LiveRamp Holdings, Inc.

Good afternoon, ladies and gentlemen, and welcome to the LiveRAMPS fiscal 2021 third quarter 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 to press star 1 on your telephone. If you require any further assistance, please press star 0. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Lauren Dillard, Chief Communications Officer.

Thank you, Operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2021 third quarter results. With me today are Scott Howe, our CEO, and Warren Jensen, President and CFO. Anika Gupta, President and Head of Platform and Products, will join for the Q&A portion of the call. Today's press release in this call may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed description of these risks, please read the Risk Factors section of our public filings 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. I hope that you and your families have managed to stay safe and healthy since the last time we spoke. It's always a challenge to summarize an entire quarter into a short call. And that's particularly true today, given how much progress we've made and potential we see. We've got a lot to talk about and too little time. So above all else, I would share three thoughts with you. One, our business continues to show strength in an unprecedented macro environment. Two, while we entered our fiscal year with some uncertainty stemming from the pandemic and an industry transition away from third-party cookies, the past 12 months have have definitively proven how important data is to our clients and how much they rely on us. As a result, while most companies aren't providing longer term guidance, we feel well positioned to share some very early thoughts about next year with you today. And three, the innovations we have introduced to the market have been well received. and position us for sustained revenue and profitability growth well beyond next year. Let me start by talking about the past quarter. We delivered another strong quarter in Q3, highlighted by solid top-line growth, impressive operating profit performance, and continued progress against a handful of key strategic imperatives. Total revenue was up 17%, and subscription revenue up 15%. ARR, exiting the quarter, was up 17%. Marketplace and other growth accelerated to 27%, driven by data marketplace, which was up 60% and benefited from a strong recovery in digital advertising spend during the holiday season and the expansion of several large platform relationships. we also closed a record bookings quarter with total growth bookings up 35 percent compared to the same period last year our land expand and extend motion continues to underpin our success upsell bookings in particular were very strong as we continue to make good progress upselling our existing customer base to new and more advanced use cases like measurement Safehaven, and CTV. In fact, the average ACV of brand deals won in Q3 was up nearly 30%. The continued growth in larger $1 million plus customers also reflects this trend. The total number of $1 million plus customers now stands at 65, an increase of 30% year over year. And importantly, the strength of our model was again on display in Q3. Scaling our business efficiently remains a top priority, and I am pleased to report our first-ever double-digit operating margin, an important milestone toward our long-term targets. The past quarter, and indeed the entire year, has really validated how important LiveRamp is to our direct customers, all of whom use data to power better marketing effectiveness and more valuable customer experiences. Historically, third-party cookies have been an important enabler of data-driven audience targeting and personalized messaging. But as we all know, the industry is transitioning away from cookies. Recognizing this transition was likely several years ago, we moved quickly to develop even better alternatives for the good of anyone and everyone in the ecosystem. A top priority throughout the year has been to evangelize the adoption of our Authenticated Traffic Solution, ATS, across every major publisher, brand, and tech platform. and we made great progress again in the third quarter. To date, more than 325 publishers worldwide, up from 215 last quarter, have adopted ATS in the US, UK, France, Italy, Spain, Germany, Australia, and Japan. including 65% of the U.S. ComScore top 50. We more than tripled the number of ATS-enabled campaigns in Q3 relative to the prior quarter and expect continued explosive campaign growth in Q4 as well. ATS is comprehensive, agile, and built to scale. and can be used anywhere an individual logs in or authenticates. It's multi-channel and supports customer journey engagement across display on mobile and desktop, as well as mobile apps and connected TV. This means that brands have the means to buy media using LiveRamp's people-based identifier cross-channel. and know that they can reach and measure individuals, not just devices, with consistency and accuracy. Our market momentum is being fueled by these factors, along with our interoperability, neutrality, and unmatched global scale. Most importantly, ATS simply works better. It works better than what it is replacing. I recently wrote a blog on the transition from third-party cookies to ATS, which can be found on our website, and that contains useful detail that I hope you'll have a chance to peruse. Also, I addressed the exceptional results we're seeing on our last call, but it bears repeating. ATS helps publishers make more money, marketers generate higher ROI, and consumers maintain greater choice and control over their data. In recent years, impressions flowing through browsers like Safari, Firefox, and Edge, which together comprise 40% of U.S. Internet traffic, haven't been addressable with third-party cookies. ATS makes these impressions available and addressable. enabling publishers to monetize more people-based inventory and marketers reach more of their target audience. We've seen publishers generate 350% greater yields on Safari, and marketers are experiencing greater unique reach and at least two times higher return on ad spend. In fact, In a campaign with Goodway Group and Index Exchange, a national retail client saw three times higher reach with consistent performance when transacting on LiveRamp's people-based identifier compared to third-party cookies. Marketers are taking notice and taking action. For example, recognizing the significance of these results One of our agency partners, Goodway Group, has subsequently pledged to migrate all of their first-party live ramp audiences to bid on our identifier via the trade desk by the end of the month. Their commitment underscores the sheer scale and proven performance of ATS and mirrors the larger industry's movement towards buying sustainable, people-based inventory. In short, ATS is transformational, and we must ensure every publisher, brand, and tech partner is using ATS to drive results and real value. Evangelizing ATS remains a top priority in Q4 and beyond. While we believe the transition away from third-party cookies will be a long-term positive for LiveRAMP, The transition will also have several financial implications for us. So I want to provide a bit of detail here as we finalize our budget and expectations for FY22. First, our customers' and partners' success with ATS equates to our success, and we continue to believe that ATS will help fuel our growth over the medium to long term. In addition to becoming a channel for new logo acquisition, ATS should drive greater adoption and usage of our platform globally as it catalyzes and pulls through use cases like measurement, safe haven, and data marketplace. This gives us confidence in our direct subscription value proposition and corresponding direct client growth rates for FY22 and beyond. This revenue represents the majority of our subscription base and will drive continued company growth. Second, we'll also be sunsetting a portion of our current revenue. We've historically licensed cookie-based components of our digital identity graph to a few technology platforms and plan to either exit or reimagine these relationships over the next 12 months. These relationships have been slower growth in recent years, and the overall revenue impact could be up to $30 million in FY22. And third, as cookies are eliminated, a portion of the data cost associated with maintaining our digital graph will be recouped. A $15 to $20 million cost of goods sold savings, which we likely won't fully see until FY23. As I mentioned earlier, given the predictability and stability in our business, we think we're in a good position to at least give some early guidance for FY22 today. And these three trends are factored into our forecasts. Warren will go into a bit more detail shortly. As our importance to our direct customers continues to increase with the changes in addressability, changing regulatory environment, and the heightened importance of data collaboration, we're broadening our core subscription offering with new features and new use cases. LiveRamp is uniquely positioned to help our customers connect data within and beyond their four walls to power the entire customer experience. And in order to capture this opportunity, we must continue to evolve our platform in three important areas, each of which creates even greater value for our customers and partners. First, We're introducing an even broader array of use cases that drive value for our clients. Connected Television represents one example of this effort. This business was up 35% in Q3, and our bookings trends remain strong. We're also seeing significant client demand for our Safe Haven offering. Safe Haven is transforming the relationship between retailers and their CPG partners, packaged goods partners. And there is a powerful two-sided network to be unlocked here, one that will catalyze both our new logo and upsell efforts. As we successfully work with our major retail clients, they introduce us to their partners, fueling our recent growth in the CPG vertical, a vertical in which we hardly participated just a year ago. For example, in Q3, we signed a Safe Haven upsell deal with a major multinational personal care company to help power their digital transformation. Initially an onboarding customer, this company is leveraging LiveRamp Safe Haven to power its offline to online data and identity infrastructure. ATS and our network of retail collaboration partners were key drivers in winning this deal. Another recent upsell example was with a major global pharmaceutical company that was an early adopter of the Safe Haven platform. Leveraging Safe Haven as the foundation for its consumer data management strategy, this customer expanded its relationship with LiveRamp to be able to leverage additional second and third party data sets inside of Safe Haven to optimize its digital media and television investments. Similar to ATS, the retail and CPG network we are building with Safe Haven is also pulling through opportunities across our larger product portfolio. For example, during the quarter, we closed a new activation deal with Unilever after working indirectly with them through one of our Safe Haven partners. Our Safe Haven momentum this past year has simply been remarkable. Our pipeline, bookings, and revenue have all been growing at rates in excess of 150%. We've already established a beachhead of over 15 million in ARR and expect this number to continue to grow rapidly in coming quarters. Looking ahead, we must lock in this incredible flywheel by ensuring our launch customers are successful as they scale their platforms across partners and geographies. Second, we must continue to expand our data protection capabilities to unlock greater data access and control for our customers. We hear and see this all the time from many of the world's largest companies. This is particularly true in industries that utilize more sensitive data, such as health care and financial services. But nearly every company considers their own proprietary data as highly confidential. They know that data utilization can improve their results, but they need absolute control over data flows, permissions, and security. Facilitating data collaboration without allowing data movement is one of the most technologically complex problems in the software world. This is why I am very excited to share that earlier today, we announced that we entered into an agreement to acquire DataFleets, a cloud-based data platform that unifies data silos without moving data or compromising privacy. With DataFleets, customers gain access to a powerful set of privacy-preserving technologies that can be configured based on business needs. DataFleets approach centers on two primary capabilities, federated learning and advanced privacy protections. Leveraging machine learning techniques, DataFleets allows insights to be derived across multiple data sets without requiring any underlying data movement. It then applies multiple advanced privacy technologies to ensure the underlying data and insights can never be re-identified, thus ensuring privacy and security. That makes it possible to analyze data across borders, across silos, in fragmented architectures, as if they were in one data environment. While other solutions take a point solution or one size fits all approach to privacy, DataFleets has built a configurable approach, ensuring customers can apply the right approach and level of privacy protection to their data without having to compromise utility. This is complicated technology, so let me describe a few hypothetical scenarios. Consider, for instance, a European company that cannot allow its data to cross borders under GDPR. or perhaps doesn't even want their data to leave their own facilities for security reasons. This problem is solved by data fleets technology. Consider a major content provider. Could be an online publisher or television content creator who knows their inventory value is predicated on audience-level characteristics, but they also want to preserve anonymity This problem is solved by data fleets technology. Or consider any client, any client who is worried about using their data given the constantly changing and confusing regulations in place. This problem is solved by data fleets technology. Ultimately, we think every client is going to want to use this technology, and through this acquisition, we are now the only company that can deliver on this type of configurable data privacy. We believe that this deal will significantly accelerate the adoption of data collaboration and analytics use cases through Safe Haven and open up new addressable markets like healthcare and financial services. We expect data fleets to be integrated in Safe Haven and commercially available to our customers by mid FY22. On behalf of all my colleagues, we are thrilled. Thrilled to welcome the DataFleets team to LiveRamp. A third important shift is the way we deliver our products and capabilities. We are migrating to an API-first modular approach in the way we build and deploy our technology to deliver customers maximum flexibility, control, and extensibility. We want to deploy our technology wherever our customers' data lives, whether that be in the cloud, in multiple clouds, on-prem, or on device. Not only does this provide greater flexibility to customers, but it also opens up an entirely new sales channel. As we sunset providing private label identity inputs into a small set of marketing hubs, we can instead embed our full array of capabilities directly into the infrastructure of a much broader array of potential technology partners. For example, we recently formed a strategic partnership with Google Cloud to deliver our identity products directly in the core of our customers' cloud data environments. As part of this partnership, Customers can access LiveRamp's identity capabilities via API through the Google Cloud Marketplace to build a unified customer view inside their data warehouse. As customers increasingly look to the cloud as a scalable, secure, and modern way to manage and take action on their data, We believe our capabilities are key to unlocking the full value of their cloud data environments. We are in discussions with all, all of the major cloud providers and hope to have more to share in this area in the coming months. Importantly, we think our opportunity to build a more sophisticated partner and reseller channel will, over time, proved to be far more meaningful than the wholesale cookie licensing relationships we intend to sunset in the coming year. Our current chief commercial officer, James Ara, is equally excited about this opportunity, so much so that he's volunteered to lead the effort. This means that James will transition away from his role as Chief Commercial Officer in order to fully focus on the success of our cloud strategy. While James is simply taking on a new role within LiveRamp, this does give me a chance to talk about him a little bit. James joined LiveRamp as its first Chief Revenue Officer in 2013. And over the course of the last eight years, has helped grow LiveRamp from a $10 million ARR niche startup to a category-creating and leading public company with approximately $330 million in ARR. Simply put, James has been a brilliant leader, teammate, and partner on this journey. And I am so excited. I am just so excited to put his energy and focus behind building out our cloud partnership strategy. We are working with an executive search firm to find James' CCO successor and are interviewing both internal and external candidates, prioritizing deep enterprise SaaS expertise and proven ability to scale a fast-growing commercial team. The search is going well, and we hope to have something to announce in the coming months. As I mentioned, James will remain in his current role through the end of our fiscal, before turning his full attention to the new role. So I think we will be well positioned for a smooth, seamless transition. I also want to announce a notable upcoming departure from LiveRAMP's Board of Directors. After two decades of service, Bill Henderson has announced his decision to leave the LiveRamp board at the end of his current term this summer. Bill has been an incredible friend and mentor to me over the past decade. He was among my first interviewers when I was originally being considered for the Axiom CEO role, and he and I have spent hundreds of hours since then discussing the business, brainstorming ideas, and even talking about things just far outside the digital realm. In addition to serving on our board since 2001, Bill previously served as Postmaster General and the COO of Netflix. Bill thinks he's going to slow down and invest even more time in some of his lifelong passions, like photography. but I'm probably still going to call him frequently to ask for his wisdom. In the coming months, we'll launch a search for Bill's replacement on the LiveRamp board. We will surely find someone terrific who will have big, big shoes to fill. With that, thank you again for joining us today, and a big thank you to our exceptional customers, partners, and employees for their ongoing support and hard work. We delivered another solid growth quarter in Q3. We feel that, despite an uncertain macroeconomic environment, we're positioned for continued growth. And our efforts to introduce new innovations and new use cases to our clients give us even greater long-term optimism. We look forward to updating you on our continued progress in the quarters ahead. And I'll now turn the call over to Warren.