Thursday, June 25, 2009

Acxiom (ACXM) down big, as expected

AlphaNinja - Acxiom (ACXM) is down 23% today after cutting revenue guidance a little, and earnings guidance a LOT. The company reduced earnings guidance to about 5cents for the 1st quarter, a tad below the 20cents the street was expecting.

A business description:

The conference call's prepared remarks and Q&A session centered mainly on the question of what kind of revenue was being "deferred," and how "discretionary" it is.

Details from the call:

-->>While no customer accounts for more than 10% of revenues, CEO Meyer said that the revenue shortfall was due to "financial difficulties on certain clients"

-->>claimed they did not "lose" any customers. Rather, the amount that clients spand on discretionary projects above and beyond "base" contract revenue, is very volatile right now. IN the CEO's words, "they either happen in a week or they don't happen in a week."

-->>sales pipeline and backlog (likely revenue) is improving, but the "timeframe" for these revenues to be booked is becoming longer.

-->>Europe is in "far worse" shape than the US, as they see competitors going out of business

One analyst tried to get a bit more clarity on earnings-per-share for the full year, which as of last night was estimated at 94cents (or net income of about $74mil). He asked if the 7cent high-end for this quarter might be the lowest quarter earnings, to which the CEO said "look at seasonality" - basically agreeing.

I'll take full-year EPS down to say, 50cents, getting to net income of $39mil. Adding back D&A, stock comp expense, and subtracting Capital expenditures gets be to Free Cash Flow of around $200million, or 29% of today's Market Value ($691mil). I purchased shares a few minutes ago, and while certain I didn't "bottom" the stock, that big FCFY (Free Cash Flow Yield) is too lush for me to ignore.

A look at why Acxiom's FCF is so much higher than net income is below. They won't continue to amortize such a degree, but when that slows down then the income statement will show higher earnings.

(Disclosure - long ACXM)

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