LiveRamp Holdings, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2019. This is LiveRamp’s fiscal 2020 second quarter; the filing-period metadata’s “2019 Q2” does not match the period stated in the filing. Unaudited results are presented in U.S. dollars.
Business context
LiveRamp operates as one segment, providing a data connectivity and identity platform, including subscription services and marketplace transactions. The prior-year Acxiom Marketing Solutions business is presented as discontinued operations after its sale. LiveRamp acquired Faktor in April 2019 and Data Plus Math (DPM) on July 2, 2019.
Key financial metrics
| Metric | Three months ended September 30 | Six months ended September 30 |
|---|---|---|
| Revenue | $90.1 million, up 39% year over year | $172.7 million, up 36% |
| Gross profit / margin | $48.7 million / 54.0%, versus 62.3% | $94.8 million / 54.9%, versus 62.2% |
| Operating expenses | $99.0 million, up 26% | $193.4 million, up 32% |
| Operating loss | $50.3 million | $98.6 million |
| Net income (loss) | $(40.2) million; $(0.59) per diluted share | $(82.3) million; $(1.21) per diluted share |
| Operating cash flow | Management reports $28.9 million used | $44.2 million used |
Quarterly revenue growth reflected subscription revenue of $72.0 million, up 31%, and Marketplace and Other revenue of $18.2 million, up 83%. Management cited new customer wins and expansion with existing customers. For the six-month period, cash used in investing activities was $112.4 million, including $105.4 million for acquisitions; cash used in financing was $112.3 million, including $100.5 million of stock repurchases.
At September 30, cash and cash equivalents were $777.4 million, plus $14.8 million restricted cash held in acquisition escrow. Current assets were $947.1 million and current liabilities $123.4 million. The balance sheet reports no debt line item; the filing text does not provide a clear debt total. Working capital was approximately $823.7 million. Management said available cash should cover working capital and capital expenditure needs for the foreseeable future.
Material changes and unusual items
- Gross margin fell, principally due to higher hosting and security costs and accelerated depreciation. Six-month results included $3.6 million of accelerated depreciation related to the move to a cloud-based data center solution.
- Quarterly net loss improved from the prior-year continuing-operations loss of $41.2 million, but the prior-year reported net income of $20.6 million included $61.8 million of after-tax discontinued-operations earnings. Six-month prior-year net income likewise included $86.6 million from discontinued operations; headline net income comparisons are therefore not like-for-like.
- DPM’s acquisition consideration was approximately $118.0 million. Its purchase-price allocation, including $89.9 million of goodwill and $35.0 million of intangibles, remained preliminary. Faktor was acquired for approximately $4.5 million.
- Stock-based compensation expense was $42.0 million for the six months, versus $35.5 million. The company also repurchased 2.1 million shares for $100.5 million during the six months; $450.5 million remained under its $1.0 billion authorization through December 2020.
- The company adopted the new lease standard on April 1, 2019. At September 30, it reported $22.6 million of discounted operating lease liabilities. Separately, restructuring-related lease accruals were $5.2 million and depend partly on expected sublease receipts.
Outlook, risks and contingencies
The filing provides no specific revenue, earnings, or margin guidance. Management described continued investment in products and growth initiatives and stated that cash resources are sufficient for foreseeable operating and capital needs. It identified risks including privacy and data-protection laws and consumer opt-outs, data availability, competition, customer cancellations, security or service interruptions, and acquisition integration. A lost customer’s revenue-sharing arrangement reduced Marketplace and Other revenue by $1.6 million in the quarter and $4.6 million year to date. Management said no pending legal matter was considered material, while noting that adverse outcomes beyond recorded accruals could affect results. The filing also disclosed $21.2 million of uncertain-tax-position liabilities whose payment timing could not be predicted.
Important facts for investors to verify
- Confirm the filing’s fiscal-period convention: quarter ended September 30, 2019 is fiscal Q2 2020.
- Assess whether margin pressure from hosting, security, and cloud transition costs persists as revenue scales.
- Track the lost customer’s effect on marketplace revenue and the concentration and durability of customer and data-provider relationships.
- Review DPM’s finalized purchase-price allocation, integration progress, and acquisition-related compensation costs.
- Monitor cash use, share repurchases, lease and restructuring obligations, and the company’s ability to fund growth while operating at a loss.
- Reconcile the management discussion’s quarterly operating-cash-flow figure with the six-month cash-flow statement; the filing reports $28.9 million used for the quarter and $44.2 million used year to date.