LiveRamp Holdings, Inc.
Q4 2015 Earnings Call Transcript

Published: 22 May 2015

[Operator:]

Good afternoon, ladies and gentlemen. Welcome to the Acxiom Fiscal 2015 Fourth Quarter Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Lauren Dillard, Director of Investor Relations.

[Lauren Dillard:]

Thank you, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2015 fourth quarter and full-year results. With me today are Scott Howe, our CEO; and Warren Jenson, our CFO and Rick Erwin, the President and General Manager of our Audience Solutions Division. 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 schedule, including any reconciliation to non-GAAP financial measures is available at acxiom.com. Also, during the call today we will be referring to the slide deck posted on our website. At this time, I will turn the call over to Scott Howe.

[Scott E. Howe:]

Thank you, Lauren. Good afternoon and thank you for joining us. Before jumping into the call, I would like to take this opportunity to publicly welcome Rick Erwin to the team and call. Rick joined last month to lead our Data efforts, as President and General Manager of Audience Solutions. We are very excited to have him onboard and look forward to what our Data business will be able to accomplish under his leadership. FY 2015 was an eventful year at Acxiom. Yesterday, we announced the divestiture of our ITO business. I view this as a major step toward the future, as this divestiture increasingly positions Acxiom as a marketing services pure play comprised of three highly focused and complementary businesses. Our LiveRamp Connectivity business, our Audience Solutions' Data business and our Marketing Services portfolio, which includes database, e-mail and consulting. Increasingly, I'm thinking about these businesses as SaaS, DaaS and Services, each centered on our core capabilities in connectivity, recognition and data stewardship. And I believe each of these businesses can be transformed into better future business than they are today. One of our top priorities for the coming year continues to be accelerating the growth of Connectivity. Over the past two years, we have established Acxiom as the early leader in an important and fast growing new industry category. In doing so, we repositioned Acxiom's reputation for innovation and won a legion of new customers. Last year, this SaaS business grew by over 300% and all signs suggest another year of strong growth. I am pleased to share that the integration of AOS and LiveRamp was completed in Q4 and as of March 31, a full six months ahead of schedule, all clients have been migrated to our combined solution, LiveRamp Connect. Marketers are now able to use a common interface and single back-end data distribution system to match and connect their data to a growing network that today includes close to 150 partners. Importantly, the growth of connectivity has introduced Acxiom to a legion of new client types, including smaller marketers, agencies, publishers, and enterprise software companies. We believe these will fuel both connectivity growth, but also over time, give us beachheads upon which to grow our data and service offerings. As for now, client reaction to the combined solution has been very positive and the fourth quarter capped off a year of incredible adoption and growth. Please turn to slide three and I will provide an update on the adoption metrics we introduced last year. A few highlights from the quarter. Our install base continues to grow and we added 20 new customers in the fourth quarter. In total, we ended the quarter with approximately 215 customers using LiveRamp Connect, a sequential increase of 10%. Revenue continues to grow in line with adoption. In Q4, we generated approximately $22 million in revenue, up from Q3 and up over 300% year-over-year. For the year, we generated $63 million in Connectivity revenue, exceeding our previous guidance of $60 million. We exited 2015 with a revenue run rate in excess of $80 million, up from $68 million at the end of Q3. We powered $47 million in gross media spend during the quarter, while we expected this number to be down sequentially due to seasonality, it is up over 200% compared to Q4 of last year. And finally, I would like to highlight some of the progress we made internationally in the past quarter. We launched LiveRamp Connect in France, Australia, Japan and China and signed a number of key partnership agreements in these geographies. In France, we are partnering with Nielsen to help Nielsen activate and distribute their segments to digital agencies and clients. And in the UK, we signed an exclusive data agreement with DunnHumby to help enable closed loop marketing for our clients. Across APAC, we are committed to over 10 regional premium publishers. We are connected to over 10 regional premium publishers and have organized the first ever RampUp Asia Conference in Tokyo this September. In summary, our Connectivity business continues to demonstrate strong momentum and I am very pleased with the launch of LiveRamp Connect this past quarter. The progress made in fiscal 2015 has enhanced our reputation for innovation and increased our relevance with both existing clients and the world of new publisher, agency and application partners. Going forward, Acxiom must aggressively extend its early lead in onboarding and connectivity. Like a telephone switchboard, the more volume and connections we can drive, the more value we create for our network of partners. Our near-term focus here is ensuring our solution scales in line with adoption and continuing to deliver exceptional results to our customers and partners. Additionally, we remain focused on expanding our partner ecosystem and building out our connectivity capabilities internationally. Before I switch gears, I would like to share two management changes within this business. I'm pleased to announce that Travis May has returned to LiveRamp as its President and General Manager replacing Auren Hoffman. Travis has spent much of his first year at Acxiom managing product and engineering across all of our offerings. So he now becomes a key point of integration and stability in the Connectivity business. Auren's exceptional business acumen, creativity and entrepreneurial ability have been key ingredients in LiveRamp success to date and he will now split his time between managing a gradual transition with Travis, and helping me identify new innovation opportunities within Acxiom. His second priority in the coming year will be to solidify our Marketing Services foundations and profitability. While this business has different economics and characteristics than Connectivity, Acxiom must continue to be a leader in our Professional Services business. Over the past year, this business hasn't performed to our expectations. But we are confident we're doing the right things to strengthen our position. We have been interviewing for a President of Marketing Services for the past few months and I've talked to some outstanding candidates. While I don't have any news to announce on that position today, we are hiring to fit our new model. So you can expect someone who knows how to run this business and operate a world-class services organization. I hope to have more news on this front in the coming weeks. We are delivering more innovation within our Marketing Services product offerings. For the past 18-months, our focus has been on building our Connectivity offering. With that business successfully growing, we're now accelerating innovation across our Marketing Services portfolio. This is already underway. For example, in April, we launched a major refresh of our Digital Impact UI and reporting capabilities. We're also readying some innovations in marketing database. A third priority will be to reinvigorate our Audience Solutions or data business into a more modern, relevant and efficient DaaS offering. Rick Erwin will talk about this in a few minutes, but I am excited about our longer term future here. Since the majority of our historical data sales have been directly to our database clients, we haven't captured our fair share of emerging demand from SMBs, agencies, publishers, and enterprise software companies. We are expanding our data specialist sales muscle while also modernizing our distribution capabilities and increasing the breadth of our data offerings. Also, with the pipes we are laying in connectivity, there will be more opportunities for us to transport our data to a new wave of prospects and customers. And finally, as we have in the past, we will continue to focus on running a better business, and fostering a high performance workplace. With the implementation of Workday, an investment in our next-generation network and infrastructure, we have made a lot of progress against this imperative in FY 2015. At the same time, we still have work to do. Our reporting systems increasingly give us clear lines of sight into each of our product lines. And we continue to find opportunities to run better businesses in every part of the portfolio. With that said, let me conclude by thanking all of you again for your continued patience and support in our journey. I look forward to updating you on our progress in the months ahead. And now, I will turn the call over to Rick.

[Rick Erwin:]

Thanks, Scott and good afternoon, everyone. Now that I've been here at Acxiom leading our Audience Solutions business for a little more than a month, I wanted to make some observations about the state of the business, and our priorities in the coming months. First, we have a solid foundation for growing our data business. Today, we have more than 4,000 Audience Solutions clients spanning all of our vertical markets

[Warren C. Jenson:]

Great. Well, thanks, Rick. Yeah, it's great to have you on board. Good afternoon, everyone. A few highlights from the quarter. Yesterday, we announced the sale of ITO. This transaction is a transformative event in the company's history. Once the transaction closes, we will be a pure-play marketing technology company. While total company revenue was down, Connectivity had a great quarter and year. Let me share a few stats. Q4 revenue was $22 million, up sequentially and up over 300% compared to the fourth quarter of last year. Connectivity finished the year with $63 million in revenue, exceeding our guidance of $60 million. The business exited the year with a revenue run rate in excess of $80 million. And finally, on April 1, we successfully implemented our next-generation ERP, going live with Workday Financials and Tidemark for enterprise performance management. These implementations will allow us to transform both our external and internal reporting capabilities. Now I'll discuss our quarterly results in more detail. Starting with slide 4, our summary financial results. Total revenue was $257 million, down 4% compared to the same period a year ago. Excluding items, revenue was also down 4%. Marketing and Data Services revenue was down 2% for the quarter. IT infrastructure management revenue was down, as expected, approximately 12%. OpEx for the quarter was $262 million compared to $280 million in the prior period. Excluding items of approximately $36 million, OpEx was down 3% year-over-year, primarily due to savings associated with our cost-reduction programs, offset by the addition of LiveRamp. We ended the quarter with total head count of approximately 4,400, down over 300 FTEs from a year ago. ITO represents roughly 700 of the total. Excluded items in the quarter included stock-based compensation of $8 million, restructuring charges of $12 million, intangible asset amortization of $4 million, accelerated software amortization of $4 million, which was associated with the integration of AOS and LiveRamp. And lastly, we incurred $7 million in transformation-related third-party expenses. Of this total, approximately $3 million was spent on our Workday and Tidemark implementation, and roughly $2 million was related to the separation of ITO and final contracting. Please note that the business separation and transformation costs are included in SG&A. Excluding unusual items, SG&A was down approximately 10%. GAAP diluted loss per share was $0.08 for the quarter. Excluding items, diluted earnings per share were $0.24, compared to $0.26. As a reminder, we recorded a tax benefit that improved EPS in the current quarter and year by $0.04. Absent this benefit, non-GAAP EPS for the quarter would have been $0.20 and for the year, $0.74. On slides 5 and 6, we've included a reconciliation of our GAAP and non-GAAP results for both the quarter and the year. Slide 7 highlights our revenue results as reported. Now, slide 8. U.S. marketing and data service revenue increased $4 million or 2% in the quarter. Excluding the impact of Connectivity, revenue was down 7% year-over-year. As I mentioned on our Q3 call, in Q4 of FY 2014, we had a large client implementation and a large one-time data sale impacting this comp. Absent those items, revenue excluding Connectivity was down 4%. International marketing and data service revenue was down 28% as a result of our exiting the paper survey business, and to a lesser extent, FX. Excluding these items and the impact of Connectivity, revenue was down 4%. For the quarter, our operating margin, excluding unusual items was 12%, down 90 basis points compared to last year. U.S. marketing and data service margin improved 10 basis points, as a result of improving margins in Connectivity. Internal operating income declined approximately $5 million to a loss of $2 million, mostly due to declines in Australia and Europe. ITO operating margin improved to 10.1% as a result of cost actions taken in response to terminated contracts. Now on to slide 10. For the quarter, operating cash flow was $34 million, compared to $41 million in the prior period. The decline was primarily due to changes in working capital. Free cash flow to equity declined in the quarter for the same reason. On a trailing 12-month basis, for the year, the decline in free cash flow to equity was driven by changes in working capital of $37 million, $22 million of lower net non-GAAP earnings, and $18 million of higher CapEx. We have included a detailed cash flow analysis on slide 11. This is the same analysis we provided last quarter. You will see once again that our fundamental ability to generate cash remains intact. Cap software costs were approximately $4 million in the quarter. Total capital spending decreased $2 million to $21 million. Total capital spending for the year was just under $90 million. Now looking ahead to fiscal 2016. First, how will we be reporting the business? As I mentioned on our call yesterday, in FY 2016 we will be reporting our business differently. We will start with two segments; Marketing Services and Audience Solutions and the second segment, Connectivity. For both segments, we will report revenue, gross profit, gross margin and contribution margin. Later this year, we will likely separate Marketing Services and Audience Solutions and report each as a segment. Together, these changes represent another step in our evolution to provide more transparency and heightened accountability. One final note on this point. Historically, we've included 100% of third-party data GMS royalties in Connectivity. Going forward, we intend to implement a market-based approach between our segments, and we will split these revenues between Audience Solutions and Connectivity. Had this been in place throughout FY 2015, it would've reduced Connectivity revenues by approximately $8 million and improved the revenues of Audience Solutions by a corresponding amount. Given this change, going forward, when we talk about the growth comparisons, we will use a revenue baseline for Connectivity of $55 million. Next, where will we be investing in FY 2016? We plan to invest in three areas. First, Connectivity. We have a terrific opportunity and we're going to go for it. In this business, we will be investing in new products, globalization, expansion of our marketing and sales efforts, and finally in our operations. Here, we won't hold back. The great news is that, despite these investments, margins will still expand. In fact, Connectivity could easily reach breakeven by Q4. Next, we will invest in strengthening our capabilities in Audience Solutions and Marketing Services. We have a plan to correct the decline, and more importantly, create a path to return to growth. Rick and his team have charted a clear set of actions, which we believe, make a ton of sense, and which over time will reverse recent declines and return this portion of our business to growth and expansion. Finally, we will continue our investments to modernize our data centers and infrastructure. While these initiatives may dampen near term earnings, we believe each comes with a strong value proposition to enhance our products and customer experience, drive long-term growth, and as a result, increase shareholder value. Now on the cost side. Given the separation of ITO, we will carefully, but very deliberately and aggressively attack the $18 million of stranded overhead. Further, with the divisionalization of our businesses, we are also seeing significant opportunities to streamline and tighten. Rest assured, we are all over our cost structure. These efforts will be ongoing throughout fiscal 2016. In short, when you think about FY 2016, our priorities are pretty straightforward. Pedal to the metal on Connectivity. Our opportunity is similar to the best SaaS place in any industry. Two, stabilize the top line in Marketing Services and Audience Solutions and return these businesses to growth and expansion. Third, relentlessly attack overhead in cost. And finally, be grade stewards and return capital to our shareowners. Now slide 12. This chart highlights our adjusted baseline for FY 2015. You'll see we have adjusted for two items. On the top line, we have excluded the revenue associated with the European paper survey business consistent with our tax adjustment in FY 2015. And on the bottom line, we have excluded the one-time $0.04 tax benefit. Our guidance excludes unusual items, including stock-based compensation, one-time expenditures and acquired intangible asset amortization. Our guidance also excludes ITO. With that, as compared to our adjusted baseline, we expect total revenue in the range of $815 million to $840 million, up between 2% and 5% versus the adjusted baseline. And non-GAAP EPS in the range of $0.45 to $0.50, up between 5% and 16%. Finally, a few other comments on FY 2016. In Q1, we expect overall revenues to be roughly flat, as we're expecting a slow quarter in Marketing Services and Audience Solutions. Also given this is the first quarter, we will report our results without ITO. The stranded overhead will pressure the bottom line. As a result, we expect a low-single digit loss per share for the quarter. For the year, we expect tough comps in Marketing Services and Audience Solutions in the first half of the year, with improving performance in the second half. If you'll turn to slide 13. While things could easily change, as a percentage of the total, we see our revenue phasing per quarter as follows

[Operator:]

Thank you. Our first question comes from the line of Todd Van Fleet of First Analysis. Your line is now open.

[Todd Van Fleet:]

Good afternoon, guys.

[Warren C. Jenson:]

Todd.

[Todd Van Fleet:]

Warren, just on the stats you gave there at the end on Connectivity growth and what's embedded in the guidance here. You mentioned 65% to 75% growth off of the 55% and then I think you said minus 4% to what, flat or slightly up for the balance of the business, is that right?

[Warren C. Jenson:]

Yes, that's what the implications are of our growth in Connectivity and where we see the core coming out. And I would say it's really 4% to roughly flat with the possibility – the only caveat, with the possibility of being slightly up.

[Todd Van Fleet:]

Okay. I'm just thinking about if we didn't build off the 55% and there weren't the reallocation or the reclassification that you talked about, is that still 65% to 75% growth for Connectivity? I guess it would imply that the data element is growing at the same pace as the rest of the business. I'm just trying to think about if we didn't reallocate, are we still thinking about 65% to 75% growth in Connectivity?

[Warren C. Jenson:]

No, Connectivity would be much higher in that case, but we also wouldn't be building off the 55%, we would be building off 63%. So I would not change the growth rate, but we would just be building from a larger base. And let me say to everyone, because I think there is an interesting point to be made here, as we are going through the creation of these different segments and separating out the businesses, let me tell you, I know there is going to be some elements of confusion. But at the same time, I know when we get through this and get everything separated out, all the costs aligned, the revenue aligned, we are going to be in a far better place and provide everyone with a lot better transparency and also really equip our businesses to grow. What we felt when we were looking at this issue is, we want our data business and Rick can talk about this to be incented like crazy to distribute and sell their data everywhere. And it just didn't make sense for Rick's P&L to include all that data revenue in Connectivity. When we are one segment, that's okay, when we are two, it's not, and that's the reason for the change.

[Todd Van Fleet:]

Okay, that's helpful. Then you mentioned, Rick. Rick, welcome to the firing line.

[Rick Erwin:]

Okay.

[Todd Van Fleet:]

I'll ask you a couple of questions. So, one, what attracted you about the opportunity here at Acxiom given your years of service, I guess, in the industry? I ask you that. And then secondly, what do you think – and thinking about Audience Solutions and what data means to Acxiom, or what it means to kind of the new digital advertizing and marketing industry that we are now in? What do you think is kind of a – and should be a kind of an average growth rate for data solutions or Audience Solutions as we think out beyond 2016? I'm just thinking, we've had a business here that's been had – it's been in the state of maybe decline, flat to decline for some time, but assuming that you bring to bear all of the initiatives and they work out for you the way you'd like and those that you articulated today. What do you see when you look out across the landscape? What is kind of the growth rate that should be expected out of Audience Solutions longer-term?

[Scott E. Howe:]

Thanks, Todd. Let me take the first part first, which is that what attracted me to Acxiom is a company that has made the investments to build the future of data-driven marketing. And what that means to me is not only a very strong foundation and heritage in data quality, data governance, data stewardship, but also the distribution potential to bring all of that power of that heritage to the rapidly growing world of digital media and that combined with the phenomenal people and reputation of the company is what drew me to it. In terms of the right way to think about the growth rate of a functioning future pointed data business, I want to have Lauren answer that, so that he can put it in the context of the other business segments that we'll be reporting going forward.

[Lauren Dillard:]

Todd, let me address that and I'll try to touch on each of our business segments, because we really are in three businesses each with different long-term growth characteristics. So, in Connectivity, we feel we have a tiger by the tail and we feel the growth characteristics of that business as far as we can see out – look, just like that, the best of SaaS in any industry. So, 65% to 75% is the long-term growth rate is really what we're expecting from the business and I know what Warren and Travis have been building toward as well. As we think about data and I think you have to look it in the long-term, because we have to build our way to stability and then we have to build our way to grow. If you go back to what Rick said, he highlighted some really interesting things, doubling the size of our TAM and attacking new markets where we just haven't been present, institute a better level of data sales capability for existing clients to drive higher revenues and more sustainable revenues, the higher level of productivity in our operations around how we think about products and procurement. When we think about all of that, coupled with the ability to take our data anywhere in the digital ecosystem, we're gunning for a double-digit growth rate in the long term. Again, that's not going to happen in the next few quarters, but that's what we're gunning for. In marketing services, same thing, first, driving for stability. We still have some work to do, as I think is evidenced by our guidance. Our goal in that division is low single-digit growth rate for the long-term.

[Todd Van Fleet:]

Thanks.

[Operator:]

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

[Dan Salmon:]

Hey, guys, good afternoon. Maybe, a double question for Warren and Rick. Warren, I know prior to Rick rejoining, you had been already starting to get some of the work underway for Audience Solutions and a lot of that consolidation and making it more accessible more quickly to your clients – maybe we'll use the baseball analogy, where would you think you're in – what inning in terms of the work that needs to be done there and then maybe just as a follow-up for Rick, sort of how do you think you can take your prior experience and really sort of lead the strategy for this for being a more differentiated product going forward?

[Scott E. Howe:]

Maybe I'll jump in and take the first one here, Dan. This is Scott. Where are we in terms of what inning, I'd say we're in the third or fourth inning. We've made pretty substantial investment and a lot of progress in terms of making our data more accessible. So over the last few years in concert with both the AOS and LiveRamp build out and we are building pipes. With that, we are building APIs that makes our data accessible to an increasing array of the marketing world without necessarily having to have attached sales capabilities with that. Recently, we've announced partnership with IBM, for instance, where our data and wiring helps power their marketing cloud. Actually, I was invited to speak at IBM's Amplify Client Summit last week. Likewise, that's the same kind of wiring and plumbing we took to our agency partners and our many publisher partners including Facebook. So we've learned a lot from that, but we need to complement that now with increased data, specialist sales muscle, advanced modeling capabilities, and just continuing to build out the connectivity grid, such that anyone who wants to ingest our data, our data is accessible to them.

[Warren C. Jenson:]

I'll just tag on there, Dan, to say – I think you asked me, what is it that makes me confident that we see the path forward on this Audience Solutions businesses, is that sort of fair representation of your question?

[Dan Salmon:]

Well, I think more just that wanting to understand where it is in its transition and then to either you or Rick sort of – how to establish differentiation for this product in the marketplace is the main idea?

[Rick Erwin:]

Yeah. So, this is Rick – so look, we have – the foundation is already in place. So that's always – in my experience when you are approaching a business unit, general management challenge the first step is, are the basics in place. Is there a leadership team? Is there a stable and strong product? Are their good relationships with clients and prospects across verticals? And do you have the right sort of distribution rails in place? And so, step one is those foundational elements are in place. And going forward, the way we make this business differentiated is not simply by having a different data product than anyone else. Product differentiation is important. Our products have to perform better and they have to span a breadth of data diversity and client use cases that others can't do, but much more important to that is the holistic experience that a client gets, when they ingest our data, market with that data, measure against that data, and see better marketing results. And so for us, it's important that the way we deliver our analytical services, our data products themselves, the Connectivity that we already have in place after our LiveRamp acquisition and that we do that with a set of resources of the client interface, the sales rep and people that support that process that drive credibility and loyalty over time and that's the way we'll do it.

[Dan Salmon:]

Great. Thanks, Rick and thanks, Scott.

[Rick Erwin:]

Thank you.

[Operator:]

Thank you. Our next question comes from line of Brett Huff of Stephens, Inc. Your line is now open.

[Brett Huff:]

Good afternoon. Thanks for taking my questions.

[Scott E. Howe:]

Hey, Brett.

[Warren C. Jenson:]

Hi, Brett.

[Brett Huff:]

Two questions for you and then I'll get back in the queue. The fact that the LiveRamp revenue went up sequentially nicely, despite a fairly substantial decline in the gross media spend seems to imply that there was a significant either increase or a bigger percentage of – in the Q3 number of SaaS revenue, relative to the gross media spend revenue. And I'm wondering if we should take that to mean that these are newer clients that have signed on or we're getting SaaS revenue from more clients, but have yet to get the gross media spend revenue, is that the right way to interpret that result?

[Scott E. Howe:]

Well, yeah, I mean the way we would think about it, Brett is, I mean first you want to install the pipes and then you want to flow data through the pipes, right? And so, when someone signs up for SaaS, they're paying us a monthly subscription. And so, that number is relatively constant unless we sign up new clients. So the increase there in the SaaS was driven by new client adoption. And then, in terms of what flows through the pipes, that is much more seasonal, I mean, that's campaign-driven. And so, yeah, our hope is that as we bring more and more people to use our pipes, as we build the power grid, so to speak, it gives them more and more opportunities in future quarters to ingest data through those pipes. So yeah, all this to say, you're thinking about it exactly the right way.

[Brett Huff:]

Okay. And then, this is sort of a related question and somebody asked this earlier, but I guess I'm still not quite getting it, Warren, we're now – we are using a base of $55 million for LiveRamp versus the $63 million that was reported. And that $8 million delta was revenue associated with gross media spend that should really be attributable to Audience, is that correct?

[Warren C. Jenson:]

Yeah, the only thing that I would clarify is, these are revenues that we have received – or royalties we have received for use of our data in the digital ecosystem. So, there were media dollars spent – yes, GMS, but it was GMS related to third-party data that Acxiom supplied.

[Brett Huff:]

Okay. And so just to roll that forward, you said, we expect midpoint 70% growth off the 55%, so that gives me, if I just do the straight up math, it's $94 million. Is that kind of what you guys are – is that the right math?

[Warren C. Jenson:]

I believe you're doing the math correctly.

[Brett Huff:]

Okay. And so – and somebody kind of asked this before, but I want to put a finer point on it if I can. How much are you then assuming in addition that is gross media spend is going to show up in Audience? And the reason I ask that is, the negative 4% to flat that you're kind of assuming for the legacy business, that looks better than maybe it otherwise would without the reclassification. So, I just – what implied in your guidance is the gross media spend in the legacy part of the business?

[Warren C. Jenson:]

I don't know that we've completely – we haven't broken out the GMS part of our business and I really don't intend to today, Brett. But suffice it to say that in the Connectivity business, whether it's use of our data or whether it's use of first-party data, we would expect that to grow substantially during the course of the year again in fiscal 2016.

[Brett Huff:]

Okay. And then, one last one and then I'll get back in queue. Can you sort of give us more color on the management changes or on what – he is going to work with you, Scott? I mean, so he is still going to stay with the company, but what specifically will be his kind of portfolio or his purview?

[Scott E. Howe:]

Yeah. I mean, first off, let me just say, incredibly talented, entrepreneurial, incredible leader who helped build the LiveRamp business, but also built a phenomenal management team around him, including Travis. And so we felt that a year after the acquisition and quite frankly a year before I think the big earn-out is due, now would be a really good time to manage an orderly transition of the business to Travis. The added benefit there is, Travis has spent most of his time since joining Acxiom thinking about products and capabilities on an Acxiom wide basis. And so, already we've seen him take some of that thinking and incorporate it into our Connectivity division. Connectivity enhanced by data stewardship, privacy management, permissions management and recognition creates a far stronger, more robust product offering for the long-term. So we're really using this to cross fertilize ideas across the organizations and build a long-term migration plan. I will tell you, as anybody who knows Auren, the man is a fountain of ideas. And as I often joke with Auren, there was kind of the rumor years ago at Princeton University that when Albert Einstein taught there, they had a group of TAs that would just follow him around and like capture all of his words, because within his remarks there was always a kernel of brilliance. My hope is that by having Auren step away from LiveRamp and think more broadly across the Acxiom portfolio and also what his next big entrepreneurial ambition might be, that some of that entrepreneurial spirit, we can plant throughout the rest of Acxiom. So all this to say is, I'm going to bleed that guy dry of all of his good ideas.

[Brett Huff:]

Okay. That's what we needed. Thank you.

[Warren C. Jenson:]

Great. Thank you.

[Operator:]

Thank you. And our next question comes from the line of Todd Van Fleet of First Analysis. Your line is now open.

[Todd Van Fleet:]

Hi. Hey, Warren, I think it might be helpful for everyone if – I know you guys are going to break it out three months from now or so, but I think it might be particularly helpful today if you could give us an understanding of how much the Audience Solutions business represents in terms of revenue, just kind of ballparkish? I guess – I think if you want people to do a sum-of-the-parts analysis and valuation on the business, I think that would be most helpful. Thanks.

[Warren C. Jenson:]

Great. I'd be happy too. For FY 2015, and I believe – let me again just say it from the outset Todd that we are in the process of just locking down these, both the revenue and also the cost, so all of this is preliminary and we will report this out obviously just as you said in Q4. So when we look at the business, I would put in the Marketing Service category based on the work we've done so far about $444 million, in Audience Solutions $305 million, and then the $55 million, I mean, it might be off a little bit here for rounding, $55 million in Connectivity.

[Todd Van Fleet:]

Okay. And then just, again thinking qualitatively or characteristically I guess about the three different businesses. The margin profile, is there any reason to believe that the margin profile that is operating margin profile for the Audience Solutions business shouldn't be at least as good as that of the Connectivity business over the longer term?

[Warren C. Jenson:]

Stay tuned on that front. I'm not going to go into the margins for the reasons that I mentioned, but directionally you're correct. This is a very high-margin business.

[Scott E. Howe:]

SaaS and DaaS they go together.

[Todd Van Fleet:]

Okay, great. Thanks, guys.

[Warren C. Jenson:]

Thank you.

[Operator:]

Thank you. And I'm showing no further questions at this time. I'd like to hand the call back over to Warren Jenson for any closing remarks.

[Warren C. Jenson:]

Great. Well, all of you on the call thank you very, very much for joining us. I'll end the call today just as I did yesterday. This is truly a transformational moment for Acxiom. We're thrilled to have Rick here. We look forward to executing on our priorities of just knocking it out of the park with Connectivity. We have work to do to stabilize and grow our business and we recognize that we've got some cost to take out too, but suffice it to say we understand that. We're focused on it and are committed to drive-in the needed productivity. And finally, as I mentioned, we're thrilled to continue to return capital to our shareholders through our share repurchase. Thanks to everyone for joining us today.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Have a great day everyone.