Good afternoon, ladies and gentlemen and welcome to the Acxiom Fiscal 2017 First 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 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 host, Mrs. Lauren Dillard, Senior Director of Investor Relations.

Thank you, Ester. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2016 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 will turn the call over to Scott Howe.

Thank you, Lauren. Good afternoon and thank you for joining us. Before jumping into the quarter, I would like to spend a few minutes discussing the pending sale of our impact email business to Zeta Interactive. For the past several years, Acxiom has been sharpening its focus around what we do best, providing the data foundation for the world's best marketers. Through our leadership and recognition, data stewardship and integrations, we're uniquely positioned to supply the critical infrastructure marketers need for omni-channel people-based marketing. In parallel, we've also identified those businesses in our portfolio which are not central to our strategy. We've divested our Security Screening business, divested our IT Infrastructure Management business, discontinued our European Paper Survey business, and shuttered Subscale Agency businesses in various international markets. Acxiom impact is an award-winning email service provider that serves some of the world's best and largest marketers. But only an in-house email service provider falls outside our strategy and every year when we won awards for creative services and placed on the best agencies' lists, we confuse the many great agencies that were actively courting as data connectivity and managed services customers. In addition, enterprise software companies such as Oracle and Salesforce have become some of our most valued data and connectivity resellers. While they have been enthusiastic supporters of Acxiom, they have questioned why we compete with their email applications. My message to all of the world's great agencies has always been simple. We don't compete with agencies; rather our goal is to empower them. My message to enterprise software companies is similar. We're not creating our own monolithic marketing stack, rather our intent is to power and connect their stacks to the world. With today's announcement, I am reinforcing our commitment to open partnership. Acxiom is an open provider…

Great. Thanks Scott and good afternoon everyone. Before running through the quarter and guidance, I'd like to spend a few minutes reviewing the impact transaction and discuss how we plan use the proceeds. Please turn to slide three. We have entered into a definitive agreement to sell our Impact Email business to Zeta Interactive for total consideration of $22 million, comprised of $18 million in cash at closing and a $4 million promissory note payable 12 months after close. Separately Acxiom will enter into a multiyear contract to provide Connectivity and Audience Solutions services to Zeta. Use of proceeds, we plan to use the proceeds to help fund the expansion of our share repurchase program and to enhance our financial flexibility. To that end, we've announced that our share repurchase authorization has been increased by $100 million to $400 million. The program has also been extended through June 2018. Today, we have repurchased 16.4 million shares for $275 million. In the quarter, we repurchased 926,000 shares for $20 million. Under the expanded program, we now have 125 million remaining available repurchase. A few additional details. While the transaction is subject to normal closing conditions, we expect the deal to close in our second fiscal quarter. There are no financing contingencies and HSR approval is not required. Due primarily to its size, Acxiom Impact will not meet the accounting requirements or reporting as a discontinued operation. However, in the appendix of our slide deck, we've included a historical view of both Marketing Services and the total company excluding Impact. And finally, while the exact closing date will determine the final adjustment, we have updated our full year guidance assuming the September 30th close date. Switching gears now to Q1, a few highlights from the quarter. First, this was another strong quarter…

Thank you. [Operator Instructions] Our first question comes from the line of Brett Huff with Stephens. Your line is now open.

Good morning guys and congrats on a nice quarter.

Thanks Brett.

Just housekeeping deal on the guidance, Warner or Scott, I just want to make sure when you gave us a nice sort of idea of what the email revenue was going to be in the back of the year of $20 million, so I understand the revenue is a push as you take that out. But you didn't give us the profit on the email. Of the $0.05 raise, roughly, how do -- given that we would -- was the email business profitable? Meaning would we have make up some of the lost EPS that was going away with the sales? So, was it more like $0.06 or $0.07 raise, or how did that work?

Brett, basically, the email business in the back half is a from an internal standpoint was pretty much flat.

Okay.

Maybe up $0.5 million or something like that. Now, that said, as you know, when you go through a transition like this with any business, the business will absorb certain levels of overhead. And as we started into this process, we got our heads around that overhang very, very quickly and in particular, in our IT and operations teams, we went after it because we just didn't want to have to deal with the dilution created by the absorption of overhead. And as I mentioned in the formal part of my remarks, we pretty much have it taken care of headed into the back part of the year.

Okay. And a second question on guidance. I think you said revenue was flat sequentially; can you just give us a sense of that seasonality? Is it because of this GMS may be declining faster, kind of give us a sense of how that it is?

Its several things. We went through and analyze that very question, Brett, and in fact, what's happening, our business is in a different place today than it was a year ago. So, for example, if you go back 12 months ago when revenue increased sequentially, think about where Audience Solutions was. So, you're not to see the same sort of sequential raise just given the progress we've made inside of that business. But we also don't see an increase -- in fact maybe a slight decreasing in Marketing Services. The other thing I think keep in mind is Impact will be in our second quarter results and that's a big deal because there is a significant fall off in the performance year-over-year. So, a lot of gus-ins [ph], a lot of gus-outs [ph], but -- and that's what led us to the statements we make.

Okay. And then last one from me, the Connectivity you said, updated assumptions, I think originally you were calling for 50% all-in Connectivity growth and now you say 55% to 60% I think. But then you gave us another stat, first of all, is my first stat right and can you just reiterate the second one?

So, let me just make sure on -- for the total segment, we said 40% to 45% growth driven by faster than anticipated -- principally faster than anticipated declines in first-party GMS. So, -- and but that the principal driver being that. The second stat, we try to take a look through the call and take a look at the things which are either legacy or going away. So, if you would exclude, for example, first-party GMS, the royalties we receive and then we also have in the segment a small, but noisy part which is -- which are legacy AOS contracts that we're running-off. Excluding those two items, our core product growth that we said was up 62% for the quarter and then would be up between 55% and 60% for the year.

Okay. That's all I needed. Thank you. I'll get back in the queue.

Great. Thank you, Brett.

And our next question comes from the line of Dan Salmon with BMO Capital. Your line is now open.

Hey, good afternoon everyone. Two questions, one for Scott, one for Warren. Scott you mentioned briefly your relationship with Verizon in the Audience Solutions business, sounds like as a client. Could you maybe expand on your broader relationship with Verizon as it looks like Yahoo will be a joining AOL there in their publishing assets and perhaps becoming an area where your clients want to direct their spend a little bit more? And then for Warren, in light of the increase to the share buyback program, could you remind us just sort of the cadence of that program; is it something you want to be doing on a consistent basis or more opportunistically still?

Hey, Dan. So, for the first, I am really impressed with what Verizon has been able to assemble. AOL has been a publisher partner, MSN is a publisher partner, and obviously Verizon reps that inventory and Yahoo is a publisher partner. So, I think this is going to be a case of one plus one plus one equals far more than three. I think there's an opportunity for Verizon here to really make some dramatic steps forward in the industry with targeting how inventory is sold. We'd like to be a part of that. And based on the relationship we have, we think we can be a catalyst for that.

And then on the share buyback, I think the answer Dan is yes and yes. So, we -- and I'm just looking at history because obviously, this could change at any time. But I think we have been consistent over the last four years in returning capital to our shareowners and from time-to-time we're going to be opportunistic. This quarter was an example as a stock checked-off a little bit after -- earlier in the quarter we were more aggressive.

Okay, great. Thanks guys.

[Operator Instructions] Our next question comes from the line of Robert Mattson with Dougherty & Company. Your line is now open.

Thanks for taking the questions, and congrats, again, on the quarter. I got a couple questions. One is a housekeeping question, you -- I'm sorry I just couldn’t keep up with the pace of the conversation, but put off some stats in the Connectivity about not the guidance, the historicals on product revenue and I missed -- unfortunately missed most of those. You mentioned that you hadn’t have any -- I afraid what it was, the 80% something rather?

Right. What we're trying to do and it's a little bit like a question which was asked earlier, I believe, Brett posed it. There are two parts to our business, LiveRamp, that are in -- I'm not going to call it entirely, but call it in a declining your run-off mode. One we've talked about for several quarters, which is our move away over time from first-party GMS. So, we think you're going to start to see those declines in particular moving into Q2 and then certainly throughout the remainder of the year. The other part is as we -- when we purchased LiveRamp, we obviously had an effort going on around onboarding and what we were trying to do in the digital ecosystem and everybody -- we just labeled that as AOS. Inside of AOS, we had some contracts for legacy services and those legacy services, we continue to provide even though they're not a core part of our strategy today because we had contractual commitments to our customers. So, if you take those two elements and then put -- look at the rest of the segment, the rest of the segment is 80% of the total. And so the 80% of the total representing really our core product revenues today was up 62% in the quarter and our guidance for that part of our business is up 55% to 60%.

Okay, great. Thanks for that. And I got -- you mentioned you're going to, during this quarter, break apart -- not break apart, but reorganize part of the sales group into four groups the agency, publishers, advertising, and software. How should we think about that? I mean -- but I guess one concern I have is making sure it doesn’t be disruptive. I'm just trying to get a handle on how you're thinking about managing that?

The way to think about that is that there a lot of levers for growth in Connectivity. And to-date, we've been pulling one, which is grow the installed base of large direct marketers. We're still going to pull that. But, in addition, we're going to have some salespeople that are dedicated on gaining even more traction with agencies, gaining even more traction with publishers, gaining even more traction with the large enterprise software companies. And so, I think you'll see that, over time, spur growth from new types of clients who have slightly different needs than major direct advertisers. In addition to that though, there are a bunch of other levers which gives us confidence about the long-term growth rates of Connectivity. So, I thought one of the coolest stacks in our call today was talking about the number of used cases, so, up to eight, and the digital data revenue 100% growth in GMS, 100% growth. What that suggests is that people are taking their LiveRamp subscriptions and expanding them to more used cases and pushing more data through it. And you we haven't really started to push on that through our client services organization yet, that's happening organically, that's being driven by client saying this is working, what else can we do. Warren talked about and I talked as well about new products and so Customer Link, we have 40 sign-ups for our GMS, our data store, we're expanding that by dozens of data suppliers and one year in our new product revenue in LiveRamp is $15 million compared to zero last year and that number should continue to grow. And then finally the fourth big growth lever is international. So, all this to say is its business as usual for that first growth lever, but then some, and then we're going to pull three other growth levers, in addition to the first.

Okay. Quickly fire-off two quick ones and I'll jump off, let others get on. If I continue on the sales reorg, is it fair to say then that it's less about transitioning people than more how you're going to hire into new groups?

Yes, I think that's right. LiveRamp is where we've been aggressively hiring both in engineering and salespeople. And then over time, we've naturally had some salespeople kind of gravitate towards publishers or towards agencies and we're going to allow them to continue to even further specialize.

One thing that I would add, I think, is a compliment to the team at LiveRamp is they work hard at getting over the horizon and really building the capability they will need for where we want to be in FY 2019. And if you wait until -- you have to have the growth in order to sustain your growth rate, it's too late. So, this is just an example of we've gotten a lot bigger and we have our aspiration where the absolute dollar growth becomes a lot larger next quarter than it was two quarters ago. And if you don't get ahead of this stuff, you then go into pause mode until you finally catch up.

Okay. And then final question. You mentioned about the international and I guess, I'm trying to get a sense for kind of a key -- I hate the term pivot points or key points that you feel you need to reach to really get that to take off. Is it just laying groundwork on pluming right now and getting your scale? Are there other things that we should keep in mind that are kind of key points for that should start to get better traction? Now that -- I'm obviously just working on smaller numbers, but I'm thinking more meaningful stuff?

I would say the following is basically and I don't know my years might be off, but if I think of about Europe as an example, Europe is I'd say roughly three to four years behind where we are in United States in terms of -- this is like when Connectivity was just getting started and people really didn't even understand what you were talking about. Now, the most important things for us right now are the following: One, we need to get our match pools built. The great news is that we are at scale already in France. We are building to scale in the U.K. Then the second part of what we are doing is really helping to educate the market on use cases and how to use Connectivity. And then the third thing is really building out our connections. A critical advantage we believe that we had is that many of the key connection points are already partners of LiveRamp and partners of Acxiom. So, all of those companies are thinking globally, too. And -- so what they want to do is replicate the same success that we've had in the United States in the foreign markets. There are several drivers that you should think about that are very relevant to long-term growth. Number one, I would tell you increasingly every almost -- not every single, but most customers are global. And they don't want to have 13 different solutions around the world. They want to work with a smaller number of partners who can operate globally, so it's critical for us to give them that capability. The second thing I can tell you flat out is that data-driven marketing is every bit as important for a CMO or a CEO in London or Paris as it is in New York City. They're on top of it. I think, increasingly, the world is coming to understand that the big Internet had been perfecting data-driven marketing since the day they opened the doors. And if you're not on top of it, you, by definition, are just going to get further behind. So, some near-term things structurally that we are doing to get ready for it, taking advantage of our capabilities that we already have and really educating the market on use cases.

Great. Thanks. And congrats again.

Thank you.

Our next question comes from the line of Adam Klauber with William Blair. Your line is now open.

Hi, thanks. Just one or two questions. The enhanced partnership with Google and the new integration with Facebook, obviously, those are great signs, I mean how impactful could those be down the road and how long will it take us to see those efforts ramp-up?

Yes, I don't want to get it out in front of our 2018 guidance, but we view those as meaningful. Facebook and Google and now Verizon are three of the big drivers of online media consumption. And if you go back a year or two ago, I think there was a fear, never voiced by us, that they would be our competitors over time in recognition, identity management. That hasn't proved to be the case. Over the course of the last few years, we've taken small partnerships and evolved them into much more sophisticated partnerships. And as they succeed, we're a part of their success. So, I look at this as just another step forward in the journey. I think it's going to be meaningful growth potential, but again, I think it's too early to peg a number to that yet.

Okay. Thanks. And then as far as business focus and divestitures, Impact, obviously, makes a lot of sense. You've had a string of transactions over a number of years. Are there more to come or do you think this is one of the last significant divestitures?

Yes, that's funny. I had a list of when I started of what we wanted to accomplish from a divestiture perspective. And increasingly, we've put checks next to all of them. I'm a big believer in focus. Burger, shakes and fries; before you put McCookies or McSalads on the menu, better make pretty darn sure you're making great burger, shakes and fries. I'm really happy with our three business units right now and what each contributes to our overall success. Each one of them has really strong leadership. Each one of them is generating growth and each one of them is catalyzing the success of the other two. Now that said, we're always going to evaluate our portfolio. And the other promise I will make is I will never comment on the potential acquisitions or divestitures we may consider.

Okay. Thanks a lot.

[Operator Instructions] Our next question comes from the line of Bill Warmington with Wells Fargo. Your line is now open.

It's Bill DiJohnson on for Bill Warmington. Congrats on the quarter guys.

Hey Bill. Thanks.

So, I just had a quick one on the segment income for Connectivity. Obviously, you guys have a lot going on there. You still managed to bring it to breakeven this quarter. I think we were expecting a higher level of investment. Is this just a timing thing or have we reached a sustainable level and we'll take off from here?

I'd say Bill that we're going to look -- our bottom-line is going to look a lot like this past year, meaning FY 2016. So, I would expect pretty much around a breakeven level, but maybe a slight -- breakeven to a loss, but probably not as heavy as you were anticipating. One thing that I can tell you is that what -- just as Scott said, one of the things that our team at LiveRamp focuses on is making sure that they are focused, but at the same time, making sure that we are investing. And we believe that we are investing appropriately. And so the net is, I'd expect the losses to be roughly -- to look a lot like they did last year.

Okay. And can you just remind us what you're expecting or what these investments will look like? Where you're focused?

I think on all the things that Scott mentioned, first of all, new products; secondly, what other the things that we don't directly mention because it's not in income statement line is stickiness. So, when you think about a lot of what we are doing around customer support, around our match rates, around building our mobile match pool, all of which are investments, those are making the user experience better and creating better ROI for our customers and therefore, enhancing the overall -- enhancing our overall portfolio and user experience, building the benefit of being part of the network. So, think about new products, think about new geographies, think about mobile match rates, and then also enhancing the stickiness of our product.

Okay. All right. Thanks guys.

We have a follow-up question from the line of Brett Huff with Stephens. Your line is now open.

Hey guys. Just a couple more from me, if we could. Can you tell us a little bit about whether the email sale will negatively impact match rates? I know the email is sort of a consistent key per digital persona. I think others in the market may use their email marketing businesses sort of to help build out their match rates. Does that impact you at all?

It will not impact us one bit.

Okay. And then in terms of Marketing Services, that does include some consulting businesses and how does the visibility look for the rest of the year? It sounds like you guys feel good about it. You reiterated guidance and seem to expect continued good progress in Marketing Services. But any comments on that on visibility?

I think we have increasingly better visibility into all of our businesses and including Marketing Services. I would look in Marketing Services; you're going to see the growth rates slow. So, -- and I'm just going to exclude, Brett, Digital Impact from the year. I believe on our last call, we mentioned that Marketing Database and Consulting together would be sort of flattish and that is our continued expectation. It could be up a little bit and it could be down a little bit. But that's our expectation for the year. The great news is that our team is doing the right thing or the right set of things, focusing their services on things that our clients want. We've enhanced our product portfolio with new products that are well-equipped and suited for the digital ecosystem and we're continually focused on driving long-term margin improvement.

Great. That's all I need. Thank you.

Brett, this is Scott again. I just want to go back to your first question, because I don't want to be glib in my answer in that. By divesting email, we'll not impact our match rate one bit. However, what I want to emphasize is it has the possibility to catalyze it. And what I mean by that is one of the obstacles that we've had is that we have been partnering with major agencies and enterprise software companies to provide Connectivity in data services. But at the same time, they're curious -- well, if you're our big partner, why are you competing with us on email? And so by eliminating that single issue, I think it allows us to pursue even tighter integrations with many of our most important partners and potentially further scale our Smart Reach capabilities. So, rather than think about this as a constraint, which it's not, think about this as a catalyst.

Okay. That's all I needed. Thanks guys.

At this time, I'm showing no further questions. I would like to turn the call back over to Warren Jenson for any closing remarks.

Terrific, everyone. Thank you so much for joining us. We look forward to chatting with you over the next couple of days and follow-up calls and, most importantly, to reporting our results as we move forward. Thanks for joining us.

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