Lauren Dillard - Director, Investor Relations Scott E. Howe - President, Chief Executive Officer & Director Rick Erwin - President, Audience Solutions Warren C. Jenson - Chief Financial Officer & EVP.

Todd Van Fleet - First Analysis Securities Corp. Dan Salmon - BMO Capital Markets (United States) Brett Huff - Stephens, Inc..

Good afternoon, ladies and gentlemen. Welcome to the Acxiom Fiscal 2015 Fourth Quarter Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Lauren Dillard, Director of Investor Relations..

Thank you, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2015 fourth quarter and full-year results. With me today are Scott Howe, our CEO; and Warren Jenson, our CFO and Rick Erwin, the President and General Manager of our Audience Solutions Division.

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 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. Before jumping into the call, I would like to take this opportunity to publicly welcome Rick Erwin to the team and call. Rick joined last month to lead our Data efforts, as President and General Manager of Audience Solutions.

We are very excited to have him onboard and look forward to what our Data business will be able to accomplish under his leadership. FY 2015 was an eventful year at Acxiom. Yesterday, we announced the divestiture of our ITO business.

I view this as a major step toward the future, as this divestiture increasingly positions Acxiom as a marketing services pure play comprised of three highly focused and complementary businesses.

Our LiveRamp Connectivity business, our Audience Solutions' Data business and our Marketing Services portfolio, which includes database, e-mail and consulting. Increasingly, I'm thinking about these businesses as SaaS, DaaS and Services, each centered on our core capabilities in connectivity, recognition and data stewardship.

And I believe each of these businesses can be transformed into better future business than they are today. One of our top priorities for the coming year continues to be accelerating the growth of Connectivity. Over the past two years, we have established Acxiom as the early leader in an important and fast growing new industry category.

In doing so, we repositioned Acxiom's reputation for innovation and won a legion of new customers. Last year, this SaaS business grew by over 300% and all signs suggest another year of strong growth.

I am pleased to share that the integration of AOS and LiveRamp was completed in Q4 and as of March 31, a full six months ahead of schedule, all clients have been migrated to our combined solution, LiveRamp Connect.

Marketers are now able to use a common interface and single back-end data distribution system to match and connect their data to a growing network that today includes close to 150 partners.

Importantly, the growth of connectivity has introduced Acxiom to a legion of new client types, including smaller marketers, agencies, publishers, and enterprise software companies. We believe these will fuel both connectivity growth, but also over time, give us beachheads upon which to grow our data and service offerings.

As for now, client reaction to the combined solution has been very positive and the fourth quarter capped off a year of incredible adoption and growth. Please turn to slide three and I will provide an update on the adoption metrics we introduced last year. A few highlights from the quarter.

Our install base continues to grow and we added 20 new customers in the fourth quarter. In total, we ended the quarter with approximately 215 customers using LiveRamp Connect, a sequential increase of 10%. Revenue continues to grow in line with adoption.

In Q4, we generated approximately $22 million in revenue, up from Q3 and up over 300% year-over-year. For the year, we generated $63 million in Connectivity revenue, exceeding our previous guidance of $60 million. We exited 2015 with a revenue run rate in excess of $80 million, up from $68 million at the end of Q3.

We powered $47 million in gross media spend during the quarter, while we expected this number to be down sequentially due to seasonality, it is up over 200% compared to Q4 of last year. And finally, I would like to highlight some of the progress we made internationally in the past quarter.

We launched LiveRamp Connect in France, Australia, Japan and China and signed a number of key partnership agreements in these geographies. In France, we are partnering with Nielsen to help Nielsen activate and distribute their segments to digital agencies and clients.

And in the UK, we signed an exclusive data agreement with DunnHumby to help enable closed loop marketing for our clients. Across APAC, we are committed to over 10 regional premium publishers. We are connected to over 10 regional premium publishers and have organized the first ever RampUp Asia Conference in Tokyo this September.

In summary, our Connectivity business continues to demonstrate strong momentum and I am very pleased with the launch of LiveRamp Connect this past quarter. The progress made in fiscal 2015 has enhanced our reputation for innovation and increased our relevance with both existing clients and the world of new publisher, agency and application partners.

Going forward, Acxiom must aggressively extend its early lead in onboarding and connectivity. Like a telephone switchboard, the more volume and connections we can drive, the more value we create for our network of partners.

Our near-term focus here is ensuring our solution scales in line with adoption and continuing to deliver exceptional results to our customers and partners. Additionally, we remain focused on expanding our partner ecosystem and building out our connectivity capabilities internationally.

Before I switch gears, I would like to share two management changes within this business. I'm pleased to announce that Travis May has returned to LiveRamp as its President and General Manager replacing Auren Hoffman. Travis has spent much of his first year at Acxiom managing product and engineering across all of our offerings.

So he now becomes a key point of integration and stability in the Connectivity business.

Auren's exceptional business acumen, creativity and entrepreneurial ability have been key ingredients in LiveRamp success to date and he will now split his time between managing a gradual transition with Travis, and helping me identify new innovation opportunities within Acxiom.

His second priority in the coming year will be to solidify our Marketing Services foundations and profitability. While this business has different economics and characteristics than Connectivity, Acxiom must continue to be a leader in our Professional Services business. Over the past year, this business hasn't performed to our expectations.

But we are confident we're doing the right things to strengthen our position. We have been interviewing for a President of Marketing Services for the past few months and I've talked to some outstanding candidates. While I don't have any news to announce on that position today, we are hiring to fit our new model.

So you can expect someone who knows how to run this business and operate a world-class services organization. I hope to have more news on this front in the coming weeks. We are delivering more innovation within our Marketing Services product offerings. For the past 18-months, our focus has been on building our Connectivity offering.

With that business successfully growing, we're now accelerating innovation across our Marketing Services portfolio. This is already underway. For example, in April, we launched a major refresh of our Digital Impact UI and reporting capabilities. We're also readying some innovations in marketing database.

A third priority will be to reinvigorate our Audience Solutions or data business into a more modern, relevant and efficient DaaS offering. Rick Erwin will talk about this in a few minutes, but I am excited about our longer term future here.

Since the majority of our historical data sales have been directly to our database clients, we haven't captured our fair share of emerging demand from SMBs, agencies, publishers, and enterprise software companies.

We are expanding our data specialist sales muscle while also modernizing our distribution capabilities and increasing the breadth of our data offerings. Also, with the pipes we are laying in connectivity, there will be more opportunities for us to transport our data to a new wave of prospects and customers.

And finally, as we have in the past, we will continue to focus on running a better business, and fostering a high performance workplace. With the implementation of Workday, an investment in our next-generation network and infrastructure, we have made a lot of progress against this imperative in FY 2015. At the same time, we still have work to do.

Our reporting systems increasingly give us clear lines of sight into each of our product lines. And we continue to find opportunities to run better businesses in every part of the portfolio. With that said, let me conclude by thanking all of you again for your continued patience and support in our journey.

I look forward to updating you on our progress in the months ahead. And now, I will turn the call over to Rick..

financial services, retail, travel, insurance, entertainment and others. And yet there're as many as 5,000 prospects in these markets where we're not yet doing much data business at all.

Additionally, many of our existing client relationships aren't yet fully penetrated in terms of potential data spend with Acxiom, which points to a real opportunity with those clients who know us best and who already trust us with their marketing budgets.

I want to say something about our talent base, because it's been an energizing discovery for me in my first month with the company. The data heritage of Acxiom is alive and well in our people and our culture. Across departments, sales, product, marketing, engineering, operations, I'm very impressed with the competence and energy of our associates.

The Acxiom culture is a powerful mix of customer focus and reliability and data innovation.

I believe that product breadth and quality are a must for growing marketing data sales and what I've found here is an unparalleled collection of data and recognition products and services, that are generally performing at or better than our clients' expectations. So growing our data business will not depend on fixing broken products.

So with such a positive outlook you might ask, so why isn't the business growing? And there are really three reasons. First, our strategy in the past has been to serve our clients through a single centralized sale force. And that's allowed us to develop long successful relationships with many of the best data driven marketers in the world.

That approach is also valued by clients who want one single point of contact for everything that they might buy and use from Acxiom.

That's great, but what we know is that when we augment that approach with very skilled data sales specialists who establish credibility with the client and show them the other Acxiom data products that they can use, that strategy pays off. So, we're doubling down on that approach this year.

And while that sales investment is dilutive in the short-term, we believe the payback on this will be fairly fast. Second, we typically marketed our business as an end-to-end solution, consisting of bundled products and services.

And while this is right for many clients, now we'll be more relevant to those segments that want to buy point solutions, think data only. We believe this doubles our total addressable market opportunity. And to serve that segment, we'll need to invest in our go-to-market approach beyond just the sales force.

Take marketing for example, we'll be investing to better articulate the value and differentiation of our services. And analytics, we'll be adding analytical services to our data offerings. We used to do this, but not recently and customers are clearly asking us for it. Third, we need to match up our operations to the way our clients buy data.

This will be about aligning our distribution and delivery for more effective execution. In some cases, this will mean combining and streamlining processes that currently exist in different parts of our organization with the goal of making it easier for our clients to buy these services and easier for our associates to deliver them.

As part of this, we see opportunities to also lower our cost by reducing data spend that's not adding value. So by this, I don't mean providing less data to our clients.

On the contrary, we see opportunities to work with our suppliers to ensure that we eliminate duplicate data and to make sure that all the data we're buying is making its way into the product. We begun phase one of this initiative and we expect to see material success from it during this fiscal year.

So in summary, we're starting with a strong solid foundation. We have some work to do and we need to make some investments as I said, but we know what needs to be done, and we can see a path to returning the business to growth. Warren, now I'll turn it over to you..

crushing the opportunity in Connectivity; two, stabilizing Marketing Services and Audience Solutions and returning these businesses to growth and expansion; third, eliminating stranded overhead and driving additional productivity into each of our businesses; and finally, returning capital to our shareowners through our share repurchase program.

Thank you again for joining us today. On behalf of my colleagues, we look forward to updating you throughout fiscal 2016. Operator, we will now open the call to your questions..

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

Good afternoon, guys..

Todd..

Warren, just on the stats you gave there at the end on Connectivity growth and what's embedded in the guidance here.

You mentioned 65% to 75% growth off of the 55% and then I think you said minus 4% to what, flat or slightly up for the balance of the business, is that right?.

Yes, that's what the implications are of our growth in Connectivity and where we see the core coming out. And I would say it's really 4% to roughly flat with the possibility – the only caveat, with the possibility of being slightly up..

Okay. I'm just thinking about if we didn't build off the 55% and there weren't the reallocation or the reclassification that you talked about, is that still 65% to 75% growth for Connectivity? I guess it would imply that the data element is growing at the same pace as the rest of the business.

I'm just trying to think about if we didn't reallocate, are we still thinking about 65% to 75% growth in Connectivity?.

No, Connectivity would be much higher in that case, but we also wouldn't be building off the 55%, we would be building off 63%. So I would not change the growth rate, but we would just be building from a larger base.

And let me say to everyone, because I think there is an interesting point to be made here, as we are going through the creation of these different segments and separating out the businesses, let me tell you, I know there is going to be some elements of confusion.

But at the same time, I know when we get through this and get everything separated out, all the costs aligned, the revenue aligned, we are going to be in a far better place and provide everyone with a lot better transparency and also really equip our businesses to grow.

What we felt when we were looking at this issue is, we want our data business and Rick can talk about this to be incented like crazy to distribute and sell their data everywhere. And it just didn't make sense for Rick's P&L to include all that data revenue in Connectivity.

When we are one segment, that's okay, when we are two, it's not, and that's the reason for the change..

Okay, that's helpful. Then you mentioned, Rick. Rick, welcome to the firing line..

Okay..

I'll ask you a couple of questions. So, one, what attracted you about the opportunity here at Acxiom given your years of service, I guess, in the industry? I ask you that.

And then secondly, what do you think – and thinking about Audience Solutions and what data means to Acxiom, or what it means to kind of the new digital advertizing and marketing industry that we are now in? What do you think is kind of a – and should be a kind of an average growth rate for data solutions or Audience Solutions as we think out beyond 2016? I'm just thinking, we've had a business here that's been had – it's been in the state of maybe decline, flat to decline for some time, but assuming that you bring to bear all of the initiatives and they work out for you the way you'd like and those that you articulated today.

What do you see when you look out across the landscape? What is kind of the growth rate that should be expected out of Audience Solutions longer-term?.

Thanks, Todd. Let me take the first part first, which is that what attracted me to Acxiom is a company that has made the investments to build the future of data-driven marketing.

And what that means to me is not only a very strong foundation and heritage in data quality, data governance, data stewardship, but also the distribution potential to bring all of that power of that heritage to the rapidly growing world of digital media and that combined with the phenomenal people and reputation of the company is what drew me to it.

In terms of the right way to think about the growth rate of a functioning future pointed data business, I want to have Lauren answer that, so that he can put it in the context of the other business segments that we'll be reporting going forward..

Todd, let me address that and I'll try to touch on each of our business segments, because we really are in three businesses each with different long-term growth characteristics.

So, in Connectivity, we feel we have a tiger by the tail and we feel the growth characteristics of that business as far as we can see out – look, just like that, the best of SaaS in any industry.

So, 65% to 75% is the long-term growth rate is really what we're expecting from the business and I know what Warren and Travis have been building toward as well. As we think about data and I think you have to look it in the long-term, because we have to build our way to stability and then we have to build our way to grow.

If you go back to what Rick said, he highlighted some really interesting things, doubling the size of our TAM and attacking new markets where we just haven't been present, institute a better level of data sales capability for existing clients to drive higher revenues and more sustainable revenues, the higher level of productivity in our operations around how we think about products and procurement.

When we think about all of that, coupled with the ability to take our data anywhere in the digital ecosystem, we're gunning for a double-digit growth rate in the long term. Again, that's not going to happen in the next few quarters, but that's what we're gunning for. In marketing services, same thing, first, driving for stability.

We still have some work to do, as I think is evidenced by our guidance. Our goal in that division is low single-digit growth rate for the long-term..

Thanks..

Thank you. Our next question comes from Dan Salmon of BMO Capital Markets. Your line is now open..

Hey, guys, good afternoon. Maybe, a double question for Warren and Rick.

Warren, I know prior to Rick rejoining, you had been already starting to get some of the work underway for Audience Solutions and a lot of that consolidation and making it more accessible more quickly to your clients – maybe we'll use the baseball analogy, where would you think you're in – what inning in terms of the work that needs to be done there and then maybe just as a follow-up for Rick, sort of how do you think you can take your prior experience and really sort of lead the strategy for this for being a more differentiated product going forward?.

Maybe I'll jump in and take the first one here, Dan. This is Scott. Where are we in terms of what inning, I'd say we're in the third or fourth inning. We've made pretty substantial investment and a lot of progress in terms of making our data more accessible.

So over the last few years in concert with both the AOS and LiveRamp build out and we are building pipes. With that, we are building APIs that makes our data accessible to an increasing array of the marketing world without necessarily having to have attached sales capabilities with that.

Recently, we've announced partnership with IBM, for instance, where our data and wiring helps power their marketing cloud. Actually, I was invited to speak at IBM's Amplify Client Summit last week. Likewise, that's the same kind of wiring and plumbing we took to our agency partners and our many publisher partners including Facebook.

So we've learned a lot from that, but we need to complement that now with increased data, specialist sales muscle, advanced modeling capabilities, and just continuing to build out the connectivity grid, such that anyone who wants to ingest our data, our data is accessible to them..

I'll just tag on there, Dan, to say – I think you asked me, what is it that makes me confident that we see the path forward on this Audience Solutions businesses, is that sort of fair representation of your question?.

Well, I think more just that wanting to understand where it is in its transition and then to either you or Rick sort of – how to establish differentiation for this product in the marketplace is the main idea?.

Yeah. So, this is Rick – so look, we have – the foundation is already in place. So that's always – in my experience when you are approaching a business unit, general management challenge the first step is, are the basics in place.

Is there a leadership team? Is there a stable and strong product? Are their good relationships with clients and prospects across verticals? And do you have the right sort of distribution rails in place? And so, step one is those foundational elements are in place.

And going forward, the way we make this business differentiated is not simply by having a different data product than anyone else. Product differentiation is important.

Our products have to perform better and they have to span a breadth of data diversity and client use cases that others can't do, but much more important to that is the holistic experience that a client gets, when they ingest our data, market with that data, measure against that data, and see better marketing results.

And so for us, it's important that the way we deliver our analytical services, our data products themselves, the Connectivity that we already have in place after our LiveRamp acquisition and that we do that with a set of resources of the client interface, the sales rep and people that support that process that drive credibility and loyalty over time and that's the way we'll do it..

Great. Thanks, Rick and thanks, Scott..

Thank you..

Thank you. Our next question comes from line of Brett Huff of Stephens, Inc. Your line is now open..

Good afternoon. Thanks for taking my questions..

Hey, Brett..

Hi, Brett..

Two questions for you and then I'll get back in the queue. The fact that the LiveRamp revenue went up sequentially nicely, despite a fairly substantial decline in the gross media spend seems to imply that there was a significant either increase or a bigger percentage of – in the Q3 number of SaaS revenue, relative to the gross media spend revenue.

And I'm wondering if we should take that to mean that these are newer clients that have signed on or we're getting SaaS revenue from more clients, but have yet to get the gross media spend revenue, is that the right way to interpret that result?.

Well, yeah, I mean the way we would think about it, Brett is, I mean first you want to install the pipes and then you want to flow data through the pipes, right? And so, when someone signs up for SaaS, they're paying us a monthly subscription. And so, that number is relatively constant unless we sign up new clients.

So the increase there in the SaaS was driven by new client adoption. And then, in terms of what flows through the pipes, that is much more seasonal, I mean, that's campaign-driven.

And so, yeah, our hope is that as we bring more and more people to use our pipes, as we build the power grid, so to speak, it gives them more and more opportunities in future quarters to ingest data through those pipes. So yeah, all this to say, you're thinking about it exactly the right way..

Okay. And then, this is sort of a related question and somebody asked this earlier, but I guess I'm still not quite getting it, Warren, we're now – we are using a base of $55 million for LiveRamp versus the $63 million that was reported.

And that $8 million delta was revenue associated with gross media spend that should really be attributable to Audience, is that correct?.

Yeah, the only thing that I would clarify is, these are revenues that we have received – or royalties we have received for use of our data in the digital ecosystem. So, there were media dollars spent – yes, GMS, but it was GMS related to third-party data that Acxiom supplied..

Okay. And so just to roll that forward, you said, we expect midpoint 70% growth off the 55%, so that gives me, if I just do the straight up math, it's $94 million.

Is that kind of what you guys are – is that the right math?.

I believe you're doing the math correctly..

Okay. And so – and somebody kind of asked this before, but I want to put a finer point on it if I can.

How much are you then assuming in addition that is gross media spend is going to show up in Audience? And the reason I ask that is, the negative 4% to flat that you're kind of assuming for the legacy business, that looks better than maybe it otherwise would without the reclassification.

So, I just – what implied in your guidance is the gross media spend in the legacy part of the business?.

I don't know that we've completely – we haven't broken out the GMS part of our business and I really don't intend to today, Brett.

But suffice it to say that in the Connectivity business, whether it's use of our data or whether it's use of first-party data, we would expect that to grow substantially during the course of the year again in fiscal 2016..

Okay. And then, one last one and then I'll get back in queue.

Can you sort of give us more color on the management changes or on what – he is going to work with you, Scott? I mean, so he is still going to stay with the company, but what specifically will be his kind of portfolio or his purview?.

Yeah. I mean, first off, let me just say, incredibly talented, entrepreneurial, incredible leader who helped build the LiveRamp business, but also built a phenomenal management team around him, including Travis.

And so we felt that a year after the acquisition and quite frankly a year before I think the big earn-out is due, now would be a really good time to manage an orderly transition of the business to Travis.

The added benefit there is, Travis has spent most of his time since joining Acxiom thinking about products and capabilities on an Acxiom wide basis. And so, already we've seen him take some of that thinking and incorporate it into our Connectivity division.

Connectivity enhanced by data stewardship, privacy management, permissions management and recognition creates a far stronger, more robust product offering for the long-term. So we're really using this to cross fertilize ideas across the organizations and build a long-term migration plan.

I will tell you, as anybody who knows Auren, the man is a fountain of ideas.

And as I often joke with Auren, there was kind of the rumor years ago at Princeton University that when Albert Einstein taught there, they had a group of TAs that would just follow him around and like capture all of his words, because within his remarks there was always a kernel of brilliance.

My hope is that by having Auren step away from LiveRamp and think more broadly across the Acxiom portfolio and also what his next big entrepreneurial ambition might be, that some of that entrepreneurial spirit, we can plant throughout the rest of Acxiom. So all this to say is, I'm going to bleed that guy dry of all of his good ideas..

Okay. That's what we needed. Thank you..

Great. Thank you..

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

Hi.

Hey, Warren, I think it might be helpful for everyone if – I know you guys are going to break it out three months from now or so, but I think it might be particularly helpful today if you could give us an understanding of how much the Audience Solutions business represents in terms of revenue, just kind of ballparkish? I guess – I think if you want people to do a sum-of-the-parts analysis and valuation on the business, I think that would be most helpful.

Thanks..

Great. I'd be happy too. For FY 2015, and I believe – let me again just say it from the outset Todd that we are in the process of just locking down these, both the revenue and also the cost, so all of this is preliminary and we will report this out obviously just as you said in Q4.

So when we look at the business, I would put in the Marketing Service category based on the work we've done so far about $444 million, in Audience Solutions $305 million, and then the $55 million, I mean, it might be off a little bit here for rounding, $55 million in Connectivity..

Okay. And then just, again thinking qualitatively or characteristically I guess about the three different businesses.

The margin profile, is there any reason to believe that the margin profile that is operating margin profile for the Audience Solutions business shouldn't be at least as good as that of the Connectivity business over the longer term?.

Stay tuned on that front. I'm not going to go into the margins for the reasons that I mentioned, but directionally you're correct. This is a very high-margin business..

SaaS and DaaS they go together..

Okay, great. Thanks, guys..

Thank you..

Thank you. And I'm showing no further questions at this time. I'd like to hand the call back over to Warren Jenson for any closing remarks..

Great. Well, all of you on the call thank you very, very much for joining us. I'll end the call today just as I did yesterday. This is truly a transformational moment for Acxiom. We're thrilled to have Rick here. We look forward to executing on our priorities of just knocking it out of the park with Connectivity.

We have work to do to stabilize and grow our business and we recognize that we've got some cost to take out too, but suffice it to say we understand that. We're focused on it and are committed to drive-in the needed productivity. And finally, as I mentioned, we're thrilled to continue to return capital to our shareholders through our share repurchase.

Thanks to everyone for joining us today..

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