LiveRamp (RAMP) - 2020 Q3 - Quarterly Report

Part I. Financial Information Financial Statements The unaudited financial statements show decreased cash, increased goodwill from acquisitions, and a net loss despite revenue growth Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Dec 31, 2019 ($ in thousands) | Mar 31, 2019 ($ in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $767,200 | $1,061,473 | | Goodwill | $297,780 | $204,656 | | Total Assets | $1,343,852 | $1,472,911 | | Total current liabilities | $149,075 | $95,118 | | Total stockholders' equity | $1,142,541 | $1,330,832 | Condensed Consolidated Statement of Operations (Q3 FY2020 vs Q3 FY2019, Unaudited) | Metric | Q3 2019 ($ in thousands) | Q3 2018 ($ in thousands) | | :--- | :--- | :--- | | Revenues | $102,217 | $80,021 | | Gross Profit | $64,251 | $45,183 | | Loss from operations | $(41,485) | $(48,211) | | Net loss from continuing operations | $(38,040) | $(15,261) | | Diluted loss per share (continuing ops) | $(0.56) | $(0.20) | Condensed Consolidated Statement of Operations (Nine Months Ended Dec 31, Unaudited) | Metric | 2019 ($ in thousands) | 2018 ($ in thousands) | | :--- | :--- | :--- | | Revenues | $274,871 | $207,304 | | Gross Profit | $159,019 | $124,346 | | Loss from operations | $(140,133) | $(116,012) | | Net loss from continuing operations | $(120,382) | $(84,259) | | Diluted loss per share (continuing ops) | $(1.77) | $(1.09) | Condensed Consolidated Statement of Cash Flows (Nine Months Ended Dec 31, Unaudited) | Cash Flow Activity | 2019 ($ in thousands) | 2018 ($ in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(28,355) | $(40,332) | | Net cash used in investing activities | $(115,150) | $(7,795) | | Net cash used in financing activities | $(135,840) | $(820,644) | | Net change in cash | $(279,458) | $1,406,756 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policy changes, significant acquisitions, revenue disaggregation, and the status of the stock repurchase program - The company adopted the new lease standard (Topic 842) on April 1, 2019, resulting in the recognition of $22.9 million in right-of-use assets and corresponding lease liabilities[33][40][41] - On July 2, 2019, the company acquired Data Plus Math (DPM) for approximately $118.0 million, resulting in $89.9 million of goodwill. On April 2, 2019, it acquired Faktor for $4.5 million, adding $3.1 million to goodwill[53][60][90] Revenue Disaggregation (Nine Months Ended Dec 31) | Category | 2019 ($ in thousands) | 2018 ($ in thousands) | | :--- | :--- | :--- | | By Geography | | | | United States | $255,895 | $189,997 | | Europe | $15,103 | $13,858 | | APAC | $3,873 | $3,449 | | By Service | | | | Subscription | $221,847 | $171,184 | | Marketplace and Other | $53,024 | $36,120 | | Total | $274,871 | $207,304 | - As of December 31, 2019, the company had $344.4 million in remaining performance obligations, with $200.4 million expected to be recognized as revenue over the next twelve months[48] - During the nine months ended December 31, 2019, the company repurchased 2.6 million shares for $121.2 million. The remaining capacity under the stock repurchase program is $429.8 million[51] - The sale of the Acxiom Marketing Solutions (AMS) business in fiscal 2019 is classified as a discontinued operation. For the nine months ended Dec 31, 2018, AMS generated $1.16 billion in earnings from discontinued operations, net of tax, primarily from the gain on sale[64][65] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses LiveRamp's platform, revenue growth, improved gross margin, increased operating expenses, and liquidity position Introduction and Overview LiveRamp provides an enterprise customer management platform, offering identity resolution and data services, with revenue from subscriptions and marketplace activities - LiveRamp operates as a single segment, providing an enterprise customer management platform with core capabilities in data accessibility, identity, connectivity, and data stewardship[109][111] - Revenue sources are primarily (i) subscription fees from clients accessing the platform and (ii) marketplace revenue from data transactions and usage-based fees[112] - The company serves over 770 direct customers, including approximately 21% of the Fortune 500, and thousands more indirectly through partnerships[121] Results of Operations Q3 revenue grew 27.7% to $102.2 million with improved gross margin, while operating expenses increased, leading to a narrowed operating loss Q3 Revenue Breakdown (in thousands) | Revenue Type | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | Subscription | $81,554 | $65,003 | 25.5% | | Marketplace and Other | $20,663 | $15,018 | 37.6% | | Total revenues | $102,217 | $80,021 | 27.7% | - Q3 gross margin increased to 62.9% from 56.5% YoY, primarily due to decreased identity graph and security costs[131][137] Q3 Operating Expenses (in thousands) | Expense Category | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | Research and development | $27,403 | $20,469 | 33.9% | | Sales and marketing | $51,993 | $40,054 | 29.8% | | General and administrative | $26,107 | $27,828 | -6.2% | | Total operating expenses | $105,736 | $93,394 | 13.2% | - The increase in Sales & Marketing expenses for Q3 was driven by higher non-cash stock-based compensation ($15.7 million vs $9.5 million YoY) and increased headcount to support growth[142] - Loss from operations for Q3 narrowed to $41.5 million (negative 40.6% margin) from $48.2 million (negative 60.2% margin) in the prior year quarter[149] Capital Resources and Liquidity Working capital decreased to $784.0 million, with cash used in operations, acquisitions, and stock repurchases, but liquidity remains sufficient - Working capital decreased by $313.0 million to $784.0 million at December 31, 2019, compared to March 31, 2019[154] Cash Flow Summary (Nine Months Ended Dec 31, 2019) | Activity | Cash Flow ($ in thousands) | | :--- | :--- | | Net cash used in operating activities | $(28,355) | | Net cash used in investing activities | $(115,150) | | Net cash used in financing activities | $(135,840) | - Investing activities for the nine months included $105.4 million for the acquisitions of DPM and Faktor and $10.3 million for capital expenditures[161] - Financing activities for the nine months included $121.2 million for the repurchase of 2.6 million shares under the stock repurchase plan[163] Off-Balance Sheet Items and Commitments The company has $429.8 million remaining in its stock repurchase program and $112.4 million in total contractual commitments - The company has remaining capacity of $429.8 million under its $1.0 billion stock repurchase program, which runs through December 31, 2020[167] Contractual Commitments as of Dec 31, 2019 (in thousands) | Commitment Type | Total Amount | | :--- | :--- | | Operating leases | $25,487 | | Purchase commitments | $23,404 | | Other commitments | $88,947 | | Total | $112,351 | Quantitative and Qualitative Disclosures about Market Risk No material changes in market risk exposures were reported for the nine months ended December 31, 2019 - There have been no material changes in market risk exposures during the nine months ended December 31, 2019[184] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that as of December 31, 2019, the company's disclosure controls and procedures were effective[185] - No changes occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[185] Part II. Other Information Legal Proceedings No pending legal matters with material financial exposure are reported against the company or its subsidiaries - There are no pending legal matters with potential exposure considered material to the company's financial statements[186] Risk Factors Risk factors from the prior Annual Report on Form 10-K remain materially current, though not exhaustive of all potential risks - The risk factors previously disclosed in the Annual Report on Form 10-K for the year ended March 31, 2019, remain materially current[187] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 423,953 shares for $20.7 million in Q3 FY2020, with $429.8 million remaining in the repurchase program Issuer Purchases of Equity Securities (Q3 FY2020) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | October 2019 | — | $ — | — | | November 2019 | 195,500 | $48.44 | 195,500 | | December 2019 | 228,453 | $49.22 | 228,453 | | Total | 423,953 | $48.86 | 423,953 | - As of December 31, 2019, the company had $429.8 million remaining under its stock repurchase program[189] Exhibits This section lists exhibits filed, including CEO and CFO certifications and financial statements in XBRL format - Exhibits filed include certifications by the CEO and CFO under Sarbanes-Oxley rules and financial data in XBRL format[195]