LiveRamp (RAMP) Q4 2018 earnings summary

Executive summary

• FY18 revenue rose 4.2% to $917.4M; gross margin improved to 49.2%, while operating income declined to $10.6M from $15.7M.

• Portfolio reorganization created two FY19 reporting units, LiveRamp and Acxiom Marketing Solutions (AMS); a subsequent agreement to sell AMS to IPG for $2.3B cash was expected to close by year-end 2018.

Financial highlights

• FY18 net earnings were $23.5M, or $0.29 diluted EPS, versus $4.1M, or $0.05, in FY17; results included a $24.6M deferred-tax remeasurement benefit.

• Revenue was $917.4M, up 4.2% YoY; cost of revenue fell 2.4% to $466.4M and gross profit rose 12% to $451.0M.

• Operating expenses increased 13.8% to $440.4M, including $63.2M non-cash stock compensation, $20.8M separation and transformation costs, and $6.4M restructuring charges and other adjustments.

• Net cash from operations was $112.2M, down 3.2% YoY; investing activities used $60.3M and financing activities used $81.5M.

Outlook and guidance

• Management expected FY19 R&D investment to remain near FY18 levels; strategy emphasized new client wins, expansion of existing accounts, international growth, Advanced TV, and Data Store.

• Facebook Partner Categories revenue was expected to be significantly lower in FY19; FY18 revenue from Facebook was $40.0M in Audience Solutions and $20.0M in Connectivity.

• The AMS-IPG transaction was expected to close by the end of calendar 2018; proposed shareholder returns included a $500M tender offer and a $500M increase in repurchase authorization, subject to approval and completion.

• Topic 606 adoption on April 1, 2018 was expected to increase retained earnings by $12.5M, primarily from capitalizing incremental contract acquisition costs.