LiveRamp's (NYSE:RAMP) Posts Q3 Sales In Line With Estimates, Gross Margin Improves

Jabin Bastian /
2023/02/07 4:20 pm EST

Advertising data platform LiveRamp (NYSE:RAMP) reported results in line with analyst expectations in Q3 FY2023 quarter, with revenue up 12.8% year on year to $158.6 million. The company expects that next quarter's revenue would be around $149.5 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. LiveRamp made a GAAP loss of $29.7 million, down on its loss of $15.4 million, in the same quarter last year.

Is now the time to buy LiveRamp? Access our full analysis of the earnings results here, it's free.

LiveRamp (RAMP) Q3 FY2023 Highlights:

  • Revenue: $158.6 million vs analyst estimates of $157.8 million (small beat)
  • EPS (non-GAAP): $0.28 vs analyst estimates of $0.27 (4.35% beat)
  • Revenue guidance for Q4 2023 is $149.5 million at the midpoint, roughly in line with what analysts were expecting
  • Free cash flow of $15.6 million, down 16.6% from previous quarter
  • Net Revenue Retention Rate: 101%, down from 108% previous quarter
  • Customers: 910, down from 920 in previous quarter
  • Gross Margin (GAAP): 72.7%, in line with same quarter last year

"We continue winning with the world's largest brand marketers, reinforcing that we are essential infrastructure for the advertising ecosystem," 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 quarterly revenue of $119.8 million in Q3 FY2021, to $158.6 million.

LiveRamp Total Revenue

This quarter, LiveRamp's quarterly revenue was once again up 12.8% year on year. We can see that the company increased revenue by $11.5 million quarter on quarter. That's a solid improvement on the $4.86 million increase in Q2 2023, so shareholders should appreciate the re-acceleration of growth.

Guidance for the next quarter indicates LiveRamp is expecting revenue to grow 5.49% year on year to $149.5 million, slowing down from the 18.9% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 7.52% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

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 Net Revenue Retention Rate

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 101% in Q3. That means even if they didn't win any new customers, LiveRamp would have grown its revenue 1% year on year. Despite the recent drop this is still a fair retention rate and and it shows us that customers stick around. But LiveRamp is lagging a little behind the best SaaS businesses that achieve net dollar retention rates of over 120%.

Key Takeaways from LiveRamp's Q3 Results

With a market capitalization of $1.81 billion LiveRamp is among smaller companies, but its more than $453.5 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see LiveRamp improve their gross margin this quarter. That feature of these results really stood out as a positive. On the other hand, it was less good to see the deterioration in revenue retention rate and there was a slowdown in customer growth. Overall, this quarter's results were mixed. The company is up 4.99% on the results and currently trades at $28.59 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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