LiveRamp Holdings, Inc. Q3 FY2023 earnings

LiveRamp closed fiscal 2023 third quarter with revenue of $158.6 million, up 12.8% from $140.6 million in the prior-year quarter. Year to date revenue reached $448.0 million, up 15.8% from $386.9 million. Gross profit followed a similar path, rising 13.0% to $115.3 million in the quarter and 15.2% to $321.3 million year to date. Gross margin was 72.7% in the quarter, up 0.1 percentage points from 72.6%, while the year-to-date gross margin slipped to 71.7% from 72.1%.

Profitability moved in the opposite direction. GAAP operating loss widened to $23.9 million from $13.8 million, and operating margin fell to negative 15.1% from negative 9.8%. Net loss widened to $29.7 million from $15.4 million, producing diluted loss per share of $0.46 compared with $0.23. Year to date net loss was $87.3 million compared with $4.4 million, and diluted loss per share was $1.31 compared with $0.07. Operating margin year to date was negative 17.6% compared with negative 9.7%.

On a non-GAAP basis, the picture was brighter. Non-GAAP operating income was $26 million compared with $15 million a year earlier, and non-GAAP operating margin of 16% expanded by 6 percentage points. Non-GAAP earnings per share were $0.28. Operating cash flow was $15.8 million for the quarter. Year to date operating cash flow was $3.8 million, down 80.3% from $19.1 million. Capital expenditures were $0.18 million in the quarter, down 86.4% from $1.32 million, and $4.6 million year to date, up 75.4% from $2.6 million. The press release reported free cash flow to equity of $16 million for the quarter, compared with $24 million a year earlier.

Customer metrics showed steady expansion. LiveRamp ended the quarter with 910 direct subscription customers, up from 890 a year earlier, and 94 customers whose subscription contracts exceed $1 million in annual revenue, up from 86. Subscription net retention was 101%, and platform net retention was 102%. Current remaining performance obligations were $324 million, up 12% from the prior-year period. Total remaining performance obligations were $405.7 million, up 6.8% from $380.0 million, and deferred revenue was $16.2 million, up 8.5% from $14.9 million. The Authenticated Traffic Solution network includes more than 160 supply-side and demand-side platforms live or committed to bid on RampID and ATS, along with more than 2,000 publishers representing more than 12,000 deployed domains. New collaborations with AWS, Pinterest, and Albertsons highlight the push into clean rooms and retail media.

Management is taking costs out of the business. On November 3, 2022, LiveRamp announced a reduction in force involving approximately 10% of full-time employees and a planned downsizing of its real estate footprint. These actions are expected to produce annualized operating expense savings of $30 million to $35 million beginning in the fourth quarter of fiscal 2023. For the fourth quarter of fiscal 2023, guidance calls for revenue growth of 4% to 7% year over year, a GAAP operating loss, and non-GAAP operating income of $13 million to $16 million. For the full fiscal year 2023, the company expects revenue growth of approximately 13% year over year, a GAAP operating loss, and non-GAAP operating income of $60 million to $63 million.

Capital returns remain a priority. The company repurchased approximately 2.3 million shares for $50 million in the quarter and 6.1 million shares for $150 million fiscal year to date. On December 20, 2022, the board extended the share repurchase program by two years to December 31, 2024 and increased the authorization by $100 million, leaving $218 million available. Since the program began in August 2011, LiveRamp has returned approximately $1.4 billion to shareholders. Risks include recession, the ongoing COVID-19 pandemic, the military conflict between Russia and Ukraine, cost increases, rising interest rates, capital markets volatility, and general inflationary pressures. The company also faces the decline of third-party cookies, changes in privacy regulation, competition, and the risk of a significant data breach. The capitalization of research and development expenditures under IRC Section 174 is expected to increase cash taxes and reduce cash flows by approximately $9 million in fiscal 2023.