Acxiom Announces Third Quarter Results

Connectivity Revenue Up 45% Year-Over-Year – Segment Margin Exceeds 10%

Repurchases 729,000 Shares in the Quarter

CONWAY, Ark--(BUSINESS WIRE)--Acxiom® (Nasdaq: ACXM), the data foundation for the world's best marketers, today announced financial results for its third quarter ended December 31, 2017.

Financial Highlights

• Revenue: Total revenue was $235 million, up 5% compared to the third quarter of last year.
• Operating Income: GAAP operating income was $11 million compared to operating income of $9 million in the prior year. Non-GAAP operating income grew 14% to approximately $38 million.
• Earnings per Share: GAAP diluted earnings per share were $0.28 compared to earnings per share of $0.01 in the prior year. Non-GAAP diluted earnings per share were $0.31 compared to $0.24 a year ago. Current period results include a $0.28 GAAP tax benefit and $0.04 non-GAAP tax benefit associated with the recent tax reform legislation.
• Operating Cash Flow: Operating cash flow was $44 million, down from $49 million in the prior year.
• Free Cash Flow to Equity: Free cash flow to equity was $27 million, roughly flat compared to the prior year. For the trailing twelve-month period, free cash flow to equity improved to $67 million, up from $53 million in the comparable period.

Segment Results

$M

Connectivity	Q318	Q317	Y/Y Δ
Revenue	$ 56	$ 39	45%
Gross Profit	$ 38	$ 23	64%
Gross Margin	68%	60%	810 bps
Segment Operating Income	$ 7	$ 2	263%
Segment Margin	12%	5%	730 bps
Audience Solutions	Q318	Q317	Y/Y Δ
Revenue	$ 84	$ 83	1%
Gross Profit	$ 53	$ 53	(1%)
Gross Margin	63%	64%	(110 bps)
Segment Operating Income	$ 33	$ 35	(4%)
Segment Margin	39%	41%	(220 bps)
Marketing Services	Q318	Q317	Y/Y Δ
Revenue	$ 94	$ 101	(7%)
Gross Profit	$ 36	$ 37	(5%)
Gross Margin	38%	37%	80 bps
Segment Operating Income	$ 22	$ 21	4%
Segment Margin	23%	21%	250 bps

A detailed discussion of our non-GAAP financial measures and a reconciliation between GAAP and non-GAAP results is provided in the schedules to this press release.

"We again delivered a solid quarter, led by the strong performance of our Connectivity division," said Acxiom CEO Scott Howe. "While revenue in Audience Solutions was softer than expected, we continue to be pleased with our ongoing ability to generate meaningful cash flows in both Marketing Services and Audience Solutions. On a trailing-twelve month basis, these businesses have generated over $200 million in segment income."

Recent Business Highlights

• LiveRamp® added over 50 new direct clients during the quarter and added several new partner integrations. Marketers can now onboard and activate their data across a growing network of more than 550 publishers and marketing technology providers.
• Audience Solutions announced the launch of a new partnership with 4INFO to deliver location-based audience segments, modeled by Acxiom. The data-as-a-service solution combines 4INFO's Predictive Visitors™ audience segments with Acxiom data to create location-informed targeting segments for digital campaigns.
• Marketing Services posted its second largest bookings quarter since the Company divisionalized, driven by several meaningful new logo and upsell wins.
• Acxiom received the 2018 Supplier of the Year award from Walmart Services in recognition of its high level of performance and service.
• Acxiom was recognized as a great workplace by the independent analysts at Great Places to Work®. For the second year in a row, Acxiom earned this credential based on positive employee feedback in areas such as culture, rewards, work-life balance, communication and leadership. In addition, Great Places to Work and FORTUNE named Acxiom one of the 2018 Best Workplaces in Technology.
• Acxiom repurchased 729,000 shares for approximately $20 million during the quarter. Since the inception of its share repurchase program in August 2011, Acxiom has repurchased 18.4 million shares for $325 million, with $75 million remaining under authorization.

Financial Outlook

Acxiom's non-GAAP guidance excludes the impact of non-cash stock compensation, purchased intangible asset amortization, restructuring charges and business separation costs.

For fiscal 2018, Acxiom now expects to report:

• Revenue of between $910 million and $915 million, an increase of approximately 6% year-over-year after adjusting for the Acxiom Impact divestiture. This is reduced from our previous guidance of between $920 million and $930 million primarily as a result of lower expected revenue from Audience Solutions.
• GAAP diluted earnings per share of between $0.19 and $0.23. Included in this guidance is an assumed tax reform benefit of approximately $0.28.
• Non-GAAP diluted earnings per share of between $0.85 and $0.89, an increase of between 20% and 25% year-over-year. Included in this guidance is an assumed tax reform benefit of between $0.04 and $0.05. This guidance is unchanged on a comparable basis.

Conference Call

Acxiom will hold a conference call at 4:00 p.m. CT today to further discuss this information. Interested parties are invited to listen to the call which will be broadcast via the Internet and can be found on our investor site. A slide presentation will be referenced during the call and can be accessed here.

About Acxiom

Acxiom provides the data foundation for the world's best marketers. We enable people-based marketing everywhere through a simple, open approach to connecting systems and data that drives seamless customer experiences and higher ROI. A leader in identity and ethical data use for more than 48 years, Acxiom helps thousands of clients and partners around the globe work together to create a world where all marketing is relevant. Acxiom is a registered trademark of Acxiom Corporation. For more information, visit Acxiom.com.

Forward-Looking Statements

This release and today's conference call contain forward-looking statements including, without limitation, statements regarding expected levels of revenue and earnings per share. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. The following are factors, among others, that could cause actual results to differ materially from these forward-looking statements: the possibility that the expected revenue from the divisions may not be realized within the expected timeframe; the possibility that the integration of acquired businesses may not be successful as planned; the possibility that certain contracts may not generate the anticipated revenue or profitability or may not be closed within the anticipated time frames; the possibility that significant customers may experience extreme, severe economic difficulty or otherwise reduce or cancel the amount of business they do 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 data purchasers will reduce their reliance on us by developing and using their own, or alternative, sources of data generally or with respect to certain data elements or categories; the possibility that data suppliers might withdraw data from us, leading to our inability to provide certain products and services to our clients; the possibility that we may not be able to attract, retain or motivate qualified technical, sales and leadership associates, or that we may lose key associates; the possibility that we may not be able to adequately adapt to rapidly changing computing environments, technologies and marketing practices; the possibility that we will not be able to continue to receive credit upon satisfactory terms and conditions; the possibility that negative changes in economic conditions in general or other conditions might lead to a reduction in demand for our 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 the historical seasonality of our business may change; the possibility that we will not be able to achieve anticipated cost reductions and avoid unanticipated costs; 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 unusual charges may be incurred; the possibility that changes in accounting pronouncements may occur and may impact these forward-looking statements; the possibility that we may encounter difficulties when entering new markets or industries; the possibility that we could experience loss of data center capacity or interruption of telecommunication links; the possibility that new laws may be enacted which limit our ability to provide services to our clients and/or which limit the use of data; and the possibility that other risks and uncertainties may emerge, including those detailed from time to time in our current and periodic reports filed with the Securities and Exchange Commission, including our current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports on Form 10-K, particularly the discussion under the caption "Item 1A. RISK FACTORS" in our Annual Report on Form 10-K for the year ended March 31, 2017, which was filed with the Securities and Exchange Commission on May 26, 2017.

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.

We undertake no obligation to update the information contained in this press release or any other forward-looking statement.

To automatically receive Acxiom Corporation financial news by email, please visit www.acxiom.com and subscribe to email alerts.

Acxiom, LiveRamp, IdentityLink, InfoBase and all other Acxiom marks contained herein are trademarks or service marks of Acxiom Corporation. All other marks are the property of their respective owners.

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
	For the Three Months Ended
	December 31,
	2017		2016		$ Variance		% Variance
Revenues	234,871		223,312		11,559		5.2	%
Cost of revenue	115,920		116,468		(548	)	(0.5	%)
Gross profit	118,951		106,844		12,107		11.3	%
% Gross margin	50.6	%	47.8	%
Operating expenses:
Research and development	23,318		20,950		2,368		11.3	%
Sales and marketing	53,730		43,048		10,682		24.8	%
General and administrative	30,886		31,620		(734	)	(2.3	%)
Gains, losses and other items, net	(41	)	2,111		(2,152	)	(101.9	%)
Total operating expenses	107,893		97,729		10,164		10.4	%
Income from operations	11,058		9,115		1,943		21.3	%
% Margin	4.7	%	4.1	%
Other income (expense):
Interest expense	(2,566	)	(1,743	)	(823	)	(47.2	%)
Other, net	419		35		384		1097.1	%
Total other expense	(2,147	)	(1,708	)	(439	)	(25.7	%)
Income before income taxes	8,911		7,407		1,504		20.3	%
Income taxes	(14,030	)	6,334		(20,364	)	(321.5	%)
Net earnings	22,941		1,073		21,868		2038.0	%
Basic earnings per share	0.29		0.01		0.28		2800.0	%
Diluted earnings per share	0.28		0.01		0.27		2700.0	%
Basic weighted average shares	79,043		77,507
Diluted weighted average shares	81,869		79,851

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
	For the Nine Months Ended December 31,
	2017		2016		$ Variance		% Variance
Revenues	672,625		655,380		17,245		2.6	%
Cost of revenue	344,952		359,392		(14,440	)	(4.0	%)
Gross profit	327,673		295,988		31,685		10.7	%
% Gross margin	48.7	%	45.2	%
Operating expenses:
Research and development	70,894		58,631		12,263		20.9	%
Sales and marketing	152,288		118,243		34,045		28.8	%
General and administrative	95,166		91,993		3,173		3.4	%
Gains, losses and other items, net	3,521		2,724		797		29.3	%
Total operating expenses	321,869		271,591		50,278		18.5	%
Income from operations	5,804		24,397		(18,593	)	(76.2	%)
% Margin	0.9	%	3.7	%
Other income (expense):
Interest expense	(7,432	)	(5,244	)	(2,188	)	(41.7	%)
Other, net	(61	)	135		(196	)	(145.5	%)
Total other expense	(7,493	)	(5,109	)	(2,384	)	(46.7	%)
Income (loss) before income taxes	(1,689	)	19,288		(20,977	)	(108.8	%)
Income taxes	(19,994	)	7,099		(27,093	)	(381.6	%)
Net earnings	18,305		12,189		6,116		50.2	%
Basic earnings per share	0.23		0.16		0.07		43.8	%
Diluted earnings per share	0.22		0.15		0.07		46.7	%
Basic weighted average shares	78,983		77,475
Diluted weighted average shares	81,594		79,494

ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP EPS (1)
(Unaudited)
(Dollars in thousands, except per share amounts)
	For the Three Months Ended December 31,			For the Nine Months Ended December 31,
	2017		2016	2017		2016
Earnings (loss) before income taxes	8,911		7,407	(1,689	)	19,288
Income taxes	(14,030	)	6,334	(19,994	)	7,099
Net earnings	22,941		1,073	18,305		12,189
Earnings per share:
Basic	0.29		0.01	0.23		0.16
Diluted	0.28		0.01	0.22		0.15
Excluded items:
Purchased intangible asset amortization (cost of revenue)	5,971		4,621	17,958		12,588
Non-cash stock compensation (cost of revenue and operating expenses)	15,919		13,427	46,707		33,955
Restructuring and merger charges (gains, losses, and other)	(41	)	2,111	3,521		2,725
Separation and transformation costs (general and administrative)	5,214		4,118	17,775		5,573
Total excluded items	27,063		24,277	85,961		54,841
Income before income taxes and excluding items	35,974		31,684	84,272		74,129
Income taxes (2)	10,704		12,751	29,713		29,513
Non-GAAP net earnings	25,270		18,933	54,559		44,616
Non-GAAP earnings per share:
Basic	0.32		0.24	0.69		0.58
Diluted	0.31		0.24	0.67		0.56
Basic weighted average shares	79,043		77,507	78,983		77,475
Diluted weighted average shares	81,869		79,851	81,594		79,494

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures and the material limitations on the usefulness of these measures, please see Appendix A.

(2) Income taxes were calculated using an effective non-GAAP tax rate of 29.8% and 40.2% in the third quarter of fiscal 2018 and 2017, respectively, and 35.3% and 39.8% for the nine months ended December 31, 2017 and 2016, respectively. The difference between our GAAP and non-GAAP tax rates were primarily due to the Tax Cuts and Jobs Act and net tax effects of the excluded items.

ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP INCOME FROM OPERATIONS (1)
(Unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31,			For the Nine Months Ended December 31,
	2017		2016	2017	2016
Income from operations	11,058		9,115	5,804	24,397
Excluded items:
Purchased intangible asset amortization (cost of revenue)	5,971		4,621	17,958	12,588
Non-cash stock compensation (cost of revenue and operating expenses)	15,919		13,427	46,707	33,955
Restructuring and merger charges (gains, losses, and other)	(41	)	2,111	3,521	2,725
Separation and transformation costs (general and administrative)	5,214		4,118	17,775	5,573
Total excluded items	27,063		24,277	85,961	54,841
Income from operations before excluded items	38,121		33,392	91,765	79,238

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures and the material limitations on the usefulness of these measures, please see Appendix A.

ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31,
	2017		2016		$ Variance		% Variance
Revenues
Marketing Services	94,457		101,177		(6,720	)	(6.6	%)
Audience Solutions	84,436		83,399		1,037		1.2	%
Connectivity	55,978		38,736		17,242		44.5	%
Total operating segment revenues	234,871		223,312		11,559		5.2	%
Gross profit
Marketing Services	35,798		37,494		(1,696	)	(4.5	%)
Audience Solutions	52,821		53,120		(299	)	(0.6	%)
Connectivity	37,914		23,091		14,823		64.2	%
Total operating segment gross profit	126,533		113,705		12,828		11.3	%
Gross margin %
Marketing Services	37.9	%	37.1	%
Audience Solutions	62.6	%	63.7	%
Connectivity	67.7	%	59.6	%
Total operating segment gross margin	53.9	%	50.9	%
Income from operations
Marketing Services	22,063		21,127		936		4.4	%
Audience Solutions	33,112		34,572		(1,460	)	(4.2	%)
Connectivity	6,808		1,877		4,931		262.7	%
Total operating segment income from operations	61,983		57,576		4,407		7.7	%
Operating income margin %
Marketing Services	23.4	%	20.9	%
Audience Solutions	39.2	%	41.5	%
Connectivity	12.2	%	4.8	%
Total operating segment operating margin	26.4	%	25.8	%
Some totals may not add due to rounding.

ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
	For the Nine Months Ended December 31,
	2017		2016		$ Variance		% Variance
Revenues
Marketing Services	280,093		316,571		(36,478	)	(11.5	%)
Audience Solutions	238,984		235,669		3,315		1.4	%
Connectivity	153,548		103,140		50,408		48.9	%
Total operating segment revenues	672,625		655,380		17,245		2.6	%
Gross profit
Marketing Services	101,476		109,440		(7,964	)	(7.3	%)
Audience Solutions	148,352		143,030		5,322		3.7	%
Connectivity	100,730		60,509		40,221		66.5	%
Total operating segment gross profit	350,558		312,979		37,579		12.0	%
Gross margin %
Marketing Services	36.2	%	34.6	%
Audience Solutions	62.1	%	60.7	%
Connectivity	65.6	%	58.7	%
Total operating segment gross margin	52.1	%	47.8	%
Income from operations
Marketing Services	63,721		61,109		2,612		4.3	%
Audience Solutions	91,151		89,640		1,511		1.7	%
Connectivity	12,475		3,831		8,644		225.6	%
Total operating segment income from operations	167,347		154,580		12,767		8.3	%
Operating income margin %
Marketing Services	22.7	%	19.3	%
Audience Solutions	38.1	%	38.0	%
Connectivity	8.1	%	3.7	%
Total operating segment operating margin	24.9	%	23.6	%
Some totals may not add due to rounding.

ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF SEGMENT RESULTS
(Unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31,			For the Nine Months Ended December 31,
	2017		2016	2017	2016
Total operating segment gross profit	126,533		113,705	350,558	312,979
Less:
Purchased intangible asset amortization	5,971		4,621	17,958	12,588
Non-cash stock compensation	1,612		2,240	4,927	4,404
Gross profit	118,951		106,844	327,673	295,988
Total operating segment income from operations	61,983		57,576	167,347	154,580
Less:
Corporate expenses	23,862		24,184	75,582	75,342
Purchased intangible asset amortization	5,971		4,621	17,958	12,588
Non-cash stock compensation	15,919		13,427	46,707	33,955
Restructuring charges	(41	)	2,111	3,521	2,725
Separation and transformation costs	5,214		4,118	17,775	5,573
Income from operations	11,058		9,115	5,804	24,397
Some totals may not add due to rounding.

ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA (1)
(Unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31,				For the Nine Months Ended December 31,
	2017		2016		2017		2016
Net earnings	22,941		1,073		18,305		12,189
Income taxes	(14,030	)	6,334		(19,994	)	7,099
Other expense	(2,147	)	(1,708	)	(7,493	)	(5,109	)
Income from operations	11,058		9,115		5,804		24,397
Depreciation and amortization	21,200		19,947		63,719		61,097
EBITDA	32,258		29,062		69,523		85,494
Other adjustments:
Non-cash stock compensation (cost of revenue and operating expenses)	15,919		13,427		46,707		33,955
Gains, losses, and other items, net	(41	)	2,111		3,521		2,725
Separation and transformation costs (general and administrative)	5,214		4,118		17,775		5,573
Other adjustments	21,092		19,656		68,003		42,253
Adjusted EBITDA	53,350		48,718		137,526		127,747

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
	December 31, 2017		March 31, 2017		$ Variance		% Variance
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	177,807		170,343		7,464		4.4	%
Trade accounts receivable, net	155,634		142,768		12,866		9.0	%
Refundable income taxes	6,365		7,098		(733	)	(10.3	%)
Other current assets	42,357		48,310		(5,953	)	(12.3	%)
Total current assets	382,163		368,519		13,644		3.7	%
Property and equipment	483,355		476,281		7,074		1.5	%
Less - accumulated depreciation and amortization	330,316		320,307		10,009		3.1	%
Property and equipment, net	153,039		155,974		(2,935	)	(1.9	%)
Software, net of accumulated amortization	37,489		47,638		(10,149	)	(21.3	%)
Goodwill	592,827		592,731		96		0.0	%
Purchased software licenses, net of accumulated amortization	7,775		7,972		(197	)	(2.5	%)
Deferred income taxes	9,621		10,261		(640	)	(6.2	%)
Other assets, net	43,576		51,443		(7,867	)	(15.3	%)
	1,226,490		1,234,538		(8,048	)	(0.7	%)
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt	1,837		39,819		(37,982	)	(95.4	%)
Trade accounts payable	46,211		40,208		6,003		14.9	%
Accrued payroll and related expenses	36,592		53,238		(16,646	)	(31.3	%)
Other accrued expenses	53,999		59,861		(5,862	)	(9.8	%)
Deferred revenue	34,169		37,087		(2,918	)	(7.9	%)
Total current liabilities	172,808		230,213		(57,405	)	(24.9	%)
Long-term debt	227,943		189,241		38,702		20.5	%
Deferred income taxes	34,300		58,374		(24,074	)	(41.2	%)
Other liabilities	17,328		17,730		(402	)	(2.3	%)
Stockholders' equity:
Common stock	13,552		13,288		264		2.0	%
Additional paid-in capital	1,216,565		1,154,429		62,136		5.4	%
Retained earnings	623,156		602,609		20,547		3.4	%
Accumulated other comprehensive income	9,826		7,999		1,827		22.8	%
Treasury stock, at cost	(1,088,988	)	(1,039,345	)	(49,643	)	(4.8	%)
Total stockholders' equity	774,111		738,980		35,131		4.8	%
	1,226,490		1,234,538		(8,048	)	(0.7	%)

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31,
	2017		2016
Cash flows from operating activities:
Net earnings	22,941		1,073
Non-cash operating activities:
Depreciation and amortization	21,200		19,947
Loss (gain) on disposal or impairment of assets	235		(78	)
Deferred income taxes	(17,213	)	4,557
Non-cash stock compensation expense	15,911		13,427
Changes in operating assets and liabilities:
Accounts receivable	(14,048	)	(4,597	)
Other assets	2,271		4,974
Accounts payable and other liabilities	8,610		10,172
Deferred revenue	3,723		(542	)
Net cash provided by operating activities	43,630		48,933
Cash flows from investing activities:
Capitalized software	(3,188	)	(3,296	)
Capital expenditures	(12,432	)	(9,557	)
Data acquisition costs	(198	)	(196	)
Equity investments	(1,000	)	-
Net cash paid in acquisition	-		(137,383	)
Net cash used in investing activities	(16,818	)	(150,432	)
Cash flows from financing activities:
Proceeds from debt	-		70,000
Payments of debt	(582	)	(8,062	)
Sale of common stock, net of stock acquired for withholding taxes	1,412		2,370
Excess tax benefits from share-based compensation	-		370
Acquisition of treasury stock	(19,665	)	-
Net cash provided by (used in) financing activities	(18,835	)	64,678
Effect of exchange rate changes on cash	323		(738	)
Net change in cash and cash equivalents	8,300		(37,559	)
Cash and cash equivalents at beginning of period	169,507		175,409
Cash and cash equivalents at end of period	177,807		137,850
Supplemental cash flow information:
Cash paid during the period for:
Interest	1,950		1,339
Income taxes	328		4,599
Noncash investing and financing activities:
Leasehold improvements paid directly by lessor	978		-

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
	For the Nine Months Ended December 31,
	2017	2016
Cash flows from operating activities:
Net earnings	18,305	12,189
Non-cash operating activities:
Depreciation and amortization	63,719	61,097
Loss (gain) on disposal or impairment of assets	2,646	(520)
Accelerated deferred debt costs	720	-
Deferred income taxes	(20,451)	(1,982)
Non-cash stock compensation expense	46,707	33,955
Changes in operating assets and liabilities:
Accounts receivable	(11,432)	(6,161)
Other assets	(1,277)	8,653
Accounts payable and other liabilities	(18,232)	(11,819)
Deferred revenue	(4,314)	(10,247)
Net cash provided by operating activities	76,391	85,165
Cash flows from investing activities:
Capitalized software	(10,332)	(11,171)
Capital expenditures	(26,950)	(30,096)
Data acquisition costs	(621)	(463)
Equity investments	(1,000)	-
Net cash received in disposition	4,000	16,988
Net cash paid in acquisitions	-	(137,383)
Net cash used in investing activities	(34,903)	(162,125)
Cash flows from financing activities:
Proceeds from debt	230,000	70,000
Payments of debt	(226,732)	(24,173)
Fees for debt refinancing	(4,001)	-
Sale of common stock, net of stock acquired for withholding taxes	5,107	9,670
Excess tax benefits from share-based compensation	-	1,785
Acquisition of treasury stock	(39,441)	(30,542)
Net cash provided by (used in) financing activities	(35,067)	26,740
Effect of exchange rate changes on cash	1,043	(1,559)
Net change in cash and cash equivalents	7,464	(51,779)
Cash and cash equivalents at beginning of period	170,343	189,629
Cash and cash equivalents at end of period	177,807	137,850
Supplemental cash flow information:
Cash paid during the period for:
Interest	6,712	5,301
Income taxes	1,152	4,796
Noncash investing and financing activities:
Leasehold improvements paid directly by lessor	978	-

ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF FREE CASH FLOW TO EQUITY (1)
(Unaudited)
(Dollars in thousands)
	06/30/16		09/30/16		12/31/16		03/31/17		FY2017		06/30/17		09/30/17		12/31/17		YTD FY2018
Net Cash Provided by Operating Activities	750		35,482		48,933		30,665		115,830		4,951		27,810		43,630		76,391
Less (plus):
Capitalized software	(3,982	)	(3,893	)	(3,296	)	(3,306	)	(14,477	)	(3,388	)	(3,756	)	(3,188	)	(10,332	)
Capital expenditures	(10,694	)	(9,845	)	(9,557	)	(17,897	)	(47,993	)	(6,888	)	(7,630	)	(12,432	)	(26,950	)
Data acquisition costs	(20	)	(247	)	(196	)	(418	)	(881	)	(190	)	(233	)	(198	)	(621	)
Required debt payments	(8,053	)	(8,058	)	(8,062	)	(8,070	)	(32,243	)	(572	)	(578	)	(582	)	(1,732	)
Net cash received in disposition	-		16,988		-		-		16,988		-		4,000		-		4,000
Proceeds from sales of assets	-		-		-		25,494		25,494		-		-		-		-
Free Cash Flow to Equity	(21,999	)	30,427		27,822		26,468		62,718		(6,087	)	19,613		27,230		40,756

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
																			Q3 FY18 to Q3 FY17
	06/30/16		09/30/16		12/31/16		03/31/17		FY2017		06/30/17		09/30/17		12/31/17		YTD FY2018		%		$
Revenues	214,801		217,267		223,312		224,867		880,247		212,514		225,240		234,871		672,625		5.2	%	11,559
Cost of revenue	122,819		120,105		116,468		118,294		477,686		113,960		115,072		115,920		344,952		-0.5	%	(548	)
Gross profit	91,982		97,162		106,844		106,573		402,561		98,554		110,168		118,951		327,673		11.3	%	12,107
% Gross margin	42.8	%	44.7	%	47.8	%	47.4	%	45.7	%	46.4	%	48.9	%	50.6	%	48.7	%
Operating expenses
Research and development	18,652		19,029		20,950		23,478		82,109		23,563		24,013		23,318		70,894		11.3	%	2,368
Sales and marketing	37,348		37,847		43,048		48,433		166,676		48,440		50,118		53,730		152,288		24.8	%	10,682
General and administrative	27,506		32,866		31,620		37,721		129,714		32,356		31,924		30,886		95,166		-2.3	%	(734	)
Gains, losses and other items, net	314		300		2,111		5,650		8,373		(98	)	3,660		(41	)	3,521		-101.9	%	(2,152	)
Total operating expenses	83,820		90,042		97,729		115,282		386,872		104,261		109,715		107,893		321,869		10.4	%	10,164
Income (loss) from operations	8,162		7,120		9,115		(8,709	)	15,689		(5,707	)	453		11,058		5,804		21.3	%	1,943
% Margin	3.8	%	3.3	%	4.1	%	-3.9	%	1.8	%	-2.7	%	0.2	%	4.7	%	0.9	%
Other income (expense)
Interest expense	(1,812	)	(1,689	)	(1,743	)	(2,137	)	(7,381	)	(2,342	)	(2,524	)	(2,566	)	(7,432	)	-47.2	%	(823	)
Other, net	307		(207	)	35		199		334		(672	)	192		419		(61	)	1096.6	%	384
Total other expense	(1,505	)	(1,896	)	(1,708	)	(1,937	)	(7,047	)	(3,014	)	(2,332	)	(2,147	)	(7,493	)	-25.7	%	(439	)
Income (loss) before income taxes	6,657		5,224		7,407		(10,646	)	8,642		(8,721	)	(1,879	)	8,911		(1,689	)	20.3	%	1,504
Income taxes	2,681		(1,916	)	6,334		(2,565	)	4,534		(7,421	)	1,457		(14,030	)	(19,994	)	-321.5	%	(20,364	)
Net earnings (loss)	3,976		7,140		1,073		(8,081	)	4,108		(1,300	)	(3,336	)	22,941		18,305		2038.2	%	21,868
Diluted earnings (loss) per share	0.05		0.09		0.01		(0.10	)	0.05		(0.02	)	(0.04	)	0.28		0.22		1985.5	%	0.27
Some earnings (loss) per share amounts may not add due to rounding.

ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP EPS (1)
(Unaudited)
(Dollars in thousands, except per share amounts)
	06/30/16	09/30/16		12/31/16	03/31/17		FY2017		06/30/17		09/30/17		12/31/17		YTD FY2018
Earnings (loss) before income taxes	6,657	5,224		7,407	(10,646	)	8,642		(8,721	)	(1,879	)	8,911		(1,689	)
Income taxes	2,681	(1,916	)	6,334	(2,565	)	4,534		(7,421	)	1,457		(14,030	)	(19,994	)
Net earnings (loss)	3,976	7,140		1,073	(8,081	)	4,108		(1,300	)	(3,336	)	22,941		18,305
Earnings (loss) per share:
Basic	0.05	0.09		0.01	(0.10	)	0.05		(0.02	)	(0.04	)	0.29		0.23
Diluted	0.05	0.09		0.01	(0.10	)	0.05		(0.02	)	(0.04	)	0.28		0.22
Excluded items:
Purchased intangible asset amortization (cost of revenue)	4,077	3,890		4,621	6,056		18,644		5,966		6,021		5,971		17,958
Non-cash stock compensation (cost of revenue and operating expenses)	8,590	11,938		13,427	15,190		49,145		15,031		15,757		15,919		46,707
Restructuring and merger charges (gains, losses, and other)	314	300		2,111	7,321		10,045		(98	)	3,660		(41	)	3,521
Gain on sales of assets (gains, losses and other)	-	-		-	(1,671	)	(1,671	)	-		-		-		-
Separation and transformation costs (general and administrative)	-	1,455		4,118	3,066		8,639		7,119		5,442		5,214		17,775
Total excluded items	12,981	17,583		24,277	29,962		84,803		28,018		30,880		27,063		85,961
Income before income taxes and excluding items	19,638	22,807		31,684	19,315		93,444		19,297		29,001		35,974		84,272
Income taxes	7,852	8,910		12,751	7,139		36,652		7,720		11,289		10,704		29,713
Non-GAAP net earnings	11,786	13,897		18,933	12,177		56,792		11,577		17,712		25,270		54,559
Non-GAAP earnings per share:
Basic	0.15	0.18		0.24	0.16		0.73		0.15		0.22		0.32		0.69
Diluted	0.15	0.18		0.24	0.15		0.71		0.14		0.22		0.31		0.67
Basic weighted average shares	77,471	77,446		77,507	78,012		77,609		78,672		79,235		79,043		78,983
Diluted weighted average shares	79,353	79,277		79,851	80,912		79,848		81,440		81,472		81,869		81,594
Some totals may not add due to rounding

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures and the material limitations on the usefulness of these measures, please see Appendix A.

ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
																			Q3 FY18 to Q3 FY17
	06/30/16		09/30/16		12/31/16		03/31/17		FY2017		06/30/17		09/30/17		12/31/17		YTD FY2018		%		$
Revenues:
Marketing Services	109,715		105,679		101,177		94,269		410,840		91,594		94,042		94,457		280,093		(6.6	%)	(6,720	)
Audience Solutions	73,744		78,526		83,399		86,396		322,065		75,734		78,814		84,436		238,984		1.2	%	1,037
Connectivity	31,342		33,062		38,736		44,203		147,342		45,186		52,384		55,978		153,548		44.5	%	17,242
Total operating segment revenues	214,801		217,267		223,312		224,867		880,247		212,514		225,240		234,871		672,625		5.2	%	11,559
Gross profit:
Marketing Services	37,466		34,480		37,494		31,207		140,647		31,358		34,320		35,798		101,476		(4.5	%)	(1,696	)
Audience Solutions	41,912		47,998		53,120		55,154		198,185		47,210		48,321		52,821		148,352		(0.6	%)	(299	)
Connectivity	17,575		19,843		23,091		27,742		88,251		27,525		35,291		37,914		100,730		64.2	%	14,823
Total operating segment gross profit	96,953		102,321		113,705		114,104		427,084		106,093		117,932		126,533		350,558		11.3	%	12,828
Gross margin %:
Marketing Services	34.1	%	32.6	%	37.1	%	33.1	%	34.2	%	34.2	%	36.5	%	37.9	%	36.2	%
Audience Solutions	56.8	%	61.1	%	63.7	%	63.8	%	61.5	%	62.3	%	61.3	%	62.6	%	62.1	%
Connectivity	56.1	%	60.0	%	59.6	%	62.8	%	59.9	%	60.9	%	67.4	%	67.7	%	65.6	%
Total operating segment gross margin	45.1	%	47.1	%	50.9	%	50.7	%	48.5	%	49.9	%	52.4	%	53.9	%	52.1	%
Income (loss) from operations:
Marketing Services	20,145		19,837		21,127		19,513		80,622		19,784		21,874		22,063		63,721		4.4	%	936
Audience Solutions	25,096		29,972		34,572		33,598		123,238		28,542		29,497		33,112		91,151		(4.2	%)	(1,460	)
Connectivity	291		1,663		1,877		1,502		5,333		(48	)	5,715		6,808		12,475		262.8	%	4,932
Total operating segment income from operations	45,532		51,472		57,576		54,613		209,193		48,277		57,086		61,983		167,347		7.7	%	4,407
Operating income (loss) margin %:
Marketing Services	18.4	%	18.8	%	20.9	%	20.7	%	19.6	%	21.6	%	23.3	%	23.4	%	22.7	%
Audience Solutions	34.0	%	38.2	%	41.5	%	38.9	%	38.3	%	37.7	%	37.4	%	39.2	%	38.1	%
Connectivity	0.9	%	5.0	%	4.8	%	3.4	%	3.6	%	-0.1	%	10.9	%	12.2	%	8.1	%
Total operating segment operating margin	21.2	%	23.7	%	25.8	%	24.3	%	23.8	%	22.7	%	25.3	%	26.4	%	24.9	%
Some totals may not add due to rounding.

ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP EPS GUIDANCE (1)
(Unaudited)
(Dollars in thousands, except per share amounts)
	For the year ending March 31, 2018
	Low Range			High Range
Income (loss) before income taxes		(3,000	)		2,500
Income taxes (benefit)		(18,500	)		(16,500	)
Net earnings		15,500			19,000
Diluted earnings per share	$	0.19		$	0.23
Excluded items:
Purchased intangible asset amortization		24,000			24,000
Non-cash stock compensation		65,000			65,000
Gains, losses and other items, net		4,000			4,000
Separation and related costs		20,000			20,000
Total excluded items		113,000			113,000
Income before income taxes and excluding items		110,000			115,500
Income taxes (2)		40,000			42,000
Non-GAAP net earnings		70,000			73,500
Non-GAAP diluted earnings per share	$	0.85		$	0.89
Diluted weighted average shares		82,500			82,500

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.

(2) Income taxes were calculated using an effective non-GAAP tax rate of approximately 36.5%. The difference between our GAAP and Non-GAAP tax rates was due to the effect of excluded items and the benefit of remeasuring net deferred tax liabilites due to enactment of new legislation.

APPENDIX A

ACXIOM CORPORATION

Q3 FISCAL 2018 FINANCIAL RESULTS

EXPLANATION OF NON-GAAP MEASURES

To supplement our financial results, we use non-GAAP measures which exclude certain acquisition related expenses, non-cash stock compensation and restructuring charges. We believe these measures are helpful in understanding our past performance and our future results. Our non-GAAP financial measures and schedules are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated GAAP financial statements. Our management regularly uses these non-GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions.  These measures are among the primary factors management uses in planning for and forecasting future periods.  Compensation of our executives is also based in part on the performance of our business based on these non-GAAP measures. Our non-GAAP financial measures, including non-GAAP earnings per share, income from operations and adjusted EBITDA reflect adjustments based on the following items, as well as the related income tax effects when applicable: Purchased intangible asset amortization: We incur amortization of purchased intangibles in connection with our acquisitions. Purchased intangibles include (i) developed technology, (ii) customer and publisher relationships, and (iii) trade names. We expect to amortize for accounting purposes the fair value of the purchased intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated.  Although the intangible assets generate revenue for us, we exclude this item because this expense is non-cash in nature and because we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our operational performance. Non-cash stock compensation: Non-cash stock compensation consists of charges for associate restricted stock units, performance shares and stock options in accordance with current GAAP related to stock-based compensation including expense associated with stock-based compensation related to unvested options assumed in connection with our acquisitions. As we apply stock-based compensation standards, we believe that it is useful to investors to understand the impact of the application of these standards to our operational performance. Although stock-based compensation expense is calculated in accordance with current GAAP and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by us and because such expense is not used by us to assess the core profitability of our business operations. Restructuring charges: During the past several years, we have initiated certain restructuring activities in order to align our costs in connection with both our operating plans and our business strategies based on then-current economic conditions. As a result, we recognized costs related to termination benefits for associates whose positions were eliminated, lease termination charges, and leasehold improvement write offs.  These items, reported as gains, losses, and other items, net, are excluded from non-GAAP results because such amounts are not used by us to assess the core profitability of our business operations. Separation and transformation costs:  In previous years, we incurred significant expenses in connection with the separation of our IT Infrastructure Management ("ITO") and the subsequent transformation of our remaining operating segments. This work enabled us to transform our external reporting and provide investors with enhanced transparency and more granular segment-level disclosures in addition to facilitating the ITO disposition. In the prior and current year, we are incurring expenses to further separate the financial statements of our three operating segments, with particular focus on segment-level balance sheets, and to evaluate portfolio priorities. Our criteria for excluding separation and transformation expenses from our non-GAAP measures is as follows: 1) projects are discrete in nature; 2) excluded expenses consist only of third-party consulting fees that we would not incur otherwise; and 3) we do not exclude employee related expenses or other costs associated with the ongoing operations of our business. We substantially completed these projects during the third quarter of fiscal year 2018. Beginning in the fourth quarter of fiscal 2018, we will likely incur transaction analysis and support expenses related to the Company's announced evaluation of strategic options for its Marketing Solutions business. Our criteria for excluding these transaction related costs are the same. We believe excluding these items from our non-GAAP financial measures is useful for investors and provides meaningful supplemental information. Our non-GAAP financial schedules are: Non-GAAP EPS and Non-GAAP Income from Operations: Our non-GAAP earnings per share and Non-GAAP income from operations reflect adjustments as described above, as well as the related tax effects where applicable. Adjusted EBITDA: Adjusted EBITDA is defined as net income from continuing operations before income taxes, other expenses, depreciation and amortization, and including adjustments as described above.  We use Adjusted EBITDA to measure our performance from period to period both at the consolidated level as well as within our operating segments and to compare our results to those of our competitors. We believe that the inclusion of Adjusted EBITDA provides useful supplementary information to and facilitates analysis by investors in evaluating the Company's performance and trends. The presentation of Adjusted EBITDA is not meant to be considered in isolation or as an alternative to net earnings as an indicator of our performance. Free Cash Flow to Equity: To supplement our statement of cash flows, we use a non-GAAP measure of cash flow to analyze cash flows generated from operations. Free cash flow to equity is defined as operating cash flow less cash used by investing activities (excluding the impact of cash paid in acquisitions), less required payments of debt, and excluding the impact of discontinued operations. Management believes that this measure of cash flow is meaningful since it represents the amount of money available from continuing operations for the Company's discretionary spending after funding all required obligations including scheduled debt payments.  The presentation of non-GAAP free cash flow to equity is not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.