Good day, ladies and gentlemen, and welcome to the Acxiom Fourth Quarter Full Year 2012 Earnings Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Jay McCrary, Treasurer. Please go ahead.

Thanks, operator. Good morning, and welcome. Thank you for joining us to discuss our fiscal 2012 fourth quarter and full fiscal year results. With me today are Scott Howe, our CEO; Warren Jenson, our CFO; and Art Kellam, Corporate Controller. 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 factor section of our public filings in the press release. Acxiom undertakes no obligation to release publicly 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. At this time, I'll turn the call over to Scott Howe.

Thanks, Jay. Good morning, and welcome again to everyone who has joined us on this call. We have a lot of ground to cover this morning, so we'll dive right in. First, I'd like to talk about my first 9 months at Acxiom, what we've accomplished and where we find ourselves today. Next, I will turn the call over to Warren, who will walk you through Q4 and fiscal year results and provide our initial thoughts on the coming year. Finally, I'll come back to close with our strategic priorities for the year ahead. We will then open the call to your questions. I always enjoy our earnings call, as it gives us another chance to reflect on the progress we've made and also assess where we're going. I want to briefly touch on 4 major areas. First, we leave fiscal 2012 a different company. We are much stronger and more effective than we were a year ago. I've talked about fixing our foundations, essentially improving the speed, efficiency and effectiveness of everything we do. In recent months, we've put in place the leadership necessary to make this happen. More specifically, we've recruited and retained world-class leadership into every major function. We started in finance by recruiting Warren Jenson. His influence is already being felt and our pace is quickening. Under Warren's stewardship, we've made rapid strides in improving our monthly management reporting, creating clear lines of sight into our performance and ensuring that accountability is cascaded throughout the organization. This is an important foundational initiative, which Warren will talk about a little more in his upcoming remarks. And we have only scratched the surface. Nada Stirratt was named Chief Revenue Officer. Since joining Acxiom in February, Nada and her team have refined our sales messages, simplified what was confusing…

Hey, thanks, Scott, and good morning, everyone. Before jumping into the numbers, I thought I would talk about what I've been up to since joining Acxiom, and more specifically, how these activities relate to our long-term objectives. One of the first areas that I concentrated on was organizing the finance team and starting the process of filling any critical gaps. It was great to have both Jay McCrary and Art Kellam on the team, and I'm pleased to say that Jay will continue as our Treasurer and Head of IR and Art is our company's Controller. That said, we also identified a few critical gaps that we're in the process of addressing. First, Acxiom did not have a cohesive and organized financial planning and analysis function. Since joining, we have named one of our outstanding new leaders, Brett Madison, as Head of FP&A. Together over the coming months, we will be building out this core function and capability. From this organization, we expect a tighter and faster planning, management reporting and measurement process. In addition, I strongly feel this organization needs to be a beacon of analytical excellence and forward thinking, and by so doing, having an important seat in the setting and driving of our strategic agenda. Second, the creation of a world-class tax organization has been a legacy I have helped to create at every company at which I have worked. Today, Acxiom has a great compliance department, but we need to add some critical planning to the mix. We are currently mid-stream in our recruiting of a Vice President of Tax. It's not lost on us that our tax rate today is substantially higher than some of our peers. There is real potential for upside here. Finally, we intend to build a global shared service organization. We…

Thanks, Warren. I'd like to end our call today by reiterating our 4 key areas of focus for the coming year: first, strengthening our core foundations; second, maniacally focusing on the needs of our clients; third, profitably operating against every product, client and geography in our portfolio; and fourth, developing world-class Marketing and Data Services products. Across all 4 of these areas, I am incredibly pleased with our progress. But I continue to be humbled by how much more still needs to be done. While 2013 is a transition year for Acxiom, make no mistake, it is also an execution year. We fully intend to deliver on these priorities and leave fiscal 2013 a stronger, faster and more focused company. Thanks again to all of you who have joined us this morning. This concludes our prepared remarks. Operator, we will now open the call to questions.

[Operator Instructions] Our first question comes from Mark Zgutowicz of Piper Jaffray.

This is John Crowther on for Mark. Quick question here. You guys talked about restructuring of the risk business. You've obviously divested the background screening business. Just wondering what your appetite is kind of going forward for further divestitures, either on the international side or some of your other noncore businesses.

Yes. And first off, John, thank you. Earlier this morning, I read your report, and so we got your questions in advance. So that was terrific that you included those in there. As a matter of policy, we will no longer comment on matters of acquisition or divestitures, and I'm sure you fully understand why. But as we've stated before, our primary, primary focus is, first and foremost, to just get better in everything we currently do. So hopefully -- now was there a second question as well?

Yes. So as I look at the international side, it certainly seemed like, as you commented, trying to get profitable in all segments and that Brazil tends to be -- or was the only real hold up there. Wondering if that's a factor of you just need to get to easier comps there. Or is there something structurally in that market that's going to make it difficult for that business to perform in line with some of your other international properties or get that business in line with some of your other international properties?

Yes, I'm not sure, John, that it's a matter of the comps as much as it is a matter of what is the foundation itself. And I would say it's not just Brazil but across all of our international businesses, we just weren't hitting on all cylinders. And the comparison relative to the U.S. business from a margin and growth perspective just hasn't been as historically strong. So in our restructuring efforts, we did dramatically streamline headcount in Brazil and Europe, in particular, over a reduction of well over 100 FPEs [ph]. And I think that positions us from a more profitable foundation off which to grow. And then there are some other things that we did in addition to that, and I've talked about those a little bit on our past calls. Chief among them are ensuring that across the globe, we have a much more effective sales cooperation effort, meaning that if we have a big client in one market that is interested in extending their business with Acxiom in another market, that we can easily do that with them. And then secondly is ensuring that all of our products are designed with globalization as a fundamental design principle, meaning that in every market going forward, as we improve our products, all of those products will be released in every market simultaneously. And so it will become far more seamless for our clients to do business with us across multiple markets. And of course, we then amortize our dev costs across a much bigger global base of operations.

Okay. And then just one final question. I think as we've kind of discussed in the last quarter, the focus is on Marketing and Data Services, and IT Infrastructure is really more about driving cash flow from that business. Obviously, you have some headwinds there on the top line, and you've been able to kind of keep costs coming down in line with that. Is that something that you can continue to do over the next year? Or are we kind of getting to a point where it might be more difficult in that business?

I really have to take my hat off to the people in our IT Infrastructure business because they're managing their business extremely well. When we look at the year ahead, we see a stable client portfolio. We are also experiencing some really good management. I mean, it's evidenced by the fact that revenues were down this past year and our margins were up. Similarly, given the client losses that I mentioned, we'd expect down revenues next year in that segment, but we again expect a strong margin performance.

Our next question comes from Carter Malloy of Stephens.

Looking at your cash position or your near net cash position, which is something that would be very new for the company or at least for a very long time, where are you guys' heads currently on capital allocation? Would we expect to see -- keep seeing you buy back stock? Or are you looking to pursue M&A further from here?

I would say looking at our capital structure and our priorities, Carter, first of all, we have about $20 million remaining on our existing share repurchase authorization. I think you should expect we will complete that in the coming fiscal year. From there, it's really about flexibility. We do believe that tuck-in acquisitions can be helpful to this company and that we can execute those profitably and execute them well. And from there, it will be up to our board, and we'll get back to you.

Okay. And then as you look around, you talked a little bit about use of your data on a more online fashion. This morning, the new Yahoo! interclick integration came out with their new Genome solution, I think, that relies pretty heavily on Acxiom data. So is that the type of partnerships you're talking about building, is more direct with those service providers? Or is this much more you're sort of becoming a service provider to your customers and working through them to get to the providers?

Yes, it's both, Carter. And I read the press release along with you. Kudos to them that in a period of difficulty, they're still finding great news to share with the world. So I think that's a really interesting development. We would like at Acxiom to have strong relationships both with direct clients and their marketing partners to the extent that you've created a really robust database for direct clients. That's good in terms of them understanding more about their customers, but it's far better if they can make it actionable. And to make it actionable, those insights have to be extended to marketing partners whether it be a major publisher or ad networks or email providers or a whole host of different participants.

Okay. And then lastly, you talked a lot about looking at economics in a multiple of ways but especially on a per customer basis. So Warren, as you have begun your scouting and FP&A look across the business, will we expect to see revenue pressure from you guys deciding to actually move away from unprofitable customers?

I think the great thing to do with customers is to take an unprofitable customer and to increase the margin tomorrow. And I'm really optimistic about the things that Nada and Mike Lloyd and the folks in our delivery organization are doing because what it's about, it's about taking a client that has a negative 5% margin and making them breakeven next quarter, and 5% 2 quarters after that and just continuously moving people up the chain. So we don't think about it per se as getting rid of customers, it's helping customers become more profitable is the crux of our initiative. In our reporting, we're highlighting our progress internally. Nada and Mike and their teams are all over making this happen with each of our customers.

Okay. So it's still too early to tell if any of them are going to be stubborn enough that you'd have to move away.

Well, you know what, it is a process. I think we've all worked through this in different aspects in our careers, and it's a constant process. But you know what, it can be done and I like our chances.

Our next question comes from Todd Van Fleet of First Analysis.

I'm hoping you can offer a little bit more detail on the pilots that you're currently engaged in for your enterprise data management platform. I'm just wondering what's entailed in the pilots, how much integration effort is required on your end, and maybe you can speak to kind of the integration efforts that might be required. As you develop the platform moving forward, how much is going to be -- how much is custom versus just kind of turnkey solution for customers? And what do you expect to find, I guess, from these 10 pilots that are currently underway?

Yes. So just stepping back here, I mentioned that our early dev efforts are already underway. The first efforts of that is our initial monthly releases. We're really focused on infrastructure and increasing the speed of our processing capabilities. And this is the kind of stuff that's inherently unsexy but also extremely necessary. Going forward, as you mentioned, our efforts will start to really focus in on client-level initiatives. And so we have started pilot work with these 10 clients. And in the next few months, kind of the next cabs off the rank for us -- and this is going to sound a little bit of tech speak, but one of it -- one initiative will be realtime integration of digital and customer data. So this holy grail of marrying up unstructured realtime data with the data that has been in the clients' repository for significantly longer; building analytics tools that examine both known and anonymous customer behavior; and building the right segmentation schemes and predictive actionable models. And then all of this under the umbrella of what we call a safe haven, which applies advertiser, agency and media data into the models in a way that is privacy-compliant. In a sense, the privacy permissions become transportable. They're stored as a data element. Now you would ask the question around, "Is this custom or is it standardized?" And I would say it's both, that we have to build our product development in such a way, I've called it before, standardized customization. I've also called it customized standardization. But there's an element of both in everything that we do, such that we always build with a common denominator of kind of big rocks, big building blocks, so to speak. And then those tools and the code [ph], they have to be configured on a case-by-case basis because every client has their own unique recipe for how they're going to succeed in marketing. And so there's no -- you can't take what you've developed for bank A and apply the same schemes to bank B. You can deploy the same technology, and you just turn the dials and knobs metaphorically in a slightly different pattern to generate -- to optimize results for each client.

One thing I might add to that, too, is one of the things that I know we're all particularly excited about is Phil's expertise in this area. Because if you think about his background, the one thing Phil understands is scalability. So when we're thinking about Scott's point of developing this -- our products is it starts with scalable solutions.

That's great. Understood. I have one more, then I have a follow-up for Warren. Scott, are we at the point -- or in your view, it doesn't sound like we're really at the point of proof of concept yet for the enterprise data management platform. It's going to be an iterative process. It sounds like you've been focused on just kind of increasing the speed at which you're providing the results for your customers, and now you're going to be layering in additional data sets and elements. When do you think we'll have proof of concept for a client, the first client on the shiny, new platform?

Yes. I don't know if we'll ever have this kind of holistic -- rather, it's going to be -- it's a journey. And so we already have dozens of kind of proof points. We have yet to pull together the end-to-end ecosystem across multiple clients to have that kind of case yet. I mean, it was interesting referencing the earlier comment about -- Carter's comment about Yahoo!'s Genomics introduction today. It was curious, they don't have the product, yet they issued the press release and they haven't actually released the final product yet. I think that's something that as a whole, Acxiom needs to get better at. We've always been a show company as opposed to a tell company. And I think here, we need to develop a better story for what's coming down the pike in future for our clients and start evangelizing that to the broader world. So that's something we're working on as well, the marketing aspect of all of this.

Okay. And then Warren, on the reporting side. It sounds like there's a lot of work being done with the new hires and so forth. I'm just wondering, as you're increasing the accountability, are you satisfied currently with where the reporting sits between really assessing and understanding how well each business segment is doing? That is, each business segment, as you guys kind of report them to us, do you have all the reporting that you need at this point? Or would you expect it to evolve further? And then as kind of a corollary to that, how much shared infrastructure is there across the business units at this stage?

So to the first question, I'd answer it the following: I don't anticipate us changing our segments or the way we externally report. So at the macro level, fine. But at the micro level, we have a lot of work to do. So as I mentioned, kind of what we found was really a set of management reporting that was based on a lot of various allocations, which created the phenomena that I described, is every number meant something to everybody but nothing to any one specifically. And what we're trying to do is to really build in this whole sort of culture and reporting structure where we have line item P&L accountability. And the reason why that is so critical is line item P&L accountability, if you have complete transparency, allows you to do 2 things very effectively. First of all, you can target more effectively because you can hold people accountable for delivering to the target. The second thing that you can do is you can benchmark. So you can move toward best-in-class. So that is stuffed through the course of this year that we will just get better at every day we come to work. I don't think it's something that I can tell you next week we're going to have completed because we won't. But you know what, next Monday, we're going to be better than we were this past Friday, and the following Monday, better than that. And we're just going to continue to build momentum. Collectively, as a management team, we're also just working together to do -- every time we get together, tweak our reporting to make it that much more robust, that much more understandable. As to the shared infrastructure, there's shared infrastructure around things like our staff functions, accounts payable, our processing. We also have shared infrastructure on both the delivery side and the IT side. So as part of our ongoing efforts to again to drive accountability, we're going to get crystal clear in each of our operating units as to who owns what, where the cost belong and where the activities reside.

Our next question comes from Dan Salmon of BMO Capital Markets.

I was just hoping, Warren, to, I just hope, clarify a few things on the guidance. Just first off, you mentioned flat to -- I think the wording was flat to slightly down revenue from continuing operations. And just to make sure we're looking at that correctly, that would be the $1.13 billion number that was reported here as the comparable from a year ago.

Yes, that's correct.

Okay. And then you also mentioned, as a result of some of these client losses on the IT side, that you do expect that to be down. I'd say the obvious implication is you would expect Marketing and Data Services to be largely up and see this sort of reacceleration in the last quarter of the fiscal year to be sustained through the year.

Yes. I would -- we're not going to give segment-level guidance. But I would tell you, I'm going to repeat what I just said a few minutes ago, is I would expect the IT Infrastructure business to be down for the year. And if you look just generally at the pattern of what we reported this quarter, that same sort of thing should repeat itself next year. I won't comment on the absolute levels of growth in one segment relative to the other. But the same sort of relationships that we just reported, I would expect to see in 2013 as well.

Okay. And then the EPS guidance. On the last call, Scott talked about the $30 million for this investment year. Is that estimate still in play and baked into your EPS guidance?

Yes, it is. And that is mentioned in my portion of the call today. We're estimating our dev expenses to have between $0.03 and $0.04 per quarter impact. It's just they are incremental development expenses.

Got it. And then just the last question is you mentioned that you've got some work to do on the tax side. But in the meantime, do you have any advice on where we should be roughly looking to put our models until you get more guidance on that?

I would hold consistent with historical patterns, so about 40%.

Our next question comes from Dan Leben of Robert W. Baird.

First, on the U.S. Marketing and Data side, challenging year-over-year comparisons there in terms of your earnings stream. Just help us understand. When you're talking about delivery costs, is this primarily a mix shift away from data towards marketing services that carry some incremental costs?

No. I would -- and Scott may want to comment on this a little bit more. But I'll give you my take on what I've seen over the last 90 days. This past year, the management team did exactly what it needed to do and that was we needed to focus on our customers. And in order to do that, it was important that we increased our spend in the delivery organization to just really put our customers first. And that's what that reflects. So first thing you do is take care of your customer. The second thing you do after you're stabilized and on the right track is then you drive for efficiency. And that's how I would be thinking about our delivery spend.

Okay. Could you comment about the services side versus the data side in the quarter, any of the trends you saw?

I would, longer-term, think about us focusing in building the product side of our business. I come back to who we just hired. We just hired one of the foremost development people who understands how to build scalable products. And while we're always going to have a services element to our company, if you think about the long-term trend, there will be a lot of focus on the product side of our business.

Okay. And then one more thing about the $30 million in investments, should we primarily think about those concentrated in this U.S. Marketing and Data side? And secondarily, are these kind of one-time expenses? Or is this adding to the cost base that you're going to leverage with growth in the future?

Well, hopefully our objective is to build some great long-term revenue streams. And those great long-term revenue streams, you want to maintain them and you want to enhance them. You want to make them more automated every quarter. So I think there should be an ongoing level of spend, but that should also be associated, again looking out over the longer-term, with this stream of revenues as well.

Okay. And then last one for me, just stepping back on the M&A side. When you're looking at the enterprise data management product, help us -- walk us through your thought process around build versus buy. And how big of a factor is time-to-market with this project?

Yes. So when we designed our plan, build is our baseline. Build is our baseline. And then whenever an opportunity presents itself to accelerate our baseline in a way that is -- generates positive ROI for shareholders, we'll avail ourselves of it. I think the challenge quite frankly right now in our space is that if valuations get too far out over the SKUs, the second condition there fails to hold true. But we are certainly open to tuck-in type acquisitions when and if they can accelerate what we're doing in a shareholder-friendly sort of way.

And our final question today comes from Ned Davis of Wm Smith & Co.

With the changes that have happened in the company, I guess, it's kind of hard as an outsider to define what your relevant market is, how fast it is growing and how fast you expect it to grow and your market share in that marketplace. Can you give us some more color on that in light of the guidance for the new fiscal year? I mean, do you expect the market to be growing much faster than your growth or in line with your growth?

Wow, that's a big question. Historically, I think you're right, that kind of the parameters of the market that we play in are shaped by a traditional competitive set that includes folks like Harte-Hanks and Epsilon and Merkle and others. Increasingly, we believe that the category as a whole will grow. And the premise that we believe to be true is that for far too long, data has kind of been the bastion of a couple geeks in most companies, the folks who can do SQL data queries. And over time, we believe data tools and analysis will start to become just like a calculator on someone's desk. It should be democratized such that it is available to everybody in an organization. Given that, what does that mean for the industry and the potential growth rate? Quite frankly, we don't know, but it's all whitespace. And if that comes to pass, the growth rates will be substantial. So we kind of work in 2 parallel tracks. One is how do we become a better version of the company that we are today, and that is about improving everything that we do and building more compelling products. And then secondly is we have an eye towards what's going on in the world around us, which if that materializes as we believe it will, we think that there is far bigger growth potential, but yet nothing that can be defined. It's just bigger than the market we're in today. Okay. Well, again, thanks for everybody for joining us this morning. This concludes our call. Thanks again.

Thank you, everyone.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect, and have a wonderful day.