Good afternoon, ladies and gentlemen, and welcome to LiveRamp's Fiscal 2019 Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer-session. [Operator Instructions]. Thank you. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host Andrew Connor with Investor Relations.

Thank you, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2019 third quarter results. With me today are Scott Howe, our CEO; and Warren Jenson, President and 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. LiveRamp undertakes no obligation to release publicly any revisions to any of our forward-looking statements. A copy of our press release and financial schedules, including any reconciliation to non-GAAP financial measures, is available at liveramp.com. Also, during the call today, we will be referring to the slide deck posted on our Web site. At this time, I'll turn the call over to Scott.

Thank you, Andrew. Good afternoon and thanks for joining us today. This is an exciting time for the company and I am very pleased to report an excellent third quarter, highlighted by strong top line growth, a significant return of capital to shareholders and an improved outlook for the remainder of the year. For the quarter, total revenue was up 35% and excluding the lost revenue from Facebook, up 49%. Our subscription business grew 42% driven by the continued strength of our enterprise and agency channels. Marketplace and other revenue was up 13% and excluding Facebook was up more than 90% driven by DataStore and our industry leading TV business. Beneath the top line, as we expected and discussed at our Analyst Day, margins were pressured due to transition-related spend. However, we’ve made significant progress hardening our public company infrastructure and expect this spend to abate over the first half of the next fiscal year. Earnings per share from continuing operations for the quarter were $0.03 and benefitted from interest income related to invested proceeds from the AMS sale. Finally, in December, we completed a $500 million tender offer adding yet another data point to our longstanding track record of returning capital to shareholders. At LiveRamp, our vision is to provide the trusted platform that transforms connected data into knowledge and remarkable experiences. This vision has never been more relevant. There is not a company on the planet that doesn’t want to enable better decisions, improve ROI and deliver better experiences to its customers. And it all begins with data. Our mission is to make that data safe and easy to use, leveraging our core capabilities and identity resolution, connectivity and data stewardship, we provide the neutral power grid for data breaking down data silos and creating the foundation through…

Thanks, Scott, and good afternoon. Well, everybody, welcome to LiveRamp. It’s been quite a launch. This marks our first quarter as a standalone company and it was an awesome start. We received $2.3 billion from the sale of Acxiom to IPG, completed a $500 million tender retiring 14% of our outstanding shares, made significant progress to harden our public company infrastructure and through all the change and heavy lifting we kept our focus on our customers, our opportunity and at the same time we delivered a great growth quarter. We landed 30 new logos, we again expanded our client relationships and are pleased to report our 10th sequential quarter in which our dollar-based net retention rate exceeded 115%. We also now have $42 million clients. Revenue was up 35% and 49%, excluding Facebook. And finally subscription revenue grew by 42%. Next, we are building a growth machine for tomorrow. Please turn to Slide 5. Land, expand and extend is fundamental to how we work with our customers. Our quarterly results highlight the strength of this strategy. Horizon 1 revenue increased 40%. Horizon 2 revenue on a comparable basis grew 73% and our run rate for long-term horizon 3 revenue now exceeds 11 million more than doubling year-over-year. In short, working with our customers we are creating new products and services to help them compete and win. We have a product strategy that is built to deliver in the short, medium and long term. This is how we get to $1 billion in five years. Our business model works. Please turn to Slide 6. Let me remind everyone that we are a platform and as we add volume, our margins naturally expand. And finally, our business is highly predictable. Please turn to Slide 7. Our subscription revenue represented 81% of total…

[Operator Instructions]. Your first question comes from Robert Coolbrith with Wells Fargo Securities. Your line is open.

Good afternoon and thank you for taking our questions.

Hi, Robert.

Hi. A couple of questions please. First, I wanted to ask a couple of questions about the land and expand strategy. First, wondering if you could speak to whether the strength in the quarter was driven more by additional on-boarding activations or entirely new used cases like measurement and analytics? Also in relation to direct versus mediated client relationships noted that you have some clients transitioning to a mediated relationship with IPG. Wondering if you can talk more generally about whether the up-sell opportunity defers in any material way between those two client groupings, direct versus mediated or reseller relationships? And then finally just wanted to ask on seasonal factors, a little bit of change in the phasing guidance for the year, wondering if you can just talk us through seasonal factors and how we should be approaching our modeling for 2020 quarters or any thoughts there? Thank you.

Why don’t I jump in, Scott?

You handle first, I’ll take the second and you take the third.

Okay. That sounds perfect. Probably the best thing that I can say is this was a quarter in which our up-sell and our existing business drove more of the revenue growth, so about 60% of our growth came from up-sell and existing clients and about 40% for new. If we look for the full year, Robert, would expect about 55% of our full year growth to come from up-sell and existing and about 45% to come from new. Scott?

And so your second question was really around what is the up-sell opportunities across our three foundational client groups; brands, platforms and data. And I would tell you that we think that there are up-sell opportunities across each. That said, probably in brands and data we have an even bigger opportunity than platforms simply because platforms tends to be a little bit more chunky given the fact that there are less clients in there and larger average client sizes. That said, what’s super interesting is when you look at the new products and capabilities we’re adding, say, for instance like DataStore, we think across the board there are going to be great opportunities for brands, for platforms and for data providers to automate their supply chain through our DataStore. So it’s really a nice story because we think that there’s opportunities across the board right now. We’re still early innings of the game we’re playing.

And then finally on the seasonal question, increasingly as marketplace becomes larger and continues to grow, we’ll feel the impacts of seasonality. So there will be some elements of seasonality to our business. That said, the lion share of our revenue remains subscription. Again, over 80% of our revenue is subscription.

Thank you.

Thank you.

Your next question is from Brett Huff with Stephens. Your line is open.

Good afternoon, guys.

Hi, Brett.

Hi, Brett.

Congrats on a nice quarter and thanks for some of the detail and a little bit of thoughts on fiscal '20, Warren. That’s always helpful.

You’re more than welcome.

We’ve gotten a couple of questions, big picture question and I have one follow up, on ad spending. The macros a little murkier in some cases for a lot of folks at least we’re thinking that this year or in this calendar year than last. Had some incoming calls on ad spending trends, impacts, so what are you seeing on that front? And then number two, if we do see a slowdown in ad spending, how do we think about that impacting your business? And then I have follow up when you’re done.

Yes, I would tell you, first off, I don’t think that we are – at least historically we haven’t seen tremendous sensitivity to kind of macroeconomic trends. I think rather there’s a larger secular trend that we benefit from which is all of our clients want to make their decisions more accountable and deliver better experiences to their customers. And so we are benefitting from the macro trend of the shift from unaccountable media to more accountable media. We should benefit from that in television. We’ve certainly seen that some of our killer used cases have been in display, targeting or search personalization. So as the pendulum shifts from unaccountable to accountable everything, we tend to be the beneficiary from that. I can’t predict the future but I have lived the past and going back even to my early days at aQuantive when I lived through the 2001 implosion and then the 2007 meltdown when I was at Microsoft, what I saw was that we were a little bit more protected in each of those businesses because the first thing to get caught on media plans was broadcast media, unaccountable media and there’s a flight to safety for holding things accountable. My hypothesis would be that would hold true in our business today as well.

That’s helpful. And then just a couple quick questions on specific products. Thank you for the update on the association. Wanted to dig in a little bit on TV and Google or search stuff. Thank you for the TV data. I think we got all we needed there. But anything on the LiveRamp for search? If you guys [indiscernible] guys can nail addressable TV and search, it would go a long way towards a lot of visibility on that kind of tier 2 type horizon or the horizon 2 stuff. Can you just give us an update on that? Thank you.

Yes, I think you’re right and we’ve talked I think a couple quarters ago about our partnership with Bing as well. And so for an advertiser that’s doing anything in search, it is now the case that through us they can do people-based search far more efficiently and essentially reach, what, 90% plus of the search market through Google and Bing. So a super nice opportunity where I’d like to see us push still further is how do we wrap that, how do we help our marketers understand how to utilize those techniques in combination with other things that they may be doing on the media plan. So, for instance, if someone behaved – they came into the dealership or they’re already a current cardholder or you’ve served them in email or they’ve seen an addressable television ad, how could you then configure your search ads, render those differently as a result of how you’ve interacted with the consumer in the past? And I think that’s the really important thing that our clients are asking LiveRamp about. They don’t think about just search or just television or just email in a silo anymore. They think about all those things holistically and how do they deliver a seamless narrative to their customers across all of those touch points. That’s what they want to do. Increasingly we got to help them get there though.

Great. Thanks again, guys.

Thank you, Brett.

Your next question is from Dan Salmon with BMO Capital Markets. Your line is open.

Good afternoon, everyone.

Hi, Dan.

Hi, guys. First, maybe a bit of a high level one for Scott and then a couple nitty-gritties for Warren. First, Scott, you identified there earlier and you talked around this for some time of different client groups, specifically platforms, data providers and brands. You’ve also spoken more about I don’t know if reseller relationships is the right way to put it, but working with partners to bring in new customers I guess is a fair high level comment on it. My question is sort of two parts for you is I would assume that you can work direct more often as I go down the hierarchy of platforms, data providers and then brands just because there’s more of them as I go down through that group. But correct me if I’m wrong if that’s the case. And then second is how do your economics change? Do they change at all when you’re working through a partner and maybe how that may differ from one partner to the next? And then just a couple of quickies, Warren. In the 10-Q we noted the performance obligations moving up and we would assume that that is related to IPG’s commitment to LiveRamp but any color that you can add to that would be great. And then just one to clarify how exactly AbiliTec is flowing through your income statement including presumably being paid for as part of your scope of work for your clients in revenue but also particularly in COGS where licensing revenues may be going out? Thanks.

All right. So, Dan, I’ll start and this is Scott obviously. I think your hypothesis is spot on that with the major platforms we want to have a direct relationship with all of them and be integrated into their technology, be an important piece that makes their technology more effective following by brands. And with the largest advertisers, marketers on the planet, we feel that they would benefit from having a direct relationship with us. There are a lot of small advertisers who might only be doing Facebook, who might only be doing search and it might not be cost effective for us to maintain a direct relationship with them at this time until we develop even more self-serve features in our platform. We’ll do that someday, but right now we think those clients are well served by working with us through their agency or through another reseller. The economics of each of the groups, well, I don’t think it varies so much by group as much as it does by volume. And so naturally if there’s an opportunity for us to secure a really large volume contract, we are going to have more favorable terms for that. That’s kind of the nature of our SaaS pricing that even in a direct client if you utilize more of it, you’ll slide up and go to the next pricing tier and your marginal cost will go down. When we’re dealing with a really big platform, think of that as kind of the end of the spectrum, they’re doing so much volume with us, their marginal price will be the lowest of the group.

And then, Dan, let me just comment on your other two questions. In terms of the performance obligations, yes, our backlog does include IPG. And just a couple of other points of color for everyone. In the third quarter, our contractual relationship increased our revenue about 4.5 million. Q4 will also be about 4.5 million. And then as you think about FY '20, year-over-year it will be up about 10 million just given the nature of our overall contractual relationship. Secondly, on AbiliTec, the cost of AbiliTec is found in COGS and one of the reasons why you see our gross margins coming down is the addition of that cost which we’re very bullish on obviously for the long term in terms of what it does for our identity graph but also in terms of what we believe in the future will have in terms of monetization opportunities. The impact in COGS give or take is going to be between 3 to 5 points.

Your next question is from Tim Nollen with Macquarie. Your line is open.

Hi. Thanks. I’ve got a couple which might come across as me being a relative newbie here, so I hope it’s understandable. But first, I wanted to ask about the 2020 guidance. OI breakeven, it sounded like kind of mid-single digit low losses by Q4. Is that a similar tone as what you had spoken of before or is it may be a bit lower? I think you were talking previously about possibly getting to breakeven by 2020. So I want to make sure I understand that. Secondly, just want to make sure I understand about your TV business because I’ve got notes from prior calls that you are looking at your TV revenues doubling this year. You’re now talking about three different sets of numbers, so I want to make sure I understand what is what. You’re saying your TV revenue in Q3 was up 38%, your addressable campaign volumes were up more than double and your IdentityLink usage for connected TV was up 300%. So just want to make sure I understand exactly which of those is which and how does that relate to prior comments about TV revenues doubling this year?

So I’ll go ahead and Tim jump in on the first one. A couple of points just to be completely clear. We have not given guidance before this for FY '20. So this is the first time we’ve really talked about guidance. And what we felt appropriate is our philosophy as we want you to see what we’re seeing and then we just try to call right down the middle of the fairway and that’s exactly what we did in giving you some preliminary guidance for FY '20. And overall the purpose was really to kind of deal with the – look at the four corners of what FY '20 would look like today. And obviously when we give more formal guidance in May will help to fill that in a little bit more. On the second point, again just to be very clear, the guidance we gave at Analyst Day is that we would be profitable in FY '21. And what we were trying to do with our comments today is again just give some shape to your models for FY '20 recognizing that by the fourth quarter of FY '20 we would expect that our operating losses as a percentage of revenue would be in the mid-single digits which would set us up then quite beautifully to move into FY '21 to not only hopefully have a great growth here but also a year in FY '21 that would be solidly profitable.

Okay. I was probably jumping the gun there. Thanks for the clarification.

No, that’s fine.

Then the second question was about television and you reeled off some stats and I will admittedly say that I think my head exploded by the time you got to the third or fourth in terms of trying to keep them all straight. I think quite frankly all of them are right. One of the great things about our television business is that unlike other players in this space, we actually allow our clients to access all forms of advanced TV; so that’s connected TV, that’s addressable television, that’s data-driven liner and it’s also measurable outcomes as well. So there’s a lot going on. I will say the common thread through all of our television efforts is it’s still off a small base and our focus over the last 6 to 12 months has been solidified our processes, ensuring that our clients are generating good outcomes. And our belief is that if we build great products and take care of our clients, the growth will naturally come. That said, I still think we have yet to arrive at the tipping point for television. It is still the case that broadcast linear television dwarfs all of the addressable channels. So I would expect that you’re going to see great growth rates from us across the board however you measure it in the coming months, but I have yet to feel like this is going to be the majority of our business or a big contributor yet. That’s why we have it grouped in our horizon 2 initiative starting to scale but still a long, long track record in front of it.

Great. They’re all nice big numbers anyway, so that’s fine. Thank you for the color.

Thank you.

Your next question is from Adam Klauber with William Blair. Your line is open.

Thanks. Good afternoon.

Hi, Adam.

Looking at revenue growth for the quarter, ex Facebook, just ballpark how much of that is coming from new clients versus how much is coming from up-sells and what would that have been roughly a year ago?

So as I mentioned just a little bit earlier, Adam, in Q3 about 40% of our revenue came from new and about 60% from up-sell. In the Q3 of '18, call it, 55 from new, 45 from up-sell. And that by the way is very consistent with how we’ve been talking about the business and our expectation. And just to get a little bit – I’m probably getting a little bit ahead of myself relative to FY '20, but FY '20 is going to be about – right now we’re looking at 60%-65% up-sell and about 35%-40% from new.

Okay. Thank you. And sorry if you said this, but which used cases are really expanding and growing if you can name the top maybe two or three, that’d be helpful?

It’s still probably the case that the biggest entry point for us is going to be display-driven targeting and personalized search. So typically when someone starts, they’re going to Google, they’re going to do Facebook. Then quickly they want to expand those targeting efforts across the rest of their media plan. And where we’re starting to see some really nice traction you heard us talk about this on Analyst Day is in areas like analytics and measurement where as you activate more and more people-based targeting efforts, there becomes more and more of a need to think about those efforts holistically across the media plan, determine what kind of things are generating the best comparable lift, start to develop media mix models, understand the linkage between online advertising and in-store conversions; so all those lead clients to things like analytics and measurement. And then you’ve heard us talk a little bit about some killer used cases that we’re pretty excited about like we talked about our partnership with one of the – well, the largest global retailer. That’s just gotten off the ground. We have several dozen clients active but we’re still working on improving the product there. We have our APIs scheduled to rollout later this spring which will generate I think even faster uptake of that. The key is that wherever our clients are trying to go that’s where we’ll invest and turning on those used cases whether it be point of sale, call center, commerce experiences and the like. And again that’s one of the advantages we bring. We don’t operate in a single swim lane, rather we are the connective tissue that allows our partners to think about everything they’re doing holistically.

Okay. Thank you. And then as far as looking to breakeven in '21 which is consistent obviously what you talked about before. Is that mainly going to be through additional revenue scale leverage on your base or is there an element that may have to rationalize some cost within the company to hit breakeven?

A couple of things. I want to be clear again on what we’ve said. We said we would be solidly profitable in FY '21, so not simply breakeven. So that was our statement and absolutely committed to that. A couple of things to your second question. I want to come back to the strength of our model and if you have the charts that we had even in our deck, we are a platform business. So as we add incremental new revenue streams like DataStore or like TV or second party or even B2B, it is leveraging our fixed cost base which produces natural leverage and natural scale. So a good example of that even today in the U.S. despite adding all these costs and standing up our public company infrastructure, our gross margins in the U.S. are still over 65%. So this is a very strong business. That with volume will very naturally scale. From there as you work your way down the income statement across every line whether it’s R&D, whether it’s sales and marketing and/or G&A, we expect each of those functions to scale as we grow. I think one of the advantages we had again as a company is we have – yes, we have work to do and we’re going through the transition, but we started this journey with a very sophisticated infrastructure in place and one that was incredibly modern and contemporary. So very quickly we’re moving from LiveRamp as a division through this transition period to by the end of the second quarter of next year we will be completely through the transition and focused on nothing but growth, nothing by scaling and nothing but taking advantage of our opportunity.

Okay. That’s helpful. Thank you.

Thank you.

Your next question is from Vasily Karasyov with Cannon Ball Research. Your line is open.

Thank you. Good afternoon. Scott, I think you said that you don’t believe that the tipping – we’re at the tipping point of budget transitioning to advanced TV advertising yet and that is confirmed by all of the companies involved. You talked to [indiscernible] and The Trade Desk and the traditional media companies. I wonder from where you stand why do you think that is and what is required for us to get over the tipping point? And then I’ll ask the second question right away, it’s related. Since you outlined your horizon 2 ambitions at the Investor Day, there have been some developments and the advertising supported the television. As you know Viacom, a client of yours, in the addressable bought Pluto TV, which is purely ad supported. I’m wondering if you see that as an opportunity or is it just going to be cannibalistic to your current addressable TV business with Viacom and others players? Thank you very much.

Yes, so on the first and this is just one person’s opinion here. I think the biggest challenge that we have to face is one, it’s a cultural challenge. It is the fact that television for the most part has been bought and sold the same way for the past 50 years. And old processes are hard to break. As a result I think one of the opportunities for us surprisingly isn’t necessarily in connected television or even addressable television, it’s also in data-driven linear television which allows a marketer to buy the same way that they bought before but use more granular data to do the planning. And I think those small steps are going to get people more and more comfortable with television. That said, I believe the tipping point and I say this from 20-some-years of experience in the digital space, marketing is nothing if not a “me too” industry. And so as we see some big advertisers have tremendous success and grab share through data-driven television, then others will very quickly adopt those strategies. In terms of the impact of any consolidation in the industry on us, I don’t worry so much about any of that rather I’ve always believed that complexity is our friend. And whether that’s complexity of industry, complexity of heightened regulations, complexity of new technologies, whenever those things occurred, our clients naturally are as confused as anyone and they look to us to help shepherd them through all those changes. So I like the fact that we live in an environment that is changing rapidly because I actually think that heightens our importance to the ecosystem around us.

Thank you very much.

Thank you.

This concludes the Q&A portion of the call. I’d like to turn things back over to Mr. Warren Jenson, President and CFO of LiveRamp.

Thanks everyone for joining us today. I’ll conclude with just a few final thoughts. We’re nearing the completion of our transition and we’ll enter the next phase of our lifecycle from a position of considerable strength. Our business is performing beautifully. We’re an integral part of our customers’ workflow. We have a huge addressable opportunity, a great team and a balance sheet that is the envy of our peers. We’re in the middle of a strong secular wave. Data is the key to customer intimacy and our solution is key to unlocking the potential of data. We enable the level playing field in a competitive ecosystem. We’re building a growth engine to deliver not only short-term results but also growth for the medium and long term. And finally, everyone, we can’t wait to have you join us at RampUp in two weeks. Thanks again for joining us today.

This concludes today’s call. You may now disconnect.