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Acxiom's turnaround - will it continue?

The Conway-Based Company May Surpass the $100 Million Sales Mark in Fiscal 1993

THE GOOD NEWS AT Acxiom Corp. is beginning to pile up like so many greeting cards heralding the yuletide season.

Long-term deals with two Chicago area corporations, Trans Union Corp. and Allstate Insurance Co., could inject $375 million into Acxiom revenues over the life of the contracts.

Acxiom's early Christmas even started before the July announcement of the first of the two lucrative agreements.

First quarter results on June 30 showed a 20 percent increase in revenues and a complete turnaround in profitability. Net income for the first three months of fiscal 1993 topped $1 million as opposed to a $2 million loss during the first quarter of 1992.

This record-setting pace is expected to characterize the entire 12-month reporting period, a welcome contrast to layoffs and losses in the not-so-distant past.

Revenues for fiscal year 1993 should approach $115 million. This new high is backed by the anticipation of the company's biggest annual profit ever -- $6 million-plus.

"We have so many things going on, it's difficult to forecast accurately what's going to happen beyond that," says Charles Morgan, Acxiom's chairman, president and chief executive officer.

The Conway-based enterprise employs 1,600 workers in operations that stretch from Faulkner County to the East Coast and across the Atlantic Ocean to the United Kingdom.

The company has undergone three name changes since its founding in 1969 as Demographics Inc. At the time, the company's bread and butter was managing the Arkansas Democratic Party's mailing list.

In 1980, the company was renamed Conway Communication Exchange, which later became CCX Network Inc. in time for the initial public offering in December 1983.

Acxiom Corp. arose in 1990 as the company began expanding from its base of processing and maintaining lists for direct mail advertisers to managing data processing centers for clients.

Acxiom executives recently emerged from an upbeat retreat at Eden Isle, near Heber Springs, where they planned to follow up on recent triumphs.

The company is aggressively pursuing large corporate clients interested in shedding data base management chores to focus on their core business during a recession-driven economy.

Deals like Trans Union and Allstate typify Acxiom's marketing strategy to broaden its traditional sales base with high-dollar, long-term contracts, which tend to have better margins and more predictable revenue and earnings streams.

"It's been the focus of our company for three years," Morgan says. "Now, we're seeing the fruits of several years' effort.

"We're being presented with an enormous array of opportunities as more companies around the world try to become more efficient."

The influx of new revenue sources will more than offset the expected decline in business with Acxiom's biggest client.

New York-based Citicorp is the only customer to account for more than 10 percent of Acxiom's business during the past three years. Citicorp will drop below the 10 percent mark this year.

The recent ebb and flow of Citicorp revenue has tracked this way: $11.7 million (12.9 percent) in 1992, $13.7 million (14 percent) in 1991 and $12.8 million (14.3 percent) in 1990.

Last month, Acxiom reported record revenues for the three-month period ending Sept. 30. Quarterly sales hit $28.7 million, an increase of 21 percent from a year ago.

More importantly, quarterly profits were up more than 16 percent. Earnings topped $1.9 million during the company's second quarter, compared to $1.6 million in 1991.

Acxiom's fiscal improvement is even more dramatic when comparing the recent six-month profit picture with last year's -- a $2.7 million gain vs. a $135,000 loss.

Big Deals

The continued good news in the second quarter was further buoyed by the deals struck with Trans Union and Allstate.

Acxiom inked a 10-year agreement to buy and manage Trans Union's data center and a five-year agreement to provide Allstate data management services.

The Allstate deal should generate $10 million to $15 million during 1993. Annual revenues from the contract are forecast to hit $40 million to $50 million when the agreement is fully operational in 12-24 months.

The Trans Union deal will add a whopping $20 million annually to the Acxiom corporate coffers.

"Both those deals will begin really showing up in our fourth quarter," Morgan says.

The investment community has greeted these developments favorably, as reflected in recent market activity.

Robert Bolen, information services analyst with J.C. Bradford & Co. in Nashville, Tenn., watched Acxiom jump over $29 per share and later close at $30, an all-time high for the stock.

Bolen saw the blip flash on his computer screen during a telephone interview Nov. 10.

"What's going on with that company?" he exclaimed. "Did I miss an announcement or something?"

As it turns out, no.

The move was merely a continuation of Acxiom's upward trend that began in earnest following the Trans Union deal in July.

The stock bottomed out in the $10-$11 range last July amid quarterly losses, staff cuts and corporate restructuring. The free-fall began with the announcement of lower-than-expected earnings in early 1991 when the stock was at $21 per share.

The stock began a slow recovery from its low point last summer to the $15-$16 range when the Trans Union announcement bumped it to $18. Word of the Allstate deal in September took the price over $22 per share, and the stock has kept climbing ever since.

The swings are more reflective of a stock market that talks long-term investments but looks for short-term results. Acxiom is still a relatively young public company, only converting from a private venture almost nine years ago.

That youthful vigor is also reflected in the average age of its staff: 29.

Prior to the Trans Union agreement, Acxiom had struck five "outsource" deals during the past four years.

Two were purchases that resulted in two Acxiom subsidiaries: Modern Mailers (Acxiom Mailing Services) in Philadelphia and Southwark Computing Services (Acxiom U.K.) in London.

The other three deals involved Guideposts, a magazine in New York; M/A/R/K Inc., a Dallas-based market research firm; and Fulfillment Corp. of America in Marion, Ohio.

"The collective size of the last three deals is about half the size of Trans Union," says James Womble, Acxiom executive vice president. "Those earlier deals involved closing the data processing departments of the companies and moving the operations to Conway.

"In the case of Trans Union, we've taken over the facilities management, and their associates are now our associates."

Trans Union is touted as the largest consumer credit information company in America, with more than 250 locations across the nation. Its client base also extends to Canada and Europe.

The transaction involved $1 million cash and 240,000 shares of Acxiom up front to buy Trans Union's Chicago data processing center, valued at $6.4 million.

Phase one of the contract runs for 2 1/2 years and gives Trans Union the right to 125,000 more shares. If both companies are pleased with the results, phase two will extend the contract for 7 1/2 years more.

Trans Union can exercise warrants for an additional 375,000 shares of Acxiom stock by entering the second phase of the contract.

The agreement prohibits Trans Union from owning more than 10 percent of Acxiom stock at any time.

The first phase of the deal makes Trans Union the third largest non-executive stockholder, according to data contained in Acxiom's June 19 proxy.

Two well-known New York names, J.P. Morgan & Co. and Rockefeller & Co., respectively held 5.4 percent and 5.3 percent at that time.

In a postscript to the Trans Union agreement, Harry C. Gambill, Trans Union's president and CEO, was elected to the Acxiom board of directors.

Gambill's appointment to the board was viewed by analysts as a favorable sign that Trans Union likely will enter the second phase of the agreement.

Gambill was named to replace S. Robson Walton, chairman of Wal-Mart Stores Inc. Walton had served on the Acxiom board since 1989.

The Nov. 4 announcement dovetailed with news of Acxiom's 2-for-1 stock split at the end of the month. Acxiom's only previous stock split was a 3-for-2 deal in March 1986.

Flushed with the early success of its work with Allstate, Acxiom is looking on the insurance industry as a big area of outsourcing opportunity.

Providing specialty software and linking Allstate's field agents with Acxiom's mainframes is expected to help cut underwriting time for policies from several weeks to a few hours or days.

The end result is speed and savings for Allstate, and big money for Acxiom. Deals of this sort will provide the power for Acxiom's growth toward the next decade.

"We're expecting a 20-30 percent growth rate for the next 3-5 years, and we think that's feasible to attain," says Rodger Kline, executive vice president and chief operating officer for Acxiom.

Growing Up

While new areas of business have grown, Acxiom's core business has rebounded from a low seen during a confluence of events in 1991 -- a postal rate increase, the war with Iraq and a recession.

When times get uncertain and costs go up, direct mail marketing becomes a discretionary item near the top of the list for cutbacks consideration.

"The perception was the company was suffering from the whims of direct mail, which was the case, but Acxiom has shifted to a more well-diversified company," says Bolen of J.C. Bradford.

Acxiom's recent resurgence doesn't come as a surprise to top man Charles Morgan. But he attributes Acxiom's rebound to more fundamental changes.

"The marketplace has played out as expected two years ago," Morgan says. "The biggest single difference was we realized we weren't running our company very efficiently."

Traditional command and control systems weren't working out. Overhead needed to be cut while maintaining research and development funding.

The work force was pared by 7 percent, with much of the layoffs in middle management.

R.P. "Phil" Carter, who led the company for five years of fast-paced growth, exited as president and chief operating officer in the fall of 1991.

Morgan cut his own paycheck by 54 percent and other executives took cuts ranging from 20-50 percent. Bonuses and incentives for the year were thrown out the window. Scheduled salary increases were postponed.

Excess facilities on the East Coast were sold or leased as part of cost-cutting maneuvers that saved Acxiom almost $6 million.

All of this wasn't the sort of rocket scientist stuff expected from a high-tech venture, but it helped restore equilibrium to a company geared up for growth in a down-market cycle.

In the U.K., Acxiom's largest project -- supporting the privatization of the electric utility -- was completed at the end of fiscal 1991, and there was little work to replace it in the midst of that country's deepest recession.

That added up to losses of more than $1.4 million for Acxiom's foreign operations in 1992, which followed a $262,000 profit the year before.

"This year, we will break even," says Jerry Ellis, a 21-year IBM veteran brought in as managing director of Acxiom U.K.

Big moves there included reducing a work force of 400 to 350, restructuring operations, upgrading equipment and rebuilding the sales staff.

"The leadership of this company has learned how to manage change," says Kline. "We know now what our strengths are. Quite frankly, we understand ourselves better."

The company's downturn two years ago caused it to fall from Forbes' list of the 200 best small companies in America after a five-year stint.

Acxiom's turnaround could propel it back into the corporate limelight. But now, the company might be too large for consideration as a small company.

Acxiom Executives


Title: Chairman, Chief Executive Officer, President and Director.

Background: As of May 31, Morgan, 49, owned 18.8 percent of Acxiom. He joined the company in 1972 and has served as chairman and CEO since 1975. He took on the title of president following Phil Carter's departure in 1991.

Cash compensation: $176,479.


Title: Executive Vice President, Chief Operating Officer, Treasurer and Director.

Background: As of May 31, Kline, 49, owned 5.1 percent of the company. He joined Acxiom in 1973 and was named an EVP and director in 1975. Kline took on the title of treasurer in 1988 along with chief information officer, a position he no longer holds. He became chief operating officer after Carter's exodus in 1991.

Cash compensation: $121,798.


Title: Vice President and Managing Director of Acxiom's United Kingdom operation.

Background: Before joining the company in April 1991, Ellis, 43, was a 21-year veteran with IBM's UK operations and was preparing to ascend to the position of assistant to the chairman and CEO of IBM UK. A native of London, Ellis replaced Mike Foreman, who left during the corporatewide staff cuts.

Cash compensation: $117,554.


Title: Executive Vice President and Director.

Background: As of May 31, Womble, 49, owned 4.5 percent of Acxiom. He joined the company in 1974 and was named vice president and director in 1975. Womble became an EVP in 1982.

Cash compensation: $103,614.


Title: Senior Vice President.

Background: Bartos, 52, came to Acxiom as SVP in 1988 after 25 years with Dun & Bradstreet Corp. in New York. He was president of Dun's marketing services when he left to join Acxiom. Bartos oversees an Acxiom business group with 250 employees.

Cash compensation: $112,831.

These five corporate officers are all members of Acxiom's Executive Operating Committee. Other committee members include: vice presidents Paul Zaffaroni, Don W. Barrett Jr., C. Alex Dietz and Jennifer Barrett.
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Article Details
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Title Annotation:includes list of Acxiom executives; Acxiom Corp. aims for bigger profits in 1993
Author:Waldon, George
Publication:Arkansas Business
Article Type:Company Profile
Date:Nov 16, 1992
Previous Article:Bouncing back.
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