Advertising data platform LiveRamp (NYSE:RAMP) missed analyst expectations in Q4 FY2023 quarter, with revenue up 4.87% year on year to $148.6 million. Guidance for the next fiscal year also slightly missed analyst expectations with revenues guided to $615 million at the midpoint, or 1.07% below analyst estimates. LiveRamp made a GAAP loss of $31.4 million, down on its loss of $29.4 million, in the same quarter last year.
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LiveRamp (RAMP) Q4 FY2023 Highlights:
- Revenue: $148.6 million vs analyst estimates of $149.6 million (0.67% miss)
- EPS (non-GAAP): $0.32 vs analyst estimates of $0.18 ($0.14 beat)
- Revenue guidance for Q1 2024 is $147 million at the midpoint, above analyst estimates of $144.9 million
- Management's revenue guidance for upcoming financial year 2024 is $615 million at the midpoint, missing analyst estimates by 1.07% and predicting 3.09% growth (vs 13.2% in FY2023)
- Free cash flow of $30.6 million, up 96% from previous quarter
- Net Revenue Retention Rate: 97%, down from 101% previous quarter
- Customers: 920, up from 910 in previous quarter
- Gross Margin (GAAP): 70.8%, down from 72.1% same quarter last year
LiveRamp CEO Scott Howe said, “We delivered an in-line quarter, hitting our key financial targets. We enter fiscal 2024 as a more efficient company, with a leaner cost structure and encouraging sales momentum, particularly upselling customers to our data collaboration platform. We expect this momentum to build in FY24 as our recently announced integrations and partnerships – such as with Google PAIR, Snowflake and Twilio – gain traction in the market.”
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 quarterly revenue of $119.2 million in Q4 FY2021, to $148.6 million.
LiveRamp's quarterly revenue was only up 4.87% year on year, which might disappoint some shareholders. But the revenue actually decreased by $9.99 million in Q4, compared to $11.5 million increase in Q3 2023.Shareholders might want to pay closer attention to this as the management is guiding for the decline in sales to continue in the coming quarter
Guidance for the next quarter indicates LiveRamp is expecting revenue to grow 3.34% year on year to $147 million, slowing down from the 19.5% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $615 million at the midpoint, growing 3.09% compared to 12.8% increase in FY2023.
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Product Success
One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.
LiveRamp's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 97% in Q4. That means if they didn't win any new customers, LiveRamp would have decreased its revenue 3% year on year. The retention rate has been going down over the last year which suggest us that at least some customers are not successful in adopting the product and LiveRamp continues to slowly lose contracts and revenue streams.
Key Takeaways from LiveRamp's Q4 Results
With a market capitalization of $1.72 billion LiveRamp is among smaller companies, but its more than $497.3 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
We were very impressed by LiveRamp’s very strong acceleration in customer growth this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was unfortunate to see that LiveRamp's revenue guidance for the full year missed expectations and it indicates quite a significant slowdown in growth. Overall, it seems to us that this was a mixed quarter for LiveRamp. The company is up 1.83% on the results and currently trades at $27.25 per share.
LiveRamp may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.