Good afternoon, ladies and gentlemen and welcome to the Acxiom Fiscal 2018 First Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Ms. Lauren Dillard, Head of Investor Relations. Please go ahead.

Thank you, Cristal. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2018 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 sections 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 will turn the call over to Scott Howe.

Thank you, Lauren. Good afternoon and thank you for joining us. In Q1 Acxiom achieved another quarter of both top and bottom line growth. Excluding divestitures and the impact of foreign exchange, total company revenue was up 6%. Topline highlights included live ramp which continued to hit on all cylinders and our ongoing progress in international. Beneath the topline we delivered meaningful gross margin improvement which allowed us to fund incremental investment and connectivity, and total company operating income was up 6% year-over-year. Before we dive in, let me spend a minute on our outlook. We are maintaining our EBITDA and EPS estimates for the year. Our connectivity growth outlook also remains unchanged. However we now realize our projections for Marketing Services and Audience Solutions were too aggressive. This is disappointing. In our Marketing Services segment, the timing of bookings will be slower than we originally forecasted. In addition, the impact of previously discussed pricing model changes will slow growth in Audience Solutions in later quarters. Given this, we now expect topline growth for the year to be between 7% and 8%. This represents a strong outlook relative to the past decade of growth at Acxiom but a reduction from our initial plan. During my portion of the call today, I'd like to provide an update on each of our segments and in that discussion touch on some of the overarching themes impacting our outlook. Marketing Services, since we reorganized into divisions at the beginning of FY '16 our Marketing Services segment has made significant progress. Over this period, our marketing data base business which represents over 90% of segment revenue and substantially all the profitability has grown in eight of the last nine quarters. Segment profits and cash flow which we think are the right valuation metrics for this…

Thanks Scott, and good afternoon everyone. In my portion of the call today, I'd like to mention a few highlights, then run through our results and finally update our guidance for FY '18. For the quarter revenue was up 6% marking the seventh sequential quarter of 5% plus growth. Gross margin was 50% expanding close to 500 basis points. Gross margin was also up in every segment. Connectivity had an exceptional quarter. We exceeded our bookings target and made great progress against our key growth initiatives. International revenue was up 15% marking the seventh consecutive quarter of growth. International connectivity revenue increased by more than 50% driven by strong growth in Europe. During the quarter, we refinanced our debt giving us more flexibility in over 30 million of added near-term liquidity. All that said, we're disappointed to lower our topline guidance for the year. This reduction is primarily driven by reduced near-term bookings expectations in marketing services and to a lesser extent by a slightly lowered outlook for Audience Solutions. That said, our framework for value creation remains intact. In connectivity, both our top and bottom line guidance remain unchanged and in marketing services and Audience Solutions, we are maintaining our EBITDA outlook for the year at our bottom line guidance. In summary, a solid quarter, no change to key valuation metrics but a lowering of our short-term topline expectations for marketing services and Audience Solutions. That said, absolutely no change in our enthusiasm for our long-term opportunity. Now onto the first quarter, starting with Slide 5 our summary financial results. First GAAP, total revenue was down 1%, gross profit was $99 million up 7% and gross margin improved 360 basis points to 46.4%. Op loss for the quarter was $6 million compared to operating income of $8 million and…

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

So I wanted to start out by asking about Marketing Services. What are you seeing in terms of the bookings trends, and how long do you think it will be before you get that to a breakeven growth level?

Bill, I’ll go ahead and start, and then Scott can jump in. I think the one thing that we wanted to start off with everybody on the call is there are a lot of positive things going on and have been going on for several quarters in the business. Obviously, we don't like the fact that we’re taking revenue guidance down and that some of the bookings trends have shifted out. The good news is that we are winning clients and that our guidance is not being impacted because we've lost clients. In fact, we are winning clients. What we did see though is, as we sat down to prepare our projections at the end of last year we reviewed our backlog, we looked at the timing of bookings and made certain judgments. As we got to the end of the first quarter and looked at our bookings in the first quarter and then met with our sales teams and looked at expectations for the second quarter and third quarter and beyond, it became clear that our original assumptions were too aggressive. And we felt we had to make a call to reduce our revenue expectations for the full fiscal year though what that the case was, was that we were too aggressive in the timing for those bookings. It was not about the projection of losing clients, in fact, it was simply a matter that we were too aggressive in our assumptions relative to the timing of bookings. Scott, you’ve anything to add? Go ahead Bill.

I was going to ask a clarifying question which was, are you seeing the softness more in the marketing database side or more on the consulting analytics side? Or is that not the right way…?

That revenue is marketing database, and it’s over 100% of the profitability. So that's where the softness is. And just to put things in perspective, Bill, if you look at the last few years in this business, I think we split in divisions, we’re coming up on the three-year mark right. And if you look at 2015 to 2017 marketing database in the U.S., it went from 336 million to 360 million. So that business is growing. And of the last nine quarters, marketing database has grown eight of the last nine quarters. And importantly, if you look at our margins and operating income which is where I think we put the most focus, our operating margins are up 500 basis points or over 20%. And our operating income is up $18 million. In 2015, it was $62 million. Last year it was $81 million. So that's growing at a CAGR of 14%. And we’re winning clients, Embrace Opportune, The Children's Place. So the takeaway for me is that I remain optimistic about this business. We’re disappointed in our bookings timing, and we need to pull more of these across the finish line so that we can end the year with the window at our back.

And, Bill, let me just add to your question because I think it's important for everybody. If you look at the next several quarters, I think Q2, Q3 look a lot like Q1 on the top line. Q4, you could start to see things ease up as the comps – just look better and we start to work through some of the price compression that we felt. So Q2 and Q3 are going to look a lot like Q1.

For specifically Marketing Services.

Specifically Marketing Services, yes.

And just to add a final bit of color on that, and I think we talked about this before. But part of the growth trends are due to price compression from the fact that over the last couple of years, we did a really good job of renewing all of our top clients. The good news is from where we sit right now, all of our top 10 Marketing Services clients are now under contract through at least year-end. So there's no other significant renewals happening right now.

And then a follow-up question on the Audience Solutions piece of business. In terms of the transition to the new revenue model, it sounded a vaguely reminiscent of the transition we went through in the AOS LiveRamp going from the gross media spend mile to the subscription model. But I just wanted to ask a little detail there in terms of what's happening there, why that's happening now. You mentioned that it should start in Q3. It’s when you really see the impact and how long before we anniversary that impact? Is it relatively short or long?

There is several things that we’re not going to be able to completely answer your question because today we’re not to give guidance going into FY19 obviously. One of the things that we’ve tried to do and will continue to do is to tell everybody what we see well ahead of the quarter in which it happens. And so we felt it’s important to let everybody know what we're seeing relative to timing in Q3. So that's why we’re bringing it up. So in terms of the first quarter where you're going to see a major impact, it's going to be Q3. Now, as to the question of how long will it take to anniversary the impact, well, we have a lot of growth initiatives going on inside of Audience Solutions to help offset some of that impact and I’ll name a few. First of all global data, our data Scott mentioned this, is now available in 62 countries, and our team in the U.S. is working with every one of our teams globally in order to make our data available to existing and prospective clients. Today, in the digital channels, our data is available in over 140 different digital locations. A year ago, I believe the number was something like 70. And two years ago, it was zero. Third, every day, there are new use cases being made available. And the pressure that we are feeling, I want to reiterate, is very isolated. It is concentrated, and the concentration is pinpoint concentration. But the pressure and the trend in the use of data is a global phenomenon that is continuing upward. Every digital publisher, digital platform and company are increasingly using data in their marketing and taking advantage of the skill sets that we can bring to the table. Though we think the pressure broadly is in our favor, but the pinpoint pressure and concentration of that pressure is significant. It is absolutely worthwhile to bring up on this call because it will be significant in Q3, and we wanted everybody to be aware of it.

Your next question comes from the line of Brett Huff with Stephens. Your line is now open.

One is a product question and Scott, I think you mentioned it, and I'm not sure this is the right number about 25 people, I think that was the data coop business. Can you give us some more insight on that it's one thing that we get a lot of questions from investors on, and if this is really kind of a big part of the network affected that you hope that you can establish. Can you give us an update on that?

Yes, just to clarify your question, are you asking about people-based programmatic, or are you talking about SmartReach?

I was talking about SmartReach but I'm happy to hear about both.

Yes, so let me start with SmartReach so we now have over 80 clients participating our recommendation to any new client to the franchises that they are to do this from the Getco because as we’ve talked in the past the incremental match rates that we see can be up to 30% in some cases more. So this is a really strong differentiator for us and what good is having a lot of segmentation information and targeting capabilities if you can actually apply them to the audiences you see. So SmartReach helps people reach more consumers regardless of what channel they use and you know adoption continues to increase there. On the people based consortium I will tell you that that is moving as fast as any development in the industry that I been involved with over the last 20 years once we announced it we had probably a dozen inbound phone calls of people asking if they could participate as well. Dave Yaffe who came over to us from Arbor he is just an absolute tech superstar he is leading the charge from our side there. We haven't launched that yet, but I think I think that will happen over the next quarter or so. And you know like customer match I'm not sure that we’ll see kind of near-term revenue benefit from this as much as we’ll see this attract new partners to our portfolio and just increased use rate of our LiveRamp but we’re very bullish on this.

There is a question for Warren since you went through the LiveRamp numbers I think they accelerated to 44% and in the live call I think you said about 50% was the annual expectation for the growth rate you said that was still in the card is that still the right number to think about?

Yes, what we've said is we said growth would accelerate and then we said it could be as much as 50% would say – our guidance is the same what we’re sticking with is growth will accelerate it could be as much as 50% but our guidance is our growth will accelerate Brett.

You said, you mentioned CapEx is going to be a little bit less than you thought where are we trimming or what are we prioritizing differently and kind of give us some inside into that?

Most of the prioritization is coming out of I’d say out of either what we’re doing corporately or in marketing services to a lesser extent than in audience solution. If you look at the first quarter where we’re increasing CapEx and where the dollars are going is to where the growth is LiveRamp as we continue to build capacity and grow. So it's really about being more efficient in the core one of the things that is allowed us to really drive a tremendous amount of productivity is what we've been doing in IT our entire IT team who led by Janet Cinfio has just done a terrific job working with each of the divisions to take cost out, drive productivity but at the same time drive a much higher level of performance than we enjoyed historically. And with that we’re also looking for ways to trim CapEx and that's just benefiting everyone.

And your next question comes from the line of Dan Salmon with BMO Capital Markets.

I guess my question is around the first question around the pricing pressure on the database side how much of that is related to secular change across the industry versus perhaps competitive issues and we seen for example Epsilon sort of revamped its approach to the market there lately. But I’d just be curious on certain individual competitive issues versus secular. And then Warren could you just maybe spend a little bit more time explaining the transition of the pricing models that is driving the pressure in the digital revenue on audience solutions maybe just sort of step-by-step through why that specifically is resulting in a lower guidance? Thanks.

On the pricing pressure I think it is entirely what I would call typical technology trends very consistent with everything that we've seen over the last 20 years it’s essentially Moore's Law for technology that anytime something comes up for renewal clients expect you to get more efficient. And you see that in our pricing the good news is we've also carried that through into standardized, modularized architecture and more efficient delivery. So we more than compensated for that in the bottom line. So I don't see anything different than I've seen since I've joined Acxiom and again the good news is that we've been able to secure all of our major renewals over the past few years the big ones and I think we’re in a good spot for the rest of this year.

And then Dan let me try to explain I guess the question is what changed and why that's causing us to slightly lower our guidance again I want to iterate the pressure that we’re seeing is highly concentrated and the best way for me to articulate concentration is just call it pinpoint concentration. And presume that we have a wonderful relationship and a big global relationship where we feeling this pressure. Nonetheless we are going to feel real revenue pressure and in several elements of our relationship. In terms of our planning we had a phased approach built-in and it became clear during the first quarter that at phased approach was going to be accelerated. And so the slight revision to our guidance is reflective of more and accelerated approach as opposed to a phased approach that we had built into our planning in May, but again that's a slight revision to our guidance nonetheless a revision.

[Operator Instructions]. Your next question comes from line of Kip Paulson with Cantor Fitzgerald. Your line is now open.

First could you just remind us what your thinking is on the total addressable market for the connectivity or LiveRamp business, how much addressable ad spend and how many thousands of clients can you target and how many potential integration partners. And then I have one follow-up?

There have been some studies out there that have pegged the addressable market in the in the billions. Our belief is that it significantly higher than that we think we’re riding a secular trend here that companies who have been successful in recent years in many cases have been very successful because they’ve done good job of ingesting data, determining what it means and utilizing that it for their business advantage. Well imitation is the most sincere form of flattery as the saying goes. And we believe that’s becoming a secular way. So anything that can be powered with data from advertising at any touch point whether that search or site personalization, television, addressable radio to things like customer interactions overall call center, or point-of-sale and retail all of those touch points all of those customer interactions within the marketing world we think will be more effective when powered with data that's why we work so hard to build our grid of activation partners. Longer term you heard me talk a little bit about this in the last call, we also think there is an opportunity for us to expand beyond marketing not in a weird way, but in a way that is driven by our clients at their request because they're doing things with marketing and they're saying hey you have data that can power other decisions for me could you extend your capabilities into these areas. So you don't have to do or play around with back of the envelope math too much to say what happens if you take half a percent or a 10th of a percent of all advertising well that becomes a much bigger number. And if you expand that to all of commerce it becomes an even bigger number and then if you do some adjacent sectors again it becomes a much, much bigger number. So we think long-term the TAM is in the tens of billions but obviously the market we’re building the category and it will take time for that true market to develop.

And then one other question I had was, I just wanted to get your thoughts on Apples intelligent tracking prevention or ITP which is coming to Safari this fall it apparently tries to block third-party trackers from capturing across like browsing data and when combined with other efforts to block third-party cookies. Just curious what impact or any you see from these developments on your business?

We don't anticipate there will be I mean it’s something we’ll watch closely, but remember we resolve everything to an individual and we use a federated group of permissions. Our clients are collecting permissions on their website and so we believe our identity resolution is much deeper than what Apples eliminating here. That said I know that there are people in the ecosystem who rely primarily on cookies that will be impacted by this, but our initial analysis suggests that this isn’t going to have a material impact on us.

And just one more if I could gross margins expanded nicely – are there any changes to your target gross margin expectations for any of these segments after this quarter?

We’ll be giving I guess again we’re not to get into FY’19 today the impact of reduction in first party in terms of digital data could impact gross margins in audience solutions. But overall as other sources of digital revenue as those grow should help to offset that, but other than that no changes.

And there are no further questions at this time. I’ll turn the call over to Warren Jenson for closing remarks.

Terrific again we want to thank everybody for joining us today. We’re pleased to report another solid quarter and then I would just reiterate we believe we’re in a very strong position to deliver on our bottom line commitments for the year. Today we are disappointed to lower our revenue guidance but at the same time we believe our valuation framework is intact, our connectivity is off to a great start and our EBITDA outlook for both marketing services and audience solutions remains unchanged. We’re innovating and we’re leading and most importantly again we would reiterate that we’re both enthusiastic and confident in our long-term opportunity. Thanks a million for joining us today. We look forward to talking to you over the next few days.

And this concludes today’s conference call. You may now disconnect.