Release Date: May 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Q4 revenue and operating income exceeded expectations, with total revenue up 16% and operating income up 20%.
- Subscription revenue grew by 11%, and marketplace revenue surged by 38%.
- Annual Recurring Revenue (ARR) grew by 7%, marking the fastest quarterly growth since Q3 FY 23.
- Significant new contracts were signed, including a three-year contract with a major home improvement retailer and a major pharmacy retailer.
- The company successfully upsold existing customers, with a notable seven-figure upsell with a major pharmaceutical manufacturer.
Negative Points
- Despite improvements, subscription net retention is still below desired levels at 103%.
- The average sales cycle has increased slightly, indicating potential delays in closing deals.
- There is continued softness with smaller, low Annual Contract Value (ACV) customers, particularly in the ad tech cohort.
- The delay in Google's third-party cookie deprecation could impact short-term opportunities and revenue.
- Stock-based compensation is expected to increase significantly, impacting operating margins.
Q & A Highlights
Q: Can you elaborate on the integration of Hubzu and the customer response relative to your initial expectations? Also, what are your financial targets for Hubzu in fiscal 2025?
A: Scott Howe (Independent Director): The integration of Hubzu has been smooth, with 100% migration of Hubzu employees to LiveRamp. The product integration has also been successful, and we have already created $40 million in pipeline. Lauren Dillard (CFO): We added about $12 million of ARR in Q4 from Hubzu and target $18 million in revenue for FY 25, with a break-even on operating income.
Q: Any updates on Hubzu being a plug-and-play solution for smaller marketers?
A: Scott Howe (Independent Director): We have seen progress with smaller customers, but the biggest catalyst will be the completion of cookie deprecation, which will drive the adoption of data collaboration platforms like Hubzu.
Q: Google announced moving Payer to an open-source platform. What are the implications?
A: Scott Howe (Independent Director): The open-sourcing of Payer by Google is positive as it promotes standardization and broader adoption of authenticated ways to buy and sell ads. We are working closely with Google to educate the market and drive adoption.
Q: How should we think about the opportunity tied with Payer and its impact on LiveRamp?
A: Scott Howe (Independent Director): We are being conservative with our guidance due to the timeline shift. The initial impact will be on usage, making existing clients stickier and driving incremental usage. Long-term, clean room adoption will be a significant catalyst.
Q: Can you talk about the incremental customers and the durability of net adds?
A: Lauren Dillard (CFO): Customer count was stable in Q4, with strength in high ACV brand customers. We expect overall customer count to be muted in FY 25 but anticipate continued growth in our $1 million-plus customer cohort.
Q: What is driving the $40 million pipeline since the Hubzu acquisition?
A: Scott Howe (Independent Director): The pipeline is driven by demand for walled garden, self-service cloud interoperability from existing clients, and new verticals like travel, entertainment, and healthcare.
Q: Is there a potential for a sizable TAM expansion outside of CPG and retail?
A: Scott Howe (Independent Director): Yes, we have created vertical industry groups within our sales force, which has improved our sales productivity and driven success in new verticals.
Q: Does the large customer growth reflect a broader opening of wallets or strong momentum in the data collaboration platform?
A: Scott Howe (Independent Director): It reflects the strong momentum in the data collaboration platform. Our largest clients are sophisticated users who activate multiple destinations and adopt more usage over time.
Q: How is the NRR metric being impacted by lower customer contraction?
A: Lauren Dillard (CFO): Hubzu contributed a couple of points to NRR in the quarter. We are seeing stabilization with lower ACV customer cohorts, but the bigger driver is stronger upsell with our largest customers.
Q: What is the opportunity with Google's Payer and the role of LiveRamp?
A: Scott Howe (Independent Director): Google is mandating that someone who does pairing has a clean room partner. We are one of the original launch partners. The biggest barrier is educating the market about the benefits of switching from cookies to authenticated methods.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
