LiveRamp Holdings, Inc.

Good afternoon, ladies and gentlemen, and welcome to LiveRAMP's fiscal 2025 third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Drew Borst, Vice President of Investor Relations.

Thank you, operator. Good afternoon, everyone, and thank you for joining our fiscal 2025 third quarter earnings call. With me today are Scott Howe, our CEO, and Lauren Dillard, our 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 factors section of our public filings and the press release. A copy of our press release and financial schedules, including any reconciliation to non-GAAP financial measures, is available at investors.liveramp.com. Also, during the call today, we'll be referring to the slide deck that is also available on our Investor Relations website. With that, I'll turn the call over to Scott.

Thank you, Drew, and thanks to everyone for joining us today. With our Investor Day approaching on February 25th, I'll keep today's remarks brief and focused on our strong third quarter results. During Investor Day, we'll provide a comprehensive update on our strategy, market position, product roadmap, go-to-market initiatives, and multi-year financial outlook. We hope to see you there, either in person in San Francisco or via the live webcast. Three key takeaways from Q3. First, we exceeded expectations for revenue and operating income. with double-digit revenue growth for the fourth consecutive quarter. Second, sales momentum rebounded as our pipeline converted into new clients and upsells, and data marketplace and usage revenue remained strong. And third, we continue making progress on our Rule of 40 journey and are prioritizing ongoing improvement. Exceeding expectations. We posted strong third quarter results, exceeding our guidance and consensus on the top and bottom line. I'm particularly pleased with the improvement in our sales momentum, which validates our strategy and product offering. We believe our data collaboration platform is uniquely positioned to capitalize on the growing demand from advertisers and publishers for enhanced measurement of digital advertising using first-party data. Revenue increased by 12%, marking our fourth consecutive quarter of double-digit growth. Operating income increased by 24%, and operating margin expanded by over two points to reach a record quarterly high of 23%. Fiscal year to date, we have generated $91 million in free cash flow, which is a 20% increase year over year. Sales momentum. Our sales momentum rebounded in the third quarter as the pipeline we've built year to date started to convert to new clients and upsells. Our pipeline conversion rate improved materially, swinging from below trend in the prior three quarters to well above trend in Q3. What drove the turnaround? We think several factors were at play. First, the IT spending environment improved as concerns about the economy and macroeconomic policy receded. Second, customers are increasingly recognizing that data collaboration is critical for measuring outcomes in the fastest growing advertising channels, such as CTV, commerce media, and social, and for supporting data-fueled AI models. Finally, Our strategic focus and optimizations are paying off. We've simplified our messaging and educated the market about the value of data collaboration. The tactical adjustments we made to our product and go-to-market strategy starting last spring are gaining traction with customers. As I outlined on the last earnings call, these adjustments made our platform faster and easier to use for the use cases that matter most to customers. such as measuring marketing outcomes in CTV and retail media. LiveRamp operates as a classic network business where scale creates a defensible advantage and a natural flywheel that further enhances the network scale and the value received by all participants. There's been a lot of talk in our industry recently about marketing entering the outcomes era. a period in which all advertising is data-driven, accountable, and achieves measurable results. This trend benefits LiveRamp as our network enables a personalized customer experience at scale across all touchpoints with the ability to measure and optimize outcomes for better performance. The brand and business value our customers build increases exponentially with the LiveRamp Data Collaboration Network. The scale of our data collaboration network is unparalleled. Consider some of these metrics. Over 350 brand customers, including 20 of the 25 largest U.S. advertisers and 30% of the Fortune 500. More than 200 ad tech platforms, such as DSPs, SSPs, marketing clouds, and customer data platforms. 200-plus third-party data providers. 70-plus ad agencies, including all six of the largest agency holding companies, 10 of the 11 largest streaming platforms, and over 30 retail and commerce media networks, including 14 of the 15 largest. Even at this scale, we're not done growing. The current leg of growth is being driven by the need to deliver measurable marketing outcomes. a dawning recognition that few companies have enough data to go it alone, and the desire to collaborate in a secure clean room environment. Every marketer, media owner, and marketing partner is judged on their ability to deliver measurable marketing outcomes, and you simply cannot deliver, measure, and optimize these outcomes without collaboration. Both the data owners and data consumers in our network, and most companies now fit into both categories, recognize that collaboration improves virtually every measurable outcome. Publishers and commerce media networks use our clean room solution to enhance the value and effectiveness of their advertising inventory through improved targeting and measurement capabilities. Advertisers are able to seamlessly connect to a broad network of the premium publishers to achieve greater reach, richer consumer insights, execute more sophisticated campaign strategies, and measure their marketing outcomes, such as return on ad spend. The customer upsells and new logo wins we had this quarter exemplify the growth across our network. We secured a high six-figure upsell on a multi-million dollar two-year contract with a leading mass market retailer in the U.S., The upsell spanned our identity, connectivity, and clean room solutions, bringing their retail media network into our network as a data owner. We also signed a seven-figure upsell on a multi-million, three-year contract with a large quick service restaurant who will be utilizing our clean room solution as a data consumer. Our collaboration network is also helping with new logos. This quarter, we signed a top five retail media network to our clean room as a data owner, for a high six-figure ACV. Finally, we signed a seven-figure new logo contract with a two-year term with a global hotel and resort operator. This contract included our cleanroom solution as a data consumer in addition to our identity and connectivity products. As I mentioned, many of our clients are now serving as both data consumers and data owners. For example, the aforementioned hotel operator came into our clean room network as a data consumer to support their advertising efforts, but we are already discussing how to expand this relationship to include their commerce media network as a data owner node in our collaboration network. This improved sales momentum is partially, although not fully, reflected in several key operational metrics. ARR grew by 10% year on year. marking the fourth consecutive quarter of double digit growth. Net new ARR in the quarter was 8 million. This only partially reflects Q3 signings due to the normal one to two month lag between contract signing and the first invoice that triggers revenue recognition for ARR. Third quarter CRPO also rebounded with a 16% increase quarter over quarter. While we typically see an acceleration in CRPO quarterly growth in Q3, due to seasonality in our contract renewals, 16% growth was significantly above the normal seasonal trend. Of course, we know that a single quarter doesn't guarantee continued success. We're focused on maintaining this momentum and improving the consistency of our execution. To support that goal, we're hosting our annual customer and partner conference, Ramp Up, in San Francisco at the end of February. This event is a cornerstone of our commercial strategy, and we anticipate engaging with over 3,000 attendees, including hundreds of customers and partners. We'll hold more than 350 customer meetings and announce platform enhancements focused on speed, ease of use, and expanded functionality. We're also excited to share new use cases, partnerships, and innovations. Given the current momentum within our data collaboration network, we're more enthusiastic than ever about this year's ramp up. Rule of 40 progress. We continue to make progress on our Rule of 40 journey, prioritizing ongoing improvement, which we believe will unlock greater returns for shareholders. Based on our updated FY25 guidance, we expect to reach or surpass rule of 30 with 12 to 13% revenue growth and an 18% operating margin. This represents a 100 to 400 basis point improvement compared to FY24. Revenue. Our medium term objective remains 10 to 15% annual revenue growth and FY25 will be the seventh consecutive year We grew above 10% since the Axiom divestiture. While our revenue growth isn't always linear, Q3's sales momentum reinforces that we have the right strategy and product to meet substantial market demand for data collaboration. This positions us for strong growth over the medium to long term. Additionally, we see an opportunity to evolve our pricing model to better align our revenue growth with our customers' increasing data use for digital advertising delivery and measurement. We'll elaborate on this at our investor day. Margin. We have a track record of steady margin expansion, delivering 200 basis points of improvement this year to reach 18%. We remain on track to deliver a 20% to 25% operating margin in FY26, driven by cost discipline, savings from our offshoring initiative, and the inherent drop-down rate on incremental revenue in our SAS model. We're confident that we're striking the right balance between investing for future revenue growth and delivering improved profitability. In closing, let me reiterate the key themes from the quarter. First, we delivered strong Q3 financial results. with revenue and operating income exceeding expectations. We achieved double-digit growth in both revenue and ARR, above normal seasonality in CRPO growth, and record high operating margin. Second, our sales momentum accelerated during the quarter, driven by an improving IT spending environment and growing recognition amongst customers that data collaboration is essential for both measuring outcomes in key advertising channels, CTV, commerce media, social, and supporting data-driven AI models. Our focus on simplifying onboarding, educating the market, and enhancing our products also contributed to this success. Third, we continue making steady progress towards rule of 40, and expect 300 to 400 basis point improvement to reach or surpass rule of 30 this fiscal year. We remain committed to delivering a 20 to 25% operating margin in FY26, up from 18% in FY25, driven by cost discipline, offshoring savings, and the high drop-down rate on incremental revenue. We hope you can join us on February 25th for our Investor Day. Registration information can be found on our Investor Relations website, and please reach out to Drew with any questions. Thank you again for joining us today. I also want to thank our exceptional, exceptional customers, partners, and all live rampers for their ongoing hard work and support. We look forward to updating you on our continued progress in the coming quarters. And with that, I'll turn the call over to Lauren.