Acxiom Executive Insights: Brazilian Holdup, Customers

On Tuesday, Acxiom Corporation (NASDAQ:ACXM) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Brazilian Holdup

John Crowther – Piper Jaffray: This is John Crowther on for Mark. Quick question here, you guys talked about restructuring of the risk business. You’ve obviously divested the background screening business. Just wondering what your appetite is kind of going forward for further divestitures either on the international side or some of your other non-core businesses?

Scott E. Howe – President and CEO: And first off John, thank you. Earlier this morning I read your report and so we got your questions in advance. So that was terrific that you included us in that. As a matter of policy we will no longer comment on matters of acquisition or divestitures and I am sure you fully understand why, but as we’ve stated before, our primary focus is first and foremost to just get better in everything we currently do. So hopefully – then was there a second question as well?

John Crowther – Piper Jaffray: Yeah, so as I look at the international side it certainly seemed like, as you commented, trying to get profitable in all segments and that Brazil tends to be – was the only real holdup there. Wondering if that’s a factor of you just need to get to easier comps there, or is there something structurally in that market that’s going to make it difficult for that business to perform in line with some of your other international properties, or get that business in line with some of your other international properties?

Scott E. Howe – President and CEO: I’m not sure John that is a matter of the comps as much as it is a matter of what is the foundation itself. And I would say, it’s not just Brazil but across all of our international businesses we’re just hitting on all cylinders and the comparison relative to U.S. business from a margin and growth perspective just hasn’t been as historically strong. So, in our restructuring efforts, we did dramatically streamline headcount in Brazil and Europe in particular over a reduction of well over a 100 FPEs. And I think that positions us from a more profitable foundation off which to grow. And then there are some other things that we did in addition to that and I’ve talked about those a little bit in our past calls, chief among them are ensuring that across the globe we have a much more effective sales cooperation effort, meaning that if we have a big client in one market that is interested in extending on their business with Acxiom in another more that we can easily do that with them. And then secondly is ensuring that all of our products are designed with globalization as a fundamental design principle, meaning that that in every market going forward as we improve our products, all of those products will be released in every market simultaneously. And so it will become far more seamless for our clients to do business with us across multiple markets. And of course, we then amortize our dev cost across a much bigger global base of operations.

John Crowther – Piper Jaffray: And then just one final question, I think as we kind of discussed in the last quarter, the focus is on marketing and data services and IT infrastructure is really more about driving cash flow from that business. Obviously, you have some headwinds there on the top line, and you’ve been able to kind of keep cost coming down in line with that, is that something that you can continue to do over the next year, or are we kind of getting to a point where it might be more difficult in that business?

Scott E. Howe – President and CEO: I really have to take my hat off to the people in our IT infrastructure business, because they’re managing their business extremely well. When we look at the year ahead, we see a stable client portfolio. We’re also experiencing some really good management. I mean, it’s evidenced by the fact that revenues were down this past year and our margins were up. Similarly given the client losses that I mentioned, we would expect down revenues next year in that segment, but we again expect a strong margin performance.


Carter Malloy – Stephens, Inc.: Looking at your cash position or your near net cash position, which is something that would be very new for the company at least for a very long time, where are you guys head currently on capital allocation, we expect to see – you keep saying you buy back stock, or are you looking to pursue M&A further from here?

Warren C. Jenson – CFO and EVP: I would say, our – looking at our capital structure and our priorities, Carter, first of all, we have about $20 million remaining on our existing share repurchase authorization. I think, you should expect we’ll complete that in the coming fiscal year. From there it’s really about flexibility, we do believe that tuck-in acquisitions can be helpful to this company, and that we can execute those profitably and execute them well, and from there it will be up to our Board, and we’ll get back to you.

Carter Malloy – Stephens, Inc.: Okay. And then as you look around, you talked a little bit about your – use of your data in more online fashion. This morning the new Yahoo interclick integration came out with their new Genome solution, and I think, that relies pretty heavily on Acxiom data. So, is that the type of partnerships you are talking about building is more direct with those service providers, or is this much more used for becoming a service provider to your customers, and working through them to get to the providers?

Scott E. Howe – President and CEO: Yeah, it’s both Carter, and I read the press release along with you, kudos to them that in the period of difficulty they are still finding great news to share with the world. So, I think that’s a really interesting development. We would like at Acxiom to have strong relationships both with direct clients and their marketing partners to the extent that you’ve created a really robust database for direct clients, that’s good in terms of them understanding more about their customers, but it’s far better if they can make it actionable. To make it actionable those insights have to be extended to marketing partners, whether it be a major publisher or ad networks or e-mail providers or a whole host of different participants.

Carter Malloy – Stephens, Inc.: Lastly, you talked a lot about looking at economics in a multiple ways, but especially on a per customer basis. So, Warren, as you guys have begun your scouting and SG&A look across the business, would we expect to see revenue pressure from you guys decide to actually move away from unprofitable customers?

Warren C. Jenson – CFO and EVP: I think a great thing to do with customers is to take an unprofitable customer and to increase the margin tomorrow, and I am really optimistic about the things that Nada and Mike Lloyd and the folks in our Delivery organization are doing because what it’s about, it’s about taking the client that has a negative 5% margin and making him break even next quarter and 5% two quarters after that and just continuously moving people up the chain. So we don’t think about it per se as getting rid of customers. It’s helping customers become more profitable is the crux of our initiative. In our reporting we’re highlighting our progress internally. Nada and Mike and their teams are all over making this happen with each of our customers.

Carter Malloy – Stephens, Inc.: So still too early to tell if any of them are going to be stubborn enough that you’d have to move away?

Scott E. Howe – President and CEO: You know what, it is a process. I think we’ve all worked through this, different aspects in our careers and it’s a constant process but you know what it can be done and I like our chances.