Good afternoon ladies and gentlemen, and welcome to the Acxiom Fiscal 2016 Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mrs. Lauren Dillard, Director of Investor Relations. Please go ahead.

Thank you, Abigail. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2016 second 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 will 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, our Audience Solutions data business and our Marketing Services portfolio. I’m pleased with the progress being made in each of our divisions, it feels as each group is focusing on clients, innovation and moving more quickly. Each group can also generate even better performance with continued improvement against their key business challenges. For each division I will share some highlights from the quarter and talk about where we are focused in the second half of the year. First our SaaS or connectivity business. Connectivity had another impressive quarter, highlighted by top line momentum, new customer additions and the launch of Customer Link, the newest product in LiveRamp's suite of open connectivity services. If you turn to Slide 3, I will update you on our key metrics. We signed 50 new connectivity deals in the quarter and added approximately 40 new customers, this was a record number of new client adds in a quarter. Since acquiring LiveRamp in Q2 of last year, we’ve added roughly 180 new customers to the Acxiom client roster. Extrapolating from recent years, we believe this new client bonanza represents more new logos than Acxiom had collectively brought in during the prior decade in marketing services. In total, we exited the quarter with over 250 direct customers using our connectivity solutions, a sequential increase of 19%. Also worth pointing out, if we included indirect customers who’s data we onboard through our reseller partnerships, this number would be multiple higher. We generated approximately $22 million in revenue during the quarter, up from Q1 and up over 65% year-over-year. We exited Q2 with the revenue run…

Great, thanks Scott, and good afternoon everyone. In my portion of the call, today, I'd like to first run through the quarter, then talk about each of our segments, and finally provide an update to our guidance for fiscal 2016. A few highlights from the quarter. Total company revenue as reported was up 2%, and revenue adjusted for items also increased by 2%. Excluding negative $3 million FX impact total revenue was up 3%. In the U.S., total revenue increased 6%. Just as a reminder, last quarter, normalized revenue in the U.S. was also up 5%. Adjusted EBITDA improved 23% year-over-year and has been up each of the last six quarters. New customers in the past year we have added more than 180 new customers at LiveRamp. In the second quarter alone, we added 40. We have also added dozens of new customers as a result of our expanded sales efforts in audience solutions. We believe these new relationships represent a meaningful long-term growth opportunity. Connectivity had another strong quarter. Revenue was approximately 65%, and we exited the quarter with the revenue run rate of roughly $90 million. Connectivity gross margin improved 62%, up significantly from 19% a year ago and operating income was nearly breakeven, again this quarter. In addition, we successfully launched Customer Link, the newest product in the LiveRamp suite of connectivity services. In the U.S., marketing services and audience solutions revenue was up roughly 2%. And finally, during the quarter, we repurchased $12 million of stock. Since inception of our repurchase program, we have acquired 14.3 million shares for a total consideration of $230 million. Now, let me discuss our second quarter results in more detail. Starting with Slide 6, our summary financial results. First, our GAAP results. Total revenue was up approximately 2%. Gross profit…

[Operator Instructions] Our first question comes from the line of Bill Warmington with Wells Fargo. Your line is now open.

Good evening, everyone.

Hi, Bill.

Hi, Bill.

And congratulations on the strong quarter.

Great, thank you.

So, I wanted to ask about the LiveRamp, Customer Link launch, you mentioned, 15 customers. Can talk a little bit about when you think that’s going to start to become revenue contribution out of the 15 that you have signed up, how many of them are actually past paid and actually paying? And then in terms of our expectations for when that is going to start to contribute to results.

Yes, so I’ll answer the first one – the second question first Bill. So of the clients and beta they’re all paying, I believe that’s true. And law of small numbers…

Okay.

So I would say that it’s not going to be material revenue this year. However, it starts to become more significant next year as we grow off at base 15 and continue to scale. We believe that anyone who is using LiveRamp for onboarding, ultimately should be using LiveRamp for Customer Link, as well.

Yes.

So we think that number of 15 has a chance to scale as more customer see the results here about what’s possible and have some successes with the products.

Bill, I could add one thing to that. While we don’t intend to give product level guidance, I will tell you that our forecast for the ARR coming from this product is meaningful at our fiscal year-end.

Got it. The gross media spend was pretty strong in this quarter, as well. I just want to ask what was helping to drive that, whether there was seasonal elements, whether we should use that as a base for modeling going forward?

I’d be happy to take that. A couple of things that I would say we’re very strong, one in particular, our data business continue to be very strong across the Board. So roughly, two thirds of the revenue was generated through data, one third of it generated via first-party data. I think this just continues to demonstrate what is a very meaningful trend, and that is campaigns are just made better with data. And we are in age, in the beginning of really data-driven marketing and this is – is great evidence. As Scott, was giving his presentation today, for those of you who were with us 18 months ago or two years ago, when we started, remember this is zero. And I think we had all sat here and forecast that number to be close to $300 million at this point in time, we feel very, very good about our progress.

And how large was specialist data sales force now? You mentioned that you’ve been adding to it, I just was curious how many [indiscernible] gone from to…

So quite a big jump, quarter-to-quarter as of Q1 and Q2. So we went from essentially 87 clients facing sales reps in Audience Solutions in Q1, to a 117 in Q2. And why this is important is, you will recall that in past conversations I’ve talked about earning our fair share of the industry growth beyond just our large marketing services, marketing database clients. All of those sales reps will be focused on helping achieve that, and so we are calling on clients and partners that historically haven’t heard from Acxiom, and that’s why you can already see that in the bookings that they generated in the quarter.

I’m feeling pretty good about what Rick and his team have done in the short period of time there.

Thank you very much.

All right, thank you Bill.

Thank you. Our next question comes from the line of Todd Van Fleet with First Analysis. Your line is now open.

Hi guys,

Hi, Todd.

Hi, I just want to circle back to what you said on Customer Link. So are we to understand that their, I’m not sure, you are very careful with your words. I’m just trying to make sure I understand what you said. Are we infer that included in guidance for this year, revenue guidance is a meaningful level of Customer Link revenue embedded in it?

So there certainly is revenue embedded in our guidance Todd. As you know, we had planned this launch and it was built into our planning. The second thing, as you all know, in the SaaS business, is revenue that builds later in the year has a lesser impact, just because you only have X number of months of subscriptions. So the impact from strong bookings is typically manifest in the next 12 months hence we give the measure of ARR. So the point I was trying to make relative to what Scott had said was just to reinforce that when we are forecasting our business for the remainder of this year and into FY 2017, we anticipate that our ARR us coming as a result, the Customer Link will be meaningful.

Okay, and…

You’ll then see in FY 2017 revenue.

Right, right, so I’m just – so in the middle, I think, you guys officially launched in the middle of September, is that right, Customer Link?

Yes, that’s correct.

And so, with the 15 clients were they all in beta at that point or can you give us an idea as to may be how much took off, since the launch? Where were you at five at the launch and then now at 15 or just to give us a sense as to how quickly things are escalating?

Yes, I don’t know, if it was five, but it was definitely kind of mid single-digits. And so, we have accelerated that and, it’s a good story, the clients you see it, get excited about it. So we’ve accelerated and we will expect that trend to continue again, we believe everybody, it was a LiveRamp client in order to using Customer Link in addition to onboarding.

Yes, and as your customer teams are out there kind of working with the clients, is there do you guys feel like you have a reasonable sense from start date to kind of full throttle maturity on a client, what the timeframe is, is that a three month period, is that a six month period before you feel like you really got the kind of Customer Link engine and humming within the particular client?

Yes, it’s probably more on the shorter end of what you just talked about, and then there is certainly a learning curve with clients and we’ve seen that with onboarding as a whole, typically someone starts with one use case then expands over time and so, I would except that there is going to be a similar learning curve for clients here. But remember, we by and enlarge use the same pipes that we’ve laid for our Customer Link. So there’s not a whole lot of additional infrastructure that’s required to campaign setup, that’s required on our site to get a client launched.

Right, okay, and then just one more and I’ll jump back in, on marketing services, Scott you talked about there being a nice win for the company in the quarter, you talked about kind of a next-gen platform, I’m curious more of a cloud-based platform, I’m curious if, have you guys seen any kind of old-gen customers migrate to new-gen platform at this point and if so, what is that migration kind of timeframe look like in and what is the kind of revenue impact – if there is one to kind of build an observation from at this stage?

Yes, so the answer is it depends. That there are certain industries that are going to be faster to embrace the cloud than others, so for example in the financial services space, given the security requirements and industry regulation, it’s really important for them to know that their data is hosted in a physical location, there is layers of security wrapped around their servers. In other industries mid-tier retail publishing, there is more of an emphasis on flexibility and a willingness to try new things. And so, we have had at least one that I can think off of, just the top of my head, in long time media published or who is migrating to a cloud based deployment and they were one of the first and they really embraced the thinking, I mean validated a lot of what we are doing there. I suspect there will be others, but I think it’s in some respects got to be an interesting innovation for us to compete and sectors where we haven’t – historically been strong. So again mid-tier retail in particular, travel, Poly Telecom, and some others so, pretty exciting for new clients.

Hi, Todd, I would add to that, it’s really interesting because our approach is to really enable the industry and for some – one solution is going to be better than another. And that’s say okay. So some we’re going to – want a dedicated infrastructure, others will prefer virtualized and migrating currently a lot of customers as part of our next-generation infrastructure project to virtualized environment and yet others will want to use the cloud and that’s great. We’re all for it and will continue to help and enable them anyway we can.

Great. Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Brett Huff with Stephens. Your line is open.

Good afternoon, guys.

Hi, Brett.

Quick question on bookings. Scott, you mentioned that they were flat kind of TTM in the marketing services and Audience Solutions business, and it looks like that maybe partly an international issue of revenue has anything to do with it. But regardless, could you unpack that for us and sort of give us a sense and again, just referring to I think at the end of last fiscal year,, you guys were kind of 6%, 7% and had a couple of big quarters. What sort of what tailed off this quarter?

Yes. I think given the size of what we’re talking about, it’s hard to continue to post every quarter is not going to be up year-over-year, you have some big wins and then you have some quarters where you didn’t bring the big win in. So what I would like to see that number the higher part and this is an important part, there is a whole bunch of other stuff going along – alongside this, and importantly what’s shouldn’t be loss as this was our best ever renewal quarter, we had the significant number of wins in connectivity, which we view as potential leads for upselling to marketing services and data. And we have a lot of innovation going along – coming along, including in marketing services which is helping us win some new logos, albeit at smaller price point. So all is that, I feel really optimistic about the future, and would love to see us have a stronger new logo quarter, next quarter but feel really good about to say the business overall, and are well-positioned.

Great and just one follow-up, can you talk a little bit about international, I think Warren you specifically called out, feeling a lot better about U.S. legacy but still feeling, seeing some difficulties in international, looks like particularly in Audience Solutions, could you give us more detail on that?

I’d be happy to, I’m going to divide Brett my comments to talk about Europe and then talk about China. In Europe, there are several things going on which are sort of a confluence of events, obviously we like everybody else that has international businesses being impacted by FX. The second thing is that’s magnified by the fact we exited the paper service business, – paper service business. And then the third thing is, we mentioned earlier and I did again today is, we add a couple of clients where our services ended at the end of last year, and we have to make up for. If you take all of that stuff into account, year-over-year international was – Europe was basically flat, they were down roughly $400,000, so not a material amount. So I think, it’s necessary to peel back a little bit those results. And in Asia-Pac and in particular in China, we’re just seeing economic softness and being impacted by the economic softness in the China market. We do a fair amount of campaign assistance and our clients are reducing their campaigns just given what’s going on in that economy.

Okay, that’s what I need. Thanks and congrats on a nice quarter.

Thank you.

Thank you. I’m showing no further questions at this time. I do apologize, looks like we have a follow-up question from the line of Todd Van Fleet with First Analysis. Your line is open.

Hi guys this one is my last.

Hey, Todd.

So, sales and marketing expenses keeping up obviously most of that – most of that, I'm assuming is related to what’s going on in Audience Solution, but the other elements, within connectivity perhaps are impacting that?

There are really two elements and I’m looking at the marketing services and Audience Solutions, P&L Todd, one is that we have renewed investment in R&D in these businesses, which is impacting both marketing services and Audience Solutions. And then the second thing as it relates to sales investment that’s exactly what you referred to and what we’ve talked about and that’s really reemergence of our dedicated selling force in Audience Solutions.

But in connectivity, to your question, yes we continue to build our sales force there. We added, I will call it, roughly 15 people to that team over the quarter as well.

Okay. And at this point, we should assume that the audience solutions sales folks are not going to be kind of cross-selling connectivity, are you just going to have dedicated folks to one of the other.

Yes, that’s right. Now there is a lot of cross referrals that should be generated the fact that we’re laying pipes leads people to want to pour data through them. And when you have data to sell, it makes people more interested in laying pipes and connecting that data to publishers and other used cases. So the two sales organizations are fairly fluid and what one and another is doing. But data expertise is very different than the technical expertise needed for connectivity.

Okay. And then in terms of the audience solutions revenue, I imagine it’s probably a short cycle to kind of get things relied on that front and you’d said I think were 87 reps in the June quarter, 117 September quarter. I don’t know if you remember explicitly how many were in the March quarter, but it seems like you’ll probably getting it may be capacity there and I was just curious how quickly has got in your mind, should we see kind of an impact there an acceleration or reacceleration I guess in that revenue stream.

I think we’re already seeing some of it with $10 million in new bookings that they’ve already won. This is going to be a shorter lead time sale then say our marketing services database, which might have a two year consideration set attached to it. So, it should be near-term. That said, they got to go do it now. And I don’t think, we’ll see any impact from these guys really materially for another quarter or until FY 2017.

Okay. And then the risk internationally, I guess, Warren, that revenue risk, so what’s going on the internationally, is that show up in audience solutions or marketing services?

Is shows up in really both, but primarily in audience solutions.

Okay, all right guys. Thanks.

Great, thank you.

Thanks, Todd.

Thank you. And we have a follow-up question from the line of Bill Warmington with Wells Fargo. Your line is open.

Guys, I’m back for one more. I just wanted to ask about the improvement in the gross margin, particularly strong in connectivity and then for the Company overall, what was driving that?

Bill, I think you nailed it. Really, if you look at the gross margin, it was very, very strong in connectivity, I mean anytime you go from 19% to 62% that’s quite an improvement that we’re pretty much – pretty pleased with. So we feel very, very good about that. To a lesser extent margin improvement came out of the U.S. and then obviously we were very negatively impacted by international in both marketing services and audience solutions.

Okay. But what happened within – is it just the sheer revenue growth that’s driving the efficiencies there or something else going on within connectivity?

I’d prefer back to something that that I mentioned, I guess, in our last conference call is this acquisition is exactly what you want to have when you draw up the pro forma. And that is on the revenue side one plus one equals more than two, and on the cost side, one plus one equals less than two. And again, if you and I were sitting doing a deal and we could write up the exact script we want that’s exactly what we want to write. And so, in gross margin like in OpEx, we have cost benefits. We also have certain costs that may take step function increases over time as you get bigger and you see more opportunity to capitalize on things in gross profit, but we have other expenses in gross profit that have scaled quite nicely. and that’s what is produced the improvements in gross margin. On this front and for connectivity, I’d reiterate something that we said at the last call, if we see opportunities to make a step function improvement in our capabilities, we will take that. We are not in harvest mode here. We are in investment mode and we want to do everything that we can to take advantage of the opportunities that are in front of us. So I would be conservative in your expectations for gross margin going forward and for operating income, we certainly don’t want to under invest in what is proving to be a pretty significant opportunity and one where it seems almost with everyday our TAM increases.

Thank you very much.

Thank you, Bill.

Thank you. I’m showing no further questions at this time. I would like to turn the call back to Warren Jenson for closing remarks.

Wonderful. Thank you all again for joining us today. It’s our pleasure to be here. We know what we’re focused on. We’re relentless in those pursuits and we look forward to updating you on our progress as we move forward. Thank you very much.

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