Q3 2021 Liveramp Holdings Inc Earnings Call
Good day.
[music].
Good afternoon, ladies and gentlemen, and welcome to the live ramps fiscal 2021 third quarter earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
You require any further assistance. Please press star Zero as a reminder, this conference call is being recorded I would now like to turn the call over to your host Lauren Dillard Chief Communications Officer.
Thank you operator, good afternoon and welcome thank you for joining us.
Our fiscal 2021 third quarter result.
With me today are Scott Howe, our CEO, and Warren Jenson, President and CFO.
Goofed up president and head of platform and products will join for the Q&A portion of the call.
Today's press release and this call may contain forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially.
For a detailed description of these risks please read the risk factors section of our public filings and the press release a.
A copy of our press release and financial schedules, including any reconciliation to non-GAAP financial measures is available at <unk> Dot com.
Also during the call today, we will be referring to the slide deck posted on our website at this time I'll turn the call over to Scott.
Thank you Lauren good afternoon, and thanks for joining us today.
Hope that you and your families have managed to stay safe and healthy since the last time, we spoke.
It's always a challenge to summarize an entire quarter Intuit shortfall.
And Thats, particularly true today, given how much progress we've made and potential we see.
We've got a lot to talk about and too little time, so above all else I would share three thoughts with you.
One.
Our business continues to show strength and an unprecedented macro environment.
Two.
While we entered our fiscal year with some uncertainty stemming from the pandemic and an industry transition away from third party cookies.
The past 12 months have definitively proven how important data is to our clients.
And how much they rely on us.
As a result, while most companies arent, providing longer term guidance, we feel well positioned to share. Some very early thoughts about next year with you today.
And three the innovations we have introduced to the market has been well received and position us for sustained revenue and profitability growth well beyond next year.
Let me start by talking about the past quarter.
We delivered another strong quarter in Q3 highlighted by solid top line growth impressive operating profit performance and continued progress against a handful of key strategic imperatives.
Total revenue was up 17% and subscription revenue up 15%.
<unk> exiting the quarter was up 17%.
Marketplace and other growth accelerated to 27% driven by data marketplace, which was up 60% and benefited from a strong recovery in digital advertising spend during the holiday season, and the expansion of several large platform relationships.
We also closed a record bookings quarter with total growth bookings up 35% compared to the same period last year.
Our land expand and extend emotion continues to underpin our success.
Upsell bookings in particular were very strong as we continue to make good progress upselling, our existing customer base to new and more advanced use cases like measurement safe Haven and C. T V.
In fact, the average ACB of brand deals one in Q3 was up nearly 30%.
The continued growth in larger 1 million dollar plus customers also reflects this trend.
The total number of $1 million plus customers now stands at 65, an increase of 30% year over year.
And importantly, the strength of our model was again on display in Q3.
Scaling our business efficiently remains a top priority and I am pleased to report our first ever double digit operating margin.
An important milestone toward our long term targets.
The past quarter.
And indeed, the entire year is really validated how important live ramp is to our direct customers.
All of whom use data to power better marketing effectiveness and more valuable customer experiences.
Historically third party cookies have been an important enabler of data driven audience targeting and personalized messaging.
But as we all know the industry is transitioning away from cookies.
Recognizing this transition was likely several years ago, we moved quickly to develop even better alternatives for the good of anyone and everyone in the ecosystem.
A top priority throughout the year has been to evangelize the adoption of our authenticated traffic solution.
A T S.
Across every major publisher brand and tech platform.
And we made great progress again in the third quarter.
To date more than 325 publishers worldwide.
<unk> from 215 last quarter.
Have adopted Ats in the U S U K, France, Italy, Spain, Germany, Australia and Japan.
Including 65 per cent of the U S Comscore top 50.
We more than tripled the number of Ats enabled campaigns in Q3 relative to the prior quarter.
And expect continued explosive campaign growth in Q4 as well.
Ats as comprehensive agile and built to scale and can be used anywhere and individual logs in or authenticate it.
It's multi channel and.
And supports customer journey engagement across display and mobile and desktop as well as mobile apps in connected TV.
This means that brands have the means to buy media.
Using live ramps people based identifier cross channel.
And know that they can reach and measure individuals' not just devices with consistency and accuracy.
Our market momentum is being fueled by these factors along with our interoperability neutrality and unmatched global scale.
Most importantly, Ats simply works better it works better than what it is replacing.
I recently wrote a blog on the transition from third party cookies to Ats, which can be found on our website and that contains useful detail that I hope you'll have a chance to peruse.
Also I addressed the exceptional results, we're seeing on our last call, but it bears repeating.
TFS helps publishers make more money.
Marketers generate higher ROI and consumers maintain greater choice and control over their data.
In recent years impressions flowing through browsers, like Safari and Firefox edge.
Which together comprise 40% of U S Internet traffic.
Haven't been addressable with third party cookies.
Ats makes these impressions available and addressable, enabling publishers to monetize more people based inventory and marketers reach more of their target audience.
We've seen publishers generate.
350% greater yields on Safari, and marketers are experiencing greater unique reach and at least two times higher return on ad spend.
In fact in a campaign with good way group, an index exchange a national retail client saw three times higher reach with consistent performance when transacting on.
On live ramps people based identifier compared to third party cookies.
Marketers are taking notice and taking action.
For example, recognizing the significance of these results.
One of our agency partners. Good way group has subsequently pledge to migrate all of their first party live ramp audiences to bid on our identifier.
The trade desk by the end of the month.
Their commitment underscores the sheer scale and proven performance of Ats.
And mirrors, the larger industry's movement towards buying sustainable people based inventory.
In short Ats as transformational.
And we must ensure every publisher brand in tech partner is using Ats to drive results and real value.
Evangelizing Ats remains a top priority in Q4 and beyond.
While we believe the transition away from third party cookies will be a long term positive for live ramp.
The transition will also have several financial implications for us.
So I want to provide a bit of detail here as we finalize our budget and expectations for FY 'twenty two.
First our customers and partners success with Ats equates to our success.
And we continue to believe that Ats will help fuel our growth over the medium to long term.
In addition to becoming a channel for new logo acquisition.
Should drive greater adoption.
And usage of our platform globally as it catalyzes and pulls through use cases like measurement safe Haven and data marketplace.
This gives us confidence in our direct subscription value proposition and corresponding direct client growth rates for FY 'twenty two and beyond.
This revenue represents the majority of our subscription base and will drive continued company growth.
Second.
We will also be sunsetting, a portion of our current revenue.
We've historically licensed cookie based components of our digital identity graph to a few technology platforms and.
And plan to either exit or re imagine these relationships over the next 12 months.
These relationships have been slower growth in recent years and the overall revenue impact could be up to $30 million in FY 'twenty two.
And third as cookies are eliminated a portion of the data cost associated with maintaining our digital graph will be recouped.
A $15 million to $20 million cost of goods sold savings, which we likely won't fully see until FY 'twenty three.
As I mentioned earlier, given the predictability and stability in our business. We think we're in a good position to at least give some early guidance for FY 'twenty two today.
And these three trends are factored into our forecast.
Warren will go into a bit more detail shortly.
As our importance to our direct customers continues to increase with the changes and address ability changing regulatory environment and the heightened importance of data collaboration we're broadening our core subscription offering with new features and new use cases.
<unk> is uniquely positioned to help our customers connect data within and beyond therefore walls to power the entire customer experience.
And in order to capture this opportunity we must continue to evolve our platform in three important areas.
Each of which creates even greater value for our customers and partners.
First we're introducing an even broader array of use cases that drive value for our clients.
Connected TV represents one example of this effort.
This business was up 35% in Q3, and our bookings trends remained strong.
We're also seeing significant client demand for our safe Haven offering.
Safe Haven is transforming the relationship between the retailers and their CPG partners packaged goods partners and there is a powerful two sided network to be unlocked here.
One that will catalyze both our new logo and upsell efforts.
As we successfully work with our major retail clients.
I introduce us to their partners fueling our recent growth in the CPG vertical.
Our vertical in which we hardly participated just a year ago.
For example in Q3, we signed a safe Haven upsell deal with a major multinational personal care company.
To help power their digital transformation.
Initially in Onboarding customer. This company is leveraging <unk> safe Haven to power its offline to online data and identity infrastructure.
Ats and our network of retail collaboration partners were key drivers of winning this deal.
Another recent upsell example was with a major global pharmaceutical company that was an early adopter of the safe Haven platform.
Leveraging safe Haven as the foundation for its consumer data management strategy. This.
This customer expanded its relationship with <unk> to be able to leverage additional second and third party data sets inside of safe Haven to optimize its digital media and television investments.
Similar to Ats, the retail and CPG network. We are building with Safe Haven is also pulling through opportunities across our larger product portfolio.
For example, during the quarter, we closed a new activation deal with Unilever.
After working indirectly with them through one of our Safe Haven partners.
Our safe Haven momentum this past year has simply been remarkable.
Our pipeline bookings and revenue have all been growing at rates in excess of 150%.
We've already established a beachhead of over $15 million and IRR and.
And expect this number to continue to grow rapidly in coming quarters.
Looking ahead, we must lock in this incredible flywheel by ensuring our launch customers are successful as they scale their platforms across partners and geographies.
Second.
We must continue to expand our data protection capabilities to unlock greater data access and control for our customers.
We hear and see this all the time.
For many of the world's largest companies.
This is particularly true in industries that utilize more sensitive data such as health care and financial services.
But nearly every company considers their own proprietary data is highly confidential.
They know that data utilization can improve their results, but they need absolute control over data flows permissions and security.
Facilitating data collaboration without allowing data movement is one of the most technologically complex problems in the software world.
This is why I am very excited to share that earlier today, we announced that we entered into an agreement to acquire data fleets.
Cloud based data platform that unifies data silos without moving data or compromising privacy.
With that of fleets customers gain access to a powerful set of privacy preserving technologies that can be configured based on business needs.
Data fleets approach centers on two primary capabilities.
<unk> learning and advanced privacy protections.
Leveraging machine learning techniques data fleets allows insights to be derived across multiple datasets without requiring any underlying data movement.
It then applies multiple advanced privacy technologies to ensure the underlying data.
And insights can never be re identified.
Thus, ensuring privacy and security.
That makes it possible to analyze data across borders across silos and fragmented architectures.
As if they were in one data environment.
While other solutions take a point solution or one size fits all approach to privacy.
Data fleets is built it configurable approach ensuring customers can apply the right approach and.
And level of privacy protection to their data without having to compromise utility.
This is complicated technology.
So let me describe a few hypothetical scenarios.
Consider for instance, a European company that cannot allow its data to cross borders under G. D. P. R.
Or perhaps doesn't even want their data to leave their own facilities for security reasons.
This problem is solved by data fleets technology.
Consider a major content provider.
Could be an online publisher or TV content creator.
Who knows their inventory value is predicated on audience level characteristics.
But they also want to preserve and non.
Emily.
This problem is solved by data fleets technology.
Or consider any client any client who is worried about using their data given the constantly changing and confusing regulations in place.
This problem.
Soft by data fleets technology.
Ultimately, we think every client is going to want to use this technology and through this acquisition. We are now the only company that can deliver on this type of Configurable data privacy.
We believe that this deal will significantly accelerate the adoption of data collaboration and analytics use cases through safe Haven, and open up new addressable markets like health care and financial services.
We expect data fleets to be integrated and safe Haven, and commercially available to our customers by mid FY 'twenty two.
On behalf of all my colleagues, we are thrilled thrilled to welcome the data fleets team deliver ramp.
A third important shift as the way, we deliver our products and capabilities.
We are migrating to an API first modular approach in the way, we build and deploy our technology to deliver customers maximum flexibility control and extensibility.
We want to deploy our technology wherever our customers data lives.
Whether that be in the cloud and multiple clouds on prem or on device.
Not only does this provide greater flexibility to customers.
But it also opens up an entirely new sales channel.
As we sunset, providing private label identity inputs into a small set of marketing hubs, we can instead embed our full array of capabilities directly into the infrastructure of a much broader array of potential technology partners.
For example.
We recently formed a strategic partnership with Google cloud to deliver our identity products directly in the core of our customers' cloud data environments.
As part of this partnership customers can access line ramps identity capabilities via API.
Through the Google cloud marketplace to build a unified customer view inside their data warehouse.
As customers increasingly look to the cloud as a scalable secure and modern way to manage and take action on their data.
We believe our capabilities are key to unlocking the full value of their cloud data environments.
We are in discussions with all all of the major cloud providers and hope to have more to share in this area in the coming months.
Importantly, we think our opportunity to build a more sophisticated partner and reseller channel will overtime proved to be far more meaningful than the wholesale cookie licensing relationships, we intend to sunset in the coming year.
Our current Chief commercial officer, James Ara is equally excited about this opportunity.
So much so that he has volunteered to lead the effort.
This means that James will transition away from his role as Chief commercial officer in order to fully focus on the success of our cloud strategy.
Well James is simply taken on a new role within library Amp. This does give me a chance to talk about them a little bit.
James joined <unk> ramp as its first chief revenue officer in 2013 and over the course of the last eight years has helped grow live ramp from a $10 million or niche startup to a category, creating and leading public company with approximately 330.
<unk>.
Simply put James has been a brilliant leader teammate and partner on this journey and I am So excited I'm just so excited to put his energy and focus behind building out our cloud partnership strategy.
We are working with an executive search firm to find James is C. C. C O successor.
And our interviewing both internal and external candidates prioritizing deep enterprise SaaS expertise and proven ability to scale a fast growing commercial team.
The search is going well.
And we hope to have something to announce in the coming months.
As I mentioned James will remain in his current role through the end of our fiscal.
Before turning his full attention to the new role.
So I think we will be well positioned for a smooth seamless transition.
I also wanted to announce a notable upcoming departure from live ramps board of directors.
After two decades of service Bill Henderson has announced his decision to leave the live ramp board at the end of his current term this summer.
Bill has been an incredible friend and mentor to me over the past decade.
He was among my first interviewers when I was originally being considered for the axiom CEO role.
And he and I have spent hundreds of hours since then.
Discussing the business brain.
Brainstorming ideas and even talking about things just far outside the digital realm.
In addition to serving on our board since 2001.
Bill previously served as Postmaster general.
And the COO of Netflix.
Bill thinks he's going to slow down and invest even more time and from some of his lifelong passions like photography.
But I'm, probably still going to call him frequently.
<unk> for his wisdom.
In the coming months, we'll launch a search for Bill's replacement on the live ramp board.
We will surely find someone terrific.
Who will have big big shoes to fill.
With that thank you again for joining us today and a big Thank you to our exceptional customers partners and employees for their ongoing support and hard work.
We delivered another solid growth quarter in Q3.
We feel that despite the uncertain macroeconomic environment.
We're positioned for continued growth.
And our efforts to introduce new innovations and new use cases to our clients.
Give us even greater long term optimism.
We look forward to updating you on our continued progress in the quarters ahead.
And I will now turn the call over to Warren.
Well, Thanks, Scott and good afternoon, everyone and thanks for joining us today.
We're pleased to have delivered another strong quarter and even happier to report that our key long term growth initiatives are performing extremely well.
As we have said before we increasingly find lybrand technology to be core to our customers' most important long term strategies and initiatives we.
We are fast becoming critical infrastructure.
Today I'd like to focus my remarks in three areas first give an update on Q3 and recent business trends highlighting the continued strength and durability of our model.
Next provide full year guidance.
And finally, a few high level observations for FY 'twenty two.
Q3 results.
Please turn to slide four.
We are durable SaaS and our position of neutrality continues to pay dividend.
Total revenue was up 17% and subscription revenue increased 15%.
The variable portion of subscription revenue with approximately 13%.
Overall marketplace was up 27%.
Data marketplace, which represents roughly 75% of ongoing marketplace and other revenue was up a strong 60%.
As expected, where we felt pressure within the transactional portion of our linear TV business.
Customer accounts were again up in the quarter, we added 15 net new subscription customers.
And we had a record bookings quarter.
Current RP O or our next 12 month backlog was up 15%.
As a reminder, the timing and contract length of renewals can and will cause volatility in this metric.
<unk> ended the quarter up 17% and net retention was 105, while platform net retention was 110.
Next our long term growth levers are in place and thriving.
Today I'd like to focus my attention on Safe Haven.
Safe Haven had another standout quarter revenue bookings in <unk> were all up more than 150%.
Safe Haven is fast, becoming the foundational platform for global brands retailers and their partners to establish a deep understanding of their customers increased customer engagement and drive sales.
Global retailers, such as car for trust Safe Haven to safely connect their data with their CPG partners.
Expanding the breadth and depth of available use cases from local retail media and marketing activation to sales analytics and category management.
The results have been transformational.
<unk> are seeing triple digit improvement in campaign performance and double digit sales lift.
Traditional supplier relationships are being transformed.
And new and significant high margin revenue streams are being created.
Finally, we are proud to be judged by the company we keep.
Our safe Haven.
Yeah.
Do you think remarks Wang.
What I will do this this morning.
Hi.
Prepared remarks, when he joins what will happen.
So finally, we are proud to be judged by the company. We keep our sales have been technology is now being used by more than 40 customers worldwide, including three of the top 10 largest retailers in the U S.
In four of the top 10 retailers in Europe.
Back to exit our first full year with more than $20 million.
Next data feed.
As Scott mentioned, we're excited about the acquisition from data feeds and what it means for both our near and long term.
With the acquisition of data free we are firmly cementing our position as the leader in privacy preserving enterprise data collaboration.
Extending our position as the trusted neutral platform for enterprise identity and data management.
Firstly human customers. This means access to a powerful set of cutting edge privacy preserving it.
It can be configured.
Right.
More specifically.
Or is that our clients can apply the right approach and level of privacy protection.
Wherever that did any of that whether within my ramp or within their own environment.
And finally, not only does this technology benefit our existing customers. The combined offering opens up new addressable market from powerful use cases, such as healthcare and financial services.
Added all up and we see an even bigger opportunity for us.
A few specifics on the detail on the deal.
The purchase price of $68 million in cash question assumed equity and additional retention incentives.
We expect the deal to close this quarter.
Given the size there is no HSR filing requirement we.
We do not expect accounts had any material impact from the current fiscal year.
In terms of next year, we expect these added capability to benefit growth across all areas of our business.
Any modest tuition will be included in our FY 'twenty two.
And finally, our business model is working and timelines point to the validity of our long term performance objectives.
Gross margin improved 400 basis points to 73% again another record for Standalone My ramp.
That activity was driven by continued identity graph and hosting optimization.
Profitable again in Q3, marking our third consecutive quarter of profitability.
In the quarter, we estimate COVID-19 related savings have been roughly $6 million.
Our operating margin for the first time line from the double digit EBITDA.
EBITDA margin with 12 per cent.
Operating cash flow was $15 million.
And free cash flow was positive $14 million.
Finally, our balance sheet continues to be in great shape.
Our cash balance is 663 million a slight increase from the end of September.
Right.
In summary strength of our business performance is a reflection of who we are as a company.
Switzerland.
Chip provider of critical technology.
Now onto guidance for FY 'twenty, one please turn to slide 12.
For the first quarter, we expect revenue of $216 million.
Non-GAAP operating income to be slightly positive.
For the full year, we expect revenue of up to $440 million and non-GAAP operating income.
$16 million.
Please keep in mind this guidance excludes intangible amortization stock based comp as you model Q4. Please note that the expected increase in Opex, we expect roughly half of it to be recurring.
The remaining in free warrant being driven.
We lost you for almost your entire earnings.
<unk>.
And you just rejoined.
So Laura and where should we start reading again.
Brian do you mind.
Starting to read out a few other call outs for Q4.
Sure I apologize everyone.
Hey.
The real world implications of the zone World in which we live.
Alright, well here we go.
A few other callouts for Q4.
We expect subscription net retention to be roughly a 100%.
And platform net retention to be between 100 and 105.
Our retention metrics in Q4, our growth rates are being pressured by anticipated contraction from a few platform relationships.
This contraction is being driven by the sunsetting of certain cookie based licensing relationships.
We expect gross margin to be roughly 73%.
As you model Q4. Please note of the expected increase in Opex, we expect roughly half of it to be recurring.
The remaining increase is being driven by payroll tax seasonality and one time project cost.
We are exploring certain tax strategies that could generate a meaningful cash tax benefit.
These tax strategies May result, in an incremental non cash stock charge during the quarter.
Other guidance related items can be found on slide 14.
With that let me spend a couple of minutes and talk about FY 'twenty, two and share a few high level observations.
This past year has been challenging but one of accomplishment too.
We like others face the daunting challenge of Covid and as a result of rapidly changing business environment.
Through all of that disruption and change the following held true.
The strength of our business model was clear.
We're having a strong growth year in both our subscription business and marketplace too.
We have been profitable in every quarter and expect to be profitable for the year.
And perhaps most importantly, we have the products and technology that people want to use and by Ats connected TV and safe Haven.
As we look ahead to FY 'twenty two we are confident in our prospects.
Our business is healthy getting stronger every day and our growth initiatives continue to build momentum.
However, as the industry moves away from third party cookies and device identifiers to more durable solutions like Ats we.
We do expect some continued downward pressure on a few platform relationships during this period of transition.
This could represent as much as the $30 million headwind next year.
As a reminder, as we've said before it's cookies go away so will the cost associated with the cookie based components of our graph.
Adding up the positives and the challenges.
Our ongoing business remains strong and as a result, we expect top line growth of up to 15% in FY 'twenty two.
Factoring for the $30 million headwind. This implies underlying growth is accelerating and should be in excess of 20%.
In FY 'twenty two as I mentioned on our last call, we will be stepping up our R&D investment to take advantage of our global strength in TV and safe Haven, but at the same time, we again expect to be profitable.
Finally, as always we ask that you be conservative with their estimate for FY 'twenty too much uncertainty remains.
Before opening the call to questions I'll close with a few final thoughts.
First thank you to all our customers and employees.
It's you who make this company great.
And to our new colleagues at data fleet welcome to our team net.
Next we are SaaS and our model is demonstrating its durability and leverage.
And finally, it's a fabulous time to be at life ramp our.
Our products and technology is at the center of our strong secular growth trends and our global role has never been more important.
Operator, we'll now open the call to questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or Husky, please standby with Campath Q&A roster suspension.
Your first question comes from the line of Shyam Patel from Susquehanna Financial Your line is open.
Hey, guys congrats on the results and the data for that division.
Hey, Sean Thank you and sorry to you and everybody else out there for our.
Zoom fiasco, they're hopefully when you piece together the script.
It makes sense to you, but we're happy to spend time addressing anything that might have gotten muddled and all that.
They've got just from our perspective everything came in came in pretty clear with the Blue line, taking over than one coming back to what that's worth.
I had a couple of questions.
One for you Scott and then once the line on the data from the acquisition.
Could you guys talk about it.
Kind of where they were income too.
Merck litigation.
Any any marquee relationship to call out there and how you guys are just thinking through how it could.
<unk> been a bit or even accelerate that David opportunity and then.
Warren Thank you for the.
The early fiscal 2022.
Commentary I was just curious the 15% year over year growth is there just a framework for.
How we should think about subscription growth versus marketplace growth.
For the next fiscal year.
So Sean it's Scott, but I'll tell you what we announced at the start of this call that <unk> was joining us for the Q&A and everybody knows that on it because our <unk>.
President and chief product engineering.
Officer as well I mean, she she is so deeply involved in all of our technology. So I'm going to hand ball Youre question on data fleets over to her.
Because she's done a ton of technical due diligence on this acquisition.
Yeah, Thanks, Scott happy to jump in here.
So when we went to look for assets that could help accelerate our position within by operating privacy preserving analytics and collaboration we evaluated a lot of different companies in the space and frankly like the technology and the advances that are being made here are early but what we.
Really impressed us about data fleet is that the product and the team are really strong and we did a POC early on in evaluating the company.
That's led US to believe is that we can launch data free technology within safe Haven by mid FY 'twenty, two and offer the ability for our customers to take data assets that are sitting in different data silos and without actually moving the day that enable you to do complex analytics and measurement on top of that day.
Yeah.
And then let me address the second question, we're not going to give too much.
Any additional detail about FY 'twenty two on this call as obviously, we will be giving more detailed guidance on our call in may.
I would simply reiterate a couple of things that I said in my prepared remarks, and that is we expect to have a strong year in FY 'twenty two.
Underneath that 15% growth is that a business that is growing quite rapidly again, excluding the $30 million our growth should be up in excess of 20% and we expect to have a strong year in both marketplace and in subscription.
Okay. Thank you guys.
Thank you.
Your next question comes from the line of Kirk <unk> from Evercore ISI. Your line is open.
Yes, thanks, very much I guess Warren or Scott can you just run through the platform relationships.
I mean, maybe I missed something but it's been the first time I think most of US start hearing about that sort of headwind on your business and.
Why I think youre bookings growth looks great. This quarter I'm just can you just walk through why that's dropping off why.
I guess, there's going be some questions about why why this is kind of kind of coming up now. So if you could just kind of walk through that a lot of that that'd be helpful. And then I have just one follow up.
Chris Why don't I go ahead and jump in and then Scott may want to add to what I'm going to say.
First of all we have a handful of platform relationships and in those relationships. We licensed component parts of our digital identity graph and it's that revenue that we expect to sunset.
If you think back to the last year I mean, it's been a really remarkable year.
We started off with the eight Ats and the Great news is that as we're rounding out FY 'twenty. One Ats is in a very strong position not only for live ramp but for the entire industry and also throughout the year theres been a lot of cookies going away cookies, not going away and a lot of <unk>.
Kinds of speculation we have obviously also been having discussions with our partners throughout the year and then as we.
It came to really doing our budgeting for FY 'twenty, two and over the last few weeks. It became clear that we had some clarity around what if any exposure we would have and that is the $30 million headwind that we talked about.
Okay. That's helpful. Thanks, Thanks, Loren and then I guess just on the core itself on sleep bookings were up nicely. This quarter can you just talk about the macro backdrop do you see them.
More upbeat than last quarter in terms of inside assume what's your pipelines are looking like in areas like Safe Haven Ats can you just talk about sort of what youre seeing.
Yes, just in terms of customer conversations customers' willingness to spend and then and just to kind of have the town is maybe today versus three months ago. Thanks.
Yeah, Kirk it's Scott So I think a couple of things have been consistent throughout the year and give us.
A lot more confidence in the strength of our business and the importance of what we do to our customers.
More specifically this past quarter I think we saw a little bit of.
The continued improvement of the macro economy.
Despite concerns about COVID-19.
We really didn't see kind of the national shutdowns.
Rather what we're seeing with our clients.
Is a real.
Bias towards action.
A real recognition that data is increasingly important in delivering great experiences to their consumers.
And delivering better results for their bottom line and I think an increased appreciation that the playing field is a little bit tilted right now and that to compete with the walled gardens.
Most companies have to get a lot more sophisticated about the injection ingestion and utilization of their data.
That in turn has helped spur a lot of interest.
And safe Haven and in measurement.
And that's been great for our core subscription business.
Our up sells and then in addition in my prepared remarks, I talked about the explosion of Ats adoption that we've seen not only on the publisher side, but increasingly on the advertiser side, where they've discovered that it has scale, they're increasing their reach.
And they're generating far better results.
And so.
<unk> two secular trends of clients knowing that they have to be more sophisticated about their data and also recognizing that it's time to migrate off of cookie solutions to authenticated consumer friendly solutions.
Really has.
<unk> given us some fuel in.
This quarter and quite frankly, it's a big reason that we're comfortable giving forward guidance at a time that most companies.
And the world just simply aren't able to do.
Thank you Scott I might just add a couple of things that came to mind as you were talking and I'd just add the word global.
One thing that's happening is Etfs as a global solution as this day pay then as is our TV offering in Europe. As example.
To give you a good example of the growth our bookings in Europe. This quarter were up 85% year over year, and we had a strong double digit performance globally. So I would also say that our products are not only working in the U S. But.
But they are global too and it's opening up a global Tam for us.
Thank you.
Your next question comes from the line of Brian Fitzgerald from Wells Fargo. Your line is open.
Thanks, guys I wanted to hit this maybe a little different way as well and thanks for the breakout on marketplace per seller marketplace re accelerated.
Pretty strongly in the quarter and it looks like you're ahead of plan there.
In terms of marketplace's other revenue as well and maybe even new customer subscription revenue. So.
At a high level.
Can you say anything about where you saw him expected pockets of strength in the core was it would you highlighted CPG or are there other areas as well.
In terms of it being what you expected and then and then a sense of how that net meters.
Intra quarter as we get out of the holiday season.
And more on to your points on a global basis too.
We should think about.
For the quarter and for the for the first half of the year.
I would say.
Just trying to go through the breadth of our performance during the quarter and really the strength was across the board.
We had an exceptionally strong upsell quarter.
Two if you look at our bookings for whether it's for measurement, whether it was per safe Haven, whether it was per TB, we had a very strong bookings performance and as I mentioned internationally, we saw strength too.
In terms of the numbers in Q3 day.
Usage portion of our subscription revenue was with strong.
That came in perhaps a little stronger than expected and then on top of that we had also strength in marketplace generally so.
Pretty much across the board a very strong performance and as we mentioned I think the thing that really bodes well for US is the strength of our booking performance in Q3, and we expect to have another solid booking performance in Q4 as well.
Got it and then maybe one quick follow up on on the Cookie based relationships that roll off in 'twenty to do that.
<unk> definitively go away, even if Google kicks back the depreciation deprecation from third party cookies as that gets delayed.
Can you talk about the phasing of that impact.
I would not expect any incremental upside beyond that which we've talked about per next year. We think it's just prudent to plan for the for the $30 million that we've mentioned.
The second thing that I would like to say however is we will have ongoing relationships with these platforms.
If you think ahead to James his new role for example, we're really bullish on the opportunities we have with all of the cloud providers and what's ahead for us So I would not factor any incremental upside.
We think the $30 million risk is real.
As said if anything changes we'll of course, let you know.
<unk>.
Yeah, and I'll, just add to that I mean, I want to be definitive on this.
It doesn't matter what Google does.
Cookies are going away.
Theyre already gone away in Safari, and Firefox edge and together that represents 40% plus of U S inventory in a much bigger chunk of non U S inventory. What we're also seeing is that.
Authenticated identifiers like Ats.
Just works better than what it's replacing.
And so quite frankly.
Even if.
Somehow.
Google.
At about face on their decision, which I don't see happening given.
Given the fact that.
Authenticated Ats type solutions are far more consumer friendly and privacy compliant EBIT of Google.
About change of face, though we would still encourage clients from publishers to make that transition.
Yes.
Great. Thanks, guys I appreciate it.
Your next question comes from the line of Stan flow Sky from Morgan Stanley. Your line is open.
Hey, guys good.
Good afternoon, and thank you for taking our questions.
From my end.
Can you hear me.
Awesome perfect.
Trying to minimize the zoom errors in mind as well.
So just on the 20% core growth.
The day you are looking for from 2022 on a fiscal 'twenty two rather.
When you think about the components of that 20% growth is it.
Is it the uptick maybe in pace of customer acquisition is the strength of an existing and is it.
Which product areas are you are you thinking are going to be the main drivers of that and I have a quick follow up for Scott rather one.
Yeah, I would tell you.
Or in the hop in here, but as we sit looking forward.
We think that there's going to be a few drivers number one is.
This year, we've really relied a lot on upsell.
In part.
The one casualty of a COVID-19 world as face to face meetings, where youll build building trust and rapport.
Net absolutely hamstrings.
New logo prospecting that said Ats is one of the greatest new logo opportunities that we've seen as it succeeds a whole legion of clients that haven't previously dip their toe into programmatic with live ramp.
Can really take advantage of our services across both the programmatic channels and the walled gardens to.
To which they are probably already advertising. So I think thats an opportunity. The second thing that we're going to benefit from his safe Haven and really the flywheel there.
It's a incredible business and as much as as we win any single retail client. They in turn introduce us to all of their packaged goods partners and encourage those packaged goods partners to become clients as well.
We've often said that.
Many of our partners have been our best sources of leads over the last decade, I think that's going to continue and even accelerate in the coming years. Because these safe haven clients are going to be introducing us to their partners and we'll benefit from that.
And then the final driver is.
One of the things that gives us a lot of confidence right now is.
We've now seen a couple of quarters.
<unk> Ats performance.
We know it works really well and so we can go out and show the case studies.
Share client testimonials.
To new and existing clients and they get really excited about the opportunity to generate more reach and better results at the same time. So there's no. One single thing it's a whole lot of elements of our business working together and I think that's why you hear a lot of enthusiasm in our Vaughan.
As today.
Got it that's perfect and then a quick follow up for 100% net revenue retention guide.
For Q4 is some of that cookie based relays.
Our relationship deprecation.
Partners.
If it's going to be $30 million for next year is that already some of it starting in Q4 is that some of the pressure that you're going to be seen.
Great Great Great question Stan Yes.
The entire decline from 105 to 100 is directly associated with that in the fourth quarter.
Got it okay, perfect and just the one and five in the current quarter was any of that dynamic.
Impacting Q3 at all.
No nothing material.
Got it alright. Thank you so much guys.
Thank you.
Your next question comes from the line of Jack Andrews from Needham Your line is open.
Good afternoon, and thanks for taking my question I wanted to drill down on the remarkable Etfs.
So you achieved could you just.
Share was your specific catalysts it really drove.
This jump in.
In people on this platform or is it just you think that the.
The message <unk> been saying for the last several quarters is finally kicking in all of a sudden any color on what really drove the jump in adoption would be super helpful.
Yes.
I'm not even sure I'd characterize it is this incredible jump quarter over quarter, yes. The stats are meaningful, but it's really been a step by step journey for us really over the past year.
It really is a flywheel business so.
As we sign up more and more publishers.
Now we have 325 direct publishers that represents tens of thousands of individual.
Websites and I think I said last quarter that we now believe in the U S. For instance, we have the capability to reach 95% plus of U S households, so the reach is there.
But then that coupled with the results that folks are seeing I mean, the biggest barrier that we've had in Ats is 20 years.
Inertia 20 years of folks building all of their processes and all of their workflows around cookies.
We're proving that these new technologies work better.
And now I would expect that.
As we get out of the holiday quarter.
And.
Cookie Deprecation is now officially on the clock its happening in less than a year.
We're going to see the the adoption just continue to increase.
Lot of excitement around advertisers when they hear the case studies.
<unk> for publishers, who are starved for yield there is no better message then being able to go to them and say Hey, your yield will go up by three X.
Jack I might also just way and I'm going to again emphasize the word global.
Ats as a global solution. So if you're a multinational CPG and youre looking to have a consistent approach across all geographies.
Ats as the solution. So again this is opening up.
Wonderful set of global opportunities for the company and also doing some terrific things for our customers globally.
I appreciate the color around that just as a quick follow up question on the data fleets acquisition could you just talk about how you're.
Planning on I guess monetizing. This is this something that you are going to be directly charging customers for us. This is going to be part of the broader value proposition around line ramping in your platform.
Hey, this is arnica can jump in here.
Our approach with data point is that it's going to be foundational technology, that's embedded in the platform and what we think the way that this is going to get monetize is that part of our <unk> solution and that's part of our product broader product suite are what we anticipate and are planning for is that this is going to open up new Tam in new opportunities and vertical.
Health care and financial services, where we have low penetration today that we're really excited about that potential but again, it's something that's not going to be a separate product, but rather embedded into the platform.
Got it that's helpful. Thanks for taking my questions.
Thank you.
Your next question comes from the line of Kyle Evans from Stephens. Your line is open hi.
Thanks.
Peter.
Reseller.
Question to death here.
$30 million exposure is that a single relationship or is that all of your reseller relationships.
Its pilots across a number think about a handful of relationships.
And again these relationships are not going away, they're just going to change in their nature.
Okay. So thats your total reseller business within subscription about $30 million.
Yes, I think the way we would put it is this is where we've licensed component parts of our identity graph to a handful of platform partners.
Why wouldn't a handful of partners simply replace the cookie based.
<unk> with the new Etfs.
Ladies components.
So the short answer to that is in a world where you require dual authentication on both the publisher and advertiser side.
It's more difficult for them to materially add value. We think that there is an opportunity all of their clients.
We'll be using ats, but in terms of them being the identity private label identity solution themselves.
It really doesn't make a lot of sense over time, we think that there is an opportunity to actually extend the relationship not just on identity.
By ensuring that our measurement safe Haven.
Our capabilities are built in on top of their cloud offerings, and so I think that quite frankly long term, that's going to be a bigger tam than what it replaces.
But short term it just doesn't make sense to continue to license them cookies when cookies are going away.
Got it and then when you you wanted that's pretty specifically in the linear transactional TV headwinds.
It does play out as you expected and when do you expect to lap those tougher comps.
And let me take the last part of the question first let's say mid year next year, we should start to lap.
Lap these trends and then also we're working our way through some legacy revenues that are holdovers, even going back to axiom.
The trend definitely held true this quarter, we had an exceptionally strong quarter in market.
Data marketplace. It was up over 60% year over year, where total marketplace and other was up 27%. So we definitely felt it this quarter I might add that we'll feel at all from next quarter. We expect to have again in Q4, a very strong performance solid double digit growth in depth data market.
Place.
Some headwinds and many are in the linear TV again.
Small set of legacy revenues.
Okay, good segway to my.
Last question it sounded like you had some new relationships on the marketplace side that maybe helps to drive some of that.
Performance in the period or any of those.
You could comment.
Okay.
You cut out for just a second there could you repeat that question.
Sounded like your marketplace business benefited from some new relationships is there anything that you could comment publicly on that.
Yeah, I would tell you that.
I'm not sure I can comment can I cannot comment book.
So.
So one of the big new destinations is Amazon.
And that was just activated I think we've hinted at it in past quarters.
But it's a.
We think it's going to be a really exciting way for all of our clients to activate data.
The Amazon platform.
Great. Thank you.
Your next question comes from the line of Tim Nolan from Macquarie. Your line is open.
Thanks, very much sorry, I've got another question about the $30 million.
And that is simply I actually appreciate you, giving that number because we can now quantify what the.
The cookie deprecation impact can be next year.
Is it possible to quantify what the upside would be from Ats and other things that would offset that probably not next year, but in subsequent years I assume youre going to say that that can more than make up for the $30 million loss beyond fiscal 'twenty two.
But if you could comment on that would be great and.
Secondly, and somewhat Relatedly, we have.
You talked about idea phase on this call at all I know it doesn't affect you in the weighted to the third party Cookie does but maybe Scott any thoughts on what near term disruption might be in the market. When the idea phase officially supposedly do go away in the next few weeks or months.
Well I'll start with the IV FAA question Tim.
I actually.
I think that's gonna be a catalyst for us I think when when.
When posed with real dates and real migration it makes the change real.
And so Ats from the get go was architected to work on both.
Display as well as mobile.
And so we're ready to go with solutions in fact, most of the publishers that we've signed up.
We'll deploy on both display and on mobile as well, we're recommending to them that they follow the.
The Apple procedure is about.
Obtaining the authentication on the actual device itself as opposed to simply on the App.
But again, we think that's a real opportunity for us in.
Just the fact that it's becoming real is going to force change in the industry.
That's good.
In terms of your question on the subs Warren mentioned aside from.
That $30 million that we're going to sunset.
That our subs business is growing at 20% expected next year.
And we think continued strong growth.
It's something that.
We're pretty optimistic about I don't want to get into specifics around what that could look like in 'twenty three 'twenty four but.
But we think.
Just as cookies.
Set some players up for two decades of growth so too do we think.
Hmm.
More people based.
Syndication set us up to really help the ecosystem for the next 10 or 20 years. The other thing that we haven't factored in at all is while the cookie graph goes away and we will save some money in our cost structure there.
<unk>.
There is an opportunity as <unk> or replaced.
And masked by Cdp's for.
For us to really license our.
Identity identity graph of billet Tac.
And that's part of the opportunity that James is going to lead the charge on we're pretty optimistic about that but we have always always been a show company as opposed to a tower company. So we will start to forecast that revenue when it actually becomes real right.
Now, we know that we're going to sunset a portion of the revenue and.
And we have plans to broaden their relationships, but that's those aren't real contracts yet so we won't build those into the forecast.
Thanks Scott.
Your next question comes from the line of Jason <unk> from Craig Hallum. Your line is open.
Hey, Thanks, guys. One from me on Safe Haven. It seems like you are identifying more use cases, there just thinking through the existing customer base can you give any context on what the mix or what percentage of the opportunity for safe Haven you'd have.
Across your existing customers.
Scott, maybe I can jump in and I'll kick off and then you can jump in we're really seeing demand both across our existing customer base and new logos.
And in particular as we build out new use cases and add new features and functionality those use cases just expand.
Data fleets will without a doubt increased use cases for both our existing customers and for.
New customers as well and should also open up a whole new Tam for us.
Specifically thinking about financial services and then also.
And also in healthcare.
Another market, which is really opening up to us.
Got mentioned and I did too is really CPG.
The flywheel between retailers and CPG how.
Supplier relationships are being transformed is really taking taking.
Taking place right in front of US right now so it's incredibly exciting I would look at this as an opportunity both for up sell to existing customers as well as new logos with whom we're we're able to forge new relationships.
Thanks Mark.
There are no further questions at this time I turn the call back over to Warren Jenson.
Dan from the for closing remarks.
Well again, thank you everyone for joining us today and again, we apologize for the technical glitch.
We want to thank you for joining us we want to thank our customers and our employees as I mentioned earlier, it's you who make this company great to the team at data fleets a hearty welcome we really look forward to working with you and I know our customers are going to love your technology as well.
We believe our model is solid it's demonstrating its durability and its leverage.
We just couldnt think of a better time to be at life ramp.
Products and technology do sit at the center of a very powerful secular growth trend and our global role has truly never been more important with that thank you so much for joining us today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].