Introduction and Overview

At Acxiom ("Acxiom" or "the Company") (Nasdaq: ACXM), we provide global interactive marketing services for many of the world's leading companies to help them solve some of their most complex marketing problems. Our products, services and thought leadership enable them to acquire new customers, retain their most valuable customers, communicate with customers in the methods and times they prefer, and make profitable marketing and business decisions. Acxiom's unmatched customer insight is achieved by blending the world's largest repository of consumer data, award-winning technology and analytics, multi-channel expertise, privacy leadership, and superior knowledge of a wide spectrum of industries. Founded in 1969, Acxiom is headquartered in Little Rock, Arkansas, with locations throughout the United States ("US") and Europe, and in Australia and China.

Highlights of the quarter ended June 30, 2008 are identified below.

• Revenue of $331.1 million, down 1.1 percent from $334.7 million in the first fiscal quarter a year ago.

• Income from operations of $25.6 million, a $24.9 million increase compared to $0.6 million in the first fiscal quarter last year.

• Pre-tax earnings of $17.5 million, compared to pretax loss of $12.8 million in the first quarter of fiscal 2008.

• Diluted earnings per share of $0.14, compared to diluted loss per share of $0.17 in the first fiscal quarter last year.

• Operating cash flow of $28.5 million.

These highlights are not intended to be a full discussion of the Company's results for the quarter. These highlights should be read in conjunction with the following discussion of Results of Operations and Capital Resources and Liquidity and with the Company's condensed consolidated financial statements and footnotes accompanying this report.

Restatement of Financial Statements

On May 14, 2008 the Company announced that it would restate its financial statements for the years ended March 31, 2007 and 2006 to correct an error in the Company's accounting for accrued revenue. Historically, and for all restated periods, the Company recorded accrued revenue for certain information services contracts based on a calculated estimate of relative value of performance that had occurred but had not yet been recognized as revenue. The Company determined that the calculation that had been used for several years did not adequately support the accrual of revenue in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 104 ("SAB 104"). The Company has concluded that the calculated estimates for the restatement periods cannot be relied upon, and the Company is unable to objectively support recording accrued revenue for these services transactions. Accordingly, the Company has restated its consolidated financial statements for the restatement periods to remove the recorded amounts of this accrued revenue and record the related income tax effect. Additionally, the Company has reclassified additions to deferred costs as an operating cash flow activity. Previously, additions to deferred costs were presented as an investing cash flow activity.

All amounts referenced in this Management's Discussion and Analysis of Financial Condition and Results of Operations for the three months ended June 30, 2007 reflect the balances and amounts on a restated basis as described above.

Results of Operations



A summary of selected financial information for each of the periods reported is
presented below (dollars in millions, except per share amounts):

                             For the quarter ended

                                    June 30

                                                       2007
                                        2008        (Restated)    % Change
Revenue
Services                             $     235.8   $     241.3    (2)%
Products                             95.3          93.3           2
                                     $     331.1   $     334.6    (1)%
Total operating costs and expenses   305.5         334.0          (9)
Income from operations               $      25.6   $       0.6    4,167%
Diluted earnings per share           $      0.14   $     (0.17)   182%

Revenues

Services revenue for the quarter ended June 30, 2008 was $235.8 million. This represents a $5.5 million decrease or 2.3% when compared to the same period in the prior year. On a geographic basis, International services increased approximately $3.3 million while US services decreased approximately $8.9 million. Approximately $1.0 million of the International services increase was due to favorable exchange rate movement. By line of business, revenue growth in CDI and Marketing Services of $5.6 million and Digital of $1.0 million was offset by declines in IT Services of $11.7 million. Most of the CDI and Marketing Services growth was related to International operations. In the US, declines in Financial Services, which was primarily due to one lost contract, offset CDI and Marketing Services increases in other industry verticals. The decline in IT Services is driven by contract reductions over the last 12 months with a few very large IT clients.

Products revenue for the quarter ended June 30, 2008 was $95.3 million. This represents a $2.0 million increase or 2.1%. The increase is primarily attributable to a $2.6 million increase in pass-through data revenue. The International operations were relatively flat. The prior year International revenue included approximately $2.5 million from the divested French GIS business. This decrease in revenue was offset by positive exchange rate movements. Otherwise, both the US Information Products and Background Screening lines of business were relatively flat quarter over quarter.

Operating Costs and Expenses

The following table presents the Company's operating costs and expenses for each
of the periods presented (dollars in millions):

                             For the quarter ended

                                    June 30

                                         2008          2007       % Change
Cost of revenue
Services                              $     177.3   $     196.6   (10)%
Products                              76.7          76.3          1
Total cost of revenue                 $     254.0   $     272.9   (7)%
Selling, general and administrative   52.0          45.7          14
Gains, losses and other items, net    (0.5)         15.4          (103)
Total operating costs and expenses    $     305.5   $     334.0   (9)%

--------------------------------------------------------------------------------
                             For the quarter ended

                                    June 30

                                       2007
                            2008    (Restated)
Gross profit margin
Services                    24.8%   18.5%
Products                    19.5    18.2
Total gross profit margin   23.3%   18.5%
Operating profit margin     7.7%    0.2%

Cost of services revenue of $177.3 million represents a decrease of $19.3 million compared to the same quarter a year ago. Gross margin for services revenue increased from 18.5% to 24.8%. Included in the prior year cost of services is $5.2 million related to an IT contract restructuring (see note 10). Margin improvement is due to significant cost reduction activities during the last fiscal year. The Company implemented cost reduction programs in both the September 30, 2007 and March 31, 2008 quarters. These cost reductions are most prominent in the delivery and development functions.

Cost of products revenue of $76.7 million represents an increase of $0.4 million compared to the same quarter a year ago. Products revenue gross margins increased from 18.2% a year ago to 19.5% in this quarter. Excluding pass-through data and related costs, product costs actually decreased approximately 3.9% and margins on non-pass through products increased to 25.4% from 23.1% a year ago. This improvement is due to cost reduction initiatives implemented during the last fiscal year related to both personnel and data content costs.

Selling, general, and administrative ("SG&A") expenses were $52.0 million for the quarter ended June 30, 2008. This represents a $6.3 million increase over the prior-year same quarter. As a percent of total revenue, these expenses are 15.7% compared to 13.7% a year ago. This increase is driven by a $2.1 million increase in sales and marketing expenses, along with increases in incentive compensation.

Gains, losses and other items were a $0.5 million gain during the quarter ended June 30, 2008, which is primarily made up of $1.0 million collection of a previously unrecognized aircraft hangar note and $0.5 million of current period adjustments of prior year restructuring reserves (see note 10), offset by an increase in a legal contingency accrual of $1.0 million.

Gains, losses and other items were $15.4 million during the quarter ended June 30, 2007, which is primarily made up of $15.1 million in banking and legal services fees related to the terminated acquisition by Silver Lake and ValueAct Capital (see note 10).

Other Income (Expense)

Interest expense for the quarter ended June 30, 2008 is $9.5 million compared to $13.6 million a year ago due primarily to a $116.5 million reduction in debt and a reduction in interest rates.

Other income increased to $1.4 million in the current quarter, which is driven primarily by a $1.1 million gain from a real estate joint venture. Both in the current and prior year quarter, remaining other income is composed primarily of interest income on notes receivable and investment income.

Income taxes

The anticipated effective tax rate for fiscal 2009 is 39%. The prior-year first quarter rate was 38% before the consideration of non-deductible merger costs, which impacted tax expense by approximately $5.8 million.

Capital Resources and Liquidity

Working Capital and Cash Flow

Working capital at June 30, 2008 totaled $87.4 million compared to $45.4 million at March 31, 2008. Total current assets were about flat due to decreases in cash of $10.9 million and refundable income tax of $4.0 million, offset by increases in trade accounts receivable of $15.2 million. Current liabilities decreased $41.9 million due to decreases in current installments of long-term debt of $10.5 million, trade accounts payable of $12.8 million, payroll accruals of $5.5 million and other accruals of $13.1 million.

                                               June 30,        March 31,
                                                 2008            2008
Numerator - trade accounts receivable, net   $     231,688   $     216,462
Denominator:
Quarter revenue                              331,073         349,797
Number of days in quarter                    91              91
Average daily revenue                        $       3,638   $       3,844
Days sales outstanding                       64              56

Net cash provided by operating activities declined 15.2%, to $28.5 million. The increase in net earnings of $24.3 million is offset by changes in operating assets and liabilities, in particular, accounts receivable and accounts payable and other liabilities. The effect on cash flow of the change in accounts payable and other liabilities decreased $28.2 million due to restructuring accrual payments and timing of vendor payments in the current period. The effect on cash flow of the change in accounts receivable, net, decreased $27.5 million due to slower collections in the period.

Investing activities used $14.9 million in cash. This included capitalization of data acquisition costs of $8.6 million and capitalization of software development costs of $5.0 million. Capital expenditures were $5.7 million for the quarter. These investments were offset by payments of $1.5 million received as a distribution from a real estate joint venture and $1.0 million from the collection of a note. Additionally the Company received a final $2.0 million payment from EMC related to the parties' amended funded software arrangement. The Company acquired $1.8 million of property under capital leases. Payments under these arrangements will be reflected in future cash flows as payments of debt.

Cash flows from financing activities include payments of debt of $23.3 million, including capital lease payments of $12.9 million, software license payments of $8.4 million, and other debt payments of $2.0 million. Financing activities also include $3.3 million in proceeds from sales of stock and $4.6 million of dividends paid.

Credit and Debt Facilities

Effective September 15, 2006, the Company entered into an amended and restated credit agreement allowing (1) term loans up to an aggregate principal amount of $600 million and (2) revolving credit facility borrowings consisting of revolving loans, letter of credit participations and swing-line loans up to an aggregate amount of $200 million. On September 15, 2006, the Company borrowed the entire amount of the term loan. The term loan is payable in quarterly principal installments of $1.5 million through September 2011, followed by quarterly principal installments of $150.0 million through June 2012, followed by a final installment of $40 million due September 15, 2012. The term loan also allows prepayments before maturity. Revolving loan commitments and all borrowings of revolving loans mature on September 15, 2011. The credit agreement is secured by the accounts receivable of Acxiom and its domestic subsidiaries, as well as by the outstanding stock of certain Acxiom subsidiaries. At June 30, 2008 there were no revolving credit borrowings outstanding. Borrowings under the revolving credit agreement bear interest at LIBOR plus 1.5%, an alternative base rate, or at the federal funds rate plus 2.25%.

Off-Balance Sheet Items and Commitments

The Company has entered into synthetic operating lease facilities for computer equipment and furniture ("Leased Assets"). These synthetic operating lease facilities are accounted for as operating leases under GAAP and are treated as capital leases for income tax reporting purposes. Lease terms under the computer equipment and furniture facility range from two to six years, with the Company having the option at expiration of the initial term to return, or purchase at a fixed price, or extend or renew the term of the leased equipment. In the event the Company elects to return the Leased Assets, the Company has guaranteed a portion of the residual value to the lessors. Assuming the Company elects to return the Leased Assets to the lessors at its earliest opportunity under the synthetic lease arrangements and assuming the Leased Assets have no significant residual value to the lessors, the maximum potential amount of future payments the Company could be required to make under these residual value guarantees was $9.0 million at June 30, 2008. As of June 30, 2008 the Company has a future commitment for synthetic lease payments of $10.5 million over the next three years.

Outstanding letters of credit which reduce the borrowing capacity under the Company's revolving credit were $7.4 million at June 30, 2008 and March 31, 2008.

Contractual Commitments

The following table presents Acxiom's contractual cash obligations and purchase
commitments at June 30, 2008 (dollars in thousands). The column for 2009
represents the nine months ending March 31, 2009. All other columns represent
fiscal years ending March 31.



                                                For the years ending March 31
                        2009        2010        2011        2012        2013      Thereafter     Total
Capital lease and
installment payment
obligations           $  25,919   $  21,675   $   6,107   $     993   $     553   $  10,335    $  65,582
Software and data
license liabilities   14,292      5,868       90          -           -           -            20,250
Warrant liability     -           -           -           -           -           1,524        1,524
Other long-term
debt                  6,473       8,064       19,206      304,449     191,523     6,038        535,753
Total long-term
obligations           46,684      35,607      25,403      305,442     192,076     17,897       623,109
Synthetic equipment
and furniture
leases                6,519       3,849       125         -           -           -            10,493
Equipment operating
leases                1,934       1,078       546         110         3           -            3,671
Building operating
leases                17,207      17,599      13,756      11,848      9,777       41,675       111,862
Partnership
building lease        1,617       1,645       1,599       1,599       1,599       1,732        9,791
Total operating
lease payments        27,277      24,171      16,026      13,557      11,379      43,407       135,817
Operating software
license obligations   4,780       5,198       1,674       1,674       836         -            14,162
Total operating
lease and software
license obligations   32,057      29,369      17,700      15,231      12,215      43,407       149,979
Total contractual
cash obligations      $  78,741   $  64,976   $  43,103   $ 320,673   $ 204,291   $  61,304    $ 773,088

                                                For the years ending March 31
                        2009        2010        2011        2012        2013      Thereafter     Total
Purchase
commitments on
synthetic equipment
and furniture
leases                1,432       7,178       377         -           -           -            8,987
Other purchase
commitments           32,027      15,825      12,082      11,088      9,157       21,197       101,376
Total purchase

The purchase commitments on the synthetic equipment and furniture leases assume the leases terminate and are not renewed, and the Company elects to purchase the assets. The other purchase commitments include contractual commitments for the purchase of data and open purchase orders for equipment, paper, office supplies, construction and other items. Other purchase commitments in some cases will be satisfied by entering into future operating leases, capital leases, or other financing arrangements, rather than payment of cash.

Residual value guarantee on the synthetic computer equipment and furniture lease $ 8,988 Guarantee on certain partnership and other loans 2,721 Outstanding letters of credit 7,436

The total of partnership and other loans of which the Company guarantees the portion noted in the above table is $7.6 million as of June 30, 2008.

While the Company does not have any other material contractual commitments for capital expenditures, certain levels of investments in facilities and computer equipment continue to be necessary to support the growth of the business. In some cases, the Company also sells software and hardware to clients. In addition, new outsourcing or facilities management contracts frequently require substantial up-front capital expenditures to acquire or replace existing assets. Management believes that the Company's existing available debt and cash flow from operations will be sufficient to meet the Company's working capital and capital expenditure requirements for the foreseeable future. The Company also evaluates acquisitions from time to time, which may require up-front payments of cash. Depending on the size of the acquisition it may be necessary to raise additional capital. If additional capital becomes necessary as a result of any material variance of operating results from projections or from potential future acquisitions, the Company would first use available borrowing capacity under its revolving credit agreement, followed by the issuance of debt or equity securities. However, no assurance can be given that the Company would be able to obtain funding through the issuance of debt or equity securities at terms favorable to the Company, or that such funding would be available.

For a description of certain risks that could have an impact on results of operations or financial condition, including liquidity and capital resources, see the "Risk Factors" contained in Part I, Item 1A, of the Company's 2008 Annual Report.

Related Parties

See note 15 to the consolidated financial statements contained in the Company's 2008 Annual Report for additional information on certain relationships and related transactions.

Non-U.S. Operations

The Company has a presence in the United Kingdom, France, the Netherlands, Germany, Portugal, Poland, Australia and China. Most of the Company's exposure to exchange rate fluctuation is due to translation gains and losses as there are no material transactions that cause exchange rate impact. In general, each of the foreign locations is expected to fund its own operations and cash flows, although funds may be loaned or invested from the U.S. to the foreign subsidiaries subject to limitations in the Company's revolving credit facility. These advances are considered to be long-term investments, and any gain or loss resulting from changes in exchange rates as well as gains or losses resulting from translating the foreign financial statements into U.S. dollars are included in accumulated other comprehensive income (loss). Exchange rate movements of foreign currencies may have an impact on the Company's future costs or on future cash flows from foreign investments. The Company has not entered into any foreign currency forward exchange contracts or other derivative instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These accounting principles require management to make certain judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The consolidated financial statements in the Company's 2008 Annual Report include a summary of significant accounting policies used in the preparation of Acxiom's consolidated financial statements. In addition, the Management's Discussion and Analysis filed as part of the 2008 Annual Report contains a discussion of the policies which management has identified as the most critical because they require management's use of complex and/or significant judgments. None of the Company's critical accounting policies have materially changed since the date of the last annual report.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), "Business Combinations", ("SFAS 141R"), which replaces SFAS 141. SFAS 141R requires most assets acquired and liabilities assumed in a business combination, contingent consideration, and certain acquired contingencies to be measured at their fair values as of the date of acquisition. SFAS 141R also requires that acquisition-related costs and restructuring costs be recognized separately from the business combination. SFAS 141R will be effective for the Company for fiscal year 2010 and will be effective for business combinations entered into after April 1, 2009.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, "Noncontrolling Interest in Consolidated Financial Statements", ("SFAS 160"). SFAS 160 amends previous accounting literature to establish new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for the Company as of the beginning of fiscal 2010.

This document contains forward-looking statements. These statements, which are not statements of historical fact, may contain estimates, assumptions, projections and/or expectations regarding the Company's financial position, results of operations, market position, product development, growth opportunities, economic conditions, and other similar forecasts and statements of expectation. The Company indicates these statements by words or phrases such as "anticipate," "estimate," "plan," "expect," "believe," "intend," "foresee," and similar words or phrases. These forward-looking statements are not guarantees of future performance and are subject to a number of factors and uncertainties that could cause the Company's actual results and experiences to differ materially from the anticipated results and expectations expressed in the forward-looking statements.

Forward-looking statements may include but are not limited to the following:

• that the amounts for restructuring and impairment charges and accruals for litigation will be within estimated ranges;

• that the cash flows used in estimating the recoverability of assets will be within the estimated ranges; and

• that items which management currently believes are not material will continue to not be material in the future.

The factors and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, forward-looking statements include but are not limited to the following:

• the risk factors described in Part I, "Item 1A. Risk Factors" included in the Company's 2008 Annual Report and in this report and those described from time to time in our future reports filed with the Securities and Exchange Commission;

• the possibility that certain contracts may not be closed, or may not be closed within the anticipated time frames;

• the possibility that clients may attempt to reduce the amount of business they do with the company;

• the possibility that in the event that a change of control of the company was sought that certain of the clients of the company would invoke certain provisions in their contracts resulting in a decline in the revenue and profit of the company;

. . .