Good afternoon, ladies and gentlemen, and welcome to LiveRamp's Fiscal 2019 Fourth 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] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Lauren Dillard, Head of Investor Relations.

Thank you, operator. Good afternoon and welcome. Thank you for joining us to discuss our fiscal 2019 fourth 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 website. At this time, I'll turn the call over to Scott.

Thank you, Lauren. Good afternoon and thanks for joining us today. I am very pleased to report another outstanding quarter highlighted by strong topline growth, continued momentum across each of our key growth initiatives and new partnerships that solidify our role as the ubiquitous provider of people-based identity and data connectivity for the open ecosystem. For the quarter, total revenue was up 30%. Excluding the impact from Facebook's discontinuation of Partner Categories, revenue was up 40%. Our Subscription business grew 40% driven by the continued strength of our enterprise and agency channels coupled with increased contribution from some of our Horizon 3 initiatives like B2B and second party data, which we are now referring to as enterprise data networks. Marketplace & Other revenue was up a solid 43% driven by Data Store. Beneath the topline as we expected and discussed, margins were again pressured due to transition-related spend. However, we are making great progress against the key operational initiatives Warren highlighted on our last call and we continue to expect this spend to be completed in the first half of FY2020. The fourth quarter capped off an incredible year for this company. The year that was both transformational and in many ways foundational for building the business we aspire to be. A year ago, LiveRamp was a single division of a larger company. Today, it is the best-in-class SaaS platform that is uniquely situated at the center of several key industry trends and amid all this change and potential distraction, we kept our eye on the ball in FY2019 and executed soundly against our key strategic initiatives. I often talk about our growth opportunities in Horizon's. Grouping those initiatives that we are counting on to deliver growth over the near, medium and long-term. I'd like to provide a brief update…

Thanks, Scott, and good afternoon, everyone. Well, it's been quite a year. That said, our call today is not about the past, rather it's all about tomorrow. We are moving decidedly forward and enter FY2020 in a great place. Our business is strong and predictable. We exited the year on a $313 million revenue run rate, three quarters of which is tied to committed recurring subscription revenue. At March 31, ARR was $232 million, up 41%, a growth rate which is a full 10 points higher than a year-ago. Our dollar-based net retention remains strong at 114% and in Q4, our subscription revenue was again up more than 40%. The importance of our network continues to build. We are the ubiquitous source of people-based identity for the open ecosystem. We now have 665 direct customers and thousands more indirectly. Our identity graph is uniquely multidimensional and unmatched and most importantly as Scott mentioned, it keeps getting stronger through our authenticated traffic solution and other efforts like ad ID Consortium and IDL for RTB, our connections are becoming even more direct. And finally our global connections now tie together thousands of companies across multiple continents. Brand expand and extend is a way of life. Our growth levers are working. Horizon 1, land and expand revenue increased 35% during FY2019. Horizon 2 revenue, which includes TV, Data Store and International, grew 49%, and our Horizon 3 revenue run rate has doubled and now exceeds $12 million. Of notes, our second-party data sharing service is now up and running on four continents with more than 30 tenants in place. Next, we have used this transition to tighten and harden LiveRamp’s operational capabilities. In other words, used process to our advantage, this focus is yielding results. Product and engineering, we strengthened our customer first…

[Operator Instructions] Your first question comes from Dan Salmon from BMO Capital Markets. Your line is open.

Hey, good afternoon everyone. Scott thanks for your comments – added comments around your views on how change to the Chrome browser may or may not impact the company. I know we've also had some continued news around ITP continuing to be upgraded. You noted that the impact on your business is relatively limited so far as you see it right now, but could you maybe just take us behind the curtain a little bit to understand how all of these changes impact your conversations with your partners in particular? Are you looking at different technical integrations around this or opportunities to work together differently as a result of this? But we just love to understand a little bit sort of some of the technical things that though this may not impact the business as you see it may need to be rewired a little bit under the hood? And then the second question, Warren, you mentioned the transition to Google Cloud. We've seen some blog post on that. Could you give a little bit more color on how you expect that to help you set a foundation for some of those growth horizons? And then the last one with cloud services that often comes into play as with investors be right or wrong to assume that your work with Google on the cloud side suggests that a growing or stronger than ever partnership on the advertising side. Just love to hear your thoughts on that as well? Thank you.

Sure. Dan, I’ll start with your first question. This is Scott. I'm not sure that Google's News or any other topics that you brought up are necessarily new to us as much as they are part of our longer journey that we've been on going back. Gosh, the last couple three decades, really. To us, identity has never been one single thing. Identity is everything. It's a multidimensional creation, rendition of an individual. It's not a hashed e-mail, it's not a cross device cookie ID, but rather it's a much more complex rendition that consists of things like name at a postal address, telephone, e-mail address, cookies, premium publisher identities, mobile IDs, connected television IDs, social graph identifiers, you name it. So this is something we think about for a long time. And if you go back even the couple of years to launching the Ad ID Consortium, I think in some respects, we might have been ahead of the industry, because we were trying to create a mechanism whereby, which the daisychain of cookies who wouldn't get data lost there and also we created redundancy such that there would be non-cookie alternatives. Some of those conversations early on, we've talked and people probably weren't ready to hear, but what I will tell you is that Google's announcement, I think, made everybody in the industry more willing to listen and inspect their own processes and ask themselves, do they have a single point of failure, and if so what can we do about it? Well, the easiest thing they can do about it is ensure that they integrated more deeply with us and others things like IdentityLink. So I think it positions us very well for the future both – regardless of what happens with Google or Apple or Facebook or anyone because our clients are looking to do much more than any single swim lane. They're looking to play across the entire pool and we allow them to do that.

And then, Dan, let me jump in on the second question. I think it's really fascinating. I was reflecting as Scott was talking. When you think about a young company in effect just going public as we did and you think about young company getting bigger, the natural inclination is that you think companies start to slow down. When one would argue what actually happens to the best growth companies is they don't slow down, they actually get faster. So everything that we have been doing throughout this transition period relative to our transition spend and the capabilities we've been building are all about accelerating our pace in every aspect of everything we do whether it's how we execute, whether it's how we innovate, whether it's how we go to market. So our partnership with Google really incorporates all of those elements just like we've been building at other parts of our company, so we think about accelerating our scalability, accelerating our speed of innovation and also the fact that we're a global company and we want to have standard global solutions across-the-board. And Google Cloud fits right into that. Next, relative to our partnership on the advertising side. We're firmly of a view and Scott mentioned it and I did to in our prepared remarks is that the world needs an open independent source of identity and the world needs an open independent data safe haven and we filled that role. We're a great partner for the Google Cloud, we're a great partner for the other cloud providers as well. Our objective is to be a great source of growth for each of the different cloud providers.

Yes, to put an exclamation point on that, we're Switzerland. We work with anyone and everyone. I think we worked with Google and half a dozen or more different ways and we'll expand that over time, but we'll do the same thing with everyone else.

Okay. Thanks guys.

Your next question comes from Kirk Materne from Evercore ISI. Your line is open.

Hi. Thanks very much. I think I want to focus on the guidance for this company here. And Warren, can you help us think about sort of the – what needs to happen to sort of hit the high end or maybe beyond 30%, [indiscernible] really good subscription quarter, 40% this quarter, what [is sort of timing] between in terms of the guidance? And I guess, along those lines, I’d had obviously, everybody [indiscernible] the impact, the Google change is going to have on industry standard general or things rather like CCPA. So I guess how [indiscernible] just get a sense of the conservatism around it? Or just kind of how you are thinking about it?

Let me try to address maybe that in reverse order and I'm sure Scott may want to weigh in here as well. Our guidance philosophy has remained the same for – since the time actually we've all been here at – we all started off at Acxiom and now at LiveRamp, so we just try to call it right down the middle. So we don't change our risk profile, we just call them the way we see it. So this is our best estimate is to how we see things today. A few things relative to our outlook. Obviously, as you think about, let me tell you about margin and then jump into revenue. As we think about our margin profile going into the back part of the year, we're counting on a few things. First of all, we're counting on a revenue uptick in Q3 relative to Q2. That is completely consistent with how our business has performed in the past. So number one, we'd expect revenues to accelerate. That's going to create incremental fall through. The second thing is our GCP migration will be completed by the end of Q2. With that, we would expect our gross margins to rebound and should be between 65% to 70% in the second part of the year. And then the third thing, which is well within our control, is we expect to see expense leverage. Therefore, we would expect our losses in the back part of the year consistent with our guidance from our last call to be in the mid single-digits. Interestingly, while not part of our guidance today, when you start to think about operating cash flow before CapEx, you're going to see that we're getting pretty doggone close to breakeven if not positive in those quarters. So way too early to make that as a call out, but we are watching cash very carefully. And by the end of the year, you start to see some really positive things happening on the cash flow side, providing more successful in hitting our numbers. Now what about hitting the upper end of our guidance? The great thing is we're really optimistic and I think the trends supported in each one of our growth initiatives, whether it's – what we're calling enterprise data networks or second-party data sharing, whether it's what's going on in B2B or even adoption of the Data Store throughout our entire brands customer base. The trends are working in our favor. So what would it take higher levels of execution, some of these opportunities kicking in, in a bigger way than perhaps as reflected in our guidance, all of which we think are possibilities, but come back our guidance is what it is, would encouraged you to align on the numbers, which we've shared with you today.

Okay. Maybe just a follow-up – maybe for Scott. Scott, you mentioned opportunities around sales, execution or sales productivity and in the renewal rate – general renewal rates. What are you thinking – I assume it's always a chance that you guys want progress on those fronts, especially as you can [indiscernible]? Are you assuming just because of net new hiring that you might not see as much on an absolute basis on that front? Or how should I guess we think about those things because it seems like higher renewal rates would be some low hanging fruit for you all if you're taking a one to two year…

Yes. I think that's fair, Kirk. We'd invest in our salesforce and we would expect that over time their productivity improves. And this really speaks to the Horizon 1 growth initiatives. We know for instance, I mean it's all about winning new clients and then upselling the clients once we win them. And from a new client perspective, we still feel like we barely scratched the surface of our TAM. So if you think about the top 2,000 marketers in the world, we have 10% of those. So the vast majority of the market we feel is still out there to win from a new bookings, new logo perspective. And then from a use case expansion, we feel like we've been on a nice trajectory. In fact, I think it was just in recent quarters that our upsells have started to outpace our new logo growth. But we have a lot of killer use cases that we need to continue to tap into. So across our client base, there are 250 or so clients that have activated Facebook. That's great, but it's not everybody. Well over a 100 that are doing people-based search with Google and increasingly being terrific, but not everyone. Amazon has been a great use case for us in recent quarters, last couple quarters. That's grown from nothing to just under 50 clients activating that, but still underpenetrated. So there's a lot of evangelization that needs to continue to be done once we win clients, and those are the expectations that we have in our sales team going forward.

Hey, Kirk. One other thing that I would add coming back just to sales trends. Let me just remind everybody that there's always going to be ups and downs depending upon year-over-year comps. So if you take dollar-based net retention, as an example, is in Q1 and Q2 in particular, we would expect that rate to come down from call it 114, 115 down to 100 to 110, and the reason for that is we had a couple of really large corporate upsells a year ago, which makes the comps very – which make the comps difficult. That said, business remain strong, it's just there are going to be periods where they're going to be ups and downs in our growth rate.

Great. Thanks for the answers.

Your next question comes from Robert Coolbrith from Wells Fargo Securities. Your line is open.

Great. Good afternoon. Thanks for taking our questions. So we have a couple. Going back to the Google Chrome browser changes. First off, thanks for the additional color. One question that we have been receiving is any sense for ballpark exposure, the cookie-based targeting advertising ecosystem versus other venues like the walled garden television and so on. And then second question, I think you talked about some changes to the AbiliTec graph, I think you may have said that it's moving to more of a people-based model, correct me if I'm wrong on that. Just wondering if you could provide some additional color there. I know that's an issue, some of your very small competitors’ make some noise about and any early impact on match rates or match accuracy, anything else you can tell us about that? Thank you.

I'll take the first and then maybe you want to take the second, right. So first off – this is Scott. With Google, the question that you are asking about in terms of exposure isn't really quite frankly, how we think about it because we think about it as redundancy. And again, when we're building our identity graph, we're trying to create this multidimensional array of every person. I often talk about the metaphor spreadsheet we're it's 9 billion rows for every consumer on the planet and hundreds of thousands of columns for different identifiers and some of those are cookies and some of them are mobile ad IDs, some of them might be an e-mail, some of them might be physical postal address so on and so forth. And the key is one of the columns goes away because of a walled garden's decision, do you still have information to make an effective match? And so [an issues] that I outlined – that we've been pursuing in recent months and years are all about creating that redundancy and you'll recall in my prepared remarks, I talked about the 8 billion daily IdentityLink's that Index Exchange sees as an example. Well, that doesn't mean that 8 billion people are using or 8 billion calls are going to those every day through IdentityLink. They are probably still using cookies. But if the cookies went away, IdentityLink would be there to receive all the calls. And so it's that redundancy that we're pursuing. What has been optimistic is that if cookies did go away, I think our importance to the ecosystem actually goes up because we are a viable alternative to walled garden methodologies. Now your second question was really about strengthening our match rates. Was it?

I think you highlighted some changes to AbiliTec, just wondering if you can tell us a little bit more about that.

Yes. So this isn’t kind of an ongoing effort that we've been pursuing for, gosh, 20, 30 years and we'll never be done with that. And more specifically, some of the most recent work, which internally we codenamed project Eagle was about strengthening our offline identifier linkages and reducing redundant linkages wherever possible. And as a result, that should give our marketers not only better match rates, but also more deterministic higher-quality match rates because you don't want to put your marketer in a position where if they have their CRM file, you can say, oh, yes, we matched it to 10 people that are possible matches. You want to as much as possible to have a one-to-one match. So all the work that we did was around ensuring a higher deterministic match rates there by just cleaning up our algorithmic logic.

Yes. Robert, I’d add one thing into the word redundancy and think of multidimensional. So when we think of what we are doing at our mission to be the open-source people-based identity for the open Internet, we think about display, we think about mobile, we think about TV, we think about offline, we think about global, we think about authenticated traffic solution about IDL for RTB. We think about consortium. So in terms of adding value, yes, we're providing redundancy, but recreating value across multiple dimensions as well.

Great. Thank you.

Your next question comes from Vasily Karasyov. Your line is open.

I have a two-part question on Advanced TV advertising that you mentioned in your prepared remarks. So question number one, it seems that I believe that it's an opportunity for you. You have to believe that Ad-Supported VOD will be outgrowing Subscription VOD services going forward. That's creating an addressable market for you. So if that's true, can you give us maybe some details what gives you the confidence that that's what's going to happen in the midterm? And the second part of the question is Pluto TV. You mentioned Hulu and Roku have been both good partners for you. Recently, Viacom after the closed acquisition of Pluto TV, they started disclosing some pretty impressive usage metrics. So I was wondering if you could talk about whether that's an opportunity for you, Pluto TV and how far along are you with Pluto TV compared to Roku and Hulu and so on? Thank you.

Yes. So Vasily, thanks for the question, and this is Scott. Let me deconstruct your two questions into a few kind of takeaways as we see them. And number one is what I would tell you, which you understand as well as anybody is. The advanced television space is incredibly complicated. There is just a lot of different players right now. And so from a very high level – there's addressable television, which is either a targeted insertion through a set-top box or a data-driven linear television effort. And then there's also OTT, so over the top, and that is comprised of three pieces, the Ad-Supported Video on Demand, Subscription Video-on-Demand, and then also a piece where we don't play Transaction Video-on-Demand. And so very complicated, the second thing I would tell you is that no one including us knows who will win and that extends to the actual participants themselves. And so I say that because the lines between AVOD and SVOD, so Ad-Supported Video and Subscription Video, they're really blurring. So like in that the ad-supported, where we work with companies like YouTube or Pluto or Tubi. In many cases, they both have an ad-supported free model, but then they're also had a subscription model as well. So in the subscription side, I'd probably put like Hulu and Roku and fuboTV who we work with. But like Hulu on the subscription side has the cheap subscription, which has got more ads or you can pay even more for the premium, and be ad free. So even though participants on either side of that are experimenting with different pay models, different subscription models to figure out what will work. As a result, importantly what we see our clients doing are two things. Our clients are testing across all of…

Thank you. I'll take you up on that offer.

Good.

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

Hey guys. Congrats on a nice quarter and thanks for the details always.

Hey. Thanks Brett.

Two questions from me, and then I'll let you answer them. Number one, we haven't got an update on Europe yet on this call. My view is that, your network effect is really working in the U.S. I know you've invested in Europe. I know Warren, you were working on that for a long time and we've been three or four years into that. So wondering kind of how our position is in Europe? Are we kind of sprinting ahead like we have in Europe? And then number two, I don't think we talked about absolute size of the ID graph, whether it's mobile or otherwise, and there was – sometimes you give us that at least on a relative rank order basis with some of the other key walled gardens or other providers. So if you'd give us update on that that would be great. Thank you.

Brett, I'll jump in on the international front. First, we're really pleased with our overall performance in international. I'll share a couple of numbers with you, all of which exclude Facebook is obviously that impacted the comps year-over-year. Just think about our growth rate. Q2 of FY2019 was 40% of 65% in Q3, 46% in Q4 and for the year, 52%. When we think about international, next year, we're expecting another strong growth year. We're approaching a point where in France in particular and likely the UK that we're approaching profitability in those markets. Certainly over the next 12 months to 24 months. We're also seeing real innovation take place, particularly as it relates to that which we're doing around creating enterprise data networks or second-party data sharing. And then finally, we're really maturing as to how we're thinking about expanding into additional global markets, which is really working with our clients and their data networks in order to form our identity graph. Because now more than ever, our clients are global, our advertisers want global solutions and they're in every – in most markets around the world, and we're working to accommodate those needs. So far we're accomplishing our objectives. We're continuing to expand. We've learned a great deal having worked through the complexities of GDPR and really hardening our security and privacy chops and then bringing the innovation that that is created back to the U.S. and to other markets in the world.

And then in terms of your second question, Brett, I think the stats that we probably have shared in the past are really around – our U.S. digital coverage? And there – I think we are truly an alternative to what you get in the walled gardens. I think, we're 200 million plus uniques. Facebook and Google are probably 220 million or something like that. Truth be told and internally, we think about this on a lot more granularity than we probably have the inclination to share in earnings call. We think about each one of our identifiers, whether it would be display or mobile or offline, and ask ourselves, do we have complete coverage? Do we have complete accuracy? Have we had success on selling those into our clients? And what can we do to make each element of our graph more effective? Some day we'll probably dress that up in some beautiful marketing collateral. But, I don't think we're there yet.

Great. Thanks for the detail guys.

Thank you.

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

Well, thanks very much. I'll just squeeze one in here please if I could, which is about investments and use of cash probably warrant question. Just want to make sure, if you could allow me to one more time what your priorities are on investments. I assume international is one. You've talked about developing APIs. So you could just maybe run through, maybe one more time kind of in maybe in order of importance, what your most important investments are upcoming as you get toward profitability? And you referred your cash balance of course, just about $1.1 billion of cash. Anything else to say about use of cash you did mention about how interest expense might change? Obviously, if it any acquisitions – I don't know if there's any of the acquisitions you're thinking about doing. Anything you might be able to give us in terms of other use of cash? Thanks.

Okay. Tim, I'm happy to jump in on that. Our priorities for use of cash remain unchanged. So number one, we think about growing and capturing the opportunity that's in front of us and we've made it a point, no matter what it is, wherever it is in our Company. We are not going to starve our growth – our long-term growth opportunities for near-term bottom line performance. That said also part of our investment, at least in the near-term has been – as I mentioned earlier, all about really building scalability into everything we do and hardening our operational processes. So big picture number one, it's all about the growth opportunities that we see in our future and then making sure that we are funding those opportunities, whether it's second-party data sharing, whether it's international, whether it's B2B, whether it's Data Store, et cetera, and or use case development. The second thing is having the flexibility for a disciplined approach to acquisitions. The great news is that the team that is on this call and our management team have been together for several years and has a really – we have a track record. So history is probably a very good guide to the future. In that we always look to take advantage of our core competencies and we say, where can acquisitions fit into the things that we do well in order that we can create synergy, whether that's operating synergy or whether it's topline synergy or taking a capability that we have and then applying that to a new market. So we want to have flexibility to look at acquisitions, partnership opportunities, and be able to move on those opportunities quickly when they arise. And then the third thing is really returning capital to our shareholders. And again, history is a great guide to the future. Over the last eight or so years, we've returned over $450 million in our buyback, plus a $500 million tender in returning capital to our shareholders. So in over, call it a roughly an eight or so year time period, we're close to $1 billion in capital that has been returned to our shareholders. So net, our priorities remain absolutely the same as they've always been. I might just add as a final note, reiterate what I said in our last call and that is at least in the near-term, we're going to take a conservative approach relative to our buyback. So for purposes of your models, I'd factor in maybe $10 million to $15 million a quarter. Again we just think that's prudent for where the market is today for potential opportunities that that are out there. We feel that being liquid in this sort of environment, we in as a real asset to our Company and to you our shareholders.

Okay, great. Thanks. And sorry if I maybe should know this, what is left on the authorization of the buyback or should we just assume it's an ongoing thing?

Left on the authorization through the end of 2020 is $550 million.

Still left.

FY2021 let me – again through the end of FY2021.

Yes. Thanks.

That's all the time we have for questions. I'd turn in the call back to Warren Jenson for closing remarks.

Great. Well, thank you, operator, and thanks most importantly to all of you for joining us on the call today. Let me just conclude with a few final thoughts. First of all, I hope you can tell from this call that we couldn't be any more excited about the opportunity than we are today. Our business is strong. It's predictable and it's recurring. Today, we're very fortunate to be in the position that we have multiple growth drivers that are helping our customers create wonderful customer experiences while capturing billion dollars in value. And finally, just as I ended my more formal remarks, please remember that transformation at LiveRamp isn't over. It's only just begun. Thanks again for joining us today.

This concludes today's conference call. You may now disconnect.