LiveRamp Holdings, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2019 (first quarter of fiscal 2020). LiveRamp provides a customer data and identity platform, including subscription services and a data marketplace. The company reports as one operating segment.
Financial results
| Metric | Q1 FY2020 | Q1 FY2019 |
|---|---|---|
| Revenue | $82.5 million | $62.5 million |
| Gross profit / margin | $46.1 million / 55.9% | $38.8 million / 62.1% |
| Operating expenses | $94.5 million | $68.4 million |
| Loss from operations | $48.4 million | $29.6 million |
| Net loss from continuing operations | $42.1 million | $27.8 million |
| Diluted loss per share from continuing operations | $0.61 | $0.36 |
| Cash used in operating activities | $15.4 million | $2.3 million |
Revenue grew 32.1% year over year: subscription revenue increased 33.1% to $68.3 million, and marketplace and other revenue increased 27.3% to $14.2 million. U.S. revenue rose 36.1%; international revenue fell 4.5%. Gross margin declined mainly due to higher identity-graph, hosting and security costs and accelerated depreciation. Operating costs also included $18.6 million of stock-based compensation, $1.9 million of accelerated depreciation, and $1.8 million of restructuring charges.
The prior-year quarter included $24.8 million of after-tax earnings from discontinued operations, following the sale of the Acxiom Marketing Solutions business. Consequently, prior-year reported net loss was only $3.0 million; continuing-operations results provide the more comparable operating view.
Cash, liquidity and capital
- Cash and cash equivalents were $1.005 billion at June 30, 2019, down from $1.061 billion at March 31, 2019. Working capital was approximately $1.0 billion.
- The balance sheet reports no debt balance. Management said existing cash should cover working-capital and capital-expenditure needs for the foreseeable future.
- Investing cash use was $9.4 million, including $4.9 million of capital expenditures and $4.5 million for the Faktor acquisition. Financing cash use was $31.1 million, including $20.1 million of share repurchases and $12.1 million of shares withheld for employee taxes.
- The repurchase authorization permits up to $1.0 billion through December 31, 2020. At quarter-end, $530.8 million of capacity remained. After quarter-end, the company repurchased approximately $49 million of shares.
- Fixed customer-contract revenue not yet recognized was $319.4 million, expected to be recognized substantially by March 31, 2024. The company also disclosed $29.7 million of purchase commitments and $20.5 million of uncertain-tax-position liabilities whose payment timing could not be predicted.
Changes, outlook and notable items
- Growth was driven primarily by new subscription customers and expansion with existing customers. A lost customer reduced marketplace and other revenue growth by approximately $3.0 million and also affected geographic revenue.
- On April 2, LiveRamp acquired consent-management platform Faktor for approximately $4.5 million in cash.
- On July 2, after the reporting period, LiveRamp completed its acquisition of Data Plus Math for approximately $117 million in cash. Approximately $33 million of assumed options and employee-related share consideration is expected to be recognized as non-cash compensation over applicable vesting periods.
- LiveRamp adopted the new lease standard on April 1. At June 30, it reported $20.9 million of right-of-use assets and $24.4 million of discounted operating lease liabilities. Adoption did not affect equity or operating results.
- No specific revenue or earnings guidance is provided in the filing. Management identifies risks including privacy and data-protection regulation, data-security incidents, changes to tracking technology, customer or data-supplier losses, competition, acquisition integration, and economic conditions. The company maintained a full valuation allowance on deferred tax assets except in certain foreign jurisdictions.
- Management reported no pending legal matters considered material to the financial statements and concluded disclosure controls were effective. Restructuring-related lease liabilities remain subject to uncertainty in sublease receipts; leases for exited facilities extend through November 2025.
Important facts for investors to verify
- Whether subscription growth can continue while marketplace revenue remains exposed to customer concentration and transactional demand.
- Whether gross margins recover as identity, hosting, security and infrastructure costs evolve.
- Cash use and the effect of the Data Plus Math acquisition and subsequent share repurchases on liquidity and future compensation expense.
- The sustainability of the large reported cash balance and the company’s capital-allocation plans, including remaining repurchase authorization.
- Potential effects of privacy regulation, data-security risks, technology changes and customer or supplier losses on revenue and operations.