Q4 2021 Liveramp Holdings Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to live ramps fiscal 2021 fourth quarter and fiscal year and earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you will need the parts.
Star 1 on your telephone if you require any further assistance. Please press star Zero as a reminder of 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 and thank you for joining us to discuss our fiscal 'twenty 'twenty, 1 and fourth quarter results with me today are Scott Howe, our CEO and Warren Jenson, President and CFO.
Today's press release and the 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 library and dotcom.
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 and preparing for this call.
Selected back to the last time, we spoke when our stock price was hovering around $80.
The difference 3 months can make and have reflected on the old Benjamin Graham quipped that states within the short run and the stock market as the voting machine, but and the long run it is a weighing machine.
Given this I wanted to focus my remarks on 3 specific investment themes.
Our strategic position.
Top line growth prospects and our operating characteristics and.
And each I feel like we are even better positioned than when we last spoke.
First our strategic position.
All of these now widely accepted that the ability to interpret and enhance and activate data is of critical and enduring component of most companies success the.
The past 12 months witnessed significant change and the data ecosystem.
Google affirmed its intention to retire of third party cookies.
Apple instituted changes the idea of Fei and regulation throughout the world placed heightened emphasis on consumer privacy transparency and choice.
Our clients and partners look to library and since.
Determine how best to navigate this changing landscape and we believe industry complexity further enhances our strategic position.
For example, recognizing that cookies were and antiquated technology live ramp again, developing and alternative for the industry.
Penta treated traffic solution or Ats several years ago.
And given its widespread adoption and better performance global reach and privacy first approach and we're now finding that our authenticated traffic solution represents a key differentiator and virtually every client and conversation.
EPS is critical and our new logo efforts, where we once again posted some meaningful wins and also has the potential to catalyze even greater adoption of our platform.
While we do not intend to charge publishers or our media platform partners for use of Etfs.
Overtime, we expect the authenticated traffic solution to drive increased platform usage and cross sell of newer use cases like conversion and analytics and personalization that were previously served by the third party cookie.
In addition, our industry authentication solution significantly accelerates our international expansion efforts and opens up new addressable markets and geographies, we have not historically served.
Just 2 years ago, we were in the U S U K, France, Australia and China.
Today, our geographic footprint also spans Spain, Italy, Germany and Japan.
And continues to grow.
We are of critical scale today with the authenticated traffic solution and global adoption continues to build.
Good day more than 400 publishers worldwide and have adopted the ats to offer marketers a more efficient way to reach audiences and measure performance.
And we supported more than triple the number of Ats enabled campaigns in Q4 relative to prior quarter and more than 100 of our brand customers have already shifted spend to use our industry authentication solution.
Most importantly, the industry is embracing the etfs because it is a better solution than what it is replacing.
Our authentication solution is the only truly neutral omnichannel and global technology available and.
As a result publishers make more money marketers generate higher returns and consumers gain greater control and transparency over their data.
For too long and publishers of ceded control of identity and their first party of relationships to the browsers or other platforms that have profit it and built segments using publisher data collected via the third party cookie as.
As the only neutral and media agnostic solution and market.
We don't care, where or what media is bought all we want to do is enable the connection of data to the inventory, where the publisher and marketer of wished of transact. This this is why publishers like Microsoft 1 of the world's largest publishers are seeing this.
Results of 40% higher CPM when leveraging a T S.
Marketers marketers are also seeing better results when using the T S.
Forrester recently published a report that independently evaluated Etfs performance relative to third party cookies and the result of verified the superior performance we've generated.
Forrester found that advertisers deploying our industry authentication solutions can generate a 340%.
ROI improvement over 3 years with the payback period of less than 6 months.
And a separate series of case studies of leading international hotel chain generated of 400% increase in bookings and the well known consumer electronics brands drove a 200% return on advertising spend when leveraging the Aps.
These types of results are game changing for our customers.
I've often been asked by analysts and shareholders, how we compare against other identity providers that have more recently emerged in the wake of cookie changes.
Notwithstanding the fact that we either private label will allow many of these partners to ride in our carriage.
And we feel we are very well positioned for the future.
2 important points.
1 we are far broader than the alternatives when evaluated by use cases.
And to us.
Unlike some of U S. First alternatives, we built of our products for the more exacting privacy standards of G. D. P. R.
As a result, we are the only company that offers a truly global capability.
We included a couple of diagrams and our appendix that illustrates both of these points.
I share. This data is evidence of an important theme, we believe industry disruption is a good thing for our business as the resulting uncertainty makes us and even more valuable advisor to our clients and gives us natural opportunities for game changing innovation.
Second revenue growth and our.
May call a year ago, we talked about navigating the FY 'twenty, 1 from a position of strength by doubling down on our customers supporting them through their digital transformations and by leveraging our durable business model and strong financial position.
And we did just that throughout and unprecedented pandemic year, we still grew.
For the quarter total revenue and subscription revenue were both up 13%.
Marketplace and the other also grew 13% driven by data marketplace, which was up 25 per cent and benefited from a steady recovery and digital advertising spend.
As we look to the future our competence of strong and our last call. We discussed $30 million of revenue we of Sunset and associated with the deprecation of the third party cookies and we'll grow through this headwind as well.
Let me share 4 important proof points.
1 where.
We're winning with clients Q4 represented yet another record bookings quarter with bookings for the quarter up more than 70 per cent for the full year bookings were up 37%, both pretty remarkable feat given the macro environment of the past year.
This performance is a testament to both the value we deliver to our customers and our commercial team's relentless focus on the execution and customer success.
2.
We're winning with the largest companies while our net customer adds metric has been pressured given the pandemic.
New logos added over the last year or more strategic and have the sophistication to leverage a wider set of our product capabilities.
As a result, the average ACB of of new logo brand deal and FY 'twenty, 1 was 50% larger than it was a year ago.
3.
We're building stronger selling capabilities, we're leveraging subject matter experts of more disciplined approach to global account planning and the continued focus on white space analysis and.
In addition over the course of the last year and response to continued client requests we launched the services business. While this does not represent meaningful standalone revenue and allows us to educate our customers, while helping them use library and more effectively.
We're pleased with our progress to date inside of our overall bookings performance up sell bookings were up 75% and we closed a record number of global deals and FY 'twenty 1.
Fourth.
Most importantly, we are well positioned for the future and fact recent conversations with customers and prospects make me confident our long term opportunity is even bigger than what we had the first envisioned.
Our vision is to make it safe and easy for companies to use data. We did this initially by pioneering data onboarding and bringing our customers offline data online to improve cross channel advertising.
While this remains a critical need for any customer centric business and increasingly we are discovering and our customers are discovering new applications and new markets for our products that even a few years ago would not of seems possible.
You see this momentum reflected in both the steady growth of the average brand ACB.
Which was up 28% and FY 'twenty 1.
As well as and the continued strong growth of $1 million plus customers, which totaled 70 plus at the end of the year.
There are so many great recent examples of our growing role across the enterprise and then.
I'd like to highlight a few today.
And Q4, we signed a multimillion dollar of new deal with the leading the insurance provider and 1 of the largest advertisers and the U S.
And in addition to leveraging live ramp to activate the data driven media campaigns. This organization wanted to develop a more sophisticated first party data and identity strategy.
They are using safe havens, and unify their data assets and stand up of measurement and analytics environment to better understand the return on their media investments and in particular their advanced television spend mid <unk>.
Fans of the Upfronts.
The second example is with the multinational automotive manufacturer who has been a customer for several years.
Significantly expanded our partnership with this customer in the quarter to help them build out their identity infrastructure.
Once again, they are leveraging our safe haven capabilities to unify data across the different business units dealership networks and agency partners to create a more holistic and connected view of their customers that they can that activate and for display and social targeting via <unk>.
Yes.
A final example is founded and the successes, we've recently experienced with the consumer packaged goods sector our.
Our success and retail encourages growth and packaged goods and vice versa.
In fact, 2 of our largest upsell deals and the quarter.
And with top 50 global CPG brands to enable onboarding to multiple digital and connected TV destinations Cross channel analytics and data collaboration.
Third.
Operating strength.
Well Warren will dive into our operating performance and more detail in his remarks I did want to briefly touch on this third key investment theme.
As is the case with most SaaS businesses Library amps model exhibits initial fixed costs with strong marginal economics and scale benefits.
We saw this on display throughout FY 'twenty 1.
I am pleased to share that this quarter marks our fourth consecutive quarter of operating profit and free.
For the full year, we generated $16 million of operating income.
And FY 'twenty true, we plan to increase our rate of investment and R&D to capture our growing safe Haven, and CTV opportunity and.
And they expand our identity advantage.
As we invest we will deliver durable growth while also maintaining profitability.
In summary, looking back on the past year, what we feel more than anything is gratitude.
Thank you. Thank you to our employees customers partners and everyone else and the library of community for your ongoing support and hard work.
Our strong execution and progress despite the unique macro challenges of FY 'twenty 1.
Give us even greater confidence and our future.
First the market forces that have driven our success to date are gaining momentum.
<unk> today must be digital first and data driven and how they deliver customer experiences and library amp is playing a critical role and enabling both of these trends.
We are strongly and strategically positioned for long term success.
Second, we're winning with clients and are well positioned for growth.
Third the.
And the strength of our operating model allows us to invest from a position of strength.
Finally, but importantly, the recurring nature of our business gives us visibility and confidence about FY 'twenty 2.
And we look forward to updating you on our continued progress in the quarters ahead.
With that I will turn the call to Warren.
Thanks, Scott and good afternoon, everyone and thanks for joining us today.
Q4 was the solid quarter and even more importantly, we enter our new fiscal year from the position of strategic strength and with momentum.
Today I would like to focus my remarks on 3 areas first share a few highlights for the year and Q4.
The next discuss a few specific callouts for the quarter and finally talking about our momentum and provide guidance for Q1 FY 'twenty 2.
1 of the year and.
And 1 of the most challenging business environments library and had a solid year.
We grew.
Total revenue was $443 million of 16%, we expanded gross margin our gross margin was 73% of 600 basis points.
We were profitable not only for the full year, but and every quarter or 2.
To put some perspective on our operating performance on a $62 million increase to our topline and gross profit increased $69 million and our bottom line improved $80 million.
While our expenses benefited from Covid related savings of approximately $25 million no matter, how you slice it the strength of our model was clear.
And finally, we returned capital to our shareowners during fiscal 'twenty, 1 we repurchased 1.3 million shares for $42 million.
Please turn to slide 4.
And the fourth quarter total revenue was up 13% and subscription revenue also increased from 13%.
Overall marketplace and other revenue was also up 13%.
Data marketplace, which represents roughly 75% of ongoing marketplace and other revenue was up 25%.
Customer accounts, where again.
And the quarter, we added 15, net new subscription customers and as Scott mentioned, we had a record bookings quarter driven by our expansion levers safe Haven and CTV.
Current our Po or our next 12 month backlog was up $25 million sequentially.
And as a reminder, timing of renewals can and will cause volatility in this metric.
<unk> ended the quarter of 13% and net retention was 101, while platform net retention was 104.
As a reminder, both of our <unk> and.
<unk> metrics were pressured by contraction associated with the few wholesale arrangements.
And the quarter this wholesale contraction and had a $5 million impact on <unk> and impacted our retention metrics by 2 points sequentially.
Beneath the top line our business model is working and the trend lines are clear.
For the quarter gross margin improved 300 basis points to 74% again, another record for Standalone light ramp.
Productivity was driven by continued identity graph and hosting optimizations.
We were profitable again in Q4.
And the quarter, we estimate COVID-19 related savings to have been roughly $8 million.
Operating cash flow was negative $18 million and free cash flow was also a negative $18 million.
2 additional Colorado and.
And the quarter, we proactively took steps to take advantage of the loss carry back.
Provisions of the cares Act.
As a result, we.
Accelerated vesting of non equity awards scheduled to vest and the first half of FY 'twenty 2.
This increased our quarterly charge for stock based comp by approximately $23 million in Q4.
And secondly, we prepaid certain qualifying service fees. This timing difference negatively impacted Q4 cash flow by approximately $20 million.
While these timing related actions negatively impacted our Q4 GAAP operating results and cash flow they created meaningful shareholder value as we now expect to receive a tax refund of roughly $28 million. After we file our tax return for FY 'twenty 1.
Next while we did not repurchase any stock in Q4, we have been and the market subsequent to quarter end and and repurchased approximately 275000 shares from $13 million.
In summary, we.
We did what we said, we would do and FY 'twenty 1.
<unk> delivered a solid growth year and a strong operating performance.
Now onto guidance for Q1, and FY 'twenty 2.
Before jumping into the numbers I'd like to talk about the strength of our foundations and our momentum heading into FY 'twenty 2.
First our foundations are strong.
<unk> is now adopted by more than 400 publishers worldwide and is the only solution and market. It is truly omnichannel and global and it works it's the.
A better solution than what it will replace.
This year, we strengthened our platform, we made significant investments and platform usability and scalability and privacy preserving technologies.
Next momentum is building.
And we acknowledged the $30 million wholesale contraction is pressuring growth metrics and FY 'twenty 2 however.
However, underneath this headwind we have a very healthy business.
Bookings have been strong in particular in the last 2 quarters.
Half of bookings were up 52% and for the year of 37%.
International is rounding the corner, while bookings growth will precede revenue growth second half bookings increased 190% and for the year were up more than 85%.
At the end of FY 'twenty, 1 we were supporting customers and over 10 different markets with plans for further expansion in the year ahead.
Next our key expansion levers TV and safe Haven, our honor roll TV.
And the second half of FY 'twenty, 1 increased over 80% and for the year were up more than 150%.
<unk> is 61% and as we approached the Upfronts momentum continues to build from both the buy and sell side.
State Palin.
Second half bookings were up over 100% and for the year of over 150% and.
In FY 'twenty, 1 both IRR and revenue were up well in excess of 100%.
Safe Haven is global and roughly 1 third of our FY 'twenty, 1 safe Haven bookings came from outside the U S.
Say payment as an enterprise platform when customers deploy say payment functionality and they are.
The addressing a set of use cases, the leverage all of the <unk> capabilities, which often extend well beyond media.
Our safe Haven platform is now being used by more than 45 brands and has contributed meaningfully to the ACB expansion Scott mentioned.
Further we are building a strong network effects and other words, our retail and CPG flywheel is taking shape and.
And the U S. We now serve customers, representing 30% of U S grocery and big box retail and.
And in Europe customers, representing roughly 7% of grocery and big box retail.
And we serve more than 30% of the 50 largest global CPG up from 20% just 3 months ago.
And finally, the operating characteristics of our business are very clear our.
Our gross margin is approaching our long term target we have demonstrated the nominal operating leverage and we have shown we know how to be profitable.
And it all up we feel the scales tip in favor of library.
Now on the guidance, please turn to slides 12 and 13.1.
For the first quarter, we expect revenue of 2 of 112 million and the non-GAAP operating loss of up to $2 million.
For the full year, we expect revenue of up to $509 million of roughly 15% growth and to be slightly profitable on a non-GAAP basis.
Please keep in mind this guidance excludes intangible amortization stock based comp and restructuring and related charges.
And a few other callouts for Q1 and the full year.
For Q1, we expect subscription net retention to be roughly 96% and platform net retention to be approximately 102.
Please note that in Q1 wholesale contraction will negatively impact our revenue growth rate by approximately 8 points and our retention metrics by roughly 10 points.
We expect net retention to recover throughout the year.
In Q1, we expect gross margin to be roughly 73%.
For the full year, please turn to slide 14.
On the slide we tried to highlight the positives and the challenges.
Again, we acknowledge that the 30 million dollar of wholesale contraction will pressure growth metrics and FY 'twenty 2.
However, underneath this headwind we have a very healthy business and good line of sight to our guidance.
Excluding the $30 million impact for the year, we expect total revenue growth to be in excess of 20% and subscription revenue growth to be approximately 25%.
1 of the year, we expect gross margins to hold roughly flat at 73%.
And lastly, we intend to increase our investment and R&D to further capture the global Safe Haven and television opportunities.
Given the strength of our recent bookings we have good line of sight to accelerating international revenue growth in the back half of FY 'twenty 2.
In addition, we expect revenues from both Safe Haven, and CTV to double in the year ahead.
Before opening the call to questions I'll close with a few final thoughts.
Through the challenges of this past year light ramp again delivered on its commitments. Our foundations are strong we have consistently demonstrated an ability to navigate change to ensure our customers are competitive and can use data to create lasting and personal relationships with our customers.
Our technology is world class and has only gotten better of this past year.
Our growth engines are finding their stripe.
Payment and TB around the global role.
And finally, our model works growth strong gross margins and demonstrated profitability. We are confident that over time, our model will generate significant returns on invested capital.
For joining us today, operator, we will now open the call up to questions.
Thank you as a reminder to ask the question you will need to press star 1 on your telephone to withdraw your question press the pound or hash key please standby and we can pass the Q&A roster.
Your first question comes from the line of Shyam Patel from <unk>.
Your line is open.
Hey, guys. Congrats on the great fiscal year I had a couple of questions.
And maybe the first 1 on CTV could you guys talk a little bit about.
And the scale of that Youre seeing with this business.
And maybe elaborate and some of the some of the trend and kind of how you think about the privacy changes that are that are coming up and how they impact that business and then second question Warren when we look at the revenue guidance for fiscal 'twenty 2.
Of the $509 million you guided to.
And.
How does that break out between subscription and marketplace.
And how should we think about the quarterly and back of the of the.
The cookie based revenue throughout the year.
Alright, let me let me jump in on the first question.
And then Scott I'm sure will want to talk about the trends and I'll come back to the guidance question.
It's really interesting and what's going on inside of the TV as the connected TV business just is doing extremely well.
You take a look at our growth during the quarter again was strong and we expect another great year next year and fact as I mentioned in the prepared remarks, we would expect that business to more than double.
The double next year.
Right now connected TV is about 50% of total if you forecast through the end of next year should be about 70% of total as the transactional or the linear transactional portion of the business will become less of a factor.
And to your point about.
The good trends and so theres 3 that we really see and hear a lot and the market.
Particularly now because we're in the middle of the upfront season.
The number 1 I think we're seeing a growing trend towards cross screen.
Purchases and that really benefits life raft, because we're unique and our ability to.
Connect different packages and really allow advertisers to determine the holistic return on the cross screen spend.
Second is the importance of first party data.
More and more advertisers are realizing that their own first party data as 1 of their most valuable assets and to the extent that they can deploy that and purchasing.
TV well that is all of it going to make their TV dollars stretch a lot further and then the third is accountability.
It is so important and coming out of the crazy year, we just experienced not surprising.
And many advertisers are trying to figure out how to make every dollar of their marketing plan and accountable.
For a long time television has been the Big question Mark you know it works you just don't know what elements work.
We're seeing that change through the advent of measurement and again that really plays to our strength.
And then let me jump in on the facing of.
And our slide deck I didn't make reference to this and in my prepared remarks, but on slide 19, we've laid out the quarterly impact of the wholesale transaction.
The wholesale transaction contraction, if you will.
And as short hand in terms of looking at total revenue its about $8 million of quarter.
Looking at subscription revenue about $8 million of quarter comes down a little bit and Q4.
In Q1 and throughout the year.
And then through at least Q3 will impact <unk> by about $30 million and then again as I mentioned in the prepared remarks about 10 points in Q1.
It's impacting our net retention metrics.
And your other question relative to the mix think about subscription of the marketplace roughly being 80.20.
It has been historically.
Great. Thank you guys. Thank you thanks, Sean.
Your next question comes from the line of Stanislawski from Morgan Stanley. Your line is open.
Yes.
Perfect. Thank you so much guys and congratulations on the <unk>.
Strong finish to a challenging year.
I wanted to go back to the.
To the large customer metrics and the 70 customers that you finished with the greater than $1 million of it.
Subscription.
The if you look at it sequentially right 5 new logos added sequentially and it really demonstrates the strategic nature of the product and it's the most of that you've added sequentially.
Sequentially since the Q3 of fiscal 'twenty.
Is there something specific that happened in the quarter that the.
And that drove some of the customers above that $1 million.
<unk> is it something that youre doing yourself or is it just organically as people.
Coming to lie of ramp plan.
I think ultimately it's a sign that we're innovating and creating products that our customers want to buy.
And as a result that allows us to command a higher price point of higher HCV.
For some of our new logos and certainly we had a lot of success and the quarter with with upsell and some of that.
Forced by the hand, we were dealt with the pandemic, but if you think about the things that we've developed over the last year.
Ats breeds accountability, and we don't necessarily see that and the numbers so much yet because it's still early and.
Terms of adoption, but that will drive overall platform economics.
Safe Haven.
Phenomenal introduction of lot of success last year.
And that tends to be a much bigger price point and pull through other products connected TV.
Such an easy upsell to a lot of our clients.
Aimed at 1 of the biggest components of most advertisers and media spend and the coming here, we'd like to see that ACB trend continue but quite frankly, when I look at the number of number of net adds I think that's an opportunity for us.
The travel opens up out of the pandemic.
Got it and that's very helpful and I wanted to get back to the $30 million impact from this wholesale contract contracts, rather that are flowing out of revenue and <unk>.
Thank you Warren and full of jobs.
Given the disclosure of the $5 million impact in Q4.
Help us to characterize was the $5 million impact in Q4 was it larger than you expected was in line with what you expect and and just overall pacing of the $30 million flowing out of the numbers.
Are you seeing that change versus how you initially thought about it or is it kind of proceeding along.
And as you thought no great Great question, Scott and I'd say exactly as we thought we felt when we gave our guidance last quarter. We had a very good handle on exactly what it would be and there has been absolutely no change to that.
So again I'd just reiterate from the first point I made during the call.
Expect <unk> to decline about $30 million or roughly $30 million in Q1 and that will trend through Q3, and then it drops to about a $25 million impact in Q4.
Got it and when you when you talk about this the $30 million of wholesale is there anything that's left over after fiscal 2000 and soon to fiscal 'twenty 3 of us that most of it already gone out of the numbers afterwards.
Again, as we as we mentioned on our last call and just to reiterate something that we set of here I guess a few months back we went through line by line every 1 of these relationships because theyre complicate and we do a lot of things and we took a very methodical work and every element of these relationships and then forecast what the.
The declines would be which led to the $30 million. We also said that as we looked at the out years, we thought there could be as much as $15 million of incremental impact beyond FY 'twenty..2 but then also highlighted obviously, we have a lot of other growth initiatives in place that we hope that doesn't even become a factor as well.
As we move into FY 'twenty 3.
Perfect. Thank you so much guys. Thank you Stan.
Your next question comes from the line of Brian Fitzgerald from Wells Fargo.
Your line is open.
Thanks, guys with the with the recent release of iOS and <unk>.
14, 5 we've seen a couple of different narratives emerge really about consumer opt in rates, some saying those rates are actually pretty high other saying quite well.
And now if you could provide some insight into what Acs publishers and brands are seeing and the iOS environment and then.
We also wanted to ask about your customers ability to drive opt in rates higher overtime, we know and the new iOS version and there's really only.
The 1 chance to ask the that opt in whereas it's more open ended and other environments more shots on goal if you will.
And so are.
Are your customers seeing a higher share of authenticated traffic over time as they get more chances to ask for consumers to authenticate.
Just as the.
Brian It's Scott.
First off I would just remind everybody where so much broader than.
Mobile or any 1 channel like programmatic or anything like that our advertisers marketers when they work with us they are using us to.
Use their data.
Cross all kinds of different touch points and.
So importantly, what I want everyone to understand is that.
All of the impacts of idea of Fe we.
We feel are immaterial to live ramp both in terms of our ability to reach our customers target audiences.
And we do not expect any financial impact.
Of of ATT or idea of Fei.
And I looked at the numbers just yesterday.
And I look since the implementation.
Patients of.
A T T.
What is the impact on our customer records.
And it has not changed 1 iota.
Over the past few weeks.
In terms of the opt in or opt out rates.
And I only know what I read and what I hear from clients because thats not something that we see remember we're not of media player.
We're not of the application providers, so we wouldn't necessarily.
See that.
I've seen estimates that are pretty low and the single digits I've also seen a slate of recent articles and.
What I would tell you is our clients seem to think this as well that suggest that those numbers will be much higher.
What I would also tell you is that both based on what we've seen and display.
And then what we've heard from providers they are getting much better at <unk>.
Telling the authentication story.
E, making it really clear of what the value of exchanges.
And.
Enticing customers to be excited about that and so at least and the display space we've seen and.
And heard from our clients that authentication rates are going up.
The last thing that I would tell you.
As.
And Mike comment of some surprise, but you don't need very high authentication rates to really move the needle from a publisher yield perspective or from a marketer efficacy perspective.
Certification right, so of even 10 or 15% drive meaningful upside and so when we see publishers that in many cases are far higher than that.
We published a case study of Microsoft talked about.
40% yield improvement across there.
Their traffic.
We think that there is a lot of reason for optimism amidst all of the noise.
Got it thanks, Scott I appreciate it.
Your next question comes from the line of Kyle Evans from Stephens. Your line is open.
Hey, guys. This is an example of around for Kyle.
And the guide for F. 'twenty 2 can you help bridge the F. 'twenty 1 'twenty 2 here and so we've got a 15% growth and revenue inclusive of the $30 million headwind as third party Cookie Sunset operating income is going from 16 million to 2 and half of the midpoint.
Can you just help us better understand the investment that's taking place and F. 'twenty 2.
Of the $25 million and savings you talked about from Covid and what comes back there and then.
Any expenses associated with the cookie sunset that can be removed in F. 'twenty 2.
Great. Thanks, Nick.
2 points and narrowed that are pretty interesting is I think if you look at our results over the past year, you'll really see the progress we've made and Cogs again, given the margin expansion and a lot of that has come through rationalization of our cost. So we continue to look for opportunities and would expect opportunities throughout throughout the course of the year.
2 in terms of Covid phasing again, we'll see exactly how this comes out.
But of the $25 million I would expect maybe a million dollars of that to come back Q1, a couple of million dollars Q2, maybe 4.5 years Q3 and call it 6 possibly 7 or so in Q4.
We like many others expect did not all of those costs are going to come back. We think we have a real opportunity to better manage our TNT and do different things that will really drive the savings while not impacting our effectiveness at all so we think that'll be upside permanently embedded into.
Permanently embedded into our run rates on the bottom line, where we do expect to invest this year is in R&D and to some lesser extent and sales and marketing.
The reality is we just see a tremendous opportunity in front of us in both connected television and then also and global Safe Haven.
And I might even just pause there and elaborate for a second I don't think its lost on anybody on this call. The retail media networks are just blowing up.
The Great News is we are of pioneer in this space our safe Haven platform was built with car for pretty close to 4 years ago, and it's the only gotten better and.
As a result of that we've been able to create the share that we have we.
We think it's an incredible accomplishment to have a segment share of 30% of grocery and big box Big box retail and the U S and even 7%.
And in Europe.
Further our business is expanding dramatically with the cpg's around the world too. So we're incredibly excited and net net.
Any additional cost will principally come in the form of incremental R&D.
The 2 sales and marketing as you would expect but to a lesser extent and very modest amounts and G&A.
That's super helpful and then.
I wanted to talk on the rash.
On the Ats solution here I would imagine the any publisher who's put up of registration wall. Maybe in response to the elimination of third party cookies is doing so in an attempt to monetize their inventory and therefore would be and easy sell for live ramped to incorporate HTS. So the question is is there.
Any reason why of publisher, who has gone ahead and put it up that registration wall is hesitant to link up with the Ats.
Theres really not.
I'd say that there are 2 drivers too.
Fulfilling kind of universal adoption.
And as just readiness and so believe it or not despite all of the commentary from Google about.
Adhering to their February 2022 timing there are still some publishers that.
Haven't moved.
<unk> as we think they should in terms of.
The testing that authenticated solution.
And the reason is pretty simple I mean, a lot of those publishers don't have a lot of operational resources and so this is just stacked a little bit lower and their queue and they think they'll play catch up later in the year.
There is another group of publishers and Theyre not the top 50, I want to say when we looked at the analysis of couple of months ago, and say like 49 or something of the top 50 publishers and the U S have put up some form of authentication.
But there is a group of publishers that comprise at least a slice of programmatic today, we've never worked with them.
And that really don't have the quality content to entice the consumer to sign up for a fair value exchange.
And those publishers are in trouble.
And quite frankly, I don't think anybody's going to shed any tears about them.
Tend to be the clickbait publishers of the world.
So there is a flight to quality here, which will be good for the industry.
Great very interesting thoughts. Thank you I appreciate it.
Your next question comes from the line of Jack Andrews from Needham Your line is open.
And good afternoon, and thanks for taking my question I wanted to see if I can ask you a couple of questions on Safe Haven I guess.
Could you talk about how you see the market opportunity of safety and finish this largely greenfield or are you running into other potential competitors like snowflake and this market and then and just a related question is could you maybe frame for us what percentage of your customer base could potentially consume safe haven or sit and.
Other way are you seeing maybe seafood and lead to net new customers for life ramp overall did you have been able to appeal to the historically.
And boy.
Great question. So let me start with the last and then work my way way to the first.
When we look at our customers and we look at the functionality of Safe Haven, plus what we are and what we will be building over the next 12 to 24 months.
We feel that 100% of our customers can adopt safe Haven and use this platform. So we see an enormous opportunity.
We measure our Tam north of probably roughly around $16 billion.
And it just gets bigger every day.
Not only about retail media.
And in retail, it's also becoming about category management.
And store promotion, how store managers are using that data to better manage their selection side of the day to day basis. So the opportunity even inside retail just continues to get bigger.
And secondly, we've begun penetrating and healthcare and financial services is not too far ahead of us either.
We see the market as being a.
Very very large and us really of that.
Really at the beginning.
The 1 of the biggest advantages we have.
And really.
3 advantages that are really unique to library of <unk>.
The first is privacy.
Our skills and privacy and then what we're doing with that with that of fleets and privacy preservation and the non movement of data are second to none.
And secondly identity everything that Scott's talked about relative to identity and what we're doing with the ats positions us and a very very unique way.
Third there are other providers out there that approach really data collaboration Morris of service. We have built the scalable SaaS platform that will scale with demand. So the retailer doesn't want just 1 to 1.
Platform they want 1 too many they want their entire supply chain, which is why we feel so optimistic around.
Our opportunities not only in retail, but also how they.
How they translate to CPG.
When it comes to Snowflake, we think they're very complementary.
So and a number of cases, we just see them as being very complementary solutions and not at all competitive.
Thanks for the color and the congratulations on the results great. Thank you.
Your next question comes from the line of Tim Nolan from Macquarie. Your line is open.
Thanks, I just had 1 other numbers question and I hope I didn't miss it earlier.
But you were talking about your net retention rate going down to the 95 range. I think you said for Q1, and then improving from there can I just ask well we'd be back above 100% by the second half of the year and I think that 95 included 10%.
From this from the dropdown that you've mentioned a few times now the last 2 or 3 quarters.
What Quebec over 100 and tend to battery back and the 115.120 range over the next few quarters.
Let me, let me try to take each of those questions. So our guide for Q1 was about 90.695, and again, a 10 point impact from the wholesale contraction.
As we look to the back part of the year.
I think we can.
Again.
And we're not going to make it a practice to give long term retention guidance, but we see it improving steadily and by the back part of the year, Yes north of 100.
As to our long term goals.
That is our intention we're not satisfied anywhere down and this 100 to of 105 hundred 10 range, we'd like to see that accelerate as we move forward.
And 2 in the coming.
Coming years.
Thanks.
Your next question comes from the line of Jason kind of from Craig Hallum. Your line is open.
And thanks, guys I just wondering if you can breakdown the record bookings figure and you can kind of give us the key drivers there and then regarding Ats, obviously, that's bringing in new logos, but as that progresses and kind of what the route to market there.
How do you take that product and and generate kind of accelerating revenue growth for a product that youre not specifically charging for it.
And I think the first.
Let me take the first on bookings.
Really the 2 principal drivers we've already touched on and those would be safe Haven, and then also connected TV as the growth rates were obviously terrific relative to the year over year comps and bookings I think the other thing that bodes well, which I'll just reiterate for everyone.
As our second half bookings have been very very strong and throughout the year as we lap some of the the.
Earlier quarters, Youre going to see that show up and and all of our metrics. So we're optimistic.
And then on the Ats from the start we've pledged interoperability I mean, our goal here is to really build a solution for anyone and everyone.
And the industry, but that's not to say that we don't see and opportunity for us there.
Yes.
Adoption becomes.
Really ubiquitous.
It's an opportunity for advertisers everywhere to take.
Integer of their first party data and.
And as they do so.
And they'll find us and become our new subscription customers.
And as they have success and say programmatic, there's really no limit to what they can do.
I think and 1 of the appendix slides I laid out a schematic of.
All of the different use cases that Ats offers off and talk about Ats.
And and live ramp where really the entire pool and there are many other identity solutions that with which we are interoperable.
And oftentimes they represent just a single swim lane so as they succeed we succeed and as we succeed hopefully we drive drive their success, but success and programmatic or and display media and mobile.
Can lead to call centers or point of sale activation.
CTV certainly so we think that this is a really important way to get the flywheel going for us.
Scott 1 follow up there just in regards to your comment on first party data can you just talk about the the market opportunity you see from this portrait engine and solution.
Oh yeah.
And I'll tell you.
It really goes back to my prepared remarks, and the fact that.
Regulated and.
And the complexity with it really benefits us strategically.
As.
As theres more heightened regulation of <unk>.
And there's a lot of companies to really think about what is their most valuable asset from a data perspective.
So off and it has their own authenticated permission first party data.
And that stands to reason because most of the customers that that client knows the best there is of repeat customers.
And so the activate that information and use that as a starting point of everything you're doing online.
That is a really easy and effective way to get started.
Our portrait of engine really is focused on the concept of first party data and the first party identity.
And using that for any company that has not yet sophisticated about data.
Dip their toes and the water and get started.
So I'm pretty optimistic about what this can be for us and the.
The coming years.
Thank you.
Your next question comes from the line of Daniel Fannon from BMO. Your line is open.
Hey, good afternoon, everyone.
2 questions.
Scott or Warren.
Could you just update us on your search for a new head of the sales force.
And then second for either of you again, maybe Scott could you return you mentioned the creation of the services arm.
Just curious what prompted that decision now and what you're hoping to achieve out of that new initiatives.
Bravo Thanks.
Sure.
And so on the first I'm really pleased with what our teams accomplished I mean, we really haven't missed a beat over the last couple of quarters.
As James was transitioning to his new role of.
The spinning up the the cloud based partnerships and that's off to a great start but we.
We've posted our strongest 2 bookings quarters and library of history the.
The team is really do and great.
And it's giving me a chance to spend even more time with clients and that's the best part of my job.
So it's been Super energizing.
At the same time.
Conducting the search itself has been equally energizing, we've been using 1 of the big search firms.
Personally interviewed over 30 external candidates, it's giving me a great chance to mine them all 4 of their best ideas.
And I would say we're.
Closer to the end of the process than we are to the start of it but.
But I would tell you I feel like we have nothing but good options. This is this is going to and well for us.
On the.
On the services front.
Like we do with a lot of our product innovations, we listen to our clients and for a couple of years now we've heard from our clients that they really need some help getting off the ground you've heard me say this before Dan so off and the biggest complaint. We have is it feels like you've sold would be of porch, but they don't know how to drive stick.
Well my starting up of professional services arm, we can educate our clients about how best to use live ramp and for some of our newer products like safe Haven.
And so important because not only is the product a little bit more complex than our norm.
But the clients are using that are operating at the very edge of sophistication.
And so the collaboration that we can have with them just allows them to get up and running far more quickly.
The other SaaS companies have much bigger professional services businesses than we do I think and hindsight I am kind of kicking myself for why we waited so long because this is off to a really good start for us.
Great. Thank you Scott.
There are no further questions at this time I turn the call back over to Warren Jenson for closing remarks, great. Thank you operator, and again to all of you on the call. Thank you so much for joining US today, let me close with just a few quick final thoughts.
First and most importantly.
We all want to really acknowledge and thank our wonderful customers for their support during this past year and all they do to make our products great and.
Help us be better every day, we are grateful to serve you.
Secondly is to thank our associates.
There is 1 reason why we again delivered on our commitments and that's the people of live ramp so to all of our associates. We also really extend of the big strong.
You and and are incredibly grateful.
When we think about our road ahead.
I'd I'd leave you with these thoughts again, our foundations are strong and even more importantly, or as importantly, we're a company that has consistently shown an ability and demonstrated an ability to navigate change to ensure our products are viable and that our customers are competitive and we.
That's a big deal.
Our technology is world class and has just gotten better just this past year our growth engines are finding their stride and our model works.
Again, thank you so much for joining us today, we look forward to your follow up questions.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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