Business context and reporting period
LiveRamp Holdings, Inc. (NYSE: RAMP) filed this Form 10-K for the fiscal year ended March 31, 2021. Although the request metadata refers to “2020 Q4,” the filing reports full-year fiscal 2021 results, with fiscal 2020 as the main comparable period. LiveRamp operates one segment: an enterprise data connectivity platform, primarily sold through annual or multiyear subscriptions.
Key financial metrics
Amounts are in U.S. dollars. The filing reports figures in thousands; values below are rounded to millions except per-share data and percentages.
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $443.0 million | $380.6 million |
| Subscription revenue | $356.6 million | $305.7 million |
| Marketplace and other revenue | $86.4 million | $74.9 million |
| Gross profit / gross margin | $299.0 million / 67.5% | $227.9 million / 59.9% |
| Operating expenses | $419.6 million | $408.8 million |
| Operating loss / operating margin | $(120.5) million / (27.2)% | $(180.9) million / (47.5)% |
| Net loss from continuing operations | $(90.3) million | $(125.3) million |
| Diluted loss per share from continuing operations | $(1.36) | $(1.85) |
| Net cash used in operating activities | $(20.6) million | $(28.6) million |
At March 31, 2021, cash and cash equivalents were $572.8 million, current assets were $825.7 million, current liabilities were $165.2 million, and working capital was $660.5 million. The balance sheet lists no debt balance; the filing provides no separate debt-maturity schedule. Cash and cash equivalents declined from $717.8 million a year earlier. Operating, investing, and financing activities used $20.6 million, $87.9 million, and $43.5 million, respectively, during FY2021. The company reported no off-balance-sheet arrangements.
Material changes versus the prior comparable period
- Revenue grew 16.4%, driven by subscription growth of 16.7% and Marketplace and other growth of 15.4%. Subscription gains reflected new customers and expansion within existing customers, partly offset by lower variable revenue.
- Gross margin rose to 67.5% from 59.9%; management cited revenue growth and lower identity-graph and security costs, partly offset by higher cloud infrastructure costs.
- Operating loss narrowed by $60.4 million. Research and development expense increased 27.5% to $135.1 million, while sales and marketing expense fell 6.0% and general and administrative expense fell 4.3%.
- Net loss from continuing operations improved to $90.3 million from $125.3 million. FY2020 included $15.4 million of other income, compared with $0.3 million of other expense in FY2021.
- Operating cash use improved by $8.0 million year over year, while investing cash use declined to $87.9 million from $116.2 million. FY2021 investing included $76.0 million of net acquisition payments.
- R&D spending increased to $135.1 million from $106.0 million. The company had 70 customers with subscription contracts exceeding $1 million annually, up from 53.
Outlook, management commentary, risks and unusual items
- Revenue outlook: The filing cautions that subscription revenue could be reduced by approximately $30 million in FY2022 as several customers transition away from cookie-based components of LiveRamp’s digital identity graph. Management gave no overall revenue or earnings forecast in the provided filing text.
- Investment: Management expects R&D spending as a percentage of revenue to remain at similar levels in FY2022. It highlights customer growth, expansion within existing accounts, product development, data collaboration and international expansion as strategic priorities.
- COVID-19: Management said the pandemic had not materially adversely affected sales or operations, but reported $2.1 million of revenue impact from customer service concessions in FY2021 and expected some concessions to extend into later periods. Reduced travel and event costs helped results, but may not recur. The full future impact remains uncertain.
- Privacy, identity and data availability: Risks include privacy-law changes and compliance costs, invalidation or uncertainty around cross-border transfer mechanisms, reduced access to third-party data, and browser or platform restrictions on cookies and identifiers. Google’s announced cookie phase-out and changes by other platforms could affect LiveRamp and its customers; the company says it is developing non-cookie alternatives.
- Other business risks: Customer renewals and expansion, competition, reliance on data suppliers and third-party cloud providers, cybersecurity, and customer concentration are material considerations. The top ten clients generated about 33% of FY2021 revenue; Interpublic Group accounted for 11% when related contractual relationships are aggregated.
- Liquidity and commitments: Management believes available cash is sufficient for working capital and capital expenditures for the foreseeable future. Purchase commitments totaled $233.6 million, primarily for data, hosting and software services. Uncertain tax position liabilities were $26.2 million; timing of payment is not predictable.
- Acquisitions and unusual items: FY2021 acquisitions included DataFleets, for approximately $67.2 million of consideration, and Acuity Data, for approximately $2.9 million in cash. DataFleets included an $18.1 million employee holdback settled in shares and recognized as stock compensation over time. Total noncash stock compensation was $111.7 million, including $21.4 million associated with accelerated vesting in March 2021. CARES Act loss carrybacks were expected to produce tax refunds of approximately $28 million for FY2021 and $33 million for FY2020, both expected in FY2022.
- Share repurchases: The company repurchased 1.3 million shares for $42.3 million in FY2021. The authorized program had $326.4 million of remaining capacity at March 31, 2021 and runs through December 31, 2022. No dividends were paid, and management had no near-term dividend plans.
- Contingencies and controls: LiveRamp disclosed ordinary-course legal matters and stated that a material loss beyond recorded accruals was considered remote, while noting the ultimate liability is uncertain. The auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Confirm the FY2022 revenue effect and timing of the approximately $30 million expected subscription impact from cookie-based customer transitions.
- Track whether non-cookie identity products and data collaboration offerings offset cookie, privacy-regulation and data-supplier risks.
- Review subsequent cash collections and DSO, which increased to 86 days from 80, and monitor realization and timing of the expected tax refunds.
- Assess the sustainability of margin improvement against higher R&D investment, cloud infrastructure costs, stock-based compensation and acquisition-related expenses.
- Monitor major-customer renewals and concentration, particularly the 11% revenue contribution attributed to Interpublic Group.
- Review acquisition integration, contingent employee payments, purchase commitments and the remaining share-repurchase authorization.