Acxiom Profit Dips in Fiscal Third Quarter

Acxiom® Corporation 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.