Good afternoon ladies and gentlemen, and welcome to the Acxiom Fiscal 2015 Third Quarter Earnings Conference 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 turn the call over to your Mrs. Lauren Dillard, Director of Investor Relations. Please begin.

Thank you, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2015 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. 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 Web site. At this time, I'll turn the call over to Scott Howe.

Thank you Lauren. Good afternoon and thanks for joining us. I would like to begin today by providing an update on the continued momentum of AOS and LiveRamp and discuss their integration in more detail. Next I will dive into our core Marketing and Data Services businesses and outline what we believe is working and where we are focusing our efforts in the coming months and throughout the next fiscal year. Finally within that discussion, I will share how we are organizing for greater success before turning things over to Warren. First AOS and LiveRamp. I am very pleased with the progress made in the third quarter, both with respect to product integration and our continued sales momentum. Over the past several months, we made tremendous strides integrating the best features of both AOS and LiveRamp to create a single, more effective, open and neutral connectivity platform. We have always believed that the explosion of new data streams, proliferation of innovative marketing applications and overwhelming complexity of managing functions like recognition, connectivity, permission and security creates a new opportunity within the marketing world. Well before our launch of AOS, and later acquisition of LiveRamp, we believed Acxiom could be the industry open standard that emerged to help the entire marketing ecosystem safely and responsibly connect data across the growing number of channels and marketing applications. While Acxiom has established itself as a leader in connecting customer data to top premium publishers, LiveRamp had established a leadership position in connecting data to the programmatic advertising ecosystem. The difference in go-to-market has created the opportunity for an exceptional combined product. In the coming months, we will be rolling out a combined connectivity product that marries the best features of both solutions, bringing marketers all of LiveRamp’s onboarding capabilities, including best in industry…

Thanks Scott, and good afternoon everyone. In my portion of the call today, I'd like to first run through the quarter, then talk about cash flow and EBITDA performance and finally confirm our guidance for fiscal ’15. Now let me turn to our third quarter results. A few highlights, total revenue was down approximately 3% year-over-year. Excluding the impact of lost ITO customers and our European restructuring, revenue was up roughly 4%. U.S. Marketing and Data Service revenue was up 5% compared to the same period, given the strength of AOS and LiveRamp. If you'd please turn to Chart 4, I would like to talk about AOS and LiveRamp for a moment. In addition to the steps that Scott discussed, we have led out a few additional performance metrics to help you evaluate our progress. Specifically I would like to call out the following. Given both the LiveRamp acquisition and our integration progress, we now have close to 200 customers. For FY ’15 we should generate approximately $60 million in revenue, which will be at the high-end of our guidance range of $50 million to $60 million. Q3 revenue for AOS and LiveRamp grew approximately 40% sequentially to $21 million. GMS was $73 million in the quarter, nearly a double sequentially and up more than 250% year-over-year. Looking ahead, based on our staffs bookings and our transactional GMS rev share, we expect to exit fiscal '15 with a top-line run rate for AOS and LiveRamp in excess of $80 million. Again, included in revenue run rate is our recurring subscription revenue and high margin GMS rev share. Next turn to Page 5. Our offering is resonating with our customers. While we won’t get into specific names, there are a few steps that speak to the quality of our offering. Our…

Thank you sir. (Operator Instructions). Our first question comes from Dan Salmon of BMO Capital Markets. Your line is now opened.

Scott you mentioned -- you highlighted the Salesforce partnership in your prepared remarks. And when I saw that news release, it looks like it's more largely a data partnership around their analytics cloud. I was just curious if there is a possibility of extending your work with them to better incorporate AOS and some of the technology tools that you're developing. And then just a quick second one. You've had a lot of changes in the international business over the last year, and some reorganization work that continues to work through. My question is if you look out six months, 12 months, 18 months, where do you see your international business as they -- based off the offering and are there certain regions that you're focused on, and basically where once all of this work is done, you expect that business to sit?

So great questions. I'll start with the first, which is around the Salesforce partnership. And let me just step back and talk about our approach to partnerships overall. The value of AOS and LiveRamp is largely in the network of connections. And with over 130 of those connections now enabled, a marketer can do almost anything that they want to do online, whether it's site personalization, or power their call center, or do interesting things with search or connecting with data and analytics cloud providers. So the way we approach these things with any of these partners, first it's about let's get a relationship going, and from that base we can hopefully expand into even more interesting things. With this Salesforce partnership I think we're scratching the surface. I'd love to see it expand into something far larger and far broader, but that’s going to depend on our ability to execute and drive great results for Salesforce. You know, for all of our partners we need to catalyze their success. On the international front, boy I am thrilled that you are even asking the question, because it gives us a chance to pause and say wow, what a difference a couple of years makes. If you think back to where we were internationally several years ago, we were bleeding money. And we talked about first, we wanted to get those on a path to breakeven, and we've made strides to do that. We have increasingly taken steps to standardize our offering worldwide and shutdown unprofitable businesses worldwide like we did with the paper survey business in Europe. So we made some hard decisions. Going forward, it's largely around how do we go from breakeven to in a few years' time a place where International starts to be a real positive for us. That won’t happen overnight. Our major focus in Europe for the coming year is to start to expand our connectivity business, LiveRamp and AOS to Europe and then also to China and APAC. So you'll see some investment in there next year, but hopefully you will see the same kind of growth that follows that. And we feel that International is going to be important for us. Our clients want us to be there and we think that it’s an area of future growth for us as well.

So Scott, you mentioned Europe and China, APAC as areas for focus for AOS and LiveRamp next year. Warren mentioned in his comments some weakness in your businesses in Australia and Brazil. Do you see those as essential places where Acxiom needs to be still?

We're happy with the offices that we're in. I will tell you Brazil has been frustrating at times for us. We're are not where we'd like to be there. In Australia we just brought on a new country manager, someone that I used to work with years ago at Microsoft. Got to know him then but it will be great to work side-by-side with him. We think he will inject some much needed leadership for us in the Australian market, but in both we have work to do.

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

Just some specific questions here I guess, maybe we do a little rapid fire. Just the 25 clients that you'd signed in the quarter, can you tell us how many, if any were recognizing your recognizing revenue in the quarter?

For the 25 new customers I don’t have the exact stat in front of me, but we're no more than typically Todd, 30 days away from recognizing revenue. When we looked at our ARR, they sit on billings, not on bookings. So in the run rate numbers we've given you that’s all based on revenue where we have already starting billing.

Right, that makes sense. So maybe another question along those lines then. And so, of the 195 or so Connectivity customers, and I guess I'll use Connectivity to mean the combination of AOS and LiveRamp at this point, if that’s fair? How many of those 195 are paying you more on a SaaS basis, or kind of a recurring basis as opposed to just kind of a media -- based on the media spend, if you have an idea of that.

The way we're approaching our customers and virtually everyone that is involved in onboarding is paying on a SaaS basis. And some of the early on AOS customers -- as you can expect when you go into the negotiation, they'll want to be on variable and the way we approached those customers was to say, okay you know what, we want a minimum commitment for GMS to go to the platform and then we're going to convert you to SaaS plus the GMS. So for example we had three of our launch customers this past quarter that all converted from contingent to pay. So for the vast -- virtually all of our LiveRamp customers, they are all on a SaaS basis. For AOS there maybe some lingering clients that are still paying on a guaranteed GMS basis but we're working to convert them SaaS plus GMS.

Okay. So Warren, maybe I don’t know 12 months from now, I guess in theory every Connectivity customer would be paying on a SaaS basis in some way?

And you can never say never to an exception here and there as we rollout, but by and large that will be true.

Let me ask two more quick ones. Then I'll jump off. So there was $6 million sequential increase in Connectivity revenue from the prior -- a sequential increase in Connectivity revenue, yet we saw a doubling of the media spend. So I'm trying to get a feel for why that dynamic might exist. So last quarter I guess we -- I think you had said it of the ’15 about half was AOS and half was LiveRamp, and within that AOS revenue there would have been some SaaS rev. Maybe correct me if I'm wrong, maybe some but the majority it would have been media spend. So I'm just kind of thinking out loud here, if we saw a $6 million sequential increase in revenue, but we saw a doubling of the media spend and then maybe in theory last quarter half of the ’15 was media spend, shouldn’t we have seen maybe a little bit better performance sequentially from revenue, just given the way the media performed in the quarter?

By our way of thinking, we were very pleased with our increase in ARR and I think one of the things, as you go through the math you may not immediately be picking up is how much revenue you actually recognize in a quarter. So for example if you have a yearlong contract that converts obviously into ARR, but you only have one-month of revenue, you might have media spend, you might have less subscription revenue particularly in a quarter where you do have a sequential jump in -- a sequential jump in media. But I can flat out tell you, given the new contracts that have signed what we now have in terms of bookings where we hadn’t yet started billing and how that translates to an $80 million run rate at year-end, even using a trailing 12 month media spend, there is zero disappointment here in our increase in bookings during the quarter.

And just on -- on maybe last one then on that $80 million Scott and Warren, if I guess if you want to comment as well. So as I think about the 80 million exiting the year -- great performance as you mentioned. As we think about the next 12 months or the fiscal 2016, you haven’t given guidance, but just kind of subjectively and given the tailwind that you see for the business and so forth and the rate at which you bring on new clients, maybe if you could answer just this question. So you would be disappointed if that 80 million couldn’t grow better than X percent next year. What would that X percent be in your view?

Warren, I'll let you take that. Because that feels like a guidance question.

Yes, we’re going to hold off on guidance on this call Todd, but I think we are obviously communicating that we’re pleased with several things relative to the acquisition of LiveRamp and our integration. And I'd say one, we’re pleased with the integration, although we’re a little bit behind on the cost side, still think we have some opportunity in both Q4 and heading into next year. We’re very pleased overall with what I'm going to call our leverage and margin improvement. As we have looked over the course of the year, our results on a bottom-line basis just continue to get better. We are pleased with how our customers are accepting this offering and hopefully we’ll see as we move into FY16 how we can advance and really I'd use FY16 as a year to begin globalization. So overall very pleased, but no guidance for FY16 on this call.

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

Two questions from. One, I need to dig in a little bit on the legacy MDS. And Warren and Scott, you both mentioned sort of proactively that not pleased, and it sounds like 4Q gets better. So -- or it gets worse before it gets better. And then Scott, I think you said that the bookings were not as good this quarter as they were last quarter. Can you just give us some more color there? I understand you guys are making some of the hard choices and Scott, you've taken the reins of the sales force, seem to focus a bit on that. But by my math it was down 8.7% ex the AOS, LiveRamp stuff year-over-year. What’s -- can you just give us some more comfort? Did that get back to stable?

Yes, let me start. It's taken as longer than I would have expected here and that’s been disappointed. That’s prompted some additional course corrections and I’ll talk about those in a second. We should probably compare notes on the math. Just to kind of walk you through what happened in the quarter, we show U.S. MD&S down roughly 4%, excluding LiveRamp and AOS. We lost some contracts, not clients, but just work that went away. Call that $8 million out of the top-line. Some volume, declines people doing typically less direct mail or less data models caused another $5 million of top-line leakage. And then to offset that we generated about $6 million of new business. So net down $7 million. In terms of the major things that we’re doing to turn it around, let me just give you a little bit more color. First off industry expertise. If you look at the last few years, there are just major sectors in the U.S. economy that have grown rapidly where Acxiom quite frankly hasn’t participated. We haven’t gotten our fair share. Think about government or healthcare but there are many. Likewise there are probably opportunities within sectors where we have a strong position where we left money on the table by not better identifying up sell opportunities, and to me that's a matter of leading our clients, being the experts in their industry and solving their problems. And I feel like we've strayed from that. And our clients have told us that, our own team has told us that. They have really pushed to go re-embrace an industry expertise model. The second thing is on specialized sales. Over the last year you've heard me talk a lot about our trials with sales specialization. We did it on the heels of…

And then Warren for you, the tax rate was pretty funky based on what it was versus our model. Can you call out anything there? Did you guys expect that originally in your guidance? I think it was a negative tax rate. Just kind of go through that to give us sense about, just trying to figure out whether you actually met or missed pro forma EPS expectations vis-à-vis the tax rate.

The way we look at it, and I'll start on the non-GAAP number because that's the easiest to reconcile to our guidance range is our tax rate was a point better than a year ago. So we were at 33% versus 34%. And that was principally driven Brett by the reinstatement of the R&D credit which we had both in this year and last year. And there's always going to be a little bit of movement. That was the primary driver of having an overall lower tax rate. And for your modeling purposes, we would expect the year rate to be roughly 36%, even though our go forward rate we would still peg at 38% 39%.

Thank you. Our next question comes from Bill Warmington of Wells Fargo. Your line is now opened.

I was hoping you could give a little additional color on the surge in the gross media spend and what was driving that, just to better understand that?

I think above all Bill, if you think about what happened last quarter, it was calendar Q4. And it was also an election season. So those two seasonal factors certainly contributed to the surge. And then also our ability to win and grow share with existing clients as well. One of the things that I found most pleasing about the quarter is that if you look at our average spend, no matter how you cut it, clients increased their share of wallet with us, which suggests that they're experiencing success deploying targeted data in their campaigns. And so that was certainly a good thing for us as well.

Bill, the only thing that I would add to that, which is just in terms of expectation is, we do expect a decline in Q1 -- calendar Q1, or our Q4 sequentially, just given the strength in holiday period how it is always strong. So we just ask you to be conservative as you think about that going into our fourth quarter of calendar Q1.

A sequential decline but I would assume still strong year-over-year?

Strong year-on-year growth, off a very small base.

And then I did want to ask about the ITO business and see the improving characteristics if you adjust for the client loss. Just wanted to ask if you feel you've turned a corner on that business and what we should think of there for the next couple of quarters?

How I would think about that is we're pretty much now at base level. So if you were thinking about a run rate going forward, unpeg that. On a quarterly basis that's give-or-take $50 million. So it's a little bit of higher. We had little higher -- the net revenue in the quarter but that’s probably the right number to be thinking about going forward. So we're really almost through the client loss. So for us from here, we run a very healthy business, take great care of our customers and work to rebuild our margin.

Got it. And then on the M&DS business, you had mentioned that you don’t feel like you've completely turned the corner yet. I wanted to ask when you thought we would start to see a pickup again in pipeline and bookings as leading indicators for that? Do you think it’s a couple of quarters out?

Well, on some of those measures we actually have seen some improvement. So I believe year-over-year our pipeline is up. Our bookings last quarter was behind. I called it okay, but it was okay relative to a historic high the quarter before. So those measures have trended in a good way. What I said last quarter continues to be true. Those are very forward measures and we need several consistent quarters of high performance there to get us back to a level that I'm comfortable with. And so we have taken steps. We got to take more.

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

Just wanted to ask how active the M&A pipeline is? Is it active, passive, very active? How would you describe it at this point?

Are you talking about from the industry or from our perspective?

From your perspective.

Yes. We're really comfortable with the assets that we have. We obviously a year-ago made a bold move when we acquired LiveRamp. We thought that was a unique set of circumstances. It was predicated on our early launch success with AOS and what we envision to be an even stronger product in combination through the acquisition of LiveRamp. Our focus is on running our existing assets more effectively and continuing to scale our connectivity business as opposed to making some -- any kind of acquisition. I'd never-say-never but -- we look at a lot of things but we rarely if ever do anything more than [indiscernible].

But I think you mentioned that there were -- in your prepared remarks that there were a couple of situations where you guys decided to deemphasize the AOS applications, where if memory serves, where the applications for your partners could provide some sort of other solution and maybe the client was taking advantage of. Could you just elaborate on that a little bit? I'm just trying to think about the situation that would exist.

Talk about bad mistakes on my part, Todd. When I look back over the last few years, this is the one I really regret. If you recall, when we launched AOS, we stood on stage and I at the time used the metaphor of you can’t tell people that you've invented electricity because no one a couple of hundred years ago understood what electricity was unless, you also invent a light bulb, right? And so when we started talking about Connectivity, people gave us blank looks. We felt we had to develop some initial applications to demonstrate the power of what we built. And so if you recall, when we launched we had seven or eight what we call freebie applications that were included with the subscription price. And everybody in the space could look at those applications and see something that they didn’t like. So we had a segment builder that any D&P would say, they are a full scale D&P, they are competing with me. We had things that DSPs could say, it looks like our business. We had things that site personalization companies, algorithmic logic that they found threatening. And instead of empowering partners, and instead of -- what I should have done is stood up on stage with eight partners and said they have built stuff to run off our Connectivity. And so a whole bunch of people that we wanted as partners upon launch viewed us as a little bit of a threat, and over the last six months I think we have completely extinguished those fears or largely extinguished those fears, in part because our actions matched our words. As we enabled more and more of these partners, we retired our own application suite. And so now some of those partners tend to be really good referral sources for us and we’re growing our Connectivity and depth of relationship with many of those partners. So, great companies. They're going to make mistakes. It's how you respond to the mistakes. This is one where we made a mistake and I believe we have successfully course corrected it.

Well then let me ask Scott, because you guys can accomplish a lot it seems with the -- with information and the analytical tools, and now the Connectivity ability that you have, it seems like you guys are in a good position to accomplish actually quite a bit and so I can understand how those conflicts would have arisen with your prospective partners. But I'm -- maybe I should just ask what do you view as kind of the core capability for the Connectivity offering that is the combined AOS and LiveRamp offering now? What is that core capability going to look like, and such that it is inoffensive to the DMPs and the DSPs and the others in the ecosystem? Because I would think that, at its core, a lot of it is audience segmenting; how to reach certain types of audiences? Where to reach them? And so, I'm just trying to understand how you view the core capability that is Connectivity, such that you won't be offensive to other players that are in existence.

Yes. Let me throw out probably four or five terms that we talk about a lot. So number one is recognition, the ability to ingest data from multiple sources and resolve it to a person or household. Number two is the ability to create a match network i.e. marry together structured and unstructured data, online and offline such that our partners can communicate with channel -- with customers across all channels. Number three is what I would call data governance, i.e. security and privacy and permissions management at scale. Those things are hugely important and they are important in a world where there are a thousand different data suppliers and a thousand different connection partners. They become even more important to manage centrally in a world where there a 100,000 data suppliers, the Internet of Things world, or tens of thousands of different potential application partners. And then finally Connectivity, the ability to do the integrations and bring that network in a turnkey way at scale to any partner, because ultimately this acts, much as the telephone grid or the railroad system, the value that you get from participating, the value you get from owning a telephone is your ability to connect with anybody else who also owns a telephone. Likewise the benefit from using Acxiom for connectivity is the ability to connect with any partner for any used case, because we’ve already done the integration. No single client wants to do a hundred or a thousand integrations on their own.

Okay. One more financial related then. Working capital, you talked a little bit about that. Does the working capital use the incremental use related to media spend it all?

No, not at all. And fundamentally we just had -- it's one of those quarters or trailing 12 month periods where everything just went the other way. So none of it has to do with media.

Thank you. At this time I'm not showing any further questions. I’d like to turn the call back to Mr. Warren Jenson for any closing comments.

Great. Thank you, operator and thanks to all of you for joining us today. We look forward to chatting and reporting in the quarter ahead. Thank you.