LiveRamp Holdings, Inc. (RAMP) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Acxiom Q4 FY '13 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to your host, Jay McCrary, Acxiom's Treasurer. Please go ahead.

Thanks, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2013 fourth quarter and fiscal year results. With me today are Scott Howe, our CEO; and Warren Jenson, our CFO; and Art Kellam, Corporate Controller. Today's press release and this call may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. For a detailed description of these risks, please read the Risk Factors section of our public filings and the press release. Acxiom undertakes no obligation to release publicly any revisions to any of our forward-looking statements. A copy of our press release and financial schedules, including any reconciliation of non-GAAP financial measures, is available at acxiom.com. Also during the call today, we will be referring to the slide deck posted on our website. A link is also included in today's press release. At this time, I'll turn the call over to Scott Howe.

Thanks, Jay, and good afternoon, everyone. As we leave Acxiom's fiscal '13 and now head into 2014, I thought it might be useful to give you my perspective on where we are in our journey and where we will go in the months and quarters ahead. From the outset, let me repeat something I said 3 months ago when we last spoke. In that late January call, I mentioned that we were knee-deep in implementation. Well, let me correct that by saying we are neck-deep in implementation. Every day, we are coding new innovation and calling new prospects. Essentially, we're laying the foundation for a more prosperous future. Next, you'll also remember I said in some ways, "This is the hardest time. Our investment spending has ramped materially, but as excited as we are about the products we are creating, we have yet to taste the tangible rewards of meaningful revenue." Well, I was right. Even though our fourth quarter came in as advertised, this is the hardest time, and we certainly felt that this quarter. And as we indicated in our last call, we know that revenue and margin pressure will continue into at least the first half of 2014. So where am I going with all this? While we are by no means perfect in our execution or satisfied with today's current state. We believe that we are on course. Our investment thesis is stronger than ever, and our opportunity is even larger than we had originally imagined. Today, I would like to talk about the strength of our investment thesis and our priorities for the 2014 fiscal year. The Acxiom investment thesis is as follows: first, we are playing from a position of competitive strength. We have strong Marketing and Data Service business with long-standing relationships. We are deeply ingrained in all of our clients' core marketing operations. We are a leader in the management of consumer data. Today, we have relationships with over 40% of the Fortune 100. We maintain privacy compliant profiles on more than 700 million individuals, and we process more than 50 trillion transactions every year. To put this number in perspective, we process more transactions per day than there are searches on Google. Finally, we have critical skills and know-how in data privacy that are essential in today's big data marketing world. Acxiom is a pioneer in this industry and a defender of individual privacy rights. Our relationship with Facebook is a perfect example, which I'll talk about in a few minutes. Second, competitive advantage for advertisers and publishers is created by mining insights. Initially from their proprietary data sets and then by supplementing that information with third-party data or machine learning. This truth is becoming increasingly apparent and plays directly to our strengths. Let me explain. As we spoke about in New York, the single most powerful and underutilized asset for a marketer is the data collected by the world's most trusted brands about their own customers and prospects. Our clients' proprietary data sets are the most informative and predictive information about a consumer's preferences and their ideal customer experience. This trove of insights starts squarely in the products and platforms that Acxiom provides to our customers to manage huge proprietary data sets. Acxiom products enable these brands to collect, curate, analyze and apply these insights to mail, email, call centers and now online mobile and social channels. We then marry our clients' data with data from other third parties, which include online social and mobile, to build a more complete consumer profile. In contrast, others begin and end with just digital data, leaving them with an incomplete view of the consumer and a far less effective solution. Under the leadership of Dr. Phil Mui, our product development is focused on making all the necessary connections. Connecting disparate data silos into a single, holistic view of every consumer. Connecting these holistic views with useful insights. And finally, connecting these insights with tangible activities that increase our marketers' return on investment. We're pleased with our progress. Acxiom's products are now connecting these data sets and our capabilities with data from new channels, including online, social and mobile, creating what we believe will be the most complete, predictive profiles the industry has ever seen. It's precision marketing at scale across all channels, devices and applications. Third, we believe we have 4 tangible opportunities to drive long-term shareholder value. More specifically, we intend to: one, invest in technology and intellectual leadership to create true innovation, and this is what we've come to call the Acxiom Audience Operating System; two, expand our client base by redefining our position in the big data ecosystem. Our emerging capabilities position us with a far broader array of potential clients and new types of revenue streams that display more SaaS or what I would even call DaaS, data-as-a-service, characteristics; three, supplement our efforts with an expanding set of partnerships and occasional portfolio refinements such as tuck-in acquisitions or divestitures; and finally, but importantly, four, run our business better within every client, across every geography, every product and every function. These 4 value-creation opportunities overlap directly with our company's strategic imperatives for 2014. Let me speak briefly about each one in turn. Imperative number one, invest and deliver innovation through the Acxiom Audience Operating System. Now many of you may not have had a chance to attend our recent product briefing in New York City, so let me give you a refresher on what we are building. We are building an ecosystem that for the first time in the history of marketing will allow advertisers to plan, buy and optimize their audiences with both precision and scale across all channels, devices and applications. As Dr. Phil said in New York, "It's magical." We believe what we are building over time will help transform the fundamental processes and expectations for marketers. Our technology stack has 3 layers. First, we are building a data layer that allows us to ingest a broad array of both structured and unstructured data. We already have a deep array of client and structured third-party data and are making great progress towards building out other data sets. For example, we currently have information on nearly 1 billion online users. We are also matching approximately 90% of all U.S. social profiles. We have made significant progress establishing and collecting broader and deeper data sets than any company in the world, and we will continue our buildout this coming fiscal year. Second, we have reconceptualized our core database technologies into what we call the Acxiom Audience Operating System. This new technology layer will allow us to both marry and anonymize disparate offline -- offline and online data to derive more useful insights for our customers. In addition, it will also allow a much broader group of customers and partners to work with Acxiom through a series of secure APIs. Finally, we are creating an application layer that allows Acxiom, our clients and partners, as well as third-party developers, to create unique applications on our Audience Operating System. We have already created some initial applications to address glaring marketing needs. For example, we recently announced AbiliTag, which allows publishers to match offline audience advertiser data with the publishers' own online data sets. We also launched Audience Propensities, with over 3,000 big data models to help predict consumer behaviors. Our pipeline for Audience Propensities is over $9 million for the first half of the year. These application efforts will make us one of the first in the world to allow marketers to research and reach audiences across online and offline channels and optimize advertising spend through a single, through a single interface. Once again, this is a first for our industry. But clearly, we still have much more work to do. While we're releasing a number of products and feature enhancements in beta, we are working hard to improve these offerings based on beta client feedback and usage. For example, we've already dramatically improved our UI, or user interface, from the demos many of you saw in New York. Our full first wave of innovation won't be in complete commercial release until later in the year. Until then, we will continue to be neck-deep in coding and demonstrating our emerging technologies to customers and prospects. Imperative number two. Expand our client base by redefining our position in the big data ecosystem. In sales, under the leadership of Nada Stirratt, our initial focus was to ensure that our core existing client base was satisfied and that we were innovating for their future needs. We are pleased with the progress we have made as evidenced by the results we've generated. For example, for the U.S., for the year in Marketing and Data Services our top 20 customers grew by approximately 9%, and our top 100 customers by approximately 7%. But of course, that is only a start, and we believe the real payoff will come in future quarters as our innovation starts to fuel growth with new types of customers and new types of revenue. Our sales team is starting to hit their stride in building a disciplined approach to sales, sales operations and deal management. The result of this is that our pipeline has never been more robust. In fact, today, our pipeline for U.S. Marketing and Data Services is up more than 30% year-over-year, even when excluding potential revenue from publisher partners and application developers. While we still need to close that pipeline, we like our chances. In fact, over the past quarter we closed on new deals, new logo deals with Foot Locker, Total Wine & More and a major global consumer electronics company. In addition, we had renewals with 2 of the largest financial institutions in the U.S. and also expanded our existing relationship with Macy's. Imperative number three. Partnerships and a portfolio focus. Acxiom is continuing to form partnerships with leading publishers and consumer technology companies. These partnerships, powered by our Audience Operating System, allow all advertisers to reach their customers and prospects in digital channels with a precision that only direct marketers have relied on for decades. This quarter, we announced an exciting partnership with Facebook that greatly improves the options available for our clients. Acxiom is an ideal partner for Facebook because of our data assets, including over 3,800 audience propensity models and our trusted client relationships. For Acxiom, Facebook's very large and engaged audience targeted with the help of Acxiom data will enable our clients to reach with confidence a large portion of each client's customers and prospects across both mobile and desktop devices with frequency, consistency and in a format that supports sharing. Facebook's mission to make the world more connected complements our own. Acxiom is uniquely positioned to support connections between Facebook users and the companies and brands they value. Connections that are accomplished securely with full respect for consumer privacy. The ads people see on Facebook powered by Acxiom's data will be more relevant to their interests, which delivers a superior brand experience, as well as providing better advertiser results. Our partnership with Facebook represents a big step toward achieving our objective to provide one-to-one marketing at scale. We are also expanding our mobile presence in other areas. In addition to the Facebook partnership, we are pleased to announce a partnership with 4INFO. 4INFO is one of the largest mobile ad-targeting platforms in the U.S. Through 4INFO, Acxiom will be able to target mobile ads with precision to approximately 100 million consumers. Along with other mobile partnerships, Acxiom now has the ability to target across the entire United States addressable mobile users and households on a one-to-one basis without cookies in a privacy compliant, safe and secure manner, and that's just the beginning. Mobile is the fastest-growing sector in the advertising industry, expected to reach $7 billion this year. We believe marketing investment will shift to Acxiom partners because our clients can justify increased mobile spend with confidence. These 2 partnerships complement a flurry of other partnering activities such as 6 new partners added in the quarter taking our total to over 40. Our partner network reaches over 95% of unique visitors across the Internet. This includes 4 out of the top 6 U.S. publishers. In mobile, we now reach over 200 million uniques in our partner network. More broadly, on the portfolio front, we will continue to evaluate opportunities to accelerate our progress through continued optimizations and possible tuck-in acquisitions. Imperative number four. Run a better company. I'm really pleased with the progress we've made over the past year. We've engineered some important changes and have much more potential for future improvements. Most importantly, our management team is now firmly on the ground and working extremely well together. While there are certainly challenges in our turnaround, we know what they are and feel as if we have detailed, tactical plans in place against each obstacle. We leave 2013 with a robust management cadence, a target P&L in place and clear accountabilities for performance. We now come to work thinking about finding a better way every day. While our top line remains a work in progress, we are pleased that we grew our non-GAAP EPS by $0.04 this year despite a drop in revenue and some big, big investments in engineering, data and our delivery organization. Some highlights include our IT Infrastructure Management segment increased their margins by 200 basis points. In addition, we have recently announced in that division the Acxiom PrivateCloud. Mike Lloyd and his delivery team in Marketing and Data Services understand that they are chasing a moving target. They must deliver near-term gains in performance and customer satisfaction, but also, also build for a future in which even greater efficiencies and client satisfaction are possible. And we are also now separating our corporate and Marketing and Data Services IT functions from our IT Infrastructure Management business. This is yet another important step in compartmentalizing our businesses into standalone entities and realizing additional efficiencies through our IT efforts. To this end, I have recently asked Warren Jenson to manage this operation, and he will address his plans later on the call. In closing, while we still have much to do, I believe that the transformation of Acxiom is well underway and that we are right on course. We have accomplished many extraordinary things over the past year. We have generated a lot of excitement around our product innovation that will give us a foundation to provide for both our new growth and improved profitability. We have introduced our product capabilities to the world and proved we have the ability to transform the marketing industry. The opportunity is even bigger than we thought. During fiscal 2014, execution and focus will be the drivers to establishing Acxiom as the clear leader in our industry. But make no mistake, as I have said before, we are still in the middle innings of our turnaround. The future appears bright, but the present requires a detailed focus on execution. I look forward to sharing our progress with you in the months ahead. Now I will turn the call over to Warren.

Well, thank you, Scott, and good afternoon, everyone. Before commenting on the fourth quarter and fiscal year, I'd like to again update you on our progress related to a few of our initiatives. Following that update, I will lay out our thoughts about where we're headed in fiscal 2014. First, our efforts to run a better business. We leave fiscal 2013 with a robust process in place to measure our business, hold managers accountable and get ahead of trends early. We have also established a long-term target P&L for each of our businesses and expect that our managers not just deliver on the current period, but incorporate initiatives today that will make next year's target possible, too. We believe that these fundamental actions have given us a solid foundation for the future. Next, we are essentially complete in our efforts to make each of our business segments operationally independent. Looking ahead to 2014, let me highlight a few things on which we will be working. First, we will be relentless in our drive to simplify and automate everything we do. As I mentioned in our last call, the customer always comes first, but every day we need to find a better way. This is a high priority for our engineering, delivery and IT teams. You can expect me to update you throughout the year on our progress. Next, we are building our pricing models for our new products. Further, we are also building our operational and back-end systems in order that we have a completely automated way of interacting with our customers and a seamless back-end for reporting and billing. Third, we are going to do a little plumbing. As we worked to build out our target P&L, we discovered that our product hierarchies in coding are a bit confused and inconsistent between functions. We've just kicked off an effort, the objective of which is to standardize all of our definitions and product coding across Acxiom. While there are many milestones associated with this project, we believe this effort will help us take another major step forward in our drive for clarity, accountability and simplicity. Finally, let me say that I'm excited about taking on this new set of responsibilities associated with our IT operations. As Scott mentioned, this is not new ground to me, as I've always been deeply involved in the operational aspects of the companies where I have worked. While it is our objective to name a CIO to oversee these functions, I can tell you there are 3 things on which we will initially focus. First, simplicity and role clarity. We want to make sure that we are working seamlessly with our partners in both engineering and delivery. Next, we will be separating out and centralizing our company's corporate IT function. Today, this is fragmented. We believe centralizing this function will result in a much stronger capability and higher service levels. Finally, we will continue to relentlessly focus on quality in customer service, coupled with a regular cadence of improved productivity. To my IT associates listening in, thanks for welcoming me to your team and thanks for all you do. Now we will discuss our results for both the year and the fourth quarter. First, a few highlights for the fiscal year. While total company revenues declined, U.S. Marketing and Data Service revenue was up 2% for the year. In U.S. Marketing and Data Services, revenue from our top 20 customers grew by approximately 9% and revenue for our top 100 customers grew 7%. Internationally, while we did not quite reach breakeven, we reduced our losses by 50% to $3.5 million. In China, our business grew by 18% and is now on a run rate that exceeds $20 million. Finally, in Brazil, we believe we have stabilized this business and positioned it for expansion. This year, we reignited our engineering efforts, and today have more than 200 people working on building our Audience Operating System. Our IT Infrastructure Management business expanded its margin to 10.6%, up over 200 basis points year-over-year. In total, despite our investments in new products, data and delivery, we were able to increase our non-GAAP EPS by $0.04 to $0.76. During the year, we repurchased $74 million of stock. Since the inception of our share repurchase program, we have repurchased approximately 10.4 million shares for a total of $140 million. Finally, we leave fiscal 2013 with a strong balance sheet and significant acquisition capacity. In summary, while we are not pleased with our top line performance, we leave 2013 with stronger customer relationships, a reinvigorated product development organization and a managerial cadence that we believe will help us run a stronger and more effective company in the years ahead. Now I'll discuss the details of our fourth quarter. I will be referring to the slide deck which was posted on our website, and a link was also included in our press release. Starting with Slide 3 and our summary financial results. Total revenue from continuing operations was $277 million, down 4% from last year. U.S. Marketing and Data Service revenue was relatively flat for the quarter, while IT Infrastructure Management and International Marketing and Data Services were down approximately 4% and 16%, respectively. Operating expense for the quarter was $257 million, down 3%. Adjusting both periods for unusual items, OpEx was $255 million, up approximately 1%. The increase in expense was primarily attributable to our investment in new products and added customer support. Excluding the impact of approximately $2 million of restructuring-related charges, non-GAAP diluted earnings per share were $0.19 in the quarter. This compares to $0.22 in the prior year. Finally, our current quarter results were impacted by an R&E tax credit of $1.4 million or approximately $0.02 per share. Now on to Slide 4 and our top line performance. U.S. Marketing and Data Services revenue was flat for the quarter. IT Infrastructure Management revenue was down 4%. This decline reflects a contract renegotiation and decreases in onetime project revenue. U.S. Other Service revenue, which includes our risk products and email fulfillment business, was $5.5 million, down from $9.7 million a year ago. This decline was a result of lower email volumes and the continuing transition of our risk business. For the quarter, International Marketing and Data Service revenue was $29 million, down approximately $5.5 million or 16%. There was no material FX impact in the quarter. Slide 5. For the fourth quarter, our company's operating margin was 7.3% compared to 7.8% in the same period a year ago. Excluding unusual items, operating margin decreased to 8% from 12.1% in the prior period. The decline in margin is due to lower U.S. Marketing and Data Service and IT Infrastructure Management margins. In the U.S., Marketing and Data Service margin was 11.6%, down from 17% last year. The decrease in margin is again primarily attributable to data and the investment in our Audience Operating System. IT Infrastructure Management margin decreased to 3.6% compared to 8.7% last year. The decrease was primarily the result of a contract renegotiation. Operating margin for International Marketing and Data Services improved to 6% compared to 3.8% a year ago. The improvement was a result of cost reductions. Now a few comments on Slide 6 and 7. For the quarter, free cash flow to equity was $42 million as compared to $103 million in the prior period. Excluding the proceeds from the sale of the background screening business, free cash flow to equity increased $13 million on a year-over-year basis. On a trailing 12-month basis, free cash flow to equity was $56 million compared to $203 million in the prior period. Excluding the proceeds from the sale of the background screening business, free cash flow to equity decreased $73 million. Reductions in free cash flow for the year were primarily attributable to increases in cash taxes along with other changes in working capital. During the fourth quarter, the company repurchased $9 million of stock. Since inception of the share repurchase program, we have retired approximately 13% of our common stock for approximately $140 million. Our total share repurchase authorization is $200 million. We ended the year with a strong cash position, an improved leverage profile and a strong balance sheet. Now on to guidance. Let me start out by saying we are incredibly excited about the year ahead. Speaking for our entire CEO staff, we have planted some important seeds this past year, and we look forward to reaping the benefit of the changes which have been made. That said, there are a few things we ask that you keep in mind. First, it's possible that we will make tuck-in acquisitions this year. Some of these may be focused on technology which would accelerate our progress in bringing the Acxiom audience platform to market. Given these acquisitions may not come with revenue or earnings, they may be near-term dilutive to our guidance. Next as we mentioned in our last call, we are at a period where we are clearly feeling the impact of investments. Our investment spending ramped late in fiscal 2013, and we are spending ahead of revenue. As a result our comparisons in the first half of the year, in particular, will be tough. Specifically, we expect down margins in Q1. Further, our new product launches will be late in the fiscal year and revenues will build slowly. Overall, we expect revenue in Marketing and Data Services to be up for the year. However, in our Infrastructure Management segment, we expect revenues to be down. All that said, for the year, for our company, we expect revenue and diluted earnings per share to be roughly flat year-over-year. Thanks for joining us today. On behalf of all my colleagues, we look forward to updating you throughout the year. Operator, we will now open the call to questions.

[Operator Instructions] Our first question comes from Carter Malloy with Stephens.

So first is on the Marketing and Data Services slowdown in the U.S., can you give us a little more detail there? And then maybe also behind that a little more detail on the pipe. You said it was up 30%. Does that have any big whales in there that really skew that or is that just across the board?

Carter, I'll start up with where we are for the fourth quarter. I wouldn't look at the fourth quarter so much as a slowdown as we had some big onetime revenues in Q4. We would certainly expect -- and I think as both Scott and I have alluded to, we are looking to grow revenues and we're not satisfied where we are, but the year-over-year comps were impacted by some big onetime project revenue that we had last year. With that, Scott, I'll turn it to you to maybe comment on the pipeline a little bit further.

Yes, on the pipeline, you had mentioned the 30% year-over-year, I would say there aren't any big whales in there. I actually feel real good about the pipeline quality versus a year ago. I think the quality of the stuff that's in there is much more realistic. And we apply a lot of probably lower weights to what's in there. That said, I guess I would reemphasize that we're playing for the long term here. And our products are still in beta and final pricing hasn't even been finalized for some of this stuff. Our challenge is going to be converting what's in the pipeline into actual contracts. And although our products are going to launch over the course of the year, I think the impact to our revenue is really going to see -- be seen in the latter half of the year. As I'm sure you've seen time and time again, and we've all experienced, the pipeline has to translate into revenue. We don't give a whole lot of weight to early stage conversations. It never happens as quickly as you'd like. And above all, what we are really focusing on is that you got to have a great product. We only have one chance for an amazing client experience, so our focus is on getting the products right. The other thing I would say is that, with regards to the pipeline, we don't have any partner or apps revenue in there. This is kind of the historical kind of direct marketer revenue that Acxiom -- has historically comprised our revenue base.

Okay. And then can you speak a little bit, we all got to see it on the Analyst Day, but the customers saw it the next day. Can you speak to the reception you've had to the Operating System idea and functionality and if -- and how many customers you have in there that are actually trying out the system or paying you revenue for the system? Just where we are in the progress of those products actually getting out there in the wild?

Yes, oh, wow. Great question. I'm glad you asked. I will tell you the stuff that you saw in New York, Carter, is already in some respects outdated. So since we talked in New York, we've actually built at least 3 more new apps that we're getting ready to release into beta. One is essentially an automated offer optimization, such that clients who have multiple client segments, customer segments can better fine-tune specific marketing offers, the best one for each segment. Second is what -- we're working on the nomenclature of namings of all this stuff, is what we're calling Portrait Analysis. And what it allows the client to do is take all of the data that they've historically collected, plug it into our system and then have immediate turnkey insights into who their customers are, what kind of offers are going to appeal. It just allows them to get smart in a hurry. And then the third thing that we're getting ready to release is an enhanced cross-channel planner with even more segment granularity than what you saw, so you can really go down to specific audience propensity segments and plan some of the media campaign in that. We've also, since New York, made some big strides on the user interface. A lot of what we need to do is make big data beautiful, and so it's about data visualization. I will tell you that the client feedback for both the stuff that we showed the world in New York and then also the things that we've done since then, have been very, very positive. I think kind of as of today, we now are in process with over 15 betas for the Audience Operating System. We have many more conversations underway. It's probably our top sales prospecting priority. And in addition, it's not just direct clients, but obviously, our other focus is on making the data usable by expanding the amount of partners that a client can use that data with. So I think I mentioned earlier, we've added 6 new partnerships in the last quarter. That brings our tally to over 40. And I would say, the feedback there has also been very good. I would say that we're becoming far better known and respected in both the digital and enterprise software communities. So a lot of good things there. But again, I think it's worth mentioning, it's important not to get out over our skis. That potential now needs to translate into contracts and revenue. And that's the secondary focus to getting the ecosystem and the products released and ensuring that they get a lot of traction with clients and partners.

And I assume, sorry to be long here, but I assume that given your flattish guidance that you're not assuming much, if any, of that revenue comes into the model from new products or even from that traditional pipeline you alluded to earlier, is that fair?

I'd look at it 3 ways. We expect ITO to be down for the year. Overall, we expect Marketing and Data Services to be up, and we expect a slow ramp in revenue for our new products given the fact that they will launch in the back half of the fiscal year.

Our next question comes from Todd Van Fleet from First Analysis.

Just looking at the business, I guess, more simplistically, there's a lot of moving parts and pieces, a lot of different initiatives going on. I'm just trying to take a look at the company kind of from a higher level here look at the fundamental performance of the 3 different segments individually and just try to get a big picture understanding of where your heads might be at with respect to each of the businesses. It sounds like there's more segmentation, I guess, coming down the line with respect to separating IT, the backbone essentially I guess between management -- or Marketing and Data Services and the IT management. But I mean, the fundamental performance of the smaller business, risk management and so forth, obviously underperforming or at least not performing probably up to your desire there. And then IT management, it seems very difficult to kind of call the margin profile for that business over the longer term, and we expect it to shrink now in the new fiscal year. So just want to think about strategically how you're thinking about the 3 segments and at this particular time while the new product initiatives and everything is going to take a while to develop and things aren't quite soup yet, so just trying to bring some simplicity I guess to the investment story.

Now let me take a stab at that and I'm sure, Todd, that Scott may want to comment here. But I'll try to give you my perspective on each of the segments. And let me start with ITO or the infrastructure management business. First of all, I think, hats off to Kevin and his team, they've had a spectacular year where actually our margin was up over 200 basis points. This quarter, the margin was negatively impacted, principally as a result of a contract renegotiation, which impacted in-quarter revenues year-over-year, and it also impacted our margins. Largely, but for that change and a couple of other project revenue related things, the margin characteristics would not have been down year-over-year for that business. Further, I would tell you, as we look at IT, as we look at the segment for the coming fiscal year FY '14, I would expect the margins to actually improve. So not to wane, but to go up year-over-year. Even though revenues will be down, we would expect the income contribution on an absolute basis within noise to be relatively flat. So the one thing Kevin and his team have done is really stabilize the income side of this business. And now we're working, as Scott mentioned, whether it's with the PrivateCloud or other things, to just really take advantage of this base of capability that we've had. So again, I think a good job to that team. Let me talk about other for a minute. Other is really 3 pieces. One is the risk business, which we're winding down and is now pretty much completely wound down. So that will really fall out into some part of the other segment. Included in there then is really 2 things. There is our fulfillment business in the U.K., which is actually doing quite well and very stable, growing in FY '14, and we would expect its income contribution will grow as well. The second piece of it is really our email business, which is here in Foster City. The great -- the kind of the big picture for that business, it contracted this past year and is now on a rebound. So we have had a couple -- and most of this stuff we just can't mention or talk about, but we've had a couple of very significant client wins and are doing some things that can truly make this email business part of our app ecosystem, sitting on top of the Audience Operating System. Because email will clearly be an application that can snap on to the Audience Operating System and provide a very, very valuable and capable -- a very, very valuable and important service to our customers. So I would call email a work in progress, but something that we believe can have an important part of our future here at Acxiom most certainly. So that's the other segment. Marketing and Data Services is really all about, one, coming back to the priorities that Scott mentioned, it's about coming to work every day and finding a better way and driving productivity into everything we do. Two, it's about investing in our future. And on top of this great -- or underneath, I think, is probably a better way to put it. Underneath this wonderful service capability that we have with these fantastic, big, needy clients is now really doing exactly what Scott said, it's bringing the Audience Operating System to bear. Where they can truly market with precision at scale across all channels and across all devices. So the thesis for the Marketing and Data Service business is about productivity. It's about drive. And it's also -- it's about investment in really the future in building something that we believe nobody else in the world has done. And then finally, as it relates to Marketing and Data Services. International is about a turnaround, and we've done well in some parts of that turnaround, in other parts, not so well. China is growing very strongly and is really a leader in helping us in the development of the Audience Operating System. Brazil looks to have stabilized. Where we've got some work to do is in the U.K. and in France, and we're just not as far along as we need to be. But we believe our teams know what is expected of them, we believe they know what to do, and now we have to go about executing on that front.

That's real helpful, Warren. Just to back up a little bit on what you'd said on the margin for IT management or the ITO business. You said that you expect the margin to improve. Is that on a sequential basis as well? I mean, we had a bit of a dip -- or not really, I guess we had a bit of a dip in the last half of the fiscal year last year. This year, it's really in Q4. I mean, are you expecting a rebound here in Q1 for the margin for that business?

Sequentially, absolutely. So relative to where we are for Q4 to Q1, it will absolutely rebound. I would also expect candidly year-over-year it to be worst-case flat and more than likely up a little bit.

And then just one more on the SG&A line, we saw a step up there. Are we seeing kind of a new level in absolute dollar terms there? Or were there some onetime issues in the quarter for SG&A?

A couple of small onetime things. Maybe a couple of million dollars of the increase. The other change in the SG&A line is really just related to our management structure and an increase in overall incentive compensation accruals. So that level, I would sort of roughly ballpark for SG&A this level going forward for your model.

Okay. So on compensation accruals though, was there a true-up in Q4 this year? And now you expect to maybe accrue a little bit differently... I'm sorry...

I would say marginally a true-up, but nothing that was material.

This concludes our Q&A session for today. I'll turn it back to management for closing remarks.

Great. Let me just jump in and thank everybody for taking the time today. It's indeed our pleasure to share this year and this quarter with you, and we absolutely look forward to sharing our results in the quarters ahead. Thank you very much.

Thanks, everyone.

Ladies and gentlemen, thank you for participating in today's program. This concludes the program. You may all disconnect.