Q1 2021 Liveramp Holdings Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to life Cramps fiscal 2021 first quarter earnings call.
This.
After the speakers presentation.
And there will be a question and answer session you will need to press star one.
And your telephone.
As a reminder, I'd now like to turn the call over to your host Lauren Dillard Chief Communications Officer.
Thank you operator good afternoon.
Discussed our fiscal 2021.
And first quarter results with me today or Scott, how our CFO.
Todays press release in this call may contain forward looking statements that are subject to risks.
Actual results to differ materially.
For a detailed description of these risks please read the risk factor section of our public filings in the press release.
A copy of our press release, some financial schedules, including any reconciliation to non-GAAP financial measures.
Also during the call today.
We'll be referring to the FIDAC post time, I'll turn the call over to Scott.
Thank you Lauren.
Yesterday.
We hope you and your loved ones are made in June to stay safe and healthy during this extraordinary Todd.
[laughter] presented considerably global challenges.
The diversity of sometimes sadly filled avoidable, but how we respond to a diversity is a true measure of the strength of our lives so over the quality of our business.
Our teams have library and public.
And then unprecedented global recession.
They've successfully transitioned.
My opinion strong top line momentum.
Have generated consistent margin growth by improving our processes inefficiencies and above all they've done an incredible job of delivering great results products that we advice to our global customers and partners.
Amazingly companies are always always built on the foundation of Amazing people and I can't take my exceptional library colleagues enough for their leadership and contributions over the past six months to.
So all of you may be listening.
Thank you.
And reflecting on life ramp strong performance during the quarter three overarching themes have emerged and I'll speak to each in turn during my prepared remarks.
First our SaaS model is proving itself could be durable predictable unprofitable.
Second in a time of uncertainty our customers and partners in the ecosystem are increasingly county done library for advice some results.
And third.
The investments we've made in recent years have prepared us for him even brighter future.
The number one.
Our SaaS model is proving itself to be predictable.
Durable and profitable.
The advantages of library obsessed model are seemingly on display during this unprecedented period.
More specifically three characteristics give us confidence in our model.
One durable and recurring revenue.
Total revenue was 99 million up 21% year over year.
Subscription revenue, which comprises 80% of our total topline was up 21% driven by the continued adoption of new and more advanced use cases, such as measurement.
Advanced television.
Second party data collaboration.
Our marketplace another business was up 16% and significantly outperformed the overall U.S. advertising market.
Which a recent AD exchange are forecast to peg to be down 4% to 8% overall for the.
Here.
Across our businesses, we're fortunate to have a diverse customer base that is not overly weighted to any single industry vertical.
That said library, along with most companies is being impacted by the pandemic and the pockets of our business, we expected to be pressured.
Behaving as we expected.
While new logo bookings were light, we compensated for it through strong upsells to existing clients.
The majority of our business is generated from large enterprise customers and we had really nice growth in our $1 million plus customers during the quarter.
$61 million plus customers up from 53 last quarter.
To.
Strong network effects and marginal economics.
But if the topline we again generated meaningful gross margin improvement and I'm very excited to report our first profitable quarter.
This was a milestone quarter for ramp and a reflection of the incredible leverage in our model.
Many SaaS companies, including library or talk about the rule of 40, the equivalent of a 400 batting average to which SaaS companies all aspire.
The calculation is a some of the company's topline growth in the operating profit margin and it forces discussion within great SAS companies about the tradeoffs between investing more in product to generate stronger top line growth.
We're optimizing for current cash flow.
The good news.
As library matures, we can generate continued topline growth and ongoing profitability improvement.
Our business as initial fixed costs, but the marginal economics reflect favorable network in scale effects.
This has been a recurring theme for us throughout recent quarters and gives us confidence in our long term trajectory.
As Warren will walk you through we benefited from roughly 70% all through and our incremental revenue for the quarter compared to the prior year.
[noise] three a position of financial strength.
Finally, we will continue to leverage our strong balance sheet and financial position to double down on key growth initiatives.
Having financial flexibility allows us to make smart bets that are immediately accretive to our customers. The comscore partnership and more recently the OCC, we'll hire of the acuity team are great examples of that.
As we have always been we will continue to be strategic and judicious in how we deploy our capital.
Being number two.
In a time of uncertainty our clients and partners and the ecosystem are increasingly counting on lybrand for advice and results.
On our last call I mentioned that circumstances like these often bring opportunities.
Across industries, the pace of Digitization has accelerated dramatically.
Even prior to Cobot 19, digital transformation was likely a top priority for most management teams. However, what would have typically had a multi year time horizon again that is now being forced to happen in a matter of mcps.
Got it is a key enabler of such change and data driven experiences are critical to brand differentiation in retention during this time.
As our customers pursue their own digital transformations within unmistakable trend toward Addressability in measurement.
They are increasingly turning to lybrand as an important thought partner and critical tool to enable their omni channel customer data strategies.
For example.
A few months ago, we met with a leading global beauty and cosmetics company.
The company everyone on this call window.
And they're Chief Digital officer mentioned to our team that while they significantly reduce their overall marketing budget last quarter.
They were using this sojourn as an opportunity to reset and ensure a 100% of their marketing spend is addressable upon reengaging.
As client budgets continue to shift from above the line to below the line the role we play and helping our customers generate real results has only become more important.
And our recent bookings trends reflect us.
We closed another strong bookings quarter in Q1.
Total gross bookings up more than 50 per cent compared to the prior year driven by a strong up sell performance.
Actually they are also grew nicely and was up 28% year over a year.
Let me describe a few notable wins from the quarter.
Early in the co bid cycle, we meaningfully expanded our relationship with one of the world's largest restaurant chains.
This company he was looking to upgrade their existing identity infrastructure to better understand how their media and television investments, we're driving people to their restaurants and ready their data driven marketing efforts for fast restart.
It was all about digital transformation for this cost and one of my favorite reflections from the last quarter comes from our main contact there.
He said his company at a three to five year digital transformation plan that is being forced to happen in three months.
In light ramp is a key partner and enabling this transformation.
Another great Digital transformation example is a recent win with the U.S. based specialty retailer, whose business model was disrupted overnight as the country moved into shelter in place mode.
Historically most of this customer sales occurred in store and they were forced to quickly scale their ecommerce presence in strategies.
They turned a library to help integrate different data sets to better understand what digital marketing tactics were driving results and ultimately build and transform their digital marketing engine.
A final when I'll mention was a new logo deal with GSK for multinational pharmaceutical company.
Oh power in future prove their first party data strategy bridging safe Haven technology as core infrastructure inside its internal data environment to support the understanding then segmentation of its first party data where activation and measurement use cases.
We are hoping GSK activate audience segments across a wide variety of digital and social platforms, and then perform cross channel measurement on the Bakken.
The global nature of our business and our ongoing commitment.
Were key reasons G.S.K. chose to partner with library.
And it is really nice to see our continued traction in the healthcare vertical.
The investments we've made in recent years has prepared us for an even brighter future.
Ramp we're big believers that we must constantly investing in our product to feed and even brighter future.
In recent years, we've explored numerous concepts and plan for the number of seat.
And we'll flour and we know that.
But we are forward in our thinking and methodical approach.
Let me share just a few of my reasons for optimism as I look to the future.
First.
Well I ramp is.
The authenticated traffic solution or a.
Raised by the global ecosystem as a neutral and agnostic standard.
Well based interoperable and puts the consumer first.
We currently have more than 20, SS Pease life with or implemented.
The kiosk, including full forms.
And on the demand.
For the Dsps bidding on the ideal or in the process of implementing.
Importantly, global published.
Yes.
We more than trip.
Tripled our publisher coverage and we're now working with more than one.
And 125 publishers the Comscore top 20.
And 50% of the Comscore from a publishers perspective, Ats, not only future proofed against business model disruption.
But can also be leverage to unlock incremental revenue.
Okay.
As the pandemic forces publishers to do more with less than a time when content.
Consumption is at an all time high.
This.
It's a big opportunity.
We recently, a leading health and fitness technology brand that demonstrates the power in value of advertising without cookies.
Yeah Agency ran a major.
Pest campaign targeting high value incremental business outcomes Fitbit.
Was able to generate we're pretty incredible.
Fitbit saw a two times higher return on Ad spend.
34 per square page view, and a 13% increase.
And average order value when structure versus the control group run using cookie.
Let me be clear on what I'm, telling you.
Ats works better than cookies.
It is getting a great reception from the industry.
And we're committed to working with the industry to expand its impact.
They are available in the appendix.
Second librarians catalyzing data collaboration across the worlds largest comp.
The 19 continues to turbo charge.
Urged the pace of change in the.
Data driven innovation companies are looking to bolster their competitor.
We have advantage with data.
Nowhere is this more apparent than our safe Haven, offering, which we formally launched earlier this year and now has over 10 primary tenancy is live in a pipe numbering in the tens of millions.
Those dollars.
Warren will provide an update on our safe Haven progress during his remarks, so well keep going.
But I'm very confident.
Sure.
Life ramp is transforming and traditional industries through data utilization.
Overtime, we believe digital transformation will touch been tool kit.
Some of them.
This transformation is already underway.
For example, we continue to believe that television represents a massive opportunity peers.
And also believe.
Just a pandemic has pushed advanced television and alternative measurement to its inflection point.
Television is a 70 billion dollar market in the U.S. alone.
Yet in 29 team only a small fraction of it was data enabled less than 15%.
Overtime, we expect the industry will migrate to what can be made addressable and measurable and the pandemic is accelerating the shift away from traditional planning and measurement to cross platform strategies that include connected television tactics.
Even prior to co bid.
There were a variety of large order ties into a ball.
The data prowess and advanced targeting capabilities, but walled garden is replacing enormous pressure on traditional television advertising.
In addition, the rapid rise of streaming platforms and connected television devices made reaching eyeballs harder through linear television advertising finally, the emergence of.
New and more complete television viewing data sets.
Made it easier for the reach and frequency of all forms of television to be measured regardless of the delivery path to the consumer.
These three factors coupled with the new financial pressure placed on the television industry will drive even more television advertisers to transact on data driven audiences.
Improving ROI will be critical.
Life ramp is perfectly positioned across all areas of advanced TV to support both the cell and by sides as these trends accelerate.
In the quarter television was again up strong double digits.
Fueled by the continued adoption of outcome based television measurement and an acceleration in CPV growth, which was up triple digits.
During the quarter, we expanded our existing partnership with ampersand, the sales and technology can serve coxon charter.
Oh power, the planning and execution of cross platform and national addressable by.
As eyeballs continue to splinter we're.
Television programs to a niche enable them to unify package.
And sell against all connected television platforms and that's it.
Disney Discovery, but.
Viacom CBS and freewheel are among the first implement these new capabilities advanced television represent.
It's roughly 10% of our revenue.
And will remain a key growth driver as this continued television revolution plays out.
Fourth.
My brands products are applicable to an even broader set of markets in industries.
Finally, but importantly, we're seeing the potential for library of an entirely new markets in industries.
For example, we've signed multiple top 10, Ats publishers and several major markets like Japan, and China, Australia in Europe, and these collaborations will accelerate our international capabilities and allow us to better serve our many global clients.
We're seeing a similar trend for our safe Haven, offering with a global companies with whom we're working once a launch these collaborations in dozens of countries.
In addition, we're also seeing initial success expanding our capabilities to new industries, such as health care.
The health care market has characteristics with which we're wells familiar complex regulation.
Segmented data sets transformative insights through data and sophisticated clients.
Together these opportunities give us even stronger conviction about the future.
In summary.
As we look ahead to the remainder of F. why 21.
We are optimistic about our capabilities client in market potential.
Our SaaS model has proven itself to be durable predictable and profitable.
I believe we're well positioned for decades of topline growth and increasing profitability.
The time of uncertainty our customers and partners in the ecosystem are looking to life ramp for advice and results.
And the investments we've made in recent years of prepared us for an even brighter future.
Well progress and results are never completely linear we've got a strong track record of operational management optimization and business improvement and the quality of our team and customers continues to be one of my greatest sources of optimism for that thanks again for joining us today and a huge staying.
Q2, our exceptional customers partners and employees for their ongoing support and hard work.
I'll now turn the call over the Warren.
Thanks, Scott and good afternoon, everyone and thanks for joining us.
Before jumping yen I too would like to thank our associates for their work over the past few months.
We represent a critical technology as our customers navigate this crisis and implement their business transformations.
I feel fortunate to work with such great people.
I also help that always well for each of you and your families.
Today I'd like to focus my remarks on four areas first talk about Q1, highlighting the strength of our SaaS driven performance and the durability of our revenue.
Next update you on our business trends, what we have seen since our last call.
Provide a few high level observations about halfway 21, and finally, our Q2 guidance.
Q1 results.
Please turn to slide four.
Well in short we are durable hsas and our position to neutrality is paying off.
Despite the challenges of the global economic environment, we had a strong growth quarter.
Total and subscription revenue were up 21%.
The usage portion of subscription revenue was approximately 8%.
Marketplace was up 16%.
As we expected customer accounts were pressured numbered flat sequentially.
That said given up sell strength, we had another strong bookings quarter bookings increased by more than 50%.
On a trailing 12 month basis bookings were also up roughly arpino or our next 12.
Percent.
Hey are off.
Our ended the quarter up 28 persist one on nine one platform that rate.
Tension was 111.
Our safe Haven, TV products are setting the pace for innovation and our power in many of our customers business transformation strategies.
Well I ramp safe Haven.
This fiscal year, we have already added more than five new safe Haven logos.
They paid then revenue bookings and a.
Our our.
We're all triple digits.
Our pipeline is now in excess of 35 million and interestingly over 40% in a pipeline is outside the U.S.
In short the combination of Ats, plus safe Haven is a winning global hand.
TV also had a standout quarter TV related revenues were again up over 50%.
Maybe even more importantly, we are exactly where we want to be in connected TV Rctv revenue was up over 100%.
Operationally. It was also a great quarter as our gross margin was 71% of nine points year over year.
Productivity was principally driven by hosting and identity graph optimizations.
In the U.S., our gross margin was 73%, which is very close to our long term model commitment.
And while we are far from declaring victory, we were profitable on a non-GAAP basis and operating leverage was striking.
Revenue increased by 17 million and our operating income improved by 24 million.
Normalizing for bulk transition related spending and cobot savings, we estimate our topline fall through was over 70%.
And finally, our EBITDA was 4 million in the quarter.
A few additional specifics worth noting.
In the quarter, we further strengthened our bad debt reserves.
Client related concessions were very manageable and in fact, we are tracking below our original estimate of 4 million.
Cobot related savings were approximately 4 million principally related to TNT and facilities.
As part of our non-GAAP adjustments, we recorded 3.6 million of third party spend associated with the execution of our restructuring activities and long term planning.
And finally 16 million.
In the corner, we reversed approximately 5 million previously accrued costs associated with select long term performance awards.
And lastly, our balance sheet continues to be in great shape.
Our cash balance ended at 650 million and we have no debt.
Our receivables exposure is appropriately reserved.
And finally as I mentioned on our last call in the absence of any further buyback activity for acquisitions, we expect our Q1 cash balance to be close to our low watermark forever 21.
In summary, we're in a great position.
We are hsas and our revenues are demonstrating the durability of our business model.
We are in the middle of the powerful secular growth curve and have a great set of customers employees and products.
We are powering some of our clients most important transformational initiatives.
We have an incredibly strong balance sheet and finally, the strength of our business performance is a reflection of who we are as a company.
Yes, and our other products are succeeding because we are neutral we're Switzerland, we don't compete with others in the ecosystem, we do not buy sell or arbitrage media.
We are in agnostic identity infrastructure provider.
For the next few minutes I'd like to provide an update on the current operating environment in other words share with you what we're seeing and experiencing.
Please turn to slide 10.
We've updated the same chart, we presented on our last call.
A few takeaways.
First our products are in fact benefiting from a secular trend toward addressability and measurement.
This is clearly evident in our revenue performance in bookings.
And I'll repeat something I alluded to a moment ago.
In May Ats, GTB and Safe Haven, all had strong global momentum.
Today does that momentum is even stronger.
Next all that said, we would also like to highlight that the challenges and negatives are real and we expect these pressures to continue.
Just as we said last quarter deal cycles are extending and the current economic environment will continue to impact our bookings.
Our growth customer accounts and retention metrics.
But when you add it all out things feel stronger today than three months ago.
And as a result, we will reiterate that fight 21 will be a solid growth year and our path toward profitability is even more clear.
As always and especially in this environment, we ask that you'd be conservative in your expectations.
I'd now like to close by providing Q2 guidance in sharing a few thoughts for F by 21.
Please turn to slide 12.
For Q2, we expect revenue of up to 100 million and a non-GAAP operating loss of up to 7 million.
Please keep in mind this guidance excludes intangibles stock based comp and restructuring and related charges.
A few other call outs for Q2.
In Q2, we expect marketplace to be flat to slightly down.
This pressure is principally being driven by a strong quarterly comp in the prior year.
And to a lesser degree reduced linear TV related transactional revenue.
We expect gross margin to be approximately 69% given incremental investments in security and select product certifications.
We expect between nine and related Stan.
And approximately a million dollars of Capex.
While we do not intend to provide formal full year guidance, a few high level thoughts on the full year.
As I mentioned, we expect up by 21 will be a growth year. In fact, we expect growth in both subscription and in marketplace.
That said, we would remind you that the challenges and pressures highlighted on slide 10 are real and will overtime negatively impact our metrics.
And finally, we continue to expect considerable operating leverage in meaningful year over year margin improvement.
Our projected expense phasing is highlighted on slide 13.
Have also been included and you'll see them on slide 14.
As always we ask that you'd be conservative and your expectations and in particular in your topline expectations. As we are in a very uncertain environment in the called the questions I'll close with a few final thoughts.
First again a huge thank you.
Due to our customers and employees.
As you who make this company great.
Next our model is demonstrating its durability and leverage.
And finally, we are Switzerland.
We said at the center of Us.
Both in the ecosystem has no.
Ever been more important.
The call to questions.
As a reminder to ask a question you will need to press Star one try your question press the pound or.
Hash key please standby and will be compiled the Q in a roster.
Question comes from Brian Fitzgerald from Wells Fargo.
Thanks, guys the.
Guidance.
What was your biggest rises it.
The customers quicker was at higher volumes among the customers who.
At a point, yet well performance in TV any anything there you would hang your hat.
On any sense of what was better for worsen.
Hey.
Brian It's Scott.
As I think about them to up in my prepared remarks.
Used to hear from so many of our client furniture and a couple anecdotes.
That they were.
For structure during recession and beyond.
And so as a result.
In two different head on all cylinders.
We want.
New opportunities.
CPV.
Our usage.
Continue at a robust pace as well, so I really think theres no.
Single.
One thing rather it was kind of things with us.
And then maybe a quick follow up if you if you had to say it was around.
Was it more suited to safe Haven date, yes, I can both of them strengthen connected TV anyways, you would you would parse out which product line is and strength.
When it was really across the board.
All of those things impact to our subscription and start to embrace HTS. It's still early for that and then proves the value they're getting.
They embrace safe Haven.
Subscription for critical piece of that.
And so.
I think what it demonstrates the power of our model were up through our.
The ability to stack additional product offerings and increase the value that we are delivering to our clients and partners.
Hey, Brian I might just add a couple of things on that point, it's pretty interesting I would say our clients are clearly looking to us to help them future proof their environments. So all of the things that you've talked about are all very much linked together and I just repeat a little bit what I said in the prepared remarks.
I mean, obviously the revenue dollars are different but.
CTV was up over 100% in the quarter.
Safe Haven, whether you look at a our AR.
With all three of those metrics were up.
For 100% year over year, so strong performance across the board.
Thanks, Scott Thanks weren't appreciate it.
You got it.
Your next question comes from Stan Zlotsky from Morgan Stanley.
Hi, guys. This is my sudano seem to questions actually I wanted to ask a little bit more on that TV business. So we continue to share a lot more about connected TV.
Yeah.
Sure on this area so.
Turning to get a little bit more color.
Might be benefiting from the current impact.
Your conversations have been trending.
Matt versus earlier in the calendar year.
Yeah, Melissa Scott.
We continue to think television as is that an interesting inflection point and we also believe that we're really well positioned with our data plus math assets and also.
What we're doing in connected television space on the cell time.
As viewing increasingly shifts kind of time shifted and mobile devices.
The whole concept of connected television becomes increasingly important.
And we really have benefited.
On both sides so on the advertiser side.
What we're seeing as a function of the recessionary environment is a real drive for advertisers to make everything accountable.
Everything measurable and so our connected television efforts in particular data plus math allow the same kind of robust targeting two occurring television that many advertisers have previously deployed in the programmatic space. Moreover, instead of just measuring.
Reach and frequency.
They can actually drive to specific outcomes. So how many products did they sell how often do people come to the web sites and for recession pressured clients.
Kind of measurement really matters a lot.
On the sell side.
They are reacting to.
The advertiser demands for more precision more accountability more visibility into Hussein, the odds and how they're reacting and so I mentioned ampersand in there and platform for instance, well that's a really terrific piece of technology.
Well Gee that they're introducing that gives their client a lot more precision and how they plan and activate campaigns. So one of the reasons again I'll come back to why I'm optimistic is that this isn't.
One side or the other it's both the by end of the sell side acting in concert together.
Got it makes sense in is really helpful.
One more sure from me so the marketplace revenue continues to do really well above our expectation is there anything you'd call out on the durability of that business and I know you gave some color on how you're thinking about Q2 banks you know how your any other.
Kelly can offer on how you're thinking about that piece of that revenues to address the year would be helpful.
Yes, Jason you guys.
Great well. Thank you Melissa I'll take this one I'd say the headline as marketplaces benefiting from a secular this same secular trend that Scott just talked about toward performance based buying.
No question about it.
And secondly, when we think about our marketplace. We think all about quality. So there is 100% flight to quality.
In terms of no long term for the year.
As I mentioned again in the prepared remarks.
Big picture topline, we said solid growth year for life ramp and we we added something this quarter and net we expect both subscription end market place to be up for the year.
Now I would qualify the one thing in Q2, given the strong comp that we had in marketplace and the fact that we expect some pressure in linear TV related transaction revenue, we said that marketplace would be flat to maybe slightly down.
We think that's a Q2 thing and again for the year, we are expecting growth in marketplace.
Great. Thank you. Thank you.
The first one.
Scott is on Ats It seems like the industries I really picked up adoption of that.
Over the past few months seems like Thats really it's really been uptick there.
I was just curious to get your take on where do you think adoption needs to be in on the next 12 to 18 months for the solution to be.
The second as you wanted to be.
Assuming that that Google does.
End of deprecating cookies in a year and half from now.
Well I'm not sure I'd give you the exact number but I would tell you or whatever it is we're pretty close and so one of the stats. The they don't pretend shared in my prepared remarks is that.
Given the 125 plus club publishers that we've already signed.
We believe that we can reach 90% of addressable us audiences already.
And so that is exactly what advertisers want.
And then it's really a question of.
How much volume can we deliver and Sean where we're on.
I think there's an opportunity still is we middle audit inroads with the largest publishers and that was naturally the place to start but theres also still some misinformation in the market.
And.
For many smaller kind of mid torso or longer tail publishers.
They're going to need a solution.
And there are the content that drives the open internet.
So we want to make sure.