TOPIC 606 ADOPTION IMPACT AND REVENUE FROM CONTRACTS WITH CUSTOMERS:

On April 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of April 1, 2018. Results for reporting periods beginning after April 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic reporting under Topic 605.

Under Topic 606, revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The Company determines revenue recognition through the following steps:


•	Identification of the contract, or contracts, with a customer


•	Identification of the performance obligations in the contract


•	Determination of the transaction price


•	Allocation of the transaction price to the performance obligations in the contract


•	Recognition of revenue when, or as, the Company satisfies a performance obligation

We recorded a net increase to our opening retained earnings of $12.7 million, net of tax, due to the cumulative impact of adopting Topic 606, with the impact primarily related to the capitalization of costs of obtaining customer contracts.

The details of the significant changes and quantitative impact of the changes are disclosed below.

Costs of Obtaining Customer Contracts

The Company previously recognized commission payments made for obtaining a contract as an operating expense when incurred. Under Topic 606, the Company capitalizes incremental costs to acquire contracts and amortizes them over the expected period of benefit, which we have determined as a range of two to five years. As of June 30, 2018, the remaining unamortized contract costs were $18.1 million and are included in deferred commissions, net, in the condensed consolidated balance sheet. Net capitalized costs of $2.9 million were recorded as a reduction to operating expense for the three months ended June 30, 2018. No impairment was recognized for the three months ended June 30, 2018.

Contingent Revenue

The Company previously limited revenue recognition to the amount that was not contingent on the provision of future services. This was typically from fees paid over the contract term for services delivered at the beginning of the contract term.

Impacts on Financial Statements



Condensed Consolidated Balance Sheet	Impact of changes in accounting policies
	As reported June 30, 2018		Adjustments			Balances without adoption of Topic 606
Trade accounts receivable, net	$	163,767	$	(1,943	)	$	161,824
Refundable income taxes	11,761		540			12,301
Deferred income taxes	11,488		(64		)	11,424
Deferred commissions, net	18,137		(18,137		)	—
Others	961,815		—			961,815
Total assets	$	1,166,968	$	(19,604	)	$	1,147,364

Deferred revenue	$	31,621	$	(232	)	$	31,389
Deferred income taxes	42,258		(4,761		)	37,497
Others	371,033		—			371,033
Total liabilities	444,912		(4,993		)	439,919

Retained earnings	638,043		(14,611		)	623,432
Other equity	84,013		—			84,013
Total equity	722,056		(14,611		)	707,445
Total liabilities and equity	$	1,166,968	$	(19,604	)	$	1,147,364



Condensed Consolidated Statement of Operations	Impact of changes in accounting policies
	As reported for the three months ended June 30, 2018			Adjustments			Balances without adoption of Topic 606
Revenues	$	226,960		$	296		$	227,256
Cost of revenue	117,271			—			117,271
Gross profit	$	109,689		$	296		$	109,985

Operating expenses:
Sales and marketing	$	54,850		$	2,939		$	57,789
Other operating expenses	60,540			—			60,540
Total operating expenses	115,390			2,939			118,329

Loss from operations	(5,701		)	(2,643		)	(8,344		)
Total other expense	(2,314		)	—			(2,314		)
Loss before income taxes	(8,015		)	(2,643		)	(10,658		)
Income taxes	(5,000		)	(695		)	(5,695		)
Net loss	$	(3,015	)	$	(1,948	)	$	(4,963	)



Condensed Consolidated Statement of Comprehensive Loss	Impact of changes in accounting policies
	As reported for the three months ended June 30, 2018			Adjustments			Balances without adoption of Topic 606
Net loss	$	(3,015	)	$	(1,948	)	$	(4,963	)
Other comprehensive loss:
Change in foreign currency translation adjustment	(1,868		)	—			(1,868		)
Comprehensive loss	$	(4,883	)	$	(1,948	)	$	(6,831	)



Condensed Consolidated Statement of Cash Flows	Impact of changes in accounting policies
	As reported for the three months ended June 30, 2018			Adjustments			Balances without adoption of Topic 606
Net loss	$	(3,015	)	$	(1,948	)	$	(4,963	)
Adjustments for:
Deferred income taxes	(1,335		)	(695		)	(2,030		)
Others	41,937			—			41,937
Changes in:
Accounts receivable, net	4,329			(256		)	4,073
Deferred costs and other assets	(2,995		)	2,939			(56		)
Accounts payable and other liabilities	(21,704		)	—			(21,704		)
Deferred revenue	(33		)	(40		)	(73		)
Net cash from operating activities	17,184			—			17,184
Net cash from investing activities	(10,684		)	—			(10,684		)
Net cash from financing activities	(52,586		)	—			(52,586		)
Effect of exchange rate changes on cash	(1,094		)	—			(1,094		)

Net change in cash and cash equivalents	(47,180		)	—			(47,180		)
Cash and cash equivalents at beginning of period	142,279			—			142,279
Cash and cash equivalents at end of period	$	95,099		$	—		$	95,099

Disaggregation of Revenue

In the following table, revenue is disaggregated by primary geographical market and major service offerings. The table also includes a reconciliation of the disaggregated revenue within the reportable segments.



Reportable Segments
June 30, 2018
(dollars in thousands)
Primary Geographical Markets	Acxiom Marketing Solutions		LiveRamp		Total
United States	$	150,307	$	56,222	$	206,529
Europe	11,115		4,908		16,023
APAC	3,080		1,328		4,408
	$	164,502	$	62,458	$	226,960

Major Offerings/Services
Audience Creation	$	45,452	$	—	$	45,452
Data Analytics	9,025		—		9,025
Data Management	110,025		—		110,025
Subscription	—		51,329		51,329
Marketplace and Other	—		11,129		11,129
	$	164,502	$	62,458	$	226,960



Reportable Segments
June 30, 2017
(dollars in thousands)
Primary Geographical Markets	Acxiom Marketing Solutions		LiveRamp		Total
United States	$	152,129	$	42,118	$	194,247
Europe	10,735		3,802		14,537
APAC	2,893		837		3,730
	$	165,757	$	46,757	$	212,514

Major Offerings/Services
Audience Creation	$	51,303	$	—	$	51,303
Data Analytics	8,858		—		8,858
Data Management	105,596		—		105,596
Subscription	—		37,052		37,052
Marketplace and Other	—		9,705		9,705
	$	165,757	$	46,757	$	212,514

Transaction Price Allocated to the Remaining Performance Obligations

We have performance obligations, primarily related to AMS offerings, associated with fixed commitments in customer contracts for future services that have not yet been recognized in our condensed consolidated financial statements. The amount of fixed revenue not yet recognized was $1.1 billion as of June 30, 2018. The Company expects to recognize revenue on approximately 75% of these remaining performance obligations by March 31, 2021 with the balance recognized thereafter.