LiveRamp (NYSE:RAMP) Q1 Sales Beat Estimates, Provides Optimistic Full-Year Guidance

Radek Strnad /
2023/08/09 4:14 pm EDT

Advertising data platform LiveRamp (NYSE:RAMP) reported Q1 FY2024 results exceeding Wall Street analysts' expectations, with revenue up 8.31% year on year to $154.1 million. Guidance for next quarter's revenue was also better than expected $152 million at the midpoint, 1.09% above analysts' estimates. LiveRamp made a GAAP loss of $1.59 million, improving from its loss of $27.2 million in the same quarter last year.

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LiveRamp (RAMP) Q1 FY2024 Highlights:

  • Revenue: $154.1 million vs analyst estimates of $147 million (4.82% beat)
  • EPS (non-GAAP): $0.29 vs analyst estimates of $0.19 ($0.10 beat)
  • Revenue Guidance for Q2 2024 is $152 million at the midpoint, above analyst estimates of $150.4 million
  • The company lifted revenue guidance for the full year from $615 million to $625 million at the midpoint, a 1.63% increase
  • Free Cash Flow of $25.6 million, down 16.1% from the previous quarter
  • Net Revenue Retention Rate: 98%, in line with the previous quarter
  • Customers: 915, down from 920 in the previous quarter
  • Gross Margin (GAAP): 70.4%, down from 71.2% in the same quarter last year

"We’re off to a strong start to the fiscal year, with first quarter revenue and operating income exceeding our expectations, operating margin expanding by double-digits and our first quarter ever with positive GAAP operating income,” said LiveRamp CEO Scott Howe.

Started in 2011 as a spin-out of RapLeaf, LiveRamp (NYSE:RAMP) provides software as a service that helps companies better target their marketing by merging offline and online data about their customers.

The digital advertising market is large, growing and becoming more diverse, both in terms of audiences and media. This as a result drives a growing need for a software that enables advertisers to use data to automate and optimize ad placements.

Sales Growth

As you can see below, LiveRamp's revenue growth has been mediocre over the last two years, growing from $119 million in Q1 FY2022 to $154.1 million this quarter.

LiveRamp Total Revenue

LiveRamp's quarterly revenue was only up 8.31% year on year, which might disappoint some shareholders. However, its revenue increased $5.44 million quarter on quarter, a strong improvement from the $9.99 million decrease in Q4 2023. This is a sign of acceleration of growth and very nice to see indeed.

Next quarter's guidance suggests that LiveRamp is expecting revenue to grow 3.33% year on year to $152 million, slowing down from the 15.6% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results announcement, the analysts covering the company were expecting sales to grow 3.43% over the next 12 months.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Product Success

One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.

LiveRamp Net Revenue Retention Rate

LiveRamp's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 98% in Q1. This means LiveRamp's revenue would've decreased by 2% over the last 12 months if it didn't win any new customers.

Despite significantly increasing since the previous quarter, LiveRamp still has a weak net retention rate, signaling that some customers aren't satisfied with its products, leading to lost contracts and revenue streams.

Key Takeaways from LiveRamp's Q1 Results

With a market capitalization of $1.91 billion, LiveRamp is among smaller companies, but its $503.9 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.

It was good to see LiveRamp beat analysts' revenue expectations this quarter, driven by strong outperformance in its marketplace segment. We were also glad its full-year revenue guidance came in higher than Wall Street's estimates and it recorded its first-ever quarter of positive GAAP operating income. On the other hand, its customer growth slowed. Overall, the results could have been better. The stock is flat after reporting and currently trades at $27.08 per share.

So should you invest in LiveRamp right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.