LiveRamp's (NYSE:RAMP) Q1 Sales Top Estimates But Full Year Guidance Underwhelms

Jabin Bastian /
2022/08/04 4:52 pm EDT
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Advertising data platform LiveRamp (NYSE:RAMP) reported Q1 FY2023 results topping analyst expectations, with revenue up 19.4% year on year to $142.2 million. On the other hand, guidance for the full year missed analyst expectations with revenues guided to $595 million at the midpoint, or 2.96% below analyst estimates. LiveRamp made a GAAP loss of $27.2 million, down on its profit of $17.3 million, in the same quarter last year.

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LiveRamp (RAMP) Q1 FY2023 Highlights:

  • Revenue: $142.2 million vs analyst estimates of $138.9 million (2.35% beat)
  • EPS (non-GAAP): $0.05 vs analyst estimates of $0.01 ($0.04 beat)
  • Revenue guidance for Q2 2023 is $144 million at the midpoint, above analyst estimates of $142.8 million
  • The company dropped revenue guidance for the full year, from $616.5 million to $595 million at the midpoint, a 3.48% decrease
  • Free cash flow was negative $35.1 million, down from positive free cash flow of $57 million in previous quarter
  • Net Revenue Retention Rate: 113%, up from 110% previous quarter
  • Customers: 910, up from 905 in previous quarter
  • Gross Margin (GAAP): 71.1%, in line with same quarter last year

“We delivered a solid first quarter, highlighted by 19% revenue growth and continued profitability,” 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 solid over the last year, growing from quarterly revenue of $119 million, to $142.2 million.

LiveRamp Total Revenue

This quarter, LiveRamp's quarterly revenue was once again up 19.4% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $518 thousand in Q1, compared to $1.12 million in Q4 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates LiveRamp is expecting revenue to grow 13.1% year on year to $144 million, slowing down from the 21.6% 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 16.3% 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 113% in Q1. That means even if they didn't win any new customers, LiveRamp would have grown its revenue 13% year on year. Significantly up from the last quarter, this a good retention rate and a proof that LiveRamp's customers are satisfied with their software and are getting more value from it over time. That is good to see.

Key Takeaways from LiveRamp's Q1 Results

With a market capitalization of $1.93 billion LiveRamp is among smaller companies, but its more than $508.2 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 net revenue retention rate this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see that LiveRamp's revenue guidance for the full year missed analyst's expectations and there was a slowdown in customer growth. Overall, this quarter's results were not the best we've seen from LiveRamp. The company is down 3.78% on the results and currently trades at $26.95 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.