LiveRamp Holdings, Inc.

Thanks, operator. Good afternoon, and welcome.

Thank you for joining us to discuss our fiscal 2013 second quarter results. With me today are Scott Howe, our CEO; Warren Jenson, our CFO; and Art Kellam, Corporate Controller.

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 from the forward-looking statements. For a detailed description of these risks, please read the Risk Factors section of our public filings and the press release.

Acxiom undertakes no obligation to release publicly any revisions to any of our forward-looking statements.

A copy of our press release and financial schedules, including any reconciliation of 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.

A link is also included in today's press release.

At this time, I'll turn the call over to Scott Howe.

Thanks, Jay. Good afternoon, and welcome to everyone.

Today, I would like to take a look at the first half of our fiscal year and share with you our assessment as to what we have accomplished and where we still have work to do. Next I will talk about our priorities for the second half of FY 2013 and how we are working to help ensure that we meet our long-term objectives in both fiscal 2014 and beyond.

first, running a better business by strengthening our core foundations and tightening our execution; second, delighting our customers by maniacally focusing on the needs of our clients; third, driving our long-term margins and returns on capital by profitably operating against every product, client and geography in our portfolio; and fourth, innovating and excelling through thought leadership by developing a world-class marketing and data services products.

Our first priority of running a better business continues to progress. In the first half, we put into place a world-class leadership team, improved our associate satisfaction and developed a clear, long-term strategy.

We now have much better insight into our business and are starting to get a clear view as to things we do today to deliver for tomorrow. We are a more transparent company and have made significant progress towards creating operating independence in our segments.

Specifically, we have embarked on several key initiatives regarding our internal management reporting, measurement packages and benchmarking. These combined efforts are strengthening our core foundation and driving performance.

Warren will update us later on several of these efforts.

Our second priority is delighting our customers. To start, I would like to point out a great example of focusing on our clients' needs and delivering results.

Recently, 2 of our clients, United Airlines and Macy's, won one of the Direct Marketing Association's highest honors, DMA Marketer of the Year. The DMA Marketer of the Year award recognizes a company or individual for outstanding achievements in exceptional leadership, innovation and marketplace success in the field of data-driven marketing.

Additionally, United Airlines also won the DMA Innovation Award.

Our work on behalf of United helped improve the quality and consistency of customer insights within the world's largest loyalty program, which resulted from United's merger with Continental Airlines. With 90 million accounts, the United MileagePlus program brings significant revenue to United.

And when combined with the additional work that we did with United's nonmember database, an additional 4% were converted to members, helping United realize tens of millions in additional revenue. This was a big win for both the company and Acxiom, and it's great when our customers get recognition from the industry.

Additionally, DMA cited Macy's outstanding achievement in the multichannel direct marketing industry. Partnering with Acxiom, Macy's delivers more tailored content and sophisticated messaging variations across offline and online channels, including mail, email and digital touchpoints.

Macy's has credited Acxiom for helping them have better, smarter and more personal conversations with their customers.

Together, these are just 2 of many examples of Acxiom helping our customers succeed.

From my ongoing client visits and discussions during the first half of this year, I know how much our expertise is valued. Our case studies reflect exceptional results and significant returns for our customers.

And under not a [ph] fearless leadership, we have made a meaningful investment in our delivery organization, improved our customer satisfaction scores and refocused our client-facing teams.

We have protected our base with a nearly 100% renewal rate and shown growth in our top customer accounts, as evidenced by growth in 17 of our top 20 marketing and data services customers this quarter. Increasingly, although we are in the very early stages of this effort, we are transforming the way we go to market through expanding our network of resellers and partners.

But while we have made a lot of progress in the first half, we also recognized the lack of top line growth year-to-date. We understand that we have to systematically convert our value proposition into revenue growth.

In the years ahead, we expect our product innovation to drive considerable upside with our existing clients and open doors with new prospects.

When it comes to our third priority, momentum stems from continued progress towards driving margin improvement. Overall, the company is showing margin improvement for both the quarter and the year-to-date.

Our goal of profitably running our international business is taking shape as we showed approximately 500 basis points' improvement this quarter in our international marketing and data services margins.

For the second quarter in a row, our IT infrastructure management business significantly improved its operating margins, from approximately 7% last year to over 12% this quarter. Our total marketing and data Services margins are down, but this was anticipated with our investment in new products and solutions.

Even with that said, we still think there is plenty of opportunity to improve productivity and drive profits even higher across the company. To date, we have simplified our organization and provided clear line-of-sight goals.

This effort is driving accountability at every level and enabling us to increase efficiency. While we are pleased with our margin performance in the first half, we also acknowledge that our profitability measures against world-class companies are lacking.

We simply must continue to drive efficiency in our work processes by making them simpler and more flexible. This is the key driver to fundamentally improving long-term margins.

data services, analytics and marketing systems. As part of this, we have organized our product and engineering management team into similar units, each with a leader reporting directly to Phil.

This will help us focus on innovating products based on Acxiom's data assets and customer relationship strengths.

We identified the creation of the enterprise data management platform or EDMP as a major component of our investment strategy. Specifically, there are multiple moving parts right now, but I'm happy to report that we are on schedule with our EDMP development efforts.

These efforts also extend to globalizing our products. As evidence of our progress globally, we recently had Unilever engage us in China to develop an EDMP solution for them.

We are excited about this opportunity to make our EDMP a global success.

Creating scalable technology platforms is a major part of our development effort. One example is our data distribution platform which allows our clients to effectively reach a much broader audience with relevant messaging.

Additionally, we are aggressively making progress on our audience management and post-campaign analytics platforms and we'll be ready for customer pilot soon.

The completion of all of these platform developments will allow us to compile, measure, analyze and distribute data more quickly and efficiently for our customers. And we plan to do this, as always, in a secure privacy-compliant manner.

When it comes to thought leadership, we've really begun to move from the trade show's ward [ph] at center stage. A year ago, our story was considered irrelevant by most within the industry.

We are now taking steps that ensure more of the world understands what Acxiom does and where we are going.

Recently, Tim Suther, our Chief Marketing and Strategy Officer, along with Nada and I, spoke on several panels both at Adweek and the DMA conference, alongside some of the biggest names in marketing. You literally could not walk more than a few feet without seeing our name or some of our people.

This represents just another step in advancing our brand reputation, and there is much more to come.

I'd also like to recognize Tim, who was named the top CMO for 2012 by ExecRank. Tim was selected for this honor due to his impressive work with data and analytics, yet another example of Acxiom's leadership in our industry.

We are starting to become recognized for both our innovation and thought leadership. Clearly, a lot of progress is being made on this priority.

Now I would like to discuss our priorities for the second half of the year. Our 4 priorities remain the same as the first half, but we are taking steps to position ourselves on a solid trajectory for a successful 2014 and beyond from both the top and bottom line perspectives.

First, in no way are we done when it comes to fixing our foundation. Across the board, we will continue to simplify our structures and processes.

While supporting our existing initiatives from the first half of the year, we will also begin new efforts in areas such as client profitability reporting and metrics, understanding that our investment spend will continue to ramp in the second half of the year. It is critical that all of these initiatives drive continued operating efficiencies.

In summary, we will relentlessly focus on both improving metrics and driving accountability. Rest assured, we intend to leave fiscal '13 on a trajectory that will allow us to meet our long-term objectives for both fiscal 2014 and beyond.

Second, focus on driving long-term growth for marketing and data services is a key element of our strategy. While pipeline has increased since the first half of the year, converting this to significant growth is the challenge before us and one we embrace.

Third, we will continue to update you on our progress regarding our product development initiatives. As I mentioned, several of our platform developments are making significant headway this year.

We are increasing our engineering hiring and expect to accelerate our product sprints in the second half. Our anticipated investment spend both for data and people will continue to ramp in the second half, as expected.

For new products and data services, we anticipate that over 150 new info-based elements will be available for online targeting in the second half of this here via popular ad targeting platforms.

Also on the marketing systems front, we will allow for the first time SaaS access for info-based elements both on a batch and online basis. Finally, for our analytics team, we plan to release over 1,500 predictive models in several key industry verticals over the remainder of the year.

Furthermore, we continue to maintain our original time line for our long-term EDMP development but expect to push ourselves towards rolling out commercial subsets as early as possible to get rapid customer feedback. We understand the magnitude of the opportunity before us and we continue to stress speed to product release.

But first, we must completely ensure all aspects of our new products are vetted. We do expect substantial progress in the second half, but it will be steady and deliberate.

solving the huge problem of marketing inefficiency. The vast amount and sheer magnitude of data present today makes effectively deriving consumer insights incredibly difficult.

That's where Acxiom comes in. We plan to be the marketing and data services and technology provider that major brands depend on.

We've taken some important first steps and are confident in our go-forward plan.

Now I will turn things over to Warren.

Terrific. And thanks, Scott.

Good afternoon, everyone.

Before jumping into the quarter, I would like to give you a quick update on the initiatives that we've talked about in our last couple of calls. Specifically, we have been focused on improving our ongoing management reporting, building a target P&L with all costs aligned to benchmarkable activities and, finally, creating operational independence for each of our business units.

A quick update on each. First, managerial reporting is an ongoing process which requires continuous improvement.

I found that what works, whether the -- what looks like a breakthrough today typically becomes table stakes tomorrow. We have now built a regular reporting package by business unit that clearly highlights the important historical and forward-looking trends which have and will impact our business.

Scott, Nada and I review this information every month with our account teams. Over the next several months, we are rolling out improved client-level profitability reporting, which will also be a helpful tool for our account teams as they manage our engagements.

Next, our target P&L. As mentioned when we last spoke, this has been quite a project.

We have basically gone person by person to align specific job codes and related costs with very specific benchmarkable activities. As part of this effort, our HR team has completely retooled our job coding and titling structure using industry standards and best practices.

This is a big win for our employees too as it puts us in a much stronger position to help with career planning, advancement and appropriate compensation.

Today, we have all the costs mapped to activities, and the job coding work is in its final phase. While we are not prepared today to discuss specifics, our benchmarking has also been completed.

We have looked at internal comparisons, competitor ratios, industry standards and overall external best practices. We are now in the process of working with our teams to incorporate these benchmarks into our planning process and internal long-term targets.

Finally, we have moved closer to having each of our business segments be operationally independent. This again is all about efficiency and accountability.

This past quarter, we have made significant progress in the development of standalone auditable financials for each of our business units. We have also started to implement intercompany agreements in order to run each segment independently at defined service levels.

And finally, we have separated our corporate IT applications group out from our IT infrastructure organization.

In summary, our progress continues. We are confident that each of these projects will be completed before our fiscal year end.

Now our second quarter results and a few highlights. Q2 diluted EPS was $0.21, up 11% year-over-year, compared to EPS of $0.19, adjusted for unusual items.

Q2 operating margin improved 150 basis points to 10.9% compared to 9.4%. Excluding the impact of the MENA divestiture, operating margin improved 60 basis points.

Infrastructure management operating margin improved to 12.2%, up over 500 basis points, reflecting strong operational cost controls.

For the quarter, 17 of our top 20 customers in the U.S. marketing and data service segment showed year-over-year growth.

In fact, revenue for the top 20 customers was up double digits year-over-year.

An additional fact, excluding our pharma healthcare vertical, our U.S. Marketing and Data Services business was up over 5% for the quarter.

To date, we have spent approximately $115 million of our $150 million authorized share repurchase program and retired almost 11% of our outstanding common stock. We have added approximately 100 associates and contractors who are focused on new product development efforts.

Now I'll discuss our second quarter results in more detail. In the course of my comments, I'll be referring to the slide deck, which is posted on our website.

A link was also included in our press release.

I'll start with Page 3, in our summary financial results. Total revenue from continuing operations was $277 million, down 3.1% from last year.

U.S. marketing and data service revenue was up approximately 2% for the quarter, while IT infrastructure management and international were down.

Operating expense for the current quarter was $247 million, as compared to $259 million, a decrease of approximately 5%. The reduction in expense was primarily attributable to efficiencies in the IT infrastructure management segment and cost reductions in international marketing and data services.

GAAP diluted earnings per share were $0.21 in the quarter compared to $0.15 last year, reflecting a 40% increase. Diluted earnings per share increased 11%, as compared to $0.19 last year, excluding the impact of the MENA divestiture.

For the trailing 12 months, free cash flow to equity was $159 million compared to $95 million for the trailing 12 months ended September 30, 2011. Excluding the proceeds from the sale of our background screening business, trailing free cash flow to equity was $86 million.

Now on to Slide 4 and our top line performance. U.S.

marketing and data service revenue was up 2% for the quarter. As I mentioned earlier, 17 of our top 20 customers grew year-over-year.

In total, our top 20 customers grew at a double-digit rate.

IT infrastructure management was down 5%. This decline continues to reflect the impact of a prior year customer loss.

Excluding this customer loss, revenue was up 2%. U.S.

other service revenue, which includes our risk products and fulfillment business, was $5.2 million, down roughly 40%. This decline was expected and is a result of lower email volumes and the transition of our risk business.

For the quarter, international marketing and data service revenue was $29 million, down approximately $5 million or 14%. Adjusting for FX, international marketing and data service revenue would have been down approximately 10% year-over-year.

Slide 5. For the second quarter, our company's operating margin was 10.9%, an increase of 150 basis points versus 9.4% in the same period a year ago.

Excluding the MENA transaction, our margin increased 60 basis points from 10.3%.

In the U.S, marketing and data service margin was 14.5%, down from 18.1% last year. This margin decrease reflects continuing investments in delivery and higher data-related costs associated with new product development.

Despite lower revenues, IT infrastructure management margin improved 525 basis points to 12.2%. The decline was a result of strong cost management and lower software-related amortization.

Our international marketing and data service operations improved margins by approximately 500 basis points this quarter. This improvement is a result of the actions taken earlier this year to reduce costs in order that we grow our international business from a base of profitability.

Now to a few comments on Slides 6 and 7. On a trailing 12-month basis, free cash flow-to-equity, excluding the sale of our background screening unit, was $86 million compared to $95 million in the prior period.

The decline in annualized cash flows was principally a result of higher tax-related payments.

During the second quarter, the company repurchased $14 million in stock and to date has retired almost 11% of our common stock for approximately $115 million. We continue to maintain a strong balance sheet with a solid cash position and sound leverage profile.

We have $35 million remaining on our $150 million share repurchase authorization.

Now on to guidance. Before our guidance, let me reiterate our excitement about the opportunity ahead.

That said, we are still in the early days. We again ask you that you be conservative in your outlook, as change takes time.

For fiscal 2013, on the top line, we maintain our guidance of flat to slightly down. On the bottom line, we are increasing our previous EPS guidance of $0.60 to $0.65.

We now expect our earnings per share for fiscal 2013 to be roughly $0.70.

Thanks for joining us today. On behalf of all my associates at Acxiom, we're delighted that we are dedicated to innovation doing great things for our customers and, at the same time, providing a great return for our shareholders.

We look forward to reporting our results.

Operator, we're now -- we would now like to open the call to questions.

First off, maybe on the ITO business. Is -- where we sit today in terms of profitability and revenues, I think, is much better than any of us would have expected just 3 or 6 months ago.

Is this something that's sustainable top and bottom in you guys' mind? Or should this slide a little further, going on into next year.

Carter, I'll comment on the bottom line. I think we've been pretty consistent in the guidance we've given overall as we're maintaining for the year the guidance that we've previously given.

Looking at sort of the margin profile of the second quarter, I would expect that margin profile throughout the remainder of this part of the year. Looking at how the business is being operated, I think we're in a great operating rhythm, and we would expect there are always going to be ups and downs but for this great performance from this team to continue.

Okay. And then in terms of the marketing services business you guys referred to -- the pipeline, can you talk a little bit maybe around new logo wins and any traction you're seeing there, what's it going to take to hit a inflection point on the top line?

Yes, sure. Happy to talk about where we are when it comes to revenue.

And just taking a step back, I always talk about 3 things, Carter, and so I'll just repeat them here. We look at our top line as a function of 3 activities, and the first is, above all, we have to protect our base.

And on this, I feel like we're doing great. So last call, I talked about a 10-point improvement in our client satisfaction ratings, close to 100% renewals, strong case studies and accolades, love aligning ourselves with United and Macy's and other great brands.

Second piece of this is, with those companies, we got to grow our existing client base. And again we're very pleased with how we're doing.

Warren cited 17 of 20. Had growth of our tops, top 20 double-digit growth year-on-year.

And I think globally, 19 of our top 25 clients across businesses showed growth year-on-year. On the new logo wins, I would say we just looked at these numbers yesterday.

We had our monthly business review. But I want to say our pipeline growth from Q1 is about up 7% since the start of this year.

And something that's not seen in just the core growth number is, anecdotally, I believe that the quality of our pipeline has improved because we've been very aggressive in removing things that have been in there too long and may have grown stale, so I like how we're shaping up on that. The one caution I'd give everyone is, over the long-term, we've always said that we thank this business is capable of double-digit top line growth, but for purposes of your model, I'd really encourage you to be conservative going into next year.

Oh sure, I think we will. And then on the other services business, what's -- what drove the step-down there?

And again, understanding the overall top line, this is a pretty small piece. Is that something that will persist or something that should improve?

I'll -- let me answer the first part first, Carter. I'd expect the second part of the year to look a lot like the first part of the year, and there are really 2 things going on there.

The first is declines in the email business and then the second is declines in our risk business, which obviously we have the partnership with LexisNexis and that's winding -- just our revenue stream is winding down over the course of the coming quarters. I think -- on the positive side, and really, I think it was a great move on the part of the team to put this in its own segment because it's really caused us to focus our attention on doing things to help improve our email business.

So while there are declines year-over-year, I also think steps are being made going forward to not only stabilize but also to improve that business.

I -- just one question for Scott and one for Warren. First, just -- if you could just tell us a little bit more about the revenue mix in marketing and data services.

And what I mean by that is a little -- are you seeing your business start to shift much more to your analytics and EDMP product solutions relative to legacy business and direct mail? And then second, for Warren, the stock's been fairly strong lately.

I just wanted to hear a little bit more on your outlook for share buyback.

I'll start with the first. And I'll tell you, we're right in the process -- I talked about our monthly business review yesterday.

Next week, we're meeting with our board as part of our long-range planning effort where we relook at our kind of 3-year forecast and then also revisit our strategy. And one of the things that we talked about there, Dan, is we would like to start to lay out, both internally and -- I don't know how much detail we'll go into -- publicly, is break down our marketing and data services revenue into greater specificity.

And we think that underneath the surface there are really several pieces. So the first is what I would call our enterprise platform revenue, our license revenue, and we think about that both in terms of kind of custom one-off database builds and then also increasingly multi-tenant SaaS-driven applications.

And what we'd like to see over time is that we transition more from -- if it's a larger-percentage custom today, that we flip that and move to a greater percentage of standard enterprise software. And with that will come, obviously, an improvement in margins as we amortize our development costs over a greater pool of clients.

The second element of our business is what we really -- we think of as kind of data-driven products. And so whether that's third-party data model sales or what we're increasingly calling our data enablement channel where we're producing data that other people build into their products or channel partners build into their products, we believe that, that's an area of future growth for us.

And then the third piece of it is our billable kind of labor whether it's analytics, consulting or just billable services. We think that, we expect, will grow a little bit slower.

We'd like it to grow slower than the first 2 certainly, given our investments in technology both in data products and standardization. Beyond that, though, I can tell you that I don't think we're ready to release that kind of detail as part of our quarterly reporting yet, but as we refine this internally, we'll probably start to talk about it a little bit more vocally on these calls.

And then, Dan, I'll jump in on the second part. I think the overarching headline is -- as a team and from the board perspective is we believe in the mission which has been laid out and the sort of opportunity that we have in the go-forward world to drive significant levels of value.

So with that as sort of a backdrop or a context, we're committed to building a great long-term business. We want to do so having the strategic flexibility to do acquisitions and partnerships.

And at the same time, we want to provide -- for an adequate level, we want to provide returns to our shareholders and return capital to them. As you know, we're on the third leg of a share repurchase program.

Today, we have $150 million authorization. We have $35 (sic) [ $35 million ] remaining on that authorization.

We are committed to that program. And similarly, at the right time we're committed to going back to our board to discuss our next steps.

Just to follow up on that great data point about the top 20 customers growing double digits. Help us understand what's going on below the top 20 that's creating a drag.

Is it simply healthcare pharma? Or is this part of the process of optimizing profitability?

All right, Dan, I'll -- this is Warren. I'll jump in here for a minute, and Scott may want to give a little bit of color.

The single biggest driver by far was healthcare pharma. There were some cats and dogs around 2 or 3 other industries, but the biggest single driver was a reduction in healthcare pharma.

Okay. So are you -- one more thing about overall client count.

Are you either firing or losing some customers below that, that are creating a drag as well? Or is it simply just that one vertical?

I mean, I could never say simply a single vertical because there always, within a client base this size, is going to be some ups and downs. I would figure that the top 20 customers are roughly 55%, 60% of our revenue.

And then there are going to be some ups and downs from there and all with some give-ins and give-outs. So figure top 20, about 55%, 60% of our revenue.

Okay, great. And as we look forward to the enterprise data platform rolling out, how should we think about revenue contributions from this?

Is this -- are these going to be kind of chunky, lumpy, more license-type sales? Or is this going to be more of a SaaS model ratable recognition to where we'll see a lot more momentum in terms of client wins than we'll see in terms of near-term revenue impact?

Well, I think, in terms of how the revenue -- what's the form of it, the answer is yes, so both because on the one hand, we are building SaaS applications which would have more of an ongoing fee, but on the other hand we're also building an increasing array of data products that will probably be more volume-driven, more variable in nature and, in many respects, linked to media and CPMs. That said, I mean, I think your real question is, "When are you going to start to see those?"

And from a modeling perspective, I think we'll start to see that take shape in 2014. And I'd start modeling from there and build off a lower base in 2014.

It will definitely be a crawl, walk, run in revenue ramp.

Great. And are there any kind of targets you have set out internally that you're thinking about in terms of mix of customers or mix of revenue that you want to get on the platform kind of first step, second step?

Help us understand how that process ramps.

Yes, it's probably not anywhere ready to share both on this call and with our competitors.

Wanted to ask you about healthcare because it seems like that vertical's been waning performance-wise for some time. Is that just not coming back?

Is it just a lack of new product in that industry? Do you feel like you have a handle on what's -- what the issue is in that vertical and maybe give us a sense as to whether or not -- or just what your expectations are for that vertical?

Yes, hard to say. And I think we probably -- knock on wood here -- hit our balance point on that but I'd say that's largely because I think a lot of the things that were happening in the industry are starting to turn.

And you heard me talk about this last quarter that, in healthcare and pharma, there was about a year of paralysis as folks were waiting to see what would happen with legislation. Now I think there's more of an impetus to action.

And so in that space, I can say anecdotally that the number of conversations that we're having has increased. Whether that translates into business going forward is going to be predicated on our ability to close those conversations into book revenue.

As such, I don't think there's anything systematic that's ongoing there.

No heightened sensitivity to privacy issues, in your view, for participants in that industry?

Not that we've seen, not really across our client base. And then, it's something we take very seriously and so for any of our clients, whoever do raise questions about privacy, then we have a whole group that we can parachute in and help clients think through those issues and make sure that everything they're doing is in a very secure and compliant methodology.

Okay. I wanted to ask, the work that you guys are doing in the predictive models, I think you said you had about 1,500 or so you're going to release to the market at some point.

I'm just -- I'm really intrigued by the idea of Acxiom adding value through the modeling and the predictive analytics. And I'm just -- I just don't know if I have a clear idea as to how you go about monetizing it so I'm hoping that maybe you could explain how your existing customer base will start using -- how you expect them to start using those new tools.

Is it -- and how are you going to get compensated for the access to that library, if you will? Or do you just kind of open up the library on a client-by-client base?

Or do you -- basis -- or do you rely on -- are your clients looking for Acxiom personnel to kind of bring the right tools to them? How is that...

I think we want to do the second, whether clients are relying on us for that or not. We believe that we've kind of reached an inflection point whereas, in the last 5 years, people have been talking about data, data, data.

Now they're starting to say, "Okay. I got lots of data, so what?

What does it mean?" And propensity models and predictive models, they help our clients figure out, "What do you do with the data?"

So an example would be, for an automotive vertical, helping them create a model to figure out what users are most likely to buy red convertibles, right? And so if you deploy that for a model, it makes their messaging go much further and it improves the ROI.

And so that's the value that they see. And we'll either charge by the consulting fee or on a per-use basis.

And in an ideal world, what we'd like to do is develop knowledge around what types of predictive models are most useful in particular situations. And so when you can do that, then the intellectual capital starts to look a lot like your product investment, meaning that you can develop something and amortize it across a greater pool of clients.

So instead of having a custom model for everyone, you start out with some standard knowledge and then customize it for a specific situation.

Right. And Scott, I can't remember if we talked about this at one point, but is the -- the predictive models, it's not just -- is it just who is likely to purchase what and when?

Or is it going to get into -- a predictive model is going to get into actually how people are buying? That is, online, who buys online versus offline and how is that...

Oh, yes, absolutely. And then the other piece, I would say, is it's about the messaging that you deliver.

I mean, too often, marketers focus in on what customers do they want to reach. And then they reach those customers and deliver a bad message.

So this is all about relevance: the relevance of the customer, the relevance of the context and in which you reach that customer and the relevance of the message that, that customer receives.

Real quickly, sort of the international component of the business. What does it take for that to stop bleeding both top and bottom line?

And how long until we get there?

I'll give that...

Carter, let me kick it off, and I'll throw it back to Scott on the top line. On the bottom line, we are focused on that business being profitable by year end.

And we're not going to be a lot profitable, but the clear mission or objective that our international team very clearly has is to be profitable by the end of this year. I think we've made it quite clear that we believe that it is really important to grow from a base of profitability internationally and then go from there.

A couple of things that we're doing on a product end, and then I'll throw it to Scott, but one is I think we have a heightened level of coordination today that is different at Acxiom where we are selling to multinational corporations in a different way than we ever have before, which I think is very much a positive. I think we have a heightened level of operational coordination between our delivery and other organizations and our associates that are not in the U.S.

And then the third thing is really how Phil is approaching the globalization of our product. I know personally because Phil and I have -- his office happens to be next to mine.

He's already visited several of our international locations and is working with our associates abroad to figure out how to better globalize our product such that, that product can be sold on a global basis, as opposed to these guys left to fend for themselves.

I think -- well said, man. The year-on-year comparisons there, Carter, from a top line perspective obviously aren't favorable, but you'll remember, in past calls I've said, as we were doing -- taking some hard action in our international portfolio, I said I would always trade $1 of revenue for $1 of profitability.

So some of this represents weaning ourselves off of unprofitable products and clients. And then just to add to what Warren is saying, I will tell you, in the last week, as an example, 2 of our best U.S.

salespeople are -- find themselves in international markets. So we have someone in financial services right now who we've redeployed in Australia.

Australia has a very, very strong financial services and banking market and we want to make sure that the expertise that we've built in the U.S. can be applied to the Australian market also.

Likewise, our vertical lead in financial services is in Europe right now and he's spending the next week to 10 days over there and he's doing the same thing, calling on many of the European financial services players. So it's that kind of stuff that simply didn't happen at Acxiom 1 year or 2 ago.

And we're starting to cross-fertilize clients and expertise across the globe with increased regularity.

And then on the healthcare pharma vertical, did you or can you call out how big that is as a percent of revenue? And is that all just a function of the patents rolling off in terms of structural versus just temporary issues?

On the percentage of revenue, I wouldn't put it in -- it's one of our top categories. I won't be quite so specific in terms of overall quantification.

I would say, this quarter, though, just to give you an order of magnitude, it's low single digits as a percentage of the total so it's just not material for this year. The decline from the prior year really had nothing to do with the roll-off of any patents, okay?

It had more to do with a specific customer who was bought out by a PE firm and moved things internally, as opposed to anything else.

Let me just wrap up, then, by thanking everyone for your time today. We appreciate all that you do for the company and your interest, and we look forward to talking further.

Thank you very much.