Good afternoon, and welcome. Thank you for joining our Fiscal 2024 Third Quarter Earnings Call. With me today are Scott Howe, our CEO; and Lauren Dillard, our CFO. Today's press release and this call may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed description of these risks, please read the Risk Factors section of our public filings and the press release. A copy of our press release and financial schedules, including any reconciliations to non-GAAP financial measures, is available at liveramp.com. Also, during the call today, we'll be referring to the slide deck posted on our website. And with that, let me turn the call over to, Scott.

Thank you, Drew, and thanks to everyone joining our call today. Q3 represented another quarter of improved momentum for LiveRamp. So my initial remarks today, will focus on our recent accomplishments in greater detail. As we look forward, however, we see a watershed year for the digital marketing industry and a significant opportunity for LiveRamp. So, I'll also spend some time talking about our goals for FY 2025, so that we can revisit our progress against these ambitions in the coming quarters. Q3 revenue growth exceeded our expectations across the board, with total revenue up 10%, Subscription revenue up 5%, and Marketplace up 29%. Non-GAAP operating income was up 40% year-on-year and was $7 million or 25% ahead of our guidance. A year ago, you may recall we had a non-recurring contract settlement. Adjusting for this, our underlying Subscription growth was 8%, which is a notable acceleration from the 5% rate we posted in the trailing three quarters. This acceleration reflects the turnaround in sales productivity that has been building over the past several quarters. As I often say, the gift and curse of a SaaS model is reported revenue growth is slow to decelerate and also slow to accelerate. The quarter seemingly demonstrates that we are now on the upswing and encouragingly the leading indicators of our revenue growth give us increased confidence about the fiscal year ahead. Our ARR or annual recurring revenue in Q3 was $447 million increasing by $19 million quarter-on-quarter, which is the largest dollar increase in the last nine quarters. Building on the new logo booking strength of Q2, Q3 represented our best new logo quarter in over two years. We signed a major health insurance company to a seven-figure annual contract with a three-year term for our identity and clean room products. A…

Thanks, Scott, and thank you all for joining us. Today, I will cover two topics: First, a review of our Q3 financial results; and second, our updated outlook for FY ‘24 and Q4. Unless otherwise indicated, my remarks pertain to non-GAAP results and growth is relative to the year ago period. Starting with Q3 results. Revenue and operating income were consistent with the preliminary results we reported on January 18. Revenue came in at $174 million, $9 million above our guidance and operating income was $36 million, $7 million above our guide. Operating margin expanded by 5 percentage points to a record high of 21%, and we generated $17 million in operating cash flow, our 6th consecutive quarter of positive OCF. Let me now provide some additional details. Please turn to Slide 5. Total revenue was $174 million up 10%, with Subscription revenue and Marketplace and Other significantly ahead of expectations, driven primarily by continued sales execution and a stronger than expected digital advertising market. Subscription revenue was $132 million up 5%. Recall that the year ago quarter benefited from a $4 million non-recurring contract settlement with a large customer. Fixed subscription growth accelerated from our most recent quarter by approximately a 150 basis points to 5%. Usage as a percentage of total subscription revenue was 16%, a tick above our historical 10% to 15% range. ARR was $447 million up 6%. ARR improved quarter-on-quarter by 5% or $19 million. This sequential dollar increase was the largest increase in the last nine quarters. The improvement was primarily driven by continued good growth in customer upsell and new logo as well as lower customer churn and down-sell. Subscription net retention was 101%, stable sequentially and in-line with our expectation. Current RPO or our next 12 month contracted backlog was $382 million…

[Operator Instructions] Your first question comes from the line of Shyam Patil from Susquehanna International Group. Please go ahead.

Hi, Scott. Hi, Lauren. This is Aaron Samuels on for Shyam. Thank you for taking our question. Maybe starting off, Scott, thank you for the details on the PAIR case study. Could you just elaborate on your expectations for how the DV360 partnership and PAIR could impact the business moving forward? And then we've got a follow-up as well.

Sure. And thanks for asking that, Aaron. I was actually kind of hoping someone would ask about PAIR because this is such a fun story. At LiveRamp, we always try to balance kind of a relentless operating focus month-over-month, quarter-over-quarter and balance that with a long-term view. And when I look back, I mean, we started working on ATS as a response to PAIR over four years ago. And so, that journey can really be divided into three phases and we're hitting the really fun part right now. So, it started with preparing for the future and building the tech during COVID, connecting to all the DSPs and SSPs, brands, publishers and agencies, and we've shared the market share stats there. We're in a really good shape in terms of connecting all the different nodes of the industry. The second piece is proving that it works, and that's squarely what we're doing right now. So, we released the Omni case study, that's the first of many, and that was phenomenal. I mean results that almost defied logic, 4x improvement for consented users versus targeting the same users on cookies. So, really nice lift there. Remember, we also published a publisher case study going back a year. You can see that in my blog. I did a blog yesterday. I have a link to it. That showed that publishers also get a nice lift. So, they generate higher yield when they use authenticated solutioning. And soon to come is we'll show that reach also increases. Right now, even without cookies fully deprecated, we have effective reach that generates meaningful volume and at scale, we think we're going to once everyone's fully implemented, we think the reach to authenticated traffic will exceed the targeted reach to that those same users on cookies.…

Really interesting. Thanks, Scott. And then, Lauren, just a quick one for you. You talked about an OpEx step up from 3Q to 4Q as being seasonally typical. Just wanted to double click on this. Is there any color you can share on sizing the typical, seasonal step up? Thanks again.

Sure. Thanks, Aaron. I'm happy to. So, at the midpoint of our guidance, we are expecting OpEx to increase by roughly $12 million quarter-on-quarter, of which you can assume $5 million to $6 million is related to seasonal items such as RampUp, payroll taxes and incentive comp adjustments. So, wouldn't expect that to carry forward into our Q1 run rate. The remaining portion is being driven by the addition of Habu, which is adding about $3 million of OpEx in the quarter, and just underlying expense increases reflecting some of the investments we're making now to support future topline growth. So as an example, we are choosing to pull forward some, some sales hiring as well as services hiring to ensure we have really strong capacity entering FY ‘25.

Great. Thank you again.

Your next question comes from the line of Elizabeth Porter from Morgan Stanley. Please go ahead.

Great. Thank you so much. My first question was on the large customer count, the 1 million plus customers increased really nicely and I think it's one of the highest net adds we've seen in about a year and a half. And you also referenced a lot of upsells in the quarter. So, I was wondering what is driving some of the loosening of spend now after being in a tight environment, either the customers feeling better about macro, kind of the cookie deadline coming up, sales execution. I appreciate there's probably a lot of factors in there, but if you could just help us unpack what's driving the greater uptick now that'd be really helpful? Thank you.

So, the answer is, yes. All of those things certainly do play a factor. But I think two things in particular are really driving the interest in clean rooms and connectivity. Number one, is an increasing recognition amongst sophisticated advertisers that they are all competing around data. And when they look across the landscape, I mean, we can name the, we could point to the walled gardens, companies that collect information from us as consumers across multiple touch points, and they are really well-positioned to compete effectively. So, everyone else in an industry is saying how do I catch up, and they can't, not everybody can out Amazon Amazon unless they collaborate. And, when they start to pool their data together in a privacy compliant way, they can actually extract insights that are far more interesting than that of any data giant. And then the second thing is, around measurability and loss of signal. As media plans expand, there are more and more line items on those media plans. Just take Linear Television for instance. It's all but tipped towards CTV and there are so many different choices for placing your ads on different viewership than they previously existed with Linear. With that explosion of choices comes the need for personalization, not necessarily just message personalization, but the kind of technology that also allows companies to do ad suppression. So, just simple frequency capping, for instance, is so important on CTV and programmatic, and you can't do that unless you have a measurement standard, a measurement technology such as LiveRamp has that facilitates the data going out, but also the measurement data coming back. And then, I'll throw one other thing into the mix. That is that we work in a copycat industry. And so, every company is looking out there and saying who's doing it better than me? And Elizabeth, you've been to RampUp before. You know what we do. We don't talk ourselves. We put our clients and partners on the stage. And right now our clients and partners are all talking about the successes that they're having and that's going viral and attracting other clients. There is a network effect that just takes off when our retailers bring us packaged goods partners and those packaged goods partners bring us more retailers. So, we're starting to benefit from that rightfully as you point out with our upselling efforts, but also with our new logo efforts. So, since the pandemic really, this has been our biggest percentage of new logo business. About a third of our bookings this quarter was new logo, and that's the network effect and the cloud partnerships starting to bear some fruit.

Great. Thank you so much. And just as a follow-up, I wanted to ask on the expense side. Appreciate the extra color on Q4. Is it fair for us to look at that $3 million from Habu in the quarter and extrapolate that into next year? I know you have additional offshoring and ongoing savings initiatives. So just, how should we think about the net of those two things going into fiscal ‘25?

Yes. And, Elizabeth, I'll just start by saying we're going to give a lot more color on both the top and bottom line, roughly 25 on our May call. So, perhaps stay tuned for precise detail. But, with respect to Habu in particular, it’s going to contribute $3 million of expense in Q4. That's a partial quarter impact given. We closed that deal January 31. So, you can assume it should add anywhere from, call it $16 million to $18 million in expense in FY ‘25.

Great. Thank you so much.

Your next question comes from the line of Brian Fitzgerald from Wells Fargo. Please go ahead.

Hi, Scott. This is actually Rob, on the call. Wanted to ask, as your customers are, absorbing the 1% Chrome cookie deprecation impact, but also, at least attempting to start evaluating Privacy Sandbox. What are you hearing from them? We've heard of, some of the frustrations there early on, but is that enhancing your sort of conviction and confidence, in sort of the future consent ID based advertising? And, I know you talked about a little bit of evangelization, but wanted to ask a little bit more about your go-to-market right now, you've done a ton of groundwork obviously over the past four years, but how are you sort of reinforcing this or reinforcing that right now during the sort of critical transition phase? Thanks.

Yes. Rob, first off in terms of the go-to-market, I would say, while we're developing really nice case studies, the frustration that we hear from clients has been fairly consistent. They just don't know how to get started, and it's different. I mean, cookies have been embedded in their workflow for over 20 years. And so, this represents a change to how media is bought and sold. But, we think it's a change for the better, and we don't think that this is going to be slowed down materially. If it is, we'll be fine, but we think that that better future is just within our grasp as an industry. But to get there, we have to make it simple. And we'll do that through evangelization, sharing case studies. We have a bunch of webinars upcoming. Some of our big partners, including Google will start to evangelize this themselves in the market that this is no longer a product initiative, this becomes a commercial initiative for them. And we'll certainly make this a priority at RampUp. We'll have entire tracks devoted to this to teach people what to do. But ultimately, our efforts to evangelize and make it simple to get up and started that will go so far. What will ultimately carry the day is just more companies having success, because it will go viral. All that said, I would end by saying, I feel like I've seen this movie before. I lived through Y2K in 1999. I lived through GDPR a few years ago. And in both cases, there were people that just didn't want to recognize what was coming and they said, hey, this isn't real. I'm not going to be concerned about it. It will all work itself out. And then on the eve of both those events, it was panic. It was pandemonium. And what I would tell you is if history follows true to that, we're ready for it. And we will have our entire selling capacity geared towards fielding those requests, answering the questions and getting clients and publishers who wait to implement, up and running quickly.

Got it. And, Lauren, just a follow-up, on Habu, is there any purchase getting impact or anything else to call out there, on the cost side or in terms of, the profit impact?

Yes, absolutely. So, we talked about, Habu adding roughly, call it, $16 million to $18 million in non-GAAP expense next year. We also expect it to impact GAAP expense by about $25 million with about $15 million of that being driven by incremental stock-based comp and the balance being driven by purchased intangible asset amortization.

Got it. Thank you very much.

Your next question comes from the line of Jason Kreyer from Craig Hallum. Please go ahead.

Perfect. Thank you. Lauren, maybe just wanted to spend a second dissecting the guide, specifically the subscription revenue guide. We've seen nice improvement in the key metrics like ARR and net retention, RPO. But, if we contrast that with the Q4 guide kind of consistent or maybe a little bit of a slowdown in subscription revenue from the December quarter. Just trying to see if we can reconcile that slowdown a little bit?

Yes. And, we would expect subscription growth to improve slightly quarter-on-quarter with fixed subscription being gable to slightly up in Q4 and usage being roughly flat. I mean usage has been one of the areas of our business where we've chosen rather, to just model pretty conservatively in our outlook, given the variability and sometimes kind of historical quarterly variability in particular. So, that's the piece of the business that if we do much better on subscription revenue, it will be because we outperformed there.

Okay. Appreciate that. One follow-up for me. Just on the offshoring initiatives that you've had in place over the last year, just wondering if there's any changes to the expectation there now as you're integrating Habu?

Thanks for the question. No, no, the headline is no major changes. I'd want to acknowledge that this is a multiyear and we're in the very early phases of implementation. We're pleased with our progress to-date. But of course, with any project of this magnitude, there are early learnings and moving pieces, and we're just really focused on making sure we get it right for the business for the long-term. To-date, we have just north of a 100 rolls offshore, and continue to take a very measured and thoughtful approach to how we transition future roles. So, we are still expecting cost savings in FY ‘25, but the really meaningful savings we expect to accrue in FY ‘26 and beyond.

Thank you.

Your next question comes from the line of Mark Zgutowicz from The Benchmark Company. Please go ahead.

Thank you. And apologies if you, addressed this in your opening. I got on the call a little bit late, but I was just hoping you could flush out, a bit the acceleration that you saw in the total RPO relative to current, and maybe what's sort of driving that and whether that gives you confidence in accelerating revenues over the next 12 months? And then I have a follow-up. Thanks.

Yes. Happy to, so total RPO, in the quarter was up 35%. The RPO or the current portion up 18%. And the delta there, Mark, is entirely being driven by multiyear deals, which as we've mentioned now for a few quarters, we've seen really nice success landing larger enterprise accounts on multiyear terms, which is a really positive thing for the business over the medium to long-term. I mean to answer your question directly, yes, this does give us increased confidence in our outlook for next year, and we'll, of course, share a lot more there during our May call.

Okay. Super. And then, as it relates to Habu, not to get too in front of you guys because it was just recently closed, but just trying to get a sense of when the revenue synergies sort of materialize and possibly more near-term, just looking at your services line, which you had some really nice growth this year. Given Habu's SMB focus, if that could perhaps add a little bit momentum on your services line? If you could comment on that, I'd appreciate it. Thanks.

Yes. I can start. And I think I talked about it a little bit in my prepared remarks. We don't expect to wait to get synergies. Synergies start with pipeline and commercial conversations and those are already well underway. So, over the last two weeks, we have had over 200 face-to-face meetings. Last week was, the IAB Annual Leadership Meeting, and the Habu team was very busy, meeting with clients and prospects, with their LiveRamp counterparts. We have RampUp coming up at the end of this month, where we'll invite several 1,000 clients and prospects to San Francisco. Once again, that's going to be a great opportunity to get in front of clients. We're already seeing that in our pipeline. So, several million dollars increase already. And then the question is, how long does it take for those to convert into revenue. But, we feel pretty optimistic about it. We've hit the ground running. One of the things that we do, as a matter of course, when we are having conversations with companies, from a corp dev perspective, is we co-author a Google document with them. And, it gives us a chance to see how they think because what we do is map out a shared vision and our implementation strategy together. So, all of that was written, revised, iterated, discussed well before we ever agreed on our final purchase price. And as a result, we have hit the ground running.

And hi, Mark, for everyone's benefit, maybe I could just put a couple of numbers against Scott's comment. So in Q4, we expect Habu to contribute roughly $2 million in revenue. Consistent with what we mentioned when we announced the deal, we expect it to contribute roughly $18 million in FY ‘25, and a lot of that assumption is predicated on Habu's standalone momentum. The synergies, at least the revenue synergies, begin to show up in the back half of ‘25, but we think it really interesting as we look ahead to FY ’26.

Super.

Operator, we have time for, sorry, operator, we have time for one more question, please.

Certainly. Your next question comes from the line of Kirk Materne from Evercore ISI. Please go ahead.

Yes. Thanks very much. Scott, I guess just to start, could you just give a little bit more color on the cloud partnerships, maybe where each of those are? I know you said they're doubling. Can you just remind us sort of sequentially maybe which ones are contributing perhaps a little bit more now and what your expectations are for the calendar year?

Yes, Kirk, and I think there's kind of a pre-Habu answer and a pro-forma answer. And that was one of the drivers of that acquisition. So, if you look back in time, LiveRamp made the decision to standardize initially on GCP as our, cloud partner for our own tech. And so, that was naturally an easy way to get started. And Google has always throughout the 10-year history of LiveRamp been one of the biggest, if not single biggest sources of new client originations. So, that will continue, but more recently, we had made some nice inroads with AWS. I mentioned in my prepared remarks being named one of their partners of the year. And then also Snowflake, which I think last quarter I talked about how effective they've been at walking us into their clients. In each of those cases, when they bring us in, we drive more storage and compute. So, it really is a nice collaboration. Admittedly, we hadn't made as much progress, with some of the other partners like Databricks or Azure. And in those cases, the good news is Habu has great relationships pretty much across the board. Now, this is really important because if I go back to one of our client advisory boards from last year, we asked the question, how many of you are using the cloud? And every single hand in the room went up. And then we asked, how many of you are using multiple clouds? Every single hand in the room went up. So, you need to have a relationship with every different cloud provider, because not only do individual companies utilize multiple clouds, but when they start to collaborate, it is absolutely the case that you have a Snowflake cloud talking to an Amazon cloud talking to an Azure cloud. And if you can't service, if you can't be interoperable across all of them, then your growth is going to be inhibited. So, I think this goes back to why were we so excited about Habu. One of the big reasons is, we think it accelerates our traction with Cloud. We're already pleased. We talked about the doubling, but we think this is going to be an area of the business in the coming years that should grow faster, than the rest of the business.

Thanks guys. That's super helpful. And then just a quick one for, Lauren. Hey, Lauren, on your guide, I was a little surprised subscription net revenue is going back down towards a 100, and I know that's probably conservatism in there, but given the trends in ARR, I guess, is that related to the lower, I guess, the lower ARR business that you were talking about sort of smaller customers that might still be there still might be some churn going on in that part of the customer base. Is that the reason for that, or is there something else that would push it back down after sort of stabilizing the last couple of quarters?

Yes. So, two things I would call out. It's, first, what you just mentioned, Kirk, and then also, we are assuming a lower contribution from variable revenue in Q4 consistent with the seasonal trends there.

Okay. That's super helpful. Thank you all.

Thank you. I will now turn the call over to Lauren Dillard, for closing remarks.

Thanks so much. And first, thank you again everyone for joining us today. Q3 was strong on both the top and bottom lines. Our growth in Subscription revenue and ARR is trending higher, and we are positioned for further acceleration exiting this year. And as we look ahead, we believe we have several growth levers to drive continued strong topline growth and margin expansion. And finally, as Scott referenced, during the call, we have our annual RampUp conference coming up the end of February in San Francisco. We invite all of you to join. We'd love to have you there. If you have any questions or need help registering, please reach out to me, Drew, or Cassandra, and hopefully, we see you at the end of the month. With that, thanks again for joining us today. We look forward to updating everyone on our progress in the quarters ahead.

This concludes today's conference call. Thank you for your participation and you may now disconnect.