LiveRamp Holdings, Inc. — Form 10-Q Summary
Business context and reporting period. LiveRamp provides an enterprise data connectivity platform, including subscription services and marketplace transactions. This fiscal third-quarter report covers the three and nine months ended December 31, 2020; comparisons are with the corresponding 2019 periods. The company reports as one operating segment. Financial statements are unaudited.
Key financial results
| Metric | Q3 FY2021 | Q3 FY2020 | Nine months FY2021 | Nine months FY2020 |
|---|---|---|---|---|
| Revenue | $119.8m | $102.2m | $323.9m | $274.9m |
| Gross margin | 69.0% | 62.9% | 67.1% | 57.9% |
| Operating loss | $15.8m | $41.5m | $68.6m | $140.1m |
| Net loss | $11.7m | $38.0m | $57.4m | $120.4m |
| Diluted loss per share | $0.18 | $0.56 | $0.87 | $1.77 |
Quarterly revenue rose 17.2% year over year: subscription revenue increased 14.6% and Marketplace and Other revenue increased 27.4%. For the nine months, revenue grew 17.8%, led by subscription growth of 18.2%. Management attributed subscription gains mainly to new customers and expansion with existing customers.
- Profitability: Q3 operating margin improved to negative 13.2% from negative 40.6%. Management cited revenue growth, lower identity graph and security costs, lower stock compensation, and reduced travel and other spending. Lower costs and acquired-intangible amortization also supported the gross-margin improvement; higher cloud infrastructure costs partly offset it.
- Cash flow: For the nine months, operating cash flow was negative $2.7m, versus negative $28.4m a year earlier. Investing cash flow was negative $24.8m and financing cash flow negative $43.0m. The MD&A separately reports quarterly operating cash flow of $14.7m versus $15.8m in the prior-year quarter.
- Liquidity and debt: Cash and cash equivalents were $663.4m at December 31, 2020, compared with $717.8m at March 31, 2020; working capital was $701.3m. The balance sheet reports no debt. Management said available cash should meet working-capital and capital-expenditure needs for the foreseeable future, while warning that COVID-19-related collection or financing disruption could affect liquidity.
Material changes and other developments
- Quarterly operating expenses fell 6.9% year over year to $98.4m, while nine-month operating expenses declined 4.4% to $286.0m. R&D increased, partly reflecting product investment; sales and marketing and G&A decreased, in part due to lower stock compensation and reduced travel and other costs.
- Cash declined by $54.4m from March 31 to December 31. Nine-month cash use included $42.3m for repurchases of 1.3m shares, $17.7m for acquisitions net of cash received, and a $10m data-revenue-share prepayment. The company had $326.4m remaining under its $1.0bn repurchase authorization, which runs through December 31, 2022.
- Remaining fixed customer-contract performance obligations were $333.1m, with $230.9m expected to be recognized over the next 12 months.
- On February 8, 2021, LiveRamp announced an agreement to acquire DataFleets for approximately $68m, plus assumed equity and retention incentives; closing was expected by March 31, 2021.
Outlook, risks and contingencies
The filing provides no formal revenue or earnings guidance. Management said COVID-19 had not materially affected the financial statements through December 31, but nine-month revenue was reduced by $2.1m from customer service concessions, some of which were expected to continue. Reduced travel, event and promotional costs helped results, but management cautioned these savings may not recur and may not offset remote-work and other pandemic-related costs.
Management disclosed that subscription revenue could be negatively affected by approximately $30m in fiscal 2022 as several platform customers transition away from cookie-based components of LiveRamp’s digital identity graph. The filing also identifies risks involving data privacy and regulation, restrictions on cookies and tracking technology, cybersecurity, customer retention and collections, competition, and the uncertain effects of COVID-19. Legal proceedings arise in the ordinary course; management considers material losses beyond recorded accruals remote, but outcomes remain uncertain. Purchase and other commitments totaled $247.3m; uncertain tax-position liabilities of $25.6m were not included in that commitment schedule.
Investor verification points
- Track whether subscription growth and Marketplace revenue growth continue, particularly after the disclosed potential fiscal 2022 customer transitions.
- Assess cash conversion, receivables and collections: nine-month operating cash flow remained negative, and days sales outstanding increased to 89 from 80 at March 31, 2020.
- Review gross-margin durability, including cloud infrastructure costs, data costs, customer concessions, and savings that may have resulted from reduced travel and events.
- Verify the cost, closing, and integration effects of the announced DataFleets acquisition, as well as ongoing repurchases and equity-based compensation.
- Monitor COVID-19 impacts, data privacy and cookie-related regulatory or technical changes, and the company’s contractual, legal, and commitment exposures.