Jay McCrary - Treasurer Scott Howe - Chief Executive Officer Warren Jenson - Chef Financial Officer.

Dan Salmon - BMO Capital Markets Mark Zgutowicz - Northland Capital Todd Van Fleet - First Analysis Brett Huff - Stephens.

Good day, ladies and gentlemen and welcome to the Acxiom Third Quarter Fiscal Year 2014 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 introduce your host for today’s conference, Jay McCrary, Treasurer of Acxiom. Please go ahead..

Thanks, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2014 third 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 from the forward-looking statements. 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 of non-GAAP financial measures, is available at acxiom.com. Also during the call today, we will be referring to the slide deck posted on our website.

A link is also included in today’s press release. At this time, I will turn the call over to Scott Howe..

Thanks, Jay and good afternoon. Thanks for joining us today. I always enjoy our conference calls as they are a chance to measure our progress against the plans we have shared. For much of the past two years, we have been outlining our strategies, investments and plans for the future.

That future has now arrived and is exciting to see us make demonstratable progress against our strategic blueprint. New products have been released to the market. Clients are responding favorably and the world is starting to take notice.

While we continue to be humbled by how much work remains to be done, we are increasingly energized at the progress we are now starting to achieve. In late September of 2013, we released the Acxiom Audience Operating Systems, or AOS. I can tell you that we are thrilled with our progress in the marketplace.

I am also very excited about our pace of development and steady stream of innovation. Just Monday, we announced our most recent product release. Given the SaaS nature of our platform, the processing and technical power of AOS will just keep getting better.

Perhaps even more importantly, we believe the ecosystem we are enabling generates a strong network effect as we gain traction. More data and stronger connections lead to better decisions. Better decisions lead to more advertisers. More advertisers lead to more publishers and finally, taken together, more software applications.

I will talk about this in a few minutes. I have organized my remarks today into three distinct areas. First, I will update you on AOS both from a market and product perspective. Next, I will revisit the overarching marketing ecosystem how Acxiom competes in our strategic differentiation.

Finally, I will highlight a few of our more notable accomplishments this quarter before handing it off to Warren. Let me start with an update on AOS. You will recall that our Audience Operating System is predicated on the belief that decision-making in advertising and marketing and commerce is flawed today.

Acxiom’s AOS can transform the industry by helping industry participants in just a holistic set of offline and online data and transform that data into compelling insights that can be capitalized into actionable tactics.

By creating an industry solution, we broadened our potential utility and customer base to include our traditional marketing clients, their agencies, major publishers across all media channels, and virtually any application that can generate better performance through the ingestion and analysis of data.

While there is more work to be done, we are pleased with our initial traction. We have made strong progress with marketers. We are now engaged with more than 30 major marketing clients that are implementing or testing one or more aspects of AOS. We have now completed 10 agreements with several large customers.

Some of the customers we have signed today include Gerber Life Insurance and American Family Insurance along with other major institutions in several key industries. Our wins are not just in the U.S. We have already signed up clients in both Asia and Australia and have several prospects in Europe also.

Our AOS pipeline continues to grow and remains strong at over $45 million. Agencies represent a new type of partner for Acxiom the one that we believe can unlock tremendous value through AOS.

Last quarter, we announced the partnership with Starcom MediaVest Group, by which SMG becomes the first agency to license Acxiom’s Audience Operating System and bring it to market. Additionally, SMG and Acxiom will co-develop applications for SMG and its clients. In addition, we continue to expand our AOS premium publisher partner network.

We are pleased to announce that we have reached agreements with eBay, PayPal Media Network and Twitter. In our first full quarter post-launch, we kicked off with more than $20 million of gross media spend enabled by the AOS data Safe Haven.

Finally, we continue to pursue broad partnering conversations with software developers and application providers. To-date, we have partnered with over 40 such companies. That said this is the one area in which I believe we have barely scratched the surface of our potential.

AOS was created to make the applications designed by others work even more effectively. We emphatically do not consider companies such as Adobe, Salesforce, Oracle or IBM to be competitors, but rather hope that they will become some of our most enduring and closely integrated future partners. Our goal here is simple.

We want to help others succeed spectacularly. While we believe AOS is unique in the market, we also recognized we must continue to innovate and improve the product in its many features. In fact, earlier this week, we announced our latest wave of enhancements.

Much of what we introduced is foundational and will help power faster processing, greater automation and more frequent data refresh cycles. But we also launched some notable new features, including industry insights.

This new application quickly shows how to reach consumers of a specific demographic, propensity for a product and affinity with the brand. Based on feedback from customers, what we have done here is simplified our ease-of-use and ability to target through high-level industry specific models.

Currently, we have five industry verticals within this offering and we plan to add more. E-mail integration, we have made our e-mail marketing solution, Digital Impact, more useful. Now, audience segments defined within Digital Impact can be automatically sent to AOS.

This allows marketers to retarget audiences by reaching out to them on digital channels. For example, e-mail non-responders can be sent advertising offers through premium, social and media sites and AbiliTag features. When we launched AbiliTag with the announcement of AOS, it allowed website owners to really understand who is visiting their sites.

We have now enhanced this with live site visitor data streams. So not only can you get more real-time analysis, you can now use this information immediately to change site content in real-time and interact with your audiences while they are still browsing your site.

In short, instead of telling you what happens, we can now immediately help you do something about it. Additionally, we have also made AbiliTag available on a SaaS-based Hadoop environment. Product innovation is an ongoing quest. Everything we built can and will be further improved. Rest assured we are just getting going.

Next, I would like to spend a few minutes and talk about how we see the marketing ecosystem, where we fit in and what we view as our competitive differentiation. In theory, marketing is a simple process. A marketer determines how it wants to communicate to its customers and then contracts with the publisher to ensure that this message is delivered.

In reality marketing and advertising have never been more complex. Many marketers work with advertising agencies who steward creative and placement planning. A new group of technologies called DSPs and DMPs hope to use device cookie data and technology to help advertisers to be more effective.

Ad exchanges and ad networks help the advisers and publishers to officially transact and place their ads using mostly real time bidding. And more recently supply side platforms or SSPs have emerged. They do what the DSPs do for advertisers, it’s just they do it for publishers, in effect working to make the publisher’s inventory more valuable.

Of course publishers still play a critical and necessary role, but the publishers have necessarily the last stop because there are still a whole host of ad verification and measurement activities that take place after an ad is delivered. The complexity is overwhelming.

Compounded by the fact that many of these industry participants are well connected and use different data sets, thus at step along the way value is lost. It’s possible that pieces of this puzzle may be integrated over time, but it’s inarguable that every participant in this process can benefit from using a more common and connected data set.

We believe this is one of the most important roles Acxiom’s AOS can play. Providing a common view of the customer and permission enabled data so that everyone in the industry absolutely everyone can deliver better experiences and results.

And I would like to clarify this complexity in the solution extend to all channels online, mobile, social, television, e-mail, direct mail, the list goes on. In the marketing wars we believe a Switzerland must emerge.

The industry needs a neutral agnostic catalyst for the common good of advertisers, publishers, software developers and importantly the people to whom they message. Over the weekend Joe Mandese from MediaPost wrote “One neutral player is emerging in an attempt to help marketers and publishers organize the data objectively and scientifically.

If there is a Switzerland in this war it’s Arkansas-based big data organizer Acxiom. In fact that neutrality is the fundamental basis of the so called Audience Operating System is unveiled last fall during advertising week and was the primary reason MediaPost’s Media Magazine named Acxiom it’s supplier of the year.” Joe has it exactly right.

We intend to be the place advertisers, publishers and agencies can go to connect audiences at scale and with precision across all channels and all devices. You can call it Switzerland. We have trademarked it as the Acxiom data safe haven. And we are not just there for one participant in the eco system.

We will be there to help everyone simplify the equation. To further our progress, we continue to invest in and extend several critical areas of differentiation.

First, our scale experience make us better on the basics of data management including our privacy awareness and safeguards, our ability to anatomize information and most importantly our unique capability for entity resolution. Let me touch on this for a moment as it’s a big deal. We don’t resolve identity to the device or cookie level.

We resolve to the individual. This is a big differentiator in a world in which the average person has multiple device IDs and scores of cookies.

By using Acxiom to resolve to an individual level across both online and offline, our clients and their partners can deliver better insights, results and experiences, after all devices and cookies don’t buy things, people do. Second, we start with the data that really matters and then make it better.

Make no mistake that was proprietary to a retailer or an automotive manufacturer to any client is not third-party digital intender data not anonymous cookies rather they want to start with their own proprietary data and marry it with other useful information, that is what we do.

By partnering with Acxiom clients and partners can protect with rightfully their own but enhance it with secure permissible data from other advertisers, publishers and partners. They get the best of all worlds. Third, ours has been an open and neutral platform, the Switzerland of data enablement.

We intend to make our technology and know-how available to everyone in the ecosystem. Ours have intended to be an open and universal standard. As more participants connect to AOS, the value that accrues to each only further increases.

One of the key reasons we have been able to secure partnerships with so many of the publishers than our clients is the relationship of trust we’ve built over many years. We keep things anonymous. We keep with private, private and we wake up everyday thinking about how to better secure our environments. This will never change. Finally it works.

For far too long marketers, publishers and developers have been hamstrung by poor data and ineffective tools. While having a paint brush and canvas doesn’t imply that a master full work of art will be created. The lack of these however ensures it will not. AOS is an enabler and clients are now starting to see some strong results.

For example I met with the client last week who shared their early results from an AOS test campaign. Against their best, best existing tactic re-messaging they were able to design a more targeted campaign that generated 10 times the results for only three times the unit cost.

We need more such success stories but I’m optimistic that they are emerging as AOS adoption accelerates like Microsoft did for business, Google for search or Wal-Mart for retail, we believe Acxiom can help transform an entire industry. Again we still have much to do. But I’m excited about our future and can now see more tangible signs of progress.

Before I turn the call over to Warren, I would like to touch on a few other achievements during the quarter. As previously mentioned we were named Supplier of the Year by MEDIA Magazine for our contributions to the marketing industry to our recent launches of both AOS and AboutTheData.com. Also while I talked extensively about AOS, our U.S.

database business generated significant new wins at Affinion Group, Pep Boys, and a top five credit card issuer. And we also continue to make progress on the IPO front. I’m pleased to share that in December we signed a deal valued at more than $15 million over five years with a large U.S. corporation. This is a great win for both the team and Acxiom.

In summary, we are off to a great start with AOS. And we had some nice wins in marketing and database services and IPO. Our platform will only grow in value as we add new features and expand our network of advertisers, publishers, agencies and application developers. We are building a virtuous cycle that we believe will change the industry forever.

Now I’ll turn the call over to Warren..

our marketing and data service business, AOS and data insight. In summary, before jumping into the quarter and looking ahead, we see a dramatically simplified Acxiom and a company that will be in a materially stronger strategic position. Specifically, we will be a cleaned up and simplified Acxiom with distinct operating units.

Within our portfolio, our marketing and data service business will be a pure-play and capable of being the consolidator and not simply the consolidated. We will also have a simplified and focused approach to globalization.

We will be a reinvigorated technology company and an organization that has the set of opportunities to drive top line growth as a result of our investments in AOS, coupled with the stream of initiatives to improve traction, and at the same time, drive margin expansion.

We still have a lot of work to do absolutely, but we like our hand and we feel we are on the right track. Now, on to a few highlights for the third quarter. Marketing and data service revenue was up 6% year-over-year. In the quarter, both the U.S. and international grew. Total revenue given the declines in ITO increased 2%.

For the quarter, 16 out of our top 20 customers in U.S. marketing and data services showed year-over-year growth. M&DS margins improved to 10.9% versus 9.3% a year ago. In the quarter, we are off to a great start with the Acxiom data Safe Haven.

In our first quarter post launch, we kicked off with more than $20 million of gross media spend enabled by our platform. On a non-GAAP basis, diluted earnings per share increased $0.06 to $0.25 for the quarter compared to $0.19 in the prior year.

Earnings per share for the current quarter benefited from a $3.1 million tax-related adjustments resulting in a $0.04 improvement. We repurchased $14 million of stock in the quarter. And now since inception, we have acquired $193 million of stock out of our $250 million program.

To-date, we have retired approximately 15% of our outstanding common shares. I will be – now, we will discuss our quarterly results in more detail. And I will be referring to the slide deck which was posted on our website. A link was also included in our release.

Starting with Slide 3 in our summary financial results, total revenue was $278 million, up 2% from $273 million last year. Marketing and Data Service revenue was up 6% for the quarter. IT Infrastructure Management revenue was down as expected approximately 11%. OpEx for the quarter was $258 million compared to $246 million in the prior period.

Excluding unusual items, operating expense increased slightly for the quarter. This was primarily attributable to lower IT related expense offsetting an increase in AOS related spending. Unusual items netted to $7 million, $5 million of which related to third party business separation costs.

We incurred an additional $5 million of charges associated with restructuring and legal accruals. These charges were offset by $3 million gain on the sale of the facility. Please note that the business separation costs are included in SG&A and the gain on sales is reflected in other income.

GAAP diluted earnings per share were $0.19 in the quarter, flat compared to the prior year. Excluding unusual items, diluted earnings per share were $0.25 compared to $0.19 in the prior year quarter. Both the GAAP and non-GAAP EPS amounts include a tax related benefit of approximately $0.04. Slide 4, U.S.

Marketing and Data Service revenue was up approximately 6% for the quarter. And as I mentioned IT Infrastructure Management revenue was down. International Marketing and Data Service revenue was up 6% to $32 million, up $2 million year-over-year. International other services revenue of $9.1 million increased approximately 22% year-over-year.

There was no material FX impact in the quarter. Slide 5, for the quarter, our operating margin excluding one-time items was 10.6% as compared to 9.8% in the prior year. The margin improvement was largely due to improvements in international marketing and data services which were partially offset by declines in ITO.

In the U.S., Marketing and Data Service margin was 11.5%, slightly down compared to 12% last year. The decrease in margin is largely associated with our investments in AOS. IT Infrastructure Management margin decreased to 10.2% compared to 13.8% last year. This decrease was due in large part to the impact of lost customers.

Op margin for the International Marketing and Data Services improved to 7.8% compared to a negative 5.3%. This is mostly due to performance improvements in both Europe and Australia. Now, to a few comments on Slide 6 and 7, for the quarter, free cash flow to equity was $47 million compared to $14 million for the prior period.

This increase was mostly related to working capital improvements. On a trailing 12-month basis, free cash flow to equity was up 136% to $103 million compared to $44 million for the same period a year ago. Free cash flow to equity for the prior trailing 12-month period excludes $73 million in proceeds from the sale of our background screening business.

Cap software costs of $5 million remained flat as compared to the prior year and it’s mostly AOS-related. Total capital spending decreased $5 million in the quarter to $14 million. Now on to guidance, before jumping into the numbers as is our practice we do not intend to discuss our FY ‘15 guidance on this earnings call.

That said, as we have done in the past, we will provide our annual guidance on our next call. A few items, tuck-in acquisitions are a possibility. Given these acquisitions may come with – may not come with revenue or earnings, they could be dilutive to our guidance.

Our guidance excludes any unusual items and separation-related costs that may be incurred during the fiscal year. As always we ask you to be conservative in your estimates as we launched AOS just one quarter ago and businesses take time to develop.

With that said, for fiscal 2014 we continue to expect revenues to be slightly down for the year, we continue to expect revenue to be slightly down for the year. We now, however, expect diluted earnings per share excluding items to be as much as $0.82. This is an increase from our previous guidance of flat for the year.

Finally, I would like to welcome Lauren Russi as our new Director of Investor Relations. Lauren will report to Chris Garber, our Head of FP&A, but will obviously work closely with me. She joins us from Addo Communications, where she managed Investor Relations consulting for public and private clients in several sectors, including technology and media.

Prior to that, Lauren worked at Silver Spring Networks including providing support for both Investor Relations and their IPO preparation. I would like to say thanks to Jay McCrary for his work on Investor Relations over the past several years as he has been a great resource and support.

He will be helping transition the IR role to Lauren over the next couple of months as he focuses on his responsibilities as Acxiom’s Treasurer. Thanks for joining us today. We look forward to updating you throughout the year on our continued progress. With that, operator, we are ready for questions..

Thank you. (Operator Instructions) Our first question comes from the line of Dan Salmon with BMO Capital Markets. Your line is open..

Hey, guys. So a couple of questions maybe, maybe a couple for Warren first and then one for Scott, Warren, just I understand the $0.04 tax, one-time tax earnings or benefit in the quarter, that would be included in the $0.82 guidance for the year.

Is that correct?.

That’s correct..

Okay.

And then the second, thanks for the information on the sort of gross spend or billings that are going through the platform through AOS already, any guidance as to sort of what we’d call maybe your take rate or your revenue take out of that figure?.

I would sort of consider an industry average to be in double-digits. I don’t really want to be anymore specific than that, but it’s typically a double-digit percentage..

Okay. And then Scott, you mentioned sort of a series of enterprise software companies where you don’t see yourself in a competitive position with them, Salesforce and Adobe and the like.

So one of the questions I just wanted to understand a little bit better is at times I have heard you describe AOS as a data management platform and of course Adobe acquired a company called Demdex a few years ago that described itself of that as well? So what would be the sort of key points of differentiation of AOS and a product like that? And then I will be finished..

Yes, so great question. If I think about kind of traditional DMPs and you saw me last week I think on stage at that AdExchanger Conference. If I thought about who was sitting to my left, they deal in cookies and digital. Acxiom is all about the online and offline marriage and the collapse of the data down to an individual resolution basis.

And so again, like what I said in my remarks, when you are going down to the individual level and the average individual has multiple device IDs and scores of cookies, you actually get much better energy resolution and much better ROI in your campaigns. That is a capability that has been our sweet spot for 40 years.

And we think we are better at recognition matching than anybody else in the industry. In addition, there is the connectivity and network effect that we have been working really hard on, but it’s not just enough to provide the data. The data is only useful and as much as it activates applications, that it activates publishers or services.

And so as much focus as we put on building the underlying AOS product, we have also been giving equal emphasis to building the AOS partner network, the ecosystem, if you will, because through the connectivity, it enables anybody’s tools to have much greater reach and much greater utility.

So, ultimately we see those types of companies as our partners that by virtue of bringing our entity recognition, our connectivity and then finally the first party data that we have by virtue of working with our client base and managing their custom databases.

We believe that our data and connectivity makes those players, the enterprise software developers much stronger again. And I will tell you that if you were to name a - an enterprise software at DMP chances are we are either already integrated or are talking about integration plans with them..

Okay, thanks very much..

Great, thanks, Dan..

Our next question comes from the line of Mark Zgutowicz with Northland Capital. Your line is open..

Hey Mark..

Good evening guys, hi. I think I have questions on AOS. Maybe just speaking to the new AOS agreement you signed in the quarter is talking about sort of sales cycle.

I’m just curious of how many of those might have been original sort of beta customers or beta trials? And then sort of talking to the sort of implementation of AOS or the ramp on average at those customers, can you kind of talk about the revenue potential sort of in your one relative to your two and beyond that would be helpful? Thanks..

I’ll start with the first, while we scramble to grab the data or start with the second one while we scramble to grab the data from the first, but in terms of the ramp cycle I think it’s premature.

And I would tell you our focus right now isn’t necessarily on the revenue ramp, it’s all about the installed base that our belief is that the more people we can get using AOS and having small successes that ramp is going to take care of itself. I think it’s too early to tell three months in as to what the ramp for a typical spend will be.

That said I will give you one data point which is we try to benchmark ourselves against every other SaaS company launch that we could find. And when we look at our projections relative to what we’ve seen in the past, we think we are on the leading edge of that.

That said again I can’t emphasize this enough and I would ask everybody to be cautious and conservative because there are always, there is always some hair that emerges that you got to shave off to improve your products, unforeseen issues that crop up over time and it will take us some time to work out all those kinks, in terms of the things that actually converted from prior beta clients..

Scott is looking at list. Mark I look through what Scott was talking. And in virtually most of the circumstances we will do some sort of trial and testing for them to work with. So I can’t tell you that all was exactly the case that just that Scott mentioned we’ve got – we have 30 or more customers today using one or more parts of AOS.

So where a trial sales process or where a pilot end sales process begins it’s very blurred. So typically there is a lot of interaction with the marketing department when one of these sales is made..

Fair enough..

Yes, I’m just looking at the list here. I would say that the vast majority of the new clients that we have signed work rollovers from the beta. The beta clients we have continue, we haven’t renewed them into a new contract rather our focus is on just letting them run.

So these are truly new clients I think almost the vast majority and that would be one exception..

Okay, great. One other sort of AOS question, you could talk about the importance of the app development in terms of driving adoption.

I’m curious is that more directed at sort of enterprise adoption relative to agencies and maybe a two part question here, what I’m trying to get a sense of is how important the Starcom deal was to opening up additional agency discussions.

Is it – is that critical in terms of a driver there on the agency side relative to existing agency relationships with respective DSPs or DMPs, I am just trying to get a sense of sort of the opportunity on the agency side or what the obstacles are there and what the opportunities are..

Yes, I mean we are bullish on what we do with Starcom. And our belief is that any long journey starts with a single step. We didn’t take a small step, we took a big leap I mean Starcom is one of the largest and certainly most skilled agencies in the world. There are really two pieces to it.

You focused in on the joint development applications and that’s a piece of it earlier this week. We had dinner with their management team in Chicago and our conversations are turning to what we can build together and we have a lot of excitement for the future there.

And I think that will allow them to differentiate themselves in the same way that as we sign other agency agreements that will probably be innovations with those agencies. The other big piece of it is around client adoption of AOS.

And regardless of what application the client is using or what applications are created there is a tremendous opportunity to change how media is purchased.

And so to the extent that we have opened the door for a whole new way of appliance to take their data marry it together through our data safe haven with the publishers that we have partnerships with and buy in a completely new way we think that offers a lot of potential.

And so our big focus with Starcom in the coming months is training their worldwide team on how to use AOS, so we can go pursue better media purchases one client at a time..

Okay, great. And then one last question on M&DS, I think Warren you talked about international being a smart driver there. I am just curious if there was some fall through there I know that’s been sort of a sore spot and I was curious what attributed to the strength internationally.

And then generally speaking, how much of the growth that you saw in M&DS in the quarter was due to any new R&P activity just trying to get a sense of is there sustainability or any carry through the strong growth that you saw in Q3?.

Let me go ahead and start Mark and Scott may want to chime in here and I will start with international. I think the headline is, it’s way, way too early to declare victory.

That said, I would want to congratulate our international team on really a solid quarter and probably one of the best quarters that have had in a long time particularly in the UK, in Australia. China continues to roll.

Our team there is 20% up plus year-over-year and doing a great job and particularly in how they are bringing AOS to that market and now into Australia. International for us is sort of three business today. And we are about to add and are adding right now AOS. So when you think about it we have had traditional analog data and resale business.

We have in some countries a Marketing and Data Service business. We do some insight or data insight work and now AOS.

As we look at it today and what I have mentioned in the script from an international perspective, we are really taking a hard look at that data reseller business or analog data aggregation and resale business and trying to decide where its future is for us.

But at the same time we are very optimistic about what we can do – continue to do on the Marketing and Data Service side. And then also what we can do with AOS in the internet AOS internationally. And then your second question on U.S..

Right..

I will jump in on that. So if I think about U.S. is this an inflection point, I have said going back I think probably over a year that we are following a pretty methodical process around our pursuit of revenue growth in the Marketing and Data Services spaces. And the first step has always been stabilize what we have got.

And so I think I am adding a check in past calls we talked about the growth of our biggest clients. And I think this quarter our top 100 was up just under 9% in Q3 year-over-year. From a dollar growth perspective, retail and financial services probably led the way, but I don’t think, there is anything meaningful driving that.

I don’t think there is any kind of pattern to take from that. The second thing we always said we would do was design around the needs of our largest clients. And that’s what created AOS. So check, because when we look at the pipeline there the number that we listed was $45 million, we feel pretty good about that.

The piece I am not happy with quite frankly is our data-based pipeline. And I think in a sense we have been our worst enemy there, that for our sales team, our focus has been so much on AOS in the recent months that our database business pipeline has suffered. It’s down double-digits actually.

And so that’s an area that we have to get right, we have to get that to hit on all cylinders. And so before we start declaring victory or start saying that this is an inflection point, we need to get that piece work in concert with AOS. It can’t be an or, it has to be an end..

Okay, great. Thanks Scott. Warren, I appreciate it..

You bet. Thanks Mark..

Our next question comes from Todd Van Fleet with First Analysis. Your line is open..

Hey, Todd..

Hi. Good afternoon guys. Just some questions on the numbers that you gave regarding the pipeline for AOS and how we should think about the $20 million in gross media spend.

I mean, you talk about the gross media spend I guess first that’s since inception, what’s the timeframe for that $20 million in gross media spend?.

That is Q3..

Q3, okay. And because I don’t recall figures for prior quarters, did you have those or….

Yes, maybe with AOS. And as we have stepped our various partnership, it’s dramatically up. I would tell you this was low single-digit millions in Q2. And it literally within the quarter skipped up to $20 million..

Okay.

And then the pipeline, I am just trying to think of the $20 million in gross media spend in the context of the pipeline, are those apples-to-apples or is that apples and oranges, because it would seem that the pipeline would have all types of relationships, not just those are based on the gross media spend, but also those are becoming more SaaS-oriented?.

So our pipeline, Todd, does not include the gross media spend or our related share of that.

Over time as we get a lot more history under our belt and some predictability than I think, we may include some sort of pipeline measure of gross media spend or the resulting revenue share, but our pipeline today for AOS does not include that and we don’t forecast it in there..

Okay.

So the $45 million pipeline is kind of purely SaaS-oriented kind of life of contract, I mean, I am just trying to think of how do we think about it?.

It would be to think about the total contract value for a given relationship. Now, just to be fair in some cases, the relationships today are going to be shorter where somebody might be going through an evaluation period and some maybe multi-year.

So the contract value can change depending upon the opportunity, but remember, there are three aspects to how we collect money through AOS. There is the license fee. They are the transactional elements, records under management, transactions process and then the third element is the gross media. And the gross media is not included..

Okay, that’s helpful.

And then I guess kind of a big picture question, so Scott, you articulated I think very well, Acxiom’s position in the space is kind of, I don’t know, how else to say of a kind of a premiere DMP provider I guess is the way I will phrase it for the moment, but as you think about the types of data that can be important to advertisers and brand owners in terms of understanding their customers.

One of the elements, of course, is kind of the customer journey right, the journey to the sales funnel.

And I am wondering how you think about Acxiom’s position in terms of getting access to information that might help develop an understanding of the customer journey that is campaign execution like ad campaign execution who click through, who saw what, that sort of thing? Are you collecting that information from the minority or the majority of your publisher partners or what’s kind of the strategy in that regard? Thanks..

Yes. Our data collection strategy, the key here is that again, it’s Switzerland right. And so what we won’t do is go pirate someone’s data. When we partner with someone it is always permission based.

And so to the extent that a publisher has valuable data that can be used to activate a better decision they can use that in concert with whatever data that we also bring for that moment in time. So, oftentimes the publisher’s own data married with the advertiser’s data is a pretty powerful combination.

But we don’t subsequently store that information rather it’s married together at that moment in time and that’s why ultimately permissions management become a big part, a big differentiator of what we’re doing. Second, I hate to hear you call us a DMP because that was not what we’re trying to be.

I think a DMP in this space is come to mean very much a online display advertising cookie-based data connection service. That’s why we launched under the umbrella of a operating system, the Audience Operating System.

Our goal is that if the industry is building computers we want to be Intel, if they are building cars we want to be the gas, but we hate to appear on stage with folks that we consider our partners and be labeled as a DMP..

Okay, great. Thank you..

Thank you..

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

Thank you.

Can you guys hear me okay?.

Yes, we can hear you, Brett..

Yes..

Okay. I hope you are doing well. Thanks for the additional data. I want to put a little finer point on the $45 million pipeline number. Is that comparable apples-to-apples to the $35 million from last quarter and am I understanding that the – we originally expected the $35 million to close in a six month period i.e.

by March and then that should pretty quickly go into fiscal 2015.

Is that number now $45 million or is that are there nuances there that we should know about?.

Brett last quarter we gave a measure that was really effectively a six month pipeline and what we try to do now is to move to a 12 month pipeline so they are not exactly comparable. I would tell you how that number in the $45 million is larger is very front-end loaded.

So, we are at strong double-digits from the $35 million or so - $30 million, $35 million that we talked about last quarter on a six month basis, but we’re going to move going forward to just to a complete 12 month look..

Okay.

And then are we right to think that so – so that $45 million theoretically then is should close MTM and then b, revenue or turn into bookings that will turn into revenue just host that MTM, is that the right way to think about that $45 million?.

Yes, I think it is. I think we’re too early though is to say okay instead of 12 month and six month agreement, 12 month agreement, 24 month agreement because that will determine really their monthly recurring revenue..

Okay..

And as we get into further into our model we’d be able to get more scientific with you. We’re just too early on to be trying to talk about those metrics yet..

Okay..

But that’s the variable piece that you don’t have..

Okay. And then you may have sort of answered this in a different way, but I just want to be really clear on it. So, the $45 million is total contract value, but what you’re telling us is that the contract length and these are early days is probably relatively short.

Should we assume that those are yearlong on average and met the $45 million annualized view or what can you talk about that?.

I would say they defer depending upon the customer, some could be six months, some could be a year, some maybe multi-year..

Okay..

And I don’t have today enough debt to try to be predictive on that front, but over time..

Okay..

As we move and are able to talk more about monthly recurring revenue – as soon as we feel confident in our metrics and to where we’re not getting in a position of disclosing something that is too competitively valuable and also these sort of SaaS metrics that we will be very happy ultimately to share with you..

Okay. And then I think Scott you had mentioned last quarter that one of the things that you said you ran into that you need to do address in terms of getting some of these deals closed was the hurdle of introducing a new contract into an already – an existing contractual regime.

How is that going, are we still working through that or have we figured out a way pass that and we are kind of clear sailing on that issue?.

Yes, I think we have made some pretty good progress on a couple of fronts. One is I talked last quarter about the challenge of training an entire organization, many of whom have spent their lives and database to also be familiar with digital marketing getting them ready for AOS.

So I talked I think at that time about our intention to form a tiger team. That’s gone really well. And that group is able to have very quickly get some economies of scale and experience by just having all of the conversations.

I mean so they on the contract front, they kind of know what the issues are going to be and have a much better sense of how to get through resolution. Second is on a lot of the contracts I mean there is kind of you don’t know and so you actually go through a few of these.

And so with double digit contracts now under our belt we are much more effective at figuring out what is going to be the issues. And we are probably starting from a better spot standard wise than we were.

I had a client tell me this is of course anecdotal, but they said hey when we started talking to you guys you were kind of a nightmare to work with from a contracting perspective and it was just clear that we were throwing around terms that your legal team was hearing for the first time and you have made tremendous progress on that.

So I think we still got work to do, but I am encouraged by how quick they were learning..

Okay.

And then last question from me, you gave a nice anecdote or proof point although it sounds like it’s early days of 10X efficacy, 2X unit cost is that representative, is that the high end, the low end I mean given I know you probably don’t have a bunch of data points, but can you give us some context for that particular data point where is that in bell curve?.

I don’t know here is what I will tell you is that our interest is into have AOS deliver triple digit lift. I mean people should be comparing what we are offering to another media technique because what we are – it’s a tool right.

And then I was harking back when people get into the comparison game about a case that I ran in two years ago where someone was buying targeted media from our ad network at that time and they concluded because it had negative lift relative to the rest of their campaign that they shouldn’t do it.

And it was an absolutely wrong decision on that client’s part. And the reason being is because filtering is the mirror twin of targeting. In that case it was someone they were going to do a re-messaging, they were doing a re-messaging campaign to people who had browsed for a piece of software and put it in their cart and then didn’t purchase.

But when they re-messaged those folks with a more compelling offer to complete the purchase, no one responded. When we did the peak side on that it was because those people realized they had an incompatible operating system. And so they were never going to buy. And so the conclusion the client initially wanted to make was this doesn’t work.

When the conclusion that they should have made was this is phenomenal because now I will suppress my advertising to this group. And so the point here is that we don’t want to be in the comparison game the way clients are going to do this is we have given them the canvas and some paintbrushes and they will paint their own masterpieces.

They now have tools that they have never had before to do more granular targeting across a wider variety of the industry than they have ever had a chance to do before and so there is going to be some successes and failures along the way.

But I think drawing a conclusion about this has worked better than search or e-mail and it’s inconclusive and it’s not apples-to-apples, it’s a tool that should make every technique they are already doing better..

Okay, that’s very good. Thank you, guys..

Alright, thank you..

And I am not showing any further questions at this time, I would like to turn the call back over to management for closing remarks..

Terrific. Well, thank you all for joining us. We look forward to talking after the call and to following up with our results next quarter. 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 good day..