LiveRamp Holdings, Inc.
Q3 2008 Earnings Call Transcript

Published: 24 Jan 2008

[Operator:]

Good day, ladies and gentlemen. Welcome to the Acxiom Third Quarter Fiscal Year 2008 Earnings Conference Call. As a reminder today’s call is being recorded. At this time for opening remarks and introductions I would like to turn the conference over to the Chief Financial Officer, Mr. Christopher Wolf, please go ahead.

[Christopher Wolf:]

Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2008 third quarter results. With me today are John Meyer, our new CEO and President, Charles Morgan, our interim company leader, and Roger Kline our Chief Administration Leader. Before we begin our formal remarks, I’d like to remind everyone that various comments we may make about future expectations, guidance, targets, estimates, plans and prospects for the company constitute forward-looking statements within the meaning of the Federal Securities Laws and are based on current information and expectations. Actual results could differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in the third quarter press release and in the filings on forms 10-K, 10-Q and 8-K which are on files with the SEC. Copies of our press release and financial schedules including any reconciliation of any non-GAAP financial measures have been posted to our website at www.acxiom.com. At this time I will turn the call over to Charles.

[Charles Morgan:]

Thank you very much, and before I get started I want to introduce John Meyer. I want to tell you how very pleased I am that Acxiom was able to recruit a new CEO and President of John’s caliber. As you know, we introduced him last week. I’m sure all of you have seen the announcement material and he’s going to come to work and be on board full time February 4th. As a matter of fact, he’s been spending a lot of time with us in the last few weeks. I am absolutely confident John is the right person to lead Acxiom to success in the months and the years to come. He has a long, proven track-record of success as a leader of complex services operations where his segments have performed very well in difficult business conditions. I spent a lot of hours with John over the past month and I am very impressed with him, both personally and professionally. I know that he’ll be a strong visionary leader for Acxiom. Likewise the board and senior leadership are unanimous in that view. John, if you want to introduce yourself, and I just want you to remember as you do that, next time, partner, it’s all yours.

[John Meyer:]

Thanks, Charles. As Charles said, today, I’d just like to introduce myself and make a few comments. I think many of you had an opportunity to see the press release last week and know a little bit about my background and hopefully you had some time to do a little bit of research and learn a little bit about me from my Alcatel-Lucent days. Clearly since my first day at Acxiom is on February 4, I hope you don’t have any expectations for me to lay out the grand plan or even answer some questions today as it relates to our future direction. What I do want to say is that I spent a lot of time researching Acxiom as a company and I’m convinced the future is a bright one. Besides having a strong client list of blue-chip clients and market-leading products, there’s a dedication among the associates that the success in the future will be driven a lot by their capabilities and where we go from here. We’ve got the right tools to improve Acxiom’s business performance and it’s something we’ll work on together with those associates on a day-to-day basis. I have already started my learning process, but you can expect that that will be created in earnest on February 4th. I’ll spend some time working with the client’s, the leaders, the shareholder’s and obviously the associates to understand the opportunities and challenges, their ideas on how we can make them better, and then the right decisions to position Acxiom forward to capitalize on those opportunities. I’ll look forward in the future to meeting with each one of you personally. As I said earlier, I appreciate the opportunity to introduce myself, but I’ll bow out now and turn it back to Charles for his finishing curtain call.

[Charles Morgan:]

I’ve been working a lot with John the last few weeks, literally almost in a daily basis. We’ve been feeding him with a power-hose with tremendous amounts of information. He’s already helping us, believe me. As you saw from our press release, our revenue is essentially flat compared to a year ago. This is primarily tied to two areas of the business, first financial services, where the distress that the large financial services are dealing with globally, it’s caused them to reduce spending in credit card marketing. A second factor is the 4.3% drop in Acxiom infrastructure management revenues year-over-year as we continue to restructure that segment of our business to be more capital efficient. Specifically with financial services, those revenues are down year-over-year 7.6%. The back revenues in this segment have held up at this level is a testament to the great relationships we have with our large financial services clients. We continue to sell them new business that is partially but not fully offsetting the reduced revenue tied to credit card marketing. For example, with one of our major financial services clients, we’ve received verbal confirmation recently of winning the DL to support marketing campaigns for the retail branches. We have verbal agreement on providing background screening services for the US and some non-US locations. We’ve been awarded a new mail-marketing program that was with a competitor. And we’ve won a new services contract that includes data hygiene services. We’re also in the proposal stage of some key digital solutions for that same bank. The activity at this one institution is a mirror of what is going on in a number of other financial services accounts. Acting as more opportunity to create value in these difficult times, we are using a rapidly growing consulting business to help us sell and deliver that value. Consulting lets us demonstrate out thought leadership at the right level and helps us achieve the best combination of strategies to deliver the greatest service value. It’s also a strategy that’s showing results in all of our other industries. Consulting revenue is up as a result 105% in Q3 year-over-year, and was up 37% over Q2. It’s important to remember that consulting revenue often leads to recurring revenue as we sell Acxiom products and services to support the solutions that our consulting teams develop. This is one of the reasons that revenue in every other industry besides financial services is up through the first three quarters. Our multi-industry client services organization’s revenue overall was up 8.5% year-to-date. There are some notable bright spots in multi-industry. Through the first three quarters, insurance was up 25%. Technology industry showed a 12% growth. Travel and entertainment was up 10% and automotive was up 8%. We are also trading up in media and communications. Media especially has had an excellent new business result in the past several months which points to good results for them in Q4 and fiscal 2009. Our multi-industry organizations growth is directly tied to creation of an array of industry specific solutions that improve our ability to sell and deliver. With these solutions we enable out clients to better connect to and serve their customers. These solutions are enjoying particular success in media, automotive, retail and insurance. One aspect of these solutions allows our clients to exploits digital marketing channels and that continues to also drive new business for Acxiom overall. In fact, Acxiom digital showed a 19% organic growth in Q3 year -over-year. That represents the 8th straight quarter of 15% greater organic growth. Actually the number is 20% for all eight quarters when a couple of small acquisitions are included, and we expect that growth trend to continue. Finally, we’ve had the best quarter in the history of signing new business for services in Europe, pure new business wins in Q3 at a total contract value of 35 million. In addition we renewed with our largest services customer for an additional five years. Revenue increases from these contracts will start in Q4 and should create solid revenue growth for European services in fiscal 2009. However, with all that said, I must caution you that these bright spots are not enough to fully offset the softness we’re experiencing with our large financial services clients, that I discussed earlier. We are likely going to see that softness continue at least through Q4. As a result, we’re being very cautious with our guidance for the year ending this March. I’m sure you also saw the news in the release about our EMC relationship. It is our opinion that EMC decided that a specialized computing platform for customer daily integration would best remain a more custom solution and not a fully productized mass-produced product. They have told us that they do not want to proceed with the DL as it was originally constituted. We have however had a productive two-year partner relationship with EMC. So far they’ve paid us 30 million for the intellectual property in addition, we have generated an additional 30 million in contracted business from great services. EMC has indicated they wish to continue with the services approach. Also all of us at Acxiom with the vote of confidence from ValueAct affiliate, it has asked for and received permission from the Acxiom board to buy up to 30 billion of Acxiom stock in the market. And finally, let me assure you that I remain energized as I look to Acxiom’s future. We have truly a great team, and now, with John, a super new leader. Our team can now focus on execution and away form the many distractions of the past several years. The current economic climate will dampen performance in the short-term, but certainly that too will pass. In the current climate we expect to see Q4 revenues roughly flat, as with Q3 at 350 million. With that, I’ll close my comments and turn it back over to Chris for some more detailed numbers.

[Christopher Wolf:]

Thank you, Charles. I’ll be reviewing selected financial highlights for the quarter. I direct you to our website for the supporting financial schedules to assist you with your own analysis. Let me begin with consolidated figures. For the three months ended December 31, 2007 total revenue was 350.3 million, down .7% compared to 352.9 million in the same period last year. Operating income was 96.9 million, up 88.9% compared to Q3 of fiscal 2007. Net income for the current quarter was 54.7 million, up 119.3% from Q3 of fiscal 2007. Fully diluted earnings per share were $0.69 for the quarter compared to $0.31 in the prior year quarter. These results included a 63.5 million net benefit of unusual items. The unusual items consisted of the following

[Operator:]

Thank you. [Operator instructions] We’ll take our first question of the day from Frederick Searby of J.P. Morgan.

[Frederick Searby:]

Hi, guys, thank you for taking my question. A couple of questions

[Charles Morgan:]

Thanks, Fred. Let me take a shot. We’ve obviously taken a lot of time looking at what’s going on in all segments of our business in these chaotic times. Clearly the large financial institutions have really starting the last four or five months have really started curtailing. Some of them have started curtailing significantly in expenditures. And the credit card acquisitionary loan and I mentioned the down number of financial services. If you look at a sequential quarter, we’re down over 7.5%, look at us year-over-year, we’re down a little over 7.5%. That really is directly tied to the volumes that are being processed for the credit card mailings, specifically. What’s interesting about it is that over the past year we used to have our revenue. If you looked at our revenue model 10-12 years ago, the volumes are down enough today that we would have been down 25% or that order of magnitude with the current fall-offs of volumes. But we’ve restructured our contracts, we’ve grown our relationships and as I said in my comments, we’re also selling a lot of new stuff to them like digital and risk business, and we’re in the retail banks now, which have not cut back. If you look at, and maybe you’re trying to find the bottom, we’re obviously being conscious in our guidance. Our guys right now, Fred, who have been watching all this and are really in close contact with our customers, at this moment, are forecasting revenues in Q4 to be exactly equal to revenues in Q3. I really trust that they’re not being overly optimistic at this point in time. The best I can tell you is that the drop off is from the credit card marketing and by the way that’s not every client. We actually have one of our clients who will for sure remain nameless, is setting all time record volumes in credit card mailings right now just because the results are real good, because the other guys aren't mailing. Generally, that's what’s driving it. I’ll let Chris talk a little bit about some of the other segments. Frankly I have been focusing very specifically on the financial services stuff.

[Christopher Wolf:]

I’ll speak then Charles can give some color. As far as the background screening, we are actually low teen double-digit growth there year-over-year. We actually had a pretty good quarter contrary to a lot of the popular press, some of our retail clients have done very well and it has driven that progress there and I think the expectation is that we’ll continue to see that in the near-term.

[Charles Morgan:]

Fred, quite frankly, if you look at our business outside financial services, certainly the retail guys have been hit and our retail business is not roaring right now, but our new business in retail is real good right now. We’re selling a lot of new stuff, if it didn't show up in this quarter, but our sales pipeline and really across the board is really very string right now. As I said in my comments, we’re not going to cover the big downdraft in financial services credit card, because still it’s a big chunk of revenue. We haven’t fallen off the table at all, and the world hasn’t ended, and we’re forecasting the same revenues in financial services in Q4 we had in Q3. And our guys I think are being pretty conservative in their estimates.

[Christopher Wolf:]

To finish the questioning, Fred, as far as the pre-cash flow that number is right, we don’t have the tax benefit in the number, we’ll actually get the tax benefit in the next quarter, so the approximately 20 to 25 million that you spoke of is correct.

[Frederick Searby:]

Just to follow up, the question, you kind of touched upon, but you didn't give me an explicit kind of answer. Was the renewal rate —?

[Charles Morgan:]

We did mention we really haven’t lost any business in the quarter. As a matter of fact, we’ve actually got two new credit card customers in the quarter, which is kind of amazing.

[Frederick Searby:]

Okay, thanks.

[Operator:]

We’ll take our next question from Troy Mastin, William Blair and Company.

[Troy Mastin:]

Thanks, you may have just answered this; I’m going to ask anyway. I’m curious what you think is happening organically in advanced services category, if you haven’t won or lost any business, I guess your results might be indicative of organically what’s happening, but if you had some insight there, I’d appreciate it.

[Charles Morgan:]

Troy, it’s not organic. All these guys go through ups and downs, I’ve looked at the spend and the volume that our big customers have done this year and we’ve talked earlier this year about a postal rate increase. You can see a big dip, but right after the postal rate increase we had a drop right after that. Then we started trending back up and by July or August we were setting some records with some of our big clients. Then it’s turned around and started trailing off these last three or four months. It is the way these guys have done it forever. These credit card operations are still big cash cows for the large banks and they cannot stop promoting their portfolio, otherwise the portfolio goes away, because there’s enough churning in these credit card portfolios. If they want to stay in the business they’ve got to continue to promote it. Direct mail, even though we’re in a bunch of other channels with them, direct mail still is the most productive. They can cut back for a while, but if they cut back dramatically for a long period of time they’re going to give up a huge center of profit. I’ve got too many war stories about all the years that this has happened in the past, but we have a downturn like this, and typically it’s six months, 12 months. We’ve been in it for about four.

[Troy Mastin:]

Okay, the trajectory of the category, would you say it’s still weakening, bottoming, improving?

[Charles Morgan:]

Based on the forecast, it’s bottomed. Look, I’m sitting here watching. I’m turning on the Asia markets at about 8 o’clock or 9 0’clock to see what’s going to happen tomorrow. Right now, based on our guys’ forecast, Troy, typically this time in the quarter, our forecasts are lower than we actually deliver. Today our rolled up forecast is exactly equal, and I mean literally to the nearest thousand dollars, what we produced in Q3. Is something else going to happen and spin further drop, it could some, but volumes are off so much right now, Troy, that we have volume limits on a lot of our contracts and we’re still doing the retail bank , we’re still doing digital. Could there be some more deterioration? There might be, but I don’t see I t based on what everybody is telling us. And we are having a lot of new business success in banking right now.

[Troy Mastin:]

Okay, I know most of your revenue is under contract, I think 70+% is under contract and isn’t impacted by variable spending based on volumes. Over time, though if it’s a longer downturn have you had the experience where it would start to cut into the bone and into some of your fixed revenue?

[Charles Morgan:]

What we’re seeing right now, if they just want to shut-down their credit card portfolio and not promote it anymore. But we have some of our clients that are literally running today below minimums in some of our contracts. As you point out there are fixed components in some of our contracts and are revenue driven components of our contracts, I tried to indicate earlier in my comments that 10 years ago we didn't have minimums and almost everything was volume driven and if that was the case today, I’m telling you our revenues would be down 25%. But we’ve changed all that and we’ve protected ourselves and we’ve got floors of those contracts and our relationships are much broader with these guys now. As I said, we’ve got retail banks, we’re doing background screening, we’re doing digital. All that stuff is going great. I really think our strategy is working pretty well right now.

[Troy Mastin:]

Okay. I’m trying to get to the $0.49 effect from the one-time items. If I take this $63.5 million and just tax-dissect that, I’m getting to $0.51. I wonder if you could lend a little insight there to help me get to the $0.49.

[Charles Morgan:]

Troy, we’re tax affecting that 63.5 at 38.5% to get the net to just under $39 million. That should get you there.

[Troy Mastin:]

Okay, you’re pretty aggressive in share buy-backs in the quarter. I’m curious if you can give some details on some of those repurchases, if you’ve got some numbers you can share and what your appetite’s like going forward for additional repurchases.

[Christopher Wolf:]

I’ll speak to the latter first, Troy, as far as we still do have authorization left under the original repurchase authorization. I think the first step would be to use up that authorization and then at that point we’d reconsider, obviously with John coming on board, we have a number of strategic considerations to consider and obviously that would be part of the equation in all things that we consider. A little bit in detail, as far as price, our average strike price was about $12.16 a share. I think you have the other data there. It was just over 4 million shares. Total purchase price was $49,000,097, just about 49.1 million.

[Troy Mastin:]

One final question on the data cost side, they were up about $5 to $6 million, a good portion of that sounds like it was currency. I’m surprised the US accounts jumped as much as they did. You mentioned a couple of things. Is something changing in the data cost area that’s making that a higher cost business?

[Charles Morgan:]

There is “variation” in that number because of the way stuff hits. Before he gives you all his detailed financial stuff, I’m going to tell you the numbers will probably moderate some next quarter. We’re already forecasting that. It really is a complicated detailed thing, but it’s just a little bit of lumpiness in the costs that occur in that business is part of it. Then I’ll let Chris give you the real answer.

[Christopher Wolf:]

We did have some data content cost increase, we mentioned that and we’re seeking improvement there. We did have increased costs overseas, I want to emphasize that, which se did rush through, we did have in increase of about $2 million because of the pass-through contract that we have and we just mentioned that in passing. As far as fundamentals, as far as that changing, the hope is that our data cost would go down. That’s what we’re driving for. There are exceptions to that. I’m not sure at this point; fundamentally we’re seeing a seismic shift in that. Internally our strategy, we always try to measure what we want to buy versus what we want to own. We’ve got the mix in that and that’s how we try to control our costs.

[Charles Morgan:]

We actually do have one contract that rolls off in December that will lower costs starting in January. So that’s another factor there. They’ll moderate some this quarter I think.

[Troy Mastin:]

Okay, good. I’ll let someone else —

[Operator:]

Next, from First Analysis, Todd Van Fleet.

[Todd Van Fleet:]

Good afternoon guys, let me just ask the question more directly, I guess, in respect to the margin, Chris, the gross margins in particular, I think have come under significant pressure in the fiscal year. For example, if you look at non-tax through margin by our accounts, it’s about 40% non-pass through data in this quarter down 50% from a year ago. What’s driving that compression in the gross margin?

[Christopher Wolf:]

As far as directionally, I think the message when we started this is that sequentially we’ve gotten better. If we replay the tape from Q1 and Q2 cost got away form us, primarily on labor. I think we’ve been pretty clear on that, in both the services and the data side of the business. Going into the year, I think the anticipation was for higher growth. We did hire accordingly, we did staff up in hindsight I think we’d say we over-hired and there was no doubt about it. We tried to take steps to reduce that. There’s always competition in the revenue side. As far as what we have for client’s we’ve talked about that. I would say primarily this has been a cost issue for us. If I had to isolate one particular variable, which is a big cost for us, it’s labor. I don’t want to make apologies because we’ve been talking about it for the past couple of quarters and we tried to take action. It’s almost that simple.

[Todd Van Fleet:]

Jus to understand that a little bit better, the company was staffing up. I’m going to assume, I guess in Europe and the US in anticipation of business that was never realized, is that right?

[Christopher Wolf:]

Yes, that’s fair.

[Charles Morgan:]

That’s also fair, but part of it is that we’re staffed up in our large financial services clients and we don’t have the ability to easily to move people in and out of those big accounts when volumes go up and down. We’re staffed for a forecasted business level for the year. Quite frankly, in the last four months, we’ve had a pretty significant cutback in those volumes. We have taken some people out, but we’ve taken a lot more revenue out than we’ve taken people out, particularly in large financial services client. The new business that’s come on board in other segments has been real string, but new business is more extensive than old business to service. We are servicing a fairly significant amount of new business, but in the first year or two of new business contracts you’re not going to get the margin. What’s falling away on the back side, directly from these volume cutbacks in these large financial services clients? That is a much higher cost of business.

[Todd Van Fleet:]

The way it sounds is the costs that are above the gross are not quite as variable as you might think. I’m just trying to understand why if there are volume reductions why you can’t right-size the cost structure to compliment those lower volume levels. Is it a reflection of the nature of the contracts where they’re very capital intensive, whereby you’re not just purchasing – you have the people in place, but not the assets and so forth that can’t be taken up and down when volumes are raised or lowered? I’m just trying to get a better understanding why the gross margin, based on what you’re saying there isn’t as much variability, I guess, in some of those costs above the gross profit line, unless I’m mischaracterizing.

[Charles Morgan:]

What you heard from Chris earlier mentions a lot about people costs. That’s really where the issue primarily is. We’ve got a large financial services client that has been traditionally running 21 separate marketing programs across a ton of products. All of those products cut their volumes, which we’ve seen, a third; we have a drop in revenue. We don’t lose a third of our revenue, but as you’ve seen we lose in this case 7.5% of our revenue. It’s very difficult for us to go in and take out a third of the people. Then these guys come back next quarter and you hire the third back. We’ve had a pretty rapidly changing environment here this year. As Chris said, it’s hard for us to keep up with it.

[Christopher Wolf:]

To your point, Todd, I think it’s fair the way we’re looking at the business now, to echo Charles’ point, it’s a higher fixed component. I think it’s safe to say that one of the things we’re trying to do is trying to get efficiencies. That’s one of the items we’re working on. That’s the best we can tell you now. I will echo the comment that it is higher, disproportionately fixed than variable.

[Todd Van Fleet:]

Let me switch gears, I do want to hear from John. But with respect to retail which appears to be growing nicely, can you tell us what kinds of services are being sold into retailers? Is this the digital service offering? And then, Chris, you mentioned earlier that digital services saw some cost increases in that area, if I heard you right, I'm wondering if you could talk a little bit about what’s driving those cost increases?

[Charles Morgan:]

I’ll answer that one. We’re stacking in new business at a great rate in the digital business. Again it’s people.

[Christopher Wolf:]

I’ll just add we have tried to modulate that number, we’ve tried to staff for growth. We’ve kept the lever close on that as far as we tried to keep cost in line with the growth. That’s something that in that business in particular we worked with the group – the execs in that business – to work on that and help them continue growth, but at the same time try to keep cost in line because like us they need to invest a little bit out in front. We clearly try to modulate that and I think fairly successfully there. We’re selling a lot of things; there are some marketing database solutions which we’ve had traditionally retail. We’ve had a number of analytic solutions that we’re selling into retail. I cannot tell you what digital solutions that we’ve sold into retail. I’m not sure about that. I don’t know of any really large retail digital accounts that we’ve sold recently. I do know that we’ve sold digital solutions into some of our retail accounts, but I cannot tell you digital solutions that we’ve sold. Some of our new revenue in retail has come from – we’ve sold background screening services into retail and had some very nice success with that. I mentioned that one of our large financial services clients has just given us a verbal. We have one of the world’s largest retailers is also a recent account that looks like it’s going to be a very large account actually.

[Todd Van Fleet:]

I’d like to hear from John. I know, John, you obviously haven’t gotten your arms quite around the business just yet, but, you obviously have had some time to look at the landscape, the industry, the marketplace. I’m just curious, what excites you about Acxiom and the market place and the opportunities that you see there?

[John Meyer:]

There are a couple of things. Obviously I’ve had an opportunity to do some deep research into this. This is a big move for me. You understand that I really haven’t bounced around a lot of companies. So it was an important step for me. If you look at the financial services business, the services business is pretty much operating on cheap people. One of the things that really intrigued me about this is the intellectual property that Acxiom has in addition to the capabilities. It gave them a way to add value on tip of resources. I saw some things around very strong financial services, breaking into new areas, actually growing very fast in some of the new areas. How can you accelerate that? You look at the global nature of the business. Many of our client’s are very multi-national. They look for one-stop shopping because that’s how their consumers buy and that’s how they want to be able to treat their consumers, providing consistency across their base. Those are three areas that just jump out at me and say this is a screaming opportunity for me. If you look at the people and the expertise that the people have, bar none this is the organization that can help people do targeted marketing. At least from my assessment and everything I’ve seen and everything I’ve talked to you so far, it just reinforces the great opportunity that we have as a customer base and the opportunity that I have as an individual.

[Christopher Wolf:]

Thanks, hey, Todd, we have to move on, because we’re running short of time and we do have other people in the queue.

[Operator:]

From Robert W Baird and Company, Mark Bacurin.

[Mark Bacurin:]

Most of my questions have been answered. Maybe one quick one. Charles, I think you mentioned something about the success you’re seeing in the consulting practice. I just wanted to get an update on how you’re going about adding consulting types, internally developed, how many people do you have? From a revenue generation standpoint, are you putting these guys in on a billable hour basis or is it being lumped in on the contracts? Thanks.

[Charles Morgan:]

The first thing is, we’re billing these guys out by the hour and they are right now at the break even point with that business. Our goal for this business is for it to pay all its own costs and expenses and develop our profitability from all the revenue that they generate. So far that’s been very successful. Chris have you got the total headcount? It’s somewhere in excess of 100, but we’re just moving one of the analytics groups over there. We’re mostly recruiting these people from outside. We’ve recruited some form the inside of Acxiom and we’ve taken some small consulting practices that already existed inside Acxiom and moved them over. My best recollection is we’re probably at 125 with the latest move over there. I'm strictly working from recollection right now.

[Mark Bacurin:]

These professionals, what are the core capabilities?

[Charles Morgan:]

We’ve got different practices. We’ve got about half a dozen or so different practices, Guys that are going to be focused for example in analytics. Clearly because of financial services, we’ve got a financial services practice. We’re allowing these guys by practices. Obviously BI and analytics are key areas. You can’t take somebody that’s been retail and send him to one of our large banks. We’re also those practices are allowed by industry.

[Mark Bacurin:]

Are they 100% focused on selling Acxiom solutions or are they sort of solution agnostic in selling?

[Charles Morgan:]

Hey, I just want you to know, I’m a hero, there are 104, I was 20 off. I think there are 20 in the hiring queue, too, actually. I think what I heard is that they’re targeting 125. They really support the Acxiom products and services. We’re trying to create value in our clients. There’s very little if any just independent consulting. They’re there to drag data and services revenue and create recurring revenue strings for the Acxiom Corporation.

[Mark Bacurin:]

Great. Thank you.

[Operator:]

Your next question comes from Kyle Evans from Stephens.

[Kyle Evans:]

Thanks for taking my question. I thought I heard Charles say he thought the financial services revenue would be flat 3Q to 4Q, first off, did I hear that correctly?

[Charles Morgan:]

Yes, sequentially, that’s correct.

[Kyle Evans:]

Can you help us rationalize that? If you would have been seeing say 25% type declines, but you’re refocusing, restructuring and selling new things and you’re offsetting it, but it’s still down, this is not clear to me how that’s going to be flat quarter-to-quarter.

[Charles Morgan:]

I’m just saying, what I’m doing is based on a very detailed forecast roll-out by every account and every segment of revenue in that account. Our largest accounts we have as many as 20 separate revenue segments. Some of those revenue segments are volume driven, others are not. Some of those revenue segments have got new business going into them. I illustrated with one of our large clients new business that is being sold. What I would suggest is that we’re actually forecasting some addition volume based revenue decline, they’re offset by the new sales that we’re confident are going to be made. I indicated earlier that we’ve actually closed some new business. I indicated one large account that was also closed some brand new customer in that segment, a very significant new customer in that segment is going to start generating revenue in Q4. Based on very exhaustive discussions with those guys, I think even being as big a pessimist as Chris Wolf is, I think – he’s got his hand over his face right now. I think we feel good about it. I’ve looked at where the volume is now and we look at this in very great detail. I don’t know what else you’re trying to ask me.

[Kyle Evans:]

I do have a follow-up question to that; it will be a quick one. If that’s flat and the other 75% of the business, the multi-industry segments are growing nicely, when I look at the midpoint of your guidance for the year, which suggests a sequential decline quarter-to-quarter and a 2.5% year-over-year decline. Is that just you guys being conservative?

[Charles Morgan:]

I’m telling you, we are being very conservative in our guidance. That’s exactly what I told you earlier.

[Christopher Wolf:]

Just a little color there, Kyle, and we’ll wrap it up, is that we haven’t talked about the infrastructure management business there and we do expect to see some continued softness there as well.

[Kyle Evans:]

Okay, one last quick one and then I’ll let you guys hang up and get one with business. The $30 million in efficiency that you’re hoping to get on the cost saving initiatives, how long until we can expect you guys to hit a $7.5 million savings run rate and where should we look for that in terms of cross-revenue and SG&A.

[Christopher Wolf:]

It will be split between the two. It will be up in the cost of sales and the SG&A to answer your last question. A big part of the bulk of that number, I won’t quote you a number, but the number was through personnel attrition. That happens and that did happen as of the end of September. That piece has flowed through. There were if you remember last quarter and the quarter before, we did have some severance costs that came through. The other is run rate in spending and that filters thorough. Some of it filtered in this quarter and the remainder, we’re hoping to see the effects here in Q4.

[K. Evans:]

Thank you.

[Charles Morgan:]

Thanks, Kyle and thanks everyone very much.

[Christopher Wolf:]

Yes, and I think we have time for one more question.

[Operator:]

We’ll take our final question of the day from Randy Hugen from Piper Jaffray.

[Randy Hugen:]

Thanks for fitting me in. Can you give me a quarter ending share count, or maybe your expectations for Q4?

[Christopher Wolf:]

We were at 79.6 for Q3 I think is my recollection. For Q4 right now, what we do is forecast that flat because depending on how much we buy and how much gets issued and what the share price is, for the forecast right now, we’re going to keep that flat.

[Randy Hugen:]

Alright, on an absolute dollar basis would you expect your expenses to go up or down sequentially if your revenues declined?

[Christopher Wolf:]

I’ll try to give you yes, no there. One of the unique things about our Q4 that comes out is that is calendar Q1, so we see a natural increase in expenses since we’re so payroll related, because we reset payroll taxes, raises kick in. I’m nit trying to give you double talk. Normally, we talked a little bit about having high fixed costs and not having the high core relation between say flatness and revenue, given that I would say we’re going to see some pressure in the expense side. Those are the drivers. Obviously I talked about some of the cost cuts and we’ll try to work that in. But in a steady, stay perfect, we’re going to have cost of living payroll increases, payroll taxes that Charles just mentioned. That would tell you that we’ll see an increase in expenses.

[Randy Hugen:]

Then just one last one, can you give us an idea of the overall economic outlook that’s implied in you guidance and what the sensitivity would be if things get a lot better or a lot worse over the next couple of months?

[Charles Morgan:]

Chris pointed at me; John’s looking at me intently right now. We said earlier, we’re being very conservative. I’ll tell you I know for a fact that some of the revenue forecast for Q4 had been cut back and it’s really what I would call, and roll back to the comment I made about being conservative, we have given somewhat of a haircut to the roll of forecast that we’ve been looking at even as recently as a couple of weeks ago. I don’t know what percentage, you’d say conservative, I will say that we are looking at the world with some caution right now, and are trying to be sure that anything that we tell you right now, we’re not going to come back next quarter and have John tell you the economy got us. Don’t let him get by with that excuse, because we rolled a fairly significant amount of that into our forecasting right now. I feel pretty good with it.

[Randy Hugen:]

Thanks.

[Charles Morgan:]

Operator, I think we’re ready to conclude the call.

[Operator:]

Do you have any closing comments?

[Charles Morgan:]

No. Thank you very much.

[Operator:]

That concludes today’s Acxiom Third Quarter Fiscal Year 2008 Earnings Conference. Thank you all for joining us.