LiveRamp Holdings, Inc. Q1 FY2024 earnings

LiveRamp reported fiscal 2024 first-quarter revenue of $154.1 million, up 8.3% from the prior-year quarter. GAAP gross profit rose 7.1% to $108.4 million, while gross margin slipped to 70.4%, down 0.8 percentage points from a year earlier. GAAP operating income was $2.3 million, a swing to a profit, and operating margin was 1.5%, up 19.5 percentage points. The company also reported a net loss of $1.6 million, or $0.02 per diluted share, compared with a larger loss in the prior-year quarter. On a non-GAAP basis, gross profit was $112 million and gross margin was 73%, down 2 percentage points; operating income was $21 million and operating margin was 14%, up 11 percentage points; and diluted earnings per share was $0.29. Adjusted EBITDA was $21.6 million, compared with $5.1 million a year earlier.

Operational metrics were mixed. Remaining performance obligations were $497.2 million, up 24.9%, and current remaining performance obligations were $351 million, up 19%. Deferred revenue, current portion only, rose 84.7% to $27.3 million. Annualized recurring revenue was $426.1 million, up 4.1%, but subscription net retention fell to 98% from 113%. The company had 915 direct subscription customers, up from 910, and 96 customers with subscription contracts above $1 million in annual revenue, up from 90. The company noted that RPO growth came from several large multi-year renewals, including one with a large customer, while current RPO growth came from new customer additions and those renewals. Its Authenticated Traffic Solution has more than 165 supply-side and demand-side platforms live or committed, over 14,000 publisher domains, and over 70% of the comScore 100 publishers. LiveRamp integrated Google Display Video 360's PAIR in May 2023 and debuted native applications in the Snowflake Native App Framework in June 2023.

Cash generation flipped positive. Operating cash flow was $25.7 million, up from a use of cash in the prior-year quarter, and the quarter benefited from a $29 million tax refund for fiscal 2021. Free cash flow to equity was $25.6 million, compared with negative $35.1 million a year earlier. Capital expenditures were $53 thousand, down 97% from the prior-year quarter. The company repurchased 0.8 million shares for $20.2 million and had $197.6 million of remaining repurchase capacity.

Guidance points to slower near-term growth. For the second quarter of fiscal 2024, management expects revenue of $152 million, an increase of 3%. For the full fiscal year, management guided revenue to $620 million to $630 million, an increase of 4% to 6%. Non-GAAP operating income guidance is $19 million for the second quarter and $90 million to $93 million for the full fiscal year.

Risks are mostly demand and execution related. Subscription net retention dropped to 98%, and annualized recurring revenue growth slowed to 4.1%. Management attributed the decline to downsell and churn, customer budget and economic pressures, and lower variable usage. The company expects subscription revenue growth in fiscal 2024 to be lower than in fiscal 2023. International gross margin pressure and a high tax rate from IRC Section 174 also weigh on results. Other risks in the filing include reliance on renewals and new customer additions, competition for talent, data supplier and partner dependence, privacy regulation, third-party cookie changes, security breaches, intellectual property claims, and international instability. The company also flagged rising interest rates, inflation, recession risk, bank failures, and capital markets volatility as factors that could affect liquidity and customer spending.