ACXM Acxiom Holdngs (delisted)

Acxiom(R) Corporation (NASDAQ: ACXM) today announced financial results for the first quarter of fiscal 2008 ended June 30, 2007. Revenue for the three-month period was $338.2 million, an increase of 0.4 percent over $336.7 million for the comparable prior-year period. Income from operations for the three-month period equaled $4.1 million compared to $36.3 million for the quarter ended June 30, 2006. The diluted loss per share of $.15 includes the impact of $20.6 million, or 24 cents per diluted share, in unusual expense items, net of income tax effect, in the quarter detailed below. Charles D. Morgan, Acxiom's company leader and chairman of the board stated, "We remain focused on operating results while we advance the acquisition process with Silver Lake and ValueAct Capital. We continue to believe that successfully completing this deal is in the best interests of Acxiom and its constituents." Details of Acxiom's first-quarter performance include: -- Revenue of $338.2 million, up 0.4 percent from $336.7 million in the first quarter a year ago. -- Income from operations of $4.1 million, an 88.6 percent decrease compared to $36.3 million in the first quarter last year. -- Unusual items that added $20.6 million in expenses in the quarter. Included were costs related to the pending transaction with Silver Lake and ValueAct Capital of $15.1 million, which are non-deductible for tax purposes, and $5.5 million predominantly related to the write-off of certain long-term assets related to an amended contract with an information technology outsourcing client. These expenses reduced first-quarter diluted earnings per share by $.24. -- Diluted loss per share of $.15, compared to diluted earnings per share of $.20 in the first quarter last year. -- Net loss of $11.5 million, compared to net earnings of $17.8 million in the first quarter of fiscal 2007. -- Operating cash flow of $39.1 million and negative free cash flow available to equity of $9.8 million. The free cash flow available to equity is a non-GAAP financial measure, and reconciliation to the comparable GAAP measure, operating cash flow, is attached to this press release. Acxiom in fiscal 2008 implemented a new organizational alignment with three operating divisions. First-quarter revenue by division was: -- Services Division: The division develops, sells and delivers industry-tailored solutions globally through the integration of products, services and consulting. Revenue for the quarter was $181.0 million, up 4 percent compared to the first quarter a year ago. -- Information Products Division: The division develops and sells all global data products, including InfoBase(R) and Personicx(R), as well as fraud and risk mitigation products sold in the U.S., including InsightIdentify. It focuses on product development, product lifecycle management, data content management and innovation. Revenue for the quarter was $96.7 million, a 2 percent increase over the same quarter last year. -- Infrastructure Management Division: The division develops and delivers information technology products and services that improve a company's ability to manage its information technology delivery platform at lower costs and higher efficiencies. Such offerings include traditional IT outsourcing and transformational solutions such as the Acxiom data factory. Revenue for the quarter was $113.5 million, down 6 percent from the same quarter last year. First Quarter Recognition -- Computerworld magazine again named Acxiom one of the 100 Best Places to Work in Information Technology, the fourth time in the last six years the company has received the honor. Computerworld's rankings are based on a comprehensive questionnaire that assesses companies' benefits, diversity, career development, training programs and retention rates. -- Wells Fargo & Company named Acxiom the winner of the "First Choice" award as part of its Vendor Recognition Program. Acxiom was one of four business partners that Wells Fargo's Technology Information Group recognized during its annual vendor summit in April. About Acxiom Corporation Acxiom Corporation (NASDAQ: ACXM; www.acxiom.com) 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, Ark., with locations throughout the United States and Europe, and in Australia, China, and Canada. For more information, visit www.acxiom.com. Acxiom is a registered trademark of Acxiom Corporation. This release contains 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 to remain focused on improving operating results, that we are advancing the acquisition process with ValueAct Capital and Silver Lake and that we continue to believe that completing the anticipated transaction is in the best interest of Acxiom and all of its constituents. 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 the anticipated transaction 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 of a change of control of the Company 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. 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 or any other forward-looking statement. Acxiom, InfoBase and Personicx are registered trademarks of Acxiom Corporation. -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) For the Three Months Ended June 30, ----------------------------------- $ % 2007 2006 Variance Variance -------- -------- ----------------- Revenue: Services 264,735 261,892 2,843 1.1% Data 73,433 74,813 (1,380) (1.8%) -------- -------- Total revenue 338,168 336,705 1,463 0.4% Operating costs and expenses: Cost of revenue Services 212,086 196,073 16,013 8.2% Data 53,885 49,572 4,313 8.7% -------- -------- Total cost of revenue 265,971 245,645 20,326 8.3% Services gross margin 19.9% 25.1% Data gross margin 26.6% 33.7% Total gross margin 21.3% 27.0% Selling, general and administrative 52,669 54,745 (2,076) (3.8%) Gains, losses and other items, net 15,390 - 15,390 100.0% -------- -------- Total operating costs and expenses 334,030 300,390 33,640 11.2% -------- -------- Income from operations 4,138 36,315 (32,177) (88.6%) -------- -------- Other income (expense): Interest expense (13,575) (7,769) (5,806) 74.7% Other, net 183 647 (464) (71.7%) -------- -------- Total other income (expense) (13,392) (7,122) (6,270) 88.0% -------- -------- Earnings (loss) before income taxes (9,254) 29,193 (38,447) (131.7%) Income taxes 2,267 11,385 (9,118) (80.1%) -------- -------- Net earnings (loss) (11,521) 17,808 (29,329) (164.7%) ======== ======== Earnings (loss) per share: Basic (0.15) 0.20 (0.35) (175.0%) ======== ======== Diluted (0.15) 0.20 (0.35) (175.0%) ======== ======== *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) For the Three Months Ended ------------------------------------- June 30, March 31, $ % 2007 2007 Variance Variance --------- --------- ----------------- Revenue: Services 264,735 267,314 (2,579) (1.0%) Data 73,433 89,957 (16,524) (18.4%) --------- --------- Total revenue 338,168 357,271 (19,103) (5.3%) Operating costs and expenses: Cost of revenue Services 212,086 209,830 2,256 1.1% Data 53,885 52,991 894 1.7% --------- --------- Total cost of revenue 265,971 262,821 3,150 1.2% Services gross margin 19.9% 21.5% Data gross margin 26.6% 41.1% Total gross margin 21.3% 26.4% Selling, general and administrative 52,669 56,031 (3,362) (6.0%) Gains, losses and other items, net 15,390 9,122 6,268 68.7% --------- --------- Total operating costs and expenses 334,030 327,974 6,056 1.8% --------- --------- Income from operations 4,138 29,297 (25,159) (85.9%) --------- --------- Other income (expense): Interest expense (13,575) (15,002) 1,427 (9.5%) Other, net 183 1,444 (1,261) (87.3%) --------- --------- Total other income (expense) (13,392) (13,558) 166 (1.2%) --------- --------- Earnings (loss) before income taxes (9,254) 15,739 (24,993) (158.8%) Income taxes 2,267 9,468 (7,201) (76.1%) --------- --------- Net earnings (loss) (11,521) 6,271 (17,792) (283.7%) ========= ========= Earnings (loss) per share: Basic (0.15) 0.08 (0.23) (287.5%) ========= ========= Diluted (0.15) 0.08 (0.23) (287.5%) ========= ========= *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except earnings per share) For the Three Months Ended --------------------------- June 30, June 30, March 31, 2007 2006 2007 -------- -------- --------- Basic earnings per share: Numerator - net earnings (loss) (11,521) 17,808 6,271 Denominator - weighted-average shares outstanding 79,341 88,155 78,385 -------- -------- --------- Basic earnings (loss) per share (0.15) 0.20 0.08 ======== ======== ========= Diluted earnings per share: Numerator - net earnings (loss) (11,521) 17,808 6,271 Denominator - weighted-average shares outstanding 79,341 88,155 78,385 Dilutive effect of common stock options, warrants and restricted stock - 2,268 1,750 -------- -------- --------- 79,341 90,423 80,135 -------- -------- --------- Diluted earnings (loss) per share (0.15) 0.20 0.08 ======== ======== ========= *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES RESULTS BY SEGMENT (Unaudited) (Dollars in thousands) For the Three Months Ended -------------------------- June 30, June 30, Revenue: 2007 2006 ------------- ------------ Information services 181,045 173,685 Information products 96,678 94,968 Infrastructure management 113,520 120,491 Eliminations (53,075) (52,439) ------------- ------------ Total revenue 338,168 336,705 ============= ============ Income from operations: Information services 24,267 29,290 Information products (5,684) (830) Infrastructure management 12,136 14,094 Corporate & other (26,581) (6,239) ------------- ------------ Total income from operations 4,138 36,315 ============= ============ Margin: Information services 13.4% 16.9% Information products -5.9% -0.9% Infrastructure management 10.7% 11.7% Total margin 1.2% 10.8% *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE (Unaudited) (Dollars in thousands) For the Three Months Ended ------------------------------------ June 30, June 30, $ % 2007 2006 Variance Variance -------- -------- ------------------ Data 53,841 54,530 (689) (1.3%) Passthrough data 19,592 20,283 (691) (3.4%) -------- -------- Total data revenue 73,433 74,813 (1,380) (1.8%) ======== ======== Cost of data revenue: Data 34,293 29,289 5,004 17.1% Passthrough data 19,592 20,283 (691) (3.4%) -------- -------- Total cost of data 53,885 49,572 4,313 8.7% ======== ======== Margin: Data 36.3% 46.3% Passthrough data 0.0% 0.0% Total data 26.6% 33.7% For the Three Months Ended ----------------------------- March 31, $ % 2007 Variance Variance --------- ----------------- Data 69,596 (15,755) (22.6%) Passthrough data 20,361 (769) (3.8%) --------- Total data revenue 89,957 (16,524) (18.4%) ========= Cost of data revenue: Data 32,630 1,663 5.1% Passthrough data 20,361 (769) (3.8%) --------- Total cost of data 52,991 894 1.7% ========= Margin: Data 53.1% Passthrough data 0.0% Total data 41.1% *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) June 30, March 31, $ % 2007 2007 Variance Variance ---------- ---------- ----------------- Assets ------------------------------- Current assets: Cash and cash equivalents 61,379 37,776 23,603 62.5% Trade accounts receivable, net 280,956 285,850 (4,894) (1.7%) Refundable income taxes 8,374 7,657 717 9.4% Deferred income taxes 22,318 22,341 (23) (0.1%) Other current assets 56,114 59,252 (3,138) (5.3%) ---------- ---------- Total current assets 429,141 412,876 16,265 3.9% ---------- ---------- Property and equipment 748,957 733,175 15,782 2.2% Less - accumulated depreciation and amortization 446,464 420,883 25,581 6.1% ---------- ---------- Property and equipment, net 302,493 312,292 (9,799) (3.1%) ---------- ---------- Software, net of accumulated amortization 50,533 44,289 6,244 14.1% Goodwill 522,279 522,046 233 0.0% Purchased software licenses, net of accumulated amortization 145,368 151,326 (5,958) (3.9%) Unbilled and notes receivable, excluding current portions 14,479 16,742 (2,263) (13.5%) Deferred costs, net 136,184 137,684 (1,500) (1.1%) Data acquisition costs 36,672 35,398 1,274 3.6% Other assets, net 23,248 23,251 (3) (0.0%) ---------- ---------- 1,660,397 1,655,904 4,493 0.3% ========== ========== Liabilities and Stockholders' Equity ------------------------------- Current liabilities: Current installments of long- term obligations 104,341 106,921 (2,580) (2.4%) Trade accounts payable 62,034 54,808 7,226 13.2% Accrued payroll and related expenses 26,562 33,663 (7,101) (21.1%) Other accrued expenses 77,474 79,078 (1,604) (2.0%) Deferred revenue 102,589 113,318 (10,729) (9.5%) ---------- ---------- Total current liabilities 373,000 387,788 (14,788) (3.8%) ---------- ---------- Long-term obligations: Long-term debt and capital leases, net of current installments 622,950 631,184 (8,234) (1.3%) Software and data licenses, net of current installments 12,290 17,695 (5,405) (30.5%) ---------- ---------- Total long-term obligations 635,240 648,879 (13,639) (2.1%) ---------- ---------- Deferred income taxes 96,726 97,926 (1,200) (1.2%) Commitments and contingencies Stockholders' equity: Common stock 11,331 11,145 186 1.7% Additional paid-in capital 760,952 718,336 42,616 5.9% Retained earnings 451,323 462,844 (11,521) (2.5%) Accumulated other comprehensive income 20,365 17,526 2,839 16.2% Treasury stock, at cost (688,540) (688,540) 0 0.0% ---------- ---------- Total stockholders' equity 555,431 521,311 34,120 6.5% ---------- ---------- 1,660,397 1,655,904 4,493 0.3% ========== ========== *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Three Months Ended June 30, ----------------- 2007 2006 ----------------- Cash flows from operating activities: Net earnings (11,521) 17,808 Non-cash operating activities: Depreciation and amortization 59,102 59,047 Loss (gain) on disposal or impairment of assets, net 310 (84) Deferred income taxes (1,226) (233) Non-cash stock compensation expense 1,358 553 Changes in operating assets and liabilities: Accounts receivable 7,721 (1,796) Other assets (792) 3,186 Accounts payable and other liabilities (3,097) (9,743) Deferred revenue (12,723) (12,388) -------- -------- Net cash provided by operating activities 39,132 56,350 -------- -------- Cash flows from investing activities: Capitalized software (8,447) (5,719) Capital expenditures (2,867) (217) Cash collected from the sale and license of software - 5,000 Deferral of costs (14,129) (16,887) Payments received from investments - 783 Net cash paid in acquisitions (2,680) - -------- -------- Net cash used by investing activities (28,123) (17,040) -------- -------- Cash flows from financing activities: Proceeds from debt 2,127 28,873 Payments of debt (31,283) (67,866) Sale of common stock 35,820 6,773 Acquisition of treasury stock - (11,965) Tax benefit of stock options exercised 5,624 1,079 -------- -------- Net cash used by financing activities 12,288 (43,106) -------- -------- Effect of exchange rate changes on cash 307 254 -------- -------- Net increase (decrease) in cash and cash equivalents 23,604 (3,542) Cash and cash equivalents at beginning of period 37,776 7,705 -------- -------- Cash and cash equivalents at end of period 61,380 4,163 ======== ======== Supplemental cash flow information: Cash paid (received) during the period for: Interest 13,888 7,830 Income taxes 115 5,268 Payments on capital leases and installment payment arrangements 19,137 18,905 Payments on software and data license liabilities 6,493 7,847 Other debt payments, excluding line of credit 3,526 1,711 Revolving credit payments 2,127 39,403 Noncash investing and financing activities: Acquisition of property and equipment under capital lease and installment payment arrangements 7,222 19,426 Construction and other financing 5,351 5,904 Software licenses and maintenance acquired under software obligation - 15,266 *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF FREE CASH FLOW AVAILABLE TO EQUITY AND RECONCILIATION TO OPERATING CASH FLOW (Unaudited) (Dollars in thousands) ---------------------------------------------- -------- 06/30/06 09/30/06 12/31/06 03/31/07 YTD FY2007 06/30/07 ---------------------------------------------- -------- Net cash provided by operating activities 56,350 64,409 62,659 76,534 259,952 39,132 Plus: Payments received from investments 783 1,925 - 50 2,758 - Less: Capitalized software (5,719) (6,926) (6,798) (8,000) (27,443) (8,447) Capital expenditures (217) (3,260) (2,518) (8,230) (14,225) (2,867) Deferral of costs (16,887) (16,559) (16,149) (17,092) (66,687) (14,129) Payments on capital leases and installment payment arrangements (18,905) (21,951) (16,700) (18,579) (76,135) (19,137) Payments on software and data license liabilities (7,847) (7,304) (6,000) (5,746) (26,897) (6,493) Other required debt payments (1,711) (1,804) (3,117) (3,603) (10,235) (3,526) ---------------------------------------------- -------- Subtotal 5,847 8,530 11,377 15,334 41,088 (15,467) Plus: Tax benefit of stock options and warrants 1,079 1,765 1,237 61 4,142 5,624 ---------------------------------------------- -------- Subtotal 6,926 10,295 12,614 15,395 45,230 (9,843) Plus: Cash collected from sale of software 5,000 5,000 - - 10,000 - ---------------------------------------------- -------- Total 11,926 15,295 12,614 15,395 55,230 (9,843) ============================================== ======== *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) -------------------------------------------------- 06/30/06 09/30/06 12/31/06 03/31/07 FY2007 -------------------------------------------------- Revenue: Services 261,892 266,099 265,798 267,314 1,061,103 Data 74,813 82,220 87,043 89,957 334,033 -------------------------------------------------- Total revenue 336,705 348,319 352,841 357,271 1,395,136 Operating costs and expenses: Cost of revenue Services 196,073 201,384 199,704 209,830 806,991 Data 49,572 51,062 53,004 52,991 206,629 -------------------------------------------------- Total cost of revenue 245,645 252,446 252,708 262,821 1,013,620 Selling, general and administrative 54,745 54,008 49,065 56,031 213,849 Gains, losses and other items, net 0 0 (225) 9,122 8,897 -------------------------------------------------- Total operating costs and expenses 300,390 306,454 301,548 327,974 1,236,366 Income from operations 36,315 41,865 51,293 29,297 158,770 % Margin 10.8% 12.0% 14.5% 8.2% 11.4% Other income (expense) Interest expense (7,769) (8,950) (14,911) (15,002) (46,632) Other, net 647 2,685 1,157 1,444 5,933 -------------------------------------------------- Total other income (expense) (7,122) (6,265) (13,754) (13,558) (40,699) Earnings (loss) before income taxes 29,193 35,600 37,539 15,739 118,071 Income taxes 11,385 13,884 12,594 9,468 47,331 -------------------------------------------------- Net earnings (loss) 17,808 21,716 24,945 6,271 70,740 ================================================== Diluted earnings (loss) per share 0.20 0.25 0.31 0.08 0.84 ================================================== Q1 FY07 to Q1 Q4 FY07 to Q1 FY08 FY08 --------- ---------------- ---------------- 06/30/07 % $ % $ -------------------------- ---------------- Revenue: Services 264,735 1.1% 2,843 -1.0% (2,579) Data 73,433 -1.8% (1,380) -18.4% (16,524) -------------------------- ---------------- Total revenue 338,168 0.4% 1,463 -5.3% (19,103) Operating costs and expenses: Cost of revenue Services 212,086 8.2% 16,013 1.1% 2,256 Data 53,885 8.7% 4,313 1.7% 894 -------------------------- ---------------- Total cost of revenue 265,971 8.3% 20,326 1.2% 3,150 Selling, general and administrative 52,669 -3.8% (2,076) -6.0% (3,362) Gains, losses and other items, net 15,390 - 15,390 68.7% 6,268 -------------------------- ---------------- Total operating costs and expenses 334,030 11.2% 33,640 1.8% 6,056 Income from operations 4,138 -88.6% (32,177) -85.9% (25,159) % Margin 1.2% Other income (expense) Interest expense (13,575) 74.7% (5,806) -9.5% 1,427 Other, net 183 -71.7% (464) -87.3% (1,261) -------------------------- ---------------- Total other income (expense) (13,392) 88.0% (6,270) -1.2% 166 Earnings (loss) before income taxes (9,254) -131.7% (38,447) -158.8% (24,993) Income taxes 2,267 -80.1% (9,118) -76.1% (7,201) -------------------------- ---------------- Net earnings (loss) (11,521) -164.7% (29,329) -283.7% (17,792) ========================== ================ Diluted earnings (loss) per share (0.15) -175.0% (0.35) -287.5% (0.23) ========================== ================ *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - INTERNAL FORMAT (Unaudited) (Dollars in thousands, except earnings per share) -------------------------------------------------- 06/30/06 09/30/06 12/31/06 03/31/07 FY2007 -------------------------------------------------- Revenue 336,705 348,319 352,841 357,271 1,395,136 Operating costs and expenses: Salaries and benefits 135,917 139,557 139,724 154,801 569,999 Computer, communications and other equipment 73,119 72,685 71,132 73,409 290,345 Data costs 43,372 44,196 43,761 42,569 173,898 Other operating costs and expenses 47,982 50,016 47,156 48,071 193,225 Gains, losses and other items, net - - (225) 9,122 8,897 -------------------------------------------------- Total operating costs and expenses 300,390 306,454 301,548 327,972 1,236,364 -------------------------------------------------- Income from operations 36,315 41,865 51,293 29,299 158,772 -------------------------------------------------- Operating Margin 10.8% 12.0% 14.5% 8.2% 11.4% Other income (expense): Interest expense (7,769) (8,950) (14,911) (15,002) (46,632) Other, net 647 2,685 1,157 1,444 5,933 -------------------------------------------------- Total other income (expense) (7,122) (6,265) (13,754) (13,558) (40,699) -------------------------------------------------- Earnings (loss) before income taxes 29,193 35,600 37,539 15,741 118,073 -------------------------------------------------- Income taxes 11,385 13,884 12,594 9,468 47,331 -------------------------------------------------- Net earnings (loss) 17,808 21,716 24,945 6,273 70,742 ================================================== Diluted earnings (loss) per share 0.20 0.25 0.31 0.08 0.84 ================================================== Q1 FY07 to Q1 Q4 FY07 to Q1 FY08 FY08 -------- ---------------- ---------------- 06/30/07 % $ % $ -------- ---------------- ---------------- Revenue 338,168 0.4% 1,463 -5.3% (19,103) Operating costs and expenses: Salaries and benefits 148,739 9.4% 12,822 -3.9% (6,062) Computer, communications and other equipment 72,444 -0.9% (675) -1.3% (965) Data costs 42,518 -2.0% (854) -0.1% (51) Other operating costs and expenses 54,939 14.5% 6,957 14.3% 6,868 Gains, losses and other items, net 15,390 - 15,390 68.7% 6,268 -------- ---------------- ---------------- Total operating costs and expenses 334,030 11.2% 33,640 1.8% 6,058 -------- ---------------- ---------------- Income from operations 4,138 -88.6% (32,177) -85.9% (25,161) -------- ---------------- ---------------- Operating Margin 1.2% Other income (expense): Interest expense (13,575) 74.7% (5,806) -9.5% 1,427 Other, net 183 -71.7% (464) -87.3% (1,261) -------- ---------------- ---------------- Total other income (expense) (13,392) 88.0% (6,270) -1.2% 166 -------- ---------------- ---------------- Earnings (loss) before income taxes (9,254) -131.7% (38,447) -158.8% (24,995) -------- ---------------- ---------------- Income taxes 2,267 -80.1% (9,118) -76.1% (7,201) -------- ---------------- ---------------- Net earnings (loss) (11,521) -164.7% (29,329) -283.7% (17,794) ======== ================ ================ Diluted earnings (loss) per share (0.15) -175.0% (0.35) -287.5% (0.23) ======== ================ ================ *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES MARGIN ANALYSIS (Unaudited) -------------------------------------------- 06/30/06 09/30/06 12/31/06 03/31/07 FY2007 -------------------------------------------- Gross profit 91,060 95,873 100,133 94,450 381,516 Gross margin 27.0% 27.5% 28.4% 26.4% 27.3% Operating margin 10.8% 12.0% 14.5% 8.2% 11.4% Services gross profit 65,819 64,715 66,094 57,484 254,112 Services gross margin 25.1% 24.3% 24.9% 21.5% 23.9% Data gross profit 25,241 31,158 34,039 36,966 127,404 Data gross margin 33.7% 37.9% 39.1% 41.1% 38.1% Q1 FY07 to Q1 Q4 FY07 to Q1 FY08 FY08 --------- ----------------- ---------------- 06/30/07 % $ % $ --------- ----------------- ---------------- Gross profit 72,197 -20.7% (18,863) -23.6% (22,253) Gross margin 21.3% Operating margin 1.2% Services gross profit 52,649 -20.0% (13,170) -8.4% (4,835) Services gross margin 19.9% Data gross profit 19,548 -22.6% (5,693) -47.1% (17,418) Data gross margin 26.6% *T -0- *T ACXIOM CORPORATION AND SUBSIDIARIES EXPENSE TREND ANALYSIS (Unaudited) -------------------------------------------- -------- 06/30/06 09/30/06 12/31/06 03/31/07 FY2007 06/30/07 -------------------------------------------- -------- Salaries and benefits % of revenue 40.4% 40.1% 39.6% 43.3% 40.9% 44.0% Computer, communications and other equipment % of revenue 21.7% 20.9% 20.2% 20.5% 20.8% 21.4% Data costs % of revenue 12.9% 12.7% 12.4% 11.9% 12.5% 12.6% Other operating costs and expenses % of revenue 14.3% 14.4% 13.4% 13.5% 13.8% 16.2% Total operating costs and expenses % of revenue 89.2% 88.0% 85.5% 91.8% 88.6% 98.8% SG&A % of revenue 16.3% 15.5% 13.9% 15.7% 15.3% 15.6% *T Acxiom� Corporation (NASDAQ: ACXM) today announced financial results for the first quarter of fiscal 2008 ended June 30, 2007. Revenue for the three-month period was $338.2 million, an increase of 0.4 percent over $336.7 million for the comparable prior-year period. Income from operations for the three-month period equaled $4.1 million compared to $36.3 million for the quarter ended June 30, 2006. The diluted loss per share of $.15 includes the impact of $20.6 million, or 24 cents per diluted share, in unusual expense items, net of income tax effect, in the quarter detailed below. Charles D. Morgan, Acxiom�s company leader and chairman of the board stated, �We remain focused on operating results while we advance the acquisition process with Silver Lake and ValueAct Capital. We continue to believe that successfully completing this deal is in the best interests of Acxiom and its constituents.� Details of Acxiom�s first-quarter performance include: Revenue of $338.2 million, up 0.4 percent from $336.7 million in the first quarter a year ago. Income from operations of $4.1 million, an 88.6 percent decrease compared to $36.3 million in the first quarter last year. Unusual items that added $20.6 million in expenses in the quarter. Included were costs related to the pending transaction with Silver Lake and ValueAct Capital of $15.1 million, which are non-deductible for tax purposes, and $5.5 million predominantly related to the write-off of certain long-term assets related to an amended contract with an information technology outsourcing client. These expenses reduced first-quarter diluted earnings per share by $.24. Diluted loss per share of $.15, compared to diluted earnings per share of $.20 in the first quarter last year. Net loss of $11.5 million, compared to net earnings of $17.8 million in the first quarter of fiscal 2007. Operating cash flow of $39.1 million and negative free cash flow available to equity of $9.8 million. The free cash flow available to equity is a non-GAAP financial measure, and reconciliation to the comparable GAAP measure, operating cash flow, is attached to this press release. Acxiom in fiscal 2008 implemented a new organizational alignment with three operating divisions. First-quarter revenue by division was: Services Division: The division develops, sells and delivers industry-tailored solutions globally through the integration of products, services and consulting. Revenue for the quarter was $181.0 million, up 4 percent compared to the first quarter a year ago. Information Products Division: The division develops and sells all global data products, including InfoBase� and Personicx�, as well as fraud and risk mitigation products sold in the U.S., including InsightIdentify. It focuses on product development, product lifecycle management, data content management and innovation. Revenue for the quarter was $96.7 million, a 2 percent increase over the same quarter last year. Infrastructure Management Division: The division develops and delivers information technology products and services that improve a company�s ability to manage its information technology delivery platform at lower costs and higher efficiencies. Such offerings include traditional IT outsourcing and transformational solutions such as the Acxiom data factory. Revenue for the quarter was $113.5 million, down 6 percent from the same quarter last year. First Quarter Recognition Computerworld magazine again named Acxiom one of the 100 Best Places to Work in Information Technology, the fourth time in the last six years the company has received the honor. Computerworld's rankings are based on a comprehensive questionnaire that assesses companies' benefits, diversity, career development, training programs and retention rates. Wells Fargo & Company named Acxiom the winner of the "First Choice" award as part of its Vendor Recognition Program. Acxiom was one of four business partners that Wells Fargo's Technology Information Group recognized during its annual vendor summit in April. About Acxiom Corporation Acxiom Corporation (NASDAQ: ACXM; www.acxiom.com) 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, Ark., with locations throughout the United States and Europe, and in Australia, China, and Canada. For more information, visit www.acxiom.com. Acxiom is a registered trademark of Acxiom Corporation. This release contains 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 to remain focused on improving operating results, that we are advancing the acquisition process with ValueAct Capital and Silver Lake and that we continue to believe that completing the anticipated transaction is in the best interest of Acxiom and all of its constituents. 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 the anticipated transaction 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 of a change of control of the Company 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. 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 or any other forward-looking statement. Acxiom, InfoBase and Personicx are registered trademarks of Acxiom Corporation. ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) � For the Three Months Ended June 30, $ % 2007 2006 Variance � Variance � Revenue: Services 264,735 261,892 2,843 1.1 % Data 73,433 � 74,813 � (1,380 ) (1.8 %) Total revenue 338,168 336,705 1,463 0.4 % � Operating costs and expenses: Cost of revenue Services 212,086 196,073 16,013 8.2 % Data 53,885 � 49,572 � 4,313 8.7 % Total cost of revenue 265,971 245,645 20,326 8.3 % � Services gross margin 19.9 % 25.1 % Data gross margin 26.6 % 33.7 % Total gross margin 21.3 % 27.0 % � Selling, general and administrative 52,669 54,745 (2,076 ) (3.8 %) Gains, losses and other items, net 15,390 � - � 15,390 100.0 % � Total operating costs and expenses 334,030 � 300,390 � 33,640 11.2 % � Income from operations 4,138 � 36,315 � (32,177 ) (88.6 %) � Other income (expense): Interest expense (13,575 ) (7,769 ) (5,806 ) 74.7 % Other, net 183 � 647 � (464 ) (71.7 %) � Total other income (expense) (13,392 ) (7,122 ) (6,270 ) 88.0 % � Earnings (loss) before income taxes (9,254 ) 29,193 (38,447 ) (131.7 %) � Income taxes 2,267 � 11,385 � (9,118 ) (80.1 %) � Net earnings (loss) (11,521 ) 17,808 � (29,329 ) (164.7 %) � Earnings (loss) per share: � Basic (0.15 ) 0.20 � (0.35 ) (175.0 %) � Diluted (0.15 ) 0.20 � (0.35 ) (175.0 %) ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) � For the Three Months Ended � June 30, March 31, $ % 2007 2007 Variance � Variance � Revenue: Services 264,735 267,314 (2,579 ) (1.0 %) Data 73,433 � 89,957 � (16,524 ) (18.4 %) Total revenue 338,168 357,271 (19,103 ) (5.3 %) � Operating costs and expenses: Cost of revenue Services 212,086 209,830 2,256 1.1 % Data 53,885 � 52,991 � 894 1.7 % Total cost of revenue 265,971 262,821 3,150 1.2 % � Services gross margin 19.9 % 21.5 % Data gross margin 26.6 % 41.1 % Total gross margin 21.3 % 26.4 % � Selling, general and administrative 52,669 56,031 (3,362 ) (6.0 %) Gains, losses and other items, net 15,390 � 9,122 � 6,268 68.7 % � Total operating costs and expenses 334,030 � 327,974 � 6,056 1.8 % � Income from operations 4,138 � 29,297 � (25,159 ) (85.9 %) � Other income (expense): Interest expense (13,575 ) (15,002 ) 1,427 (9.5 %) Other, net 183 � 1,444 � (1,261 ) (87.3 %) � Total other income (expense) (13,392 ) (13,558 ) 166 (1.2 %) � Earnings (loss) before income taxes (9,254 ) 15,739 (24,993 ) (158.8 %) � Income taxes 2,267 � 9,468 � (7,201 ) (76.1 %) � Net earnings (loss) (11,521 ) 6,271 � (17,792 ) (283.7 %) � Earnings (loss) per share: � Basic (0.15 ) 0.08 � (0.23 ) (287.5 %) � Diluted (0.15 ) 0.08 � (0.23 ) (287.5 %) ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except earnings per share) � For the Three Months Ended � June 30, June 30, March 31, 2007 2006 2007 � Basic earnings per share: � Numerator - net earnings (loss) (11,521 ) 17,808 6,271 � Denominator - weighted-average shares outstanding 79,341 � 88,155 78,385 � Basic earnings (loss) per share (0.15 ) 0.20 0.08 � Diluted earnings per share: � Numerator - net earnings (loss) (11,521 ) 17,808 6,271 � Denominator - weighted-average shares outstanding 79,341 88,155 78,385 � Dilutive effect of common stock options, warrants and restricted stock - � 2,268 1,750 � 79,341 � 90,423 80,135 � Diluted earnings (loss) per share (0.15 ) 0.20 0.08 ACXIOM CORPORATION AND SUBSIDIARIES RESULTS BY SEGMENT (Unaudited) (Dollars in thousands) � � For the Three Months Ended � June 30, June 30, Revenue: 2007 2006 � Information services 181,045 173,685 Information products 96,678 94,968 Infrastructure management 113,520 120,491 Eliminations (53,075 ) (52,439 ) � Total revenue 338,168 � 336,705 � � � Income from operations: � Information services 24,267 29,290 Information products (5,684 ) (830 ) Infrastructure management 12,136 14,094 Corporate & other (26,581 ) (6,239 ) � Total income from operations 4,138 � 36,315 � � Margin: � Information services 13.4 % 16.9 % Information products -5.9 % -0.9 % Infrastructure management 10.7 % 11.7 % � Total margin 1.2 % 10.8 % ACXIOM CORPORATION AND SUBSIDIARIES DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE (Unaudited) (Dollars in thousands) � For the Three Months Ended � June 30, June 30, $ % March 31, $ % 2007 2006 Variance � Variance 2007 Variance � Variance � Data 53,841 54,530 (689 ) (1.3 %) 69,596 (15,755 ) (22.6 %) Passthrough data 19,592 � 20,283 � (691 ) (3.4 %) 20,361 � (769 ) (3.8 %) � Total data revenue 73,433 � 74,813 � (1,380 ) (1.8 %) 89,957 � (16,524 ) (18.4 %) � � Cost of data revenue: Data 34,293 29,289 5,004 17.1 % 32,630 1,663 5.1 % Passthrough data 19,592 � 20,283 � (691 ) (3.4 %) 20,361 � (769 ) (3.8 %) � Total cost of data 53,885 � 49,572 � 4,313 8.7 % 52,991 � 894 1.7 % � Margin: � Data 36.3 % 46.3 % 53.1 % Passthrough data 0.0 % 0.0 % 0.0 % Total data 26.6 % 33.7 % 41.1 % ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) � June 30, March 31, $ % 2007 2007 Variance � Variance Assets Current assets: Cash and cash equivalents 61,379 37,776 23,603 62.5 % Trade accounts receivable, net 280,956 285,850 (4,894 ) (1.7 %) Refundable income taxes 8,374 7,657 717 9.4 % Deferred income taxes 22,318 22,341 (23 ) (0.1 %) Other current assets 56,114 � 59,252 � (3,138 ) (5.3 %) � Total current assets 429,141 � 412,876 � 16,265 3.9 % � Property and equipment 748,957 733,175 15,782 2.2 % Less - accumulated depreciation and amortization 446,464 � 420,883 � 25,581 6.1 % � Property and equipment, net 302,493 � 312,292 � (9,799 ) (3.1 %) � Software, net of accumulated amortization 50,533 44,289 6,244 14.1 % Goodwill 522,279 522,046 233 0.0 % Purchased software licenses, net of accumulated amortization 145,368 151,326 (5,958 ) (3.9 %) Unbilled and notes receivable, excluding current portions 14,479 16,742 (2,263 ) (13.5 %) Deferred costs, net 136,184 137,684 (1,500 ) (1.1 %) Data acquisition costs 36,672 35,398 1,274 3.6 % Other assets, net 23,248 � 23,251 � (3 ) (0.0 %) � 1,660,397 � 1,655,904 � 4,493 0.3 % � Liabilities and Stockholders' Equity Current liabilities: Current installments of long-term obligations 104,341 106,921 (2,580 ) (2.4 %) Trade accounts payable 62,034 54,808 7,226 13.2 % Accrued payroll and related expenses 26,562 33,663 (7,101 ) (21.1 %) Other accrued expenses 77,474 79,078 (1,604 ) (2.0 %) Deferred revenue 102,589 � 113,318 � (10,729 ) (9.5 %) � Total current liabilities 373,000 � 387,788 � (14,788 ) (3.8 %) � Long-term obligations: Long-term debt and capital leases, net of current installments 622,950 631,184 (8,234 ) (1.3 %) Software and data licenses, net of current installments 12,290 � 17,695 � (5,405 ) (30.5 %) � Total long-term obligations 635,240 � 648,879 � (13,639 ) (2.1 %) � � Deferred income taxes 96,726 97,926 (1,200 ) (1.2 %) � Commitments and contingencies � Stockholders' equity: Common stock 11,331 11,145 186 1.7 % Additional paid-in capital 760,952 718,336 42,616 5.9 % Retained earnings 451,323 462,844 (11,521 ) (2.5 %) Accumulated other comprehensive income 20,365 17,526 2,839 16.2 % Treasury stock, at cost (688,540 ) (688,540 ) 0 0.0 % � Total stockholders' equity 555,431 � 521,311 � 34,120 6.5 % � 1,660,397 � 1,655,904 � 4,493 0.3 % ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) � For the Three Months Ended � June 30, 2007 � 2006 � Cash flows from operating activities: Net earnings (11,521 ) 17,808 Non-cash operating activities: Depreciation and amortization 59,102 59,047 Loss (gain) on disposal or impairment of assets, net 310 (84 ) Deferred income taxes (1,226 ) (233 ) Non-cash stock compensation expense 1,358 553 Changes in operating assets and liabilities: Accounts receivable 7,721 (1,796 ) Other assets (792 ) 3,186 Accounts payable and other liabilities (3,097 ) (9,743 ) Deferred revenue (12,723 ) (12,388 ) Net cash provided by operating activities 39,132 � 56,350 � Cash flows from investing activities: Capitalized software (8,447 ) (5,719 ) Capital expenditures (2,867 ) (217 ) Cash collected from the sale and license of software - 5,000 Deferral of costs (14,129 ) (16,887 ) Payments received from investments - 783 Net cash paid in acquisitions (2,680 ) - � Net cash used by investing activities (28,123 ) (17,040 ) Cash flows from financing activities: Proceeds from debt 2,127 28,873 Payments of debt (31,283 ) (67,866 ) Sale of common stock 35,820 6,773 Acquisition of treasury stock - (11,965 ) Tax benefit of stock options exercised 5,624 � 1,079 � Net cash used by financing activities 12,288 � (43,106 ) Effect of exchange rate changes on cash 307 � 254 � � Net increase (decrease) in cash and cash equivalents 23,604 (3,542 ) Cash and cash equivalents at beginning of period 37,776 � 7,705 � Cash and cash equivalents at end of period 61,380 � 4,163 � � Supplemental cash flow information: Cash paid (received) during the period for: Interest 13,888 7,830 Income taxes 115 5,268 Payments on capital leases and installment payment arrangements 19,137 18,905 Payments on software and data license liabilities 6,493 7,847 Other debt payments, excluding line of credit 3,526 1,711 Revolving credit payments 2,127 39,403 Noncash investing and financing activities: Acquisition of property and equipment under capital lease and installment payment arrangements 7,222 19,426 Construction and other financing 5,351 5,904 Software licenses and maintenance acquired under software obligation - 15,266 ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF FREE CASH FLOW AVAILABLE TO EQUITY AND RECONCILIATION TO OPERATING CASH FLOW (Unaudited) (Dollars in thousands) � � � � � � � � � � 06/30/06 � 09/30/06 � 12/31/06 � 03/31/07 � YTD FY2007 06/30/07 � Net cash provided by operating activities 56,350 64,409 62,659 76,534 259,952 39,132 � Plus: Payments received from investments 783 1,925 - 50 2,758 - Less: Capitalized software (5,719 ) (6,926 ) (6,798 ) (8,000 ) (27,443 ) (8,447 ) Capital expenditures (217 ) (3,260 ) (2,518 ) (8,230 ) (14,225 ) (2,867 ) Deferral of costs (16,887 ) (16,559 ) (16,149 ) (17,092 ) (66,687 ) (14,129 ) Payments on capital leases and installment payment arrangements (18,905 ) (21,951 ) (16,700 ) (18,579 ) (76,135 ) (19,137 ) Payments on software and data license liabilities (7,847 ) (7,304 ) (6,000 ) (5,746 ) (26,897 ) (6,493 ) Other required debt payments (1,711 ) � (1,804 ) � (3,117 ) � (3,603 ) � (10,235 ) (3,526 ) � Subtotal 5,847 8,530 11,377 15,334 41,088 (15,467 ) � Plus: Tax benefit of stock options and warrants 1,079 � � 1,765 � � 1,237 � � 61 � � 4,142 � 5,624 � � Subtotal 6,926 10,295 12,614 15,395 45,230 (9,843 ) � Plus: Cash collected from sale of software 5,000 � � 5,000 � � - � � - � � 10,000 � - � � Total 11,926 � � 15,295 � � 12,614 � � 15,395 � � 55,230 � (9,843 ) ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) � � � � � � � � � � � Q1 FY07 to Q1 FY08 Q4 FY07 to Q1 FY08 06/30/06 � � 09/30/06 � � 12/31/06 � � 03/31/07 � � FY2007 06/30/07 � � % � � $ � % � � $ � Revenue: Services 261,892 266,099 265,798 267,314 1,061,103 264,735 1.1 % 2,843 -1.0 % (2,579 ) Data 74,813 � � 82,220 � � 87,043 � � 89,957 � � 334,033 � 73,433 � � -1.8 % � (1,380 ) -18.4 % � (16,524 ) Total revenue 336,705 348,319 352,841 357,271 1,395,136 338,168 0.4 % 1,463 -5.3 % (19,103 ) � Operating costs and expenses: Cost of revenue Services 196,073 201,384 199,704 209,830 806,991 212,086 8.2 % 16,013 1.1 % 2,256 Data 49,572 � � 51,062 � � 53,004 � � 52,991 � � 206,629 � 53,885 � � 8.7 % � 4,313 � 1.7 % � 894 � Total cost of revenue 245,645 252,446 252,708 262,821 1,013,620 265,971 8.3 % 20,326 1.2 % 3,150 � � Selling, general and administrative 54,745 54,008 49,065 56,031 213,849 52,669 -3.8 % (2,076 ) -6.0 % (3,362 ) Gains, losses and other items, net 0 � � 0 � � (225 ) � 9,122 � � 8,897 � 15,390 � � - � � 15,390 � 68.7 % � 6,268 � � Total operating costs and expenses 300,390 306,454 301,548 327,974 1,236,366 334,030 11.2 % 33,640 1.8 % 6,056 � Income from operations 36,315 41,865 51,293 29,297 158,770 4,138 -88.6 % (32,177 ) -85.9 % (25,159 ) % Margin 10.8 % 12.0 % 14.5 % 8.2 % 11.4 % 1.2 % Other income (expense) Interest expense (7,769 ) (8,950 ) (14,911 ) (15,002 ) (46,632 ) (13,575 ) 74.7 % (5,806 ) -9.5 % 1,427 Other, net 647 � � 2,685 � � 1,157 � � 1,444 � � 5,933 � 183 � � -71.7 % � (464 ) -87.3 % � (1,261 ) Total other income (expense) (7,122 ) (6,265 ) (13,754 ) (13,558 ) (40,699 ) (13,392 ) 88.0 % (6,270 ) -1.2 % 166 � Earnings (loss) before income taxes 29,193 35,600 37,539 15,739 118,071 (9,254 ) -131.7 % (38,447 ) -158.8 % (24,993 ) Income taxes 11,385 � � 13,884 � � 12,594 � � 9,468 � � 47,331 � 2,267 � � -80.1 % � (9,118 ) -76.1 % � (7,201 ) � Net earnings (loss) 17,808 � � 21,716 � � 24,945 � � 6,271 � � 70,740 � (11,521 ) � -164.7 % � (29,329 ) -283.7 % � (17,792 ) � � Diluted earnings (loss) per share 0.20 � � 0.25 � � 0.31 � � 0.08 � � 0.84 � (0.15 ) � -175.0 % � (0.35 ) -287.5 % � (0.23 ) ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - INTERNAL FORMAT (Unaudited) (Dollars in thousands, except earnings per share) � � � � � � � � � � � Q1 FY07 to Q1 FY08 Q4 FY07 to Q1 FY08 06/30/06 � 09/30/06 � 12/31/06 � 03/31/07 � FY2007 06/30/07 % � $ % � $ � Revenue 336,705 348,319 352,841 357,271 1,395,136 338,168 0.4 % 1,463 -5.3 % (19,103 ) � Operating costs and expenses: � Salaries and benefits 135,917 139,557 139,724 154,801 569,999 148,739 9.4 % 12,822 -3.9 % (6,062 ) � Computer, communications and other equipment 73,119 72,685 71,132 73,409 290,345 72,444 -0.9 % (675 ) -1.3 % (965 ) � Data costs 43,372 44,196 43,761 42,569 173,898 42,518 -2.0 % (854 ) -0.1 % (51 ) � Other operating costs and expenses 47,982 50,016 47,156 48,071 193,225 54,939 14.5 % 6,957 14.3 % 6,868 � Gains, losses and other items, net - � � - � � (225 ) � 9,122 � � 8,897 � 15,390 � - � � 15,390 � 68.7 % � 6,268 � � Total operating costs and expenses 300,390 � � 306,454 � � 301,548 � � 327,972 � � 1,236,364 � 334,030 � 11.2 % � 33,640 � 1.8 % � 6,058 � � Income from operations 36,315 � � 41,865 � � 51,293 � � 29,299 � � 158,772 � 4,138 � -88.6 % � (32,177 ) -85.9 % � (25,161 ) Operating Margin 10.8 % 12.0 % 14.5 % 8.2 % 11.4 % 1.2 % Other income (expense): Interest expense (7,769 ) (8,950 ) (14,911 ) (15,002 ) (46,632 ) (13,575 ) 74.7 % (5,806 ) -9.5 % 1,427 Other, net 647 � � 2,685 � � 1,157 � � 1,444 � � 5,933 � 183 � -71.7 % � (464 ) -87.3 % � (1,261 ) � Total other income (expense) (7,122 ) � (6,265 ) � (13,754 ) � (13,558 ) � (40,699 ) (13,392 ) 88.0 % � (6,270 ) -1.2 % � 166 � � Earnings (loss) before income taxes 29,193 � � 35,600 � � 37,539 � � 15,741 � � 118,073 � (9,254 ) -131.7 % � (38,447 ) -158.8 % � (24,995 ) � Income taxes 11,385 � � 13,884 � � 12,594 � � 9,468 � � 47,331 � 2,267 � -80.1 % � (9,118 ) -76.1 % � (7,201 ) � Net earnings (loss) 17,808 � � 21,716 � � 24,945 � � 6,273 � � 70,742 � (11,521 ) -164.7 % � (29,329 ) -283.7 % � (17,794 ) � Diluted earnings (loss) per share 0.20 � � 0.25 � � 0.31 � � 0.08 � � 0.84 � (0.15 ) -175.0 % � (0.35 ) -287.5 % � (0.23 ) ACXIOM CORPORATION AND SUBSIDIARIES MARGIN ANALYSIS (Unaudited) � � � � � � � � � � � Q1 FY07 to Q1 FY08 Q4 FY07 to Q1 FY08 06/30/06 � 09/30/06 � 12/31/06 � 03/31/07 � FY2007 06/30/07 % � $ % � $ � Gross profit 91,060 95,873 100,133 94,450 381,516 72,197 -20.7 % (18,863 ) -23.6 % (22,253 ) Gross margin 27.0 % 27.5 % 28.4 % 26.4 % 27.3 % 21.3 % � Operating margin 10.8 % 12.0 % 14.5 % 8.2 % 11.4 % 1.2 % � Services gross profit 65,819 64,715 66,094 57,484 254,112 52,649 -20.0 % (13,170 ) -8.4 % (4,835 ) Services gross margin 25.1 % 24.3 % 24.9 % 21.5 % 23.9 % 19.9 % � Data gross profit 25,241 31,158 34,039 36,966 127,404 19,548 -22.6 % (5,693 ) -47.1 % (17,418 ) Data gross margin 33.7 % 37.9 % 39.1 % 41.1 % 38.1 % 26.6 % ACXIOM CORPORATION AND SUBSIDIARIES EXPENSE TREND ANALYSIS (Unaudited) � � � � � � � � � � 06/30/06 � 09/30/06 � 12/31/06 � 03/31/07 � FY2007 06/30/07 � Salaries and benefits % of revenue 40.4% 40.1% 39.6% 43.3% 40.9% 44.0% � Computer, communications and other equipment % of revenue 21.7% 20.9% 20.2% 20.5% 20.8% 21.4% � Data costs % of revenue 12.9% 12.7% 12.4% 11.9% 12.5% 12.6% � Other operating costs and expenses % of revenue 14.3% 14.4% 13.4% 13.5% 13.8% 16.2% � Total operating costs and expenses % of revenue 89.2% 88.0% 85.5% 91.8% 88.6% 98.8% � SG&A % of revenue 16.3% 15.5% 13.9% 15.7% 15.3% 15.6%