LiveRamp Holdings, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2022, LiveRamp’s first quarter of fiscal 2023. Comparisons are with the three months ended June 30, 2021, unless otherwise noted. LiveRamp provides enterprise data connectivity, identity, activation, measurement, and data-collaboration services; revenue is primarily subscription-based, with additional Marketplace and Other revenue.
Financial performance
| Metric | Quarter ended June 30, 2022 | Prior-year quarter |
|---|---|---|
| Revenue | $142.2 million | $119.0 million |
| Gross profit / gross margin | $101.2 million / 71.2% | $84.7 million / 71.2% |
| Operating expenses | $126.8 million | $102.3 million |
| Operating loss / margin | $(25.6) million / (18.0)% | $(17.6) million / (14.8)% |
| Net earnings (loss) | $(27.2) million | $17.4 million |
| Diluted earnings (loss) per share | $(0.40) | $0.25 |
| Cash used in operating activities | $33.4 million | $17.2 million |
Revenue increased 19.5% year over year. Subscription revenue was $115.7 million, up 19.9%; Marketplace and Other revenue was $26.5 million, up 17.7%. Management attributed subscription growth mainly to new customers, expansion with existing customers, and higher variable revenue, and Marketplace growth primarily to Data Marketplace activity. U.S. revenue rose 18.2%; international revenue rose 38.7%, though foreign exchange reduced international growth by approximately 10%.
Operating expenses rose 23.9%, faster than revenue, with research and development up 37.1%, sales and marketing up 22.2%, and general and administrative up 11.7%. Management cited headcount investment and, in sales and marketing, higher marketing costs. Stock-based compensation was $24.2 million, versus $18.5 million. Gross margin was unchanged as higher revenue was offset by a similar percentage increase in cost of revenue, including cloud and security costs.
Cash, liquidity, and capital allocation
Cash and cash equivalents were $508.3 million at June 30, 2022, down from $600.2 million at March 31, 2022. Working capital was $581.8 million, down from $631.3 million, primarily due to share repurchases. Net cash used in investing activities was $1.7 million, mainly capital expenditures; net cash used in financing activities was $56.0 million, primarily share repurchases. The balance sheet presents no debt balance. Management said existing cash should be sufficient for working capital and capital expenditures for the foreseeable future.
Accounts receivable was $154.6 million, and days sales outstanding increased to 99 days from 94 at March 31, 2022. The company repurchased 2.1 million shares for $60.1 million during the quarter. Its $1.0 billion repurchase authorization runs through December 31, 2022; $207.8 million remained available at quarter-end.
Outlook, risks, and notable items
The filing provides no specific revenue or earnings guidance. Management noted that the pandemic had not materially adversely affected the business to date, while emphasizing uncertainty around future effects. It also cited inflation, rising interest rates, customer collections, capital-market access, and potential business disruption as liquidity risks. If the tax-law requirement to capitalize and amortize research and development expenditures is not changed, management estimated it could increase fiscal 2023 cash taxes and reduce cash flows by approximately $6 million.
The prior-year quarter included a $30.1 million gain from a distribution related to a retained profits interest in a previously disposed business; this largely explains the swing from prior-year net income to a current-quarter net loss. Current-quarter restructuring charges were $0.7 million. The company reported $184.9 million of purchase commitments and $66.6 million of undiscounted operating lease commitments. It disclosed ordinary-course legal matters, with management stating that material losses beyond recorded accruals were considered remote, while noting ultimate outcomes remain uncertain.
Risks highlighted in the filing include changes to privacy and data-use laws or practices, restricted access to data or tracking technologies, competition, customer cancellations and payment delays, cybersecurity or service interruptions, foreign-exchange movements, and broader economic pressures. The filing states disclosure controls were effective at June 30, 2022 and that there were no material changes in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether revenue growth continues to outpace operating-expense growth and narrows the operating loss.
- Whether cash used in operations and the rise in days sales outstanding reverse or persist.
- The effects of share repurchases on cash balances, remaining authorization, and share count.
- Whether research-cost tax rules change and whether the estimated fiscal 2023 cash-tax impact materializes.
- Developments in privacy regulation, data availability, tracking technology, and the company’s legal matters and contractual obligations.