Good afternoon ladies and gentlemen, and welcome to LiveRamp's Fiscal 2024 Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Drew Borst, Vice President of Investor Relations.

Thank you, operator. Good afternoon and welcome. Thank you for joining our fiscal 2024 fourth 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, I'll turn the call over to Scott.

Thank you, Drew, and thanks to everyone joining our call today. As I've done in past year ending earnings calls, today I'll strike a balance between talking about the quarter and the year that just ended, and perhaps more importantly, provide a bit of color around what we intend to accomplish across the coming year. We ended fiscal 2024 on a high note with Q4 revenue and operating income, exceeding our expectations and a positive inflection in several key performance indicators. As we look ahead to FY‘25, we like our strategic position. Our data collaboration platform seems well positioned to capitalize on the growing need for secure first party data collaboration and to sustain addressable digital advertising in a world of third party signal loss. Operationally, we also as if there are still a lot of ways we can run the business even more effectively and efficiently. Before turning to our FY’25 priorities, however, let me spend some time on Q4 and FY’24. Q4 revenue growth exceeded our expectations across the board with total revenue up 16%, subscription up 11% and marketplace up 38%. Revenue was ahead of our guidance by $12 million or 7% and non-GAAP operating income was ahead by $3 million or 20%. Revenue growth came a long way in FY’24. You might recall that, our initial guide 12 months ago was for revenue growth of 2% to 4%. Over the past year, we actually grew our top-line at 11% or 10% on a like-for-like basis excluding Habu. The majority of the upside was driven by our marketplace business, but subscription also over performed in the fiscal second half. Subscription revenue growth after positively inflecting in Q3 accelerated again in Q4 by 1.9% on a like-for-like basis. This growth acceleration demonstrates the progress we made throughout FY'24…

Thanks Scott and thank you all for joining us. Today, I will cover two topics. First, a review of our Q4 financial results and second, provides our outlook for FY’25 in Q1. Unless otherwise indicated, my remarks pertain to non-GAAP results and growth is relative to the year ago period. Starting with Q4, we had a strong finish to FY’24, with revenue and operating income exceeding our original expectations. Revenue came in at $172 million, $12 million above our guide and operating income was $16 million, $3 million above our guide. Operating margin was 9% and we generated $28 million in operating cash flow in the quarter and $106 million in the fiscal year. Let me provide some additional details. Please turn to Slide 5. First, as a reminder, we closed the acquisition of Habu on January 31. Consistent with what we shared previously, the transaction contributed $2 million of revenue in the quarter or approximately 2 points of subscription growth and roughly $3 million of expense. As you would expect, it also positively impacted our other revenue metrics. Total revenue was $172 million, up 16% 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 $134 million, up 11%. Fixed subscription revenue was 9% and usage as a percentage of total subscription revenue was 14%, in line with the historical 10% to 15% range. ARR was $467 million, up 10%, reflecting a $12 million impact from Habu and continued growth in customer upsell and new logo. Subscription net retention was 103%, 2 points better sequentially and ahead of our expectation. The outperformance was driven in part by Habu and by strong upsell of our Clean Room and connectivity products. Current RPO or our…

[Operator Instructions] Your first question comes from the line of Shyam Patil of Susquehanna.

I had a couple of questions on Habu. First one, can you elaborate on the integration and the customer response relative to your initial expectations? And then second one, can you remind us of your financial targets for Habu in ‘25?

In terms of Habu integration progress, we've done this a few times now, but we think we're pretty good at it. And it's complex. So, I'll talk about a few different pieces. First off and most importantly is always the people integration. And there we've had a 100% migration of Habu employees over to LiveRamp. And I'm really pleased, I mean, this is an injection of world class talent and fresh ideas, which is great for our company because it brings new thinking but it also energizes our legacy team. It's also given us some bench strength. And if you look at the Habu leadership team, many of them have already taken on expanded roles within LiveRamp and others of them have taken on brand new challenges. And an example I would give is Matt Kilmartin. He's just a brilliant CEO, talented entrepreneur. And the acquisition is kind of freedom from the day-to-day management grind. So we're using his entrepreneurial skills to tap in. He is going to lead the charge on new use cases and verticals. And as you know, Shyam, this is something we've talked about for a couple years now, but we haven't ever made as much progress as we would like outside of advertising and marketing. And so we feel like we have a good product. We got with some small configuration or maybe some slight design mods. It is extendable to all kinds of other use cases. We just need someone smart and entrepreneurial thinking about it all the time and driving the charge. And so Matt's going to do that. So very excited about the people integration. The second big piece that is very visible to our clients is the product integration. And there I'm really pleased. I mean, Habu has done a great…

Yes. Hi, Shyam. With respect to the second part of your question on our financial targets, as we shared in the call, we added about $12 million of ARR in Q4, which you can think about as inorganic contribution to growth in '25 We continue to target $18 million in revenue in '25 again this is a synergized number, so inclusive of a few millions of synergies from cross sell in the back half of the year. A point I would make and Scott just made it as well, Habu is being fully integrated into our platform and given the strong opportunity for cross sell of LiveRamp products alongside Habu, drawing the line between LiveRamp and Habu will become increasingly challenging as we move through the year. And then just a final point on the bottom-line, we continue to target breakeven on an op income basis, which equates to about a point of dilution on op margin in '25.

Your next question comes from the line of Jason Kreyer of Craig-Hallum Capital Group.

Just stick with Habu, we've talked about that the last couple of months as kind of being a plug-and-play solution for smaller marketers. Just curious any updates on that, any progress with smaller customers in the quarter or what we should anticipate for the evolution of that being a better solution for that lower end of the market?

Yes. I mean, that's certainly part of our pipeline and no particular updates in terms of new clients to share that I didn't talk about in my prepared remarks. I feel pretty good about that. I ultimately think one of the bigger catalysts is still out in front of us. I believe that, when we get across the finish line on cookie deprecation, that's going to be the biggest catalyst that we've seen for adoption of a data collaboration platform, because you need one in order to activate in DV360. DV360 is the market share leader along with Amazon's DSP. It drives the most tonnage on most media plans. Most advertisers are going to have to embrace what we do, if they want to avoid disruption in their advertising efforts. We're a little bit bummed about the slowdown in deprecation, probably most so because having planned for this for five years, I just want it behind us and to start talking about the glorious future as opposed to what's to come. But I think all good things in store for the future of Clean Rooms.

Thanks, Scott. And then, like a month ago, Google announced that they're moving PAIR to an open source platform in conjunction with the IAB. Just curious, if there are any implications there? I'm wondering if this kind of broadens the reach of PAIR by expanding the developer network and making it available to more developers, but curious your thoughts on the opportunity?

We'd sure like to think so. I love the fact that Google open source that and put it into the hands of the IAB. The more standardization that there is around adoption of authenticated ways to buy bifurcated consents at both the buyer and seller side, that's the future is to get consented users. And so the more that that can take wing, not just with Google but with major CTV players, with all the social media platforms, it's just better for the entire industry. It fuels more standardization and we've seen the great returns that you get through pear. It's pretty significant lift not just for advertisers, but also for publishers in terms of their yield. So everything that Google can do to spread adoption is something we're cheering for. And I should also just say, I mean, a big chunk of our summer here at LiveRamp is going to be spent out in the road evangelizing, we'll take use of the extra time Google afforded with their PAIR deprecation timeline to educate and evangelize the offering in the market in many cases with Google. We'll be doing some stuff with them at [Can] in next month, and just a lot of road shows seminars things like that to ensure that the market's ready.

Your next question comes from line of Elizabeth Porter of Morgan Stanley.

I just wanted to follow-up on your comment about kind of the bigger catalyst being data collaboration and really needing it for DV360. I understand that the timeline to recognize some of this opportunity has been pushed out a bit, but any sort of framework you're providing in terms of how to think about sizing the opportunity tied with PAIR and how that could impact LiveRamp?

Well, first off, Elizabeth, and I'm sure that, Lauren can dive into this a little bit more, I would tell you if you look at our guidance, I mean, we're being -- what we think is appropriately conservative with respect to PAIR. And with the timeline now really sifting into the last quarter of our fiscal year. So that January to March timeline, we won't see a huge impact of it in our year this year, but we've been very -- what we think appropriately conservative. Because there's just going to be [gaz ins and gaz outs] remember that you have an entire industry that was built on cookies and has operated on them for the last 30 years. And we got nine months to get them fully ready for the cutover. And my guess is we'll be pretty successful with the sophisticated advertisers, but there's probably going to be a lot in the industry who won't be ready. And so it'll be interesting come next calendar Q1 to see how that plays out. It wouldn't surprise me if there's a stall as folks figure out what they're doing operationally before there's an acceleration. That said, as you know, Elizabeth, we're out in the market telling folks not to wait. Because the same techniques that can be utilized in PAIR, it's just an extension of what folks are doing in cookies today. But it gets you pretty significant incremental reach because it allows you to reach the consented users on Firefox and Edge and Safari and that drives a pretty significant increase in performance. We are going to try really hard to prepare the industry and get them converted well before next Q1. But I think it's a little bit unpredictable. Now the last thing I would say is, initially, we think that we'll see the first impact on just usage, because people will switch from cookies to true authentication and everything that they do. It will make our existing clients even stickier. It might drive some incremental usage. That's particularly true as authenticated methods extend to the major CTV providers. But then, the next catalyst will really be not seen in our subscription usage as much as just Clean Room adoption. We think that, virtually everybody is going to need to have a Clean Room to do the kind of addressable advertising that they've grown used to. And that should be a catalyst for us both in the U. S. to win potential new clients, but then also internationally where in many cases Google's market share internationally, DV360's market share internationally is much higher than it is here in the U.S.

Just as a quick follow-up. It was good to see the new logo start to increase quarter-over-quarter after being flat to down earlier in the year. Could you just talk about kind of where are the incremental kind of customers coming from? Is this momentum with cloud partners, kind of Habu? And how should we think about just the durability of net ads?

Hi, Elizabeth. Lauren here. As we've mentioned in the past, there are a lot of moving pieces with respect to customer ads and Habu did benefit this metric in the quarter. On an organic basis, customer count was roughly stable in Q4 and the trends that we have been seeing in recent quarters played out again in Q4, which is continued strength in high ACV brand customers, partially offset by continued pressure with lower ACV customers, particularly in the ad tech cohort. As we look ahead to FY’25, we would expect overall customer count to be somewhat muted, again given the dynamics that I just mentioned. That said, we've discussed this in recent quarters, we have shifted our sales focus to larger, higher LTV brand customers over the past year plus and you really see that play out in metrics like our $100 million customer count, which grew nicely in FY'24 and we would expect to continue to grow nicely into FY'25.

Your next question comes from the line of Mark Zgutowicz of Benchmark.

Congrats on an exceptional quarter. Just a couple of questions from me. On the pipeline $30 million, I guess $40 million now since the Habu acquisition. I'm curious if you think about what's driving that maybe just a split between demand for walled garden self-service cloud interoperability from your existing clients versus new verticals, accelerating subscription outside of retail and CPG, if you could maybe provide some color there would be helpful.

Yes. It really is both. If I think back a year, two years ago, we obviously had a lot of success powering the retail media networks. But even in my prepared remarks, the examples that I gave went beyond retail. So I talked about a pharmaceutical for instance company. And we're also doing some really interesting things in travel. And not surprisingly, some of the most interesting things that we're starting to talk about and you're starting to see are actually in the entertainment space. It's the case that as you think about a world that increasingly first party data is going to be really important, well, who has great sources of first party data? The major publishers and they're not all named Google and Facebook. You think about all of the CTV providers that you authenticate every time you log-in, they have deep viewership information, and they know a lot of demographic information as well. And so, kind of the clean room capabilities that any advertiser can spin up with those destinations is pretty powerful. So I think retail and packaged goods gave every other industry a roadmap to follow here.

And Mark, maybe just to put some additional color against that. If we look at the collaboration or clean room deals, we won in Q4 about half were with retail and CPG, but half were with the companies that Scott just mentioned. So publishers, travel and entertainment companies, automotive companies, healthcare, and if we look at the composition of our pipeline and the pipeline created, it kind of mirrors that split.

And maybe on the new verticals, is it too early to start talking about a potential sizable TAM expansion here outside of the CPG and retail, meaning, do you have adequate sales capacity to sort of address, these newer verticals? Is that expanding? Will that sort of TAM expand as you add more capacity there? Or what is that just a learning curve more with those industries and that just takes time?

I feel really fortunate. I think we were a little bit ahead of this one because if you recall a couple years ago during the great resignation, we really saw a big exodus for a short period of time to our salesforce. And we used that opportunity, when we backfilled to remake our sales force. We actually created vertical industry groups. So now we have a retail group, we have a financial services group, we have experts in travel. And that's so important. When LiveRamp was formed, we used to be able to go in and wow people just talking about the technology. But now increasingly, particularly given the fact that we have higher level audiences within the clients we're calling on, oftentimes it's the CMO or the CEO, we have to go in and talk in their language. We have to understand how does the airline industry work, for example, how do airlines make money in future? How are they going to monetize their screens on their seat backs and personal entertainment devices that you use in flight? And so by hiring that way for the last couple years for the last couple of years. I think it's actually improved our sales productivity and actually driven some of the success we're seeing in these new verticals.

Your next question comes from the line of Kirk Materne of Evercore ISI.

This is actually Peter Burkly on for Kirk. I'll echo my congrats on our next quarter. I'll have to like here, couple of metrics that really stood out to us, the large customer growth, $1 million customers and then the NRR acceleration. Scott, maybe I'm hoping I can start with you just on large customer growth. Does this feel like a broader opening up of wallets dynamic or is this reflective of the strong momentum in the data collaboration platform, which are generally larger deal sizes? And then Lauren, maybe just as the second one, on the NRR metric, understanding the color on Habu's contribution and assuming the large customers are acting as a tailwind here. But I'm curious the sort of pressure on the NRR has been contraction at the lower segment of the market of your customer base. It sounds like that's sort of continuing on. But I'm just curious given the acceleration and kind of the go forward color. Does it feel like that's sort of stabilizing or perhaps even inflecting just in terms of that lower customer contraction and just a little bit more trouble at the low end?

Peter, I'll start with the first. If you looked at our cohort of largest clients, these $1 million plus a year spenders, I think you would recognize almost every single one of them as being kind of major advertisers, brands that you trust, really strong consumer brands. We did a detailed analysis of -- we did a big customer segmentation about a year ago. What we found is that, those sophisticated large spenders share some characteristics in common. They are obviously more profitable to us. The churn rate for those is significantly less. But the most interesting insight was the number of activations that they had. For the largest clients, I can't remember exactly the number, but it was in excess of 18 activations that they had. When you have 18 activations, you are lighting up different destinations, maybe point-of-sale, certainly a lot of different properties. You're a lot more sophisticated about what to do with your data. You probably are much more likely to want to have a clean room and set up data collaboration with partners. You are certainly much more likely to want measurement back. And so, they just start becoming power users. And so, I don't think it's a function of the macro or budgets becoming easier to get or anything like that. I think it's just a function of those are more sophisticated companies. They've learned how to use their data effectively and they're trying to do even more with their data. Our challenge internally is, how do we get some of our smaller companies to look more like those big companies. We are laser-focused on making sure that, everybody activates more destinations on their media more destinations on their media plan, which is going to lead them to adopt more usage with us.

And Peter, with respect to your question on NRR, I will just again point out that Habu contributed a couple points to NRR in the quarter. Outside of that, we are seeing some stabilization with our lower ACV customer cohort, but the bigger driver continues just to be stronger contribution from upsell with our largest customers as they adopt clean room and collaboration use cases.

Operator, we have time for one more question.

Your last question comes from line of Brian Fitzgerald of Wells Fargo.

I want to follow-up on the your PAIRs commentary. Obviously there are thousands of DV customers out there, and it seems like DV360 customers need to use PAIR to target ads off of first party data and measure performance after deprecation. Has Google built free tools to access PAIR via data hubs or otherwise? It seems like you are far and away, the most important partner for Google's messaging about PAIRs the announcement with NBCU and so on, and customers more or less need to adopt. Is that a correct way to view the opportunity? They expansively or are there other considerations, free tools, more clean room partners likely be named over time and any other reason to look at it more conservatively?

Well, I am sure that there will be more partners over time. We were fortunate to be one of what are now two launch partners, Habu, LiveRamp, and then there was a third. So we actually comprised 2/3, I guess, of the original launch partners for this. And the deal is that they're not building the technology. Rather they're mandating that someone who does pairing has a clean room partner. Google wants to be agnostic in this and they want to ensure that someone can ensure that on both sides the consents have been obtained and handle the security of anonymization that occurs. Now all that said, I would tell you anecdotally that it felt like for a long time we were having a lot of conversations with the Google product team. And we were really involved going back and forth with suggestions around their design and doing a lot of process mapping. Since January, it is the switch has really flipped on with the Google commercial teams. As for example, they invited me to come speak to their sales leadership in New York about a month ago. And likewise, their ad plat sales leader came and spoke to LiveRamp's entire sales organization. When we had our sales kick off a few weeks ago, we're going to be out in market with them educating and evangelizing. I mentioned, we'll do some stuff with them at [Can], which is coming up here in a couple weeks. And then, we have a lot more things planned to educate and evangelize. I think the biggest barrier here isn't the technology at all. It is just kind of the inertia of 30 years of people using cookies, and just educating them that there's a better way. And although it requires a process requires a process switch and that may be painful. As soon as you do it, you unlock better results. That will be the key messages you'll hear both from Google and from us in the coming months.

I'll now turn the call back over to Lauren Dillard for closing remarks.

Thanks so much. In closing, we ended FY'24 on a high note with both revenue and operating profit outperforming our original expectations. As we look ahead, FY'25 will be a year of improving subscription growth and continued margin expansion. Our revenue guidance reflects a continuation of the Q4 momentum in the fiscal first half and slightly slower revenue growth in the second half, mostly in the name of conservatism. With that, thanks again for joining us today. We look forward to updating you on our continued progress in the quarters ahead.

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