LiveRamp Holdings, Inc. (RAMP) Q1 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Acxiom Fiscal 2015 First Quarter Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Lauren Russi, Director of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome. Thank you for joining us to discuss our fiscal 2015 first quarter results. With me today are Scott Howe, our CEO; and Warren Jenson, our CFO. 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. 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 to 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. At this time, I'll turn the call over to Scott Howe.

Thank you, Lauren. Good afternoon, and thank you for joining us today. The last 90 days have been trying for all of us. When we last talked, we shared our view of the year and laid out financial guidance that many found disappointing. Our share price has declined, which is also disappointing to us all. But throughout, our confidence in our future and commitment to the path forward has not wavered. We believe we have many terrific things going on at Acxiom, and where we have challenges, we have plans in place to address them. We continue to believe that we are building a stronger company, step by step, day by day and quarter by quarter. Warren will walk through our financial performance for the quarter in a few minutes, but let me reassure you that we continue to believe in our guidance for the year and see many reasons for optimism. Nearly 3 years ago, I first shared with you a 3- to 5-year vision of the Acxiom we would one day become. I talked of focusing on Marketing and Data Services as our north star. I spoke of accelerating our innovation to the market and delivering better results to our marketing clients. I've talked of transforming our core business that was largely built around ad hoc custom services to one in which continued customization spurred innovation and standardization around SaaS-based offerings. And throughout, I've talked of our continued efforts to simply run a better business by standardizing our processes, streamlining our cost structure and eliminating bureaucracy and waste. Transformation is never quick or easy, but rather is always a step-by-step journey. So I thought today it might be useful for me to revisit some of our top priorities, talk about the progress we've made and also the challenges on which we are still working. Core growth. Let me start by focusing in on our Marketing and Data Services top line growth. When we last spoke, you'll recall that we provided guidance suggesting that top line growth for M&DS, excluding AOS and LiveRamp would be down. At that time, I viewed this softness as a problem of our own making rather than anything structural or systemic. I continue to believe this, and we've been busy making the necessary course corrections. First, we've strengthened our leadership. Earlier this month, Nada hired former American Express executive Kerry Hatch to lead our sales operations efforts. I'm a big believer that what gets measured gets done, and sales operations is the discipline of maintaining sufficient pipelines, measuring throughput, forecasting future results and ensuring account planning is performed across the organization. Kerry is a world-class executive with a solid track record of transforming and leading successful sales operations. After just a few weeks on the job, Kerry has identified a handful of priorities that I believe will make a big difference. Second, we put a far stronger emphasis on account planning. In our forecasts, we saw weakness in what we would characterize as upsell activity, the ability to deliver ad hoc solutions that supplement contracted revenue. These upsells are directly tied to our ability to identify client pain-points and deliver new ideas throughout the year. Over the past quarter, we've strengthened our account planning for nearly every major client and for every product group: marketing database, data consulting and analytics, email and AOS. Third, we are extending our use of the specialist/generalist model to build upon the success we have had securing major foundational customers over time. After experimenting with the tiger team specialist group in AOS with some success, we have created a similar team of 6 data product specialists. This group is charged with evangelizing the newest data sources and predictive models that serves specific industries, creating the types of packages that improve our customers' ROI and helping the sales teams be more effective in telling our powerful data story. We've also expanded our inside sales group to focus on outbound prospecting and small- to mid-sized data deals. Fourth, we've added to our sales force. We welcomed 13 new hires to the sales organization in Q1. Finally, we've placed increased focus on the top of our pipeline. Our marketing and data services pipeline is up 7% sequentially, and we closed a number of key deals in the quarter, including new contracts with Zürich-based ACE insurance group and Australia-based Seven West Media Group, as well as large renewals with Virgin Media, First National Bank of Omaha, a top 5 credit card issuer and one of the world's largest communications companies. That said, let me pause and acknowledge that this continues to be a work in progress, accelerating our top line growth is our utmost immediate and long-term priority. And we are doing the right things. But the ultimate measure of success won't be how hard we're working, but rather the revenue growth that we hope to achieve. Our outlook for AOS and LiveRamp integration. Next, I will provide an update on AOS. On our last call, I reinforced our vision of a new category within the industry. We live in a world in which data can be used to drive better marketing decisions, but 3 fundamental disconnects occur: marketers cannot access all the relevant data; they can't connect all of their disparate data to form meaningful insights; and they cannot use these insights to power the many tactics they utilize. This is a connection problem, and we believe that, together, AOS and LiveRamp foster more connections between advertisers, agencies, publishers and applications than any company in the world. We're pleased with our progress over the past quarter with AOS, but continue to believe we can do even better. Please turn to Page 3, where we have created a new set of AOS adoption metrics that we intend to share on a quarterly basis. Over time, as the business gains greater maturity, we will likely add more metrics. We signed 7 new AOS deals in the quarter with several industry-leading companies, including a large, multiyear contract with Carrefour Media. Based in France, the Carrefour group is the leading retailer in Europe and the second largest retailer in the world. Carrefour will use AOS to help optimize its media buying and improve customer engagement. It will also become a publisher partner. We are very optimistic about this relationship and are excited to work with Carrefour to deploy the first full AOS platform in Europe. We ended the quarter with 48 customers using some element of the AOS platform, a sequential increase of 20%. Notably, this figure excludes 81 agency deployments. Our AOS pipeline continues to grow, and we exited Q1 with over $75 million in qualified pipeline, which represents an increase of 25% from the prior quarter. Now it becomes a matter of converting that pipeline into bookings, which the changes I outlined above put us in a better position to do. AOS powered more than $28 million in gross media spend in Q1, representing an 87% increase over last quarter and a 40% increase over Q3 of fiscal 2014. We continue to expect a ramp in gross media spend throughout the fiscal year, and this solution continues to generate results for our customers. We are starting to package some of these in the case studies. Just recently, a major automaker teamed with Acxiom to use its off-line data and our Automotive Audience Propensity Models to develop highly targeted audience segments on Facebook and Twitter. The campaign generated 4x the click-through rate for Facebook and unprecedented CTRs for Twitter. Further, the cost per click was the lowest of any initiative on Facebook and Twitter for the advertiser. As we build our client success stories, we need to keep educating the market on the power of using off-line customer data and digital marketing and continue to drive spend through the data Safe Haven. We are expanding our partner ecosystem and exited Q1 with over 60 AOS partners. With LiveRamp, this number becomes greater than 100. We are now partnered with 4 of the 5 top mobile display publishers and all 4 of the major cable and satellite providers. Through our TV partnerships, we are able to reach approximately 40 million households and close to 88 million individuals. In fact, we have run over a dozen beta-targeted television campaigns. And finally, an update on our Starcom partnership. Since the announcement of this partnership last December, we have successfully trained and enabled close to 400 Starcom employees to use AOS. I am pleased to share that we have onboarded over 80 Starcom clients into the AOS platform. This allows SMG to use Acxiom third-party data to more effectively target audiences online. The next step for these clients is to combine their first-party data with Acxiom data to enable a more complete view of their audiences and ultimately deliver even better results. A handful of SMG customers are starting to do this, and our pipeline of on-boarding opportunities continues to grow. As you can see, there appears to be a lot of positive momentum with AOS, but we're not without challenges. As with any new product, AOS is being refined according to client feedback and how we're actually seeing them use the product. We believe we're creating a new category where off-line and online data are integrated and connectivity is paramount. So there is a lot of education involved. While our GMS spend is accelerating, we have work to do to ensure installed base translates into recurring subscription revenue over time and, above all, as we transform pipeline into booked revenue, it will give us a needed boost in top line growth. Finally, I'd like to update you on the LiveRamp acquisition, which was completed on July 1. With the transaction now complete, we are laser-focused on ensuring we integrate LiveRamp in a manner that allows us to fully capitalize on the opportunities it brings us. We are in the process of introducing LiveRamp to our client base, and to date, we have made introductions to over 20 of our top customers. The feedback we've received from both customers and partners has been astoundingly positive. And since July 1, LiveRamp has added 8 new customers. I think we're off to a good start here, but our product and sales integration efforts are still in process and will likely span the entirety of Q2. Focus in running a better business. As I just mentioned, our LiveRamp integration efforts are now underway. While there are certainly top line synergies we are pursuing, we also believe we will find sizable efficiencies. For instance, both companies were contracting with data partners to fuel effective online to off-line matching. By eliminating the duplication, we have already removed what will amount to approximately $10 million in annualized costs. We believe that this is just the tip of the spear. Over the next 45 days, we will continue our integration efforts and ultimately emerge with functionality that marries the best of both companies' products, a much broader set of application partners and an organization that, together, is more efficient and able to innovate faster. Warren will talk more about our various initiatives to build a better business in a minute, so let me switch gears to our portfolio efforts. During the quarter, we sold our U.K. call center business, 2Touch, to increase focus on the growth of our core database business in Europe and the global expansion of AOS and LiveRamp. Since we launched our portfolio initiatives we have: divested our background screening division; shuttered our perpetually unprofitable European paper survey business; and now divested 2Touch. We believe our ongoing efforts on our portfolio and running a better business are critical to transforming us to the more streamlined, profitable and innovative company we believe we will be. Stability and continuity are our goals and we are taking steps to get there. Let me conclude by thanking all of you for your patience and support in our journey. We understand we still have a lot to do and much to prove but remain optimistic and excited about the opportunities that lie ahead. With that, I will turn the call over to Warren.

Thank you, Scott, and good afternoon, everyone. Before jumping into the quarter, I would like to again update you on some of our initiatives and, in that context, provide additional color on our onetime expenditures. In addition, I will share a little more detail on our LiveRamp integration. Running a better business has been a top priority and one against which we've made a lot of progress. In fiscal 2014, we took a series of steps to streamline our management structure, transform the way we work and ultimately improve our operating leverage. As a result of these actions, we were able to dramatically simplify the business and reduce our annual expense run rate by more than $30 million. The separation of our business units is now complete. During Q1, we announced the sale of our U.K. call center operation, 2Touch, to focus more specifically on our marketing and data service business and the global expansion of AOS and LiveRamp. And on our last call, we shared plans to remove a longtime drain on our financials by exiting our European paper survey business. All of this, however, has required significant onetime investment. As an example, to achieve our $30 million run rate savings, we spent approximately $4 million in outside fees in addition to $10 million of onetime severance costs. A hefty onetime spend, but an obvious immediate payback and strong NPV. We also spent significant amounts to detangle Acxiom and to separate ITO. Without these expenditures and focus, this would not have been possible. Rest assured, we don't take these expenditures lightly. I would now like to walk you through our onetime expenses for the past quarter and then share what we expect in terms of returns and payback. In the quarter, we had roughly $19 million in onetime charges and outside spending. None of these costs outside of the severance benefits are associated with Acxiom headcount in any way. Once these projects are complete, the spending goes away. That said, Q1 was a big quarter and should represent a high watermark as several big initiatives were in full swing. Here's a breakdown of the $19 million. Restructuring headcount reductions and facility closures accounted for approximately $7 million. This included the exit of the European paper survey business and severance associated with headcount reductions. Workday. Roughly $4 million was outside spending associated with our Workday implementation. This project replaces our outdated legacy financial and HR systems with a state-of-the-art SaaS platform. We expect this project to be complete by our fiscal year end. Separating ITO. This quarter, we spent approximately $2 million. The bulk of this spend was tied to the further refinement of our intercompany agreements and accounting, legal and auditing services. Next-generation network and infrastructure. This is about redefining the Acxiom technical architecture and upgrading our infrastructure. In the quarter, we spent roughly $6 million. We want to do things one way, one time and in a highly secure and scalable way. So what's the payback? Please turn to Chart 4. This chart summarizes what we have spent to date, what we expect to spend in the remainder of FY '15 and some of the benefits we have realized and expect to obtain. Do we have a lot on our plate? Absolutely. Should we have only taken 1 of these projects on instead of 5? A resounding no. The stakes are too big and the foundations too important: standard, simple and reliable, automated and efficient and secure. In summary, we in no way take these onetime expenses lightly. It's real money. At the same time, we are 100% committed to using these investments to create long-term shareholder value and redefine our future. LiveRamp. As Scott mentioned, the transaction was completed on July 1, and we're right in the middle of integration. While there is a lot of work to be done, our teams are working well together, challenging each other where appropriate and already seeing some interesting opportunities to drive value. Finally, we are working through purchase accounting. Net of contractual adjustments, our net cash out for the acquisition was $266 million. Today, Acxiom's cash balance stands at approximately $110 million. Now let me turn back to our first quarter results. For the quarter, total revenue was down approximately 6% year-over-year. Excluding the impact of the lost ITO customers and our European restructuring, revenue was roughly flat compared to last year. Marketing and data service revenue was down slightly compared to the same period last year. M&DS margins were down 130 basis points due to higher year-over-year R&D expense. On a GAAP -- non-GAAP basis, diluted earnings per share were $0.13 compared to $0.19 in the prior year. Before jumping into the detail, let me touch on a disconnect between our results and consensus. Please turn to Page 5. On the top line, your models were spot on. However, on the bottom line, our operating plan didn't match up with your estimates. In Q1, total expense, excluding unusual items and stock-based comp, was $223 million, a $10 million sequential decline from Q4 of FY '14. As best we can tell, consensus estimates assumed close to a $20 million sequential decline. This appears to have created the difference. Lastly on this topic, we want you to know we are ahead of our internal bottom line operating plan for the year and are reiterating our full year guidance. Nothing has changed since we last spoke. Now the quarterly detail. Starting with Slide 6, our summary financial results. Total revenue was $242 million, down 6% compared to the same period a year ago. Marketing and data service revenue was roughly flat for the quarter. IT infrastructure management revenue was down, as expected, approximately 20%. Operating expense for the quarter was $247 million compared to $234 million in the prior period. Excluding onetime items of approximately $19 million, OpEx was down 3% year-over-year and $10 million sequentially, primarily due to savings associated with our cost reduction program. GAAP diluted loss per share from continuing operations was $0.08 in the quarter. Excluding unusual items, diluted earnings per share were $0.13 compared to $0.19 for the first quarter of last year. Slide 7. U.S. marketing and data service revenue was slightly down for the quarter. International marketing and data service revenue was also slightly down year-over-year. Our year-over-year comps in international were negatively impacted by roughly $2 million as a result of our exiting the European paper survey business. And finally, as I mentioned, IT infrastructure management revenue was down. Slide 8. For the quarter, our operating margin, excluding onetime items and noncash compensation, was 7.9% compared to 10.4% in the prior year. U.S. Marketing and Data Services margin decreased from 10.2% to 8.3%. This decline is primarily due to increased engineering investment, partially offset by savings associated with our cost reduction efforts. International losses decreased to $3.3 million, mostly due to performance improvements in Europe, Asia and Australia. ITO margins decreased from 15.5% to 8.5%, driven by lost revenue from terminated contracts. Now onto Slides 9 and 10. For the quarter, free cash flow to equity was negative $25 million compared to negative $5 million for the prior period. The decrease was mostly due to cash restructuring and business transformation expenses, coupled with increased capital spending. On a trailing 12-month basis, free cash flow to equity was $56 million compared to $70 million for the prior period. Cap software costs, which were mostly AOS-related, were roughly $5 million in the quarter. Total capital spending was $26 million, up $9 million year-over-year. The increase was due to investment in our next-generation network and infrastructure, facility moves and initial CapEx associated with our Exelon contract. We did not repurchase any shares in the first quarter. Given all we were working through on the M&A front, we felt it best to pause our buyback activity. We remain committed to the program and expect to resume share repurchases this quarter. Since inception, we have acquired $193 million in stock out of our $250 million program. To date, we have retired approximately 15% of our outstanding common shares. Now onto guidance. Our guidance excludes items including: onetime separation and transformation expenses, acquisition-related charges, restructuring and severance costs and stock-based compensation. Second, as our 2Touch announcement indicated, our previous guidance assumed 2Touch would contribute revenue of approximately $36 million and earnings per diluted share of approximately $0.02. Please turn to Pages 11 and 12. These charts are the same as we used last quarter but updated for the announced 2Touch disposition. Onetime expenditures. Over the next 3 quarters, we expect onetime expenditures to be approximately $20 million and to incur additional restructuring charges of approximately $10 million. In Q2, total expenditures should be roughly $12 million. One caveat though, to the extent we find opportunities for cost takeouts, we will take them providing there is a compelling payback. This could result in additional charges. CapEx. We are lowering our CapEx forecast for the year to approximately $100 million from our previous estimate of up to $125 million. While this could change, we feel our normalized CapEx is somewhere in the range of $75 million to $85 million. Looking at Q2, it's going to look a lot like Q1. We expect overall margins to be down roughly 300 basis points. However, this drop should be entirely ITO-related. Finally, let me remind you that starting in Q2, our GAAP results will be impacted by acquisition-related charges associated with our LiveRamp acquisition. Net and adjusting for 2Touch, we maintain our full year revenue guidance of flat to up 4% off of our adjusted revenue base of $981 million. And we are confident we are on track to meet our full year adjusted EPS guidance of $0.73 to $0.83. Before opening the call to your questions, let me briefly summarize. Our integration of LiveRamp is off to a solid start. While we acknowledge FY '15 is a year of transition and heavy lifting, our projects and initiatives are critical to our future and being done with solid business cases in hand. And we reiterate our full year guidance and our confidence in our outlook. On behalf of my colleagues, we look forward to updating you throughout the remainder of fiscal 2015. Operator, we will now open the call for questions.

[Operator Instructions] And our first question comes from Dan Salmon from BMO Capital Markets.

And for the commentary, Scott, around the sales force and everything you've been doing there, and that's what I wanted to follow up on. Could you maybe just help us a little bit on how the sales force, at least in broad strokes at least, how it's organized? Are you still largely having teams that are focused on certain offerings or products linked together by account teams? Is there a vertical focus around it? But I just -- that's something a lot of people have been asking about lately is just how the team is set up or, more importantly, how you envision it being set up?

Yes, Dan. So right now, and I think I have these numbers right. We have within Acxiom about 198 salespeople. And that number excludes -- it excludes LiveRamp. If you think about that group, it is organized in what I would call a hybrid fashion. So there is a geographic element to it where we organize ourselves into West Coast, Midwest and East, but overlaid against that is an element of industry specialization. So for example, many of our Eastern sales reps and our East Coast GVP has a strong expertise in financial services. Likewise, in the Midwest, our group Vice President has a strong expertise in retail and packaged goods. In addition, we've overlaid against that kind of -- think about the vast majority of our salespeople as account quarterbacks, so to speak. They own the client relationship and we've begun to overlay a degree of specialization on top. So for example, the AOS sales force represents a part of that specialization. In addition, the data sales force that I just mentioned, those 6 specialists represent another degree of specialization. And the way that we operate that is, like any generalist/specialist sales force, we provide dual quotas such that, for any given opportunity, a generalist has a strong incentive to bring the sales specialist into the call to help close the deal because when they do, both of them get compensated. I should mention, finally, that this specialist overlay is really a new thing for Acxiom. Historically, we've had some degree of specialization, but really it was more in sales support and marketing. It was not until our AOS rollout of last year that we really started to experiment with a specialist model where we gave folks additional quotas. And we think that largely tracks with how the industry is working today: that in the world of increased media fragmentation, where clients are demanding increased specialization, the generalist/specialist model allows us to give them the best of both worlds.

That's great. That's really helpful. Would you quantify -- you quantified the number of sales folks on the data team, would you quantify the AOS team?

Yes. And let me just find those numbers because I know I just saw them. So within AOS, let's see. I'm just going to do a quick tally here. For all intents and purposes, the way I would split that is we have 8 folks who are spending a big chunk of time with clients and doing most of the selling. We have an additional 20 people on that team who I would characterize as more publisher-facing or biz-dev facing. The publisher-facing guys do the aftermarket support for our major premium publisher partners. And then, finally, kind of anticipating the other question you might have is, if I look at LiveRamp, I would characterize kind of the apples-to-apples number as 12.

That's great. And then just one quick follow-up. Are there any other call center businesses, either domestically or other markets internationally, which you may look at divesting as well?

We do have -- so no call centers, at least nothing significant. We do -- I should say we do have an inside sales call group, but that's a really different thing. And I should also say that's something that we've started recently. I mentioned that in my script, having a group of folks that help us identify new leads that can go sit in the top of our funnel and then also, they have done a real nice job -- under the leadership of a guy named Jeff Standridge, done a real nice job of starting to grow our data sales efforts through that call center.

But in terms of anything that would be similar to 2Touch?

No, no.

And our next question comes from Todd Van Fleet from First Analysis.

Just want to start with some accounting-related questions. So as a look at Page 5 of the press release, where you talk about the unusual items, I'm just hoping you could square that back to where they show up in the P&L, Warren, if you could help us out there.

I'd be happy to. If you look on the face [ph] of the P&L, in SG&A, which for 20 -- in SG&A, it's about $12 million and then all of the restructuring charges show up in gains, losses and other. So think of the division as being transformation-related activities and also ITO separation showing up in SG&A. And of note, you can see, Todd, the effects, I think some of our cost reduction because, if I'm not mistaken, I believe SG&A, excluding those amounts, was down about 16% over the course of the year. And then again the restructuring-related things like severance, the European paper survey business all show up in gains, losses and other.

Right, that's helpful. I might want to circle back with you on that one after the call. But I guess I'll move on to AOS. So I'm assuming that given there's no change in the revenue or the EPS guidance that you're probably still expecting the contribution from AOS, revenue contribution from AOS and LiveRamp, to be in the $50 million to $60 million range this year.

That's correct.

Okay. And I'm just thinking about that guidance just in the context of Carrefour, which seems like it would be a pretty significant relationship for you for AOS. So I just -- I want to ask, it doesn't seem like the Carrefour relationship would necessarily be included in the pipeline at this point given the timing of the announcement. I could be wrong about that, but could you verify whether that's the case and then whether or not that relationship was considered in the context of the $50 million to $60 million. And then I have a follow-up on that.

So the answer is part of the Carrefour relationship is in our numbers or will be in our revenue going forward. So as an example, anything related to subscription is in our pipeline and in our numbers. Then there's the second element of the -- any revenue that comes through GMS, and that we do not include in our pipeline but is certainly included in our estimates. Obviously, we were pleased that the GMS jumped up to $28 million this quarter. The second thing that I would say is another plus is that, this quarter, we had about $1.5 million -- it's a small number, but it's a start -- of GMS in Europe associated with both our Facebook and eBay relationships. So as we contemplated, then, to your third point, what -- as we built our guidance, did we have GMS for Carrefour included in our guidance and in our estimates? No, we did not. However, let me just very strongly advise you, don't take your estimates up for that. Nonetheless, it's obviously a very significant relationship and we're also pleased to be underway in generating GMS-related revenue in Europe.

Right, right. That's great. So the -- just thinking about how long it would take to quantify, for you guys anyway internally, to think about what kind of opportunity that brings. Because I imagine -- maybe we can get into a little bit. So you have the opportunity with Carrefour spend, that is the amount that they spend on advertising every year and having that run through AOS, but then there's also the element of their partners, their CPG companies, their manufacturers and so forth, their retail partners that pay them for placement in store, in mailers and what-have-you. So I'm just trying to think about the quantum of the overall opportunity as you guys see it. And then if you haven't really identified it to this point or haven't really been able to quantify it, how long do you think it's going to take you to really kind of quantify it?

Yes. I'll jump in and try to correct, perhaps, sins of the past in as much as, if I've learned nothing through the AOS rollout and indeed every product rollout I've ever been involved with in my life, it's that things always take longer than you would anticipate. There are always unforeseen product gaps or repayment of the kind of technical deficit as you do implementation. And that, if you approach an implementation with an eye towards building a great, long-term partnership as opposed to maximizing near-term revenue, you have a much greater chance of being successful. When I think about the things that I'm most excited about that we've made some real progress on over the last 6 months at Acxiom, I look at things like Facebook, where the seeds that we planted a year ago are now starting to generate some meaningful GMS gains, particularly through their self-serve interface. Likewise, at Starcom, we've taken a very methodical approach and we've been very cautious in terms of estimating any kind of revenue ramp for that because we want to get it right. So we've done a lot of handholding and educating. Right now, we're working with them. We're partnering to give them advice into what data, what propensity models, what client segments they ought to launch as they ramp up their media buys. All this to say is Carrefour is a partnership along those same ranks. We want to get it right and so I think, realistically, you're not going to see the needle move for that this year, rather you'll start to see that ramp next year and beyond. But we think it is a really important partnership, not only because of what it can become but also because it represents our first full-scale AOS platform deployment in Europe, and that's a milestone in and of itself. We believe if we get that right, other European clients will follow.

I could add on that, Todd, just to build on what Scott said. The Carrefour team was actually here in Silicon Valley with us several weeks ago. And one of the things that they are doing, which is exactly what Scott is saying, is they're out learning. So they spent a day with Facebook, they spent a day here with Phil and our technical team, and we heard about their plans and how they are thinking about things. They believe in data, they believe in the power of onboarding and also in the power of AOS, but they're going to very methodically go about their work. That's exactly what they should do, and we'll be right alongside them all the way.

And our next question comes from Bill Warmington from Wells Fargo.

So I wanted to just start off by asking what drove such a strong rebound in the gross media spend? Did you guys change...

Yes, Bill, it's 2 things, but I'd put the emphasis on the first. I'd say, above all, it's just, quite frankly, the passage of time. That as we roll these products out, there is a natural, call it an S-curve kind of adoption. And as marketers try things like Facebook, they will learn how it works and they will scale it, if it works, over time. And so what we have particularly seen on the Facebook front is that marketers are trying data-driven media purchases on Facebook. It's succeeding. And as it succeeds, they are either expanding their buys or word-of-mouth is spreading to other advertisers who are trying it. Second is I got to give a call out to our own sales force. We were very disappointed in our GMS results last quarter, and so we made that a focus of education for our sales force and Nada made it a focus. She even put in place a sales contest internally, and that got our entire sales organization more focused in on what could be done. We supplemented that with some case studies because now that we've been in the market for a while, we're starting to collect data on what's working. That allows us to evangelize it more effectively to our sales teams. But I will say we got a lot of work to be done there because, although we seem to be going in the right direction on Facebook in particular, we need to duplicate that success with all of our online display publisher partners, and then also really put a push in the coming quarters behind extending kind of the online display use case to other use cases as well, both media spend and other types of ways to use data.

Bill, I could even add maybe a few things on top of what Scott said that might be helpful here. The one thing that we know is that, if you know how to use data in your campaigns, it works. So Scott said this 100 times about the more you know, the better results you're going to generate. What we also know is, and we've really heard this too from our colleagues at LiveRamp, is it takes practice. And what we also know is that people aren't really used to using data in this way in order to run their campaigns. So we're doing a lot of training and education in helping people to understand how better to use data. What we don't want is we don't want people to do a single campaign. What you want to do is you want to really embark upon a program that says, "I am going to take the information that I have. My first-party data, third-party data. And I am going to constantly refine how I think about it, how I work it in my results." And we're confident, if you do that over time, you're going to get a great result on what you want, but it definitely takes practice. And then the final thing, and this comes a little bit out of our LiveRamp integration, but we know it, too. One of the things that LiveRamp has done a great job with is really their partner support. And we have a tremendous opportunity as we think about our publisher relationships and our relationships with the DSPs to build on that. And the more closely we can work with our premium publishing partners and the DSPs to help them drive great results, the more successful we're both are going to be.

Okay. So a question on AOS. I just wanted to ask what was the AOS revenue in the June quarter? And how that fits in, in terms of the -- or we want to set our expectations in terms of the ramp towards the $25 million to $30 million in guidance.

Let me answer the question. I'll start with the last part and then work backward. Our guidance remains $50 million to $60 million. In the quarter, AOS generated about $5.5 million of revenue, 50% of which came through the GMS line. In addition, if you -- and this is -- again, I want to be clear about that because we did not book any LiveRamp revenue in the first quarter because we closed on July 1. LiveRamp's revenue for the June quarter was $7 million. So you can figure $7 million plus $5.5 million or $12.5 million for the quarter.

Got it. Okay. And then I also wanted to ask on Starcom. You mentioned that the number of clients has gone up to 80. I believe the number I have in my notes on what the clients were before was 30 prior -- end of the prior quarter. And I wanted to ask, how many clients are actually starting to execute actual campaigns?

Yes. And that's the right question. So the way we think about the 81 deployments is those are clients that have AOS activated and can utilize our UI to execute things with their data. If you look at the number of Starcom clients that have launched, I think it's been several who have run 24 distinct campaigns to date. Again, we're following a real methodical approach with them. First, sign an agency, train them, onboard our third-party data and enable things, which is where we are now. Then collaborate with the teams at a team level and work with them to understand what kind of propensity models or use cases, what kind of segments that they may want to launch. Because we want data-driven campaigns to work out of the gate and just get better over time. And then optimize. So we need to be looking at the results and then refining the campaigns over time in concert with them. I was out in Chicago this week, and I had a chance to sit down with a big chunk of Starcom's leadership team. They had a big summit. And I think they're a great partner. It is going incredibly well and I believe if we continue to execute, this is going to be a model that over time we can start to deploy with other agencies.

And our last question comes from Brett Huff from Stephens.

Can you give us a sense of where the costs will go down. The one place we were surprised, and I think you guys called it out in your slide, the sort of what your analysis was of where the miss for EPS was. Where -- which line items are going to go down that's going to get us to our full year guidance even though we kind of -- at least we were above where you came in on pro forma EPS? What kind of catches up?

Well, I would look at the run rates for Q1 and you can be assured that whether you're looking at cost of sales or SG&A, we're trying to drive cost improvements wherever we have the opportunity. So we're really midstream in integration with LiveRamp, and let me start there. So what we're doing with our teams are asking ourselves 2 big questions. One, how do we drive more revenue -- or really 3 questions. One, how do we drive more revenue? The second question is, how do we make our products even that much more exciting? And that's really the first for our customers. And then the third question we're looking at is, how do we optimize our cost structure and eliminate any overlaps where they may exist and look for opportunities to drive synergy? Some of those benefits would impact cost of goods sold, some of those benefits might impact something more down along the lines of SG&A. So I would look, Brett, to answer your question, at where are the run rates today for each of the line items and then just expect that we are going to continue, as we always have, whether it's in delivery, whether it's in our G&A or any other -- IT or any other function to drive productivity across all those lines.

That's helpful. And then the second question is, if I did my math right, last quarter when you gave the first annual guidance it implied that the legacy marketing and data service business was down about 4%. I think Scott, you referenced that. I don't know if you gave us the number, but at least that was the math we did. And you guys came in better than that this quarter. Can you give us a sense of why that is or where the -- have you sort of adjusted the basis on a continuing operating basis point of view, so that we've taken out the $36 million in the comp for last year?

Let me try to address that, Brett. And I feel, I'd say from the outset, we have not changed our revenue guidance for the year, so it is what it is. The second thing that I would say is our objective is to always improve and to do just exactly as Scott said and address the issues that we see in front of us. And we'd hope that, over time, that changes the trajectory. We're not happy about the guidance that we gave you, but it's appropriate. So our job going forward is to continue -- is to execute and drive growth.

Okay. And then last question for me, just I want to double check. I remember you said the $50 million to $60 million for LiveRamp plus AOS included, obviously, a full year of AOS, but only 3 quarters of LiveRamp, is that correct?

That is correct.

I would now like to turn the call back to management for any further remarks.

Again, thank you, all, for joining us. It's our pleasure to be with you. We look forward to the follow-up calls. I'd conclude with the same 3 thoughts that I left you with. We're tickled to have LiveRamp be part of Acxiom, and our integration is off to a great start. We acknowledge FY '15 is a year of transition. A lot of heavy lifting and improvement. But we believe in our projects, we believe in our initiatives and everything that we're doing is being done with solid business cases in hand. And that, again, we would reiterate our full year guidance and confidence in our outlook. Thanks a lot for joining us.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.