LiveRamp Holdings, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended December 31, 2019. Unless stated otherwise, dollar amounts are in millions. Comparisons are with the corresponding 2018 periods.
Business context
LiveRamp provides an enterprise customer data and identity platform, with revenue from subscriptions and marketplace and other services. It operates as one segment. The quarter included the acquired Data Plus Math (DPM) business, acquired July 2, 2019, and Faktor, acquired April 2, 2019. The Acxiom Marketing Solutions (AMS) business was sold in fiscal 2019 and is reported as discontinued operations in the prior-year comparison.
Financial results
| Metric | Three months ended Dec. 31 | Nine months ended Dec. 31 |
|---|---|---|
| Revenue | $102.2; up 27.7% | $274.9; up 32.6% |
| Subscription revenue | $81.6; up 25.5% | $221.8; up 29.6% |
| Marketplace and other revenue | $20.7; up 37.6% | $53.0; up 46.8% |
| Gross profit / margin | $64.3 / 62.9% (prior: 56.5%) | $159.0 / 57.9% (prior: 60.0%) |
| Operating expenses | $105.7; up 13.2% | $299.2; up 24.4% |
| Operating loss | $(41.5); prior $(48.2) | $(140.1); prior $(116.0) |
| Net loss from continuing operations | $(38.0); $(0.56) per diluted share | $(120.4); $(1.77) per diluted share |
| Operating cash flow | $15.8 provided (per management’s quarterly summary) | $(28.4) used |
Prior-period net earnings included $1,071.7 million for the quarter and $1,158.3 million for the nine months from discontinued operations, largely reflecting the AMS sale. Therefore, prior-year total net income and EPS are not comparable measures of ongoing operations.
Liquidity, cash flow and capital allocation
- Cash and cash equivalents were $767.2 million at December 31, 2019; restricted cash was $14.8 million. Working capital was $784.0 million. Management said existing cash should meet working-capital and capital-expenditure needs for the foreseeable future.
- Cash and restricted cash declined $279.5 million from March 31, 2019. Nine-month investing cash use was $115.2 million, including $105.4 million for acquisitions and $10.3 million in capital expenditures. Financing cash use was $135.8 million, including $121.2 million of share repurchases.
- The balance sheet presents no debt line item at December 31, 2019. The filing does not state a separate total-debt figure.
- The $1.0 billion repurchase authorization runs through December 31, 2020. The company repurchased 2.6 million shares for $121.2 million during the nine months; remaining authorization was approximately $429.8 million.
Material changes and management commentary
- Quarterly revenue growth came from new customer wins and upselling existing customers, alongside Data Store and TV growth. U.S. revenue rose 29.3%; international revenue rose 9.0%.
- Quarterly gross margin improved, primarily due to lower identity graph and security costs and accelerated depreciation in the prior-year period, partly offset by higher hosting and TV direct costs. Nine-month margin declined because of higher hosting and security costs and accelerated depreciation.
- Operating expenses increased, notably research and development and sales and marketing, reflecting product investment, growth-related hiring, higher stock compensation and bad-debt expense. Nine-month stock-based compensation expense was $72.3 million.
- Management attributed $4.6 million of nine-month marketplace and other revenue headwind to a lost customer’s revenue-sharing arrangement; it also said the lost customer affected U.S. and international revenue.
- DPM consideration included $100.9 million cash net of acquired cash, $14.8 million held in escrow and replacement options. DPM’s purchase-price allocation remained preliminary at quarter-end; goodwill was not deductible for U.S. tax purposes.
- Remaining fixed customer-contract revenue obligations were $344.4 million, of which $200.4 million was expected to be recognized over the next 12 months; substantially all was expected by March 31, 2024.
Outlook, risks and contingencies
The filing provides no specific revenue, earnings or margin guidance. Management stated that available cash should be sufficient for foreseeable operating and capital needs. Key disclosed risks include privacy and data-protection laws and consumer opt-outs, changes affecting third-party cookies and tracking, cybersecurity or service interruptions, competition, customer or data-supplier losses, longer sales cycles, and integration of acquisitions. The company reported no pending legal matter considered material to the financial statements, while noting that legal outcomes remain uncertain. It also had $22.4 million of liabilities for uncertain tax positions whose payment timing could not be predicted.
Important facts for investors to verify
- Whether subscription growth and marketplace growth can continue, particularly after the disclosed lost-customer impact.
- Whether the quarter’s gross-margin improvement persists, given weaker nine-month margins and rising hosting and security costs.
- Cash conversion and working-capital trends, including receivables and income-tax cash flows.
- Final DPM acquisition valuation, integration results and related compensation costs.
- Share repurchases relative to ongoing losses, liquidity needs and the remaining authorization.
- Exposure to privacy regulation, consumer data restrictions, third-party-cookie changes and security or service disruptions.