LiveRamp Holdings, Inc.
Q1 2009 Earnings Call Transcript

Published: 31 Jul 2008

[Operator:]

Good day, ladies and gentlemen, and welcome to the Acxiom First Quarter Fiscal Year 2009 Earnings Conference Call. As a reminder today’s call is being recorded. At this time for opening remarks and introductions, I'd like to turn the conference over to the Chief Financial Officer, Mr. Christopher Wolf. Please go ahead, sir.

[Christopher Wolf:]

Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2009 first quarter results. With me today is John Meyer, our CEO and President and John Adams, our Chief Operating Officer. Before we begin our formal remarks I'd like to remind everyone that this release in today’s conference call contains forward-looking statements that are subject to certain risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include but are not limited to the factors detailed under the section titled 'Risk Factors' and elsewhere in filings with the Securities and Exchange Commission, made from time to time by Acxiom. Including but not limited to its Annual Report on Form 10-K filed on May 30, 2008, and other current reports on Form 8-K, as well as the Press Release we issued today. Acxiom undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. A copy of our Press Release and financial schedules including any reconciliation of non-GAAP financial measures have been posted to our website at acxiom.com. At this time I'll turn the call over to John.

[John Meyer:]

Great. Thank you, Chris, and thank you everyone for joining the call. As you saw in today’s release, our performance for the quarter was in line with the annual guidance. With the revenue essentially even and the margin up for the same quarter last year, we did what we forecasted, which is no small feet in this tough economy. As I said before, consistency and performance is what I expect from my team and that's what you should expect from Acxiom going forward. To that end I'd like to reiterate our fiscal year ‘09 guidance and that we communicated in the investor meeting in New York. For revenue, we're expecting it to be about the same as last year. For earnings per share, we're expecting to generate between $0.66 and $0.72 a share which represents growth of 10% to 20% over previous year, and the free cash flow for the year should come in somewhere between $77 million and $85 million. Now as Chris will report later our results thus far are tracking with that guidance. Now given the impact of the down economy and our clients I feel like we've proven resilience maintaining this revenue. Many of our clients realize the need to have a comprehensive view of their customer life cycle from acquisitions to the conversion and what's becoming more important, the retention, thus although the revenue remains even, the mix of our business has begun to evolve. So, on the whole we're making progress towards a plan that we outlined back in May. You may recall that we discussed three focus areas. The first is creating a unified Acxiom with a culture of accountability and winning. Among our initial steps we have introduced a consistent business review process across all geographies and industries. We inventory our products and services worldwide so that we can rationalize and achieve repeatability and most importantly, maximize the return on our investments. We've assessed our global expansion opportunities where we can both establish a market presence and enjoy a lower cost environment. The second area is improving our operational effectiveness so that it's easier for our client toss do business with us, and more effective for them and us. A few early successes. We've begun consolidating common delivery functions so that we can leverage our tools and processes to a greater effect. We're seeing the benefit of cost cutting measures such as space consolidation, discontinued plan operations and reducing leadership overhead. We worked directly with our clients on continuous improvement initiatives such as our lien project to drive efficiency in our delivery engagements. Among some of the recent results in the current months, a 63% reduction in cycle time for one Financial Services client along with almost $1 million cost savings for that client and a $300,000 incremental revenue for Acxiom. The first year return on investment is returning about 70% and thousands of hour of both mutual, manual effort had been eliminated. With an insurance client, we've achieved a 50% reduction in the number of production resources required. This client is also on-track to see a lead time that will reduce from 150 plus to 75 hours and they've already seen platforms reduced from 4 to 1. The third area of focus is our evolution to a premier market driven solutions based company with a global sales force focused on driving new logos and renewals and our account team focused on driving new products and services within our existing customers. Since naming our global sales leader two months ago, we made considerable progress in centralizing our sales force. We have sales leaders announced in places for two of the three primary regions

[Christopher Wolf:]

Thank you, John. 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 June 30, total revenue was $331.1 million, down 1.1% compared to $334.7 million in the same period last year. Operating income was $25.6 million compared to $639,000 in the same quarter last year. Net income was $10.7 million compared to a net loss of $13.7 million last year. Fully diluted earnings per share were $0.14 for the first quarter compared to a loss per share of $0.17 in the prior year quarter. The current year quarter included unusual net gain items of $1.6 million. The prior year quarter included unusual loss items of $20.6 million, excluding any unusual items operating expenses decreased from $313.5 million to $306.1 million or 2.4% while operating income increased by 17.9%. Also excluding these unusual items from both periods, earnings per share were $0.12 in the first quarter of fiscal 2009, up from $0.06 in the first quarter of fiscal ‘08. Turning to revenue, services revenue includes the company’s global lines of business for customer data integration or CDI, marking services, digital marketing, information, technology and consulting. Services revenue for the quarter ended June 30, 2008, was $235.8 million. This represents a $5.6 million decrease or 2.3% compared to the prior year period. Revenue growth in CDI and Marketing services was 4% and digital was 6.9%. The growth in these areas was offset by a decrease in IT services of 14.4%. The decline in IT services was driven by contract reductions over the last 12 months with a few very large IT clients. On a geographic basis international services increased $3.3 million while US services decreased $8.9 million. Approximately 1 million of the international services increase was due to favorable exchange rate movement. Products revenue includes the company’s global information products in the US background screening products. Products revenue for the quarter ended June 30 was $95.3 million which was up $2 million or 2.1% compared to the same period last year. The international operations were relatively flat, but the current quarter results were positively impacted by exchange rate movements in the amount of $2.1 million. Additionally, the prior year international revenue included approximately $2.5 million from the divested French Mapping software business. As noted on the product revenue supplemental schedule, pass-through data revenue increased approximately $2.6 million. Otherwise, both the US information products and background screening lines of business were relatively flat quarter-over-quarter. Turning to operating costs and expenses for the quarter, costs of services revenue was $177.3 million representing a decrease of $19.3 million or 9.8% compared to the same quarter a year ago. Included in the prior year cost of services was $5.2 million related to an IT contract restructuring. Excluding this item, cost of services decreased $14.1 million or 7.4%. Excluding the unusual item from last year, gross margin for services revenue increased from 20.7% to 24.8%. Margin improvement was due to significant cost reduction activities during the last fiscal year. The company executed cost reduction programs in both Q2 and Q4 last year. These cost reductions were most prominent in the delivery and the development functions. Cost of products revenue of $76.7 million is relatively flat compared to the same quarter a year ago. Products revenue gross margins increased from 18.2% a year ago to 19.5% this quarter. Excluding the pass-through data, product costs actually decreased approximately 3.9% and margins on non-pass-through products increased to 25.4% from 23.1% a year ago. Again, much of the margin improvement is due to cost reduction initiatives implemented during the last fiscal year related to both personnel and to data content costs. Margin improvements are reflected in both the information products and background screening lines of business. SG&A expense was $52 million for the quarter ended June 30 or 15.7% of revenue. This represents a $6.3 million increase over the same quarter last year, the current year amounts include expenses related to the MKTG operations which were acquired in November of 2007. Other increases in the current year include investment in sales and marketing and higher incentive compensation expense due to equity grants and the FY or fiscal year ‘09 bonus plans. These increases were partially offset by staff reductions and other cost reductions in other SG&A functional areas. Gains, losses, and other items for the quarter ended June 30 reflected income of 545,000 compared to an expense of $15.4 million in the prior year quarter. The income in the current year quarter is the result of adjusting restructuring accrual estimates established in the previous quarter. The most significant adjustment was a gain related to the closing of the flight operations department. The expenses in the prior year were related to merger transaction costs. Interest expense for the quarter was $9.5 million compared to $13.6 million a year ago. The decrease in interest expense is due primarily to a lower average balance and rate on the term loan. The balance is approximately $35 million lower and the rate is approximately 260 basis points lower. Interest on other debt such as capital leases was also lower due to the decline levels of spending of capital spending. Other income increased by $1.2 million to $1.4 million in the current year. Other income is comprised primarily of interest income on notes receivable and interest income. The current year includes $1.1 million gain from the company’s investment in a real estate joint venture. The joint venture sold the companies former headquarters building here in Little Rock resulting in that gain. The current year effective tax rate is 39%. The prior year rate was 38% before consideration of non-deductible merger costs. Diluted earnings per share for the quarter were $0.14 compared to a loss of $0.17 in the same period last year. Diluted weighted average shares outstanding for the quarter were $77.8 million compared to $79.3 million a year ago. Now I'll discuss results by segment. The recent reorganization of the company has resulted in a change in the company’s reported segments. The company now reports financial results for two business segments; services and products. The services and products segment consist of the same lines of business as the services and product revenue lines discussed earlier. With that in mind let's move to operating income by segment. Information Services income from operations was $39.2 million for the quarter ended June 30, 2008, compared to $29.9 million for the same quarter a year ago. The increase is primarily attributable to the cost reduction programs implemented during fiscal ‘08. Additionally, the prior year results were negatively impacted by the $5.2 million IT contract restructuring charge. Information products income from operations in the quarter ended June 30, 2008, was $3.2 million which was up slightly compared to the same period a year ago. Increases in international selling, general and administrative costs partially offset the impact of cost reduction programs implemented during fiscal ‘08. These cost reductions impacted both headcount and data content related costs. Income from operations for corporate and other represents corporate costs not allocated to one of the two operating segments. These include corporate expenses such as marketing, accounting, legal, and human resources as well as sales overhead. Additionally, any items reported as gains, losses and other items net on the consolidated statement of operations are included in the corporate segment. Corporate and other expenses in the current year were $16.9 million compared to $32 million in the prior year. Excluding unusual items, corporate and other expenses were $17.4 million in the current quarter up from $16.6 million in the same quarter last year. Now let me touch on a few of the highlights of the current quarter balance sheet as compared to the March 31 balance sheet. As of June 30, the company had cash of $51.8 million down from $62.7 million in March. Cash flow from operations is generally the lowest in the first fiscal quarter. Net payments related to previous cost reduction activities were approximately $10 million in the quarter. Accounts receivable as of June 30 were $231.7 million up from $216.5 million in March. The increase is primarily due to a slowdown in collections from the previous quarter. Day sales outstanding were 64 days at June 30 compared to 56 days at March 31. Property and equipment net as of June 30 was $253.7 million down from $266.3 million last quarter. The decrease was due to $20 million of depreciation offset by acquisitions of PP&E of $7.5 million, $1.8 million which was financed using capital leases. Accounts payable and accrued expenses decreased by $31.4 million in the quarter primarily due to cash payments of restructuring expenses accrued in the prior quarter and the timing of payments to suppliers and vendors. Total debt as of June 30 was $623.1 million, a decrease of $21.5 million. Total debt as of June 30 consisted of $509.5 million in the term loan, $65.6 million in capital leases, $20.2 million in software and data licenses and $27.8 million in other debt which is primarily construction financing. Turning to free cash flow to equity. For the quarter ended June 30, free cash flow to equity was negative $9.6 million compared to negative $9.8 million in the same quarter last year. A slight improvement reflects lower capital spending and cash collected from the sale of software in a current year, offset by a decrease in operating cash flow of $5.1 million primarily driven by working capital changes as mentioned in the balance sheet review and a tax benefit on stock options and warrants in the prior year of $5.6 million. Total capital expenditures for the acquisition of property and equipment were $7.5 million in the quarter. Included in this amount was $11.8 million of finance purchases. Consistent with our focus on Capital Management, expenditures in the current quarter represent a significant reduction from the prior year level of $15.4 million. The Company did not repurchase any big shares in the first quarter. The outstanding Board authorized capacity for share repurchases is currently $49.4 million. This concludes our prepared comments and the financial statements. Now operator we are prepared to begin the question-and-answer session of our call.

[Operator:]

Thank you, sir. (Operator Instructions). We'll take our first question today from Randy Hugen with Piper Jaffray.

[Randy Hugen:]

Thanks. You guys are doing a nice job on the SG&A line. I guess a new dollar level going forward or could spend there continue to decline?

[Christopher Wolf:]

Randy, could you repeat the question, I'm sorry.

[Randy Hugen:]

The SG&A line, is that going to level off or I guess is there potential for continued cost cutting going forward?

[Christopher Wolf:]

Yes. I'd say we're still always trying to take costs out of the business. I mean, we're constantly looking for efficiencies but with that in mind, I think this run-rate that we had for Q1 is pretty much run-rate that we're predicting going forward.

[Randy Hugen:]

Okay, thanks. Do you see risk to your 2009 guidance if the European economies I guess slowdown like we've seen in the U.S., was that a scenario that was already contemplated when you put together your guidance or could that I guess provide some incremental downside to what you have out there?

[Christopher Wolf:]

Randy, we're reconfirming where we are, and that really is in consideration of all of the potential risk that we have out there. Now, you can never predict the future, but where we see the businesses both in Europe and in the United States puts us in a position where we believe that the revenue stream will stay consistent with where it was in prior years.

[Randy Hugen:]

Thanks and one more. We're seeing some restructuring going on in a couple of the bigger industries that you guys are in like auto and retail, do you have any large clients in those areas where bankruptcy could have some sort of significant impact on the business?

[Christopher Wolf:]

John, why don't you handle that one?

[John Meyer:]

Well, yeah. I mean, I guess let me answer the last one in a bit more detail, and then get to the second part of the question. Going back to the sort of general economy in Europe that you were talking about, it's probably worth just spending a second talking about how we build that forecast up because there really isn't a macroeconomic views of the world. It's more on client-by-client, item-by-item, pipeline prospect by pipeline prospect, and then applying some judgment on the back end of that, so maybe that helps add a little clarity to the first part of the question. The second, we're not aware at the moment of any imminent threat from any large client without getting into clients specifically, I can think of one example in the retail industry that has had some problems where they're actually spending a little more money at the moment, looking at understanding their customer mix much better in the face of restructuring that client, so we don't see anything imminent by large clients, so actually we see some opportunities as the market continues to change.

[Christopher Wolf:]

One of the things, Randy that I put into mine that's worth understanding is that we see a big part of our business has always been acquisitions but we also have the capability around client retention and have seen some of the industries customer by customer decide to shift towards more of a retention focus, or it's an individual strategy for each customer within an industry. In some cases, they're deciding this is an opportunity for them to gain market share, and are using that as a way to more aggressively go after acquisitions, so it's hard to paint industries in a consistent brush because it's really customer by customer strategies.

[Randy Hugen:]

Alright, thanks a lot.

[Operator:]

We'll take our next question from Kyle Evans with Stephens.

[Kyle Evans:]

Hi, guys thanks for taking my questions. I'd like to start off with maybe the revenue concentration that you have and the Financial Services sector, roughly a quarter of total revenue as of your Analyst Day, and kind of compare and contrast that to a pretty modest revenue decline overall 1% because when I look at the comps on the pre-screening side of the business they're pretty consistently down some between 20% and 40%. What did you see in your Financial Services end Markets and how did you off-set some of that pressure?

[Christopher Wolf:]

Well, I'll tell you it's a mixed bag, it kind of like where I repeated a little bit what I said to Randy is that what we have seen, first of all you have to understand that a concentration in the financial industry is a lot most a good 20% of that 25% is in the credit card industry, and that credit card division is proving to be one of the profit sanctuaries inside financial institutions, and so we're seeing very different strategies by client where many of them are looking if this is an opportunity for them to gain market share and they're going after it aggressively. So I don't believe that the assessment Kyle, where you can say just because the financial industry as a whole is doing poorly that translates directly to Acxiom doing poorly and we haven't seen that be the case.

[Kyle Evans:]

I mean, you have over 20 of the top 25 card issuers and the declines were as high as 40% year-over-year in pre-screening and I'm assuming when you say market share gains that you're implying that they're out there trying to get that next card issued. Is that what you're implying?

[John Meyer:]

Yes, I am. And what we have seen in the volumes coming through is that some people are pulling back, but there some other very large card issuers that are being aggressive in this time, and seeing this as an opportunity to gain market share as opposed to spending their money maybe doing an acquisition.

[Christopher Wolf:]

And I think if you look year-over-year the results be a little decline, but we were pleasantly surprised versus what we anticipated in our planning process, with how the financial industry came in the first quarter.

[Kyle Evans:]

Can you tell me specifically what the revenue trend was in the Financial Services?

[Christopher Wolf:]

That was about as specific as I'm going to get actually.

[Kyle Evans:]

Okay. Maybe some broader commentary on strength and weakness in any particular line items of the business or end markets would be great?

[John Meyer:]

You know, I think if you just work down the P&L, revenue came in pretty close to in line with what we thought was going to happen in the plans and when you look at us only being two months into putting our sales force in place and the compensation, we're seeing trends that give us a good indication that the renewed interest in sales is going to translate into growth force on that. So, although we're disappointed that we drop 1% year on year, we expect that we'll make it up in the future quarters. When you drop down the expense, I'm very happy with the expense results in this. I think the first quarter out of the box and the efforts that we put and really the effort by the entire team, not just any special actions has translated to taking the costs down in the business on that. So, therefore the income is good. The management of our debt and paying down debt in addition to getting a good interest rate paid some dividend in that area. I'm not happy with how we did in accounts receivable. If we would have pulled in cash, I guess about a week earlier than we would have, you would have been seeing great numbers, but unfortunately it came in a week late, and therefore, you'll just have to see it next quarter but it was one of those things where from your perspective, that's a negative, and so I see a neutral revenue, I see a real positive in expense, and I see a negative in cash.

[Kyle Evans:]

Okay, one last question for Chris and then I'll get back in the queue. You guys gave a pretty nice look at the earnings per share bridge at your Analyst Day, and you implied that you were going to lose about $0.32 would kind of go out of the model on contract expirations and potential business losses and lower volume and that you win back between $0.33 and $0.39, and what you said at the Analyst Day was something to the effect that you had a pretty decent line of sight on that business. It sounds like you've had some good wins in the first quarter of the fiscal year. Do you have an even clearer line of sight on that $0.33 to $0.39?

[Christopher Wolf:]

Kyle, what I would say to you at this point, we have a pretty good vantage point to it. I would echo the message that I gave out in New York is that we have a line of sight to it but we have to go execute it against them. I think the pipeline without speaking in absolute quantitative terms is fairly robust and we have enough pipeline to get that numbers, so we do have a line of sight to it, but we do have to execute against it and that's really where we were, so I'd say the tone is exactly the same that we put out when we were in New York. And I just wanted to add one thing on color just about some of the units that you'd mentioned earlier. I think is our various markets have been sort of mixed just like John said in Financial Services, the one thing I do want to add I think that's worth mentioning is retail has probably been a sector that we've had our challenges in and that's an area that as John, our previous questioner asked as far as some bankruptcy issues, so that's an area that we do have some area of focus on and we're watching closely.

[Kyle Evans:]

Thank you.

[Operator:]

We'll take our next question from Mark Bacurin of Robert W. Baird.

[Mark Bacurin:]

Good afternoon. A couple things. Chris, it looks like there was some shifting of revenues from service to the products line. Can you tell us what exactly the shift was there, what was re-categorized?

[Christopher Wolf:]

Sure. Mark, I don't know if I can give you all the numbers here and then we might have to publish something down the road on this, but as far as when we went to the metrics that we laid out in the New York, at our Investor Day and when we went to the line of business approach, one line of business which is our AISS business shifted from services to the product mix, and so that was part of their number and then also our risk business which is now was in the services number as part of our information products business, so that's really where you see the shift in there. To kind of give you a dollar magnitude it was less than $20 million, somewhere between $15 million and $20 million was the shift during the quarter.

[Mark Bacurin:]

And when you give that breakdown, will you go back and give it to us historically quarterly in those as well, just so --

[Christopher Wolf:]

We have to go back and get last years obviously to dial-up all of the quarters since we're in a transition now, we only just put first quarter numbers out there but obviously we are going to have to put all of the prior quarters out there when we move forward.

[Mark Bacurin:]

Great. And then I think you gave, you said part of this I want to make sure I get it right. I think you just gave the growth number for digital products but I didn't hear the growth for consulting and then also you're not giving us the IT outsourcing infrastructure business at this point. Could you just give us I think you said it was down in the teens but can you strip out for us also how much of that was driven off of the elimination of equipment sales out of that revenue stream?

[Christopher Wolf:]

Sure. I will start on the last part about the IT services there. We did actually mention it was down 14.4% year-over-year. I did mention that in the comments. I would say that probably unlike in previous quarters, the bulk of the decrease this quarter was due to contract restructurings, a much smaller portion had to do with the our capital line initiative, we did renegotiate some contracts last year, and did see that effect this year.

[Mark Bacurin:]

And by contract restructuring you don't mean a shift to capital, you mean more of pricing?

[Christopher Wolf:]

Yes, we had restructured a few contracts last year, Mark , I think you had actually seen we took charges for a couple of them as we restructure them last year, so some of the pricing dynamics did change in those, and we did see revenue decreases in those contracts. So I guess actually I am looking through here, I can say roughly I don't know, half, about half, I stand a little bit corrected about half of the decrease year-over-year is capital life.

[Mark Bacurin:]

Okay, perfect.

[John Meyer:]

And then Mark as far as the consulting business, we still see demand increasing on that. We are not publishing those numbers on a quarterly basis, especially since it is a small part of the business, and you would expect based on whatever projects you do in a particular quarter, you can see a bump up or a go down, so we don't intend to publish that quarterly, but it still remains a focus, and a place we are pushing.

[Mark Bacurin:]

And finally you did show it looks like if you strip out the data pass-through costs, or even with them in there, you did see nice gross margin improvement in the products line, but not all of that translated down to the operating margin line, I think you are up 130 basis points in product gross margin but only 50 on the operating line. Can you strip out there was incremental investments in SG&A. Can you help us quantify what was going on there?

[Christopher Wolf:]

Sure, Mark. I will take that. The incremental SG&A as I said in my comments first of all we did make some investing in some of the Sales and Marketing functions that are in SG&A, and as we talked about pretty clearly at our Investor Day, we do have amounts for incentive compensation in the numbers this year that we just didn't have last year, and the combination of those two, or those items is really what the effect on SG&A year-over-year.

[John Meyer:]

Just to add a little color to that, we have got very clear plans is what our compensation is, and we are going to be able to reward our employees, as and when and only when we achieve our target, so we had a good quarter this quarter.

[Mark Bacurin:]

Very good. Thank you.

[John Meyer:]

Thanks Mark.

[Operator:]

We'll take our next question from Troy Mastin with William Blair.

[Troy Mastin:]

A little bit late from another call, but I am curious if you can give some insight on how contract renewals have been progressing through the quarter, in terms of magnitude if they are roughly equivalent to previous sizes, and in terms of how many or how substantial that contracting activity is versus past quarters?

[John Meyer:]

Yes, Troy, it is progressing consistently how it has happened in previous quarters. I did single out because we are starting to pull some of the statistics out of our pipeline, is that we signed 29 deals that were larger than $0.5 million, of which eight of them were new logo customers or about a third, so we are seeing things, we are actually seeing some traction in our sales effort on that, and we are believing that the renewals are holding consistent as they had in previous quarters.

[John Adams:]

And there were a couple of pretty significant multi-million dollar deals that renewed, in reasonably tough industries, so we believe we did pretty well in the quarter.

[Troy Mastin:]

And is there any lumpiness coming up where you have an unusually robust quarter of renewals in the next few quarters?

[John Meyer:]

I don't know is the answer. My gut feels they are spread pretty evenly, but we have got, I mean, I really don't know though to tell you the truth, Troy.

[Troy Mastin:]

Okay. And then you may have kind of answered my next question a minute ago, but I am going to ask a little more detail regarding the compensation structure. I wanted to kind of get an update on how the new compensation plan is going, and if there was anything meaningful that was either paid out or accrued for in the quarter, and how we should expect this to play out through the year? The reason I ask is in the past, we would oftentimes get some lumpiness in the incentive compensation from quarter to quarter, based on how Acxiom's performance looked later in the year. Could you give us some insight as who to you it could play out as we progress through the fiscal year?

[John Meyer:]

Well we evaluate our performance on a quarterly basis, and then we accrue what the expected expense would be as it relates to compensation. In some cases, we do pay that compensation in a particular quarter, so things like commissions, so that is kind of a normal ongoing expense. We do not, of the lions share of the expense that got accrued in that SG&A function will not be paid out until year-end, and so it is really based on the performance that we did for the entire year, not just for one quarter, but we accrue the expense for the quarter, and so continued good performance quarter by quarter will equate to continued accruals, put aside for those efforts, assuming that everything is progressing along like we expect, that is why we think that SG&A number would stay consistent for every quarter going forward.

[John Adams:]

One thing to add to that, these are very defined plans, and to give you an example of a number of the people on the call were in New York, and they saw the structured reorg chart, everyone on that chart was in the operations area, or the market facing area, or the line of business that got some part of their compensation on the corporate results, and another part on their individual unit results, so we are trying to maximize individual performance, but get everyone focused on the corporate whole, and they are pretty specific sliding scales with revenue and profit and cash to drive those bonuses, so we have got it pretty buttoned down I think.

[John Meyer:]

And to add to that point is we are trying to normalize this, we are trying to avoid big accruals or big adjustments as the year goes by, so Troy, we are very in-tune with being consistent with the accruals there.

[Troy Mastin:]

If something would have change later in the year, those could be reversed and could show up as kind of a benefit in latter quarters, correct?

[John Meyer:]

Yes, they could. It's a mathematical calculation depending on the profits, which is why we're focused on that.

[Troy Mastin:]

Okay, and did you quantify what that accounted for in the quarter or can you?

[Christopher Wolf:]

No, Troy, we're just not going to release that information right now.

[Troy Mastin:]

Okay. Fair enough. Thank you. I'll move on.

[John Meyer:]

Thank you.

[Operator:]

At this time we have time for one further question which we will take from Todd Van Fleet of First Analysis.

[Todd Van Fleet:]

Good afternoon, guys. John, I wanted to get your sense as to where you think we are at in the evolution of the sales force here, as you mentioned I think Shawn has been on Board maybe a couple months now, he has had time to probably size things up. I am trying to think of the best way to kind of get at like I say the evolution of where you guys are at, and getting the sales force where you would like it to be so you can start reinvigorating the top line here? Do you expect that over the course of the next several months, that there will be some attrition in the sales force, and then you will have to re hire, are you going to be able to do more with less moving forward, in terms of sales personnel into do you expect to be more efficient? Can you just kind of speak broadly to some of those kind of somewhat elusive metrics?

[John Meyer:]

Nebulous?

[Todd Van Fleet:]

Yeah.

[Christopher Wolf:]

Yeah, I will cover that. First of all, Todd we get you the balance sheet this time?

[Todd Van Fleet:]

I did get that this time, thanks. Thank you very much.

[John Meyer:]

John is apologizing for cutting you off, because Chris failed to get it to you last time. Don't worry, he was severely chastised.

[Todd Van Fleet:]

I'm sure.

[John Meyer:]

As far as sales I would say we were in the early days of this. You have to remember that our sales cycles probably run 6 to 8 months, with Shawn on for two months, the first thing we did is had to inventory the sales organizations, because they were pretty much scattered throughout the Company, and we had to make sure that they understood how they were compensated and rewarded, which in many cases wasn't as clear as it should have been in the past, and so what we have actually been doing, what Shawn has been doing is working through the sales force and we have seen some attrition, but that has actually been involuntary attrition, because we went back and looked at people's performance relative to quota and relative to expectation compensation, and decided that they weren't contributing as much as they should have on that. Corresponding with that, we had done some hiring, and so I will expect to do, kind of task Shawn with we should be doing more with less, okay? Less individual salespeople. And I guess in contrast, our account teams are now tasked with growing at the percentage that their market is growing, and so we have some very big customers and very good relationships, and I mentioned the white space analysis. That is probably worth a little bit of an explanation. What we did is we took our products and services and we categorized them. How many do we have, what do they do? Are they packaged, and put in a place, then down the vertical axis, we listed all our customers, and then we took the revenue and said where is that revenue occurring by product, and what customers? What that shows you is an opportunity for all of the other things we could bring to the customer base, where we have already established a presence, we are already doing a good job, and what else could we carry into that customer base? We found there was a lot of white space, and so my expectation is we are going to see some organic growth on existing clients, in addition to tasking our sales force, our smaller task force with growing new logo business.

[Todd Van Fleet:]

What's your expectation regarding broadening that discussion with these clients, as renewals come up? Does it strike you as being perhaps a difficult environment now that we find ourselves in macro economically speaking to kind of broaden that discussion when maybe your clients might only be interested in kind of okay here is what we've used you guys for in the past, we got to tighten our belts a little bit. Let's take a look at what we're using you for and just kind of start from there. I mean, do you think that's going to be, are you going to be more challenged to broaden that discussion at this point?

[John Meyer:]

Todd, that is a perfect time to do it, because like you would expect, every customer wants more for less, and so if you are doing exactly the same thing as you were doing before, they want you to show them a cost reduction, a price reduction on this, and so that opens a door for us to say, in addition to that, we can give you this, where we push to keep the revenue or grow the revenue by giving them more value than before, and therefore opening the doors to some of the new things that we want to push into a customer, and so that becomes a time when we open the door to new opportunities, and then grow from there, and so we have found that that is a good time for us to bring those new ideas. I am not sure we were as organized and as disciplined in the past, and seeing that okay, this is what we do today now here is what we're pushing guys, and here is where we want to get in so your job is, if you want to get a cost reduction or a price reduction you have got to make sure that you get this footprint of this new capability inside that customer.

[Todd Van Fleet:]

Okay. Thanks very much.

[Operator:]

And Mr. Meyer, I'd like to turn the call back over to you for any additional or closing remarks sir.

[John Meyer:]

Great. Thank you very much, and thank you everyone for showing up. Before we close, I want to reiterate my belief that we made a number of changes and internal adjustments, to respond to the changing positions externally, and now we believe we are in a place where we can execute that plan out in the marketplace. We will be positioning Acxiom as the global interactive marketing services provider. That is a position of leadership that we established in over four decades of innovation. We appreciate your continued interest and attention. Thank you.

[Operator:]

And that does conclude today's conference call. Thank you for your participation. You may disconnect at this time.