LiveRamp Holdings, Inc. Q2 FY2025 earnings call

• Q2 results were strong with revenue and operating income exceeding expectations. Total revenue grew 16%, subscription revenue up 14%, marketplace and other revenue up 23%. Operating income grew 28% and operating margin expanded by 200 basis points to 22%. • Discussed the selling environment with economic uncertainty and client caution, but remains optimistic about long-term due to LiveRamp's market position. • Focused on network expansion, including fine-tuning sales function, focusing on key collaboration partners, adding publisher partners, expanding use cases, making collaboration easier, and improving product functionality. • Making progress toward being a Rule of 40 company, with midpoint of FY25 guidance expecting to reach Rule of 30 with 12% revenue and 18% operating margin.

Total revenue for the quarter was $185 million, growing by 16%. Subscription revenue was $143 million, up 14%, accounting for approximately 77.3% of total revenue. Marketplace and other revenue was $42 million, increasing by 23%, making up about 22.7% of total revenue. Subscription net retention was 107%, marking the sixth consecutive quarter of improvement. The $1 million plus customer count increased by 10 to a record high of 125.

• FY25 revenue guidance adjusted to between $737 million and $739 million, up 12% year-on-year. Non-GAAP operating income expected to be between $133 million and $135 million, with a margin of 18% at midpoint. • Q3 expected total revenue of $191 million, non-GAAP operating income of $39 million, and an operating margin of 20%. • FY26 expected operating margin to be between 20% and 25% driven by cost efficiencies, offshoring savings, and high drop down rate on incremental revenue.

• Economic uncertainty leading to tight IT budgets and client caution in software spending decisions. • Scrutiny of software spending decisions by customers. • Need to continuously manage and adapt to changing market conditions to maintain growth and margin improvement.

Q: Jason Kreyer asked about the strong performance in subscription revenue and what elements drove the acceleration in the selling process.

A: Lauren Dillard responded that the outperformance in subscription was driven by improvement in fixed subscription and subscription usage. Fixed subscription had a near record high renewal rate and record low contraction, and subscription usage benefited from one-time items in the quarter but not expected to repeat in the second half. Data marketplace also outperformed in the quarter, largely driven by strong performance and particularly CTV.

Q: Aaron Flack asked about CTV contributing to growth and details on the clean room partnership with Netflix.

A: Scott Howe replied that CTV is instrumental in the future of CTV as major CTV providers have authenticated audiences and valuable data, and clean rooms are needed for collaboration. On the Netflix partnership, it was announced last quarter and goes live in early January, but not expected to contribute to growth in the coming quarter.

Q: Josh Baer inquired about the FY '26 operating margin guidance and what drives the difference between 20% and 25%.

A: Lauren Dillard said it's too premature to talk about top line growth next year, but under reasonable revenue scenarios, levers like offshoring, cost structure management, and leverage on GA investments will drive margin expansion. Revenue, offshoring pace, and efficiency drives will dictate margin expansion in FY26.

Q: Alex Lavigne asked about the Oracle related marketplace pipeline progression and the contribution of Habu to revenue and ARR in the quarter.

A: Lauren Dillard stated that there is a modest positive impact in Q3 associated with Oracle's ad business shutdown, and Habu is on track for the $18 million of synergized revenue this year, but it's hard to pull out the exact contribution from Habu to revenue and ARR at this point.