Summary
LiveRamp's fiscal third quarter update landed alongside a sizeable acquisition. The company agreed to buy Habu, a data clean room software provider, in a cash and stock transaction valued at approximately $200 million. About $170 million was to be paid in cash at closing, with the rest tied to unvested stock awards and holdback agreements for key employees. Management framed the purchase as a way to extend its data collaboration platform across all clouds and walled gardens, and it expects Habu to contribute roughly $18 million of revenue in fiscal 2025. The MD&A says the deal closed on January 31, 2024 for approximately $174 million in cash. The company also said the transaction should help accelerate progress toward Rule of 40 achievement.
Reported results improved across the board. Revenue for the quarter ended December 31, 2023 was $173.9 million, up 9.6% from $158.6 million a year earlier. Growth came from both Subscription and Marketplace and Other, which rose 4.7% and 29.0% respectively. Gross margin improved to 74.2% from 72.7%. Operating income was $15.2 million, a swing from an operating loss of $23.9 million in the prior-year quarter, and operating margin was 8.7% against negative 15.1%. Net income was $14.0 million, or $0.21 per diluted share, compared with a net loss of $29.7 million, or $0.46 a share. Year to date, revenue rose 8.9% to $487.8 million and gross margin improved to 73.0% from 71.7%.
Revenue growth carries a caveat. The prior-year quarter included a one-time $4.0 million benefit from a customer contract settlement, so the comparison flatters the current period. Operating metrics were mixed. Subscription net retention was 101%, flat versus a year earlier. LiveRamp said rising downsell and churn continued to offset customer upsell, driven in part by budget and economic pressure on customers. Annualized recurring revenue was $446.9 million, up 6.0%, slower than the 10.6% growth reported a year earlier. The backlog looks sturdier. Remaining performance obligations rose 34.6% to $546.2 million, and current remaining performance obligations rose 17.9% to $382.4 million. Current deferred revenue was $30.0 million, up 85.0%.
Cash generation improved. Operating cash flow was $16.6 million for the quarter, up 5.0% from $15.8 million, and $78.0 million for the nine months against $3.8 million a year earlier. Capital expenditures were $2.2 million in the quarter. The company held $498.9 million in cash at December 31, 2023, with about $18.0 million of that outside the United States. Days sales outstanding stretched to 106 days from 95 days at March 31, 2023. LiveRamp repurchased 0.3 million shares for $10.0 million during the quarter, compared with 2.3 million shares for $49.9 million a year earlier.
LiveRamp will report complete third quarter results on February 8, 2024, and plans to give an updated outlook for fiscal 2024 at that point. The company said the Habu acquisition should not have a material impact on fiscal 2024 revenue or non-GAAP operating income, though it will weigh on GAAP operating income through higher non-cash stock compensation, purchased intangible amortization and one-time transaction related expenses. The figures in the release are preliminary and unaudited, and could shift during the closing process. The deal had been expected to close in the fiscal fourth quarter before it was completed in January.
Risk sits in a few places. Customer budget pressure and elevated churn are capping subscription net retention and ARR growth. Integrating Habu brings the usual execution and retention risk. LiveRamp also flagged that client use of data on its platform could be restricted if industry use of third-party cookies and tracking technology declines because of platform changes, regulation or increased user controls.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $173.9M | $159.9M | +8.8% | $158.6M | +9.6% |
| Gross profit | $128.9M | $118.7M | +8.7% | $115.3M | +11.8% |
| Gross margin | 74.2% | 74.2% | -0.1 pp | 72.7% | +1.5 pp |
| Research & development | $37.8M | $33.7M | +12.0% | $43.2M | -12.5% |
| Sales & marketing | $46.2M | $44.1M | +4.7% | $47.7M | -3.1% |
| General & administrative | $27.2M | $26.0M | +4.7% | $36.7M | -25.7% |
| Total operating expenses | $113.7M | $110.5M | +3.0% | $139.3M | -18.3% |
| Operating income (loss) | $15.2M | $8.2M | +85.2% | -$23.9M | +163.5% |
| Operating margin | 8.7% | 5.1% | +3.6 pp | -15.1% | +23.8 pp |
| Net income (loss) | $14.0M | $4.9M | +187.4% | -$29.7M | +147.1% |
| Net margin | 8.0% | 3.0% | +5.0 pp | -18.7% | +26.8 pp |
| Diluted EPS | $0.21 | $0.07 | +$0.14 | -$0.46 | +$0.67 |
| Customers | 105 | 500 | -79.0% | 94 | +11.7% |
| Net retention rate | 101.0% | 101.0% | ±0.0 pp | 101.0% | ±0.0 pp |
Risks
Customer budget and economic pressures are driving elevated downsell and churn activity that continues to substantially offset customer upsell. Subscription net retention was flat at 101% for the quarter ended December 31, 2023 versus 101% a year earlier, and ARR growth slowed to 6.0% from 10.6%.
International gross margins decreased to 39.6% from 51.6% in the quarter and to 43.1% from 53.2% year to date, and the company recorded a $2.8 million APAC goodwill impairment in the nine months ended December 31, 2023.
The company completed the Habu acquisition for approximately $174 million in cash and assumed unvested equity awards. Integration and merger costs totaled $1.2 million in the quarter, with additional non-cash stock compensation of approximately $26 million expected over vesting periods, creating execution and dilution risk.
Management cites risk of recession, military conflicts in Europe and the Middle East, cost increases, rising interest rates, capital markets volatility, bank failures, and inflationary pressures that could impair collections, raise the cost of capital, and force the company to curtail operations if it cannot raise funds.
Days sales outstanding increased to 106 days at December 31, 2023 from 95 days at March 31, 2023, and net accounts receivable rose $42.0 million to $199.4 million, partly due to Data Marketplace gross receivables.
The effective tax rate was 39% for the quarter and 63% year to date, reflecting the capitalization of R&D expenditures under IRC Section 174, a valuation allowance, and nondeductible stock-based compensation.
SaaS KPIs
All quarters →Annualized Recurring Revenue (ARR)
Subscription CRPO
Summary, forecast, risks and KPIs are extracted from LiveRamp Holdings, Inc.'s SEC filings for Q3 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.