.
Our traditional direct marketing operations typically experience their lowest revenue in the first quarter of the
fiscal year, with higher revenue in the second, third, and fourth quarters. To minimize the impact of these
fluctuations, we continue to seek long-term arrangements with more predictable revenues.
Non-U.S. Operations
p
The Company has a presence in the United Kingdom, France, Germany, Poland, Australia and China. Most
of the Company’s exposure to exchange rate fluctuation is due to translation gains and losses as there are no
material transactions that cause exchange rate impact. In general, each of the foreign locations is expected
to fund its own operations and cash flows, although funds may be loaned or invested from the U.S. to the
foreign subsidiaries subject to limitations in the Company’s revolving credit facility. These advances are
considered long-term investments, and any gain or loss resulting from changes in exchange rates as well as
gains or losses resulting from translating the foreign financial statements into U.S. dollars are included in
accumulated other comprehensive income (loss). Exchange rate movements of foreign currencies may have
an impact on the Company’s future costs or on future cash flows from foreign investments. The Company
has not entered into any foreign currency forward exchange contracts or other derivative instruments to
hedge the effects of adverse fluctuations in foreign currency exchange rates.
Recent Accounting Pronouncements –
g
See “Adoption of New Accounting Standards” and “Recent Accounting Pronouncements” under Note 1,
“Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements for a
discussion of certain accounting standards that have been issued during fiscal 2017 and 2016.
F-23
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Acxiom Corporation:
We have audited the accompanying consolidated balance sheets of Acxiom Corporation and Subsidiaries as
of March 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income
(loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended March 31,
2017. We also have audited Acxiom Corporation’s internal control over financial reporting as of March 31,
2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Acxiom Corporation’s
management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting
appearing under Item 9A. Our responsibility is to express an opinion on these consolidated financial
statements and an opinion on the Company’s internal control over financial reporting based on our audits.
f
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement and whether effective internal control
over financial reporting was maintained in all material respects. Our audits of the consolidated financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of Acxiom Corporation and subsidiaries as of March 31, 2017 and 2016, and the results
of their operations and their cash flows for each of the years in the three-year period ended March 31, 2017,
in conformity with U.S. generally accepted accounting principles. Also in our opinion, Acxiom Corporation
maintained, in all material respects, effective internal control over financial reporting as of March 31, 2017,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
KPMG LLP
F-24
Dallas, Texas
May 26, 2017
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2017 AND 2016
(Dollars in thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Trade accounts receivable, net
Refundable income taxes
Other current assets
Total current assets
Property and equipment, net of accumulated depreciation and amortization
Software, net of accumulated amortization of $288,122 in 2017 and $286,387
in 2016
Goodwill
Purchased software licenses, net of accumulated amortization of $72,403 in
2017 and $98,222 in 2016
Deferred income taxes
Other assets, net
LIABILITIES AND EQUITY
Current liabilities:
Current installments of long-term debt
Trade accounts payable
Accrued payroll and related expenses
Other accrued expenses
Deferred revenue
Total current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Commitments and contingencies
Equity:
March 31,
2017
March 31,
2016
$
170,343 $
142,768
7,098
48,310
368,519
189,629
138,650
9,834
37,897
376,010
155,974
183,043
47,638
592,731
55,735
492,745
7,972
10,261
51,443
10,116
6,885
25,315
$ 1,234,538 $ 1,149,849
$
$
39,819
40,208
53,238
59,861
37,087
230,213
189,241
58,374
17,730
32,243
37,717
61,309
48,254
44,477
224,000
157,897
53,964
15,020
Common stock, $0.10 par value (authorized 200 million shares; issued 132.9
million and 130.4 million shares at March 31, 2017 and 2016, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost (54.6 million and 53.0 million shares at March 31,
2017 and 2016, respectively)
Total equity
13,288
1,154,429
602,609
7,999
13,039
1,082,220
598,501
8,590
(1,039,345)
738,980
(1,003,382)
698,968
$ 1,234,538 $ 1,149,849
See accompanying notes to consolidated financial statements.
F-25
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 2017, 2016 AND 2015
(Dollars in thousands, except per share amounts)
Revenues
Cost of revenue
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Impairment of goodwill and other assets
Gains, losses and other items, net
Total operating expenses
Income (loss) from operations
Other income (expense):
Interest expense
Other, net
Total other expense
Income (loss) from continuing operations before income taxes
Income taxes (benefit)
Net earnings (loss) from continuing operations
Earnings from discontinued operations, net of tax
2017
2016
2015
$
880,247
$ 850,088 $ 804,911
477,686
402,561
488,382
361,706
494,037
310,874
—
82,109
166,676
129,714
8,373
386,872
15,689
(7,381)
334
(7,047)
8,642
4,534
4,108
—
74,247
146,176
135,385
6,829
12,132
374,769
(13,063)
74,201
116,494
130,263
—
22,600
343,558
(32,684)
(7,669)
452
(7,217)
(20,280)
(11,632)
(8,648)
15,351
(7,672)
(991)
(8,663)
(41,347)
(14,805)
(26,542)
15,511
6,703 $ (11,031)
Net earnings (loss)
$
4,108
$
Basic earnings (loss) per share:
Net earnings (loss) from continuing operations
Net earnings from discontinued operations
Net earnings (loss)
Diluted earnings (loss) per share:
Net earnings (loss) from continuing operations
Net earnings from discontinued operations
Net earnings (loss)
See accompanying notes to consolidated financial statements.
$
$
$
$
0.05 $
—
0.05 $
(0.11) $
0.20
0.09 $
(0.34)
0.20
(0.14)
0.05
—
0.05
$
$
(0.11) $
0.20
0.09 $
(0.34)
0.20
(0.14)
F-26
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED MARCH 31, 2017, 2016 AND 2015
(Dollars in thousands)
Net earnings (loss)
$
4,108
$
6,703 $ (11,031)
2017
2016
2015
Other comprehensive income (loss):
Change in foreign currency translation adjustment
Unrealized gain (loss) on interest rate swap
Other comprehensive loss
Comprehensive income (loss)
See accompanying notes to consolidated financial statements.
(706)
115
(591)
(907)
84
(4,074)
(175)
(823)
(4,249)
$
3,517 $
5,880 $ (15,280)
F-27
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ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2017, 2016 AND 2015
(Dollars in thousands)
Cash flows from operating activities:
Net earnings (loss)
Earnings from discontinued operations, net of tax
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Depreciation and amortization
Loss on disposal of assets
Impairment of goodwill and other assets
Deferred income taxes
Non-cash stock-based compensation expense
Changes in operating assets and liabilities:
Accounts receivable, net
Other assets
Accounts payable and other liabilities
Deferred revenue
Net cash provided by operating activities
Cash flows from investing activities:
Capitalized software development costs
Capital expenditures
Data acquisition costs
Proceeds from sales of assets
Equity investments
Cash paid in acquisitions, net of cash acquired
Net cash received in dispositions
Net cash used in investing activities
Cash flows from financing activities:
2017
2016
2015
$
4,108 $
—
6,703 $ (11,031)
(15,511)
(15,351)
82,690
3,040
—
(8,818)
49,145
85,463
232
6,829
(11,664)
31,463
(11,161)
(172)
4,302
(7,304)
115,830
(13,014)
(13,632)
25,529
11,084
113,642
80,447
1,700
—
(4,965)
28,316
3,744
12,867
(28,129)
(6,307)
61,131
(14,477)
(47,993)
(881)
25,494
(1,000)
(137,383)
16,988
(159,252)
(14,880)
(47,423)
(1,553)
—
—
(5,386)
—
(69,242)
(18,587)
(56,952)
(1,871)
—
—
(265,672)
—
(343,082)
Proceeds from debt
Payments of debt
Sale of common stock, net of stock acquired for withholding taxes
Excess tax benefits from stock-based compensation
Acquisition of treasury stock
Net cash provided by (used in) financing activities
Net cash used in continuing operations
70,000
(32,243)
15,709
2,852
(30,542)
25,776
(17,646)
—
(87,231)
10,417
3,551
(52,764)
(126,027)
(81,627)
—
(26,601)
5,039
4,645
(9,868)
(26,785)
(308,736)
Cash flows from discontinued operations:
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash used in financing activities
Net cash provided by discontinued operations
Net cash provided by (used in) continuing and discontinued operations
Effect of exchange rate changes on cash
—
—
—
—
(17,646)
(1,640)
6,323
124,506
(206)
130,623
48,996
(377)
43,853
(9,254)
(1,820)
32,779
(275,957)
(1,619)
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
See accompanying notes to consolidated financial statements
F-29
(19,286)
189,629
(277,576)
418,586
$ 170,343 $ 189,629 $ 141,010
48,619
141,010
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
YEARS ENDED MARCH 31, 2017, 2016 AND 2015
(Dollars in thousands)
2017
2016
2015
$ 7,779 $ 8,145 $ 8,673
(3,845)
—
6,866
—
55,000
6,100
—
—
3,823
Supplemental cash flow information:
Cash paid during the period for:
Interest
Income taxes, net of refunds
Prepayment of debt
Payments on capital leases and installment payment
arrangements
See accompanying notes to consolidated financial statements.
F-30
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2017, 2016 AND 2015
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business -
p
Acxiom is a global technology and enablement 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 omni-channel 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.
Basis of Presentation and Principles of Consolidation -
p
The consolidated financial statements include the accounts of the Company and its subsidiaries. All
significant intercompany balances and transactions have been eliminated in consolidation. We have prepared
the accompanying consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) and we consider the various staff accounting bulletins
and other applicable guidance issued by the United States Securities and Exchange Commission.
Use of Estimates -
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 consolidated
financial statements in conformity with GAAP. Estimates are used in determining, among other items, the fair
value of acquired assets and assumed liabilities, estimated selling price in certain revenue arrangements,
projected cash flows associated with recoverability of assets, restructuring and impairment accruals, litigation
and facilities lease loss accruals, amortization of software development costs, and the recognition and
measurement of current and deferred income taxes, including the measurement of uncertain tax positions.
Actual results could differ from those estimates.
Discontinued Operations -
p
Discontinued operations comprise those activities that have been disposed of during the period or which have
been classified as held for sale at the end of the period, and represent a separate major line of business or
geographical area that can be clearly distinguished for operational and financial reporting purposes. In fiscal
2016, the Company sold its IT Infrastructure Management business (“ITO”) and began reporting the results of
operations, cash flows and the balance sheet amounts pertaining to ITO as a component of discontinued
operations in the consolidated financial statements. In fiscal 2015, Acxiom identified its U.K. call center
operation, 2Touch, as a component of the Company that is reported as discontinued operations because of
its disposal. Refer to Note 4, Discontinued Operations, for more information.
Unless otherwise indicated, information in the notes to the consolidated financial statements relates to
continuing operations.
F-31
Significant Accounting Policies
Cash and Cash Equivalents -
q
The Company considers all highly-liquid investments with original maturities of three months or less to be
cash equivalents.
Accounts Receivable -
Accounts receivable includes amounts billed to customers as well as unbilled amounts recognized in
accordance with the Company’s revenue recognition policies, as stated below. Unbilled amounts included in
accounts receivable, which generally arise from the delivery of data and performance of services to
customers in advance of billings, were $14.1 million at March 31, 2017 and $14.3 million March 31, 2016.
Accounts receivable are presented net of allowance for doubtful accounts. The Company evaluates its
allowance for doubtful accounts based on a combination of factors at each reporting date. Each account or
group of accounts is evaluated based on specific information known to management regarding each
customer’s ability or inability to pay, as well as historical experience for each customer or group of customers,
the length of time the receivable has been outstanding, and current economic conditions in the customer’s
industry. Accounts receivable that are determined to be uncollectible are charged against the allowance for
doubtful accounts.
Property and Equipment -
q p
p
y
Property and equipment are stated at cost. Depreciation and amortization are calculated on the straight-line
method over the estimated useful lives of the assets as follows: buildings and improvements, up to 30 years;
data processing equipment, 2 - 5 years, and office furniture and other equipment, 3 - 7 years.
Property held under capitalized lease arrangements is included in property and equipment, and the
associated liabilities are included in long-term debt. Amortization of property under capitalized leases is
included in depreciation and amortization expense. Property and equipment taken out of service and held for
sale is recorded at the lower of depreciated cost or net realizable value and depreciation is ceased.
Leases -
Rent expense on operating leases is recorded on a straight-line basis over the term of the lease agreement.
,
Software, Purchased Software Licenses, and Research and Development Costs –
p
,
Costs of internally developed software are capitalized in accordance with ASC 350-40, Internal Use Software.
The standard generally requires that research and development costs incurred prior to the beginning of the
application development stage of software products are charged to operations as such costs are incurred.
Once the application development stage has begun, costs are capitalized until the software is available for
general release. Costs of internally developed software are amortized on a straight-line basis over the
remaining estimated economic life of the software product, generally two to five years (see Note 8 – Software
Costs).
Costs of purchased software licenses are amortized on a straight-line basis over the estimated economic life
of the license, generally not to exceed five years (see Note 8 – Software Costs).
Capitalized software, including both purchased and internally developed, is reviewed when facts and
circumstances indicate the carrying amount may not be recoverable and, if necessary, the Company reduces
the carrying value of each product to its fair value.
F-32
Business Combinations –
We apply the provisions of ASC 805, Business Combinations, in accounting for its acquisitions. It requires us
to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date
fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over
the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our
best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition
date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and
subject to refinement. As a result, during the measurement period, which may be up to one year from the
acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding
offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of
assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to
our consolidated statement of operations.
Accounting for business combinations requires our management to make significant estimates and
assumptions, especially at the acquisition date, including our estimates for intangible assets. Although we
believe the assumptions and estimates we have made in the past have been reasonable and appropriate,
they are based in part on historical experience and information obtained from the management of the
acquired companies and are inherently uncertain.
Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not
limited to:
future expected cash flows from Connectivity sales;
(cid:120)
(cid:120) expected costs to develop the in-process research and development into commercially viable
(cid:120)
products and estimated cash flows from the products when completed;
the acquired company’s brand and competitive position, as well as assumptions about the period of
time the acquired brand will continue to be used in the combined company’s product portfolio; and
(cid:120) discount rates.
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such
assumptions, estimates or actual results.
In addition, uncertain tax positions and tax related valuation allowances in connection with a business
combination are initially estimated as of the acquisition date. We reevaluate these items quarterly based upon
facts and circumstances that existed as of the acquisition date with any judgments to our preliminary
estimates being recorded to goodwill if identified within the measurement period. Subsequent to the
measurement period or our final determination of the uncertain tax positions and tax related valuation
allowances, whichever comes first, changes to these tax estimates will affect our provision for income taxes in
our consolidated statement of operations and could have a material impact on our results of operations and
financial position.
Goodwill -
Goodwill is measured and tested for impairment on an annual basis in the first quarter of the Company’s fiscal
year in accordance with ASC 350, Intangibles—Goodwill and Other, or more frequently if indicators of
impairment exist. Triggering events for interim impairment testing include indicators such as adverse industry
or economic trends, restructuring actions, downward revisions to projections of financial performance, or a
sustained decline in market capitalization. According to ASC 350, we can opt to perform a qualitative
assessment to test a reporting unit’s goodwill for impairment or we can directly perform the two-step
impairment test. Based on our qualitative assessment, if we determine that the fair value of a reporting unit is
more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, the two-
step impairment test prescribed by ASC 350 will be performed. The first step requires comparing the
estimated fair value of a reporting unit to its net book value, including goodwill. A potential impairment exists
if the estimated fair value of the reporting unit is lower than its net book value. The second step of the
impairment test involves assigning the estimated fair value of the reporting unit to its identifiable assets, with
any residual fair value being assigned to goodwill. If the carrying value of an individual indefinite-lived
F-33
intangible asset (including goodwill) exceeds its estimated fair value, such asset is written down by an amount
equal to the excess, and a corresponding amount is recorded as a charge to operations for the period in
which the impairment test is completed. Completion of the Company’s annual impairment test during the first
quarter of fiscal 2017 indicated no impairment of its goodwill balances.
During the fourth quarter of fiscal 2016, a triggering event occurred which required the Company to test the
recoverability of goodwill associated with its APAC Marketing Services and Audience Solutions reporting
units. The triggering event was the Company’s decision to focus efforts in Australia exclusively on the
Connectivity business; as a result, the Company plans to wind-down the Marketing Services and Audience
Solutions operations in Australia. In addition to testing the recoverability of goodwill, the Company also tested
certain other long-lived assets in these units for impairment. The results of the two-step test indicated
complete impairment of the APAC Audience Solutions goodwill as well as impairment for certain other long-
lived assets. The amount of impairment was $6.1 million, of which $5.4 million was goodwill and $0.7 million
related to other long-lived assets, primarily property and equipment. The impairment test also indicated a
reduced fair value for the APAC Marketing Services component, but the fair value was still in excess of the
carrying value resulting in no impairment.
During the third quarter of fiscal 2016, management determined that results for the APAC component were
lower than had been projected in the previous goodwill test in part due to an economic slowdown in Asia.
Management further determined that the failure of the APAC component to meet expectations, combined with
the expectation that future projections would also be lowered, constituted a triggering event, requiring an
interim goodwill impairment test. The impairment test indicated a reduced fair value, but the fair value was still
in excess of the carrying value resulting in no impairment.
During the second quarter of fiscal 2016, a triggering event occurred which required the Company to test the
recoverability of goodwill associated with its Brazil Marketing Services and Audience Solutions reporting unit.
The triggering event was the announced closure of the Company’s Brazil operation. In addition to testing the
recoverability of goodwill, the Company also tested certain other long-lived assets in this unit for impairment.
The results of the impairment testing indicated complete impairment of the goodwill as well as impairment for
certain other long-lived assets. The amount of impairment was $0.7 million, of which $0.5 million was
goodwill and $0.2 million related to other long-lived assets, primarily property and equipment.
To estimate the fair value for each of the components, management uses an income approach based on a
discounted cash flow model together with valuations based on an analysis of public company market
multiples and a similar transactions analysis.
The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates,
cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the
most sensitive and susceptible to change as they require significant management judgment. Discount rates
are determined by using a weighted average cost of capital (“WACC”). The WACC considers market and
industry data as well as company-specific risk factors for each reporting unit in determining the appropriate
discount rate to be used. The discount rate utilized for each reporting unit is indicative of the return an
investor would expect to receive for investing in such a business. Management, considering industry and
company-specific historical and projected data, develops growth rates and cash flow projections for each
reporting unit. Terminal value rate determination follows common methodology of capturing the present value
of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-
term growth rates.
The public company market multiple method is used to estimate values for each of the components by
looking at market value multiples to revenue and EBITDA (earnings before interest, taxes, depreciation and
amortization) for selected public companies that are believed to be representative of companies that
marketplace participants would use to arrive at comparable multiples for the individual component being
tested. These multiples are then used to develop an estimated value for each respective component.
The similar transactions method compares multiples based on acquisition prices of other companies believed
to be those that marketplace participants would use to compare to the individual component being tested.
Those multiples are then used to develop an estimated value for that component.
F-34
To arrive at an estimated value for each component, management uses a weighted-average approach to
combine the results of each analysis. Management believes that using multiple valuation approaches and
then weighting them appropriately is a technique that a marketplace participant would use.
As a final test of the annual valuation results, the total of the values of the components is reconciled to the
actual market value of Acxiom common stock as of the valuation date. Management believes this control
premium is reasonable compared to historical control premiums observed in actual transactions.
f
Management believes that the estimated valuations are reasonable and consistent with what other
marketplace participants would use in valuing the Company’s components. However, management cannot
give any assurance that these market values will not change in the future. For example, if discount rates
demanded by the market increase, this could lead to reduced valuations under the income approach. If the
Company’s projections are not achieved in the future, this could lead management to reassess their
assumptions and lead to reduced valuations under the income approach. If the market price of the
Company’s stock decreases, this could cause the Company to reassess the reasonableness of the implied
control premium, which might cause management to assume a higher discount rate under the income
approach which could lead to reduced valuations. If future similar transactions exhibit lower multiples than
those observed in the past, this could lead to reduced valuations under the similar transactions approach.
And finally, if there is a general decline in the stock market and particularly in those companies selected as
comparable to the Company’s components, this could lead to reduced valuations under the public company
market multiple approach. The Company’s next annual impairment test will be performed during the first
quarter of fiscal 2018. The fair value of the Company’s components could deteriorate which could result in
the need to record impairment charges in future periods. The Company continues to monitor potential
triggering events including changes in the business climate in which it operates, attrition of key personnel, the
volatility in the capital markets, the Company’s market capitalization compared to its book value, the
Company’s recent operating performance, and the Company’s financial projections. The occurrence of one
or more triggering events could require additional impairment testing, which could result in impairment
charges.
Impairment of Long-lived Assets -
p
g
Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The
Company considers factors such as operating losses, declining outlooks, and business conditions when
evaluating the necessity for an impairment analysis. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset group to the undiscounted cash flows
f
expected to result from the use and eventual disposition of the asset group. If such assets are impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds
the fair value of the assets.
During fiscal 2016, in conjunction with the goodwill impairment tests noted above, the Company also tested
certain other long-lived assets in the affected units for impairment. The Company recorded impairment
charges of $0.9 million related to other long-lived assets, primarily property and equipment.
Data Acquisition Costs -
q
The Company defers certain costs related to the acquisition or licensing of data for the Company’s proprietary
databases which are used in providing data products and services. These costs are amortized over the
useful life of the data, which is from two to seven years. To estimate the useful life of any acquired data, the
Company considers several factors including 1) the type of data acquired, 2) whether the data becomes stale
over time, 3) to what extent the data will be replaced by updated data over time, 4) whether the stale data
continues to have value as historical data, 5) whether a license places restrictions on the use of the data, and
6) the term of the license.
F-35
Deferred Revenue -
Deferred revenue consists of amounts billed in excess of revenue recognized. Deferred revenues are
subsequently recorded as revenue when earned in accordance with the Company’s revenue recognition
policies.
Revenue Recognition -
g
The Company’s policy follows the guidance from ASC 605, Revenue Recognition.
The Company provides marketing database services under long-term arrangements. These arrangements
may require the Company to perform setup activities such as the design and build of a database, and may
include other products and services purchased at the same time, or within proximity of one another (referred
to as multiple element arrangements). Each element within a multiple element arrangement is accounted for
as a separate unit of accounting provided the following criteria are met: the delivered products or services
have value to the customer on a standalone basis; and for an arrangement that includes a general right of
return relative to the delivered products or services, delivery or performance of the undelivered product or
service is considered probable and is substantially controlled by us. We consider a deliverable to have
standalone value if the product or service is sold separately by us or another vendor or could be resold by the
customer. Further, our revenue arrangements generally do not include a general right of return related to the
delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the
deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for
purposes of allocation of the arrangement consideration and revenue recognition.
For our multiple-element arrangements, we allocate revenue to each element based on a selling price
hierarchy at the arrangement’s inception. The relative selling price for each unit of accounting in a multiple-
element arrangement is established using vendor-specific objective evidence (VSOE), if available, third-party
evidence (TPE), if available, or management’s best estimate of stand-alone selling price (BESP). In most
cases, the Company has neither VSOE nor TPE and therefore uses BESP. The total arrangement
consideration is allocated to each separate unit of accounting for each of the deliverables using the relative
selling prices of each unit based on the aforementioned selling price hierarchy. We limit the amount of
revenue recognized for delivered elements to an amount that is not contingent upon future delivery of
additional products or services or meeting any specified performance conditions.
The objective of BESP is to determine the price at which the Company would transact a sale if the product or
service were sold on a stand-alone basis. Management’s BESP is determined by considering multiple factors
including actual contractual selling prices when the item is sold on a stand-alone basis, as well as market
conditions, competition, internal costs, profit objectives and pricing practices. As pricing and marketing
strategies evolve, we may modify our pricing practices in the future, which could result in changes to BESP,
or to the development of VSOE or TPE for individual products or services. As a result, future revenue
recognition for multiple-element arrangements could differ from recognition in the current period. Our relative
selling prices are analyzed on an annual basis or more frequently if we experience significant changes in
selling prices.
Revenues are recognized when: (1) persuasive evidence of an arrangement exists; (2) we deliver the
products and services; (3) the sale price is fixed or determinable; and (4) collection is reasonably assured.
Revenues that are not recognized at the time of sale because the foregoing conditions are not met are
recognized when those conditions are subsequently met. Where applicable, we reduce revenue for certain
incentive programs where we can sufficiently estimate the effects of these items. In some cases, the
arrangements also contain provisions requiring customer acceptance of the setup activities prior to
commencement of the ongoing services arrangement. Up-front fees billed during the setup phase for these
arrangements are deferred and setup costs that are direct and incremental to the contract are capitalized.
Revenue recognition does not begin until after customer acceptance in cases where contracts contain
acceptance provisions. Once the setup phase is complete and customer acceptance occurs, the Company
recognizes revenue and the related costs for each element as delivered. In situations where the arrangement
does not require customer acceptance before the Company begins providing services, revenue is recognized
for each element as delivered and no costs are deferred.
F-36
The Company evaluates its marketing database arrangements to determine whether the arrangement
contains a lease. If the arrangement is determined to contain a lease, applicable accounting standards
require the Company to account for the lease component separately from the remaining components of the
arrangement. In cases where marketing database arrangements are determined to include a lease, the lease
is evaluated to determine whether it is a capital lease or operating lease and accounted for accordingly.
These lease revenues are not significant to the Company’s consolidated financial statements.
Sales of third-party software, hardware and certain other equipment are recognized when delivered. If such
sales are part of a multiple-element arrangement, they are recognized as a separate element unless
collection of the sales price is dependent upon delivery of other products or services. Additionally, the
Company evaluates revenue from the sale of data, software, hardware and equipment in accordance with
accounting standards to determine whether such revenue should be recognized on a gross or a net basis. All
the factors in the accounting standards are considered with the primary factor being whether the Company is
the primary obligor in the arrangement. “Out-of-pocket” expenses incurred by, and reimbursed to, the
Company in connection with customer contracts are recorded as gross revenue.
The Company also performs services on a project basis outside of, or in addition to, the scope of long-term
arrangements. The Company recognizes revenue from these services as the services are performed.
All taxes assessed on revenue-producing transactions described above are presented on a net basis, or
excluded from revenues.
Revenues from the licensing of data are recognized upon delivery of the data to the customer. Revenue from
the licensing of data to the customer in circumstances where the license agreement contains a volume cap is
recognized in proportion to the total records to be delivered under the arrangement. Revenue from the sale
of data on a per-record basis is recognized as the records are delivered.
Revenues from Connectivity services are primarily recorded as monthly recurring subscription fees, and to a
lesser extent from data providers and certain digital publishers in the form of revenue-sharing agreements.
Concentration of Credit Risk -
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of
trade accounts, unbilled and notes receivable. The Company’s receivables are from a large number of
customers. Accordingly, the Company’s credit risk is affected by general economic conditions. The
Company maintains deposits in federally insured financial institutions more than federally insured limits.
Management, however, believes the Company is not exposed to significant credit risk due to the financial
position of the depository institutions in which those deposits are held.
Income Taxes -
The Company and its domestic subsidiaries file a consolidated federal income tax return. The Company’s
foreign subsidiaries file separate income tax returns in the countries in which their operations are based.
The Company makes estimates and judgments in determining the provision for income taxes for financial
statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and
deductions, and in the calculation of certain tax assets and liabilities that arise from differences in the timing
of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and
penalties related to uncertain tax positions. Significant changes in these estimates may result in an increase
or decrease to the tax provision in a subsequent period. The Company assesses the likelihood that it will be
able to recover its deferred tax assets. If recovery is not likely, the Company increases the provision for taxes
by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be
recoverable. The Company believes that the deferred tax assets recorded on the consolidated balance
sheets will be ultimately recovered. However, should a change occur in the Company’s ability to recover its
deferred tax assets, its tax provision would increase in the period in which the Company determined that the
recovery was not likely.
F-37
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and
regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process
pursuant to ASC 740, Income Taxes. The first step is to evaluate the tax position for recognition by
determining whether the weight of available evidence indicates that it is more likely than not that the position
will be sustained on audit, including resolution of related appeals or litigation processes, if any. If the
Company determines that a tax position will more likely than not be sustained on audit, the second step
requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50%
likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts,
as the Company must determine the probability of various possible outcomes.
The Company re-evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on
factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively
settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a
change in recognition or measurement would result in the recognition of a tax benefit or an additional charge
to the tax provision.
Foreign Currency Translation -
g
y
The reporting currency of the Company is the U.S. dollar. The functional currency of our foreign operations
generally is the applicable local currency for each foreign subsidiary. The balance sheets of the Company’s
foreign subsidiaries are translated at period-end rates of exchange, and the statements of operations are
translated at the weighted-average exchange rate for the period. Gains or losses resulting from translating
foreign currency financial statements are included in accumulated other comprehensive income (loss) in the
consolidated statements of stockholders’ equity and comprehensive income (loss).
g
Advertising Expense -
p
The Company expenses advertising costs as incurred. Advertising expense was approximately $9.3 million,
$5.9 million and $5.0 million for the fiscal years ended March 31, 2017, 2016 and 2015, respectively.
Advertising expense is included in operating expenses on the accompanying consolidated statements of
operations.
Guarantees -
The Company accounts for the guarantees of indebtedness of others under applicable accounting standards
which require a guarantor to recognize, at the inception of the guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. A guarantor is also required to make additional disclosures in
its financial statements about obligations under certain guarantees issued. The Company’s liability for the fair
value of guarantees is not material (see Note 12 – Commitments and Contingencies).
Loss Contingencies and Legal Expenses -
g
p
g
The Company records a liability for loss contingencies when the liability is probable and reasonably
estimable. Legal fees associated with loss contingencies are recorded when the legal fees are incurred.
F-38
Earnings (Loss) per Share -
g (
) p
A reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share is shown
below (in thousands, except per share amounts):
Net earnings (loss) from continuing operations
Net earnings from discontinued operations, net of tax
Net earnings (loss)
f
g (
) p
Basic earnings (loss) per share:
Basic weighted-average shares outstanding
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Net earnings (loss)
Diluted earnings (loss) per share:
) p
g (
Basic weighted-average shares outstanding
2017
2016
$ 4,108 $ (8,648) $ (26,542)
15,511
15,351
$ 4,108 $ 6,703 $ (11,031)
—
2015
77,609
77,616
77,106
$
0.05 $ (0.11) $
—
0.05 $
0.20
0.09 $
$
(0.34)
0.20
(0.14)
Dilutive effect of common stock options, warrants, and restricted
stock as computed under the treasury stock method
Diluted weighted-average shares outstanding
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Net earnings (loss)
77,609
77,616
77,106
2,239
—
79,848
77,616
—
77,106
$
$
0.05
—
0.05
$ (0.11) $
0.20
0.09
$
$
(0.34)
0.20
(0.14)
Due to the net loss from continuing operations in fiscal 2016 and 2015, the dilutive effect of options, warrants
and restricted stock units covering 1.5 million and 1.4 million shares, respectively, of common stock was
excluded from the earnings 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 earnings (loss)
per share because the effect was anti-dilutive are shown below (in thousands, except per share amounts):
Number of shares outstanding under options, warrants
and restricted stock units
Range of exercise prices for options
90
1,654
1,829
$ 27.77-$ 32.85 $ 17.49-$ 62.06 $ 19.18-$ 62.06
2017
2016
2015
Share-based Compensation -
p
The Company records share-based compensation expense according to the provisions of ASC Topic 718,
“Compensation – Stock Compensation.” ASC Topic 718 requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the statement of operations over the service
period of the award based on their fair values. Under the provisions of ASC Topic 718, the Company
determines the appropriate fair value model to be used for valuing share-based payments and the
amortization method for compensation cost.
The Company has stock option plans and equity compensation plans (collectively referred to as the “share-
based plans”) administered by the compensation committee (“compensation committee”) of the board of
directors under which options and restricted stock units were outstanding as of March 31, 2017.
The Company’s equity compensation plan provides that all associates (employees, officers, directors,
affiliates, independent contractors or consultants) are eligible to receive awards (grant of any option, stock
appreciation right, restricted stock award, restricted stock unit award, performance award, performance share,
performance unit, qualified performance-based award, or other stock unit award) under the plan with the
terms and conditions applicable to an award set forth in applicable grant documents.
F-39
Incentive stock option awards granted under the share-based plans cannot be granted with an exercise price
less than 100% of the per-share market value of the Company’s shares at the date of grant and have a
maximum duration of ten years from the date of grant. Board policy currently requires that nonqualified
options also must be priced at or above the fair market value of the common stock at the time of grant with a
maximum duration of ten years.
Restricted stock units may be issued under the equity compensation plan and represent the right to receive
shares in the future by way of an award agreement which includes vesting provisions. Award agreements
can further provide for forfeitures triggered by certain prohibited activities, such as breach of confidentiality.
All restricted stock units will be expensed over the vesting period as adjusted for estimated forfeitures. The
vesting of some restricted stock units is subject to the Company’s achievement of certain performance
criteria, as well as the individual remaining employed by the Company for a period of years.
The Company also has outstanding performance-based stock appreciation rights and performance-based
stock units. These are expensed over the vesting period of the award.
The Company receives income tax deductions because of the exercise of nonqualified stock options and the
vesting of other stock-based awards. The tax benefit of share-based compensation
f
book compensation expense is reflected as a financing cash inflow and operating cash outflow included in
changes in operating assets and liabilities. The Company has elected the short-cut method in accounting for
the tax benefits of share-based payment awards.
expense in excess of the
Derivatives and Hedging -
g g
Derivative financial instruments are valued in the market using regression analysis. Significant inputs to the
derivative valuation for interest rate swaps are observable in active markets and are classified as Level 2 in
the fair value hierarchy.
In fiscal 2014, the Company entered into an interest rate swap as a cash flow hedge against LIBOR interest
rate movements on the term loan. All changes in fair value of the derivative were deferred and recorded in
other comprehensive income (loss) until the related forecasted transaction was recognized in the
consolidated statement of operations. The interest rate swap matured in fiscal 2017.
Restructuring – g
The Company records costs associated with employee terminations and other exit activity in accordance with
ASC 420, Exit or Disposal Cost Obligations, depending on whether the costs relate to exit or disposal
activities under the accounting standards, or whether they are other post-employment termination benefits.
Under applicable accounting standards for exit or disposal costs, the Company records employee termination
benefits as an operating expense when the benefit arrangement is communicated to the employee and no
significant future services are required. Under the accounting standards related to post employment
termination benefits the Company records employee termination benefits when the termination benefits are
probable and can be estimated. The Company recognizes the present value of facility lease termination
obligations, net of estimated sublease income and other exit costs, when the Company has future payments
with no future economic benefit or a commitment to pay the termination costs of a prior commitment. In future
periods the Company will record accretion expense to increase the liability to an amount equal to the
estimated future cash payments necessary to exit the leases. This requires judgment and management
estimation to determine the expected time frame for securing a subtenant, the amount of sublease income to
be received and the appropriate discount rate to calculate the present value of the future cash flows. Should
actual lease exit costs differ from estimates, the Company may be required to adjust the restructuring charge
which will impact net earnings (loss) in the period any adjustment is recorded.
Adoption of New Accounting Standards –
p
g
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2016-15, Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments. The
new standard eliminates the diversity in practice related to the classification of certain cash receipts and
F-40
payments in the statement of cash flows by adding or clarifying guidance on eight specific cash flow issues,
including payments for debt prepayments or extinguishments. The early adoption of this standard did not
result in any changes to our existing accounting policies, presentation of items in our consolidated statements
of cash flows, or any changes resulting from the retrospective application to all periods reported.
Recent Accounting Pronouncements Not Yet Adopted –
p
g
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment, which eliminates step two from the goodwill impairment test. Under the
amendments in 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 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 consolidated
financial statements and related disclosures.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the
Definition of a Business, which provides guidance for evaluating whether certain transactions are to be
accounted for as an acquisition (or disposal) of either a business or an asset. ASU 2017-01 is effective for
annual periods beginning after December 15, 2017 (fiscal 2019 for the Company), including interim periods
within those fiscal years, and earlier adoption is permitted for transactions occurring after the issuance of ASU
2017-01 and not reported in the financial statements. The Company does not expect the adoption of this
guidance to have a material impact on its consolidated financial statements and related disclosures.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.
This standard is intended to reduce diversity in the presentation of restricted cash and restricted cash
equivalents in the statement of cash flows. The standard requires that restricted cash and restricted cash
equivalents be included as components of total cash and cash equivalents as presented on the statement of
cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and
restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for
annual periods beginning after December 15, 2017 (fiscal 2019 for the Company), including interim periods
within those fiscal years; earlier adoption is permitted. The Company does not expect the adoption of this
guidance to have a material impact on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting which modifies certain aspects of the
accounting for share-based payment transactions, including income taxes, classification of awards, and
classification in the statement of cash flows. Currently, excess tax benefits or deficiencies from the
Company’s equity awards are recorded as additional paid-in capital in its Consolidated Balance Sheets. Upon
adoption, the Company will record, on a prospective basis, any excess tax benefits or deficiencies from its
equity awards in its consolidated Statements of Operations in the reporting periods in which settlement
occurs. As a result, after adoption the Company’s income tax expense and associated effective tax rate will
be impacted by fluctuations in stock prices between the grant dates and settlement dates of equity awards.
ASU 2016-09 is effective for annual periods beginning after December 15, 2016 (fiscal 2018 for the
Company). The Company is continuing to evaluate the impact of the adoption of this guidance on its
consolidated financial condition, results of operations and cash flows.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) as a comprehensive new leases
standard that amends various aspects of existing guidance for leases and requires additional disclosures
about leasing arrangements. It will require lessees to recognize lease assets and lease liabilities for those
leases classified as operating leases under previous guidance, ASC 840, Leases. ASU 2016-02 creates a
new Topic, ASC 842, Leases. This new Topic retains a distinction between finance leases and operating
leases. The classification criteria for distinguishing between finance leases and operating leases are
substantially similar to the classification criteria for distinguishing between capital leases and operating leases
in the previous leases guidance. 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; earlier adoption is
F-41
permitted. In the financial statements in which the ASU is first applied, leases shall be measured and
recognized at the beginning of the earliest comparative period presented with an adjustment to equity. The
Company is continuing to evaluate the impact of the adoption of this guidance on its consolidated financial
condition, results of operations and cash flows.
In May 2014, the FASB issued update ASU 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 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 that is expected to be received for those goods or
services. The guidance defines a five-step process to achieve this core principle and, in doing so, it is
possible more judgment and estimates may be required within the revenue recognition process than are
required under existing GAAP, including identifying performance obligations in the contract, estimating the
amount of variable consideration to include in the transaction price and allocating the transaction price to
each separate performance obligation, among others. Topic 606 also provides guidance on the recognition of
costs related to obtaining customer contracts. The effective date for the Company is the first quarter of fiscal
2018 or the first quarter of fiscal 2019 using either of two methods: (i) retrospective application to each prior
reporting period presented with the option to elect certain practical expedients; or (ii) retrospective application
with the cumulative effect recognized at the date of initial application and providing certain additional
disclosures. The Company has completed its preliminary assessment of the new standard and is continuing
assessment as we complete implementation design activities. Preliminarily, we plan to adopt Topic 606 in the
first quarter of fiscal 2019 pursuant to the aforementioned adoption method (ii) and we do not believe there
will be a material impact to our revenues upon adoption. We are continuing to evaluate the impact to our
revenues related to our pending adoption of Topic 606 and our preliminary assessments are subject to
change. We are also continuing to evaluate the provisions of Topic 606 related to costs of obtaining customer
contracts.
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.
RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
The following table summarizes the restructuring activity included in gains, losses and other items, net in the
consolidated statements of operations for the fiscal years ended March 31, 2017, 2016 and 2015 (dollars in
thousands):
March 31, 2014
Restructuring charges and adjustments
Payments
March 31, 2015
Restructuring charges and adjustments
Payments
March 31, 2016
Restructuring charges and adjustments
Payments
March 31, 2017
Restructuring Plans
g
$
$
$
$
Associate-related
reserves
Total
13,284
(12,615)
Lease
accruals
6,542 $ 1,513 $ 8,055
19,784
6,500
(15,400)
(2,785)
7,211 $ 5,228 $ 12,439
11,632
8,630
3,002
(17,692)
(4,706)
(12,986)
2,855 $ 3,524 $ 6,379
6,740
3,755
2,985
(4,210)
(6,411)
(2,201)
2,400 $ 4,308 $ 6,708
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 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.
F-42
The associate-related accruals of $3.8 million relate to the termination of associates in the United States and
Europe and include a $1.3 million increase to the fiscal 2016 restructuring plans, primarily in Australia. Of the
amount accrued for 2017, $1.2 million remained accrued as of March 31, 2017. These costs are expected to
be paid out in fiscal 2018.
The lease accruals and adjustments of $3.0 million result from the Company’s exit from certain leased office
facilities. The Company intends to sublease the facilities to the extent possible. The liability 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. Of the amount accrued for this facility in 2017, $3.0
million remained accrued as of March 31, 2017.
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 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.
The associate-related accruals of $8.6 million relate to the termination of associates in the United States,
Europe, Brazil and Australia. Of the amount accrued for 2016, $1.0 million remained accrued as of March 31,
2017. These costs are expected to be paid out in fiscal 2018.
The lease termination charges and accruals of $3.0 million included a $1.4 million lease early-termination fee
in France, a lease accrual of $0.2 million, and a $1.4 million increase to the fiscal 2015 lease restructuring
plans. The fiscal 2016 lease early-termination fee and lease accrual were fully paid during fiscal 2016.
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 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.
The associate-related accruals of $13.3 million related to the termination of associates in the United States,
Europe, Australia, and China and included an increase of $0.7 million to the fiscal 2014 restructuring plan. Of
the amount accrued for 2015, $0.2 million remained accrued as of March 31, 2017. These costs are expected
to be paid out in fiscal 2018.
The lease accruals of $6.5 million result from the Company’s exit from certain leased office facilities. The
Company intends to sublease the facilities to the extent possible. The liability will be satisfied over the
remainder of the leased properties’ terms, which continue through November 2025. Actual sublease
payments 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. Of the remaining amount accrued for
2015, $1.3 million remained accrued as of March 31, 2017.
Gains, Losses and Other Items
,
Gains, losses and other items for each of the years presented are as follows (dollars in thousands):
Restructuring plan charges and adjustments
Other restructuring charges
Write-off of accumulated foreign currency translation in Brazil
Gain on disposition of assets
AAcquisition-related costs
Other
2017
$ 6,740
2,125
1,315
(2,986)
1,365
(186)
$ 8,373
2016
$ 11,632
381
—
—
—
119
$ 12,132
2015
$ 19,784
1,976
—
—
820
20
$ 22,600
F-43
3.
ACQUISITIONS:
Arbor and Circulate
The Company acquired all the outstanding shares of Arbor Technologies, Inc. (“Arbor”) and Circulate.com,
Inc. (“Circulate”) on November 22, 2016 and November 29, 2016, respectively. Arbor and Circulate help
publishers connect people-based data to the marketing ecosystem. Because of these acquisitions, Arbor and
Circulate are now wholly-owned subsidiaries of the Company included in the Connectivity segment, and
increase the scale of the Company’s omni-channel identity graph and network. The Company has included
the financial results of Arbor and Circulate in the consolidated financial statements from the dates of
acquisition. The consideration paid for the outstanding shares and vested stock options was approximately
$137.4 million, net of cash acquired of approximately $9.5 million. The consideration paid for unvested stock
options had an estimated fair value of $9.2 million. These options are not part of the purchase price and will
be expensed as non-cash stock compensation over the applicable vesting periods.
In connection with the Arbor acquisition, the Company agreed to pay $38.3 million to certain key employees
(see “Consideration Holdback” in note 13). The consideration holdback is payable over 30 equal, monthly
increments and is settleable in shares of Company common stock. The number of shares to be issued
monthly will vary depending on the market price of the shares on the date of issuance and will be recorded as
non-cash stock compensation expense as the shares are issued. The consideration holdback is not part of
the purchase price as vesting is dependent on continued employment of the key employees.
Following the closing of Arbor, the Company granted new awards of restricted stock units to select employees
of Arbor to induce them to accept employment with the Company (the “Arbor Inducement Awards”). The
Arbor Inducement Awards had a grant date fair value of $10.4 million, and will vest over three years with 34%
of the total vesting on the first anniversary of the closing date and 8.25% vesting each three months
thereafter, subject to the employee’s continued service through each vesting date. Following the closing of
Circulate, the Company granted new awards of restricted stock units to select employees of Circulate to
induce them to accept employment with the Company (the “Circulate Inducement Awards”). The Circulate
Inducement Awards had a grant date fair value of $10.0 million. The Circulate Inducement Awards granted to
certain key employees of Circulate will vest over two years with 50% of the total vesting on the first
anniversary of the closing date and 12.5% vesting each three months thereafter, subject to the employee’s
continued service through each vesting date and vesting acceleration upon a qualifying termination as set
forth in the applicable employee’s offer letter with the Company. The Circulate Inducement Awards granted to
all other Circulate employees will vest incrementally over four years with 25% of the total vesting on the first
anniversary date of the closing, and 25% vesting each 12 months thereafter, subject to the employee’s
continued service through each vesting date.
On November 29, 2016, the Company delivered approximately $5.9 million of the cash consideration to an
escrow agent according to the terms of the Circulate acquisition agreement. The escrow deposit is restricted
as to withdrawal or use by the Company and is expected to be delivered to the sellers one year from the
acquisition date. The principal escrow amount is owned by the Company until funds are delivered to the
sellers. All interest and earnings on the principal escrow amount remain property of the Company. The
escrow deposit is included in other current assets (note 5), with an offsetting liability included in other accrued
expenses (note 6), in the consolidated balance sheet.
F-44
The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of the
acquisitions (dollars in thousands):
Assets acquired:
Cash
Trade accounts receivable
Goodwill
Intangible assets (Other assets)
Other current and noncurrent assets
Total assets acquired
Deferred income taxes
Accounts payable and accrued expenses
Net assets acquired
Less:
Cash acquired
Net cash paid
$
9,495
3,352
105,670
40,800
278
159,595
(8,093)
(4,623)
146,879
(9,495)
$ 137,384
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets
acquired was recorded as goodwill and is primarily attributed to expectations of development of future
technology and products, development of future customer relationships, and the Arbor and Circulate
assembled workforces. The Company allocated the goodwill to the reporting unit that was expected to benefit
from the acquired goodwill. The goodwill balance is not deductible for U.S. income tax purposes.
The Company recognized the assets and liabilities acquired based on estimates of their acquisition date fair
values. The determination of the fair values of the acquired assets and liabilities assumed (and the related
determination of the estimated lives of depreciable tangible and identifiable intangible assets) requires
significant judgement. The Company believes that the information available at the date of acquisition
provided a reasonable basis for estimating the fair values of the assets acquired and the liabilities assumed.
The amounts allocated to intangible assets in the table above included publisher relationships, developed
technology, customer relationships, and trade name. Intangible assets will be amortized on a straight-line
basis over the estimated useful lives of 1 to 6 years. The following table presents the components of
intangible assets acquired and their estimated useful lives as of the acquisition date (dollars in thousands):
Publisher relationships
Developed technology
Customer relationships
Trade name
Total intangible assets
$ 23,800
Useful life
Fair value (in years)
6
2 to 4
6
1
9,300
7,100
600
$ 40,800
The Company has omitted disclosures of revenue and net loss of the acquired companies from the
acquisition dates of November 22, 2016 and November 29, 2016, respectively, to March 31, 2017 as the
amounts are not material.
During the year ended March 31, 2017, the Company incurred $1.4 million of acquisition costs related to the
Arbor and Circulate acquisitions, which are included in gains, losses, and other items, net on the consolidated
statement of operations (see Note 2 - Restructuring, Impairment and Other Charges).
The unaudited pro forma financial information in the table below summarizes the combined results of
operations for Acxiom, Arbor and Circulate for the purposes of unaudited pro forma financial information
disclosure as if the companies were combined as of the beginning of fiscal 2016. The unaudited pro forma
financial information for all periods presented included the business combination accounting effects resulting
from these acquisitions, including amortization charges from acquired intangible assets (certain of which are
preliminary), stock-based compensation charges for unvested restricted stock-based awards and stock
options assumed, if any, and the related tax effects as though the aforementioned companies were combined
as of the beginning of fiscal 2016. The unaudited pro forma financial information as presented below is for
F-45
informational purposes only and is not necessarily indicative of the results of operations that would have been
achieved if the acquisitions had taken place at the beginning of fiscal 2016.
The unaudited pro forma financial information for the years ended March 31, 2017 and 2016, respectively,
combined the historical results of Acxiom for the years ended March 31, 2017 and 2016 and the historical
results of Arbor and Circulate for the years ended December 31, 2016 and 2015 (adjusted due to differences
in reporting periods) and the effects of the pro forma adjustments listed above. The unaudited pro forma
financial information was as follows (dollars in thousands, except per share data):
Revenues
Net loss from continuing operations
Basic and diluted loss per share from continuing operations
2017
$
887,495
(17,025) $
$
(0.22)
2016
853,249
(38,903)
(0.30)
$
$
$
Addressable Television Net Assets from Allant (“Allant”)
On December 1, 2015, the Company acquired certain addressable television net assets from The Allant
Group, Inc. The acquisition provides the Company additional consumer insight capabilities that enable clients
to more effectively reach their television channel customer base and audiences. The Company paid
approximately $5.4 million in cash. The Company has omitted pro forma disclosures related to this
acquisition as the pro forma effect of this acquisition is not material. The results of operation for the
acquisition are included in the Company’s consolidated results beginning December 1, 2015.
The following table presents the purchase price allocation related to assets acquired and liabilities assumed
(dollars in thousands):
Assets acquired:
Trade accounts receivable
Goodwill
Developed technology (Software)
Other intangible assets (Other assets, net)
Net assets acquired
Accounts payable
Net cash paid
December 1, 2015
$
$
499
1,377
2,700
1,400
5,976
(590)
5,386
The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were
based on calculations and valuations using management’s estimates and assumptions and were based on
the information that was available as of the date of acquisition.
LiveRamp
On July 1, 2014, the Company acquired all the outstanding shares of LiveRamp, Inc. (“LiveRamp”), a leading
service provider for onboarding customer data into digital marketing applications. The Company acquired
LiveRamp to, among other things, provide clients with solutions for bringing offline customer data online with
better matching, more connectivity, and faster onboarding. The Company has included the financial results of
LiveRamp in the consolidated financial statements from the date of acquisition. LiveRamp is included in the
Connectivity segment. The acquisition date fair value of the consideration transferred for LiveRamp was
approximately $272.7 million which consisted of the following (dollars in thousands):
Cash, net of $12.0 million cash acquired
Restricted cash held in escrow
Fair value of stock options issued included in purchase price
Total fair value of consideration transferred
July 1, 2014
$ 234,672
31,000
6,978
$ 272,650
The fair value of the stock options issued by the Company was determined using a binomial lattice approach
(see Note 13 – Stockholders’ Equity). The total fair value of the stock options issued was $30.5 million of
F-46
which $7.0 million was allocated to the purchase consideration and $23.5 million was allocated to future
services and will be expensed over the remaining service periods on a straight-line basis, net of any
forfeitures.
On the acquisition date, the Company delivered $31.0 million of cash to an escrow agent according to the
terms of the purchase agreement. The cash was restricted as to withdrawal or use by the Company. The
restricted cash was delivered to the LiveRamp sellers one year from the acquisition date, during fiscal 2016.
The principal escrow amount was owned by the Company until funds were delivered to the LiveRamp sellers.
All interest and earnings on the principal escrow amount remained property of the Company.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the
date of the acquisition (dollars in thousands):
AAssets acquired:
Cash
Trade accounts receivable
Deferred income tax assets
Goodwill
Developed technology (Software)
Other intangible assets (Other assets, net)
Other current and noncurrent assets
Deferred income tax liabilities
AAccounts payable, accrued expenses and deferred revenue
Net assets acquired
Less:
Cash acquired
Net purchase price allocated
Less:
Fair value of stock options issued included in purchase price
Net cash paid
July 1, 2014
$ 12,016
5,206
10,444
213,093
40,000
26,500
1,306
308,565
(18,945)
(4,954)
284,666
12,016
$ 272,650
6,978
$ 265,672
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets
acquired was recorded as goodwill and is primarily attributed to development of future technology and
products related to the onboarding of customer data into digital marketing applications, development of future
customer relationships, and LiveRamp’s assembled workforce. The fair values assigned to tangible and
identifiable intangible assets acquired and liabilities assumed were based on calculations and valuations and
on management’s estimates and assumptions and were based on the information that was available as of the
date of the acquisition. Goodwill is not deductible for U.S. income tax purposes.
The amounts allocated to other intangible assets in the table above included customer relationships and a
trade name. Intangible assets will be amortized on a straight-line basis over the estimated useful lives of 2 to
6 years. The following table presents the components of intangible assets acquired and their estimated useful
lives as of the acquisition date (dollars in thousands):
Developed technology
Customer relationships
Trade name
Useful life
Fair value (in years)
4
6
2
$ 40,000
25,000
1,500
Total intangible assets subject to amortization
$ 66,500
The Company’s consolidated statements of operations for fiscal 2015 included revenue and net loss of $27.0
million and $16.5 million, respectively, attributable to LiveRamp since the acquisition.
F-47
4.
DISCONTINUED OPERATIONS AND DISPOSITIONS:
Disposition of Impact email business
p
p
In August 2016, the Company completed the sale of its Impact email business to Zeta Interactive for total
consideration of $22.0 million, including a $4.0 million subordinated promissory note receivable with interest
accruing at a rate of 6% per annum (see Note 5 - Other Current and Noncurrent Assets). The note is payable
on the 12-month anniversary of the closing date, and is included in other current assets in the consolidated
balance sheet. The Company also entered into a separate multi-year contract to provide Zeta Interactive with
Connectivity and Audience Solutions services. Prior to the disposition, the Impact email business was
included in the Marketing Services segment results.
The business did not meet the requirements of a discontinued business; therefore, all financial results are
included in continuing operations. The Company recorded a gain on sale of $0.3 million, included in gains,
losses and other items, net. The transaction also generated a $4.3 million income tax benefit.
Revenue and income (loss) from operations from the disposed Impact email business are shown below
(dollars in thousands):
Revenues
Income (loss) from operations
)
IT Infrastructure Management business (“ITO”)
g
(
2017
20,375
2016
$ 60,199
(157) $ 10,105
2015
64,634
18,659
$
$
$
$
On May 20, 2015, the Company announced it had entered into a definitive agreement to sell its ITO business
to Charlesbank Capital Partners and M/C Partners. The sale was completed on July 31, 2015. Beginning in
the first quarter of fiscal 2016, the Company began reporting the results of operations, cash flows, and the
balance sheet amounts pertaining to ITO as a component of discontinued operations in the consolidated
financial statements. Prior to the discontinued operations classification, the ITO business unit was included in
the IT Infrastructure Management segment in the Company’s segment results.
At the closing of the transaction, the Company received total consideration of $131.0 million ($140.0 million
stated sales price less closing adjustments and transaction costs of $9.0 million). The Company may also
receive up to a maximum of $50 million in contingent payments in future periods through 2020 subject to
certain conditions. Due to the uncertainty of contingent payments, income will be recorded upon resolution of
the contingency as a component of income from discontinued operations. In addition, the Company has the
right to participate in distributions of the divested entity above a defined amount. The Company reported a
gain of $9.3 million on the sale which is included in earnings from discontinued operations, net of tax.
The Company also entered into an agreement to amend its credit agreement (see Note 10 – Long-Term
Debt). The effectiveness of the amendments contained in the agreement were conditioned on, among other
things, the closing of the ITO disposition. Once the ITO disposition was completed and the amendment
became fully effective, certain financial covenants in the credit agreement were modified for the quarters
ending on September 30, 2015, December 31, 2015 and March 31, 2016. Additionally, the Company is not
entitled to declare or pay any dividends during this time and share repurchases will be limited to no more than
$100 million depending on the Company’s leverage ratio. After March 31, 2016, the financial covenants and
dividend and share repurchase limitations returned to the requirements in the credit agreement in effect prior
to the amendment. In addition, the amendment revised certain definitions in the credit agreement to clarify
the effect of acquisitions and dispositions on certain financial covenants.
On July 31, 2015, the Company applied $55.0 million of proceeds from the sale to repay outstanding
Company indebtedness to comply with the Company’s existing credit agreement (see Note 10 – Long-Term
Debt). The Company allocated interest expense associated with the $55.0 million repayment of Company
indebtedness to the ITO discontinued operating business. Allocated interest expense was $0.4 million and
F-48
$1.3 million, respectively, for the fiscal years ended March 31, 2016 and 2015. We used the remaining
proceeds from the sale to fund expansion of its common stock repurchase program and for general corporate
purposes.
Summary results of operations of ITO for the fiscal years ended March 31, 2016 and 2015, respectively, are
segregated and included in earnings from discontinued operations, net of tax, in the consolidated statements
of operations. The following table is a reconciliation of the major classes of line items constituting earnings
from discontinued operations, net of tax (dollars in thousands):
Major classes of line items constituting earnings from discontinued
operations, net of tax:
Revenues
Cost of revenue
Gross profit
Operating expenses:
Sales and marketing
General and administrative
Gain on sale of discontinued operations
Gains, losses and other items, net
Total operating expenses
Earnings from discontinued operations
Interest expense
Other, net
Earnings from discontinued operations before income taxes
Income taxes
Earnings from discontinued operations, net of tax
2016
2015
$
69,410
50,837
18,573
$
215,148
167,524
47,624
1,192
6,053
(9,349)
367
(1,737)
20,310
(681)
(230)
19,399
3,598
15,801
$
2,771
10,736
—
2,037
15,544
32,080
(2,378)
(334)
29,368
11,973
17,395
$
ITO was a provider of managed hosting and cloud infrastructure services, optimized for mid-tier enterprises.
The Company entered into certain agreements with ITO in which support services, including data center co-
location services, will be provided from the Company to ITO, and from ITO to the Company. Additionally, the
Company entered into certain other agreements with ITO to provide or receive leased office space. The terms
of these agreements range from several months to the longest of which continues through July 2020. The
agreements generally provide cancellation provisions, without penalty, at various times throughout the term.
F-49
Cash inflows and outflows related to the agreements are included in cash flows from operating activities in the
consolidated statements of cash flows. Revenues and expenses related to the agreements are included in
income (loss) from operations in the consolidated statements of operations. The related cash inflows and
outflows and revenues and expenses for the periods reported are shown below (dollars in thousands):
Cash inflows
Cash outflows
Revenues
Expenses
U.K. call center operation
p
2017
2016
$ 7,214 $ 4,728
$ 4,140 $ 4,165
$ 6,470 $ 4,650
$ 3,284 $ 4,617
On May 30, 2014, the Company substantially completed the sale of its U.K. call center operation, 2Touch, to
Parseq Ltd., a European business process outsourcing service provider. Some assets of the 2Touch
operation were subject to a second closing, which occurred in March 2015, resulting in the complete disposal
of the operation. The 2Touch business qualified for treatment as discontinued operations during fiscal 2015.
The results of operations, cash flows, and the balance sheet amounts pertaining to 2Touch have been
classified as discontinued operations in the consolidated financial statements.
Summary results of operations of the 2Touch business unit for the fiscal years ended March 31, 2016 and
2015, respectively, are segregated and included in earnings from discontinued operations, net of tax, in the
consolidated statements of operations and consists of (dollars in thousands):
Revenues
Earnings (loss) from discontinued operations before income taxes
Loss on sale of discontinued operations before income taxes
Loss from discontinued operations, net of tax
2016
2015
—
$
8,484
(450) $
—
(450) $
4
(1,888)
(1,884)
$
$
$
5.
OTHER CURRENT AND NONCURRENT ASSETS:
Other current assets consist of the following (dollars in thousands):
Prepaid expenses and other
Escrow deposit (see Note 3 - Acquisitions)
Note receivable (see Note 4 – Discontinued Operations and Dispositions)
Assets of non-qualified retirement plan
Other current assets
Other noncurrent assets consist of the following (dollars in thousands):
AAcquired intangible assets, net
Deferred data acquisition costs
Other miscellaneous noncurrent assets
Noncurrent assets
March 31, March 31,
2017
$ 25,714
5,880
4,000
12,716
$ 48,310
2016
$ 25,365
—
—
12,532
$ 37,897
March 31, March 31,
2017
$ 43,884
1,116
6,443
$ 51,443
2016
$ 19,203
1,644
4,468
$ 25,315
F-50
6.
OTHER ACCRUED EXPENSES:
Other accrued expenses consist of the following (dollars in thousands):
AAccrued purchase consideration (see Note 3 - Acquisitions)
Other accrued expenses
Other accrued expenses
7.
GOODWILL AND INTANGIBLE ASSETS:
March 31, March 31,
2017
$ 5,880
53,981
$ 59,861
2016
—
$
48,254
$ 48,254
Goodwill by operating segment and activity for the years ended March 31, 2017 and 2016 was as follows
(dollars in thousands).
Balance at March 31, 2015
Brazil Impairment
Reallocation of segments
Acquisition of Allant
APAC Audience Solutions Impairment
Change in foreign currency translation
adjustment
Balance at March 31, 2016
Marketing
Services
and Audience Marketing
Solutions
$ 497,362
$
(502)
(496,860)
—
—
Services
Audience
Solutions Connectivity
Total
— $
—
— $
—
124,627
277,516
—
—
1,377
(5,413)
94,717
— $ 497,362
(502)
—
—
1,377
(5,413)
—
—
$
—
— $ 124,586
(41)
(50)
12
$ 273,430 $ 94,729
(79)
$ 492,745
Acquisitions of Arbor and Circulate (see
note 3)
Impact email disposition (see note 4)
Allant purchase accounting adjustments
Change in foreign currency translation
adjustment
Balance at March 31, 2017
$
—
—
—
—
(5,684)
—
— 105,670
—
—
—
18
105,670
(5,684)
18
(18)
—
—
— $ 118,890 $ 273,448 $ 200,393 $ 592,731
(12)
(6)
Year end balances in the table above are net of accumulated impairment losses of $120.1 million at March
31, 2017 and 2016, respectively.
Goodwill by component included in each operating segment as of March 31, 2017 was:
U.S.
APAC
Balance at March 31, 2017
Marketing
Services
$ 110,910
Audience
Solutions Connectivity
Total
$ 196,833 $ 581,191
11,540
$ 200,393 $ 592,731
3,560
$ 273,448
7,980
—
$ 118,890
$ 273,448
F-51
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):
Developed technology, gross (Software)
Accumulated amortization
Net developed technology
Customer/Trade name, gross (Other assets, net)
Accumulated amortization
Net customer/trade name
Publisher relationship, gross (Other assets, net)
Accumulated amortization
Net publisher relationship
Total intangible assets, gross
Total accumulated amortization
Total intangible assets, net
2017
$ 52,150
(29,775)
$ 22,375
2016
$ 42,850
(17,950)
$ 24,900
2015
$ 42,524
(9,924)
$ 32,600
$ 43,164
(21,702)
$ 21,462
$ 34,166
$ 35,466
(16,263) (11,265)
$ 22,901
$ 19,203
$ 23,800
(1,378)
$ 22,422
$
$
— $
—
— $
—
—
—
$ 119,114 $ 78,316
(52,855)
$ 66,259
$ 76,690
(34,213) (21,189)
$ 55,501
$ 44,103
Intangible assets by operating segment as of March 31, 2017 was (dollars in thousands):
Developed technology
Customer/Trade name
Publisher relationship
Balance at March 31, 2017
Marketing Audience
Solutions
1,500
Services
—
37
—
37 $
$
Connectivity
Total
778
20,875 22,375
20,647 21,462
— 22,422 22,422
2,278 $ 63,944 $ 66,259
Total amortization expense related to intangible assets was $18.6 million, $15.5 million, and $11.4 million in
fiscal 2017, 2016, and 2015, respectively. As of March 31, 2017, estimated future amortization expenses
related to purchases and other intangible assets were as follows (dollars in thousands):
Year ending March 31,
2018
2019
2020
2021
2022
Thereafter
$ 24,072
15,213
11,192
7,254
5,150
3,378
$ 66,259
F-52
8.
SOFTWARE COSTS:
The Company recorded amortization expense related to internally developed computer software of $27.5
million, $30.7 million, and $29.0 million for fiscal 2017, 2016 and 2015, respectively, including $11.8 million,
$10.0 million, and $7.5 million, respectively, related to internally developed software acquired as part of the
Arbor, Circulate, and LiveRamp acquisitions. Amortization expense in fiscal 2016 and fiscal 2015 also
included $1.8 million and $4.3 million, respectively, of accelerated amortization expense resulting from
adjusting the remaining estimated useful lives of certain capitalized software products which the Company no
longer uses due to the LiveRamp acquisition.
The Company recorded amortization expense related to purchased software licenses of $3.0 million, $3.8
million, and $5.0 million in fiscal 2017, 2016 and 2015, respectively.
9.
PROPERTY AND EQUIPMENT:
Property and equipment, some of which has been pledged as collateral for long-term debt, is summarized as
follows (dollars in thousands):
March 31,
March 31,
Land
Buildings and improvements
Data processing equipment
Office furniture and other equipment
Less accumulated depreciation and amortization
$
2017
5,398 $
2016
6,737
222,868
261,101
37,969
528,675
345,632
$ 155,974 $ 183,043
189,666
249,131
32,086
476,281
320,307
Depreciation expense on property and equipment was $42.9 million, $40.6 million and $35.5 million for the
fiscal years ended March 31, 2017, 2016 and 2015, respectively.
10.
LONG-TERM DEBT:
Long-term debt consists of the following (dollars in thousands):
March 31,
March 31,
2017
2016
Term loan credit agreement
Revolving credit borrowings
Other debt and long-term liabilities
Total long-term debt
Less current installments
Less deferred debt financing costs
$ 155,000 $ 185,000
—
7,856
192,856
32,243
2,716
70,000
5,612
230,612
39,819
1,552
Long-term debt, excluding current installments and deferred debt financing
costs
$ 189,241 $ 157,897
The Company’s amended and restated credit agreement provides for (1) term loans up to an aggregate
principal amount of $300 million and (2) revolving credit facility borrowings consisting of revolving loans, letter
of credit participations and swing-line loans up to an aggregate amount of $300 million.
The term loan is payable in quarterly installments of $7.5 million through September 2017, followed by
quarterly installments of $11.3 million through June 2018, with a final payment of $106.3 million due October
9, 2018. The revolving loan commitment expires October 9, 2018.
F-53
In November 2016, the Company borrowed $70.0 million on its revolving credit facility and used the proceeds
for the Arbor and Circulate acquisitions (see Note 3 - Acquisitions). The revolving credit borrowings are
payable and due October 9, 2018.
Term loan and revolving credit facility borrowings bear interest at LIBOR or at an alternative base rate plus a
credit spread. At March 31, 2017, the LIBOR credit spread was 2.00%. The weighted-average interest rate
on term loan borrowings at March 31, 2017 was 2.98%. The weighted-average interest rate on revolving
credit borrowings at March 31, 2017 was 3.0%. There were no material outstanding letters of credit at March
31, 2017.
The term loan and revolving credit borrowings allow for prepayments before maturity. The credit agreement
is secured by the accounts receivable of Acxiom and its domestic subsidiaries, as well as by the outstanding
stock of certain Acxiom subsidiaries.
Under the terms of the term loan, the Company is required to maintain certain debt-to-cash flow and debt
service coverage ratios, among other restrictions. At March 31, 2017, the Company was in compliance with
these covenants and restrictions. In addition, if certain financial ratios and other conditions are not satisfied,
the revolving credit facility limits the Company’s ability to pay dividends in excess of $30 million in any fiscal
year (plus additional amounts in certain circumstances).
On July 31, 2015, in conjunction with the ITO disposition, the Company used $55.0 million of proceeds to
repay outstanding Company indebtedness as required by the Company’s existing credit agreement. The
Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness
to the ITO discontinued operating business. Allocated interest expense was $0.4 million and $1.3 million for
the fiscal years ended March 31, 2016 and 2015, respectively.
The Company’s future obligations, excluding interest, under its long-term debt at March 31, 2017 are as
follows (dollars in thousands):
Year ending March 31,
2018
2019
2020
2021
$ 39,819
189,083
1,362
348
$ 230,612
11.
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
A summary of the activity of the allowance for doubtful accounts, returns and credits is as follows (dollars in
thousands):
Balance at
beginning
of
period
Additions
charged to
costs and
expenses
Bad debts
written off,
Other
changes
net of
amounts
recovered
Balance at
end of
period
2015:
Allowance for doubtful accounts, returns
and credits
2016:
Allowance for doubtful accounts, returns
and credits
2017:
Allowance for doubtful accounts, returns
and credits
$ 4,875
$
731
$
(288)
$
(895) $ 4,423
$ 4,423
$ 3,673
$
56
$
(890) $ 7,262
$ 7,262
$ 1,859
$
(372)
$ (2,643) $ 6,106
Other changes in the table above result primarily from the effects of exchange rates ($0.1 million) and
disposition of the Impact email business ($0.3 million).
F-54
12.
COMMITMENTS AND CONTINGENCIES:
Legal Matters
g
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 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
consolidated financial statements.
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
23 years of $82.8 million.
Total rental expense on operating leases was $15.9 million, $17.1 million, and $14.7 million for the fiscal
years ended March 31, 2017, 2016 and 2015, respectively. Future minimum lease payments under all
noncancellable operating leases for the five years ending March 31, 2022, are as follows: 2018, $18.7 million;
2019, $12.5 million; 2020, $12.0 million; 2021, $11.7 million; and 2022, $11.3 million.
In connection with the Impact email disposition during fiscal 2017 (see Note 4 – Discontinued Operations and
Dispositions), 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 runs through September 2021. At
March 31, 2017, the Company’s maximum potential future rent payments under this guarantee totaled $2.7
million.
13.
STOCKHOLDERS’ EQUITY:
The Company has authorized 200 million shares of $0.10 par value common stock and 1 million shares of
$1.00 par value preferred stock. The board of directors of the Company may designate the relative rights and
preferences of the preferred stock when and if issued. Such rights and preferences could include liquidation
preferences, redemption rights, voting rights and dividends, and the shares could be issued in multiple series
with different rights and preferences. The Company currently has no plans for the issuance of any shares of
preferred stock.
At March 31, 2017, the Company had outstanding 4,942 warrants to purchase shares of its common stock.
The outstanding warrants carry an exercise price of $13.24 and expire March 17, 2019.
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was
subsequently modified and expanded, most recently on July 28, 2016. Under the modified common stock
repurchase program, the Company may purchase up to $400.0 million of its common stock through the period
ending June 30, 2018. During the fiscal year ended March 31, 2017, the Company repurchased 1.3 million
shares of its common stock for $30.5 million. During the fiscal year ended March 31, 2016, the Company
repurchased 2.6 million shares of its common stock for $52.8 million. During the fiscal year ended March 31,
2015, the Company repurchased 0.5 million shares of its common stock for $9.9 million. Through March 31,
2017, the Company has repurchased 16.8 million shares of its stock for $285.7 million, leaving remaining
capacity of $114.3 million under the stock repurchase program.
F-55
The Company paid no dividends on its common stock for any of the years reported.
Share-based Compensation Plans
The Company has stock option and equity compensation plans for which a total of 30.0 million shares of the
Company’s common stock have been reserved for issuance since the inception of the plans. These plans
provide that the exercise prices of qualified options will be at or above the fair market value of the common
stock at the time of the grant. Board policy requires that nonqualified options also be priced at or above the
fair market value of the common stock at the time of grant. At March 31, 2017, there were a total of 2.7
million shares available for future grants under the plans.
Stock Option Activity of Continuing Operations
In fiscal 2017, as part of the Company’s acquisition of Arbor (see Note 3 - Acquisitions), the Company issued
285,339 replacement stock options having a per share weighted-average fair value and exercise price of
$25.85 and $1.27, respectively, to Arbor employees who had outstanding unvested stock options to purchase
Arbor stock. The fair value of the replacement options was determined using a customized binomial lattice
model with the following assumptions: dividend yield of 0.0% since Acxiom is currently not paying dividends
and there are no plans to pay dividends; risk-free interest rates from 2.24% to 2.32%, based on the rate of
U.S. Treasury securities with a term equal to the remaining term of each option; remaining terms of each
option from 8.6 to 9.9 years; expected volatility of 38%, based on both the historical volatility of Acxiom stock,
as well as the implied volatility of traded Acxiom options; and a suboptimal exercise multiple of 1.4, based on
actual historical exercise activity of Acxiom options.
The number of shares and exercise price of each replacement option were determined by converting Arbor
options into equivalent Acxiom options by multiplying the number of shares subject to Arbor options by the
exchange ratio of .41998 and by dividing the exercise price for each Arbor option by the exchange ratio of
.41998. Once the value of each replacement option was determined, the total fair value of $7.4 million, net of
any forfeitures, will be expensed by the Company over the remaining vesting period of each option.
Also in fiscal 2017, as part of the Company’s acquisition of Circulate, the Company issued 73,164
replacement stock options having a per share weighted-average fair value and exercise price of $24.80 and
$2.30, respectively, to Circulate employees who had outstanding unvested stock options to purchase
Circulate stock. The total fair value of $1.8 million, net of any forfeitures, will be expensed by the Company
over the remaining vesting period of each option.
In fiscal 2016, the Company granted 445,785 stock options, having a per-share weighted-average fair value
of $6.48. This valuation was determined using a customized binomial lattice approach with the following
weighted-average assumptions: dividend yield of 0.0% since Acxiom is currently not paying dividends and
there are no plans to pay dividends; risk-free interest rate of 2.2%, based on the rate of U.S. Treasury
securities with a term equal to the life of the options; expected option life of 4.5 years, an output of the lattice
model; expected volatility of 40%, based on both the historical volatility of Acxiom stock, as well as the implied
volatility of traded Acxiom options; and a suboptimal exercise multiple of 1.4, determined using actual
historical exercise activity of Acxiom options.
In fiscal 2015, the Company granted 415,639 stock options, exclusive of replacement options granted in
connection with the LiveRamp acquisition. The per-share weighted-average fair value of the stock options
granted during 2015 was $8.05. This valuation was determined using a customized binomial lattice approach
with the following weighted-average assumptions: dividend yield of 0.0% since Acxiom is not currently paying
dividends and there are no plans to pay dividends; risk-free interest rate of 2.5%, based on the rate of U.S.
Treasury securities with a term equal to the life of the options; expected option life of 4.4 years, an output of
the lattice model; expected volatility of 43%, based on both the historical volatility of Acxiom stock, as well as
the implied volatility of traded Acxiom options; and a suboptimal exercise multiple of 1.4, determined using
actual historical exercise activity of Acxiom options.
In fiscal 2015, as part of the Company’s acquisition of LiveRamp, the Company issued 1,473,668
replacement stock options to LiveRamp employees who had outstanding unvested stock options to purchase
LiveRamp stock. The fair value of the replacement options was determined using a customized binomial
lattice model with the following assumptions: dividend yield of 0.0% since Acxiom is not currently paying
F-56
dividends and there are no plans to pay dividends; risk-free interest rates of from 1.57% to 2.54%, based on
the rate of U.S. Treasury securities with a term equal to the remaining term of each option; remaining terms of
each option of from 6.1 to 9.7 years; expected volatility of 43%, based on both the historical volatility of
Acxiom stock, as well as the implied volatility of traded Acxiom options; and a suboptimal exercise multiple of
1.4, based on actual historical exercise activity of Acxiom options.
The number of shares of each replacement option and the exercise price of each replacement option was
determined by converting LiveRamp options into equivalent Acxiom options by multiplying the number of
shares subject to LiveRamp options by the exchange ratio of .63774 and by dividing the exercise price for
each LiveRamp option by the exchange ratio of .63774. Once the value of each replacement option was
determined, the percentage of that value which was attributed to employee service prior to the acquisition
date was allocated to the purchase price of LiveRamp, and the remaining value will be expensed by the
Company over the remaining vesting period of each option. The total included in the purchase price was $7.0
million and the total to be expensed in future periods was $23.5 million, net of any forfeitures.
Stock option activity during the year ended March 31, 2017 was:
Outstanding at March 31, 2016
Arbor and Circulate replacement
stock options
Exercised
Forfeited or cancelled
Outstanding at March 31, 2017
Exercisable at March 31, 2017
Weighted-average
Number of
shares
3,604,102
$
exercise price
per share
14.52
Weighted-average
remaining
contractual term
(in years)
Aggregate
Intrinsic value
(in thousands)
358,503 $
(855,797) $
(73,737) $
3,033,071
$
2,128,023 $
1.48
14.04
13.17
13.14
13.79
$
9,751
5.7
$
4.6 $
46,574
31,303
The aggregate intrinsic value for options exercised in fiscal 2017, 2016, and 2015 was $9.8 million, $10.7
million, and $8.3 million, respectively. The aggregate intrinsic value at period end represents 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 March 31, 2017. This amount changes based upon changes in the
fair market value of Acxiom’s stock.
A summary of stock options outstanding and exercisable as of March 31, 2017 was:
Range of
exercise price
per share
Options
outstanding
$ 0.61 - $ 9.99
$ 10.00 - $ 19.99
$ 20.00 - $ 24.99
$ 25.00 - $ 32.85
824,755
1,475,505
713,259
19,552
3,033,071
Options outstanding
Weighted-average
remaining
contractual life
Weighted-average
Options exercisable
Weighted-average
exercise price
per share
Options
exercisable
exercise price
per share
7.4 years
$
5.1 years $
4.8 years
$
6.6 years $
$
5.7 years
1.67
15.15
21.72
32.85
13.14
433,414
$
1,166,348 $
$
14,663 $
$
2,128,023
513,598
1.70
14.46
21.93
32.85
13.79
Total expense related to stock options was approximately $6.9 million in fiscal 2017, $9.8 million in fiscal
2016, and $12.0 million in fiscal 2015. Of the fiscal 2017, 2016 and 2015 expense, $4.3 million, $6.7 million
and $9.4 million, respectively, relates to LiveRamp replacement stock options. Of the fiscal 2017 expense,
$0.9 million relates to Arbor and Circulate replacement stock options. Future expense for all options is
expected to be approximately $11.6 million in total over the next four years.
Performance Stock Option Unit Activity
In fiscal 2017, the Company granted 633,604 performance-based stock option units with a fair value at the
date of grant of $4.9 million, determined using a Monte Carlo simulation model. All the units granted in the
current period vest and become exercisable in three equal tranches, each being subject to attainment of
F-57
performance criteria and a subsequent service period established by the compensation committee of the
board of directors (“compensation committee”). Each of the three tranches may vest in a number of stock
options, from zero to 300% of the initial award, each having a weighted-average exercise price of $21.40,
based on the attainment of certain revenue growth and operating margin targets for the years ending March
31, 2017, 2018, and 2019 respectively. Each tranche is subject to a service period following the respective
performance periods, such that each tranche will cliff vest in two separate 50% increments over two years
beginning with the compensation committee meeting that immediately follows the end of the respective
performance period.
Performance stock option unit activity during the year ended March 31, 2017 was:
Outstanding at March 31, 2016
Granted
Forfeited or cancelled
Outstanding at March 31, 2017
Exercisable at March 31, 2017
Number
of shares
— $
633,604 $
(78,481) $
555,123 $
— $
Weighted-average
exercise price
per share
Weighted-average
remaining
contractual term
(in years)
Aggregate
intrinsic value
(in thousands)
—
21.40
21.36
21.41
—
2.1 $
— $
3,921
—
Of the performance stock option units outstanding at March 31, 2017, 185,042 will reach maturity of the
relevant performance period at March 31, 2017. The units are expected to vest at an approximate 171%
attainment level during the subsequent service period, resulting in issuance of approximately 316,422 stock
options having a weighted average exercise price of $21.40.
Total expense related to performance stock option units in fiscal 2017 was $1.3 million. Future expense for
these performance stock option units is expected to be approximately $3.9 million over the next four years.
Stock Appreciation Right (“SAR”) Activity
During fiscal 2015, the Company granted 245,404 performance-based SARs with a fair value at the date of
grant of $0.5 million and having an exercise price of $40. All of the performance-based SARs granted in
fiscal 2015 vest subject to attainment of performance criteria established by the compensation committee.
The units granted in fiscal 2015 may vest in a number of SARs up to 100% of the award, based on the
attainment of certain revenue targets for the period from April 1, 2014 to March 31, 2017. At vesting in fiscal
2018, the SARs will be automatically exercised, and the award recipient may receive a number of common
stock shares equal to the number of SARs that are being exercised multiplied by the quotient of (a) the final
Company stock market value (up to a maximum share value of $70) minus the SAR exercise price, divided by
(b) the fair market value of a share of stock at the exercise date. The grant date value of the performance-
based SARs was determined using a Monte Carlo simulation model.
SAR activity during the year ended March 31, 2017 was:
Outstanding at March 31, 2016
Outstanding at March 31, 2017
Exercisable at March 31, 2017
Number
of shares
245,404
$
245,404 $
— $
Weighted-average
exercise price
per share
Weighted-average
remaining
contractual term
(in years)
Aggregate
intrinsic value
(in thousands)
40.00
40.00
—
— $
— $
—
—
All of the SAR units outstanding will reach maturity of the relevant performance period at March 31, 2017.
The units are expected to achieve the 100% performance attainment level. However, application of the
vesting multiplier, together with the applicable $40 exercise price, is expected to result in zero shares granted.
Total expense related to SARs in fiscal 2017, 2016 and 2015 was approximately $0.2 million in each period.
There is no expected future expense related to these awards.
F-58
Restricted Stock Unit Activity
Non-vested time-vesting restricted stock units activity during the year ended March 31, 2017 was:
Outstanding at March 31, 2016
Granted
Vested
Forfeited or cancelled
Outstanding at March 31, 2017
Weighted-average Weighted-average
Number
of shares
2,279,895
$
2,309,183 $
(1,013,186) $
(268,315) $
$
3,307,577
fair value per
share at grant
date
19.69
24.01
20.04
20.02
22.57
remaining
contractual
term (in years)
2.12
2.45
During fiscal 2017, the Company granted time-vesting restricted stock units covering 2,309,183 shares of
common stock with a fair value at the date of grant of $55.4 million, of which units covering 768,710 shares,
with a fair value at grant date of $20.4 million, were granted to former Arbor and Circulate employees
subsequent to the acquisitions (see Note 3 - Acquisitions). Of the restricted stock units granted in the current
period, 1,454,340 vest in equal annual increments over four years, 398,079 partially cliff vest at the one-year
anniversary and then over equal quarterly increments during the subsequent two years, 408,534 partially cliff
vest at the one-year anniversary and then over equal quarterly increments during the subsequent year, and
48,230 vest in one year.
During fiscal 2016, the Company granted time-vesting restricted stock units covering 1,427,561 shares of
common stock with a fair value at the date of grant of $27.0 million. Of the restricted stock units granted in the
current period, 1,041,572 vest in equal annual increments over four years, 70,799 vest in equal annual
increments over two years, 72,650 vest in one year, and 242,540 vest in equal quarterly increments starting
15 months after the date of grant.
During fiscal 2015, the Company granted time-vesting restricted stock units covering 1,770,303 shares of
common stock with a fair value at the date of grant of $37.6 million, of which units covering 1,075,392 shares,
with a fair value at date of grant of $23.7 million, were granted to former LiveRamp employees subsequent to
the acquisition of LiveRamp (see Note 3 - Acquisitions). Of the restricted stock units granted in fiscal 2015,
773,735 vest in equal annual increments over four years, 927,052 vest in equal annual increments over two
years, and 69,516 vest in one year.
Valuation of time-vesting restricted stock units for all periods presented is equal to the quoted market price for
the shares on the date of grant. The total fair value of time-vesting restricted stock units vested in fiscal 2017,
2016, and 2015 was $23.1 million, $17.6 million, and $8.4 million, respectively and is measured as the quoted
market price of the Company’s common stock on the vesting date for the number of shares vested.
Non-vested performance-based restricted stock units activity during the year ended March 31, 2017 was:
Outstanding at March 31, 2016
Granted
Forfeited or cancelled
Outstanding at March 31, 2017
Weighted-average Weighted-average
Number
of shares
516,818
$
263,835 $
(47,942) $
732,711 $
fair value per
share at
grant date
18.62
24.83
18.13
20.89
remaining
contractual
term (in years)
1.67
1.13
During fiscal 2017, the Company granted performance-based restricted stock units covering 263,835 shares
of common stock with a fair value at the date of grant of $6.6 million, determined using a Monte Carlo
simulation model. Of the performance-based restricted stock units granted in fiscal 2017, 9,416 units
represent award modifications that included 14,349 corresponding cancelled units. The remaining 254,419
performance-based restricted stock units, having a fair value at the date of grant of $6.3 million, vest subject
to attainment of performance criteria established by the compensation committee. Those units may vest in a
number of shares from zero to 200% of the award, based on the total shareholder return of Acxiom common
F-59
stock compared to total shareholder return of a group of peer companies (“TSR”) established by the
compensation committee of the board of directors for the period from April 1, 2016 to March 31, 2019.
During fiscal 2016, the Company granted performance-based restricted stock units covering 367,807 shares
of common stock with a fair value at the date of grant of $6.8 million. All the performance-based restricted
stock units granted in fiscal 2016 vest subject to attainment of performance criteria established by the
compensation committee. The units granted in the current period may vest in a number of shares from zero
to 200% of the award, based on the attainment of an earnings-per-share target for fiscal 2018, with a modifier
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, 2015 to
March 31, 2018. The value of the performance-based restricted stock units is determined using a Monte
Carlo simulation model.
During fiscal 2015, the Company granted performance-based restricted stock units covering 263,609 shares
of common stock with a fair value at the date of grant of $5.0 million. All the performance-based restricted
stock units granted in fiscal 2015 vest subject to attainment of performance criteria established by the
compensation committee. The units granted in fiscal 2015 may vest in a number of shares from zero to 200%
of the award, based on the attainment of an earnings-per-share target for fiscal 2017, with a modifier based
on the total shareholder return of Acxiom stock compared to total shareholder return of a group of peer
companies established by the compensation committee for the period from April 1, 2014 to March 31, 2017.
The value of the performance units is determined using a Monte Carlo simulation model.
There were no performance-based restricted stock units vested in fiscal 2017 and 2016. During fiscal 2015,
517,565 performance-based restricted stock units vested. Of the units vested, 109,273 vested due to
attainment of performance and shareholder return targets established by the compensation committee in
fiscal 2012. The remaining 408,292 units represent inducement awards granted to certain of the Company’s
chief executive officers.
Of the performance-based restricted stock units outstanding at March 31, 2017, 157,985 will reach maturity of
the relevant performance period at March 31, 2017. The units are expected to vest at an approximate 200%
performance attainment level that is modified by an expected 80% TSR multiplier, resulting in issuance of
approximately 252,776 shares of common stock.
Of the performance-based restricted stock units outstanding at March 31, 2017, 278,378 will reach maturity of
the relevant performance period at March 31, 2018. The units are expected to vest at an approximate 200%
attainment level, resulting in issuance of approximately 556,756 shares of common stock before
consideration of the TSR multiplier.
The expense related to restricted stock in fiscal 2017, 2016, and 2015 was $33.3 million, $19.4 million, and
$15.2 million, respectively. Future expense for restricted stock units is expected to be approximately $19.9
million in fiscal 2017, $11.7 million in fiscal 2018, $5.4 million in fiscal 2019 and $1.4 million in fiscal 2020.
Other Performance Unit Activity
During fiscal 2016, the Company granted 323,080 performance-based units with a fair value at the date of
grant of $0.9 million. All the performance-based units granted vest subject to attainment of performance
criteria established by the compensation committee. The units granted may vest in a number of units up to
100% of the award, based on the attainment of certain Company common stock share price targets for the
period from July 1, 2015 to June 30, 2017. At vesting, the award recipient may receive a number of common
stock shares equal to the number of units vested multiplied by a share price factor. The share price factor
modifies the final number of common shares awarded based on the Company’s stock price on the date of
vesting and ranges from 0% at a $25 Company stock price, or below, to 100% at a $55 Company stock price.
The grant date fair value of the performance-based units is determined using a Monte Carlo simulation model.
During fiscal 2015, the Company granted 312,575 performance-based units with a fair value at the date of
grant of $1.6 million. All the other performance-based units granted in fiscal 2015 vest subject to attainment of
performance criteria established by the compensation committee.
F-60
Of the units granted in fiscal 2015, 201,464 may vest in a number of units up to 100% of the award, based on
the attainment of certain revenue targets for the period from April 1, 2014 to March 31, 2017. At vesting, the
award recipient may receive a number of common stock shares equal to the number of units vested multiplied
by a share price factor. The share price factor modifies the final number of common shares awarded based
on the Company’s stock price on the date of vesting and ranges from 0% at a $40 Company stock price, or
below, to 100% at a $70 Company stock price. The units also contain an accelerated exercise provision if the
closing market price of the Company’s stock exceeds the $70 maximum share value for 20 consecutive
trading days during the performance period. The grant date value of the performance-based units is
determined using a Monte Carlo simulation model.
The remaining 111,111 units granted in fiscal 2015 may vest in a number of units up to 100% of the award,
based on the attainment of certain revenue targets for the period from April 1, 2015 to March 31, 2018. At
vesting, the award recipient may receive a number of common stock shares equal to the number of units
vested multiplied by a share price factor. The share price factor modifies the final number of common shares
awarded based on the Company’s stock price on the date of vesting and ranges from 0% at a $25 Company
stock price, or below, to 100% at a $45 Company stock price. The units also contain an accelerated exercise
provision if the closing market price of the Company’s stock exceeds the $45 maximum share value for 20
consecutive trading days during the performance period. The grant date value of the performance-based units
is determined using a Monte Carlo simulation model.
Other performance unit activity during the year ended March 31, 2017 was:
Weighted average Weighted-average
Outstanding at March 31, 2016
Forfeited or cancelled
Outstanding at March 31, 2017
Number
of shares
635,655
$
(38,462) $
$
597,193
fair value per
share at
grant date
remaining
contractual
term (in years)
1.30
4.07
2.94
4.14
0.30
Of the other performance-based stock units outstanding at March 31, 2017, 201,464 will reach maturity of the
relevant performance period at March 31, 2017. The units are expected to have an approximate 100%
performance attainment level. However, application of the share price factor is expected to result in 0%
shares vesting.
Of the other performance-based stock units outstanding at March 31, 2017, 284,618 will reach maturity of the
relevant performance period at June 30, 2017. The units are expected to have an approximate 24%
performance attainment level, resulting in issuance of approximately 68,308 shares of common stock.
The expense related to other performance units in fiscal 2017, 2016 and 2015 was $1.0 million, $0.9 and $0.3
million, respectively. Future expense for these performance units is expected to be approximately $0.3 million
over the next fiscal year.
Consideration Holdback
As part of the Company’s acquisition of Arbor, $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”).
The consideration holdback will vest in 30 equal, monthly increments following the date of close, subject to
the Arbor key employees’ continued employment through each monthly vesting date. At each vesting date,
1/30th of the $38.3 million holdback consideration will vest and be settled in shares of Company common
stock. The number of shares will be based on the then current market price of the Company common stock.
Total expense in fiscal 2017 related to the Holdback Agreement was approximately $5.1 million.
Qualified Employee Stock Purchase Plan
In addition to the share-based plans, the Company maintains a qualified employee stock purchase plan
(“ESPP”) that permits substantially all employees to purchase shares of common stock at a discount from the
market price. At March 31, 2017, there were approximately 0.7 million shares available for issuance under the
F-61
ESPP. During the combined fiscal years of 2017, 2016, and 2015, 201,678 shares were purchased under the
plan. The total expense to the Company, representing the discount to the market price, for fiscal 2017, 2016
and 2015 was approximately $0.4 million, $0.2 million and $0.1 million, respectively.
Accumulated Other Comprehensive Income
The accumulated balances for each component of other comprehensive income was (dollars in thousands):
Foreign currency translation
Unrealized gain (loss) on interest rate swap
14.
INCOME TAXES:
Total income tax expense (benefit) was allocated as follows (dollars in thousands):
March 31, March 31,
2017
$ 7,999
—
$ 7,999
2016
$ 8,705
(115)
$ 8,590
Earnings (loss) from continuing operations
Earnings from discontinued operations
Stockholders’ equity:
Tax shortfall (excess tax benefits) from share-based compensation
2017
2016
$ 4,534 $ (11,632) $ (14,805)
11,973
3,598
—
2015
(2,183)
(4,645)
$ 2,351 $ (7,741) $ (7,477)
293
Income tax expense (benefit) attributable to earnings (loss) from continuing operations consists of (dollars in
thousands):
2017
2016
2015
Current:
U.S. Federal
Non-U.S.
State
Deferred:
U.S. Federal
Non-U.S.
State
Total
$ 9,778 $ (2,410) $ (7,744)
164
(2,260)
(9,840)
535
1,907
32
472
3,102
13,352
(3,680)
405
(5,543)
(8,818)
(1,064)
(3,789)
326
(3,220)
(4,227)
(4,655)
(4,965)
(11,664)
$ 4,534 $ (11,632) $ (14,805)
Earnings (loss) before income tax attributable to U.S. and non-U.S. continuing operations consists of (dollars
in thousands):
U.S.
Non-U.S.
Total
2017
2016
$ 7,936 $ (6,952) $ (24,459)
(16,888)
(13,328)
$ 8,642 $ (20,280) $ (41,347)
706
2015
Earnings (loss) before income taxes, as shown above, are based on the location of the entity to which such
earnings (loss) are attributable. However, since such earnings (loss) may be subject to taxation in more than
one country, the income tax provision shown above as U.S. or non-U.S. may not correspond to the earnings
(loss) shown above.
F-62
Below is a reconciliation of expected income tax benefit computed using the U.S. federal statutory income tax
rate of 35% of earnings (loss) before income taxes to actual income tax expense (benefit) from continuing
operations (dollars in thousands):
Computed expected income tax (benefit)
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal benefit
Research and other tax credits
Nondeductible expenses
Acxiom Impact disposition
Share-based compensation
Non-U.S. subsidiaries taxed at other than 35%
Adjustment to valuation allowances
Acquisitions costs
Foreign income inclusion
Other, net
2017
3,025
2016
(7,098) $ (14,472)
2015
$
$
(1,586)
(2,285)
1,156
(4,502)
3,308
614
2,896
478
473
957
$
4,534
(1,796)
(4,027)
661
—
1,857
2,468
(3,585)
—
—
(112)
(441)
(6,369)
590
—
2,276
4,354
(776)
217
—
(184)
$ (11,632) $ (14,805)
In fiscal 2017, the Company incurred a tax loss on the Acxiom Impact disposition, resulting in a capital loss
carryforward. Based on management’s assessment of realizability, a valuation allowance was established
against the related deferred tax asset. The state income tax benefit resulting from the Acxiom Impact
disposition, net of related valuation allowances, is reflected above in State income taxes, net of federal
benefit.
Due to changes in management’s assessment of the realizability of deferred tax assets in certain foreign
jurisdictions, the Company released $3.6 million in valuation allowances in fiscal 2016.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
liabilities at March 31, 2017 and 2016 are presented below (dollars in thousands). In accordance with income
tax accounting standards, as of March 31, 2017, the Company has not recognized deferred income taxes on
approximately $15.3 million of undistributed earnings of foreign subsidiaries that are indefinitely reinvested
outside the respective parent’s country. Calculation of the deferred income tax related to these earnings is
not practicable.
2017
2016
Deferred tax assets:
Accrued expenses
Deferred revenue
Net operating loss and tax credit carryforwards
Share-based compensation
Capital loss carryforward
Other
Total deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Intangible assets
Capitalized software costs
Property and equipment
Total deferred tax liabilities
Net deferred tax liabilities
$
534
60,817
19,854
3,414
2,691
9,517 $ 11,525
1,612
57,370
12,706
—
5,242
88,455
(46,602)
41,853
96,827
(47,074)
49,753
$ (77,785) $ (65,084)
(11,582) (14,143)
(9,705)
(8,499)
(97,866)
(88,932)
$ (48,113) $ (47,079)
At March 31, 2017, the Company has net operating loss carryforwards of approximately $16.8 million and
$69.8 million for U.S. federal and state income tax purposes, respectively. These net operating loss
carryforwards expire in various amounts and will completely expire if not used by 2037. The Company has a
capital loss carryforward of $8.4 million, which will expire if not used by 2022. The Company has foreign net
operating loss carryforwards of approximately $129.5 million. Of this amount, $129.2 million do not have
F-63
expiration dates. The remainder expires in various amounts and will completely expire if not used by 2026.
The Company has federal and state credit carryforwards of $0.7 million and $20.1 million, respectively, of
which $0.7 million and $2.7 million, respectively, will be credited to additional paid-in capital if and when
realized. Of the credit carryforwards, $5.9 million will not expire. The remainder expires in various amounts
and will completely expire if not used by 2037.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income of the proper character during the periods
in which those temporary differences become deductible.
Based upon the Company’s history of profitability and taxable income and the reversal of taxable temporary
differences in the U.S., management believes that apart from the U.S. federal capital loss carryforward and
various carryforwards in certain states it is more likely than not the Company will realize the benefits of these
deductible differences. The Company has established valuation allowances against $2.9 million of deferred
tax assets related to the U.S. federal capital loss carryforward and $4.1 million of deferred tax assets related
to loss and credit carryforwards in the states where activity does not support the deferred tax asset.
Based upon the Company’s history of losses in certain non-U.S. jurisdictions, the Company has not recorded
a benefit for current foreign losses in these jurisdictions. In addition, Management believes it is not more
likely than not the Company will realize the benefits of certain foreign loss carryforwards and has established
valuation allowances in the amount of $40.1 million against deferred tax assets in such jurisdictions. No
valuation allowance has been established against deferred tax assets in non-U.S. jurisdictions in which
historical profits and forecasted continuing profits exist. The earnings of subsidiaries in such jurisdictions and
the differences in income taxes computed using the U.S. statutory tax rate and the effective tax rate in such
jurisdictions are not significant.
The following table sets forth changes in the total gross unrecognized tax benefits for the fiscal years ended
March 31, 2017, 2016 and 2015 (dollars in thousands):
Balance at beginning of period
Increases related to prior year tax positions
Decreases related to prior year tax positions
Increases related to current year tax positions
Increases resulting from acquisitions
Settlements with taxing authorities
Lapse of statute of limitations
Balance at end of period
$
2015
2017
$ 10,906
307
(466)
2,123
—
—
—
2016
9,711 $ 2,457
292
1,717
(83)
(1,227)
4,339
2,035
2,887
—
—
(1,330)
(181)
—
$ 12,870 $ 10,906 $ 9,711
The total amount of gross unrecognized tax benefits as of March 31, 2017 was $12.9 million, of which up to
$10.4 million would reduce the Company’s effective tax rate in future periods if and when realized. The
Company reports accrued interest and penalties related to unrecognized tax benefits in income tax expense.
The combined amount of accrued interest and penalties related to tax positions on tax returns was
approximately $0.5 million as of March 31, 2017. There was no material change in accrued interest and
penalties during fiscal year 2017. The Company does not anticipate any reduction of unrecognized tax
benefits within the next 12 months.
The Company files a consolidated U.S. federal income tax return and tax returns in various state and local
jurisdictions. The Company’s subsidiaries also file tax returns in various foreign jurisdictions in which they
operate. In the U.S., the statute of limitations for Internal Revenue Service examinations remains open for
the Company’s federal income tax returns for fiscal years after 2013. The status of state and local and foreign
tax examinations varies by jurisdiction. The Company does not anticipate any material adjustments to its
financial statements resulting from tax examinations currently in progress.
F-64
15.
RETIREMENT PLANS:
The Company has a qualified 401(k) retirement savings plan which covers substantially all U.S. employees.
The Company also offers a supplemental nonqualified deferred compensation plan (“SNQDC Plan”) for
certain highly-compensated employees. The Company matches 50% of the first 6% of employee’s annual
aggregate contributions. The Company may also contribute additional amounts to the plans at the discretion
of the board of directors.
Company contributions for the above plans amounted to approximately $6.5 million, $6.1 million, and $5.3
million fiscal years 2017, 2016, and 2015, respectively. Included in both other current assets and other
accrued liabilities are the assets and liabilities of the SNQDC Plan in the amount of $12.7 million and $12.5
million at March 31, 2017 and 2016, respectively.
The Company has one small defined benefit pension plan covering certain employees in Germany. Both the
projected benefit obligation and accumulated benefit obligation were $0.4 million as of March 31, 2017 and
2016, respectively. There were no plan assets as of either March 31, 2017 or March 31, 2016, resulting in an
excess of benefit obligations over plan assets of $0.4 million at March 31, 2017 and 2016, respectively.
16.
FOREIGN OPERATIONS:
The Company attributes revenue to each geographic region based on the location of the Company’s
operations. The following table shows financial information by geographic area for the years 2017, 2016 and
2015 (dollars in thousands):
Revenue
United States
Foreign
Europe
APAC
Other
All Foreign
2017
$ 807,387
2016
2015
$ 770,043 $ 709,133
17,433
$ 52,562
$ 55,427
$ 59,958
32,658
3,162
$ 72,860 $ 80,045 $ 95,778
25,138
2,345
—
Long-lived assets excluding financial instruments (dollars in thousands)
$ 880,247
$ 850,088 $ 804,911
United States
Foreign
Europe
APAC
All Foreign
March 31,
2017
2016
$ 843,127 $ 748,123
$
9,096 $ 11,899
13,817
13,796
$ 22,892
$ 25,716
$ 866,019 $ 773,839
17.
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 term loan and revolving credit agreement is adjusted for changes in
market rates and therefore the carrying value of these loans approximates fair value. The estimated fair
value of other long-term debt was determined based upon the present value of the expected cash flows
F-65
considering expected maturities and using interest rates currently available to the Company for long-term
borrowings with similar terms. At March 31, 2017, the estimated fair value of long-term debt approximates its
carrying value.
Derivative instruments included in other liabilities - The carrying value is adjusted to fair value through other
comprehensive income (loss) at each balance sheet date. The fair value is determined from an interest-rate
futures model.
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 financial assets and liabilities measured at fair value as of March
31, 2017 and 2016 (dollars in thousands):
As of March 31, 2017
Assets:
Other current assets
Total assets
As of March 31, 2016
Assets:
Other current assets
Total assets
Liabilities:
Other accrued expenses
Total liabilities
18.
SEGMENT INFORMATION:
Level 1
Level 2 Level 3
Total
$ 12,716 $ — $ — $ 12,716
$ — $ — $ 12,716
$ 12,716
Level 1
Level 2 Level 3
Total
$ 12,532 $ — $ — $ 12,532
$ — $ — $ 12,532
$ 12,532
$
$
— $ 115 $ — $
— $ 115 $ — $
115
115
The Company reports segment information consistent with the way management internally disaggregates its
operations to assess performance and to allocate resources.
Revenue 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.
Operating expenses, excluding non-cash stock compensation expense and purchased intangible asset
amortization, are attributed to the segment groups as follows:
(cid:120) Research and development expenses are primarily directly recorded to each segment group based
on identified products supported.
(cid:120) Sales and marketing expenses are primarily directly recorded to each segment group based on
products supported and sold.
(cid:120) General and administrative expenses are generally not allocated to the segments unless directly
attributable.
(cid:120) Gains, losses and other items, net are not allocated to the segment groups.
F-66
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):
Revenues:
Marketing Services
AAudience Solutions
Connectivity
Total segment revenues
Gross profit(1):
Marketing Services
AAudience Solutions
Connectivity
Total segment gross profit
Income (loss) from operations(1):
Marketing Services
AAudience Solutions
Connectivity
2017
2016
2015
$ 410,840 $ 449,772 $ 446,103
303,836
297,846
102,470
54,972
$ 850,088 $ 804,911
322,065
147,342
$ 880,247
198,185
$ 140,647 $ 152,258 $ 156,395
158,386
167,715
13,322
61,199
$ 381,172 $ 328,103
$ 427,084
88,251
$ 80,622 $ 74,371 $ 81,247
115,078
109,598
(40,069)
(3,298)
123,238
5,333
Total segment income from
operations
$ 209,193
$ 180,671 $ 156,256
Depreciation and amortization:
Marketing Services
AAudience Solutions
Connectivity
$
7,549 $
13,286
21,906
Total depreciation and amortization
$ 42,741
12,909
19,932
9,988 $ 12,280
12,652
16,469
$ 41,401
$ 42,829
(1) Gross profit and Income (loss) 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, Gross profit and Income (loss) from
operations do not reflect non-cash stock compensation expense and purchased intangible asset
amortization.
F-67
The following table reconciles total operating segment gross profit to gross profit and total operating segment
income from operations to income (loss) from operations (dollars in thousands):
Total segment gross profit
$
427,084
$ 381,172 $ 328,103
2017
2016
2015
5,879
—
402,561
2,150
1,850
1,459
4,316
$ 361,706 $ 310,874
209,193
$ 180,671 $ 156,256
117,342
8,373
—
18,644
49,145
15,689
6,829
127,844
12,132
126,570
22,600
—
11,454
28,316
$ (13,063) $ (32,684)
15,466
31,463
Less:
Non-cash stock compensation
Accelerated amortization
Gross profit
Total segment income from operations
Less:
administrative)
Gains, losses and other items, net
Impairment of goodwill and other
Purchased intangible asset amortization
Non-cash stock compensation
Income (loss) from operations
$
$
$
F-68
19.
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA:
The following tables contain selected unaudited statement of operations information for each quarter of 2017
and 2016. The following information reflects all normal recurring adjustments necessary for a fair
presentation of the information for the periods presented. The operating results for any quarter are not
necessarily indicative of results for any future period. Unaudited quarterly results are as follows:
(dollars in thousands except per-share amounts)
Revenue
Gross profit
Income (loss) from operations
Net earnings (loss)
Basic earnings (loss) per share:
Net earnings (loss)
Diluted earnings (loss) per share:
Net earnings (loss)
(dollars in thousands except per-share amounts)
Revenue
Gross profit
Loss from operations
Earnings (loss) from discontinued operations,
net of tax
Net earnings (loss)
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Net earnings (loss)
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Net earnings (loss)
Quarter ended Quarter ended Quarter ended
September 30, December 31,
June 30,
2016
$ 214,801
2016
$ 217,267
Quarter ended
March 31,
2017
2016
$ 223,312 $ 224,867
106,573
(8,709)
(8,081)
106,844
9,115
1,073
91,982
8,162
3,976
97,162
7,120
7,140
0.05
0.09
0.01
(0.10)
0.05
0.09
0.01
(0.10)
Quarter ended Quarter ended Quarter ended Quarter ended
September 30, December 31,
2015
$ 207,345
86,033
(2,056)
12,068
10,723
2015
$ 221,193
95,458
(374)
March 31,
2016
$
224,655
101,029
(7,764)
(971)
(1,410)
111
(1,571)
(0.02)
0.15
0.14
(0.02)
0.15
0.14
(0.01)
(0.01)
(0.02)
(0.01)
(0.01)
(0.02)
(0.02)
0.00
(0.02)
(0.02)
0.00
(0.02)
June 30,
2015
$ 196,895
79,186
(2,869)
4,143
(1,039)
(0.07)
0.05
(0.01)
(0.07)
0.05
(0.01)
Some earnings (loss) per share amounts may not add due to rounding.
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©
i
ACXIOM CORPORATION
301 E. Dave Ward Dr.
Conway, AR 72032
acxiom.com or call 1.888.3ACXIOM
TRANSFER AGENT AND REGISTRAR
(cid:36)(cid:80)(cid:78)(cid:81)(cid:86)(cid:85)(cid:70)(cid:83)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:3)(cid:42)(cid:79)(cid:87)(cid:70)(cid:84)(cid:85)(cid:80)(cid:83)(cid:3)(cid:52)(cid:70)(cid:83)(cid:87)(cid:74)(cid:68)(cid:70)(cid:84)(cid:3)(cid:116)(cid:3)(cid:24)(cid:22)(cid:22)(cid:24)(cid:3)(cid:51)(cid:66)(cid:78)(cid:67)(cid:77)(cid:70)(cid:83)(cid:3)(cid:51)(cid:80)(cid:66)(cid:69)(cid:13)(cid:3)(cid:52)(cid:86)(cid:74)(cid:85)(cid:70)(cid:3)(cid:25)(cid:17)(cid:17)(cid:34)(cid:3)(cid:116)(cid:3)(cid:37)(cid:66)(cid:77)(cid:77)(cid:66)(cid:84)(cid:13)(cid:3)(cid:53)(cid:57)(cid:3)(cid:116)(cid:3)(cid:24)(cid:22)(cid:19)(cid:20)(cid:18)(cid:3)(cid:116)(cid:3)(cid:26)(cid:24)(cid:26)(cid:15)(cid:23)(cid:26)(cid:18)(cid:15)(cid:23)(cid:17)(cid:20)(cid:20)
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