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LiveRamp (NYSE:RAMP) Reports Upbeat Q1, Stock Soars


Full Report / August 05, 2021
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Advertising data platform LiveRamp (NYSE:RAMP) announced better-than-expected results in the Q1 FY2022 quarter, with revenue up 19.7% year on year to $119 million. LiveRamp made a GAAP profit of $17.3 million, improving on its loss of $21.7 million, in the same quarter last year.

LiveRamp (RAMP) Q1 FY2022 Highlights:

  • Revenue: $119 million vs analyst estimates of $111.9 million (6.29% beat)
  • EPS (non-GAAP): $0.09 vs analyst estimates of -$0.02 ($0.11 beat)
  • Revenue guidance for Q2 2022 is $124 million at the midpoint, above analyst estimates of $121.6 million
  • The company lifted revenue guidance for the full year, from $509 million to $522 million at the midpoint, a 2.55% increase
  • Free cash flow was negative -$17.67 million, compared to negative free cash flow of -$18.27 million in previous quarter
  • Net Revenue Retention Rate: 108%, up from 104% previous quarter
  • Customers: 855, up from 825 in previous quarter
  • Gross Margin (GAAP): 71.1%, up from 68.4% previous quarter

Founded in 2011, LiveRamp provides software as a service that helps companies better target their marketing by merging offline and online data about their customers.

In a world where shopping happens not only in physical stores but also online, on multiple devices and through multiple channels, organizations are struggling to keep track of their customers' interests. LiveRamps platform integrates all the data advertisers have about their (potential) customers, both online and offline and provides them with tools that allow them to use it to target advertising.

For example, after a customer purchased a new kitchen robot in a company’s physical store, LiveRamp can help the company match the details of the customer with their database and enable them to target the customer with online ads for additional accessories for that particular type of a kitchen robot.

The advertising market is massive, growing and becoming more diverse, both in terms of audiences and media. This as a result drives a growing need to automate and optimize ad placements, which requires reliable data, and that is where platforms like LiveRamp come into play.

Competitors include The Trade Desk (NASDAQ:TTD), Nielsen, and Oracle (NYSE:ORCL).

Sales Growth

As you can see below, LiveRamp's revenue growth has been decent over the last year, growing from quarterly revenue of $99.4 million, to $119 million.

LiveRamp Total Revenue

This quarter, LiveRamp's quarterly revenue was once again up 19.7% year on year. We can see that the company decreased revenue by $137 thousand quarter on quarter. That's on top of the $578 thousand decrease in Q4 2021.

Analysts covering the company are expecting the revenues to grow 14.9% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

Customer Growth

You can see below that LiveRamp reported 855 customers at the end of the quarter, an increase of 30 on last quarter. That is quite a bit better customer growth than last quarter and quite a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

LiveRamp Customers

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 108% in Q1. That means even if they didn't win any new customers, LiveRamp would have grown its revenue 8% year on year. Significantly up from the last quarter, this a decent retention rate and it shows us that not only LiveRamp's customers stick around but at least some of them get increasing value from its software over time.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. LiveRamp's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 71.1% in Q1.

LiveRamp Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.71 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is around the lower average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market so it is important to track.

Key Takeaways from LiveRamp's Q1 Results

With market capitalisation of $2.64 billion LiveRamp is among smaller companies, but its more than $541 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We were very impressed by LiveRamp’s very strong acceleration in customer growth this quarter. And we were also excited to see it that it outperformed Wall St’s revenue expectations. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 9.67% on the results and currently trades at $42.62 per share.

Is Now The Time?

When considering LiveRamp, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. Although we have other favorites, we understand the arguments that LiveRamp is not a bad business. Its revenue growth has been solid. And while its gross margins aren't as good as other tech businesses we look at, the good news is its very efficient customer acquisition hints at the potential for strong profitability.

LiveRamp's price to sales ratio based on the next twelve months is 5.1, suggesting that the market is expecting more moderate growth, relative to the hottest tech stocks. In the end, beauty is in the eye of the beholder. While LiveRamp wouldn't be our first pick, if you like the business, the shares are trading at a pretty interesting price point right now.