LiveRamp Holdings, Inc. — Form 10-Q Summary
Business and period: LiveRamp provides an enterprise data-connectivity platform focused on identity, data activation, measurement, and data collaboration. This unaudited filing covers the quarter and six months ended September 30, 2021, the second quarter and first half of fiscal 2022. Comparisons are with the corresponding fiscal 2021 periods.
Financial performance
| Metric | Quarter ended September 30 | Six months ended September 30 |
|---|---|---|
| Revenue | $127.3 million, up 21.6% | $246.3 million, up 20.7% |
| Subscription revenue | $105.4 million, up 22.9% | $201.9 million, up 19.7% |
| Marketplace and other revenue | $21.9 million, up 15.9% | $44.4 million, up 25.4% |
| Gross profit / margin | $92.2 million / 72.4%, versus 66.7% | $176.9 million / 71.8%, versus 66.0% |
| Operating expenses | $98.4 million, up 1.8% | $200.7 million, up 7.0% |
| Operating loss | $6.2 million, versus $26.9 million | $23.8 million, versus $52.9 million |
| Net income (loss) | $(6.4) million, or $(0.09) per diluted share, versus $(24.0) million | $10.9 million, or $0.16 per diluted share, versus $(45.7) million |
Six-month net income included a $30.1 million gain from a $31.0 million cash distribution on a retained profits interest related to the 2015 sale of the company’s former IT Outsourcing business. Excluding that unusual gain, the reported year-to-date net income does not reflect operating performance alone.
For the six months, net cash used in operating activities was $6.3 million, compared with $17.4 million used in the prior-year period. Investing activities provided $21.3 million, including the $31.0 million distribution, while financing activities used $52.3 million, mainly for $44.1 million of share repurchases and $12.5 million of tax-withholding share repurchases. Cash and cash equivalents were $535.6 million at September 30, down from $572.8 million at March 31; including restricted cash, the balance was $544.3 million. Working capital was $638.3 million. The balance sheet lists no borrowings or debt; the filing text does not provide a separate debt metric.
Changes and business developments
- Revenue growth reflected subscription gains from new customer wins, upsells, and higher variable revenue, as well as increased Data Marketplace volume. U.S. revenue drove most of the increase.
- Gross margin improved as revenue rose while cost of revenue remained nearly flat; management cited identity-graph cost reductions, partly offset by higher hosting and other costs.
- Research and development expense rose 15% in the quarter, principally from headcount and professional-services investments. Quarterly sales and marketing and general and administrative expense declined.
- LiveRamp acquired Diablo.ai on April 21, 2021, for approximately $9.7 million net purchase price, to add first-party data resolution and identity capabilities.
- In the quarter, the company extended leases at three locations, including its San Francisco headquarters. This added approximately $35.7 million of right-of-use assets and lease liabilities.
Outlook, risks, and contingencies
Management said subscription revenue is expected to be approximately $14 million lower during the remainder of fiscal 2022 because several platform customers licensing cookie-based digital-identity components transitioned to alternative solutions. The filing provides no broader numerical revenue or earnings guidance.
Management stated existing cash should meet working-capital and capital-expenditure needs for the foreseeable future, while cautioning that COVID-19-related collection, financing, and operating disruptions could affect liquidity. COVID-19 had no material financial-statement impact identified for the six months, but future effects remain uncertain. Other key risks include privacy and data-use regulation, restrictions or technical changes affecting third-party cookies and tracking, data-supplier or customer losses, competition, security incidents, and integration of acquisitions.
At September 30, remaining fixed customer-contract performance obligations were $371.5 million, of which $265.9 million was expected to be recognized over the next 12 months. Purchase commitments totaled $213.9 million, primarily for data, hosting, and software services. Operating lease commitments totaled $51.2 million undiscounted. The company reported ordinary-course legal matters, stated that appropriate accruals were recorded, and considered material losses beyond accrued amounts remote; outcomes remain uncertain. It also had $23.9 million of liabilities for uncertain tax positions, with payment timing not predictable.
The company had repurchased 1.0 million shares for $44.1 million during the six-month period. Its $1.0 billion repurchase authorization runs through December 31, 2022, with $282.4 million remaining at September 30. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Investor verification points
- Resolve a cash-flow disclosure inconsistency: the financial statements report six-month net cash used in operating activities of $6.3 million, while the MD&A summary says net cash provided was $10.9 million. The detailed cash-flow statement supports the $6.3 million outflow; verify against the filed statements and XBRL.
- Assess the effect and duration of the expected $14 million subscription-revenue reduction from customer transitions, and whether other cookie-related changes could have further impact.
- Separate recurring operating results from the $30.1 million retained-profits-interest gain when evaluating year-to-date profitability and cash generation.
- Monitor receivables and collections: accounts receivable rose to $130.9 million and DSO increased to 95 days from 86 days at fiscal year-end.
- Review the scale of stock-based compensation, share repurchases, purchase commitments, lease obligations, and the uncertain-tax-position liability relative to future cash needs.