Good afternoon, ladies and gentlemen, and welcome to the Acxiom Fiscal 2018 Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Ms. Lauren Dillard, Head of Investor Relations.

Thank you, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2018 fourth quarter and full year 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'll turn the call over to Scott Howe.

Thank you, Lauren. Good afternoon and thanks for joining us. I'd like to start today by addressing a few key topics, specifically I'll provide a brief update on our portfolio realignment and strategic process for Acxiom's marketing solutions, discuss our GDPR readiness efforts and address the changes to our Facebook relationship. I'll then review the quarter and talk about where each of our businesses is focused in fiscal 2019. First, our portfolio realignment and strategic process. On our last call, we announced plans to reconfigure our portfolio into two distinct business segments; LiveRamp and Acxiom Marketing Solutions or AMS. We believe this structure unlock several clear benefits including a simplified go-to-market strategy, stronger organizational structure, meaningful synergies, a cleaner investment thesis, and strategic optionality. The new structure went into effect on April 1 with minimal disruption to the business, and we will report our results under the realign segments beginning next quarter. Last time we spoke, we also announced plans to evaluate strategic alternatives for AMS to further strengthen the business and deliver greater value to clients. As part of our process, we are working through a wide range of options, all focused on better serving clients through expanding our product offering, maximizing our value proposition, and accelerating growth. We are pleased with our progress, while we have not committed to a specific timeline we are moving both expeditiously and methodically, and we are confident the process will yield a successful outcome for clients, associates and you, our shareholders. Next, GDPR readiness. If there is one thing Acxiom has understood over it's 50-year history, it is the importance of strong data stewardship and data ethics. Our mission is then to provide value to businesses and consumers through data. Importantly, as stewards of data, it is also our responsibility to be…

Thanks, Scott, and good afternoon, everyone. Well, it's been quite a year and an exciting quarter. While we, like you, are focused on all things; GDPR, strategic process, industry noise and so on. We believe there are a few powerful things that should not be lost. First, Acxiom in each of our businesses is strong and poised for expansion. We have digitally transformed this Company and entered FY19 as a thought leader and industry innovator. While others may talk, we have done. And finally, we are well down the road of beginning the next chapter of our Company's history. Well, I won't talk today about each of these points specifically, you will see the proof points in our results and guidance. In my portion of the call, I will share a few highlights from the year and the quarter, walk you through a view of our new segments LiveRamp and AMS. Then I will discuss the value prop of each of these businesses, and finally provide guidance for FY19. After conclusion of my comments, Scott, Lauren and I will again proactively address some anticipated QA. For the full year while fiscal '18 certainly had it's bumps and surprises we're very proud of our company. Over the last three years our company has undergone a financial transformation. Adjusting for divestitures revenue has increased by an average of 7% per year. Connectivity finished with a $230 million run rate. Marketing services just finished two of it's best new logo bookings quarters in recent history. Our gross margin has increased by over 770 basis points, and for the first year in recent history finished over 50%. Our operating margin improved from 9% to 14%. Our cash flow has improved from $18 million to $55 million, and our EBITDA margin was a strong 20%…

Thanks, Warren. Let's start with a few questions on the AMS process. Scott, using the baseball analogy; can you tell us what inning you were in and when you think the transaction may clown?

Lauren, let me first iterate a few things. As it relates to the process, we are pleased with our progress. It's clear that both AMS and LiveRamp are unique and important assets. In terms of the innings now, I'd put it squarely in the middle innings. As for the timing, it's still too early to be specific.

Just another one for you Scott; have you narrowed down your list of potential strategic options? From what I've heard, your focus primarily on a sale.

I can't -- won't comment any specific option or structural alternative; it's just way too early to close any doors.

And have you received any interest in LiveRamp and/or the whole company?

Our focus is on AMS and beyond that we simply will not comment.

Warren, a question for you. Now that you're further along in the process, do you have a better sense of how to allocate corporate expense between the segments?

Sure, Lauren. Consistent with what we said last quarter; for LiveRamp, as a public company, we would expect standalone G&A to be approximately 15% to 20% of revenue. For AMS it's dependent on the potential partner. For some there will be no incremental overhead and for others it could be as high as 10% of revenue.

And one, what would be an appropriate tax basis to use for AMS?

We have an update to our previous comments. With some additional structuring, we now expect our bases to be approximately $350 million versus our previous guidance of $250 million.

Switching gears now to safe buck [ph]. Scott, what is your relationship with Facebook going forward? And do you expect to generate any material revenue from Facebook in FY19?

Well, our relationship has changed but remember Facebook remains an important destination. The good news is that we are working with Facebook to meet the needs and demands of our mutual clients. On an ongoing basis, our clients expect that we will continue to be a data safe haven and provide important matching, audience expansion, and distribution services. In FY19, we are expecting to generate roughly $5 million in revenue from Facebook, all in the early part of the year.

Question for you Warren; by my math it would imply Facebook represents a $55 million impact year-over-year. How can you possibly offset this impact in a single year and basically, keep your EPS roughly flat.

The short answer is that we jumped right on top of the problem. Here is the math using round numbers. In AMS the impact is roughly $35 million year-over-year, our divisional realignment unlocked roughly $20 million in savings. In addition, we're expecting roughly $15 million in additional operating leverage throughout the year. In LiveRamp, the year-over-year impact is approximately $20 million, this is being more than offset by growth and operating leverage.

And one follow-up; can you reconcile your last press release highlighting a $25 million impact with the $55 million impact we just discussed?

Remember, we already took a hit from Facebook earlier in FY18, therefore the majority of the impact had already been factored into our preliminary guidance.

Thanks. And then just a couple of miscellaneous questions. Warren, thanks for providing the three segments to two segment bridge; but I was surprised there was not an adjustment for AbiliTec given the IPO is moving to LiveRamp. Can you help me understand how to think about that?

Sure. First, you're right to raise the question; the AbiliTec IP has now been moved into LiveRamp. However, you will not see any revenue impact inside of LiveRamp until the point of a transaction.

And then another one for you Warren; at the end of March you reaffirmed your guidance would be at least 30% for LiveRamp, now you're at 25% to 30%, what changed?

As we went through our final planning, we thought 25% to 30% ended up being the right answer. We are simply trying to be appropriately conservative in our guidance. Let me again reiterate however that absent to Facebook impact, we expect the LiveRamp segment to grow over 37%; this is a very strong performance and more indicative of our steady state trends.

And then final question for me; Warren, stock-based comp is materially increasing again this year, how should we think about stock-based comp going forward?

Lauren, I'm glad you brought this up, a few things to note. On chart 24, we have provided a breakdown of our stock-based compensation. We would again highlight that roughly half of our projected FY19 expense is associated with acquisitions. Next, I want to reiterate something we've said in the past; using stock-based comp as an acquisition tool is a practice we will continue to use and employ as it has worked beautifully as a retention tool. Next, when looking at our ongoing stock comp expense as a percentage of revenue, it is well inline with industry benchmarks.

Great, thanks. That's it for me guys. Operator, we will now open the call to other questions.

[Operator Instructions] Our first question comes from the line of Brett Huff of Stephens, Incorporated.

First question, just a follow-up on Facebook. Scott, can go into little more detail on kind of how the process used to work on third-party data consumption by Facebook and how it's going to happen now? Is the understanding that simply rather than going direct to Facebook Acxiom won't work with the marketers, the market representing [ph] just the data, certify it and that's our Facebook will get it directly from the marketers or is there a nuance there that I'm missing?

Let me unpacked that a little bit. First off, just a little bit more broadly; the two main ways that we work with Facebook would be first, feeding what they had called their partner categories program. And as you know, partner categories was an effort by the over the past few years to layer in additional ethically sourced information into their inventory, so they could sell more audience tailored ad packages. The second way that we work with them is what we'll call data onboarding which is the process whereby which advertisers can take their own custom models, their own ethically sourced data -- permission enabled data, and use that myriad of Facebook inventory and purchase only the audiences -- only the customers with which they have existing relationships. The partner categories program is what has been discontinued here. What Facebook has decided to do given the glut of information that they have on their own site is turn off any external data and instead use their data for advertisers who want to buy specific audiences using that kind of standard demographic model, third-party type information. However, most of the advertisers that Acxiom works with are very large sophisticated advertisers who are already on their own premises combining first, second and third-party information, typically starting with their own CRM file, and then porting that over to Facebook. So the impact here will be felt in kind of mid to long tail advertisers who were going into Facebook and building a custom campaign; we believe that at least a portion of that overtime will be offset because essentially what they've decided to do by allowing the data onboarding is for sophisticated advertisers they're going to be able to plan their own segments, and then traffic those segments, that blueprint, across all their activation points including Facebook and all their other touch points. So it's a smart move by Facebook, and welcome news to advertisers. And one follow-up on GDPR; it sounds like you guys are ready -- you've been talking about that for a while which is great. One question we've been getting from folks is -- and I think you referred to this a little bit in the last call, a slowdown in marketing and data buying around marketing from European companies as they kind of see how the dust settles. Are you seeing that happen as you expected better or worse? And then, also -- are we seeing that leak over into U.S. companies who may not have any operations in Europe and have their postures on that? Thank you, that's all I had.

What I would say, Brett, as you would expect everybody is being very careful and in the long-term in particular, this works in our favor. Clearly, we are a privacy leader, we have been on top of this for the last two years and we're working with some of the most sophisticated brands in the world. We are seeing some slowdown which is already factored into our guidance, just as I had mentioned earlier -- but what data-driven marketing is alive and well globally, as an example of the 30 new logos in Q4 inside of LiveRamp, well 10 of those were in Europe. So marketers, brands everywhere are focused on being compliant -- that's a very positive thing, it's exactly what we want to do and we'll be as well but at the same time they're moving forward.

Your next question comes from the line of Bill Warmington of Wells Fargo.

The first question for you is on the guidance for connectivity. You're talking about it being in the 25% to 30% range with the Facebook impact, and excluding the Facebook impact being at least 37%. So one question is, it sounded like in other parts of your comment that you had a pretty good opportunity to hold on to a lot of that revenue, especially that within the LiveRamp data store. And then, the other is, you were working with sort of a range of 25% to 30%, it looks like 37% would be basically in the middle -- midpoint of the range of 35% to 40%; is that the way to think about it?

I would say -- again, our guidance is what it is Bill, the answer to your question is yes. If you were going to create a range, what we thought was important to do was to highlight everything that we're seeing today, it's obviously early days, our guidance at 25% to 30% just as I said in my prepared remarks is what we thought to be appropriately conservative for where we are. The other thing that I would point out though to everybody is that we have -- as Scott highlighted, some really interesting growth initiatives underway, even on top of the success we're already having with brands; TV, B2B, our second-party data work and international. Each of those is expected for the year to be up over 50%, so we have some real strong businesses that we're working on with and creating some real interesting opportunities for LiveRamp.

And Bill just to jump back to answer your specific question; and as I'm sure, you're familiar with -- I mean, we're always reluctant to forecast things that we haven't yet done. And so when we talk about the Facebook transition, we know what revenue is going away but we have not modeled specific revenue for the migration from Facebook [Technical Difficulty] on-premise.

You mentioned that connections for client were running at about 12 on average, and then also that theoretically we could be looking at 100 activation points for a typical Fortune 500 company. I wanted to ask, as you look at on the portfolio today, what's the highest number of connections being used by any one client today?

Bill, I think the 100 number is fairly conservative, our high point right now is one of our financial services clients has distributed data with 40 different activations. And I'll tell you, we're really pleased with the 12 number because the more activations you have, the harder -- the greater switching costs obviously are -- a number when we get up to 20, 30 and 40 -- we feel like we're going to be powering those clients for a long, long time.

And then also congratulations on the APAC launch for LiveRamp in Australia. We've heard from some clients that they're excited about you guys moving more broadly internationally, and so my question for you is -- do you have a date for when you're heading to India?

I thought you were going to ask when our Australian Road Show with you is going to. Yes, we don't know and I'll tell you we prioritize these bill based on -- buy and large part what our clients are asking for because we'll move to adjacent markets when our major clients are ready to do so, and while we feel good about the growth that we're seeing in international and our plans to expand there, I will tell you that if you stack up international opportunities relative to just expanding our used cases, more activations in the U.S. -- right now, most of our clients are focused on how do they go from 12 to 13 used case because they have lots of ideas with which to light up their data and so that's where we're put more of our focus right now.

[Operator Instructions] Your next question comes from the line of Daniel Salmon of BMO Capital Markets.

Maybe just the first one for Warren; thank you for -- and Lauren, as well as I know you did a lot of this work behind the scenes -- all the placing and dicing of the revenue and the guidance including an excluding Facebook. I think I know the answer to this but I just want to ask it bluntly, is the guidance assuming that some portion of the revenue that was done through partner categories is functionally recaptured by advertisers doing it themselves on their own end for their campaigns on Facebook, I just want to make sure I'm clear on that? And if you can quantify, that would be great. And then second, maybe for Scott -- and certainly your Chief Risk Officer and your policy department is -- if we get -- start to cautiously look past GDPR, are there any pieces of legislation ballot initiatives, we've seen some in California, we've seen since Senate -- legislation discussed that is sticking out as being particularly relevant to different parts of Acxiom or maybe set another way changing data practices in a way that you didn't anticipate? Thanks.

Dan, I'll start up on the first one and I want to reiterate something that Scott said which is absolutely true on our guidance and our plan. We don't really forecast things that we haven't yet proven out. So relative to your first question meaning advertisers, in effect acquiring third-party data directly from us as opposed to through Facebook or partner categories, that is not in our number; so should we be successful in that that would be upside for us. I would say really three things though in that regard before turning it over to Scott. First of all, the use of third-party data continues with our customer base in the industry, both Scott and I made the point that this is a very healthy industry and use of third-party data has not gone away. Secondly, the phenomenon that you are talking about; our clients are speaking to us directly about that possibility. And then obviously, we are speaking to them as well, so stay tuned.

On the second, regarding GDPR; we think that this is the start of a journey as opposed to the endpoint of it. And you're exactly right, Dan, there is pending legislation -- you mentioned the California ballot initiative, there are others though. The good news is, as we look at GDPR and indeed any contemplated legislation in the U.S., those pieces of legislation, almost always start with two fundamental principles -- giving consumers greater visibility, and then second, giving them greater control over their data. And we think that those two principles make it even more important for companies like Acxiom to exist and be very important in the industry. And in fact, you know, I've become a master at -- like nuance GDPR, there is one of the provisions recital 63 where possible the controller has to provide remote access to a secured system which would provide the subject with direct access to their personal data. That recital 63 describes what we released four to five years ago with about the data; and so -- in fact, the things that we've done -- we see influencing policy, so again, we feel really good about where this is all going, it shines as spotlight on our safe haven and our ethical data stewardship. And at the same time, is going to weed out the bad players in the industry that have kind of pulled us into their mass [ph] at times and that is good for us and good for the industry to get rid of those guys.

There are no further questions at this time. I'd now like to turn the call over to Warren Jensen for closing remarks.

Let me again, thank everyone for joining us today. And I'll just conclude with a few final thoughts. The first thing I'd like to reiterate, our industry remains very strong, it is vibrant, and we are in the middle of a secular trend which is not stopping; data driven marketing is here to stay. Next, we are entering FY19 in a very exciting place, we have two very very strong businesses; one in AMS, and one in the form of LiveRamp, both of these businesses are poised for growth, poised for expansion. We expect this to be another defining year, our process is going extremely well, and we look forward to updating you in the weeks and quarters to come. Thank you.

This concludes today's conference call. You may now disconnect.