LiveRamp (RAMP) - 2025 Q1 - Quarterly Report

Forward-looking Statements This section outlines the company's forward-looking statements, including financial estimates, operational expectations, and market position, along with factors that could cause actual results to differ Summary of Forward-looking Statements This section details the company's forward-looking statements, covering financial estimates, operational expectations, and market position, alongside factors that could cause actual results to differ materially - Forward-looking statements include management's expectations on macro economy, industry trends, competitive position, data privacy regulations, impact of public health crises, tax legislation, cost savings, financial projections (revenue, operating income, EPS), future operations, stock-based compensation, and benefits from the Habu acquisition[6] - Factors that could cause actual results to differ include risks from change of control, failure to realize benefits from acquisitions (like Habu), asset fair value changes, lengthened sales cycles, inability to motivate/retain employees, global workforce strategy difficulties, inability to sublease office spaces, competitive product introductions, failure to keep up with technology, negative industry changes, inability to protect IP, changes in regulatory/judicial environments affecting data use, data supplier withdrawals, reduced reliance by data purchasers, short-term contracts, unexpected volume-based work, data center issues, security breaches, customer cancellations, service level failures, impact of third-party cookie deprecation, general negative economic conditions, and tax rate changes[7][8][10] - The company cautions readers not to place undue reliance on forward-looking statements, which speak only as of the report date, and disclaims any obligation to update or revise them, except as required by law[12] Part I. Financial Information This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for LiveRamp Holdings, Inc. and its subsidiaries, including balance sheets, statements of operations, comprehensive loss, equity, and cash flows, along with detailed notes explaining significant accounting policies, changes, and specific financial line items Condensed Consolidated Balance Sheets The balance sheet shows a slight decrease in total assets and liabilities, while stockholders' equity saw a minor increase from March 31, 2024, to June 30, 2024 | Metric | June 30, 2024 (Unaudited, thousands) | March 31, 2024 (thousands) | | :--------------------------------------- | :------------------------ | :------------- | | Total current assets | $585,037 | $602,032 | | Total assets | $1,206,256 | $1,231,443 | | Total current liabilities | $189,638 | $216,576 | | Total liabilities and stockholders' equity | $1,206,256 | $1,231,443 | | Total stockholders' equity | $951,876 | $949,135 | - Cash and cash equivalents decreased from $336,867 thousand at March 31, 2024, to $310,396 thousand at June 30, 2024[14] - Trade accounts receivable, net, increased from $190,313 thousand to $206,305 thousand[14] Condensed Consolidated Statements of Operations The company reported a net loss of $7.5 million for the three months ended June 30, 2024, a significant increase from the $1.6 million net loss in the prior year, despite a 14.2% increase in revenues | Metric | Three months ended June 30, 2024 (thousands) | Three months ended June 30, 2023 (thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Revenues | $175,961 | $154,069 | | Cost of revenue | $51,749 | $45,621 | | Gross profit | $124,212 | $108,448 | | Total operating expenses | $129,460 | $106,178 | | Income (loss) from operations | $(5,248) | $2,270 | | Net loss | $(7,489) | $(1,586) | | Basic loss per share | $(0.11) | $(0.02) | | Diluted loss per share | $(0.11) | $(0.02) | - Revenues increased by 14.2% year-over-year, from $154,069 thousand in Q2 2023 to $175,961 thousand in Q2 2024[16] - Total operating expenses increased by 21.9% year-over-year, from $106,178 thousand in Q2 2023 to $129,460 thousand in Q2 2024, leading to an operating loss[16] Condensed Consolidated Statements of Comprehensive Loss The company's comprehensive loss increased significantly to $7.6 million for the three months ended June 30, 2024, primarily driven by the higher net loss and a negative foreign currency translation adjustment | Metric | Three months ended June 30, 2024 (thousands) | Three months ended June 30, 2023 (thousands) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net loss | $(7,489) | $(1,586) | | Change in foreign currency translation adjustment | $(72) | $61 | | Comprehensive loss | $(7,561) | $(1,525) | Condensed Consolidated Statements of Equity Stockholders' equity slightly increased from March 31, 2024, to June 30, 2024, despite a net loss, primarily due to non-cash stock-based compensation and employee stock awards, partially offset by treasury stock acquisitions | Metric | March 31, 2024 (thousands) | June 30, 2024 (thousands) | | :-------------------------------- | :------------- | :------------ | | Total Equity | $949,135 | $951,876 | | Common Stock (Amount) | $15,594 | $15,726 | | Additional paid-in capital | $1,933,776 | $1,966,578 | | Retained earnings | $1,314,172 | $1,306,683 | | Treasury Stock (Amount) | $(2,318,371) | $(2,341,003) | - Non-cash stock-based compensation contributed $26,767 thousand to additional paid-in capital for the three months ended June 30, 2024[20] - The company acquired $15,785 thousand in treasury stock during the quarter[20] Condensed Consolidated Statements of Cash Flows The company experienced a significant shift in cash flow from operating activities, moving from a net cash inflow of $25.7 million in Q2 2023 to a net cash outflow of $9.3 million in Q2 2024, primarily due to changes in operating assets and liabilities | Metric | Three months ended June 30, 2024 (thousands) | Three months ended June 30, 2023 (thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $(9,328) | $25,693 | | Net cash used in investing activities | $(593) | $(553) | | Net cash used in financing activities | $(16,465) | $(18,522) | | Net change in cash, cash equivalents and restricted cash | $(26,457) | $6,325 | | Cash, cash equivalents and restricted cash at end of period | $313,014 | $470,773 | - The decrease in operating cash flow was mainly driven by a $39.0 million decrease in accounts payable and other liabilities and a $16.6 million increase in accounts receivable, partially offset by a $7.5 million increase in deferred revenue[148] - Net cash used in financing activities decreased slightly from $18.5 million in Q2 2023 to $16.5 million in Q2 2024, primarily due to lower treasury stock acquisitions[24] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and breakdowns for various accounts and activities presented in the condensed consolidated financial statements, including accounting policies, loss per share, revenue disaggregation, lease information, stock-based compensation, asset details, and commitments 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the basis for preparing the unaudited condensed consolidated financial statements in accordance with U.S. GAAP and SEC rules, emphasizing management's estimates and assumptions. It also mentions recent accounting pronouncements, with no material ones adopted in the current year but two new ASUs (Segment Reporting and Income Taxes) being evaluated for future impact - The financial statements are unaudited and prepared in conformity with U.S. GAAP, relying on management's estimates and assumptions[28][29] - No material accounting pronouncements were adopted during the current year[30] - The company is evaluating the impact of ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes), effective for fiscal 2025 and 2026, respectively[32] 2. LOSS PER SHARE AND STOCKHOLDERS' EQUITY This note details the calculation of basic and diluted loss per share, highlighting the anti-dilutive effect of stock options and restricted stock units due to the company's net loss position. It also provides an update on the common stock repurchase program and accumulated other comprehensive income | Metric | Three months ended June 30, 2024 (thousands) | Three months ended June 30, 2023 (thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net loss | $(7,489) | $(1,586) | | Basic weighted-average shares outstanding | 66,621 | 66,497 | | Basic loss per share | $(0.11) | $(0.02) | | Diluted loss per share | $(0.11) | $(0.02) | - Approximately 1.8 million common stock options and restricted stock units for Q2 2024 (0.9 million for Q2 2023) were excluded from diluted EPS calculation as their effect would be anti-dilutive due to the net loss[33] - The company repurchased 0.5 million shares for $15.8 million during the quarter, with $141.5 million remaining capacity under the $1.1 billion repurchase program, extended through December 31, 2024[36] 3. REVENUE FROM CONTRACTS WITH CUSTOMERS This note disaggregates revenue by geographical markets and major offerings, showing a significant increase in total revenue driven by both subscription and marketplace/other services, primarily from the United States | Metric | Three months ended June 30, 2024 (thousands) | Three months ended June 30, 2023 (thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Total Revenues | $175,961 | $154,069 | | Subscription Revenue | $134,793 | $121,882 | | Marketplace and Other Revenue | $41,168 | $32,187 | | United States Revenue | $166,319 | $144,166 | | Europe Revenue | $8,113 | $8,137 | | APAC Revenue | $1,214 | $1,555 | - Total revenue increased by 14.2% year-over-year. Subscription revenue grew by 10.6%, and Marketplace and Other revenue grew by 27.9%[38] - As of June 30, 2024, fixed revenue not yet recognized from performance obligations was $535.8 million, with $398.0 million expected to be recognized over the next twelve months[40] 4. LEASES This note provides details on the company's operating leases, including right-of-use assets, lease liabilities, and future minimum payments. It highlights a slight decrease in right-of-use assets and long-term lease liabilities, along with the impact of sublease income on total lease costs | Metric | June 30, 2024 (thousands) | March 31, 2024 (thousands) | | :--------------------------------------- | :------------ | :------------- | | Right-of-use assets, net | $23,781 | $24,471 | | Short-term lease liabilities | $10,161 | $10,125 | | Long-term lease liabilities | $30,488 | $32,097 | | Weighted average remaining lease term | 5.1 years | 5.3 years | | Weighted average discount rate | 5.3% | 5.3% | | Metric | Three months ended June 30, 2024 (thousands) | Three months ended June 30, 2023 (thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Operating lease costs | $2,004 | $2,141 | | Operating sublease income | $(241) | $0 | | Total leases costs, net | $1,763 | $2,141 | - Total undiscounted lease payments are $46.5 million, with net operating lease payments of $41.3 million, extending through fiscal 2031[44] 5. STOCK-BASED COMPENSATION This note details the company's stock-based compensation plans, including stock options, restricted stock units (RSUs), performance-based restricted stock units (PSUs), and acquisition-related awards. It highlights a significant increase in total non-cash stock-based compensation expense year-over-year, primarily driven by RSUs and PSUs | Metric | Three months ended June 30, 2024 (thousands) | Three months ended June 30, 2023 (thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Total non-cash stock-based compensation | $27,985 | $13,292 | | Stock options expense | $845 | $173 | | Time-vesting restricted stock units expense | $21,487 | $11,567 | | Performance-based restricted stock units expense | $3,461 | $0 | | Habu acquisition consideration holdback expense | $1,218 | $0 | - Total non-cash stock-based compensation increased by 110.5% year-over-year, with significant increases in R&D ($5.1 million), Sales & Marketing ($3.4 million), and G&A ($5.2 million)[49] - The board approved an amendment to increase shares available under the 2005 Equity Compensation Plan by 2.5 million, subject to shareholder approval[47] - For the three months ended June 30, 2024, 1,663,601 time-vesting RSUs were granted, and 429,857 PSUs were granted under the Fiscal 2025 plan, with vesting tied to TSR and operating metrics[57][58][59][60] 6. OTHER CURRENT AND NONCURRENT ASSETS This note provides a breakdown of other current and noncurrent assets, showing minor changes in prepaid expenses, non-qualified retirement plan assets, and strategic investments | Metric | June 30, 2024 (thousands) | March 31, 2024 (thousands) | | :--------------------------------------- | :------------ | :------------- | | Other current assets | $31,456 | $31,682 | | Prepaid expenses and other | $15,755 | $17,398 | | Assets of non-qualified retirement plan | $15,701 | $14,284 | | Other assets, net (noncurrent) | $35,663 | $36,748 | | Right-of-use assets | $23,781 | $24,471 | | Strategic investments | $3,100 | $2,700 | 7. PROPERTY AND EQUIPMENT This note summarizes property and equipment, net, which saw a slight decrease from March 31, 2024, to June 30, 2024, primarily due to depreciation | Metric | June 30, 2024 (thousands) | March 31, 2024 (thousands) | | :--------------------------------------- | :------------ | :------------- | | Total property and equipment, gross | $25,413 | $25,394 | | Accumulated depreciation and amortization | $(17,717) | $(17,213) | | Property and equipment, net | $7,696 | $8,181 | - Depreciation expense on property and equipment was $0.7 million for the three months ended June 30, 2024, down from $0.8 million in the prior year[70] 8. GOODWILL Goodwill remained relatively stable, with a minor decrease due to foreign currency translation adjustments | Metric | March 31, 2024 (thousands) | June 30, 2024 (thousands) | | :--------------------------------------- | :------------- | :------------ | | Goodwill | $501,756 | $501,721 | | Change in foreign currency translation adjustment | N/A | $(35) | 9. INTANGIBLE ASSETS Net intangible assets decreased from $34.6 million to $30.7 million, primarily due to amortization, with estimated future amortization expenses detailed through fiscal 2027 | Metric | June 30, 2024 (thousands) | March 31, 2024 (thousands) | | :--------------------------------------- | :------------ | :------------- | | Total intangible assets, net | $30,737 | $34,583 | | Net developed technology | $27,862 | $31,333 | | Net customer relationship/trade name | $2,875 | $3,250 | | Total amortization expense (3 months) | $3,800 | $3,300 | | Fiscal Year | Estimated Amortization Expense (thousands) | | :------------ | :--------------------------------------- | | 2025 | $10,570 | | 2026 | $11,000 | | 2027 | $9,167 | | Total | $30,737 | 10. OTHER ACCRUED EXPENSES Other accrued expenses remained stable, with a slight increase driven by non-qualified retirement plan liabilities, offset by a decrease in other miscellaneous accrued expenses | Metric | June 30, 2024 (thousands) | March 31, 2024 (thousands) | | :--------------------------------------- | :------------ | :------------- | | Other accrued expenses | $43,220 | $42,857 | | Liabilities of non-qualified retirement plan | $15,701 | $14,284 | | Short-term lease liabilities | $10,161 | $10,125 | | Other miscellaneous accrued expenses | $17,358 | $18,448 | 11. OTHER LIABILITIES Other liabilities saw a minor decrease, primarily due to a reduction in long-term lease liabilities and lease restructuring accruals, partially offset by an increase in uncertain tax positions | Metric | June 30, 2024 (thousands) | March 31, 2024 (thousands) | | :--------------------------------------- | :------------ | :------------- | | Other liabilities | $64,742 | $65,732 | | Uncertain tax positions | $26,104 | $25,289 | | Long-term lease liabilities | $30,488 | $32,097 | | Lease restructuring accruals and related sublease deposits | $3,470 | $3,957 | 12. ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses increased slightly to $9.4 million at June 30, 2024, with $0.6 million in additions charged to costs and expenses during the quarter | Metric | Balance at March 31, 2024 (thousands) | Additions charged to costs and expenses (thousands) | Bad debts written off, net (thousands) | Other changes (thousands) | Balance at June 30, 2024 (thousands) | | :--------------------------------------- | :------------------------ | :-------------------------------------- | :------------------------- | :------------ | :----------------------- | | Allowance for credit losses | $9,199 | $550 | $(1) | $(307) | $9,441 | 13. RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES The company recorded $0.2 million in employee-related restructuring charges during the quarter and continues to manage lease-related restructuring plans from prior fiscal years, including impairments from reducing its global real estate footprint | Metric | Employee-related reserves (thousands) | Lease accruals (thousands) | Total (thousands) | | :--------------------------------------- | :------------------------ | :------------- | :---- | | Balances at March 31, 2024 | $1,680 | $2,925 | $4,605 | | Restructuring charges and adjustments | $178 | $0 | $178 | | Payments | $(1,053) | $(247) | $(1,300) | | Balances at June 30, 2024 | $805 | $2,678 | $3,483 | - Employee-related restructuring charges for Q2 2024 were $0.2 million, primarily for severance in the U.S[84] - Lease-related restructuring plans from fiscal 2023 and 2024 resulted in $26.5 million in impairment charges and $2.8 million in restructuring charges, with $1.6 million remaining accrued for the San Francisco lease through April 2029[87] 14. COMMITMENTS AND CONTINGENCIES This note addresses legal matters, for which the company believes it has made adequate accruals, and outlines purchase commitments primarily for data, hosting, and software services totaling $90.2 million through fiscal 2028 - The company is involved in various legal proceedings and has made appropriate accruals, believing the probability of a material loss beyond accrued amounts to be remote[91] | Fiscal Year | Purchase Commitments (thousands) | | :------------ | :------------------------------- | | 2025 | $60,637 | | 2026 | $19,992 | | 2027 | $6,183 | | 2028 | $3,375 | | Total | $90,187 | 15. INCOME TAX The company computed its income tax expense using a discrete approach due to volatility in its estimated annual effective tax rate, resulting in an 831.5% effective tax rate for the quarter, primarily driven by non-deductible stock-based compensation, R&D capitalization, and valuation allowance - Income tax expense was $6.7 million on a pretax loss of $0.8 million for Q2 2024, resulting in an 831.5% effective tax rate, compared to $8.7 million on pretax income of $7.1 million (122.3% effective tax rate) in Q2 2023[140] - The high effective tax rate is primarily due to non-deductible stock-based compensation, capitalization of R&D expenditures (IRC Section 174), and the valuation allowance[94][140] - The company maintains a full valuation allowance on its net deferred tax assets, except in certain foreign jurisdictions[94] 16. FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS This note details the fair value measurements of the company's financial assets, categorized into a three-level hierarchy. Most assets are classified as Level 1, including money market funds and U.S. Treasury securities | Metric | Cash and Cash Equivalents (thousands) | Short-Term Investments (thousands) | Other Current Assets (thousands) | Total (thousands) | | :--------------------------------------- | :------------------------ | :--------------------- | :------------------- | :------ | | June 30, 2024 | | | | | | Cash | $23,869 | — | — | $23,869 | | Money market funds | $286,527 | — | — | $286,527 | | Assets of non-qualified retirement plan | — | — | $15,701 | $15,701 | | U.S. Treasury securities | — | $24,833 | — | $24,833 | | Certificates of deposit | — | $7,500 | — | $7,500 | | Total (Level 1) | $310,396 | $32,333 | $15,701 | $358,430 | | March 31, 2024 | | | | | | Cash | $33,224 | — | — | $33,224 | | Money market funds | $303,643 | — | — | $303,643 | | Assets of non-qualified retirement plan | — | — | $14,284 | $14,284 | | U.S. Treasury securities | — | $24,545 | — | $24,545 | | Certificates of deposit | — | $7,500 | — | $7,500 | | Total (Level 1) | $336,867 | $32,045 | $14,284 | $383,196 | - Strategic investments in privately held companies, totaling $3.1 million at June 30, 2024, are accounted for under the cost method and do not have readily determinable fair values[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results for the quarter ended June 30, 2024, compared to the prior year. It covers revenue sources, key performance metrics, detailed analysis of operating results, capital resources, and liquidity, highlighting significant increases in revenue and operating expenses, leading to a net loss Introduction and Overview LiveRamp Holdings, Inc. is a global technology company specializing in data collaboration, identity resolution, and privacy-conscious data sharing. Headquartered in San Francisco, it serves a global customer base across various industries, enabling brands to deepen customer engagement and maximize first-party data value - LiveRamp is a global technology company focused on building brand and business value through responsible data collaboration, emphasizing consumer privacy and foundational identity[102] - The company's platform enables secure, privacy-conscious sharing of first-party consumer data with trusted partners, supporting various data collaboration use cases[102] - LiveRamp serves a global customer base, including iconic consumer brands, tech platforms, retailers, financial services, and healthcare leaders, across the United States, Europe, and Asia-Pacific[103] Operating Segment The company operates as a single operating segment, with its chief operating decision maker evaluating financial information and resources on a consolidated basis - LiveRamp operates as one operating segment, and all financial segment information is presented in the condensed consolidated financial statements[104] Sources of Revenues LiveRamp generates revenue primarily from Subscription fees for platform access and Marketplace and Other revenue, which includes data marketplace revenue-sharing, transactional usage-based revenue, and professional services fees - Primary revenue sources are Subscription revenue (platform access fees) and Marketplace and Other revenue (data marketplace revenue-sharing, transactional usage-based revenue, professional services)[105] - The LiveRamp Data Collaboration Platform offers four core capabilities: Live/Identity (omnichannel identity resolution), Live/Access (Data Marketplace for third-party data), Live/Connectivity (data onboarding and ecosystem integrations), and Live/Insights (advanced measurement and analytics)[107][108][109][110] - Professional services revenue constitutes approximately 4% of total company revenue, offered on an ad hoc basis or bundled with platform subscriptions[115] Summary Results and Notable Events For the quarter ended June 30, 2024, LiveRamp reported a 14.2% increase in revenues to $176.0 million, but a net loss of $7.5 million, significantly higher than the prior year, primarily due to a 21.9% increase in total operating expenses, including higher non-cash stock compensation | Metric | Q2 2024 (ended June 30, 2024, millions) | Q2 2023 (ended June 30, 2023, millions) | % Change | | :--------------------------------------- | :------------------------------ | :------------------------------ | :------- | | Revenues | $176.0 | $154.1 | 14.2% | | Cost of revenue | $51.7 | $45.6 | 13.4% | | Gross margin | 70.6% | 70.4% | 0.2 pp | | Total operating expenses | $129.5 | $106.2 | 21.9% | | Net loss | $7.5 | $1.6 | 368.8% | | Diluted loss per share | $0.11 | $0.02 | 450.0% | | Net cash used in operating activities | $9.3 | $(25.7) (provided) | N/A | - Non-cash stock compensation increased from $13.3 million in Q2 2023 to $28.0 million in Q2 2024, significantly impacting operating expenses[117] - The company repurchased 0.5 million shares for $15.8 million in Q2 2024, compared to 0.8 million shares for $20.2 million in Q2 2023[118] Key Performance Metrics LiveRamp's key performance metrics show improved Subscription Net Retention and Annualized Recurring Revenue growth, driven by lower contraction and new customer additions, while Remaining Performance Obligations also increased Subscription Net Retention Subscription Net Retention (SNR) increased by 7 percentage points year-over-year to 105%, primarily due to lower contraction levels and increasing usage revenue, with the Habu acquisition contributing approximately three percentage points | Metric | June 30, 2024 | June 30, 2023 | % Change | | :--------------------------------------- | :------------ | :------------ | :------- | | Subscription net retention | 105% | 98% | 7% | | Annualized recurring revenue (millions) | $478 | $426 | 12% | | Remaining performance obligation (millions) | $536 | $497 | 8% | | Current remaining performance obligation (millions) | $398 | $351 | 13% | - SNR improved by 7 percentage points, driven by lower contraction and increased usage revenue, with Habu acquisition contributing 3 percentage points[124] Annualized Recurring Revenue Annualized Recurring Revenue (ARR) grew by 12% to $478 million, attributed to both new customer revenue and net growth from existing customers, with the Habu acquisition contributing approximately two percentage points - ARR grew 12% to $478 million, driven by new customer revenue and net growth from existing customers, with the Habu acquisition contributing approximately two percentage points[126] Remaining Performance Obligations and Current Remaining Performance Obligations Remaining Performance Obligations (RPO) increased by 8% to $536 million, and Current RPO (CRPO) increased by 13% to $398 million, primarily due to large, multi-year renewals and new customer additions - RPO increased by 8% to $536 million, and CRPO increased by 13% to $398 million, primarily due to large, multi-year renewals and new customer additions[122][129] - The relative decline in RPO and CRPO growth percentage is due to revenue run-off from large multi-year arrangements subject to future renewal[129] Results of Operations LiveRamp experienced a 14% increase in total revenues, but a significant 372% increase in net loss, primarily driven by a 22% rise in total operating expenses, particularly in R&D, Sales & Marketing, and G&A, largely due to increased stock-based compensation and headcount-related expenses Revenues Total revenues increased by 14.2% to $176.0 million, with Subscription revenue growing 10.6% (including $3.2 million from Habu acquisition) and Marketplace and Other revenue growing 27.9%. U.S. revenue increased by 15.4%, while international revenue decreased by 2.6% | Metric | Q2 2024 (ended June 30, 2024, thousands) | Q2 2023 (ended June 30, 2024, thousands) | % Change | | :--------------------------------------- | :------------------------------ | :------------------------------ | :------- | | Total Revenues | $175,961 | $154,069 | 14% | | Subscription Revenue | $134,793 | $121,882 | 11% | | Marketplace and Other Revenue | $41,168 | $32,187 | 28% | | U.S. Revenue | $166,319 | $144,166 | 15.4% | | International Revenue | $9,642 | $9,853 | -2.6% | - Subscription revenue growth was primarily due to upsell to existing customers, new logo deals, higher variable revenue, and approximately $3.2 million from the Habu acquisition[132] - Marketplace and Other revenue growth was mainly driven by Data Marketplace and Services volume growth[132] Cost of Revenue and Gross Profit Cost of revenue increased by 13.4% to $51.7 million, resulting in a gross profit increase of 15% to $124.2 million. Gross margin slightly improved to 70.6%, despite higher services costs, cloud infrastructure costs, and stock-based compensation | Metric | Q2 2024 (ended June 30, 2024, thousands) | Q2 2023 (ended June 30, 2023, thousands) | % Change | | :--------------------------------------- | :------------------------------ | :------------------------------ | :------- | | Cost of revenue | $51,749 | $45,621 | 13% | | Gross profit | $124,212 | $108,448 | 15% | | Gross margin (%) | 70.6% | 70.4% | 0.2 pp | | Services costs increase | $2.1 million | N/A | N/A | | Cloud infrastructure costs increase | $2.0 million | N/A | N/A | | Stock-based compensation expense increase | $1.0 million | N/A | N/A | - U.S. gross margins decreased to 71.5% from 72.2%, while International gross margins increased to 55.5% from 43.3%[134] Operating Expenses Total operating expenses increased by 22% to $129.5 million, driven by significant increases across R&D (27.8%), Sales & Marketing (20.7%), and General & Administrative (16.1%), largely due to higher stock-based compensation and headcount-related expenses | Metric | Q2 2024 (ended June 30, 2024, thousands) | Q2 2023 (ended June 30, 2023, thousands) | % Change | | :--------------------------------------- | :------------------------------ | :------------------------------ | :------- | | Research and development | $44,118 | $34,519 | 28% | | Sales and marketing | $54,175 | $44,879 | 21% | | General and administrative | $30,961 | $26,664 | 16% | | Gains, losses and other items, net | $206 | $116 | 78% | | Total operating expenses | $129,460 | $106,178 | 22% | - R&D expenses increased by $9.6 million, primarily due to a $5.1 million increase in stock-based compensation and a $4.0 million increase in headcount-related expenses[136] - S&M expenses increased by $9.3 million, mainly from a $3.4 million increase in stock-based compensation, a $3.1 million increase in headcount, and higher marketing and professional services expenses[137] - G&A expenses increased by $4.3 million, largely due to a $5.2 million increase in stock-based compensation and a $0.8 million increase in professional services, partially offset by a $1.9 million decrease in transformation costs[138] Income (Loss) from Operations and Operating Margin The company shifted from an operating income of $2.3 million in Q2 2023 to an operating loss of $5.2 million in Q2 2024, resulting in a negative operating margin of 3.0% - Loss from operations was $5.2 million for Q2 2024, compared to income from operations of $2.3 million in Q2 2023[139] - Operating margin for Q2 2024 was negative 3.0%, a decrease from positive 1.5% in Q2 2023[139] Total Other Income and Income Taxes Total other income decreased slightly to $4.4 million, primarily from interest income. Income tax expense was $6.7 million on a pretax loss of $0.8 million, resulting in an 831.5% effective tax rate, influenced by non-deductible stock-based compensation and R&D capitalization - Total other income, net, decreased by $0.4 million to $4.4 million, primarily consisting of interest income[117][139] - Income tax expense was $6.7 million on a pretax loss of $0.8 million, leading to an 831.5% effective tax rate, significantly impacted by non-deductible stock-based compensation, R&D capitalization, and valuation allowance[140] Capital Resources and Liquidity The company's liquidity position is supported by existing cash, but operating cash flow turned negative. Management believes current cash is sufficient for the foreseeable future, but acknowledges risks from economic conditions and capital market volatility Cash Flows Operating activities shifted from providing $25.7 million in cash in Q2 2023 to using $9.3 million in Q2 2024. Investing activities used $0.6 million, and financing activities used $16.5 million, primarily for treasury stock acquisitions | Metric | Q2 2024 (ended June 30, 2024, thousands) | Q2 2023 (ended June 30, 2023, thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by (used in) operating activities | $(9,328) | $25,693 | | Net cash used in investing activities | $(593) | $(553) | | Net cash used in financing activities | $(16,465) | $(18,522) | Common Stock Repurchase Program The company repurchased 0.5 million shares for $15.8 million during the quarter under its common stock repurchase program, which has $141.5 million remaining capacity and is authorized through December 31, 2024 - During Q2 2024, 0.5 million shares were repurchased for $15.8 million under the common stock repurchase program[155] - The program, authorized for $1.1 billion through December 31, 2024, has $141.5 million remaining capacity as of June 30, 2024[155] Contractual Commitments The company has contractual cash obligations totaling $46.5 million for operating leases and $90.2 million for purchase commitments, primarily for data, hosting, and software services, extending through fiscal 2029 | Fiscal Year | Operating Leases (thousands) | Purchase Commitments (thousands) | | :------------ | :--------------------------- | :------------------------------- | | 2025 | $7,783 | $60,637 | | 2026 | $9,139 | $19,992 | | 2027 | $8,265 | $6,183 | | 2028 | $8,454 | $3,375 | | 2029 | $8,529 | N/A | | Thereafter | $4,299 | N/A | | Total | $46,469 | $90,187 | - Future minimum payments related to lease restructuring plans are $2.0 million for fiscal 2025 and $1.8 million for fiscal 2026[156] Non-U.S. Operations LiveRamp operates in multiple non-U.S. locations, with most foreign currency exposure related to translation gains and losses. Foreign subsidiaries are expected to be self-funding, and the company does not use derivative instruments to hedge exchange rate fluctuations - The company has operations in the UK, France, Netherlands, Italy, Spain, Brazil, India, Australia, China, Singapore, and Japan[159] - Most foreign currency exposure is due to translation gains and losses, with no material transactional exchange rate impact[159] - The company does not use foreign currency forward exchange contracts or other derivative instruments to hedge exchange rate fluctuations[159] Critical Accounting Policies The company's critical accounting policies, which involve significant judgments and estimates, have not materially changed since the 2024 Annual Report, except as noted in the accounting pronouncements section - No material changes to critical accounting policies since the 2024 Annual Report, other than those described in Note 1 regarding accounting pronouncements[160] Recent Accounting Pronouncements Information on recent accounting pronouncements, including those adopted and not yet adopted, is detailed in Note 1 of the condensed consolidated financial statements - Refer to Note 1 for details on recent accounting pronouncements, including those adopted during the current year and those not yet adopted[161] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposures for the three months ended June 30, 2024, compared to those discussed in its 2024 Annual Report - No material changes in market risk exposures for the three months ended June 30, 2024, compared to the 2024 Annual Report[163] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, and there were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2024[164] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2024[165] Part II. Other Information This part covers legal proceedings, risk factors, equity security sales, and other required disclosures Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 14, 'Commitments and Contingencies,' in the unaudited condensed consolidated financial statements - Legal proceedings information is detailed in Note 14, 'Commitments and Contingencies,' of the financial statements[167] Item 1A. Risk Factors The company's risk factors remain current, with an update regarding Google's decision not to deprecate third-party cookies in 2024, but acknowledging potential future impacts on data collection and use - Google announced in July 2024 that it will not deprecate third-party cookies in 2024, instead introducing a new Chrome experience for informed user choice[169] - Despite the delay, Google's ongoing efforts in this area could still substantially impact the ability to collect and use data from Internet users[169] - The risks described in the 2024 Annual Report, particularly those related to third-party cookies and changes in data collection regulations, remain relevant and are updated by this development[168][170] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item details the company's common stock repurchase activities during the quarter, showing the number of shares purchased, average price, and remaining capacity under the program | Period | Total Number of Shares Purchased | Average Price Per Share | | :--------------------------------------- | :------------------------------- | :---------------------- | | April 1, 2024 - April 30, 2024 | 163,574 | $32.91 | | May 1, 2024 - May 31, 2024 | 160,000 | $32.74 | | June 1, 2024 - June 30, 2024 | 175,000 | $29.50 | | Total (Q2 2024) | 498,574 | $31.66 | - As of June 30, 2024, the company had repurchased 38.2 million shares for $958.5 million under its common stock repurchase program, with $141.5 million remaining capacity[172] Item 3. Defaults Upon Senior Securities This item states that there are no defaults upon senior securities to report - Not applicable[174] Item 4. Mine Safety Disclosures This item states that there are no mine safety disclosures to report - Not applicable[174] Item 5. Other Information This item confirms that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2024[174] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the CEO and CFO, and financial information formatted in inline XBRL - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and financial information formatted in inline XBRL (101, 104)[176][177] Signature This section contains the official signature and date of the report Signature Details The report is duly signed on behalf of LiveRamp Holdings, Inc. by Lauren Dillard, Executive Vice President and Chief Financial Officer, on August 7, 2024 - The report was signed by Lauren Dillard, Executive Vice President and Chief Financial Officer, on August 7, 2024[178]