Lauren Russi - Scott E. Howe - Chief Executive Officer, President, Director and Chairman of Executive Committee Warren C. Jenson - Chief Financial Officer, Principal Accounting Officer and Executive Vice President.

Daniel Salmon - BMO Capital Markets U.S. Daniel Salmon - BMO Capital Markets Canada Todd Van Fleet - First Analysis Securities Corporation, Research Division William A. Warmington - Wells Fargo Securities, LLC, Research Division Brett Huff - Stephens Inc., Research Division.

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

Thank you, operator. Good afternoon, and welcome. Thank you for joining us to discuss our fiscal 2015 first quarter results. With me today are Scott Howe, our CEO; and Warren Jenson, our CFO.

Today's press release and this call may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed description of these risks, please read the Risk Factors section of our public filings and the press release.

Acxiom undertakes no obligation to release publicly any revisions to any of our forward-looking statements. A copy of our press release and financial schedules, including any reconciliation to non-GAAP financial measures, is available at acxiom.com. Also, during the call today, we will be referring to the slide deck posted on our website.

At this time, I'll turn the call over to Scott Howe..

divested our background screening division; shuttered our perpetually unprofitable European paper survey business; and now divested 2Touch. We believe our ongoing efforts on our portfolio and running a better business are critical to transforming us to the more streamlined, profitable and innovative company we believe we will be.

Stability and continuity are our goals and we are taking steps to get there. Let me conclude by thanking all of you for your patience and support in our journey. We understand we still have a lot to do and much to prove but remain optimistic and excited about the opportunities that lie ahead. With that, I will turn the call over to Warren..

onetime separation and transformation expenses, acquisition-related charges, restructuring and severance costs and stock-based compensation. Second, as our 2Touch announcement indicated, our previous guidance assumed 2Touch would contribute revenue of approximately $36 million and earnings per diluted share of approximately $0.02.

Please turn to Pages 11 and 12. These charts are the same as we used last quarter but updated for the announced 2Touch disposition. Onetime expenditures. Over the next 3 quarters, we expect onetime expenditures to be approximately $20 million and to incur additional restructuring charges of approximately $10 million.

In Q2, total expenditures should be roughly $12 million. One caveat though, to the extent we find opportunities for cost takeouts, we will take them providing there is a compelling payback. This could result in additional charges. CapEx.

We are lowering our CapEx forecast for the year to approximately $100 million from our previous estimate of up to $125 million. While this could change, we feel our normalized CapEx is somewhere in the range of $75 million to $85 million. Looking at Q2, it's going to look a lot like Q1. We expect overall margins to be down roughly 300 basis points.

However, this drop should be entirely ITO-related. Finally, let me remind you that starting in Q2, our GAAP results will be impacted by acquisition-related charges associated with our LiveRamp acquisition. Net and adjusting for 2Touch, we maintain our full year revenue guidance of flat to up 4% off of our adjusted revenue base of $981 million.

And we are confident we are on track to meet our full year adjusted EPS guidance of $0.73 to $0.83. Before opening the call to your questions, let me briefly summarize. Our integration of LiveRamp is off to a solid start.

While we acknowledge FY '15 is a year of transition and heavy lifting, our projects and initiatives are critical to our future and being done with solid business cases in hand. And we reiterate our full year guidance and our confidence in our outlook. On behalf of my colleagues, we look forward to updating you throughout the remainder of fiscal 2015.

Operator, we will now open the call for questions..

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

And for the commentary, Scott, around the sales force and everything you've been doing there, and that's what I wanted to follow up on.

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

that in the world of increased media fragmentation, where clients are demanding increased specialization, the generalist/specialist model allows us to give them the best of both worlds..

That's great. That's really helpful.

Would you quantify -- you quantified the number of sales folks on the data team, would you quantify the AOS team?.

Yes. And let me just find those numbers because I know I just saw them. So within AOS, let's see. I'm just going to do a quick tally here. For all intents and purposes, the way I would split that is we have 8 folks who are spending a big chunk of time with clients and doing most of the selling.

We have an additional 20 people on that team who I would characterize as more publisher-facing or biz-dev facing. The publisher-facing guys do the aftermarket support for our major premium publisher partners.

And then, finally, kind of anticipating the other question you might have is, if I look at LiveRamp, I would characterize kind of the apples-to-apples number as 12..

That's great. And then just one quick follow-up.

Are there any other call center businesses, either domestically or other markets internationally, which you may look at divesting as well?.

We do have -- so no call centers, at least nothing significant. We do -- I should say we do have an inside sales call group, but that's a really different thing. And I should also say that's something that we've started recently.

I mentioned that in my script, having a group of folks that help us identify new leads that can go sit in the top of our funnel and then also, they have done a real nice job -- under the leadership of a guy named Jeff Standridge, done a real nice job of starting to grow our data sales efforts through that call center..

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

No, no..

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

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

I'd be happy to. If you look on the face [ph] of the P&L, in SG&A, which for 20 -- in SG&A, it's about $12 million and then all of the restructuring charges show up in gains, losses and other. So think of the division as being transformation-related activities and also ITO separation showing up in SG&A.

And of note, you can see, Todd, the effects, I think some of our cost reduction because, if I'm not mistaken, I believe SG&A, excluding those amounts, was down about 16% over the course of the year. And then again the restructuring-related things like severance, the European paper survey business all show up in gains, losses and other..

Right, that's helpful. I might want to circle back with you on that one after the call. But I guess I'll move on to AOS.

So I'm assuming that given there's no change in the revenue or the EPS guidance that you're probably still expecting the contribution from AOS, revenue contribution from AOS and LiveRamp, to be in the $50 million to $60 million range this year..

That's correct..

Okay. And I'm just thinking about that guidance just in the context of Carrefour, which seems like it would be a pretty significant relationship for you for AOS. So I just -- I want to ask, it doesn't seem like the Carrefour relationship would necessarily be included in the pipeline at this point given the timing of the announcement.

I could be wrong about that, but could you verify whether that's the case and then whether or not that relationship was considered in the context of the $50 million to $60 million. And then I have a follow-up on that..

So the answer is part of the Carrefour relationship is in our numbers or will be in our revenue going forward. So as an example, anything related to subscription is in our pipeline and in our numbers.

Then there's the second element of the -- any revenue that comes through GMS, and that we do not include in our pipeline but is certainly included in our estimates. Obviously, we were pleased that the GMS jumped up to $28 million this quarter.

The second thing that I would say is another plus is that, this quarter, we had about $1.5 million -- it's a small number, but it's a start -- of GMS in Europe associated with both our Facebook and eBay relationships.

So as we contemplated, then, to your third point, what -- as we built our guidance, did we have GMS for Carrefour included in our guidance and in our estimates? No, we did not. However, let me just very strongly advise you, don't take your estimates up for that.

Nonetheless, it's obviously a very significant relationship and we're also pleased to be underway in generating GMS-related revenue in Europe..

Right, right. That's great. So the -- just thinking about how long it would take to quantify, for you guys anyway internally, to think about what kind of opportunity that brings. Because I imagine -- maybe we can get into a little bit.

So you have the opportunity with Carrefour spend, that is the amount that they spend on advertising every year and having that run through AOS, but then there's also the element of their partners, their CPG companies, their manufacturers and so forth, their retail partners that pay them for placement in store, in mailers and what-have-you.

So I'm just trying to think about the quantum of the overall opportunity as you guys see it.

And then if you haven't really identified it to this point or haven't really been able to quantify it, how long do you think it's going to take you to really kind of quantify it?.

Yes. I'll jump in and try to correct, perhaps, sins of the past in as much as, if I've learned nothing through the AOS rollout and indeed every product rollout I've ever been involved with in my life, it's that things always take longer than you would anticipate.

There are always unforeseen product gaps or repayment of the kind of technical deficit as you do implementation. And that, if you approach an implementation with an eye towards building a great, long-term partnership as opposed to maximizing near-term revenue, you have a much greater chance of being successful.

When I think about the things that I'm most excited about that we've made some real progress on over the last 6 months at Acxiom, I look at things like Facebook, where the seeds that we planted a year ago are now starting to generate some meaningful GMS gains, particularly through their self-serve interface.

Likewise, at Starcom, we've taken a very methodical approach and we've been very cautious in terms of estimating any kind of revenue ramp for that because we want to get it right. So we've done a lot of handholding and educating. Right now, we're working with them.

We're partnering to give them advice into what data, what propensity models, what client segments they ought to launch as they ramp up their media buys. All this to say is Carrefour is a partnership along those same ranks.

We want to get it right and so I think, realistically, you're not going to see the needle move for that this year, rather you'll start to see that ramp next year and beyond.

But we think it is a really important partnership, not only because of what it can become but also because it represents our first full-scale AOS platform deployment in Europe, and that's a milestone in and of itself. We believe if we get that right, other European clients will follow..

I could add on that, Todd, just to build on what Scott said. The Carrefour team was actually here in Silicon Valley with us several weeks ago. And one of the things that they are doing, which is exactly what Scott is saying, is they're out learning.

So they spent a day with Facebook, they spent a day here with Phil and our technical team, and we heard about their plans and how they are thinking about things. They believe in data, they believe in the power of onboarding and also in the power of AOS, but they're going to very methodically go about their work.

That's exactly what they should do, and we'll be right alongside them all the way..

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

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

Yes, Bill, it's 2 things, but I'd put the emphasis on the first. I'd say, above all, it's just, quite frankly, the passage of time. That as we roll these products out, there is a natural, call it an S-curve kind of adoption. And as marketers try things like Facebook, they will learn how it works and they will scale it, if it works, over time.

And so what we have particularly seen on the Facebook front is that marketers are trying data-driven media purchases on Facebook. It's succeeding. And as it succeeds, they are either expanding their buys or word-of-mouth is spreading to other advertisers who are trying it. Second is I got to give a call out to our own sales force.

We were very disappointed in our GMS results last quarter, and so we made that a focus of education for our sales force and Nada made it a focus. She even put in place a sales contest internally, and that got our entire sales organization more focused in on what could be done.

We supplemented that with some case studies because now that we've been in the market for a while, we're starting to collect data on what's working. That allows us to evangelize it more effectively to our sales teams.

But I will say we got a lot of work to be done there because, although we seem to be going in the right direction on Facebook in particular, we need to duplicate that success with all of our online display publisher partners, and then also really put a push in the coming quarters behind extending kind of the online display use case to other use cases as well, both media spend and other types of ways to use data..

Bill, I could even add maybe a few things on top of what Scott said that might be helpful here. The one thing that we know is that, if you know how to use data in your campaigns, it works. So Scott said this 100 times about the more you know, the better results you're going to generate.

What we also know is, and we've really heard this too from our colleagues at LiveRamp, is it takes practice. And what we also know is that people aren't really used to using data in this way in order to run their campaigns. So we're doing a lot of training and education in helping people to understand how better to use data.

What we don't want is we don't want people to do a single campaign. What you want to do is you want to really embark upon a program that says, "I am going to take the information that I have. My first-party data, third-party data.

And I am going to constantly refine how I think about it, how I work it in my results." And we're confident, if you do that over time, you're going to get a great result on what you want, but it definitely takes practice. And then the final thing, and this comes a little bit out of our LiveRamp integration, but we know it, too.

One of the things that LiveRamp has done a great job with is really their partner support. And we have a tremendous opportunity as we think about our publisher relationships and our relationships with the DSPs to build on that.

And the more closely we can work with our premium publishing partners and the DSPs to help them drive great results, the more successful we're both are going to be..

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

Let me answer the question. I'll start with the last part and then work backward. Our guidance remains $50 million to $60 million. In the quarter, AOS generated about $5.5 million of revenue, 50% of which came through the GMS line.

In addition, if you -- and this is -- again, I want to be clear about that because we did not book any LiveRamp revenue in the first quarter because we closed on July 1. LiveRamp's revenue for the June quarter was $7 million. So you can figure $7 million plus $5.5 million or $12.5 million for the quarter..

Got it. Okay. And then I also wanted to ask on Starcom. You mentioned that the number of clients has gone up to 80. I believe the number I have in my notes on what the clients were before was 30 prior -- end of the prior quarter.

And I wanted to ask, how many clients are actually starting to execute actual campaigns?.

Yes. And that's the right question. So the way we think about the 81 deployments is those are clients that have AOS activated and can utilize our UI to execute things with their data. If you look at the number of Starcom clients that have launched, I think it's been several who have run 24 distinct campaigns to date.

Again, we're following a real methodical approach with them. First, sign an agency, train them, onboard our third-party data and enable things, which is where we are now. Then collaborate with the teams at a team level and work with them to understand what kind of propensity models or use cases, what kind of segments that they may want to launch.

Because we want data-driven campaigns to work out of the gate and just get better over time. And then optimize. So we need to be looking at the results and then refining the campaigns over time in concert with them. I was out in Chicago this week, and I had a chance to sit down with a big chunk of Starcom's leadership team. They had a big summit.

And I think they're a great partner. It is going incredibly well and I believe if we continue to execute, this is going to be a model that over time we can start to deploy with other agencies..

And our last question comes from Brett Huff from Stephens..

Can you give us a sense of where the costs will go down. The one place we were surprised, and I think you guys called it out in your slide, the sort of what your analysis was of where the miss for EPS was.

Where -- which line items are going to go down that's going to get us to our full year guidance even though we kind of -- at least we were above where you came in on pro forma EPS? What kind of catches up?.

Well, I would look at the run rates for Q1 and you can be assured that whether you're looking at cost of sales or SG&A, we're trying to drive cost improvements wherever we have the opportunity. So we're really midstream in integration with LiveRamp, and let me start there. So what we're doing with our teams are asking ourselves 2 big questions.

One, how do we drive more revenue -- or really 3 questions. One, how do we drive more revenue? The second question is, how do we make our products even that much more exciting? And that's really the first for our customers.

And then the third question we're looking at is, how do we optimize our cost structure and eliminate any overlaps where they may exist and look for opportunities to drive synergy? Some of those benefits would impact cost of goods sold, some of those benefits might impact something more down along the lines of SG&A.

So I would look, Brett, to answer your question, at where are the run rates today for each of the line items and then just expect that we are going to continue, as we always have, whether it's in delivery, whether it's in our G&A or any other -- IT or any other function to drive productivity across all those lines..

That's helpful. And then the second question is, if I did my math right, last quarter when you gave the first annual guidance it implied that the legacy marketing and data service business was down about 4%. I think Scott, you referenced that. I don't know if you gave us the number, but at least that was the math we did.

And you guys came in better than that this quarter.

Can you give us a sense of why that is or where the -- have you sort of adjusted the basis on a continuing operating basis point of view, so that we've taken out the $36 million in the comp for last year?.

Let me try to address that, Brett. And I feel, I'd say from the outset, we have not changed our revenue guidance for the year, so it is what it is. The second thing that I would say is our objective is to always improve and to do just exactly as Scott said and address the issues that we see in front of us.

And we'd hope that, over time, that changes the trajectory. We're not happy about the guidance that we gave you, but it's appropriate. So our job going forward is to continue -- is to execute and drive growth..

Okay. And then last question for me, just I want to double check.

I remember you said the $50 million to $60 million for LiveRamp plus AOS included, obviously, a full year of AOS, but only 3 quarters of LiveRamp, is that correct?.

That is correct..

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

Again, thank you, all, for joining us. It's our pleasure to be with you. We look forward to the follow-up calls. I'd conclude with the same 3 thoughts that I left you with. We're tickled to have LiveRamp be part of Acxiom, and our integration is off to a great start. We acknowledge FY '15 is a year of transition. A lot of heavy lifting and improvement.

But we believe in our projects, we believe in our initiatives and everything that we're doing is being done with solid business cases in hand. And that, again, we would reiterate our full year guidance and confidence in our outlook. Thanks a lot for joining us..

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