Acxiom Still Evolving, Currently In Growth Phase

Scott-HoweThe story of Acxiom is one of constant evolution. Consequently, it’s also in what seems like a perpetual growth phase.

With the development of its data-management platform Audience Operating System and its acquisition of data onboarder LiveRamp, it seemed to become a neutral infrastructure provider, the pipes facilitating the flow of information across its clients’ marketing and advertising technologies.

That might still be in the cards for that particular unit, now called Connectivity.

“It’s not an us vs. them world,” said Acxiom CEO Scott Howe during the company’s Q1 2016 earnings call Wednesday. He referred specifically to Connectivity’s white label clients. “What others perceive as traditional competition, we view as our most valuable customers. We have to deliver a great service to all of them and stay agnostic and innovate.”

But Acxiom is also investing heavily in Marketing Services and Audience Solutions, a consolidated unit it will divide by Q3. In June, it dusted off its old email and cross-channel marketing solutions platform Digital Impact, rebranding it as Acxiom Impact.

It hired earlier this year Nielsen vet Jeremy Allen to oversee Marketing Services, and longtime Experian Marketing Services vet Rick Erwin to head the Audience Solutions. Travis May, coming from the LiveRamp acquisition, oversees Connectivity.

Acxiom certainly has ambitions bundling these various products together – Howe explicitly mentioned the possibilities of connecting its refurbished email platform with connectivity and data products.

So how is Acxiom doing as it sets out in this new direction? That remains to be seen. As a whole, the company saw $197 million in Q1 revenue, up 5% YoY – though it would’ve been flat were it not for favorable foreign exchange conditions. However, it soundly beat analysts’ pessimistic estimates, which anticipated about $187 million in revenue. It still posted a $1 million quarterly loss, but that’s better than this time last year, when it had a $7.6 million loss.

Its Marketing Services and Audiences Solutions division was down 3% YoY to $176 million. Acxiom tentatively split those revenues in two, anticipating the coming schism, which gave Marketing Services $109 million, down 3%. Audience Solutions nabbed about $72 million, up 1%.

Connectivity meanwhile scored $80 million, up 8% sequentially. It now has a total of 212 subscribing customers as well, up from 194 last quarter.

It saw three times the number of direct advertisers YoY, and average deal size was also up four times YoY. That last part is important, given Acxiom’s purchase price for LiveRamp was over 11 times the latter’s revenue.

And Connectivity also had very nice growth in gross media spend, with $67 million in Q1, up 230% YoY. That brings its totals over the last 12 months to $224 million.

This growth was supposedly driven by royalties associated with use of Acxiom’s data, which CFO Warren Jenson said had increased dramatically.

So what next?

Acxiom is clearly investing in growth. Certainly, it’s continuing to get its Audience Solutions and Marketing Services running full speed. And despite Connectivity’s impressive gains, it too is a growth area.

Within that unit, Howe mentioned that Acxiom is investing in building scalability, new products and international expansion.

Because of these factors, he tempered investor expectations: “I want to be clear about the near term: It’s highly likely our margins will be down in the back part of this year, both in terms of gross and operating margins, because of those investments.”

He approached Acxiom’s other initiatives with similar cautious optimism. For instance, when asked when bookings across Acxiom will finally show revenue, Howe noted that bookings are a longer-term measure. At the same time, Howe pointed out that new wins in Marketing Services, for instance, exceed the rate of contract expirations.

“I like where we’re going, but I’m not ready to declare victory yet,” he said. “With Marketing Services, I’m happy with our upsells, but the challenge I’m throwing down to the team is to do better with new logo performance.”

Audience Solutions, which Acxiom hired Rick Erwin to troubleshoot, seems to have a bigger hole to dig itself out of. One issue, for instance, was that it lost a large legacy relationship when a client decided to terminate data relations with Acxiom to bring that discipline in-house. Howe noted that the unit will have to drive a lot of sales to compensate.

“We’re laying the groundwork for Audience Solutions,” Howe said.

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