LiveRamp Holdings, Inc. — Form 10-Q summary
Reporting period: Fiscal third quarter and nine months ended December 31, 2021, compared with the corresponding prior-year periods. The filing is unaudited. LiveRamp operates as one segment, providing an enterprise data connectivity platform, primarily through subscriptions and marketplace/other services.
Financial performance
| Metric | Three months ended Dec. 31, 2021 | Nine months ended Dec. 31, 2021 |
|---|---|---|
| Revenue | $140.6m, up 17.4% | $386.9m, up 19.5% |
| Subscription revenue | $111.1m, up 18.9% | $313.0m, up 19.4% |
| Marketplace and other revenue | $29.5m, up 12.0% | $73.9m, up 19.7% |
| Gross profit / gross margin | $102.0m / 72.6% (69.0% prior year) | $279.0m / 72.1% (67.1% prior year) |
| Operating expenses | $115.8m, up 17.7% | $316.6m, up 10.7% |
| Operating loss / margin | $13.8m / (7.7%) | $37.6m / (9.7%) |
| Net loss / diluted loss per share | $15.4m / $0.23 | $4.4m / $0.07 |
| Operating cash flow | $25.5m, per management’s quarterly comparison | $19.1m, versus cash used of $2.7m in the prior-year period |
Quarterly net loss widened from $11.7m a year earlier, despite higher revenue and an improved operating loss. For the nine-month period, net loss narrowed substantially from $57.4m, but results included a $30.2m gain from a retained profits interest distribution and a $2.6m tax benefit from releasing tax contingency reserves. The filing does not provide a clear adjusted-profit measure.
Cash, liquidity, debt and commitments
- At December 31, 2021, cash and cash equivalents were $553.0m, with a further $8.7m of restricted cash. Working capital was $637.7m, down from $660.5m at March 31, 2021. Management said available cash should meet working-capital and capital-expenditure needs for the foreseeable future.
- The balance sheet reports no borrowings or debt line item. Current liabilities were $184.0m; total assets were $1.34bn.
- Nine-month investing cash flow was positive $18.2m, principally reflecting the $31.2m cash distribution from the retained profits interest. Financing cash use was $57.3m, including $49.2m of share repurchases and $14.2m of tax-withholding share repurchases.
- Accounts receivable increased to $156.8m from $114.3m at fiscal year-end; days sales outstanding rose to 103 from 86. The company said customer accounts are actively managed and it does not expect losses beyond reserves.
- Purchase commitments totaled $201.2m. Operating lease liabilities were $60.2m discounted, with undiscounted minimum lease commitments of $68.5m. The company also reported $24.1m of uncertain tax positions for which payment timing cannot be predicted.
Changes, outlook and notable items
- Revenue growth reflected new subscription customers, upsells and higher variable revenue, as well as increased Data Marketplace volume. Gross-margin expansion was attributed to revenue growth with relatively flat cost of revenue, including identity-graph optimizations.
- Research and development expense rose 36.8% in the quarter, primarily from headcount and professional-services investment. Management described hiring and product development investment across functions.
- Management estimated that changes to a small number of platform relationships licensing cookie-based digital-identity components will reduce subscription revenue by approximately $6m during the remainder of fiscal 2022. The March 2022 quarter is expected to be the final quarter of impact on year-over-year growth metrics. No broader numerical earnings or revenue guidance is provided.
- Remaining performance obligations from fixed customer commitments were $380.0m at December 31, 2021; $289.3m was expected to be recognized over the next 12 months.
- The company received a $31.2m distribution from a retained profits interest tied to its 2015 disposition of a former IT outsourcing business, recording a $30.2m gain. It also acquired Diablo.ai for approximately $9.7m net purchase price and Rakam technology assets for approximately $2.2m.
- A $31.6m tax refund related to a fiscal 2020 net operating loss carryback was received on January 5, 2022. The company repurchased $49.2m of shares during the nine months; $277.2m remained under its $1.0bn repurchase authorization through December 31, 2022.
- Key risks include privacy and data-use regulation, restrictions or technical changes affecting third-party cookies and tracking, data security incidents, competition, customer or supplier changes, collection timing, and uncertainty related to COVID-19. The company reported ordinary-course legal matters; management considered accruals adequate and the likelihood of material losses beyond accrued amounts remote.
Key facts for investors to verify
- Whether subscription growth and the stated approximately $6m customer-transition impact develop as management expects.
- How much of the reported nine-month improvement reflects recurring operations versus the $30.2m distribution gain and tax-reserve release.
- Whether receivables and DSO normalize, and whether operating cash flow remains positive as revenue expands.
- Execution and returns on increased R&D and headcount investment, alongside stock-based compensation expense of $61.5m for the nine-month period.
- Progress on remaining performance obligations, acquisition integration, and exposure to privacy, identity-technology and data-marketplace changes.