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Acxiom Corp. Posted By : admin
Posted On : Sunday, November 9, 2014
Company Name : Acxiom Corp. Investment Range : Long
Ticker : NASDAQ: ACXM M.Cap.Range : Large-cap
Country : US Stock Price : 19.06
Description :        

Positives

1) New committed management – Energetic and considerably new management with strong experience in digital space

2) Transition phase – New management which took office in the FY 2012 have done lot of restructuring in the Company. Around two divisions were sold since 2012 and only after 3 years they have announced the acquisition of a new business LiveRamp for an all cash deal.

3) Shares buyback – Through March 31, 2014, the Company had repurchased 12.3 million shares of its stock for $192.6 million.

4) Acquisition target – Company has a history of a failed acquisition in May 2007. Considering the consolidation and growth in this industry the Company is good acquisition target.

5) Cheap at this valuation

Company's Business – Acxiom Corporation is an enterprise data, analytics and software-as-a-service (SaaS) company. The company primarily operates in the US. It is headquartered in Little Rock, Arkansas and employed approximately 6,300 people as of March 31, 2013. The Company is into existence for the past 40 years.

Clients Base

The Company’s 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 the government sectors.  The Company typically operates under contracts with initial terms of at least two years.  The Company’s ten largest clients represented approximately 38% of our revenue in fiscal year 2014 but no single client accounted for more than 10% of our revenues as a whole.

Segments

The Company’s business segments consist of,

a)      Marketing and data services – includes the Company’s global lines of business for Customer Data Integration (CDI), Consumer Insight Solutions, Marketing Management Services (including the Audience Operating System), and E-mail Fulfillment and Agency Services.  

b)      IT Infrastructure management – Includes development and delivery of IT outsourcing and transformational solutions. 

**In FY 2014, the Company has a reportable segment named “Other services” – predominantly the UK business which was sold in the current fiscal.

About the management

# Efficient management team – All team members have firmly planted roots in the digital marketing space and they have good understanding of where the business is going. 

# Visionary CEO – Joined in the FY 2012 and he has done total restructuring of the business by exiting sick divisions.

Management Compensation

# Compensation of the management is huge, but the catch in the compensation is majority is in the form of Stock awards and options.

Ownership Interest

# In the past couple of month institutional investors has added around 4.3million shares.

# Top 10 institutions holds around 54.35% of ownership interest in the Company

# Almost 96% of the Company’s stocks is held by institutional owners.

# Insider buying – Scott E Howe, CEO has bought around 20,000 shares in the open market for a total process of $351,482.

Recent developments in the Company

# In Oct 2014, Acxiom has signed has signed a European-wide partnership with Starcom Mediavest Group or SMG for Audience Data.

# On Sep 17, 2014, Acxiom And Dmg Announce A Strategic Alliance For The Multicultural Market Place –New Strategic Alliance Set to Transform the Multicultural Marketing Landscape Across the U.S.

# On 14 May 2014, Acxiom signed an agreement to acquire LiveRamp for $310 million. On July 1, 2014, Acxiom Corporation, a Delaware corporation (the Company), completed its previously announced acquisition of LiveRamp, Inc.

# Acxiom Opens Austin Office with 150 Job – Acxiom, a Little Rock-based software company, announced Monday that it will be opening an Austin office and hiring 150 new employees.

# Acxiom Launches Program to Leverage its Data Power for Community Wellness. In Sep 23, 2014 the Company announced a company-wide program to unlock the power of data to bring relief to pressing community challenges associated with health, education and humanitarian aid.

Industry

# Mobile advertising industry is around $8.1 billion in North America

Negatives

#Huge churns in the management in the past seven years three CEO have been changed.

a)      On January 17, 2008, Acxiom named John Meyer (from Alcatel-Lucent) as new CEO and president, effective February 4, 2008.

b)      On March 30, 2011, Acxiom named Jerry Gramaglia as interim CEO.

c)       On July 27, 2011, Acxiom named marketing and advertising veteran, Scott E. Howe, as the company’s chief executive officer and president.

Customer concentration – The Company’s ten largest clients represented approximately 38% of revenue in fiscal year 2014 but no single client accounted for more than 10% of revenues as a whole.

# The space of big data is getting crowded and hence slowly the advantage of entry barrier is coming down.

Competitive advantage

# Breadth and Depth of Privacy – Compliant Consumer Data – For over 40 years, Acxiom has been an innovator in sourcing and use of data for marketing.

# Data and Insight

  • Multi-sourced insight into approximately 700 million consumers worldwide
  • Over 3,000 propensities for nearly every U.S. consumer

# Enterprise Data Management, Data Quality and Recognition

  • Manage over 15,000 databases and process roughly 13 trillion transactions per quarter for clients
  • Manage over 2.5 billion customer relationships and maintain over 3.7 billion prospect records for our clients
  • Perform nearly 11 trillion consumer record updates per year (including updates to an estimated 25 trillion individual fields or elements within those records)

Market’s View

# Brokers in the street through their channel check has felt that the Company’s acquisition LiveRamp is positive.

# Few have given a bullish view on a long term to the stock considering the cheap valuation of the business when compared to its peers and the target market index.

Undervaluation:

  • Price/Sales of 1.2 versus sector average of 3.7 and market average of 2.3. We estimate the shares are trading at a current year Price/Sales of 1.2 and a forward year Price/Sales of 1.2.
  • The Price to Book of 4 lower than average of 6.8 for the Internet/Software sector and 6.6 for the Total NASDAQ Market. We estimate the shares are trading at a current year Price to Book of 4.2 and a forward year Price to Book of 4.4.
  • The company is cash rich with Cash to Market Capitalisation at 32.6%.
  • The Q Ratio, defined by James Tobin as MCap divided by Total Assets, is 1. Compared with the rest of the market the stock is undervalued.

Other Bullish Signals:

Also, the following criteria set by Benjamin Graham:

"Total debt less than tangible book value"; total debt of $US317.6 Million is less than tangible book value of $US324.5 Million.

"Current ratio of two or more"; current assets are 2.7 times current liabilities.

"Total debt equal or less than twice the net quick liquidation value"; total debt of USD317.6 Million is 0.9

times the net liquidation value of USD347.92 Million.

 
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