Good afternoon ladies and gentlemen, and welcome to the Acxiom Fiscal 2016 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Mrs. Lauren Dillard, Director of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2016 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 schedule, including any reconciliation to non-GAAP financial measures is available at acxiom.com. Also, during the call today, we'll 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. I would like to spend my portion of the call today, updating you on each of our businesses, our LiveRamp Connectivity business or Audience Solutions data business in our Marketing Services portfolio, which includes database, e-mail and consulting. Within that discussion, I will share some key highlights from the quarter and provide an update on our progress against the initiatives we laid out on our last call. First our SaaS or Connectivity business. We believe that our Connectivity solutions are appropriate for anyone and everyone in the marketing ecosystem, and we want to work with every advertiser, publisher, agency and marketing application to help make their products better. Good news. This hypothesis is paying off. Connectivity had another great quarter and our results demonstrate the strength of our combined offering and highlight the significant growth and momentum we continue to experience. If you turn to Slide 3, I will provide a few highlights. We signed 40 new Connectivity deals in the quarter, and added approximately 30 new customers, including several large retailers and a handful of leading financial services companies. LiveRamp continues to accelerate its traction with brands and ended Q1 with more than three times the number of direct advertisers than it had at this time last year. Our average deal size is also up four fold from where it was a year, a testament to the quality of clients LiveRamp has been able to bring in, since joining Acxiom. In total, we exited the quarter with roughly 212 direct customers using our Connectivity solutions, a sequential increase of 9%. Please note that we have adjusted our customer accounts to exclude some early AOS beta customers that were using parts of our distribution services but not paying on…

Thanks Scott, and good afternoon everyone. In my portion of the call today I'd like to run through the quarter, then talk about each of our segments and finally confirm our guidance for fiscal '16. A few highlights from the quarter. First we have transformed our financial reporting to a contemporary approach with significantly enhanced transparency and while we are now reporting in two segments, by the end of Q3 we will separate Marketing Services from Audience Solutions and report three segments. For the quarter total company revenue as reported was up 5% and revenue adjusted for items increased by 4%. Adjusted EBITDA improved 28% year-over-year and has been up every quarter for the last five quarters. In fact, it has been up double digits in three of the last five quarters. Connectivity continues to roll and had another great quarter. Normalized revenue was up more than 80% and we exited the quarter with a revenue run rate of roughly $80 million. While likely a high point for the year, our Connectivity gross margin was approximately 60% and on the bottom line, we were essentially breakeven. In addition, we are well down the path with a couple of exciting new product launches. In the U.S. Marketing Services and Audience Solution revenue was roughly flat. During the quarter we repurchased $15 million of stock. Since inception of our share repurchase program, we've acquired 13.7 million shares for total consideration of $217 million. Finally on July 31st, we closed the sale of ITO. We used approximately $55 million of the proceeds to pay down debt and our current cash balance is approximately $190 million. Our long-term debt balance is roughly 220 million. Now, let me discuss our first quarter results in more detail. Starting with Slide 4, our summary financial results. First…

[Operator Instructions] Our first question comes from Bill Warmington from Wells Fargo. Your line is now open, please go ahead.

Good afternoon everyone. So, congratulations on the improved business pattern.

Great. Thank you.

So, a question for you on the split of the Marketing Services and the Audience Solutions businesses. First on Marketing Services, it looks like you had some nice sequential improvement there from being down 8% to being down 1%. Should we expect that to turn positive in the September quarter, and if so, what's going to help drive that?

Bill, let me just talk about that generally, I would tell you, I think our comps are the toughest in Q1 and Q2 of this year, and then as we look forward into the back part of the year, we look for, and I wouldn't call it a complete reversal but we look for improvement. So I would continue to expect difficult comps just as we thought we would in Q1 into Q2. That said, just to Scott outlined I would reiterate, I think Rick is doing absolutely the right things with Audience Solutions, he and his team and we're excited to have Jeremy on board in Marketing Services.

Then on the on gross media spend, that seemed like a pretty impressive pickup. Can you talk a little bit about what's driving that?

I'd be happy to and Scott may have some color on this as well. The big driver here and I think it is really emblematic of our strategy to get our data everywhere. Our third-party data was royalties associated with the use of our data was up dramatically in the quarter. It was probably two-thirds of the revenue generated from the GMS was a result of third-party. First-party was a little bit lighter this quarter, as Scott mentioned is a result of some work we did on our measurement capabilities, but we have that right where we want it and we feel great about things going forward. So, real strength in that was positive surprise for us in the quarter.

Okay, and then also on the rebranding of digital impact, you know it sounds like you've been able to get some traction there that would seem like a fairly mature business. I mean, I think you guys acquired that probably 10 years ago. What is it that you've changed that's actually enabled you to bring in some new logos?

Yeah, I think a couple of things, number one is we've kind of reconstituted the business and that's part of a larger theme about enabling specialization across Acxiom, that we don't believe that an engineer should be able to code great products in every offering that we have nor do we believe a sales rep ought to be able to sell everything we have effectively. So by bringing together all the people who were specializing in e-mail and really rebuilding the e-mail team, we think we've accelerated their decision-making, allowed them to make smarter decisions and have more traction with clients. In addition, they've been innovating and so, for a long time, digital impact didn't get a whole lot of innovation behind it, but what we found is that, some of the innovations we did, didn't even have to be that expensive to really move the needle with clients. Then finally, we believe that the world's tilting in some respects towards Acxiom, that for a long time people were in a race to the bottom around the e-mail and it was kind of a feature war where people were just buying e-mail only. Well, increasingly people are looking at e-mail as part of their overall marketing programs and so to the extent that we can bundle our e-mail with Connectivity and data and enable really innovative cross channel marketing. As an example, for someone who's dropping an e-mail campaign, they could surround it with a targeted banner effort that's going to improve their open rates, that's something that we're uniquely positioned to offer. So, our connectivity and data efficacy, we think is going to catalyse our e-mail results, over time.

Got it. Thank you very much, appreciate the insight.

Thank you. Your next question comes from Todd Van Fleet from First Analysis. Your line is now open, please go ahead.

Good afternoon, guys, wanted to make sure I understood, I think what you were saying here with respect to Marketing Services and Audience Solutions. It seems as though the performance, revenue performance from both of those segments was flat relative to prior year once you exclude the impact of ForEx and divestitures. Is that right?

That is correct.

All right. I just wanted to make sure I got that. Then I want to dig into a little bit, the gross margin performance from Connectivity, which has shown a really nice ramp on a sequential basis over the past several quarters and just thinking about the leap that we saw from the March quarter to the June quarter, thereabouts, 42% or so in the March quarter and then up to 60% in the June quarter. Rather than kind of pose a few questions related to that, could you just kind of Warren, maybe describe for us what are the drivers? What's the primary driver of gross margin improvement as you see it for the Connectivity business, and how high do you think we can get?

Let me talk about that in general terms first Todd, and then I want to talk to you about the near term and things you could expect. If you look over the course of the past year and I tried to outline this in the more formal part of the call today, it's just one plus on the revenue side is equalling more than two and on the cost side one plus one is equalling less than two. So, over this past year, we have really tightened our offering. We've gotten it very focused and just as you would expect, we would -- with any acquisition of this nature, we've gone after the synergies and this has played very well and hence the rapid rise in gross margin. We've got revenue growing fast and you also have your cost base, we've been able to rationalize our combined cost base. So it's absolutely the best of both worlds in exactly what you would love to have in any acquisition that you would make. So what's driving gross margin up from 42, say to 60? It's really that scale and then really what's going on with our cost base. So its growth, we're getting volume on top of a cost base that hasn't been increasing as fast as the volume. Now, looking ahead, in the near term and then I'll talk about the long term, what we want to do is invest in this business and invest for growth. So, what we're doing internally, it's really about building scalability and being one step ahead of where you are today and having a vision of where we're going to in 12 to 24 months and being ready for that and not playing catch up once you get there. So, we're investing in infrastructure.…

Okay. Thanks for that and then two quick ones I guess, I want you to comment if you can on customer length, I know it's still early days in Connectivity, but if you could comment any qualitative commentary on that in terms of traction so forth would be helpful and then back on the cost front, as you invest over the course of the year, corporate expense as a percent of revenue looks to be declining subtly I guess over the -- since fiscal 2014, is that the expectation that we'll still see kind of subtle declines in that expense line or as a category as a percent of revenue moving ahead.

Okay, this is Scott. I'll take the first and have Warren take the second. So first off in customer length that's one of a handful of new products that are in beta within the LiveRamp Connect division. We haven't really put a lot of marketing muscle behind it yet. We've been very quietly putting this in the beta. That said our initial traction, we're really pleased with, I think we have 10 customers that we signed up in the past quarter but it's still very early stages and so I think you should expect to hear more about this but as with the any new product this and the other things that we're experimenting with, we're going to work with those beta clients, refine it, make it better before we really push it with a broad scale market launch.

And then Todd on the corporate costs, what we've tried to do and we're doing it with really all of our business is really benchmark to best in class and today, our corporate expenses are rough terms 12% or so of revenue. When we benchmark against others for companies of our size, we think that's pretty comparable. There are some companies that are much lower than that. Typically they're companies that are much larger than us and a lot more mature. The other thing that we're thinking about, I'd say two things. One is having the capabilities that can take us where we need to go. So, for example our capabilities to completely redo our data model Institute new, put in a new ERP and deliver the sort of reporting and insights that you guys are seeing today is not accidental. That's because we've recruited and brought in here some really talented people on the IT and finance operation side the can make that sort of thing possible. So, while we come to work every day trying to find a better way and to lower our corporate expense, we're also going to maintain a little bit of capacity so that we can take on the next wave of growth projects that can again help fuel our growth in in the quarters and years ahead. So the short stories were all over -- we're watching it all the time. I think our track record has been pretty good on that front despite the initiatives we had. We're very mindful of it and will always focus on keeping it in line, but at the same time, keeping some real strong technical capacity that can help fuel our growth.

Thanks.

[Operator Instructions] Our next question comes from Brett Huff from Stephens, Inc. Your line is now open. Please go ahead.

Good afternoon and congrats on a nice quarter guys. First question is, Scott you mentioned a couple of nice bookings, growth numbers, I think you said double-digit for the quarter and double-digit for TTM, can you give us a sense -- I don't know if this is for you or for Warren -- give us a sense of how we should think about those booking rolling into revenue? I know it's a little bit of a mixed bag on timing, but should that give us -- how should that give us comfort or not about an improving legacy marketing and data services growth rate?

Yeah, I'll take you back to what I've said in past quarters Brett, last quarter, we had showed growth there and you'll recall me saying at the Stephens conference, I talked about, one data point doesn't a trend make. So, now we've got two and we showed acceleration there actually. So, feel pretty good and I will tell you anecdotally, our pipeline's stronger. We had a nice upsell quarter, applied to the bucket test, the rate of new wins in Marketing Services exceeded the expiring contracts. So a lot of reasons for optimism, but bookings are a longer-term measure. Our average contract length in the Marketing Services for example is probably between two and three years. So I'd really like to see us string together a third data point which would give me a lot more optimism about the back half of the year and going into next year and then maintain that momentum over time. So, like where we're going but again wouldn't say that I'm ready to declare victory yet.

Then the second question, sort of just a more detailed maybe version of that one. Can you give us a sense of how the bookings looked on a segment basis? I mean is it, identify for us where the major declines have been, one Audience Solutions or Marketing Services, and kind of how the booking shook out on those two divisions.

Hey Brett, let me take that one. We're not going to separate out bookings between segments. I think though to answer your question clearly if you look at the charts we've attached and then take out the paper survey business, because it creates noise. I think you will see that we've had more pressure in Audience Solutions than we have had in Marketing Services. So, I think that is a relative indicator to answer your question.

Just to give maybe a little -- even more color, on the Marketing Services side, I'd say quite frankly we're pretty happy with our upsells, but the challenge that I'm throwing down with the team, is we'd like to do better on new logo performance. Then in our Audience division, it feels like there's a lot of growth for us to go get there but as we've talked about before, we have to overcome one big bad guy there where we had a negative comp that was a large -- a large data client that terminated all of their data relationships with Acxiom and others, and chose to go with it alone and so, you've got to win a lot of smaller clients to make up for one big legacy relationship.

Okay, and then, the last question is, just partner relationships, folks who white label your Connectivity or LiveRamp business, any update on renewals of those partnerships or anything good or bad on that front?

Yeah, so I'd say, all good there, and let me reinforce what I've always said, which is our world is changing. It's not an us versus them world, and so what others might perceive as kind of traditional competition, we increasingly view as our most valuable customers, and so our focus there is, we've got to deliver a great service to all of them, stay agnostic and innovate, and I would say, we've been really lucky over the last year that we've ramped our relationship with some of the marquee innovative companies in the space, I mean, you're kind of judged by the company you keep and measured by that, you know, we work with Google and Facebook and Oracle and we're happy that we've played a role in driving some of their success and we'd like to accelerate that role. So, all good.

Okay. That's what I needed thank you.

Thank you, and your next question comes from Dan Salmon from BMO Capital Markets. Your line is now open. Please go ahead.

Hey guys. Sorry I'm jumping on a little late so I apologize if some of this has been covered already, but just one question for Warren and one for Scott. So, just for Warren, I know you spent a lot of time focused on the Audience Solutions business, the data business, up until recently and I'm sure you're still focused there as well, but, I know a lot of that work was around trying to consolidate some of the data sets, make them a little bit more actionable, a little bit more real time oriented. Could you just sort of give us an update on how that is progressing and then second, just for Scott, with the three divisions now, aligned and set up, how do you think about your cost structure across the Company, in particular, thinking of initiatives like what you've done with Workday to bring some efficiencies into the Company, a little bit more. Are there opportunities like that to come still and do you see those as largely being initiatives that go across the companies or across the divisions or are they a little bit more specific to the individual ones?

Yeah, let me answer the second question first, and that's on the cost structure. So, if you could envision what Warren and I are sitting in front of, we each have a binder and there are probably 3 inches of financial information in that binder, and that is night and day versus where we were say three years ago. Just the degree of visibility we have into each one of the businesses at a micro level has grown leaps and bounds, and it's not just Warren and me, but it's each of our divisional presidents and so to answer your question, the answer is absolutely yes. We believe that by virtue of having more sophistication on how we measure and manage our businesses, we're going to be much better positioned to find opportunities to drive out both cost, improve our efficiencies and also identify revenue trends as well, and go after those. Those are really going to be at a granular level. You win clients one at a time, one product, one pitch, one business at a time, likewise you take out costs from an improved processes, one process, one client, one contract at a time. So while, yeah there are certainly going to be things that span divisions, we think turning our divisions lose on the unique levers that each of them have at both revenue and cost is going to be a big driver of our future success.

Then let me comment on the first part, and I'll be the first one to say that if Rick were here with us, he could do a far better job than I could in answering your question, but I'll give you my perspective. First, I am, in our Audience Solutions business absolutely glass half full. I think we've had some tough comps, but I believe that the team that is working with Rick has really identified absolutely the right strategies to go forward and Scott mentioned those, it's beef up our sales capability, expand our [indiscernible], hit clients that we haven't before, look at different ways that we can drive better products through more efficient and better data procurement and fundamentally better data products. All those things I firmly believe will help this business. I'm also particularly excited in data or in Audience Solutions with what's going on and what I'd call our digital ecosystem. We're distributing our data more places than ever, two thirds of the GMS that was driven was driven by data and that is a fundamental macro trend that we are going to benefit from and Rick and his team are all over it. So, a lot of really good things. As it relates to the procurement efficiencies, if I've learned anything over the course of my career is you seldom come in and just do one thing that suddenly creates $10 million of incremental bottom line benefit. What you do is you come in and you identify one thing that'll identify $1 million and then that leads to another $1 million and then -- suddenly you get up to $10 million. It's a little bit like looking at GMS from just a year ago and now thinking that we're over a $200 million run rate from where we were just 12 months ago and that's how you do it, you did it month by month, quarter by quarter. Andy Johnson who works with Rick and his team are doing exactly that, and you know what, they've turned over some really positive things. Now they have to also work through some long-term contracts, but there absolutely focused on the procurement efficiencies, doing the right things, creating great products and then also automating this that it's much more of a data [ph] service than a cloud service as opposed to something that is a series of manual processes. So work in process, but I believe we have the right people doing the right things.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back to Warren Jenson for any closing remarks.

Let me again just thank everyone for joining us today. We're very pleased to report our results. We're very pleased with the quarter. We're happy that you're joining us today and most importantly, we're looking forward to the opportunities for Acxiom in the quarters and years ahead. Thank you very much.

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.