LiveRamp Holdings, Inc.

I've ramped the fiscal 2020 fourth quarter earnings call. As a reminder, this conference call is being recorded, and I'd 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 to discuss our fiscal 2020 fourth quarter and year-end results. With me today are Scott Howe, our CEO, and Warren Jensen, President and CFO. James Ara, President and Chief Commercial Officer, will be participating in the Q&A portion of today's 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 Factor section of our public filings in the press release. A copy of our press release and financial schedules, including any reconciliation to non-GAAP financial measures, is available at LiveRamp.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. Let me begin by saying we hope you and your loved ones are safe and healthy. To say that we are in unprecedented times almost feels cliche, but we are.

and the rapid onset of the COVID-19 pandemic will have far-reaching consequences for months and likely years to come.

This is a global time unlike any we have faced before, and we are responding by supporting our global employees, customers and partners and community. Our first priority is always to our people, and I am incredibly proud of how seamlessly our 1,100 employees Transition to working remote. We are providing our teams with the tools and resources they need to be productive and serve our customers in a work from home environment. We are doubling down on employee communications, all hands meetings, and virtual events to ensure our people feel supported and connected to their teams. And we are soliciting and responding to employee feedback through ongoing surveys. We held a very successful virtual sales kickoff at the end of last month and have smoothly transitioned our ramp up on the road events to a series of virtual summits. While it feels as though we haven't missed a beat, we also recognize this is a challenging time for our employees and their families, and I am so inspired by the resilience, grit, and customer obsession our teams have demonstrated. There are silver linings to be found in every crisis. And for LiveRamp, this period has served to strengthen the exceptional culture and character of our company. As a technology partner, we also have a duty to support all our customers and partners as they adjust to these challenging economic conditions by offering products and solutions that help their businesses Thank you for joining us. to deliver customer value and drive measurable return on investment. And finally, we have a commitment to our community. And in recent months, we have stepped up our data for good efforts to support organizations that are on the front lines. For example, in mid-March, we launched a no-cost initiative to enable healthcare companies to use our products to recruit healthcare workers to telehealth platforms and to reach out to patients with personalized information in a time of national crisis. In addition, we are supporting a variety of local nonprofit organizations in the cities where we have offices. Before turning to the quarter, let me just acknowledge the efforts of all those who are working tirelessly to keep us safe and reopen the economy during this period. Thank you. A final but important thank you before I transition to discussing the business is to Bill Dillard, who earlier today announced he would retire from our Board of Directors when his term expires in August. Bill is a giant in the business world. As CEO and Chairman of Dillard's He runs one of the biggest retailers in North America. He has incredible business and financial intellect, and he has been a director for LiveRamp and before that Axiom for more than 30 years. In my time as CEO, Bill has been a professional and personal mentor. He even took me to all the best Arkansan barbecue restaurants in my first year at Axiom. He is amazing, and I can't thank him enough for his years of service. We've already started a search for Bill's board successor, and we're prioritizing SAS expertise, operating experience, diversity, and deep understanding of the data ecosystem. Switching gears now to the quarter. Amidst a challenging macro environment, I am pleased to report we delivered another strong quarter, highlighted by continued top line execution and improving gross margin trends. Total revenue was $106 million, representing 35% year-over-year growth. Subscription revenue increased 28%, driven by strong usage of our platform to support more destinations and new use cases. including measurement, advanced TV, and second-party data collaboration. Marketplace and other revenue was up 71%, driven by a record data marketplace quarter. We saw strong growth in third-party data sales in Q4 to support advanced television targeting and our consumer social program. We also closed another solid bookings quarter, following record quarters in Q2 and Q3. Upsell bookings, in particular, were strong, and we had a number of nice safe haven wins, driving our average ACV up. Ending ARR grew 29% year over year, and our subscription and platform net expansion metrics were a healthy 110% and 122% respectively. Beneath the top line, we generated significant gross margin leverage in the quarter and remain focused on driving further efficiencies across our entire cost base in the coming year. And finally, we continue to support our shareholders through our buyback. We took advantage of the recent pullback in our stock to pull forward our planned repurchases. As a result, we opportunistically bought back over $100 million of stock since December 31st. While we are very proud of our strong finish to FY20, LiveRamp, along with most companies, will be impacted by the pandemic in FY21. We are carefully monitoring leading indicators and key activity metrics, including pipeline, sales cycle length, Conversion rates, contraction, and product usage to assess the potential impact this year. We believe in the fundamental strength of our model, but we'll feel pressure in certain areas. For example, at the end of last quarter, we began to experience a higher trend in contraction amongst our smaller customers. This, in addition to some non-controllable churn events, drove the deceleration in net customer ads in Q4. That said, we are actively pursuing a handful of initiatives to ensure we are delivering world-class customer experience during this time. We recently released several enhancements to our UI and also made significant improvements in reliability and turnaround times, reducing the average turnaround time by as much as 40% in recent months. We have also streamlined our customer support structure to get customers faster, higher quality responses. We are also watching our variable and data marketplace revenue closely. In line with what others in the space are reporting, year-over-year marketplace growth, although positive, Trended lower in April as certain advertisers paused campaign spend. However, we are seeing some early signs of stabilization in May. While we acknowledge the macro environment will present some headwinds for our industry and business, we also know that circumstances like these often bring opportunities. And in the coming months and quarters, we will play... from a position of strength by leveraging three core competitive advantages. One, the growing importance of our value proposition. Two, our durable business model. And three, our exceptionally strong balance sheet. Let me briefly address each in turn. First, We have an attractive and increasingly important value prop for our customers and partners in this environment. While we would never claim to be immune to the global pullback in advertising, we are fortunate to benefit from this secular wave toward data-driven performance-based marketing. As budgets shift from above the line to below line, we play a critical role in helping our customers spend smarter, and demonstrate clear return on investment. Our product suite, and in particular solutions like ATS, Advanced TV, and Safe Haven, helps to ensure every marketing dollar spent is addressable, accountable, and measurable. We continue to experience strong global traction with the Authenticated Traffic Solution, or ATS. Thank you for joining us. We have 35 DSPs bidding on IDL or in the process of implementing, including Amobi, Beeswax, Criteo, and MediaMath. And perhaps most validating is the recent global publisher momentum we've generated. We now have people-based integrations with over 30% of the ComScore 50, and have publishers on board in the UK, France, Italy, Spain, Germany, Australia and Japan. Continuing to evangelize and drive adoption of ATS will remain a top priority in the coming year. We know this is an area of interest for many of you, so we have included additional resources on our website and plan to host another ATS-focused investor webinar Next, we believe the last two months have significantly accelerated our opportunity in advanced television. If there were ever to be a tipping point for data-driven television, we are witnessing it. With live sports canceled and the traditional upfronts canceled or postponed, we are seeing a sharp shift in activity to regional buying and and CTV, both of which have the opportunity to be data-driven and addressable. Our CTV-related revenues were, again, very strong in the quarter, and our total advanced television business was up well in excess of 50%. As the economy begins to gradually reopen and as TV advertisers re-engage, targeting, and in particular regional targeting, and measurement will become more important than ever. We are uniquely positioned to help these advertisers find targeted audiences across addressable television and streaming platforms and measure how those campaigns are driving business outcomes with Data Plus Math. The dramatic shift to streaming, and in particular, AVOD streaming services, During this time also presents an interesting opportunity for us to help brands find cord cutters and cord nevers where they are now consuming television. Finally, our safe haven solution has also generated tremendous global interest since its official launch this year. The current environment has spurred a moment for the industry to pause and reflect on its current strategies and practices. And as a result, many retailers are looking for ways to modernize their tech stack, which is exactly, exactly where Safe Haven comes in. I will let Warren share more on our progress in this area in a moment. As Safe Haven was really born out of the innovative work we have been doing internationally with Carrefour, and several other leading brands under Warren's leadership. While no one can predict exactly when we will see a recovery or what it will look like, what we do know is that data-driven advertising has an important role to play today and an even bigger one as advertisers begin to strategize how they emerge on the other side of this pandemic. Second, We have a durable business model and diversified customer base. In recent quarters, there has been some debate around whether LiveRamp is true SaaS or ad tech. We hope our performance during this period serves to take that debate off the table. While peers in the ad tech space are forecasting sharp year-over-year revenue declines, we are forecasting growth. LiveRamp is enterprise SaaS, and we generate recurring subscription revenue. Approximately 80% of our revenue comes from subscription contracts, and more than 70% of our committed revenue, or RPO, is tied to multiyear deals. This provides us more stability than most as we navigate this period. We are also fortunate to have a diversified customer base with approximately 780 direct subscription customers spanning a variety of verticals and geographies. Exposure to the most impacted industries, like travel, hospitality, and entertainment, is highly manageable. And for these customers, we are developing a series of hit-the-ground running packages. Design to help ready their data and capabilities for a quick restart when the economy stabilizes. Making bold investments to secure our future growth. In the coming year, we intend to aggressively invest in the continued platformization of our infrastructure and in our key future growth initiatives like television and Safe Haven. In addition, our strong financial position enables us to explore smart and strategic acquisitions and partnerships. Like the partnership we announced with Comscore a couple weeks ago, which we believe is a game changer for outcome-based television measurement. This preferred partnership provides customers access to Comscore's unified television viewership data, spanning tens of millions of addressable households for outcome-based measurement through data plus math and additional activation and measurement use cases through SafeHaven. In short, it means that an advertiser running an advanced television campaign now has even more options available for measurement, segment creation, and understanding business outcomes. We are very excited to team up with Comscore to bring these combined capabilities to market. To conclude, I'll end where I began. We are in unprecedented times, and we expect this pandemic to have lasting effects on how companies do business now and in the future. But as Warren and I have often said, data usage is only growing in importance. During periods of great uncertainty, leaders lead and we will navigate the coming months and quarters from a position of strength. We play a critical role in helping companies deliver relevant and meaningful experiences to consumers. We have a set of products designed to deliver immediate value to customers by enabling their marketing spend to be addressable, accountable and measurable. We have a recurring subscription business model, diverse customer base and a strong balance sheet, which provides us flexibility to drive innovation and invest for long-term growth. And importantly, we have a nimble and resilient culture and a team of global live rampers who are up for the challenge. With that, thanks again for joining us today and a big thank you to our exceptional customers, partners and employees for their ongoing support and hard work. I'll now turn the call over to Warren.

Thanks, Scott, and good afternoon, everyone. Thanks for joining us. Before jumping in, I too would like to thank our associates for their awesome work over the last several weeks. I feel fortunate to work with such great people. I also hope that all is well for each of you and your families. I'd like to focus my remarks today on four areas. First, briefly talk about Q4, highlighting the strength of our position going into this downturn. Next, share a few performance highlights from April and the first two weeks of May. In other words, what we're seeing right now. Then share a few high-level observations about FY21. And finally, our Q1 guidance. Q4 results. LiveRamp's position of strength. Please turn to slide four. Well, in short, we entered this crisis with considerable momentum and from a position of strength. Almost every critical metric was up close to or over 30%. Q4 revenue was up 35%. Subscription revenue up 28%. Bookings grew by 31%. Current RPO or our next 12-month backlog was up 29%. And ARR ended the year up 29%. And notably, Marketplace was up 71%, driven by the strength of our performance in TV. Net retention was 110% and platform net retention was a strong 122. Our growth initiatives are on a roll in setting the pace for innovation globally. LiveRamp Safe Haven. Earlier this year, we launched our Safe Haven platform and we've been winning globally. This calendar year, we've entered into Safe Haven partnerships with over 10 leading global brands, including another top five U.S. retailer, One of the largest pharma companies in the world, Carwow, the leading online automotive marketplace in the UK, and MIQ, a programmatic media platform in China. In addition, TV had a standout quarter. TV-related revenues were up over 70% year over year. Operationally, it was also a great quarter as our gross margin exceeded 70% for the first time as a standalone business. We have now fully absorbed our extra public company infrastructure costs. Interestingly, in the US, our gross margin was 73%, which is very close to our long-term model commitment. Our operating loss was $16 million. As part of our year-end close, we scrubbed our balance sheet and added approximately $3.5 million in incremental bad debt reserves to cover potential COVID-related challenges. Of our total expenses, approximately $10 million was largely one time in nature. And lastly, we ended the year with a very strong balance sheet. Our cash balance was $718 million, and we have no debt. We've been through our receivables with a fine-tooth comb, and we feel our exposures are appropriately reserved. We were careful over the last few months, but at the same time, we're opportunistic with our buyback. and as a result, we took the opportunity to front-end load our FY21 repurchases. Calendar year to date, we have repurchased 3.1 million shares for total consideration of 103 million. Since inception of our buyback, we have returned approximately 1.2 billion to our shareholders. In summary, we ended FY20 in an incredibly strong position. We are in the middle of a powerful secular growth curve and have a great set of customers, employees, and products. Our lagging and leading performance metrics are strong, and our products are winning. We are helping to power the secular trend toward outcome-driven advertising and addressability. And finally, we have a balance sheet that is the envy of the industry. But, as we all know, that was then. So what are we seeing now? For the next several minutes, I'll focus my comments on three areas. First, metrics. What are the numbers telling us? Next, what have we done to manage the crisis and ensure we will lead and win in economic recovery? And finally, share our perspective on FY21 and provide guidance for Q1. Metrics. What are the numbers telling us? Please turn to slide 13, industry concentration and customer concessions. First, we are SaaS, and as a result, our revenues are highly durable. As this chart shows, our client mix is also diverse. As you would expect, we have worked with our customers who have been severely impacted. For those customers, in some cases, we have temporarily paused our service and billing for a short period of time, usually about three months. Typically, that accommodation has also included a contract extension. Concessions have been highly manageable and have totaled about $4 million. These concessions will impact our near-term revenue and have been factored into the guidance we will share later on this call. In summary, our client mix is diverse and our SaaS revenue is resilient. And while things could always change, customer concessions have been manageable. April results. Please turn to slide 14. In short, we grew. Subscription, Marketplace, and ARR all improved year over year. We continue to win in closed business. Further, we have seen no deterioration in the records being uploaded into our platform. In fact, our volumes indexed against the first 10 weeks of the calendar year were up in April and for the first two weeks of May. However, the usage portion of our subscription revenue as a percentage of total subscription revenue did decline compared to the prior year. Typically, the variable portion has averaged between 10% and 15% of total subscription revenue. For the month of April and the first two weeks of May, variable is averaging low to mid-single digits as a percentage of total subscription revenue. Net, while down as a percentage of revenue, we continue to see usage from customers in excess of their committed minimums. Before talking about our approach to and outlook for FY21, I'd like to share a few of the challenges we are seeing. While we are obviously thrilled with the resiliency of our platform and the reception of our products, we would be the last to argue that our business is not being impacted by the downturn. It has been and is. Specifically, we would highlight that we have seen pipeline push out. Make no mistake, we're still closing deals, but deal cycles are extending. Next, we expect our net new customer ads to slow considerably as a result of higher churn and fewer new deals closing in this environment. We felt some of this pressure in late March. It is conceivable that we may have a quarter where our net ads are flat to down. We expect our results internationally to continue to be pressured. Next, We expect our retention metrics to be pressured for the reasons mentioned above, and it's very possible that there will be more requests to put our service on hold, particularly in industries where recovery will lag. In summary, we feel very fortunate to be the category creator, an innovator in a business which is benefiting from a powerful secular trend. We are Switzerland, and the industry needs a neutral identity infrastructure. Our products drive real results. This is more important than ever during this critical time. We're SaaS, and the resiliency of our subscription business is clear. And finally, while we are clearly feeling the impact of macro forces, we have and are managing the impact. In short, we are still growing. I would now like to spend a minute and share our approach to the macro challenges. As many of you know, I was Amazon's CFO in the company's early days. Twenty years ago, the markets and press turned on Amazon. Pretty sure it was the Wall Street Journal who came out with the headline, Amazon.bomb. The stock went to $7. That said, Amazon had a unique advantage and challenge. Its customers loved the service, but the company was bleeding hundreds of millions. An absent change was a goner. but true. History now tells the rest. In those dark days, Amazon became free cash flow positive, but simultaneously drove massive innovation. Used goods were sold next to new. The company entered into platform joint ventures with Toys R Us and Target, and as a result, the origins of AWS were seeded. Its fulfillment centers became an asset as third-party merchants could use Amazon's infrastructure and sell next to Amazon's owned inventory. What seldom discussed, though, was how buttoned up Amazon became. In short order, every operational process got good. My words, Amazon got control of the knobs really, really fast. And 20 years later, the rest is history. So, what have we been up to at LiveRamp? As the world around us changed, Our leadership team gathered virtually in mid-March and set some objectives and guardrails for replanning the company's coming months and quarters. Specifically, we would protect the health and well-being of our employees and our company's culture, delight our customers and focus on their needs, deal with the new realities and move quickly to take action, and finally take steps to ensure we would protect our business in the short term But also, when in recovery. Specifically, on the top line, double down on new initiatives like ATS, TV, and Safe Haven. And on the bottom line, tighten up our operational processes to accelerate our drive toward operational excellence, profitability, and margin expansion. Please turn to slide 16. This page summarizes the financials associated with eight weeks of focused planning and activity across every function of LiveRamp. We built detailed plans for accelerating our investments in ATS, TV, Safe Haven, and B2B. These investments will mostly show up in R&D. Next, we have built strategies to boost productivity in every functional area of the company. As an example, as a result of changing work practices, We don't intend to add any new lease space this coming year. We have also retooled our quote-to-cash practices, and where we had opportunity, we went after reducing discretionary spend. In short, we're excited and leaning in. We have protected innovation and are doubling down on some big opportunities, and at the same time have dramatically brought in our profitability timelines. I'd like to close by summarizing our thoughts on FY21 and then provide specific guidance for Q1. Please turn to slide 15. While we don't intend to give traditional full-year guidance, we wanted to summarize the positives, the challenges, and the likely implications. Our net takeaways are on the right. Secular trends are in our favor. We expect FY21 will be a growth year, albeit modest. Given what we see today, we expect meaningful profit improvement and manageable cash burn. Our balance sheet and liquidity are secure. And finally, the importance of our platform and products puts us in a great position to win and accelerate in economic recovery. For Q1, we expect revenue of approximately 88 million and a non-GAAP operating loss of up to 12 million. Please keep in mind that this guidance excludes intangibles, stock-based compensation, and restructuring and related charges. A few other call-outs. In Q1, our guidance is intended to be conservative, but it is also appropriate. Given a sequential decline in revenue, we would expect gross margin to be down sequentially. We expect approximately $6 million of restructuring and related spend. and $1 million of CapEx. Finally for the year, a few additional items. Buyback. Given the market dislocation, we purposely front-end loaded our repurchases. Therefore, we do not expect to be in the market for the remainder of the calendar year. That said, we will not hesitate to be opportunistic should circumstances warrant. Note that during the year, we expect to receive a tax refund of approximately $30 million as a result of being able to carry back our FY20 tax losses. Other full-year guidance items have been included on slide 19. Before opening the call to questions, I'll close with a few final thoughts. First, again, a huge thank you to our customers and employees. It is you who make this company great. Next, we are approaching the coming months and quarters from a position of considerable strength. We are SaaS and our revenues are resilient. We sit at the center of a strong secular trend and have taken steps to deliver a solid top and bottom line performance through the downturn and are investing and tightening to ensure we lead in recovery too. It's a great time to be at LiveRamp. With that, operator, we will open the call to questions.

Thank you. As a reminder, in order to ask a question, please press star then one on your telephone keypad. Our first question comes from Dan Selman with BMO Capital Markets. Your line is open.

Good afternoon, everyone. Thanks for taking the questions. I've got one for Scott, one for Warren. Scott, I'd be curious just to hear a little bit more of the nuance on your Conversations with clients if we can and sort of remove the effect of the pandemic if that's possible and what the tone of conversations is with clients around some of the key issues that were driving adoption of your product previously, including obviously the challenges to third-party cookies and particularly the notice that a lot more people tended to take once Chrome made their announcement regarding that. So I'd love to just hear what the conversation is broadly around where those priorities still lie. And then, you know, Warren, I understand the fiscal 21 guidance of albeit modest growth. I guess when we see that and compare it against the plus 14% in April, I guess it's fair to say that we're Some of these negatives around, especially, say, pipeline pushing out and some concessions are driving something that we would expect to be below the April rate. Is that how we should take modest to be?

Thank you. So, Dan, it's Scott. And I'll start but also invite James Aras on the call with us as well. He can probably provide some real anecdotal color around what I'm about to say. What I would tell you is there is a real headwind from COVID, but also a real silver lining. Certainly, the economy is in a different period, different state than it was just three short months ago. and we absolutely work with some clients who are hard hit by that. Travel, retail, automotive, they have been hard hit and you can see it in particular their television investments, their broadcast television investments. I mean, they've really pulled back. But within that backdrop, I think all of our clients are Thank you for joining us. Thank you for joining us. So as a result, those conversations have really found wings. Our direct clients also, as they think about what spend remains and what additional spend they'll activate as they come out of the recession, they're really focused on measurability and ROI. And those two characteristics really play to our strengths. So You know, we were talking earlier, we tend to be the last one to leave and the first one back, meaning that when clients turn off their efforts, the direct accountable stuff is the last thing that they'll ever want to touch, and it's the first thing that they want to reactivate coming out of a downturn. and so that spurred additional conversations for us in things like connected television where clients realize there's no upfront. Behavior has shifted to in-home behind screens and the only way to reach young people is through connected television, the likes which we can provide. Moreover, because we have a data set that allows them to buy far more granularly Then, GRPs or TRPs, they can actually target their audience more effectively. So, a lot of good opportunities for us to go mine in this downturn. And then Dan.

Hi, everybody. James, go ahead.

Oh, sure. Thanks, Warren. Hey, Dan. Yeah, just to give you some client anecdotes, because clearly, The COVID shutdown is having an impact that no one could have predicted a few months ago. But our conversations with our clients have always been around two primary themes, and that's addressability and measurability. And the interesting thing we saw at the end of last quarter and then even in April is many – we are seeing some pipeline push. We're also seeing some of our companies look to this as an opportunity to really think about What to do once they're out of the COVID shutdown. And there's two examples I want to give you. One is with a fantasy sports platform. And we thought for sure our deal at the end of last quarter would be dead in the water. But we were able to show them that once we get through this period, here's all the things they need to do. And they ended up signing a deal at the end of the quarter. So we were really pleased with that. And that's an example of a company thinking about what happens after the shutdown. and another one is in the QSR space. We signed a new logo deal, seven-figure deal with one of the major QSR companies out there and they're clearly not as impacted by the COVID period, but they are using this as an opportunity to really think about their strategy and think about how to drive to more of a data-driven approach, how to drive to more measurability and more addressability. So there's certainly a lot of silver linings in what's happening and we really believe strongly were well-positioned to help our customers through the recession and to really recession-proof their businesses.

And Dan, this is Warren. Let me chat a little bit about our guidance. First, let me just start off by saying we were incredibly pleased by what we saw in April and the resiliency of our business across the board. As you would expect, however, We, like you, were watching everything very, very carefully, and in particular, watching the variable portion of subscription revenue and marketplace. So what about our guidance? A couple of things that I want to mention. First, as I did in my prepared remarks, we intended our guidance to be conservative. And let me just kind of put another phrase around that. We wanted to give you guidance you can take to the bank. and I'm going to mention three things. First of all, overall revenues will be up for the year, subscription revenue will be up for the year and we expect profitability improvement. So again, we fully intended the guidance to be conservative, be conservative and secondly, guidance you can take to the bank.

Thank you.

Thank you. Your next question goes to Stan Zlotsky with Morgan Stanley. Your line is open.

Perfect. Thank you so much. Hey, ladies and gentlemen, thank you so much for taking my questions. First one for me, the connected TV business, we're certainly hearing a lot about it in the industry news with the upfronts going away, as you mentioned. How are you thinking about this business and whether this really could, COVID, as terrible as the whole thing is, maybe this could be a massive shift that finally pushes the whole industry away from the legacy way in which TV advertising was bought and really push it to this connected TV and digital buying. And then I have a quick follow-up.

Thank you for having me. that we've fielded. Yeah, it's picked up perhaps in the last couple months. However, these were strong over the last six to eight months that this trend was already coming. The other thing that I mentioned briefly in my prepared remarks, but one of the advantages that we have as a company right now is we do feel like we have a really strong balance sheet. And that's going to allow us to Be very strategic in commercial deals as well. And so one of the things we announced in the last couple weeks was our deal with Comscore. In the television space, there are kind of two things that really matter. Number one is addressability, the ability to identify who's living behind a set-top box, and that's something that Thank you for joining us. Significant number of households. I mean, when you talk about both set-top box and connected television, we are talking upwards of 80 or 90 million devices. So that really, I think, allows us to bring scale to the conversations we have and really offer a compelling value proposition to our advertisers. So all this to say, we're really excited about what's to come here. Got it.

And then just a follow-up on the expansion and, well, actually, I guess the flip side, the contraction, rather, that you're seeing within your existing customers. Maybe help us to break it down between the 22% of your ARR that's really coming from these heavily impacted industries and and what you're seeing there is that the contraction there, you know, as in like, you know, full stop, we're stopping everything. Or is it, you know, maybe just a slight pullback? And then the other 78% of your business and what the contraction looks like on the other side. That's it for me. Thank you. James?

This is James. Yeah, I'll go ahead and take this. So let me start by saying Q4 was a really good quarter. And as Scott mentioned in his prepared remarks, it was our third largest bookings quarter ever. And similar to other quarters for FY20, roughly 65-ish percent of that was an upsell. So we are still seeing significant growth within our customer base.

Now,

What we experienced towards the end of Q4 and what we're being very cautious of in our guidance for FY21 is we did see a number of very small clients, sub $50,000 a year clients, pull back. And we saw a churn from there. The other thing we saw was some non-controllable churn. There was some major acquisitions that have happened where both sides were our clients. So we saw that impact to a certain extent. and then some bankruptcies and some non-payment. We saw that tick up quite substantially in Q4 as well. So all that being said, we're always looking for ways we can provide more value to our customers and we'll continue to do that. And we've always said that churn is an opportunity for us and we're really looking for ways that we can continue to drive more value. Now, the COVID impact for specific to the 22% that we outlined, there what we are seeing is them ask for concessions. And we're being a good partner. And we recognize that they're going through some very, very tough times right now. And we're working with them as they shut things down right now. But we don't view this as a situation for the companies that survive this. And we think many will. of our customers will. We don't necessarily view that COVID shutdown as a churn event. In fact, just earlier today, a major hotel chain that two months ago had asked us to pause because they were shutting down everything and furloughing employees, they came back to us today and said they're starting back up. We were expecting the conversation to be, hey, we're going to need another month or we're going to need another two months, and it was the opposite. They're already gearing up for the reopening. So we're viewing that as a really positive sign.

Perfect. Thank you so much. Sure. Thank you.

Your next question comes from Brian Fitzgerald with Wells Fargo. Your line is open.

Thanks, John. I want to drill down just a little bit more on the mechanics of that lower usage. Is it fewer campaigns, fewer segments, customers using fewer touch points, or... or just the impact of, to your point, clients who are pulling back very hard on advertising and any broad trends or themes to tease out there, how quickly you see that bouncing back as we exit. Thanks.

Well, yeah, I'll start and then, Warren, why don't you weigh in with some of the macro metrics that we're seeing. So for the customers that have requested a pause, and really this is a concession that we're giving, It's really due to the fact that they've either completely shut off all marketing and in many situations have furloughed employees because of the shutdown where there's just no reason for them to be spending that money. But we're staying engaged with these customers. We're being a good partner. And what we're also doing is we're helping them build their startup plans. So Scott mentioned this in his remarks as well. Once we get out of sort of COVID shutdown mode, there is going to be a meaningful recession. And we strongly believe we can help our customers through a recession because budgets are going to be constrained and they're going to need to maximize the value they get out of every marketing dollar they spend. And the way they do that is through measurability and addressability. And that's the areas that we really help them with. So for many of these customers that are on pause, We're staying engaged. We're working with them on their plans for how to restart and what they should focus on. And we believe that will help them and will help us accelerate out of this very quickly.

You know, a couple of things, Brian, that I'd mentioned that are also, I guess, one thing very specific to the numbers and then a couple of things anecdotally. It was really interesting. A large global A consumer brand that spends I don't know how many hundreds if not billions of dollars on advertising came to us about 30 days ago and they said we have pulled back 80% of our advertising globally. But we have also made the decision that when we come back, we are going to come back with 100% addressability. And so we are working with this brand on putting them in a position to do exactly that. That's the sort of thing that we're seeing from our customers. The second thing is that, obviously, as it comes to usage for April and for the first two weeks of May, it's been, we said, low to mid-single digits, so-called 4% or 5%. It is down from 10% to 15%, but it's still positive and would argue, at least for now, it's certainly stable. And then one other interesting specific, in terms of the concessions we've given to people, as noted in the column, I'll just repeat it. Typically, they're 30 to 90 days. And then also, for the vast majority of those, we also extended our contracts. So it was very much just a pause. And I think, James, wasn't it over 70% of those requests? came in the first 10 days or so of April. So this was very much front-end loaded, and we just have not seen any kind of volume like that over the course of really the last four weeks.

Yeah, that's exactly right. Got it. Thanks, James. Thanks, Mark.

You got it.

Your next question comes from Shyam Patel with Susquehanna. Your line is open.

Good afternoon. Thanks for all the transparency and color. I wanted to ask a few questions or a couple of questions around the marketplace business. It seems like it's trending much better than what we've seen for, you know, programmatic spend. And I was just curious, you know, why you think that is. And, you know, when you look at just the programmatic display portion of that business, are you seeing any changes in terms of data elements per campaign, you know, less uses there. And then, Warren, in your fiscal year expectations, just in your base case, how are you thinking about just the marketplace line? Thank you.

So, Sham, it's Scott. First off, on the marketplace business, remember that if you think about the customers of our data marketplace business, it's Thank you for joining us. Thank you for joining us. They can actually utilize data plus math to go find a much more granular audience. So we think that will be an enabler for that business over time. That said, it is the one area, because it's variable, much of it is not subscription, that we think will be most impacted by the recession. And so we put in place a A conservative forecast. In terms of the data elements that people are buying, the mix, it's not something I know off the top of my head, but we'll look at that and let you know. I mean, we certainly have a good line of sight to that.

And then in terms of our guidance or just our outlook for the year, I'd probably just repeat a little bit of what Scott said. We're, again, very pleased by what we've seen in April and what we've seen really month to date in May. That said, just given all the uncertainty, this is one of the areas that we're watching throughout the year, and we've tried to be appropriately conservative in our internal outlook such that we right-size everything, but at the same time, we're optimistic but also cautious.

Great. Thanks, guys.

Thank you. And our next question comes from Kyle Evans with Stevens. Your line is open.

Scott, you mentioned that ATS was causing some of your constituents to rally around in this kind of a solution in a post-cookie world. Could you talk about what you've seen geographically? I know there are other countries that have higher exposure to Safari and Firefox. I was wondering if that was a good kind of leading indicator for what we would expect from the rest of the world going forward.

Warren runs our international business. In my prepared remarks, I talked about the traction we have gotten outside the U.S. I think we've signed double-digit international publishers in the last quarter, as an example. In certain markets, particularly in Europe and much of Asia, This is the only solution for publishers. I mean, you know, they have even more stringent privacy regulations that they need to navigate. And so it's just so important that they go out and rather than rely on someone else to sit as the intermediary and potentially disintermediate them, that they collect their own authentications, their own consents. Any publisher who has compelling content is already offering a value exchange, and it's just making it from being an implicit value exchange to explicit. And as soon as they do that, as soon as they collect those consents and literally upload a LIDA code on their page to benefit from ATS, then they can start to generate significant advantages in monetizations. Our initial tests have suggested that could be 20% or more. And obviously, in markets that have the most adoption of Safari and Firefox or the most exposure to Chrome, the yield is going to be even greater and the urgency to adopt something like ATS will increase. As a result, a lot of traction. I think the biggest challenge for us is how to evangelize that without getting on airplanes. But our team has done a really great job of hosting VidCon sessions, webinars, and we have a lot of content on our site if you're interested in learning more.

Kyle, let me add a couple of things to what Scott said that really excites us from an international and global perspective. I just remind everybody that ATS is not a U.S. thing. It's a global thing. So it is truly a global product offering for LiveRamp. And, you know, when you think about our acceleration and recovery, this really globalizes our company much, much more quickly. We have momentum with ATS in Japan. We have momentum with ATS in Australia. We have momentum in Italy, in Germany, France, U.K., you know, and keep going in Spain. So this is a global phenomenon, and it is a global phenomenon with brands. Many of the largest advertisers in the world, again, are not simply U.S. companies. They're global companies, and they want uniform addressability in every single market in which they operate, and that's a very, very positive thing for us. The second thing that I'd note for everybody that has had time to sit down and work with us and hear about what we're doing with our Safe Haven platform is ATS and Safe Haven are very natural partners. And they're natural partners for brands, and they're natural partners for publishers, which again, accelerates our opportunity. And again, when you think about Safe Haven, it just revolutionizes how companies collaborate. And it was also built in a privacy-first way. It was built for GDPR. So the combination of those two things really, we believe, Beek, and in fact, you know, the results are showing it bode well for us globally over, you know, not only the near term, but also very much so as the world moves on from this crisis.

Great. Thank you.

That is all the time that we have for questions. I turn the call back to Warren Jensen for any closing remarks.

Great. Well, thank you, operator. And again, a huge thank you to everyone for joining us today. And most importantly, I'd like to repeat something I said in my prepared remarks. Just a huge thank you to our customers and our employees. It's you who make this company great. I'd like to conclude with, I guess, just a few thoughts as you think about the year ahead and what we've talked about today. We will grow in FY21, and our subscription revenue will grow in FY21. When we think about momentum in the near term and we think about momentum in recovery, our products are winning, whether it's TV, whether it's Safe Haven, whether it's ATS. We believe we've given you guidance that you can take to the bank with profitability improvement. And then as always for everyone, just as we've done this past year, we will be highly strategic with our capital. And let me put it this way. In the near term and on anything discretionary, we will be very stingy, but also we intend to be very strategic. So with that, thank you all very much for joining us. We look forward to speaking with you over the coming days. Thank you.

This concludes today's conference call You may now disconnect