LiveRamp Holdings, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended March 31, 2020. This is an annual report, not a filing for calendar 2019 Q4; the filing separately reports unaudited results for the quarter ended March 31, 2020. Amounts are in U.S. dollars.
Business context and reporting period
LiveRamp operates as one segment, providing an enterprise data connectivity and identity-resolution platform used to connect and activate customer data across marketing channels. Revenue is primarily subscription-based, with additional transactional marketplace and other revenue. During FY2020, LiveRamp acquired Data Plus Math (DPM), a media-measurement company, and Faktor, a consent-management platform. DPM’s results were included from July 2, 2019; Faktor’s from April 2, 2019.
Financial results and liquidity
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $380.6 million | $285.6 million | +33.2% |
| Subscription revenue | $305.7 million | $236.7 million | +29.1% |
| Marketplace and other revenue | $74.9 million | $48.9 million | +53.1% |
| Gross profit / gross margin | $227.9 million / 59.9% | $164.9 million / 57.7% | Margin +2.2 percentage points |
| Operating loss | $180.9 million | $198.1 million | Loss narrowed |
| Net loss from continuing operations | $125.3 million | $133.9 million | Loss narrowed |
| Diluted loss per share from continuing operations | $1.85 | $1.79 | Loss per share increased |
| Cash used in operating activities | $28.6 million | $2.0 million | Use increased |
Revenue growth reflected new customer wins and expansion within existing accounts, as well as growth in Data Marketplace and TV transactions. Operating expenses rose 12.6% to $408.8 million, including increased investment in product development and sales. Operating margin improved to negative 47.5% from negative 69.4%.
At March 31, 2020, cash and cash equivalents were $717.8 million, with an additional $14.8 million of restricted cash. Current assets were $896.4 million and current liabilities were $161.4 million; reported working capital was $735.0 million. The balance sheet reported no long-term debt. FY2020 investing cash outflow was $116.2 million, including $105.4 million for acquisitions; financing cash outflow was $202.0 million, including $182.2 million of share repurchases.
For the quarter ended March 31, 2020, revenue was $105.7 million, gross profit was $68.8 million, and net loss from continuing operations was $4.9 million.
Material changes versus the prior comparable period
- Revenue accelerated from 29.8% growth in FY2019 to 33.2% in FY2020. Subscription revenue grew 29.1%; marketplace and other revenue grew 53.1%, following minimal growth in FY2019.
- Gross margin increased to 59.9%, supported by revenue growth and lower identity-graph data costs, partly offset by higher security, hosting, TV direct costs, and acquired-intangible amortization.
- Operating loss narrowed, helped by higher gross profit and lower stock-compensation and contract-termination charges than in FY2019.
- FY2019 net earnings of $1.03 billion were substantially driven by the $1.7 billion pre-tax gain on the sale of Acxiom Marketing Solutions (AMS). FY2020’s reported net loss therefore is not directly comparable to FY2019’s total net earnings; continuing operations remained loss-making in both years.
- Cash and cash equivalents declined from $1.06 billion to $717.8 million. FY2020 cash used in operating activities increased, while acquisitions and repurchases were significant cash uses.
Outlook, risks, contingencies, and unusual items
- Management expected R&D investment as a percentage of revenue to remain at similar levels in FY2021. The filing provides no specific revenue, earnings, or cash-flow guidance.
- Management said COVID-19 had not materially adversely affected sales or operations through the filing date, but warned that reduced advertising budgets, delayed purchasing, customer concessions, slower collections, and remote-work security risks could affect future results and liquidity. Management believed available cash would cover working-capital and capital-expenditure needs for the foreseeable future, subject to pandemic-related uncertainty.
- Key business risks include customer renewal and concentration, reliance on third-party data suppliers, competition, privacy regulation, and restrictions on third-party cookies and other tracking technology. The ten largest clients represented about 35% of FY2020 revenue; Interpublic Group accounted for 14% when related contracts are aggregated.
- The company recorded $89.4 million of non-cash stock-based compensation and $19.0 million of acquired-intangible amortization in FY2020. It recognized $5.0 million in gains, losses, and other items, including restructuring and contract-termination charges.
- The CARES Act enabled carryback of FY2020 tax losses; the company expected an approximately $32 million tax refund. Uncertain tax-position liabilities were $25.0 million in contractual disclosures; gross unrecognized tax benefits were $23.4 million, excluding accrued interest and penalties.
- Management stated that no pending legal matter had potential exposure considered material to the consolidated financial statements. The filing reports $103.6 million of purchase and other commitments, in addition to lease obligations.
- The company repurchased 4.4 million shares for $182.2 million in FY2020. The board-authorized program had $368.8 million of remaining capacity through December 31, 2020. No dividends were paid, and management had no near-term dividend plans.
Important facts for investors to verify
- Review the audited financial statements and reconcile the continuing-operations loss, total net loss, and per-share figures; FY2019 total earnings were unusually affected by the AMS sale.
- Assess whether subscription growth, customer expansion, and marketplace growth persist, and monitor the contribution from acquired DPM and Faktor operations.
- Track operating cash flow, receivable collections, bad-debt expense, and the expected CARES Act tax refund; FY2020 operating cash use rose to $28.6 million.
- Evaluate exposure to major customers and the availability of licensed third-party data, alongside privacy-law changes and the transition away from third-party cookies.
- Monitor stock-based compensation, acquisition-related holdbacks, repurchase spending, and the use of the remaining buyback authorization.