LiveRamp Holdings, Inc. — Q1 FY2022 Form 10-Q
Business context and period: LiveRamp provides an enterprise data-connectivity platform, including identity, activation, measurement, data collaboration and marketplace services. This unaudited quarter ended June 30, 2021, compared with the three months ended June 30, 2020. The company reports one operating segment.
Financial highlights
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Revenue | $119.0 million | $99.4 million |
| Gross profit / gross margin | $84.7 million / 71.2% | $65.0 million / 65.3% |
| Operating loss / operating margin | $17.6 million / (14.8%) | $26.0 million / (26.2%) |
| Total other income | $30.6 million | $0.5 million |
| Net earnings (loss) | $17.4 million; $0.25 diluted EPS | $(21.7) million; $(0.33) diluted EPS |
| Cash from operating activities | $(17.2) million | $(23.6) million |
- Revenue grew 19.7%: subscription revenue rose 16.4% to $96.5 million, while Marketplace and Other rose 36.4% to $22.5 million. Growth reflected new customer wins, expansion, higher variable revenue and Data Marketplace volume. The prior-year quarter included $1.4 million of COVID-related service concessions.
- Operating expenses increased 12.5% to $102.3 million, including higher research and development expense, primarily from headcount and professional services. Gross margin improved mainly because revenue increased while cost of revenue was approximately flat.
- Cash and cash equivalents were $541.0 million at June 30, 2021, down from $572.8 million at March 31, 2021. Working capital was $641.3 million. Current liabilities were $130.2 million; the balance sheet reports no borrowing balance, and the filing does not identify outstanding debt.
- Cash used in investing activities was $22.2 million of net inflow, including a $31.0 million distribution from a retained profits interest, partly offset by $8.4 million net cash paid for the Diablo acquisition and $0.4 million of capital expenditures. Financing used $37.2 million, including $29.1 million for share repurchases.
Material changes, outlook and risks
- Reported net income included a nonrecurring $30.1 million gain associated with the $31.0 million cash distribution from the retained profits interest. The company still reported an operating loss; investors should distinguish this item from operating performance.
- Management expects subscription revenue to be approximately $22 million lower over the remainder of fiscal 2022 as several platform customers transition away from cookie-based digital-identity components to alternative solutions. The filing provides no broader numerical revenue or earnings guidance.
- Management said existing cash should meet working-capital and capital-expenditure needs for the foreseeable future, while cautioning that COVID-19-related collection or market disruptions could affect liquidity. DSO increased to 92 days from 86 days at March 31, 2021.
- The April 2021 acquisition of Diablo.AI was completed for approximately $9.7 million in cash, including a holdback; its technology is intended to support LiveRamp’s platform and identity relaunch.
- Principal disclosed risks include privacy and data-use regulation, restrictions or technical changes affecting cookies and tracking, data-provider or customer dependence, cybersecurity and service interruptions, competition, COVID-19 uncertainty, and foreign-exchange exposure. The company disclosed ordinary-course legal matters, but management considered material losses beyond recorded accruals remote; outcomes remain uncertain.
- Purchase commitments totaled $224.3 million, primarily for data, hosting and software services. The repurchase program had $297.4 million of remaining capacity at June 30, 2021. The company reported no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the anticipated approximately $22 million subscription-revenue impact from customer transitions is consistent with subsequent results and management’s updated outlook.
- Underlying operating performance excluding the $30.1 million retained-interest gain, including operating-loss trends, expense growth and cash generation.
- Whether the gross-margin improvement is sustained and whether investment in research and development and sales capacity produces expected growth.
- Cash conversion, receivables collection and DSO trends, alongside the company’s cash balance, commitments and continued share repurchases.
- Progress integrating Diablo and execution of the identity relaunch, together with developments in privacy regulation and cookie alternatives.