LiveRamp Holdings, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2020, LiveRamp’s first quarter of fiscal 2021. Comparative figures are for the three months ended June 30, 2019, unless stated otherwise. Amounts are in U.S. dollars.
Business context
LiveRamp provides an enterprise data-connectivity platform, including identity resolution, onboarding, Safe Haven, analytics and measurement, and consent-management services. It reports as one operating segment. Revenue comes primarily from subscriptions and from marketplace and other transactions.
Financial results
| Metric | Q1 FY2021 | Q1 FY2020 |
|---|---|---|
| Revenue | $99.4 million | $82.5 million |
| Gross profit / gross margin | $65.0 million / 65.3% | $46.1 million / 55.9% |
| Operating expenses | $91.0 million | $94.5 million |
| Operating loss | $26.0 million | $48.4 million |
| Net loss / diluted loss per share | $21.7 million / $0.33 | $42.1 million / $0.61 |
| Cash used in operating activities | $23.6 million | $15.4 million |
Revenue increased 20.5% year over year: subscription revenue rose 21.4% to $82.9 million, and marketplace and other revenue rose 16.5% to $16.5 million. U.S. revenue increased 22.0%; international revenue increased 1.4%. The company said COVID-19-related customer service concessions reduced quarterly revenue by $1.4 million.
Gross margin improved primarily with revenue growth, lower identity-graph data costs and reduced security costs; prior-year accelerated depreciation also contributed to the comparison. Operating expenses declined 3.7%, although research and development expense increased 13.8%. Operating margin improved to negative 26.2% from negative 58.6%. Other income was $0.5 million, down from $5.9 million. The $3.8 million income-tax benefit included anticipated refunds from net operating loss carrybacks under the CARES Act.
Balance sheet and liquidity
At June 30, 2020, cash and cash equivalents were $649.9 million, restricted cash was $14.8 million, and working capital was $699.4 million. Cash, cash equivalents and restricted cash totaled $664.7 million, down $67.9 million from the start of the quarter. Current assets were $825.3 million and current liabilities were $125.9 million. Net accounts receivable was $96.5 million; days sales outstanding increased to 88 from 80 at March 31, 2020. The presented balance sheet does not show a borrowing or debt balance.
Operating cash outflow worsened year over year, largely reflecting payment timing for accrued compensation and suppliers, higher receivables, and a $10 million data-revenue-share prepayment. Investing cash outflow was $1.5 million. Financing cash outflow was $43.0 million, including $42.3 million of share repurchases. Management said existing cash should cover working-capital and capital-expenditure needs for the foreseeable future, while cautioning that pandemic-related collection or market disruptions could affect liquidity.
Material changes and notable items
- Revenue growth and lower costs substantially narrowed operating and net losses compared with the prior-year quarter.
- Stock-based compensation expense was $16.5 million, versus $18.6 million. The quarter also included $3.6 million in transformation costs and $2.0 million in restructuring charges, including severance and a lease settlement.
- The company repurchased 1.3 million shares for $42.3 million. At quarter-end, $326.4 million remained under the $1.0 billion repurchase authorization, which runs through December 31, 2020.
- After quarter-end, on July 16, 2020, LiveRamp acquired Acuity Data for approximately $3.1 million in cash, with a three-year performance earnout of up to $5.1 million.
- Fixed revenue commitments not yet recognized totaled $339.1 million, including $222.7 million expected to be recognized over the next 12 months.
Outlook, risks and contingencies
The filing provides no specific financial guidance. Management said the full effect of COVID-19 was difficult to estimate: short-term customer concessions had reduced revenue, while lower travel, entertainment and promotional spending benefited expenses during the quarter. Management cautioned that these cost benefits may not persist and that concessions could continue into later periods.
Risks highlighted include weaker customer advertising budgets, delayed purchases or renewals, pricing concessions, longer payment terms and collection delays; changes in privacy regulation or restrictions on cookies and other tracking technologies; data-supplier or customer attrition; security incidents; and uncertainty in the wider economy and financial markets. The company recorded $1.3 million of bad-debt expense and said it was monitoring customer credit. It reported no pending legal matter considered material to its financial statements. Purchase and other commitments totaled $95.8 million; uncertain-tax-position liabilities of $25.3 million were excluded because payment timing could not be predicted.
Important facts for investors to verify
- Whether subscription growth and customer renewals hold up as pandemic-related concessions and advertising-market pressures evolve.
- Receivables, collections, days sales outstanding, and any further credit-loss provisions.
- Whether gross-margin improvement and expense savings persist, particularly after temporary pandemic-related cost reductions.
- Cash use, share-repurchase pace and remaining authorization, alongside contractual commitments and restructuring payments.
- Acquisition accounting and earnout terms for Acuity Data, and the impact of transformation costs and stock-based compensation.