1. WELCOME BUILDING BUSINESS ACUMEN

2. How much do you know about Epsilon and ADS Corporation’s Key Success Measures? (or Key Performance Indicators (KPIs) ) Let’s find out! Important Questions

3. 1 - How much Cash was on hand?$______$______ 2 - How much Cash was generated by Operating Activities?$______$______ 3 - What was our Total Revenues? $______$______ 4 - What was our Net Income? $______$______ 5 - What was our EBITDA Margin? ______% ______% 6 - What was our Net Margin? ______% ______% 7 – What was our Return on Assets? ______% ______% 8 - How much did Total Revenue change YOY? ______%_______% 9 - How much did EBITDA change YOY? ______% _______% 10 - How much did Net Income change YOY? ______%_______% For fiscal year 2011: Epsilon ADS Pop Quiz N/A

4. Understand the 10 key performance measures that are important to Epsilon, ADS and the Executive Team. List and describe the five business drivers all successful businesses must focus on. Teach specific components of ADS financial statements. Better articulate company performance & strategy. Create a personal action plan that can positively impact personal performance and company results. Learning Objectives

5. …the ability to make good business decisions in a timely manner with an understanding of how the decision should impact the business. 3 Acumen Means?

6.  Only 5-10% of business start-ups survive past 5 years.  16% of CEOs lose their job every year. Booz Allen Hamilton 5 th annual Study  70% of merger and acquisition activity do not live up to expectation. Wall Street Journal 2007 Why do businesses fail? 6 Business can be tough!

7. Every business must focus on five business drivers.  If they do, they will be successful.  If they don’t, they’ll fail. Let’s Start a Business! 4 Business Acumen:

8. Sources of Cash Can a company have too much Cash? 9 Earn it cash from Operation Sell Assets Cash from Investing Borrow it Cash from Financing Pro: No Cost -Con: Time Pro: Immediate -Con: Reduces Assets Pro: Immediate -Con: Cost (Interest) Cash & Cash Flow

9. Can a company have too much Cash? 1)More attractive in a buy-out. 2)Low return. 3)Shareholders don’t like it. 4)May make poor decisions. 9 Cash

10. Companies ought to keep just enough cash to cover their interest, expenses and capital expenditures; plus they should hold a little bit more in case of emergencies. Investopedia How much cash should you have?

11. Cash 8 What is required to grow and maintain the business. Cash – the bills and coins in the register, petty cash, and cash in the bank. Also includes cash equivalents, like CD’s and other highly liquid investments, that easily convert into cash within 90 days. M EASURES Cash Flow – The cash generation from core business activities calculated from the difference between the cash that flows into and out of the business in a given period of time (month, quarter, annual) D EFINITION Definition: Cash

12. (In Millions) Cash ADS 9 Business Measures and Metrics ADS 20112010200920082007 Total Revenue $3,173 $2,791 $1,964 $2,025 $1,962 Cash Cash and Equivalents $216 $139 $213 $157 $219 Cash as % of Revenue 6.80%4.98%10.86%7.75%11.17% Cash from Operating Activities $1,011 $903 $358 $451 $572

13. Cash Benchmarks 9 (In Millions) Business Measures and Metrics ADS VISA AMEX Harte- Hanks, Inc. ACXIOM 2011 March 2010 Total Revenue $3,173 $9,188 $32,282 $851 $1,160 Cash Cash and Equivalents $216 $2,127 $3,514 $87 $207 Cash as % of Revenue 6.80%23.15%10.89%10.22%17.85% Cash from Operating Activities $1,011 $3,872 $10,475N/A $166

14. Profit 10 What is left over after you have subtracted expenses. Can be expressed in dollars ($) or percent (%). EBITDA/EBITDA Margin– Reflects earnings before interest and taxes. M EASURES Net Profit / Net Profit Margin – Profit after all expenses have been subtracted from sales. D EFINITION Definition: Profit

15. Total Revenues (Sales)$100100% - Cost of Operations$ 57 - Provisions For Loan loss$ 10 - General & Admin. (G&A)$ 3 =EBITDA$ 3030% -Depreciation & Amortization$ 5 = Operating Income$ 25 23% -Interest & Other Expense $ 9 -Taxes $ 6 = Income From Continuing Operations $ 10 10% -Losses from discontinued operations $ -- = Net Income $ 10 10% Two ways to impact PROFIT

16. Driving Profit High and Low Profit Margins S&P Average TTM:13% Who has much higher profit margins? Coca Cola33% Microsoft30% Google 29% Apple21% Why the high margins?

17. Driving Profit High and Low Profit Margins S&P Average TTM:13% Who has lower profit margins? ExxonMobil8% Wal-Mart3.8% Costco 1.7% Why the low margins?

18. 2011 EBITDA$ 965.8 +Stock Compensation Expense$ 43.5 +Loss on Sale of Assets$-- +Merger and Other Costs$-- = Adjusted EBITDA$ 1009.3 Calculating Adjusted EBITDA

19. Epsilon 613,374 514,272 Profit ADS 11 (In Millions) Business Measures and Metrics ADS 20112010200920082007 Total Revenue $3,173 $2,791 $1,964 $2,025 $1,962 Net Income $315 $194 $144 $206 $164 Profit EBITDA Margin 30.44%27.67%27.14%29.45%27.94% Net Margin 9.94%6.94%7.32%10.19%8.36%

20. Epsilon 613,374 514,272 Profit Epsilon 11 (In Millions) Business Measures and Metrics Epsilon Q4-20112011201020092008 Total Revenue $255$847 $613 $514 $491 Profit Adjusted EBITDA Margin 25.1%23.07%24.83%24.94%25.78% Operating Income From Continued Operations Margin N/A 10.61%9.62%8.06%

21. Profit Benchmarks S&P 500 Averages: Net Margin = 11% 2010 13% 2011 11 (In Millions) Business Measures and Metrics ADS VISA AMEX Harte- Hanks, Inc. ACXIOM 2011 March 2010 Total Revenue $3,173 $9,188 $32,282 $851 $1,160 Net Income $315 $3,650 $4,935 $44 $(23) Profit EBITDA Margin 30.44%62.52%19.72%11.37%2.67% Net Margin 9.94%39.73%16.47%5.2%-2.00%

22. Balancing… Asset Strength Asset Utilization & i.e. cash, inventory and ratings Assets (Read from guide book p. 12)

23. Assets 12 What we have and how well we use what we have. Return on Assets (ROA)— percent value of Net Income to Total Assets M EASURES D EFINITION Definition: Assets

24. Assets ADS 13 (In Millions) Business Measures and Metrics ADS 20112010200920082007 Total Revenue $3,173 $2,791 $1,964 $2,025 $1,962 Net Income $315 $194 $144 $206 $164 Assets Return on Assets (ROA) 3.51%2.34%2.75%4.75%3.94% ROA = Net Income = $315 = 3.51% Total Assets $8,980

25. Assets Benchmarks 13 (In Millions) Business Measures and Metrics ADS VISA AMEX Harte- Hanks, Inc. ACXIOM 2011 2010 Total Revenue $3,173 $9,188$32,282 $851 $1,160 Net Income $315 $3,650 $4,935 $44 $(23) Assets Return on Assets (ROA) 3.51%2.38%14.2%N/A-1.77%

26. Growth 14 The ability to increase year over year, quarter over quarter, and/or month over month. Revenue Growth M EASURES EBITDA Growth “In today’s business world, no growth means lagging behind in a world that grows every day…” “Investors expect it, employees are energized by it, customers are generally attracted to it and executives are measured by it.” D EFINITION Definition: Growth Net Income Growth

27. Best & brightest leave first. Productivity goes down. Morale goes down. Costs are cut, which limits ability to grow, company becomes less profitable. Studies Show: It usually takes 4 or 5 years for the company to recover. 15 Business in Rapid Decline…

28. Attracts/Retains the best & brightest! Productivity goes up = more profit = more cash = more ability to grow! Morale is high. You have the ability to grow in your career! Growth gets more time & attention than any of the 5 elements in a public company. 15 Business in Rapid Growth…

29. Growth ADS 15 (In Millions) Business Measures and Metrics ADS 2011201020092008 Total Revenue $3,173 $2,791 $1,964 $2,025 Net Income $315 $194 $144 $206 Growth Revenue Growth 13.68%42.10%-3.01%3.22% EBITDA Growth 25.04%44.91%-10.62%8.78% Net Income Growth 62.78%34.79%-30.36%25.81%

30. Growth Epsilon 15 (In Millions) Business Measures and Metrics Epsilon Q4-20112011201020092008 Total Revenue $255$847 $613 $514 $491 Profit Revenue Growth 41.76%38.10%24.83%24.94%25.78% Adjusted EBITDA Growth 28.83%28.3010.61%9.62%8.06%

31. Growth Benchmarks 15 (In Millions) Business Measures and Metrics ADS VISA AMEX Harte- Hanks, Inc. ACXIOM 2011 March 2010 Total Revenue $3,173 $9,188 $32,282 $851 $1,160 Net Income $315 $3,650 $4,935 $44 $(23) Growth Revenue Growth 13.68%13.92%8.63%-1.14%5.53% EBITDA Growth 25.04%18.34%16.63%-15.6%-68.71% Net Income Growth 62.78%23.06%21.64%-17.54%-151.96%

32. Page 32 Q2 Earnings Release

33. Page 33 Q2 Earnings Release

34. People 16 -The External Customer, Vendor/Re-seller, or Internal Customer that has the ability to impact the success of the business.. -Employees D EFINITION Definition: People

35. EPSILON “the focus is very simple. It’s to continue to drive double-digit growth. And second, and this is also critical, is we want to make sure that when we’re dealing with the Global 1000 that they view Epsilon not as just a provider of digital agency or analytics or distribution or data, but they view Epsilon as the place to go to handle their entire needs when it comes to this targeted marketing. And so, much time and effort will be spend on integrating all the different parts of Epsilon in the sales team to make sure that we’re selling no longer a $3 million or $5 million contract, but a $40 million or $50 million contract and that’s the ultimate goal, very similar to the other two parts of the business where it’s all or nothing with our clients.” 2011 Year End Press Release Goal for 2012 Page 35

36. Epsilon acquires Aspen Marketing Services We’ve Invested Over $1.3 Billion To Be The Comprehensive Provider Page 36 Industry Leadership Epsilon acquired by Alliance Data Frequency Marketing, Inc. integrated into Epsilon Epsilon acquired Bigfoot Interactive Epsilon acquired DoubleClick Email Solutions Epsilon acquired CPC Associates Epsilon acquired Abacus ICOM integrated into Epsilon Epsilon acquired the Equifax Direct Marketing Services Division Epsilon founded 1969 Oct 2004 Sept 2005 Nov 2005 Apr 2006 Sept 2006 Feb 2007 Jan 2009 Jul 2010 Jun 2011

37. EPSILON AGENCY OVERVIEW Marketing Database Design Development Hosting Digital & Interactive Email Service Provider Web design & hosting Real-time decision support Loyalty Management Technology platforms & Program Strategy Services Data Processing Services CDI/PDI Data Hygiene NCOA, PCOA, M/P Demographics 115 million HH, 225 million individuals with 31 different sources. Financials HH Income, Credit Card Capacity, Financials Stress Indicators, Home Value, Net Worth Lifestyles Self-reported lifestyles & interests from 40 million consumers Market Activity Online and Offline purchase Information, with details RFM data For 60 millions+ HH Triggers Behavioral data w/life event and life stage triggers, + purchase propensity Strategic Consulting & Advanced Analytics Program Strategies, Investment Justification, Customer Segmentation, ROI Analytics, Predictive Modeling & Marketing Mix Modeling Digital Websites, Email & Mobile Campaigns, Social & Word-of-mouth Programs Direct Response Concept to Mailbox Campaigns, Web-to-print Technology & Database Management Consumer Promotions & Events Loyalty & Continuity Programs, Partnerships & Sponsorships, In-Store Marketing, Mobile Tours, Guerilla Marketing & Sampling Events Hispanic Marketing Consumer Promotions, Direct, Digital & Experiential Marketing 37

38. Business Drivers (Page 18) Cash -On hand -Generation Assets -Strength -Utilization Growth -Top Line -Bottom Line Profit -Revenue -Expenses People -Customers -Employees

39. 1. What is the basic equation for each statement? 2. What is the purpose of the statement? 3. What are the key numbers and how are they trending? 4. How can you impact each statement? The Annually Reported Financial Statements Statement of Income (P&L) Balance Sheet Statement of Cash Flows Epsilon Financial Statements

40. Indicates: Profitability (G&A) SG&A: Salaries Sales commissions Benefits/Severance Rental Expense Bad debt charges Merger integration costs Professional services: Attorney fees, Accounting (Revenue = Sales) = Top Line = Bottom Line = EBIT Equation: Revenues- Expenses= Income P&L = Net income / Diluted # of shares (COGS) EBITDA Margin Total Revenue: 3,173,287 EBITDA: EBIT812,680 +70,427 +82,726 = 965,833 ÷ 3,173,287 = 30.44% Net Profit Margin Net Income: 315,286 Total Rev. ÷ 3,173,287 = 9.94% S&P 500 Ave. = 13% EBITDA margin =30.44% Net profit margin = 9.94%

41. Statement of Income (P&L) Increase revenue by 100K 100K 57K 43K 17K 26K

42. Statement of Income (P&L) 100K 38K 62K Lower costs by 100K

43. Raising Revenues $100M =$26 -or- Cutting Costs by $100M =$62 What are the implications of each action? Which is better?

44. Becomes Cash < 1 year  Most Liquid  Least Liquid  Due First  Due Last Due in < 1 year Balance Equation: Assets = Liabilities + Equity Indicates: Financial (asset) Strength Current Ratio = 1.71 Snapshot in time

45. Equation: Cash from operations + Cash from investing + Cash from financing = Net Change in Cash Purpose: Cash Management Started Year  Ended Year  Net Change in Cash  ? ?

46. 216.2 812.7 + 153.1 = 965.8 30.43 3,173.3

47. 812.7 + 153.1 = 965.8 315.3 8,980.2 3,173.32,791.4 812.7+153.1=965.8629.2 + 143.2 = 772.4 216.2 3,173.3 315.3 9.94 13.68 62.78 30.43 3,173.3 315.3 3,173.3 3.51 25.04 193.7 315.3 1,1011.4 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10

48. Epsilon Corporation’ Key Success Measures 1 ½ 0 SCORING: Right answer = 1 point Somewhat close = ½ point (within: $2B, $2, 2%) Missed it by a ways = 0 point 35

49. Chances of the idea being incorporated into their life is... When a Person Says … *Based on a 1993 Brigham Young University Study Changing Behavior “That’s a good idea”…10% “I’ll do it!” and commits...25% Says when they’ll do it… 40% Plans how to do it… 50% Commits to another…60% Sets a future specific appointment with the person they committed to... 95% Good Management Technique!

50. * nasdaq.com* finance.google.com * reuters.com* hoovers.com * yahoo.com* smartmoney.com Glossary: page 58 Where to Find Information (page 55)

51. One final thought… People will work hard for a paycheck, harder for a person, and hardest for a reason.