LiveRamp Holdings, Inc. (RAMP) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong sales growth, strategic AI partnerships, and successful CTV integrations, which are positive indicators. The usage-based pricing model and AI-driven initiatives are expected to drive future growth, despite some management opacity. The market cap suggests a moderate reaction, leading to a positive stock price prediction.
Key Financial Performance
Q3 Revenue Growth 9%, inclusive of a 4-point acceleration in Subscription revenue also to 9%. Reasons for change: Driven by use cases for Commerce Media, CTV, and cross-platform measurement.
ARR (Annual Recurring Revenue) Increased $11 million quarter-over-quarter and 7% year-over-year. Reasons for change: Driven by use cases for Commerce Media, CTV, and cross-platform measurement.
Total Customer Count Increased by 15 quarter-over-quarter, the largest increase in more than 3.5 years. Reasons for change: Not explicitly mentioned.
$1 Million-Plus Customers Increased by 8 to a high of 140. Reasons for change: Driven by several million-dollar-plus upsell deals, including with the world's largest e-commerce retailer, a major social media platform, and a leading QSR.
Operating Margins Record quarterly operating margins on both a non-GAAP and GAAP basis. Reasons for change: Not explicitly mentioned.
Free Cash Flow Record quarterly free cash flow. Reasons for change: Not explicitly mentioned.
Subscription Revenue $158 million, up 9%. Reasons for change: Fixed grew 8%, accelerating by 2 points, and usage increased by 13% year-over-year.
Marketplace and Other Revenue Increased 8% to $54 million. Reasons for change: Timing-related dynamics, including slower data marketplace growth early in the quarter and the sequencing of certain services projects.
Gross Margin 74%, a few ticks higher than expected. Reasons for change: Timing of customer migrations to the upgraded back-end platform.
Non-GAAP Operating Income $62 million, up 36%. Reasons for change: Strong execution by the team and continued sales momentum.
GAAP Operating Income $40 million, more than doubled year-over-year. Reasons for change: A more disciplined approach to stock compensation.
Free Cash Flow (Q3 Specific) $67 million, a record. Reasons for change: Not explicitly mentioned.
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Operating Highlights
AI integration: Expanded data marketplace to include AI models, agents, and applications. Partnered with over 20 AI companies, including Google and Scout, to enhance AI-powered marketing capabilities.
Usage-based pricing: Piloted a usage-based pricing model for brand direct customers and reseller customers, with plans for broader deployment in FY '27.
Customer growth: Total customer count increased by 15 quarter-over-quarter, the largest increase in over 3.5 years. $1 million-plus customers increased by 8 to a high of 140.
Partnerships: Expanded partnership with Publicis to integrate AI model library with measurement solutions. Collaborated with Uber Advertising to underpin its new Uber Intelligence platform.
Revenue growth: Q3 revenue grew by 9%, with Subscription revenue also up by 9%. ARR increased by $11 million quarter-over-quarter and 7% year-over-year.
Operating efficiency: Achieved record quarterly operating margins and free cash flow. Operating income increased by 36% year-over-year.
AI as a growth driver: Positioned AI as a core growth driver, emphasizing its role in increasing data volume and enhancing marketing outcomes.
Rule of 40 target: Reaffirmed commitment to achieving Rule of 40 by FY '28, with a focus on revenue growth and operating margin expansion.
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Risk or Challenges
Regulatory and Privacy Expectations: LiveRamp's business model heavily relies on meeting rising privacy and regulatory expectations. Failure to comply with these could disrupt operations and damage reputation.
Dependence on AI Ecosystem: The company's growth strategy is tied to the adoption and success of AI in advertising. Uncertainty around AI winners and losers could impact LiveRamp's partnerships and revenue.
Transition to Usage-Based Pricing: The shift to a usage-based pricing model is still in pilot stages and could face challenges in adoption or execution, potentially affecting revenue growth.
Economic Uncertainty: Broader economic conditions could impact advertising budgets, which in turn could affect LiveRamp's revenue and growth.
Customer Churn and Retention: While churn is currently low, any increase in customer churn could negatively impact subscription revenue and overall financial performance.
Platform Upgrade and Migration: Ongoing platform upgrades and customer migrations could face delays or technical issues, potentially disrupting service and customer satisfaction.
Competitive Pressures: The advertising and data collaboration market is competitive. Failure to maintain differentiation or respond to competitors could impact market share and growth.
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Guidance & Outlook
Revenue Growth: The company expects to achieve revenue growth of 10% to 15% by FY '28, supported by AI-driven incremental revenue and a pivot to usage-based pricing models.
Operating Margin: LiveRamp aims to achieve a non-GAAP operating margin of 25% to 30% by FY '28, with a current trajectory of 22% for FY '26.
AI Integration: AI is expected to be a significant growth driver, creating new nodes for the company's network and accelerating data volume growth. The company is actively partnering with over 20 AI partners and expanding its data marketplace to support AI training and applications.
Usage-Based Pricing: The company plans to broadly deploy a usage-based pricing model in FY '27, which is expected to unlock incremental revenue growth and enhance customer flexibility.
Customer Growth: LiveRamp anticipates continued growth in its customer base, supported by lower churn, higher gross additions, and the adoption of AI-driven solutions.
Free Cash Flow and Share Repurchases: The company plans to use a substantial portion of its free cash flow for share repurchases, with $137 million remaining under the current authorization.
Platform Upgrades: Completion of back-end platform upgrades is expected in Q4 FY '26, which will support future revenue growth and operational efficiency.
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Shareholder Return Plan
Share Repurchase: We continue using the bulk of our free cash flow for share repurchases. Fiscal year-to-date, we've repurchased $119 million in stock compared to $108 million in free cash flow. We have $137 million remaining under the authorization that expires on December 31 of this year.
Share Repurchase Details: Free cash flow was a record $67 million, of which $39 million was used for share repurchases in the quarter. Fiscal year-to-date, we've repurchased $119 million in stock compared to $108 million in free cash flow. We have $137 million remaining under the authorization that expires on December 31 of this year.
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Key Q&A
Q:What key features or functionality does LiveRamp bring to the table that led Publicis to select them?
A:LiveRamp has modernized its platform and rolled out changes to its pricing model, making it ready to work with reseller partners without fear of cannibalizing itself. The company aims to be a modular, composable platform that major platforms and agencies can build on to deliver better products to their customers.
Q:What kind of upsell and cross-sell conversations are progressing with customers in the back half of the fiscal year?
A:Q3 was a strong sales quarter with bookings up in strong double digits, driven by expansion with existing customers. The cross-sell of LiveRamp's clean room supports Cross-Media Intelligence, commerce media use cases, and other measurement use cases, acting as a catalyst for customer expansion upon renewal.
Q:How does LiveRamp prioritize AI opportunities given the large and dynamic market?
A:LiveRamp prioritizes AI opportunities based on client and partner-led innovation. Of the 21 active AI partnerships, about two-thirds are with legacy companies like Google, while one-third are with native use cases. LiveRamp adopts a portfolio approach to ensure it is affiliated with future winners in the AI space.
Q:In which verticals is LiveRamp seeing the most growth as it expands Commerce Media with new partners like Uber and PayPal?
A:LiveRamp is seeing growth in travel (e.g., airlines launching commerce media networks), food delivery (e.g., Uber, DoorDash), and finance. These verticals expose LiveRamp to new types of clients, including SMBs, and the company’s updated pricing model and self-serve capabilities position it to serve these clients effectively.
Q:How is the Netflix integration performing in the CTV space, and how does it compare to other CTV platforms?
A:The Netflix integration is scaling nicely, albeit from a small base. CTV data purchased from LiveRamp's Data Marketplace is expected to outpace overall marketplace growth. About 70% of LiveRamp's 50 largest integrations are with CTV providers or platforms enabled to buy CTV, making it a strong growth area and a catalyst for clean room adoption.
Q:What is LiveRamp's response to concerns that AI might disrupt the software subscription business model?
A:LiveRamp believes it is an enabler of AI, essential for safe AI usage. The company sees AI as a tailwind rather than a headwind, as AI requires data, and LiveRamp provides the control and visibility needed for clients to use their first-party data effectively. Approximately 10% of LiveRamp's activations are already AI-related.
Q:What progress has been made toward the commercialization of the Universal Context Protocol (UCP) and other standards for AI in marketing?
A:LiveRamp has developed the UCP and provided it to the IAB for commercialization. Another standard, ACP, is also in development. LiveRamp supports the emergence of any standard that organizes data for AI use, as it is essential for widespread AI adoption in marketing.
Q:What is the go-to-market strategy for LiveRamp's new usage-based pricing model, and what impact is it expected to have?
A:LiveRamp is targeting new logo opportunities and introducing the pricing model during renewal processes for existing clients. The model lowers upfront commitments and aligns value with usage, improving churn and enabling growth with smaller clients. Incremental revenue from this initiative is expected in the back half of the next fiscal year.
Q:What is driving the sequential increase in operating expenses in Q4, and how does it compare to previous years?
A:The $15 million sequential increase in operating expenses is due to seasonally high expenses for events and conferences, compensation-related step-ups, and project spend related to growth initiatives. This increase is consistent with prior years, and LiveRamp still expects strong year-over-year growth in operating income and margin expansion.
Q:What impact does Trade Desk's new data pricing model have on LiveRamp's Data Marketplace business?
A:Trade Desk's new model aims to stimulate demand from customers who previously did not purchase data. If successful, it could represent incremental transaction volume for LiveRamp without changing its take rate. However, this impact is not yet reflected in LiveRamp's numbers.
Q:How does LiveRamp view its role in the AI ecosystem, and what internal AI initiatives is it pursuing?
A:LiveRamp sees itself as the enabler of AI, providing the data pipelines and plumbing for clients to succeed with AI. Internally, LiveRamp is working on AI-driven projects like automated error signaling and integrating AI models into its Data Marketplace to enhance client value.
Q:What factors contributed to the deceleration in CRPO growth despite strong ARR growth?
A:CRPO growth was impacted by the runoff of large multiyear deals in their final year ahead of renewal. However, total RPO grew by 23%, reflecting strong sales momentum and recent bookings.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the number of brands leveraging the Netflix integration, typical spend levels, and how it compares to other CTV platforms. Additionally, they did not quantify the expected revenue incrementality from the new usage-based pricing model or provide a clear timeline for the commercialization of the Universal Context Protocol (UCP).
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI partner
AI tailwind
AI workflow
FY margin
IAB
Lauren
Uber
Wall Street
ad tech
advertising industry
agency ad
application agent
durability predictability
focus Rule
frequency
lifetime
loop
loser AI
marketplace
moat
model brand
motion
network AI
node network
optimize measure
outcome
pivot usage
plan optimize
platform advertising
point customer
predictability scalability
proposition AI
reseller
room
tech platform
track
usage pricing
RAMP Transcript
LiveRamp Holdings, Inc. (RAMP) Presents at Morgan Stanley Technology, Media & Telecom Conference 2026 Transcript
Neutral3-2
LiveRamp Holdings, Inc. (RAMP) Q3 2026 Earnings Call Transcript
Positive2-6
The earnings call reveals strong sales growth, strategic AI partnerships, and successful CTV integrations, which are positive indicators. The usage-based pricing model and AI-driven initiatives are expected to drive future growth, despite some management opacity. The market cap suggests a moderate reaction, leading to a positive stock price prediction.
LiveRamp Holdings, Inc. (RAMP) Q2 2026 Earnings Call Transcript
Positive11-5
The earnings call shows strong financial performance, with revenue and ARR growth, and optimistic guidance. The Q&A section supports this with positive sentiment on growth opportunities, particularly in AI and new pricing models. Despite some lack of clarity on specifics, the overall sentiment is positive, with a focus on future growth and shareholder returns. The market cap suggests a moderate reaction, placing the stock price movement in the 'Positive' category (2% to 8%).
LiveRamp Holdings, Inc. (RAMP) Q1 2026 Earnings Call Transcript
Positive8-7
The earnings call indicates a positive sentiment with several growth catalysts. The company has raised its full-year outlook due to recent sales momentum and confidence in higher revenue growth in the second half. Partnerships with major companies and new pricing models are expected to drive further growth. The Q&A section revealed management's confidence in their strategies, despite some uncertainties. The market cap suggests a moderate reaction, leading to a positive prediction of 2% to 8% stock price increase over the next two weeks.
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