Good afternoon, ladies and gentlemen and welcome to the Acxiom Fiscal 2017 Third 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. [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, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2017 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 sections 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. Last quarter I talked about the operating rhythm our businesses have achieved, a situation where each of our divisions was progressing but each also had room to further improve. This is where we always want to be and I'm pleased to report that we had another solid quarter highlighted by three key themes. First, strong financial results driven by top line momentum and improving profitability across each of our segments. Second, continued product innovation complemented by the recent acquisitions of Arbor and Circulate. And finally, solid execution across all of our key growth initiatives. I will now review each of our businesses in more detail highlighting both their accomplishments and emerging challenges. I'll start with Connectivity. Connectivity again had a great quarter and we continue to make good progress building out our network. Despite headwinds from the first party GMS transition, total revenue grew 36% and LiveRamp recorded another strong bookings quarter. If you turn to slide 3, I will update you on our key metrics for Q3. We signed dozens of Connectivity deals in the third quarter and added more than 50 new direct customers. In total our direct customer count grew to roughly 385. Segment revenue was approximately 39 million, up 36% compared to the prior year and LiveRamp product revenue was up over 60% again this quarter. We exited Q3 with a revenue run rate of approximately 160 million, up from 135 million at the end of Q2 and up 60% year-over-year. We continued to build out our partner ecosystem and added over 30 new integration partners in the third quarter. We're pleased to share that we were recently named a Snapchat partner. Through this partnership, marketers can onboard customer segments via LiveRamp into Snapchat’s audience…

Thanks Scott and good afternoon. It's great being with everyone today. During my portion of the call, I'd like to cover a few things. First, I'll run through a few highlights then talk about each of our segments. Next, I'll update you on our guidance and finally offer preliminary thoughts on FY18. With that highlights please turn to slide 4. In many respects this was a milestone quarter. For the first time in nearly a decade our adjusted gross margin exceeded 50% and our operating margin reached 15%. Next, we are pleased with our progress in steadily driving higher levels of operational productivity and cash flow. On a trailing 12 month basis adjusted EBITDA is up 15% and our EBITDA margin reached 22% in Q3. We are also pleased that EBITDA has increased in 10 of the last 11 quarters. Equally if not more importantly, our vision of a ubiquitous universal ID and a common global marketing infrastructure is no longer just an aspiration, rather it's starting to take shape. Today we can deterministically identify more than 190 million individuals in the U.S. In fact our identity resolution capability has never been better. Our SmartReach efforts continue to gain traction and we have more than 60 brands signed. Participants are now enjoying a 30% to 50% improvement in match rates as a result. And as Scott discussed the addition of Arbor and Circulate has materially strengthened our publisher relationships and is also driving match rates higher. Today clients are experiencing web match rates to have more than 60% and deterministic mobile match rates of more than 30%. In Europe we are steadily building our match network and are beginning to approach scale in both the UK and France. In fact in France our match rates are now in the 35%…

Thank you sir. [Operator Instructions]. Our first question comes from Brett Huff of Stephens, your question please.

Good afternoon guys and congrats on a nice quarter.

Great, thanks Brett.

Just first question on the GMS first party stuff, it sounds like we're lowering our guidance a little bit in light on LiveRamp , not the product stuff that we're more focused on, but the overall, I assume that’s is just a faster decline in that first party of GMS commission than we expected, is that the right way to think about that?

That's exactly right Brett. And then just a little bit of added color, we would expect those negative comps to be there for Q4 as well. It was down sort of mid-60s for the quarter, same sort of thing in Q4. The negativity if you will, they will be also negative in Q1, not quite as bad and then we will be through the negative comps as we roll into Q2.

Okay, so we kind of lap all this stuff as we exit fiscal 1Q next year?

That's correct.

Okay, and then can you tell us, I think you've been talking about a metric that seems really important in addition just to the overall match rates which obviously are turning in the right direction. I think the question was asked last time that a year ago last quarter -- the number of connections per advertiser used was 1 or 1.5, it got up to 8, is that a metric you can share with us again and is that a metric that you can kind of continue to share with us and is that the right way to think about how we should view the LiveRamp business?

I think it is one of the right ways Brett. This is Scott. For the last quarter, it was a little bit North of 9 so we're making progress. What will temper that number going forward, is we know that as we sign new advertisers typically they start with one or two used cases. So we might have to play with that number a little bit and give you kind of a steady state, same store kind of number. The other thing I should say, I mean, in my remarks today I talked a little bit about Google match. I am hopeful that that has the possibility of expanding the number of new advertisers into the fold because that really helps drive transformational performance and search. So, for our existing clients we hope that they add that as used case. We also hope that a number of new clients take notice and that attracts them to our business.

Okay and then last question from me is you mentioned changing business models and Audience Solutions, can you be any more specific than that, I mean it's been a great grower and it sounds like it will continue to be, but it sounds like we are being -- trying to be a little more conservative as we look forward, what is that changing business model that you're referring to?

Brett, I will go ahead and jump in, and Scott may want to comment. Over the last couple of quarters, we've talked about the possibility that certain publishers, our business model might change as it relates to digital data and that's specifically what we're referring to. So, as we look into FY18, that will happen. We expect that our growth rate in digital data will slow. So it's not going to be North of 100, we would expect that it's going to be probably 15% to 20% next year. That said, we would reiterate a couple of things; one, for Audience Solutions we feel our long-term growth rate of 5% to 10% is intact. We're going to expect a great year in FY18 from Audience Solutions. And then finally, I'd point out that the long-term trends as it relates to digital data are very, very strong and very much intact across the entire ecosystem both in the U.S. and internationally.

Great, that's it from me, thanks guys.

Thank you.

Thank you. Our next question comes from Kip Paulson of Cantor Fitzgerald, your question please.

Hi, thanks and congrats on another solid quarter, just a couple from me. First, you guys have made a lot of interesting announcements in recent months, could you help us rank order the potential revenue contribution or even importance of Audience Cloud, the IdentityLink expansion last October, Arbor, Circulate, and even incremental opportunities from location data via that Verve partnership? And then second, regarding the expanded DataView partnership you announced recently, is this all Audience Solutions revenue, and if so how is it split between AbiliTec and InfoBase? Thanks.

Yeah, this is Scott and I’ll start. So of the things you mentioned to me, the most important development is the acquisition of Arbor and Circulate, and I say that because it's truly a foundational capability. We saw significant improvements in both our online and mobile match rates. We nearly doubled our publisher network and that provides both additional distribution, but also access to additional data for ingestion. And perhaps most importantly, we brought on some phenomenally talented people who we can trust to carry the ball forward and do great things for us. At the end of the day, our success is always driven by smart people and we've brought on two great teams of people that can make a real contribution to Acxiom in the coming years. Beyond that we are focused on expanding the number of used cases that we offer and, so I think search is a really big deal given how big search spend is as a percentage of total advertising spend. This is a new way to potentially buy search and make it work better. And even things like what I talked about today with in-home advertising, it's small, it's very early, but that's a $5 billion plus channel that hasn't had a whole lot of innovation in it for decades, and so long-term our mantra is data driven everything, data driven everywhere, and these are all good steps forward towards achieving that.

Okay, and then the Audience Cloud is -- that’s relatively smaller opportunity compared to the first two?

You know the way I'd characterize Audience Cloud is we've talked in recent months about digital data. Well digital data is not a different product. Data is just data but, what is happening is a fundamental transformation in how data is consumed. And so the data cloud first and foremost replaces kind of the batch file processing and manual sending of data with real time APIs, real time ingestion. Publishers, platforms, and agencies that's how they want to ingest data and so if we can deliver them real time data they're going to consume more of it. And in addition included in the release and our plans going forward is the ability to curate data much more efficiently. Today that team if they want to change a data segment, they have to write a custom sequel query and it can take weeks or even months to create a manufacturing data segment with the introduction of data store and advanced curation tools we will be able to reduce the cycle time of data curation from days, weeks, and months to minutes in hours and that's a big deal given the wave of new data sets that is now appearing on the market.

Hey Kip, you know I'd add a couple of things to your second question about size of opportunity and I’d make couple of points. I think for almost every one of the things you mentioned it's really day one. And I'd just reflect on customer visits that I know I've had in the last 30 days. Take IdentityLink we're starting to explore used cases where companies, medium sized and very, very large are looking at how to use IdentityLink across their entire partner networks in order to create a common identity with all of their suppliers partners and everybody that they touch. So we're just right at the very beginning. I was with a large agency who was trying to figure out how to use Lat/Long and Vocation data to measure billboard usage and views. So, really all kinds of interesting opportunities that are just now getting started. So I think size of the opportunity, size of the temp is yet to be determined but we're certainly at the beginning and a lot of real positive signs.

Alright, great and that's really helpful. And then yeah, just on the data view, whether that's all Audience Solutions revenue, how it's split between AbiliTec and InfoBase and maybe even if anything you can comment on as far as how you are going to be recognizing revenue with regard to these sorts of data deals?

Well most of it will be Audience Solutions revenue as sort of the digital data. So we also have a partnership with Data Zoo with LiveRamp so but in this case it will be through Audience Solutions. Yeah, from time to time we're going to have relationships like this which will be both with Audience Solutions and with LiveRamp.

Alright, great, thanks guys. And congrats again.

Great, thank you very much.

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

Hey guys, good afternoon, maybe one for Scott and then one for Warren. Scott if I can just follow up on your comments about how the changes that are going on in search and applying customer data are much more a big opportunity for you and I think you mentioned in a prior answer specifically around it sort of opening up the client opportunity. By that do you mean that we are opening up to certain new logos, new verticals that you hadn’t tapped earlier I think of being search spenders like online travel and e-commerce and digital businesses, so just maybe if you could follow up on that a little bit more? And then Warren my question for you is just on marketing services gross margins which improved so much, is that largely the balance of mix shift with the impact business leaving or there are real fundamental changes driving that or a little bit of both? Thanks.

Hi Dan, on the first the answer is yes, with an exclamation point after it. But we have some work to do to achieve that and it's largely around evangelizing the kinds of case studies that I shared with you today and really extending our audiences from Fortune 500 type advertisers really more towards torso and even long tail type advertisers. Essentially for a long time only the very biggest companies were effective at using their data. But search was the domain of a lot of smaller companies. It was the one thing that worked. Customer match allows even a small advertiser to utilize their data affectively and achieve much better search results. So our hope is that over time as folks try this, succeed with it, word will spread and yes, will attract new customers to the franchise.

And then Dan I think that looking at gross margin and even looking into FY18 I can tell you we will always be at this level but it's not too far off from where we're expecting in the near term margins to be for the business going forward. Some benefit from Impact as clearly was accretive to exit that business. I would also tell you that our IT and operations team both in delivery and also in our IT core infrastructure are doing really a great job of driving productivity. We've set long-term targets as a percentage of revenue where we want our cost of revenue to be associated with operations. And I'll tell you, [indiscernible] and our teams are hitting the bogie. So we're pretty proud of those accomplishments and think there's more to come.

Okay, great, thank you.

Thank you, our next question comes from Katling Young [ph] of William Blair. Your line is open.

Hi, thanks and congrats on the quarter. The first question I have for you guys the Connectivity revenue run rate 160 million up 60% obviously that’s a great metric. I guess my question is, understanding a big part of that growth comes from just sheer number of customers being added on to the platform but imaginative questions that comes from just increases in customer efforts -- I know you talked about connections for customer increasing overtime quite often its seen that's not necessarily hand in hand with the revenue backlog. So, I was just curious if you could give a little more color on the level or thoughts of customer listing and how much that is contributing to the run rate movement?

Yeah, I can start and Warren should chime in. But I would say increased customer usage is not what's driving revenue today. We talked a little bit about last quarter, about the price changes that we're making where we're moving from, really records under management pricing approach in large part to one that incorporates greater usage variables that as you expand to new use cases your flat monthly fee increases by some amount. That pricing adoption we just rolled that out. That's standard now for new clients. But for existing clients it will really take a couple years to roll them all over as their contracts come up for renewal. So it's not something you'll see, it's not something we've seen to date and I don't think it's something that will be a growth driver for the next few quarters. Longer term as we look a couple three years out we think it's going to be a major driver for us.

I would add only one thing, and it's not really directly on point with your question but I think very relevant for everybody because it's been an absolute focus of our team at LiveRamp and that is just think of everything that we're doing to make our service better and more sticky and more relevant. And all of this over the long-term will drive volume. The increase in match rates is huge to what we're doing in extending the value of our network for example through our publisher network is really significant in terms of creating value. The reach in mobile all of these things are all designed to make the power of the network more significant and the value of our service offering more broad. So over time we think those are all positive signs that should continue to help us grow this business.

Alright, thank you.

Thank you.

Thank you. [Operator Instructions]. Our next question comes from Bill Warmington of Wells Fargo. Your line is open.

Good evening everyone.

Hey Bill.

Congratulations on the strong quarter and especially on the gross margin improvement across all three segments is impressive.

Thank you.

So a question for you on IdentityLink, you'd launched it back in October and I just wanted to ask how the adoption was going by brands and the marketing applications and kind of and ask also if as LiveRamp on boarding contracts come up for renewal are they converting over to IdentityLink contracts, is that the way you are handling that?

Yeah, that is the plan because all of our products essentially migrate into IdentityLink. You know Bill, I'd say the biggest benefit that we've seen from the IdentityLink segmentation thus far is really just having much greater line of sight into each of our businesses. Travis had me sit in on his business reviews a couple weeks ago and to go through publishers and agencies and platforms and direct brands and to have a hour long session on each one of those businesses, talking about what the customers were looking for, the kind of traction that we're getting, having a specialized sales force in place for each of those, we're just getting started. But the quality of the conversation that the granularity of the observations and the go dos that came out of it were transformational. It reminded me of splitting into the divisional structure a couple of years ago at Acxiom and the benefits we saw in each of our divisions. Well Travis is now doing that within LiveRamp by having IdentityLink for publishers, IdentityLink for brands and so on. And I think that's going to pay some dividends for him going forward.

And then a question for you on SmartReach and so how many clients are sharing authentication data to SmartReach these days and how's that trending and what kind of improvement and match rates are the clients seeing?

Yes, so rough number little bit North of 60. And it depends by client where their starting point was but it really works well. I mean call it on average maybe 30% to 50% match rate improvements are what those clients are experiencing. Importantly we're also now extending that. Originally the focus was largely on online, now we're using it to improve our offline matching capabilities and Warren, I should let you talk about this. It's been really successful as we've expanded that capability internationally.

What I would tell you is we've been using SmartReach to actually build the reach that I mentioned in the formal part of my remarks. So when we talk about our identity graph in China, in Australia and Japan we've done that without cookies. So that's entirely based on reading approach predicated on SmartReach.

Interesting, so just to make sure I have the numbers right, I think the last client count that you guys had given was 20, so you've gone from 20 to 60?

Yeah, I'm not sure you give us that much credit. I think we were probably a little bit higher than that but it is a major focus for us and will continue to be. I mean ultimately we want every single customer across our entire franchise to sign up for this.

Well, I think what’s being confused is there are client signs but implementation lags this signing. So you're probably looking at those who have been implemented and a number Scott quoting of those that have signed today. Not all of those are yet implemented. That's probably the disconnect.

So what would be an apples to apples number then?

Our view is somewhere call it 40ish the last time we net to today at 50.

So, 40 to 50 and that represents implemented.

So implemented today would be about 30.

Got it, okay. Alright, well congratulations and thank you very much for the insight.

Right, thank you.

Thank you.

Thank you. I will now turn the call back over to Warren Jenson.

Great. Operator, thank you very much. If there are any more questions operator we would be happy to take a couple more given the fact our remarks went a little bit long.

[Operator Instructions].

Great, operator then I will wrap up our call today. First of all let me again thank all of you for joining us today. We're obviously pleased with our results for the third quarter. This does represent another positive step forward for the company but, we know we've got a big opportunity ahead of us and we're looking forward to delivering going forward and also reporting on our results. Couple of quick housekeeping items before we adjourn, a reminder for everyone, Ramp Up is in San Francisco on March 6th and 7th at the Fairmont. We hope you can join us. You can register by visiting rampup2017.com or call us and we can help you get registered. I would also note and again that's on March 6th and 7th. On March 6th at 2 P.M. we will be hosting an investor breakout which we hope you can all attend, which will do a little deeper dive into that which we're doing at LiveRamp, should be a great hour to spend with you all. Secondly, between now and our next earnings call Lauren will be taking a little break because she's expecting a new little girl into the Dillard family. So all of you is -- we are doing our calls this afternoon and tomorrow and over the course of the next few weeks please wish her best. We are all looking forward to having a new little girl in the Dillard family and wishing her and her husband the absolute very best. So, thank you all for joining us and we look forward to talking this afternoon and tomorrow.

Ladies and gentlemen this does conclude your program. You may disconnect your lines at this time. Have a wonderful day.