LiveRamp Holdings, Inc.

Ladies and gentlemen, this is your operator. Your conference will begin in one minute. Please continue to stand by. Once again, this is your operator. Your conference will begin in one minute. Please continue to stand by. Thank you. Thank you. Good afternoon, ladies and gentlemen, and welcome to LiveRAM's Fiscal 2022 Fourth Quarter Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Lauren Dillard, Senior Vice President of Finance and Investor Relations.

Thank you, Operator. Good afternoon and welcome. Thank you for joining us to discuss our Fiscal 2022 Fourth Quarter results. With me today are Scott Howe, our CEO, and Warren Jensen, President and CFO. 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 will turn the call over to Scott.

Thank you, Lauren, and thanks to all of you for joining us today. I'm hoping that my prepared remarks today will highlight three fundamental takeaways about LiveRAMP. As the economy enters a period of market uncertainty, we believe LiveRAMP is well insulated from macroeconomic headwinds relative to most companies. We're resilient, 80% subscription-based, and embedded into the very fabric of the data economy. Second, in the recently completed Q4, we posted another quarter of growth with a number of notable client wins. And third, we're by no means satisfied with where we are and have clear line of sight to areas that we think can improve our top line growth, profitability, and return on shareholder capital. First, LiveRAMP's resilience. Let me start by just addressing the swirling macroeconomic headwinds. I always enjoy talking with Wall Street at our fiscal year end, as it provides a chance for both reflection on the path we traveled, as well as an opportunity to share our perspective on the next leg of the journey. This year feels really different, however, given the absolute chaos of the financial markets in recent weeks. With the devastating war in Ukraine, supply chain challenges, rising inflation rates, and volatility in the financial markets, as well as lingering impacts of the global pandemic, this year has brought a significant amount of uncertainty. As we have seen in the past, broader market uncertainty can serve as a strong catalyst for LiveRAMP's business as companies shift their dollars toward resources that more directly enable them to address and measure their marketing performance. This not only plays into our strengths, but is the very reason we exist. Since our founding over a decade ago, LiveRamp has been recognized as a leader in the customer experience economy. We've grown through multiple industry cycles and ecosystem changes, delivered category-creating innovation to our customers, and future-proofed our product for the next generation of data-driven experiences. Despite recent macroeconomic uncertainty, we are entering FY23 from a position of strength with conviction in our ability to deliver a balance of solid top line growth and enhanced operating profit, all while continuing to transform customer experiences and generate more valuable business outcomes. Moreover, our success in identity, addressability, and data collaboration have embedded us into the very fabric of the data ecosystem. Case in point, today more than 1,500 publishers representing more than 11,000 domains are leveraging LiveRAMP's authenticated addressability technology, including roughly 80% of the ComScore 50 and the major walled gardens. These include both display publishers and mobile app inventory. And there are a handful of great case studies on our website that prove how well our solutions are working. In part due to these integrations, LiveRamp is now connected to over 85% of consumer time spent online in the U.S. and continues to scale internationally as well. For example, earlier this year, we announced an expanded partnership with the Trade Desk to power their EUID in Europe. Taken together, these successes secure our destination network. And of course, on the origination side, 80% of our revenue is comprised of predictable SAS subscriptions, which help insulate us from large economic fluctuations. Second, LiveRamp continued to grow and win with clients in Q4. In Q4, we exceeded our guidance across all metrics for the eighth consecutive quarter. Total revenue grew 19%, and subscription revenue was up 22%. Normalizing for the wholesale contraction, total revenue grew 26%, and subscription revenue was up 31%. We exited the quarter and year with approximately $400 million in ARR, up 19% as reported, and up 28% normalized for wholesale. We're pleased with these top line results, which continue to be driven by the momentum in our land and expand selling motion. In the quarter, we added 15 net new logos and continue to see particular strength in our large enterprise customer segment, as a result of increased adoption of our enterprise product suite, Safe Haven. Our 500,000 to 1 million customer count was up 30%, and our $1 million plus customer count grew to 87, an increase of 24% compared to the prior year. In the quarter, we signed a new Safe Haven deal with Colgate in the EU, for projects in both the UK and France, and a TV measurement deal with a major North American insurance provider. Safe Haven also continues to be a big driver of account expansion. For example, last quarter we talked about a new Safe Haven deal with JD.com. In the quarter, we expanded this relationship to include an emerging new use case, enabling collaborative personalization on JD.com's owned and operated properties. This is a great example of next generation retail media network use cases powered by our capabilities. Another safe haven expansion example from the quarter was with a major global agency holding company. As part of this multi-year strategic partnership, LiveRAMP will power the identity and collaboration suite for top clients in the retail, CPG, and financial services verticals. Given the breadth of use cases enabled by the platform, Safe Haven customers have higher ACVs and upgrade at higher price points. As we continue to upgrade our customer base to Safe Haven, we expect the average length and size of our contracts to continue to increase, and the average churn and contraction to remain lower than what we have typically seen on average. Our subscription net retention in the quarter was 111% or 119% normalized for wholesale. Turning to our bottom line, our gross margin expanded to 76% ahead of our long-term target of 75%, and we delivered sustained profitability. For the full year, operating margin was roughly 8%, up 400 basis points. This performance reflects the leverage in our model and our ability to generate strong free cash flow across the business, which is perhaps a great segue to the final topic I would like to discuss, our focus on and commitment to value creation. Third. we are not remotely satisfied and have implemented plans designed for faster growth, improved profitability, and greater return for our shareholders. As I often remind our employees, great companies have an ability to look in the mirror and never, never like what they see. They recognize that there are always ways to better serve clients, grow even faster, improve efficiencies, and build better market traction. LiveRamp aspires to be not just great, but an exceptional, an exceptional company. And we recognize that we have many improvement levers which can accelerate our success in the coming quarters. Let me walk through a few areas of the business where I don't think we're hitting on all cylinders and where I think there is untapped potential for us to pursue. While some of these may explain our recent performance and near-term outlook, all of them represent opportunities to further improve on our operating plan for the coming year. Opportunity number one, accelerate our top line growth. Although we grew subscription revenue by roughly 20% over the past year, I think we can do better. We intend to accomplish this through four discrete initiatives. One, expanding our sales and marketing capacity. Two, improving our product efficacy. Three, expanding to new geographies. And four, accelerating our partner channel efforts. In FY22, we came out of the blocks fast fast in bookings the early indicator of future revenue but we slowed in the back half of the year now let me be clear we're not we're not seeing material competitive headwinds adverse economic conditions or changing client demands the biggest driver is a product of the hot labor market of the past 12 months we simply did not hire enough sales reps In the US, for example, year-over-year revenue increased by roughly 20% compared to sales and marketing headcount growth of approximately 8%. When you further refine this number to just experienced commercial salespeople, we were roughly flat. We're already responding to this challenge. We've hired 18 new commercial leads over the past three months. an increase of about 25% to our sales capacity. With the influx of talent, we've also introduced new training and development programs to ensure sales reps are more persuasive, well-trained in enterprise selling, and more effectively achieve their quotas. We also hired a CMO and are in the process of building a more robust lead gen program to provide qualified leads to our sellers. And while we know that not every person we hire will succeed, we strongly believe that successful SaaS sales at scale is a math equation. It just requires growing pipeline, strong sellers, and predictable conversion rates. We believe that continued investments and selling capacity will fuel stronger long-term growth. Now in SaaS, there's an old axiom that great product sells itself. To this end, we also think our recent refinement of our SafeHaven suite will continue to pay dividends for us. Some investors ask whether SafeHaven is just another clean room. The answer is an emphatic no, that we can work with almost any clean room or any cloud. Safe Haven represents a holistic, integrated suite of all of LiveRAMP's capabilities that can be easily purchased and used through a common user interface and is interoperable with all kinds of complementary technologies, major data destinations, CDPs, storage and compute, the clouds. We work with everyone. and there isn't a true competitor that has our breadth and scale. All data is accessible, can be powered with identity, can be activated anywhere, and can be centrally managed with appropriate permissions and security. This bundled suite is exactly how clients have expressed how they desire to work. A simple buying process and user experience. seamless across hundreds of valuable use cases, and increasingly cloud agnostic so that clients can plug us into any partner. Clients can explore new functionality and upgrade as their needs expand. Today, we have over 40 brands on the Safe Haven suite. These clients have higher annual ACV and a net dollar retention in excess of 120%. Within the next year, our goal is to double the number of clients leveraging the Safe Haven suite. We think the migration will be relatively painless. As existing onboarding or television clients, they won't experience disruption, but rather will simply start to use a cleaner, more intuitive UI with access to capabilities to which they may not have been previously exposed. A third strategic initiative this year is to accelerate our international expansion. The combination of ATS and Safe Haven has been a game changer for our international business and has allowed us to scale the new markets more quickly and much more efficiently. Today, we serve over 40 markets, up from 12 only a few years ago. In FY22, our international bookings outpaced the U.S. and revenue for the quarter was up 33%. We increasingly serve global multinational companies and believe we have a long runway for growth here. A final key initiative in FY23 is to expand our partner channel strategy, the initiative that James Ara has been leading for us. This includes ecosystem partners, systems integrators, and increasingly, importantly, cloud providers. We help our customers unlock value from their data wherever it lives. And as more customer data migrates to the cloud, key live ramp technologies, identity for example, can be deployed natively in these environments. This enables these customers to achieve faster returns on their cloud investments, reduce data fragmentation, and allows for greater flexibility and simplicity with using identity in the cloud. A year ago, we announced a strategic partnership with GCP, which has been a nice source of lead gen for us. And since then, we announced similar partnerships with AWS and more recently Snowflake to power identity natively within their cloud environments and data warehouses. In the coming year, We expect to launch additional live ramp technologies like advanced segmentation and activation natively in the cloud as well. This will unlock many additional use cases and deliver even greater value to our cloud customers. Now, we haven't built significant revenue from these efforts into our near-term forecast. But over time, we think that this could be a catalyst for us. Opportunity number two, improve operating profit. LiveRAMP's SaaS model exhibits strong economies of scale. On this, our track record speaks for itself. Operating cash flow over the past 12 months was $78 million, an improvement of over $100 million from just two years ago. Again, we are not satisfied. as the travel restrictions of COVID ease will absorb additional T&E, but will continue to improve profitability in the coming year. While we'll increase sales capacity and invest internationally, most other areas of our business will benefit from increasing returns to scale. And opportunity number three, improve shareholder return on capital. we are not remotely satisfied with LiveRamp's recent share price performance. We don't believe that our stock price currently appropriately reflects our potential, and we're committed to continue exploring all opportunities to maximize shareholder value. Of course, the best thing we can do is simply continue to grow revenues, profits, and satisfied clients And as I just discussed, that's our intent. But in this erratic market, as we have done historically, we will also explore returning capital to shareholders. For example, we have a strong track record of opportunistically and aggressively buying back shares based on market conditions. As a result, over the course of the last decade, we have returned over $1.2 billion to shareholders in the form of share repurchases, including more than $800 million since the live ramp axiom separation in late 2018. Given the current market, we today announced our intention to repurchase up to an additional $150 million of live ramps common stock before December 31st. Warren will discuss this in more detail during his portion of the call. In summary, let me revisit the three key themes with which I started the call. First, in a period of market uncertainty, we believe LiveRamp is a safe choice. We'll continue to grow and improve profitability, and we're embedded into the very fabric of the data ecosystem we serve. Second, Q4 represented another quarter of growth, and we anticipate more of the same in the coming year. And third, but perhaps most importantly, know that we aren't even remotely satisfied with our current trajectory. In the coming months, we will seek to grow bookings and revenue even faster by increasing our sales and marketing capacity, improving our products, expanding geographically, and broadening our cloud and partner channels. We will continue to focus on a path of cash flow improvement. And we will explore creative ways to unlock shareholder value, including an accelerated buyback program. There is much work to do, but our market opportunity is significant and continues to grow. We are a critical component of our customers' data infrastructure. and continue to deliver category creating innovation to the market. Finally, and importantly, we have a strong team in place to execute against our goals and we enter FY23 focused and energized to deliver on the year ahead. With that, thank you again for joining us today and a special thanks to our exceptional customers, partners, and to all of our live rampers across the globe for their ongoing hard work and support. We look forward to updating you on our progress in the coming quarters. I will now turn the call over to Warren.