ACXM Acxiom Holdngs (delisted)

Acxiom� Corporation (Nasdaq: ACXM) today announced financial results for the third quarter of fiscal 2007 ended December 31, 2006. Acxiom will hold a conference call at 4:30 p.m. CST today to discuss this information further. Interested parties are invited to listen to the call, which will be broadcast via the Internet at www.acxiom.com. Third-quarter earnings per diluted share of $.31 included a $.02 benefit related to a lower-than-expected income tax rate and a $.01 expense related to organizational changes in Europe. Third-quarter earnings were equal to the $.31 per diluted share reported in the same quarter a year ago. Operating income for the quarter decreased 3 percent to $51.3 million. Third-quarter revenue totaled $352.8 million, an increase of 2 percent over the same quarter last year. �Our earnings continue to improve on a sequential basis but are not in line with our expectations due to slower than expected revenue growth,� Company Leader Charles D. Morgan said. �We continue to execute our company-wide initiatives to create more value for our clients and drive more rapid revenue growth. We expect to see more from those efforts over the next several quarters.� Details of Acxiom�s third-quarter performance include: Revenue of $352.8 million, up 2 percent from $347.4 million in the third quarter a year ago. Declines in revenue in the traditional IT outsourcing business and from one large client undergoing a merger negatively impacted the growth rate by 4 percentage points for the quarter and 5 percentage points year-to-date. Income from operations of $51.3 million, a 3 percent decrease compared to $52.7 million in the third quarter last year. Diluted earnings per share of $.31, equal to the third quarter of fiscal 2006. Operating cash flow of $62.7 million and free cash flow available to equity of $12.6 million. Free cash flow available to equity is a non-GAAP financial measure, and a reconciliation to the comparable GAAP measure, operating cash flow, is attached to this press release. Gross margin of 28.4 percent compared to 31.4 percent in the same quarter last year. Computer, communications and other equipment expense equaling 20.2 percent of revenue compared to 21.2 percent of revenue in the third quarter of fiscal 2006. Interest expense in the quarter was $14.9 million compared with $8.6 million in the same quarter a year ago. The increase reflects the $600 million term loan completed in September 2006. Proceeds from the term loan were used to retire debt and buy back approximately 11 million shares of Acxiom stock. �While our overall revenue growth number for the quarter was disappointing, there are several areas of our business that turned in encouraging performances � including our digital and risk businesses and our direct-to-market U.S. data business,� Morgan said. �We also showed strong growth in several key industries � including auto and insurance, which were both up 10 percent, year over year. We have continued to make investments to support future revenue growth, as evidenced by our recent acquisition of Equitec, which brings us strong marketing and merchandizing optimization expertise in the retail industry.� Morgan noted that General Motors awarded significant new business to Acxiom in the quarter and that the company has also recently completed new contracts with JPMorgan Chase & Co.; The Container Store; Colonial Penn� Life Insurance Company; and Sears Holdings. He also reported that Acxiom has been awarded significant business from a large European corporation in a deal pursued in partnership with EMC and Accenture. Outlook The Company�s expectations are communicated in the Financial Road Map, which includes a chart summarizing the one-year and long-term goals as well as an explanation of the assumptions and definitions that accompany these goals. Acxiom�s current Financial Road Map reflects the Company�s revised expectations for fiscal year 2007, and the long-term goals reflect expected performance in fiscal 2010. Acxiom anticipates fiscal 2007 earnings per diluted share between $0.92 and $0.97. This range is based on revising the income tax rate from 39 percent to 37 percent as a result of Congress� extension of the Research and Experimentation tax credit and doesn�t reflect any European restructuring charges that may be incurred during the fourth quarter. These financial projections are based on the assumptions and limitations set forth in the Financial Road Map. These projections are forward looking, and actual results may differ materially. These projections may be impacted by mergers, acquisitions, divestitures or other business combinations that may be completed in the future as well as the other factors set forth below. About Acxiom Acxiom Corporation (Nasdaq: ACXM) integrates data, services and technology to create and deliver customer and information management solutions for many of the largest, most respected companies in the world. The core components of Acxiom�s innovative solutions are Customer Data Integration (CDI) technology, data, database services, IT outsourcing, consulting and analytics, and privacy leadership. Founded in 1969, Acxiom is headquartered in Little Rock, Arkansas, with locations throughout the United States and Europe, and in Australia, China and Canada. For more information, visit www.acxiom.com. This release and today�s conference call contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially. Such statements may include but are not necessarily limited to the following: that we expect that our emphasis on revenue growth will lead to increased rates of revenue growth, that we expect that continued focus on expense controls will lead to continued improvement in operating margins, that the projected revenue, operating margin, return on assets and return on invested capital, operating cash flow and free cash flow, borrowings, dividends and other metrics referred to in the Financial Road Map attached to this release will be within the estimated ranges; that the Company has identified categories of opportunity that provide upside to the ranges of the Financial Road Map, that the estimations of revenue, earnings, cash flow, growth rates, restructuring charges and expense reductions will be within the estimated ranges; and that the business pipeline and our anticipated cost structure will allow us to continue to meet or exceed revenue, cash flow and other projections. The following are important factors, among others, that could cause actual results to differ materially from these forward-looking statements: The possibility that certain contracts may not be closed, or may not be closed within the anticipated time frames; the possibility that clients may attempt to reduce the amount of business they do with the Company; the possibility that in the event that a change of control of the Company was sought that certain of the clients of the Company would invoke certain provisions in their contracts resulting in a decline in the revenue and profit of the Company; the possibility that certain contracts may not generate the anticipated revenue or profitability; the possibility that negative changes in economic or other conditions might lead to a reduction in demand for our products and services; the possibility of an economic slowdown or that economic conditions in general will not be as expected; the possibility that the historical seasonality of our business may change; the possibility that significant customers may experience extreme, severe economic difficulty; the possibility that the integration of acquired businesses may not be as successful as planned; the possibility that the fair value of certain of our assets may not be equal to the carrying value of those assets now or in future time periods; the possibility that sales cycles may lengthen; the possibility that we may not be able to attract and retain qualified technical and leadership associates, or that we may lose key associates to other organizations; the possibility that we won�t be able to properly motivate our sales force or other associates; the possibility that we won�t be able to achieve cost reductions and avoid unanticipated costs; the possibility that we won�t be able to continue to receive credit upon satisfactory terms and conditions; the possibility that competent, competitive products, technologies or services will be introduced into the marketplace by other companies; the possibility that we may be subjected to pricing pressure due to market conditions and/or competitive products and services; the possibility that there will be changes in consumer or business information industries and markets that negatively impact the Company; the possibility that changes in accounting pronouncements may occur and may impact these projections; the possibility that we won�t be able to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms; the possibility that we may encounter difficulties when entering new markets or industries; the possibility that there will be changes in the legislative, accounting, regulatory and consumer environments affecting our business, including but not limited to litigation, legislation, regulations and customs relating to our ability to collect, manage, aggregate and use data; the possibility that data suppliers might withdraw data from us, leading to our inability to provide certain products and services; the possibility that we may enter into short-term contracts which would affect the predictability of our revenues; the possibility that the amount of ad hoc, volume-based and project work will not be as expected; the possibility that we may experience a loss of data center capacity or interruption of telecommunication links or power sources; the possibility that we may experience failures or breaches of our network and data security systems, leading to potential adverse publicity, negative customer reaction, or liability to third parties; the possibility that postal rates may increase, thereby leading to reduced volumes of business; the possibility that our clients may cancel or modify their agreements with us; the possibility that we will not successfully complete customer contract requirements on time or meet the service levels specified in the contracts, which may result in contract penalties or lost revenue; the possibility that we experience processing errors which result in credits to customers, re-performance of services or payment of damages to customers; the possibility that the services of the United States Postal Service, their global counterparts and other delivery systems may be disrupted; and the possibility that we may be affected by other competitive factors. With respect to the Financial Road Map, all of the above factors apply, along with the following which were assumptions made in creating the Financial Road Map: that the U.S. and global economies will continue to improve at a moderate pace; that global growth will continue to be strong and that globalization trends will continue to grow at an increasing pace; that Acxiom�s computer, communications and other equipment expenses will continue to fall as a percentage of revenue; that the Customer Information Infrastructure (CII) grid-based environment will continue to be implemented successfully over the next 3-4 years and that the new CII infrastructure will continue to provide increasing operational efficiencies; that the acquisitions of companies operating primarily outside of the United States will be successfully integrated and that significant efficiencies will be realized from this integration; relating to operating cash flow and free cash flow, that sufficient operating and capital lease arrangements will continue to be available to the Company to provide for the financing of most of its computer equipment and that software suppliers will continue to provide financing arrangements for most of the software purchases; relating to revolving credit line balance, that free cash flow will meet expectations and that the Company will use free cash flow to pay down bank debt, buy back stock and fund dividends; relating to annual dividends, that the Board of Directors will continue to approve quarterly dividends and will vote to increase dividends over time; relating to diluted shares, that the Company will meet its cash flow expectations and that potential dilution created through the issuance of equity instruments will be mitigated by continued stock repurchases in accordance with the Company�s stock repurchase program. With respect to the provision of products or services outside our primary base of operations in the United States, all of the above factors apply, along with the difficulty of doing business in numerous sovereign jurisdictions due to differences in scale, competition, culture, laws and regulations. Other factors are detailed from time to time in our periodic reports and registration statements filed with the United States Securities and Exchange Commission. We believe that we have the product and technology offerings, facilities, associates and competitive and financial resources for continued business success, but future revenues, costs, margins and profits are all influenced by a number of factors, including those discussed above, all of which are inherently difficult to forecast. We undertake no obligation to update the information contained in this press release, including the Financial Road Map or any other forward-looking statement. Acxiom is a registered trademark of Acxiom Corporation. � ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) � � For the Three Months Ended December 31, $ % 2006� 2005� Variance Variance � Revenue: Services 265,798� 263,266� 2,532� 1.0% Data 87,043� 84,165� 2,878� 3.4% Total revenue 352,841� 347,431� 5,410� 1.6% � Operating costs and expenses: Cost of revenue Services 199,704� 189,502� 10,202� 5.4% Data 53,004� 48,799� 4,205� 8.6% Total cost of revenue 252,708� 238,301� 14,407� 6.0% � Services gross margin 24.9% 28.0% Data gross margin 39.1% 42.0% Total gross margin 28.4% 31.4% � Selling, general and administrative 49,065� 57,625� (8,560) (14.9%) Gains, losses and other items, net (225) (1,202) 977� 0.0% � Total operating costs and expenses 301,548� 294,724� 6,824� 2.3% � Income from operations 51,293� 52,707� (1,414) (2.7%) � Other income (expense): Interest expense (14,911) (8,635) (6,276) 72.7% Other, net 1,157� (71) 1,228� (1729.6%) � Total other income (expense) (13,754) (8,706) (5,048) 58.0% � Earnings before income taxes 37,539� 44,001� (6,462) (14.7%) � Income taxes 12,594� 16,720� (4,126) (24.7%) � Net earnings 24,945� 27,281� (2,336) (8.6%) � Earnings per share: � Basic 0.32� 0.32� 0.00� 0.0% � Diluted 0.31� 0.31� 0.00� 0.0% � ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) � � For the Nine Months Ended December 31, $ % 2006� 2005� Variance Variance � Revenue: Services 793,789� 754,958� 38,831� 5.1% Data 244,076� 233,267� 10,809� 4.6% Total revenue 1,037,865� 988,225� 49,640� 5.0% � Operating costs and expenses: Cost of revenue Services 597,161� 575,734� 21,427� 3.7% Data 153,638� 149,808� 3,830� 2.6% Total cost of revenue 750,799� 725,542� 25,257� 3.5% � Services gross margin 24.8% 23.7% Data gross margin 37.1% 35.8% Total gross margin 27.7% 26.6% � Selling, general and administrative 157,818� 166,227� (8,409) (5.1%) Gains, losses and other items, net (225) 9,960� (10,185) 0.0% � Total operating costs and expenses 908,392� 901,729� 6,663� 0.7% � Income from operations 129,473� 86,496� 42,977� 49.7% � Other income (expense): Interest expense (31,630) (21,213) (10,417) 49.1% Other, net 4,489� 1,870� 2,619� 140.1% � Total other income (expense) (27,141) (19,343) (7,798) 40.3% � Earnings before income taxes 102,332� 67,153� 35,179� 52.4% � Income taxes 37,863� 26,084� 11,779� 45.2% � Net earnings 64,469� 41,069� 23,400� 57.0% � Earnings per share: � Basic 0.77� 0.47� 0.30� 63.8% � Diluted 0.75� 0.45� 0.30� 66.7% � ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) � � For the Three Months Ended � December 31, September 30, $ % 2006� 2006� Variance Variance � Revenue: Services 265,798� 266,099� (301) (0.1%) Data 87,043� 82,220� 4,823� 5.9% Total revenue 352,841� 348,319� 4,522� 1.3% � Operating costs and expenses: Cost of revenue Services 199,704� 201,384� (1,680) (0.8%) Data 53,004� 51,062� 1,942� 3.8% Total cost of revenue 252,708� 252,446� 262� 0.1% � Services gross margin 24.9% 24.3% Data gross margin 39.1% 37.9% Total gross margin 28.4% 27.5% � Selling, general and administrative 49,065� 54,008� (4,943) (9.2%) Gains, losses and other items, net (225) -� (225) 0.0% � Total operating costs and expenses 301,548� 306,454� (4,906) (1.6%) � Income from operations 51,293� 41,865� 9,428� 22.5% � Other income (expense): Interest expense (14,911) (8,950) (5,961) 66.6% Other, net 1,157� 2,685� (1,528) (56.9%) � Total other income (expense) (13,754) (6,265) (7,489) 119.5% � Earnings before income taxes 37,539� 35,600� 1,939� 5.4% � Income taxes 12,594� 13,884� (1,290) (9.3%) � Net earnings 24,945� 21,716� 3,229� 14.9% � Earnings per share: � Basic 0.32� 0.25� 0.07� 28.0% � Diluted 0.31� 0.25� 0.06� 24.0% � ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except earnings per share) � � For the Three Months Ended � December 31, December 31, September 30, 2006� 2005� 2006� � Basic earnings per share: � Numerator - net earnings 24,945� 27,281� 21,716� � Denominator - weighted-average shares outstanding 77,717� 85,203� 86,000� � Basic earnings per share 0.32� 0.32� 0.25� � Diluted earnings per share: � Numerator - net earnings � Net earnings 24,945� 27,281� 21,716� � Denominator: � Weighted-average shares outstanding 77,717� 85,203� 86,000� � Dilutive effect of common stock options, warrants and restricted stock 2,238� 2,723� 2,203� � 79,955� 87,926� 88,203� � Diluted earnings per share 0.31� 0.31� 0.25� � ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except earnings per share) � � For the Nine Months Ended December 31, � 2006� 2005� � Basic earnings per share: � Numerator - net earnings 64,469� 41,069� � Denominator - weighted-average shares outstanding 83,957� 87,748� � Basic earnings per share 0.77� 0.47� � Diluted earnings per share: � Numerator - net earnings � Net earnings 64,469� 41,069� � Denominator: � Weighted-average shares outstanding 83,957� 87,748� � Dilutive effect of common stock options, warrants and restricted stock 2,237� 2,691� � 86,194� 90,439� � Diluted earnings per share 0.75� 0.45� � ACXIOM CORPORATION AND SUBSIDIARIES RESULTS BY SEGMENT (Unaudited) (Dollars in thousands) � � For the Three Months Ended � December 31, December 31, September 30, Revenue: 2006� 2005� 2006� � US services & data 298,978� 300,086� 300,204� International services & data 53,863� 47,345� 48,115� � Total revenue 352,841� 347,431� 348,319� � US supplemental information: Services & data excluding IT mgmt 211,312� 210,455� 211,447� IT management services 87,666� 89,631� 88,757� 298,978� 300,086� 300,204� � International supplemental information: Services & data excluding IT mgmt 53,863� 47,345� 48,115� � � Income from operations: � US services & data 46,832� 47,766� 40,090� International services & data 4,236� 3,739� 1,775� Corporate & other 225� 1,202� -� � Total income from operations 51,293� 52,707� 41,865� � Margin: � US services & data 15.7% 15.9% 13.4% International services & data 7.9% 7.9% 3.7% � Total margin 14.5% 15.2% 12.0% � ACXIOM CORPORATION AND SUBSIDIARIES RESULTS BY SEGMENT (Unaudited) (Dollars in thousands) � � For the Nine Months Ended December 31, � Revenue: 2006� 2005� � US services & data 890,601� 851,846� International services & data 147,264� 136,379� � Total revenue 1,037,865� 988,225� � US supplemental information: Services & data excluding IT mgmt 624,001� 589,653� IT management services 266,600� 262,193� 890,601� 851,846� � International supplemental information: Services & data excluding IT mgmt 147,264� 136,379� � � Income from operations: � US services & data 122,872� 95,129� International services & data 6,376� 1,327� Corporate & other 225� (9,960) � Total income from operations 129,473� 86,496� � Margin: � US services & data 13.8% 11.2% International services & data 4.3% 1.0% � Total margin 12.5% 8.8% � ACXIOM CORPORATION AND SUBSIDIARIES DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE (Unaudited) (Dollars in thousands) � � For the Three Months Ended � December 31, December 31, $ % September 30, $ % 2006� 2005� Variance Variance 2006� Variance Variance � Data 68,520� 66,054� 2,466� 3.7% 62,654� 5,866� 9.4% Passthrough data 18,523� 18,111� 412� 2.3% 19,566� (1,043) (5.3%) � Total data revenue 87,043� 84,165� 2,878� 3.4% 82,220� 4,823� 5.9% � � Cost of data revenue: Data 34,481� 30,688� 3,793� 12.4% 31,496� 2,985� 9.5% Passthrough data 18,523� 18,111� 412� 2.3% 19,566� (1,043) (5.3%) � Total cost of data 53,004� 48,799� 4,205� 8.6% 51,062� 1,942� 3.8% � Margin: � Data 49.7% 53.5% 49.7% Passthrough data 0.0% 0.0% 0.0% Total data 39.1% 42.0% 37.9% � ACXIOM CORPORATION AND SUBSIDIARIES DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE (Unaudited) (Dollars in thousands) � � For the Nine Months Ended December 31, $ % 2006� 2005� Variance Variance � Data 185,704� 177,454� 8,250� 4.6% Passthrough data 58,372� 55,813� 2,559� 4.6% � Total data revenue 244,076� 233,267� 10,809� 4.6% � � Cost of data revenue: Data 95,266� 93,995� 1,271� 1.4% Passthrough data 58,372� 55,813� 2,559� 4.6% � Total cost of data 153,638� 149,808� 3,830� 2.6% � Margin: � Data 48.7% 47.0% Passthrough data 0.0% 0.0% Total data 37.1% 35.8% � ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) � December 31, March 31, $ % 2006� 2006� Variance Variance Assets Current assets: Cash and cash equivalents 88,014� 7,705� 80,309� 1042.3% Trade accounts receivable, net 276,061� 261,624� 14,437� 5.5% Deferred income taxes 24,452� 24,587� (135) (0.5%) Other current assets 53,437� 44,937� 8,500� 18.9% � Total current assets 441,964� 338,853� 103,111� 30.4% � Property and equipment 713,235� 662,948� 50,287� 7.6% Less - accumulated depreciation and amortization 397,261� 329,177� 68,084� 20.7% � Property and equipment, net 315,974� 333,771� (17,797) (5.3%) � Software, net of accumulated amortization 40,319� 45,509� (5,190) (11.4%) Goodwill 500,639� 472,401� 28,238� 6.0% Purchased software licenses, net of accumulated amortization 149,982� 155,518� (5,536) (3.6%) Unbilled and notes receivable, excluding current portions 17,466� 19,139� (1,673) (8.7%) Deferred costs, net 130,016� 112,817� 17,199� 15.2% Data acquisition costs 35,241� 40,828� (5,587) (13.7%) Other assets, net 19,504� 21,662� (2,158) (10.0%) � 1,651,105� 1,540,498� 110,607� 7.2% � Liabilities and Stockholders' Equity Current liabilities: Current installments of long-term obligations 100,801� 93,518� 7,283� 7.8% Trade accounts payable 41,343� 44,144� (2,801) (6.3%) Accrued payroll and related expenses 28,318� 32,139� (3,821) (11.9%) Other accrued expenses 79,166� 81,428� (2,262) (2.8%) Deferred revenue 99,606� 123,916� (24,310) (19.6%) Income taxes 7,055� 4,845� 2,210� 45.6% � Total current liabilities 356,289� 379,990� (23,701) (6.2%) � Long-term obligations: Long-term debt and capital leases, net of current installments 688,381� 353,692� 334,689� 94.6% Software and data licenses, net of current installments 20,353� 22,723� (2,370) (10.4%) � Total long-term obligations 708,734� 376,415� 332,319� 88.3% � � Deferred income taxes 77,043� 77,916� (873) (1.1%) � Commitments and contingencies � Stockholders' equity: Common stock 11,103� 10,946� 157� 1.4% Additional paid-in capital 709,983� 677,026� 32,957� 4.9% Unearned stock-based compensation -� (1,941) 1,941� (100.0%) Retained earnings 461,276� 410,278� 50,998� 12.4% Accumulated other comprehensive income 15,670� 2,205� 13,465� 610.7% Treasury stock, at cost (688,993) (392,337) (296,656) 75.6% � Total stockholders' equity 509,039� 706,177� (197,138) (27.9%) � 1,651,105� 1,540,498� 110,607� 7.2% � ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) � For the Three Months Ended � December 31, � � � 2006� � 2005� � Cash flows from operating activities: Net earnings 24,945� 27,281� Non-cash operating activities: Depreciation and amortization 54,396� 59,712� Loss (gain) on disposal or impairment of assets, net 187� (524) Deferred income taxes (553) 4,386� Non-cash stock compensation expense 1,555� 346� Changes in operating assets and liabilities: Accounts receivable (8,933) (8,552) Other assets (769) (6,587) Accounts payable and other liabilities 979� 4,161� Deferred revenue (9,148) 15,191� Net cash provided by operating activities 62,659� 95,414� Cash flows from investing activities: Disposition of operations -� 3,315� Sale of assets -� 1,510� Capitalized software (6,798) (5,204) Capital expenditures (2,518) (401) Cash collected from the sale and license of software -� 20,000� Deferral of costs (16,149) (19,603) Payments received from investments -� 2,093� Net cash paid in acquisitions (14,400) (2,983) Net cash used by investing activities (39,865) (1,273) Cash flows from financing activities: Proceeds from debt (513) 31,833� Payments of debt (25,817) (125,264) Dividends paid (4,663) (4,259) Sale of common stock 8,896� 10,058� Acquisition of treasury stock (6,001) (2,430) Tax benefit of stock options exercised 1,237� -� Net cash used by financing activities (26,861) (90,062) Effect of exchange rate changes on cash 249� (135) � Net increase (decrease) in cash and cash equivalents (3,818) 3,944� Cash and cash equivalents at beginning of period 91,832� 5,962� Cash and cash equivalents at end of period 88,014� 9,906� � Supplemental cash flow information: Cash paid (received) during the period for: Interest 14,813� 7,932� Income taxes 8,196� 1,070� Payments on capital leases and installment payment arrangements 16,700� 17,994� Payments on software and data license liabilities 6,000� 7,344� Other debt payments, excluding line of credit 3,117� 1,715� Noncash investing and financing activities: Acquisition of property and equipment under capital lease and installment payment arrangements 10,427� 14,804� Construction and other financing 4,511� 402� Issuance of common stock for acquisition 3,610� -� � ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) � For the Nine Months Ended � December 31, � � � 2006� � 2005� � Cash flows from operating activities: Net earnings 64,469� 41,069� Non-cash operating activities: Depreciation and amortization 170,379� 172,350� Gain on disposal or impairment of assets, net (1,483) (1,451) Deferred income taxes (975) 12,401� Non-cash stock compensation expense 2,699� 968� Changes in operating assets and liabilities: Accounts receivable (15,768) (13,838) Other assets (2,159) (21,747) Accounts payable and other liabilities (7,844) 2,790� Deferred revenue (25,900) 9,133� Net cash provided by operating activities 183,418� 201,675� Cash flows from investing activities: Disposition of operations -� 4,844� Sale of assets -� 5,123� Capitalized software (19,443) (16,686) Capital expenditures (5,995) (6,355) Cash collected from the sale and license of software 10,000� 20,000� Deferral of costs (49,595) (54,498) Payments received from investments 2,708� 2,855� Net cash paid in acquisitions (14,400) (144,509) Net cash used by investing activities (76,725) (189,226) Cash flows from financing activities: Proceeds from debt 649,756� 423,122� Payments of debt (393,742) (216,041) Dividends paid (13,471) (13,068) Sale of common stock 25,801� 31,609� Acquisition of treasury stock (299,301) (231,865) Tax benefit of stock options exercised 4,081� -� Net cash used by financing activities (26,876) (6,243) Effect of exchange rate changes on cash 492� (485) � Net increase in cash and cash equivalents 80,309� 5,721� Cash and cash equivalents at beginning of period 7,705� 4,185� Cash and cash equivalents at end of period 88,014� 9,906� � Supplemental cash flow information: Cash paid (received) during the period for: Interest 31,375� 18,405� Income taxes 31,027� (376) Payments on capital leases and installment payment arrangements 57,556� 53,890� Payments on software and data license liabilities 21,151� 23,610� Other debt payments, excluding line of credit 6,632� 5,506� Noncash investing and financing activities: Issuance of options for acquisition -� 7,541� Software licenses and maintenance acquired under software obligation 15,266� 8,380� Acquisition of property and equipment under capital lease and installment payment arrangements 44,454� 70,377� Construction and other financing 18,167� 7,200� Issuance of common stock for acquisition 3,610� -� � ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF FREE CASH FLOW AVAILABLE TO EQUITY AND RECONCILIATION TO OPERATING CASH FLOW (Unaudited) (Dollars in thousands) � � � � � � � � � 06/30/05� 09/30/05� 12/31/05� 03/31/06� FY2006 06/30/06� 09/30/06� 12/31/06� YTD FY2007 � Net cash provided by operating activities 61,476� 44,785� 95,414� 74,158� 275,833� 56,350� 64,409� 62,659� 183,418� Less: Tax benefit of stock options and warrants -� -� -� (19,097) (19,097) -� -� -� -� � Subtotal 61,476� 44,785� 95,414� 55,061� 256,736� 56,350� 64,409� 62,659� 183,418� � Plus: Proceeds received from the disposition of operations -� 1,529� 3,315� -� 4,844� -� -� -� -� Proceeds received from the disposition of assets -� 3,613� 1,510� -� 5,123� -� -� -� -� Payments received from investments 721� 41� 2,093� 905� 3,760� 783� 1,925� -� 2,708� Less: Capitalized software (5,673) (5,809) (5,204) (5,217) (21,903) (5,719) (6,926) (6,798) (19,443) Capital expenditures (2,929) (3,025) (401) (493) (6,848) (217) (3,260) (2,518) (5,995) Deferral of costs (16,192) (18,703) (19,603) (15,956) (70,454) (16,887) (16,559) (16,149) (49,595) Payments on capital leases and installment payment arrangements (19,929) (15,967) (17,994) (18,342) (72,232) (18,905) (21,951) (16,700) (57,556) Payments on software and data license liabilities (10,938) (5,328) (7,344) (5,459) (29,069) (7,847) (7,304) (6,000) (21,151) Other required debt payments (1,357) (2,434) (1,715) (3,796) (9,302) (1,711) (1,804) (3,117) (6,632) � Subtotal 5,179� (1,298) 50,071� 6,703� 60,655� 5,847� 8,530� 11,377� 25,754� � Plus: Tax benefit of stock options and warrants -� -� -� 19,097� 19,097� 1,079� 1,765� 1,237� 4,081� � Subtotal 5,179� (1,298) 50,071� 25,800� 79,752� 6,926� 10,295� 12,614� 29,835� � Plus: Cash collected from sale of software -� -� 20,000� -� 20,000� 5,000� 5,000� -� 10,000� � Total 5,179� (1,298) 70,071� 25,800� 99,752� 11,926� 15,295� 12,614� 39,835� � ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) � � � � � � � � � Q3 FY06 to Q3 FY07 Q2 FY07 to Q3 FY07 06/30/05� 09/30/05� 12/31/05� 03/31/06� FY2006 06/30/06� 09/30/06� 12/31/06� % $ % $ Revenue: Services 238,499� 253,193� 263,266� 257,591� 1,012,549� 261,892� 266,099� 265,798� 1.0% 2,532� -0.1% (301) Data 71,772� 77,330� 84,165� 86,752� 320,019� 74,813� 82,220� 87,043� 3.4% 2,878� 5.9% 4,823� Total revenue 310,271� 330,523� 347,431� 344,343� 1,332,568� 336,705� 348,319� 352,841� 1.6% 5,410� 1.3% 4,522� � Operating costs and expenses: Cost of revenue Services 194,349� 191,883� 189,502� 196,428� 772,162� 196,073� 201,384� 199,704� 5.4% 10,202� -0.8% (1,680) Data 48,885� 52,124� 48,799� 52,142� 201,950� 49,572� 51,062� 53,004� 8.6% 4,205� 3.8% 1,942� Total cost of revenue 243,234� 244,007� 238,301� 248,570� 974,112� 245,645� 252,446� 252,708� 6.0% 14,407� 0.1% 262� � � Selling, general and administrative 53,700� 54,902� 57,625� 51,642� 217,869� 54,745� 54,008� 49,065� -14.9% (8,560) -9.2% (4,943) Gains, losses and other items, net (1,637) 12,799� (1,202) (456) 9,504� 0� 0� (225) -81.3% 977� 0.0% (225) � Total operating costs and expenses 295,297� 311,708� 294,724� 299,756� 1,201,485� 300,390� 306,454� 301,548� 2.3% 6,824� -1.6% (4,906) � Income from operations 14,974� 18,815� 52,707� 44,587� 131,083� 36,315� 41,865� 51,293� -2.7% (1,414) 22.5% 9,428� % Margin 4.8% 5.7% 15.2% 12.9% 9.8% 10.8% 12.0% 14.5% Other income (expense) Interest expense (5,162) (7,416) (8,635) (7,531) (28,744) (7,769) (8,950) (14,911) 72.7% (6,276) 66.6% (5,961) Other, net 891� 1,050� (71) 135� 2,005� 647� 2,685� 1,157� -1729.6% 1,228� -56.9% (1,528) Total other income (expense) (4,271) (6,366) (8,706) (7,396) (26,739) (7,122) (6,265) (13,754) 58.0% (5,048) 119.5% (7,489) � Earnings before income taxes 10,703� 12,449� 44,001� 37,191� 104,344� 29,193� 35,600� 37,539� -14.7% (6,462) 5.4% 1,939� Income taxes 4,064� 5,300� 16,720� 14,132� 40,216� 11,385� 13,884� 12,594� -24.7% (4,126) -9.3% (1,290) � Net earnings 6,639� 7,149� 27,281� 23,059� 64,128� 17,808� 21,716� 24,945� -8.6% (2,336) 14.9% 3,229� � � Diluted earnings (loss) per share 0.07� 0.08� 0.31� 0.26� 0.71� 0.20� 0.25� 0.31� 0.0% 0.00� 24.0% 0.06� � ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - INTERNAL FORMAT (Unaudited) (Dollars in thousands, except earnings per share) � � � � � � � � � � Q3 FY06 to Q3 FY07 Q2 FY07 to Q3 FY07 06/30/05� 09/30/05� 12/31/05� 03/31/06� FY2006 06/30/06� 09/30/06� 12/31/06� % $ % $ � Revenue 310,271� 330,523� 347,431� 344,343� 1,332,568� 336,705� 348,319� 352,841� 1.6% 5,410� 1.3% 4,522� � Operating costs and expenses: � Salaries and benefits 126,264� 127,325� 129,888� 132,579� 516,056� 135,917� 139,557� 139,724� 7.6% 9,836� 0.1% 167� � Computer, communications and other equipment 77,647� 76,250� 73,614� 71,730� 299,241� 73,119� 72,685� 71,132� -3.4% (2,482) -2.1% (1,553) � Data costs 41,831� 44,752� 42,021� 44,593� 173,197� 43,372� 44,196� 43,761� 4.1% 1,740� -1.0% (435) � Other operating costs and expenses 51,192� 50,582� 50,403� 51,310� 203,487� 47,982� 50,016� 47,156� -6.4% (3,247) -5.7% (2,860) � Gains, losses and other items, net (1,637) 12,799� (1,202) (456) 9,504� -� -� (225) -81.3% 977� 0.0% (225) � Total operating costs and expenses 295,297� 311,708� 294,724� 299,756� 1,201,485� 300,390� 306,454� 301,548� 2.3% 6,824� -1.6% (4,906) � Income (loss) from operations 14,974� 18,815� 52,707� 44,587� 131,083� 36,315� 41,865� 51,293� -2.7% (1,414) 22.5% 9,428� Operating Margin 4.8% 5.7% 15.2% 12.9% 9.8% 10.8% 12.0% 14.5% Other income (expense): Interest expense (5,162) (7,416) (8,635) (7,531) (28,744) (7,769) (8,950) (14,911) 72.7% (6,276) 66.6% (5,961) Other, net 891� 1,050� (71) 135� 2,005� 647� 2,685� 1,157� -1729.6% 1,228� -56.9% (1,528) � (4,271) (6,366) (8,706) (7,396) (26,739) (7,122) (6,265) (13,754) 58.0% (5,048) 119.5% (7,489) � Earnings (loss) before income taxes 10,703� 12,449� 44,001� 37,191� 104,344� 29,193� 35,600� 37,539� -14.7% (6,462) 5.4% 1,939� � Income taxes 4,064� 5,300� 16,720� 14,132� 40,216� 11,385� 13,884� 12,594� -24.7% (4,126) -9.3% (1,290) � Net earnings (loss) 6,639� 7,149� 27,281� 23,059� 64,128� 17,808� 21,716� 24,945� -8.6% (2,336) 14.9% 3,229� � Diluted earnings (loss) per share 0.07� 0.08� 0.31� 0.26� 0.71� 0.20� 0.25� 0.31� 0.0% 0.00� 24.0% 0.06� � ACXIOM CORPORATION AND SUBSIDIARIES MARGIN ANALYSIS (Unaudited) � � � � � � � � � � Q3 FY06 to Q3 FY07 Q2 FY07 to Q3 FY07 06/30/05� 09/30/05� 12/31/05� 03/31/06� FY2006 06/30/06� 09/30/06� 12/31/06� % $ % $ � Gross profit 67,037� 86,516� 109,130� 95,773� 358,456� 91,060� 95,873� 100,133� -8.2% (8,997) 4.4% 4,260� Gross margin 21.6% 26.2% 31.4% 27.8% 26.9% 27.0% 27.5% 28.4% � Operating margin 4.8% 5.7% 15.2% 12.9% 9.8% 10.8% 12.0% 14.5% � Services gross profit 44,150� 61,310� 73,764� 61,163� 240,387� 65,819� 64,715� 66,094� -10.4% (7,670) 2.1% 1,379� Services gross margin 18.5% 24.2% 28.0% 23.7% 23.7% 25.1% 24.3% 24.9% � Data gross profit 22,887� 25,206� 35,366� 34,610� 118,069� 25,241� 31,158� 34,039� -3.8% (1,327) 9.2% 2,881� Data gross margin 31.9% 32.6% 42.0% 39.9% 36.9% 33.7% 37.9% 39.1% � ACXIOM CORPORATION AND SUBSIDIARIES EXPENSE TREND ANALYSIS (Unaudited) � � � � � � � � � � � 06/30/05� 09/30/05� 12/31/05� 03/31/06� FY2006 06/30/06� 09/30/06� 12/31/06� YTD FY2007 � Salaries and benefits % of revenue 40.7% 38.5% 37.4% 38.5% 38.7% 40.4% 40.1% 39.6% 40.0% � Computer, communications and other equipment % of revenue 25.0% 23.1% 21.2% 20.8% 22.5% 21.7% 20.9% 20.2% 20.9% � Data costs % of revenue 13.5% 13.5% 12.1% 13.0% 13.0% 12.9% 12.7% 12.4% 12.7% � Other operating costs and expenses % of revenue 16.5% 15.3% 14.5% 14.9% 15.3% 14.3% 14.4% 13.4% 14.0% � Total operating costs and expenses % of revenue 95.2% 94.3% 84.8% 87.1% 90.2% 89.2% 88.0% 85.5% 87.5% � SG&A % of revenue 17.3% 16.6% 16.6% 15.0% 16.3% 16.3% 15.5% 13.9% 15.2% � ACXIOM CORPORATION � Financial Road Map (as of December 31, 2006) � � � � � Actual Actual Actual Target Long-Term Goals Years Ending March 31, Fiscal 2006 Q3 Fiscal 2007 YTD Fiscal 2007 Fiscal 2007 Fiscal 2010 � U.S. Revenue Growth 13.6% -0.4% 4.5% 4% to 5% 8% to 11% (CAGR) U.S. Revenue $1,148 million $299 million $891 million $1,195 to $1,205 mil -� � International Revenue Growth -13.0% 13.8% 8.0% 5% to 8% 5% to 8% (CAGR) International Revenue $185 million $54 million $147 million $195 to $200 mil -� � U.S. Operating Margin 11.6% 15.7% 13.8% 13% to 14% 16% to 18% Adjusted U.S. Operating Margin 12.4%2 � International Operating Margin -1.1% 7.9% 4.3% 4% to 5% 12% to 15% Adjusted International Operating Margin 2.5%2 � Return on Assets 1 8.5% 10.9% 10.9% 10% to 11% 14% to 17% Adjusted Return on Assets 1 9.5%2 � Return on Invested Capital 1 11.4%2 13.2% 13.2% 12% to 13% 16% to 19% � Operating Cash Flow $276 million $63 million $183 million $245 to $255 mil $320 to $360 mil � Free Cash Flow to Equity $100 million $13 million $40 million $50 to $60 mil $140 to $160 mil � Revolving Credit Line Balance $252 million $0 million $0 million < $250 mil < $250 mil � Dividends Per Share $0.20� $0.06� $0.16� $0.22� $0.24 to $0.28 � � 1 ROA and ROIC are calculated on a trailing 4 quarters basis. 2 Results exclude unusual charges of $9.1 million for U.S. and $6.7 million for International in the quarter ended September 30, 2005. These charges are excluded when calculating performance compared to the Road Map since they were not considered in setting the Road Map target. All other time periods are as reported for GAAP. � Reconciliation of Non-GAAP Measurements (Dollars in thousands) � � � � � � � � � Actual Actual Actual Target Long-Term Goals Years Ending March 31, Fiscal 2006 Q3 Fiscal 2007 YTD Fiscal 2007 Fiscal 2007 Fiscal 2010 � � U.S. Operating Margin � U.S. Revenue 1,147,641� 298,978� 890,601� � U.S. Operating Income 133,072� 47,057� 123,097� U.S. Operating Income Margin 11.6% 15.7% 13.8% � Gains, losses and nonrecurring items, net 6,147� 0� 0� ValueAct Defense 2,216� 0� 0� Lawsuit Expenses 761� 0� 0� Adjusted U.S. Operating Income (1) 142,196� 47,057� 123,097� Adjusted U.S. Operating Income Margin (1) 12.4% 15.7% 13.8% � International Operating Margin � International Revenue 184,927� 53,863� 147,264� � International Operating Income (1,991) 4,236� 6,376� International Operating Income Margin -1.1% 7.9% 4.3% � Gains, losses and nonrecurring items, net 6,652� 0� 0� Adjusted International Operating Income (1) 4,661� 4,236� 6,376� Adjusted International Operating Income Margin (1) 2.5% 7.9% 4.3% � � � � � � � � � � � � � � � � � � � � � Free Cash Flow to Equity Low � High Low � High � Net cash provided by operating activities 275,833� 62,659� 183,418� 245,000� 255,000� 320,000� 360,000� � Plus: Proceeds received from disposition of assets 5,123� 0� 0� 0� 0� 0� 0� Proceeds received from disposition of operations 4,844� 0� 0� 0� 0� 0� 0� Cash received from investments 3,760� 0� 2,708� 3,000� 3,000� 0� 0� Tax benefit of stock option and warrant exercise 0� 1,237� 4,081� 5,000� 5,000� 10,000� 10,000� Proceeds received from sale of software 20,000� 0� 10,000� 10,000� 10,000� 0� 0� 33,727� 1,237� 16,789� 18,000� 18,000� 10,000� 10,000� � Less: Capitalized software (21,903) (6,798) (19,443) (26,000) (26,000) (20,000) (25,000) Capital expenditures (6,848) (2,518) (5,995) (9,000) (9,000) (10,000) (10,000) Deferral of costs (70,454) (16,149) (49,595) (66,000) (66,000) (65,000) (75,000) Capital lease and installment payments (72,232) (16,700) (57,556) (75,000) (75,000) (65,000) (70,000) Software and data license liability payments (29,069) (6,000) (21,151) (27,000) (27,000) (25,000) (25,000) Other debt payments (9,302) (3,117) (6,632) (10,000) (10,000) (5,000) (5,000) (209,808) (51,282) (160,372) (213,000) (213,000) (190,000) (210,000) � � � � � � � Free cash flow to equity 99,752� 12,614� 39,835� 50,000� to 60,000� 140,000� to 160,000� � � Free cash flow to equity as defined by the Company may not be comparable to similarly titled measures reported by other companies. Management of the Company has included free cash flow to equity in this Financial Road Map representing the amount of money available for the Company's discretionary spending. Management believes that it provides investors with a useful alternative measure of liquidity by allowing an assessment of the amount of cash available for general corporate and strategic purposes after funding operating activities and capital expenditures, capitalized software expenses, deferred costs and required debt repayments. The above table reconciles free cash flow to equity to cash provided by operating activities, the nearest comparable GAAP measure. � � Notes 1 Results exclude unusual charges of $9.1 million for U.S. and $6.7 million for International in the quarter ended September 30, 2005. These charges are excluded when calculating performance compared to the Road Map since they were not considered in setting the Road Map target. All other time periods are as reported for GAAP. � Reconciliation of Non-GAAP Measurements (Dollars in thousands) � � � � � � � � � � � � � � � � � � � Actual Actual Actual Target Long-Term Goals Fiscal 2006 Q3 Fiscal 2007 YTD Fiscal 2007 Fiscal 2007 Fiscal 2010 � � � � � � � � � � � � � � � � � � � � ROA ROIC ROA ROIC Return on Assets (ROA) and Return on Invested Capital (ROIC) ROA Adjusted ROA ROIC ROA ROIC ROA ROIC Low � High Low � High Low � High Low � High � Numerator: Income from operations (3) 131,083� 131,083� 131,083� 174,060� 174,060� 174,060� 174,060� 163,200� 178,700� 163,200� 178,700� 268,600� 337,600� 268,600� 337,600� Unusual Charges, Net (1) 15,776� 15,776� 0� 0� 0� 0� 0� 0� 0� 0� Add implied interest on operating leases � � 11,696� � 10,369� � 10,369� � � � 10,400� � 10,400� � � � 9,000� � 9,000� 131,083� 146,859� 158,554� 174,060� 184,429� 174,060� 184,429� 163,200� � 178,700� 173,600� � 189,100� 268,600� � 337,600� 277,600� � 346,600� � Denominator: Average total assets 1,549,933� 1,549,933� 1,549,933� 1,592,493� 1,592,493� 1,592,493� 1,592,493� 1,622,400� 1,627,800� 1,622,400� 1,627,800� 1,860,000� 1,960,000� 1,860,000� 1,960,000� Less average cash (2) (8,616) (47,929) (47,929) (71,700) (74,200) (10,000) (10,000) Less average non-interest bearing current liabilities (288,063) (271,317) (271,317) (263,400) (266,400) (261,000) (285,000) Plus average present value of operating leases � � 135,190� � 128,525� � 128,525� � � � 128,600� � 128,600� � � � 114,000� � 114,000� � 1,549,933� 1,549,933� 1,388,444� 1,592,493� 1,401,773� 1,592,493� 1,401,773� 1,622,400� � 1,627,800� 1,415,900� � 1,415,800� 1,860,000� � 1,960,000� 1,703,000� � 1,779,000� � Return on invested capital 8.5% 9.5% 11.4% 10.9% 13.2% 10.9% 13.2% 10% to 11% 12% to 13% 14% to 17% 16% to 19% � Notes 1. Results exclude unusual charges of $9.1 million for U.S. and $6.7 million for International in the quarter ended September 30, 2005. These charges are excluded when calculating performance compared to the Road Map since they were not considered in setting the Road Map target. All other time periods are as reported for GAAP. 2. Future cash balances above $10.0 million are assumed to be invested at money market rates and are excluded from this operating cash adjustment. 3. Trailing four quarters. � � Return on Invested Capital (ROIC) as defined by the Company, may not be comparable to similarly titled measures reported by other companies. Management of the Company has included ROIC in this Financial Road Map because it measures the capital efficiency of our business. ROIC does not consider whether the business is financed with debt or equity; rather ROIC calculates a return on all capital invested in the business. The above table reconciles ROIC to a ROA calculation using GAAP numbers. The Company uses ROIC in a number of ways, including pricing analysis, capital expenditure evaluation, and merger and acquisition valuation. � � General Road Map Definitions � 1. Revenue Growth is defined as the percentage growth compared to the previous corresponding fiscal year or comparable period. 2. Operating Margin is defined as the income from operations as a percentage of revenue. 3. Operating Cash Flow is as shown on the Company's cash flow statement. 4. Free Cash Flow to Equity is defined as cash flow from operating activities plus or minus cash flow from investing activities (excluding net cash paid for acquisitions), less required payments of debt (total debt payments excluding payments on the line of credit). 5. Revolving Credit Line Balance is defined as actual funds borrowed under the Company�s revolving line of credit facility at the end of the period. 6. Dividends Per Share is defined as the sum of the dividends for that period. 7. Return on Assets (ROA) is defined as income from operations divided by average total assets for the trailing four quarters. 8. Return on Invested Capital (ROIC) is defined as trailing four quarters income from operations adjusted for the implied interest expense included in operating leases divided by the trailing four quarters' average invested capital. The implied interest adjustment for operating leases is calculated by multiplying the average quarterly balances of the present value of operating leases [(beginning balance + ending balance)/2] x an 8% implied interest rate on the leases. Average invested capital is defined as the trailing four-quarter average of the ending quarterly balances for total assets less operating cash, less non-interest bearing liabilities (current liabilities less the current portion of long-term debt), plus the present value of operating leases.