Good afternoon, ladies and gentlemen. And welcome to LiveRamp's Fiscal 2025 Second Quarter Earnings Call. All lines have been placed on mute, to prevent any background noise. After this 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, Drew Borst, Vice President of Investor Relations.

Thank you, operator. Good afternoon, everyone and thank you for joining our fiscal 2025 second 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 investors.liveramp.com. Also, during the call today, we'll be referring to the slide deck that is also available on our Investor Relations website. With that, I will turn the call over to Scott.

Thank you Drew and thanks to everyone for joining our call. There was a lot to like about our most recent quarter, whether it be top line growth, client progress or margin improvement. I'll start my remarks today by discussing our performance on these dimensions, which will be a fun conversation. I'll then shift to the topic about, which many of you have been asking the current selling environment, provide some color and talk about why I'm optimistic about the long-term. Finally, I will discuss our ongoing progress toward becoming a Rule of 40 company, a steady journey of continuous improvement to, which we are fully committed. Let's start by spending some time on Q2 results. There were strong. For the quarter, both revenue and operating income exceeded our expectations. Total revenue grew by 16%, our third consecutive quarter of double-digit growth. Subscription revenue grew by 14% and marketplace and other revenue increased by 23%. This marks the sixth straight quarter of at least 20% marketplace growth, reflecting both strong secular growth in digital advertising, as well as strong execution by our team. On the bottom line, operating income grew by 28% and operating margin expanded by 200 basis points, to a quarterly high of 22%. Beyond these key financial results, there are two operational measures worth highlighting. First, our subscription net retention was 107%, which marks a sixth consecutive quarter of improvement. Second, our $1 million plus customer count increased by 10, to a record high of 125. Both of these metrics reflect a continued improvement in our renewal rate with existing customers. Over the past 18 months, we have enhanced our customer support and service function, and invested in our platform to make it more user friendly. This has led to higher customer satisfaction, and contributes to our…

Thanks Scott, and thank you all for joining us. Today, I will cover two topics. First, a review of our Q2 financial results, and second, provide our outlook for FY '25 and Q3. Unless otherwise indicated, my remarks pertain to non-GAAP results and the growth is relative to the year ago period. I will be referring to the earnings slide deck that is available on our IR website. Starting with Q2. In summary we delivered strong results above our expectations, highlighting another quarter of solid performance. Revenue came in at $185 million, $9 million above our guide and operating income was $41 million, $10 million above our guide. Operating margin expanded by two points to a record quarterly high of 22%, subscription net retention improved by two points sequentially to 107%. ARR grew by 13% and million dollar plus customer count grew by 10 quarter-on-quarter to a record high of 125. Let me provide some additional details. Please turn to Slide 5. Total revenue was $185 million up 16% with both subscription and marketplace and other above our expectations. Subscription revenue was $143 million up 14%. Fixed subscription revenue was also up 14%, a two point acceleration from last quarter and slightly ahead of our low double digit expectation on lower than expected contraction. Usage revenue was up 16% and largely benefited from some onetime activity. Usage as a percentage of total subscription revenue was 16%, slightly above the 10% to 15% historic range. ARR was $483 million up 13% year-on-year and quarter-on-quarter grew by $5 million driven by product attach expansion and improved customer churn and downsell. Subscription net retention was 107%, two points better sequentially and above our 100% to 105% expectation. The improvement was mostly driven by lower customer churn and downsell and to a lesser extent…

Thank you. [Operator Instructions] Your first question comes from the line of Jason Kreyer with Craig-Hallum. Please go ahead.

Great. Thank you guys. I just wanted to ask about the strong performance in subscription revenue. We talked the past couple of quarters about these longer sales cycles, so we had expected maybe a little bit of a de-sell there. Just curious if you can unpack what elements of the selling process drove the acceleration used on subscription?

Yes, I'm happy to. And we were pleased to report that the outperformance in subscription was driven, by both an improvement in fixed subscription as well as subscription usage. With respect to fixed subscription, as Scott mentioned, we had a near record high renewal rate in the quarter, and record low contraction and that benefited our fixed subscription growth in Q2. And then as I mentioned in my prepared remarks, subscription usage did benefit from some one-time items and activity in the quarter, which we're not expecting to repeat in the second half, but certainly benefited usage growth in Q2. So taken together, we saw a nice beat against our expectation for subscription. And then - while you didn't ask it, data marketplace also outperformed relative to our expectations in the quarter. And that was largely driven by a strong data marketplace performance and particularly CTV.

Always happy to have you slide in the outperformance on data marketplace. Appreciate that. So you also had some interesting commentary just on the margin outlook as we get into 2026. Can you maybe unpack what the drivers are going to be, or a little bit detail on where you expect that better performance and margin to come from, as we get into next year?

Yes, I'm happy to take this one as well and thank you for the question. First, offshoring, as we've discussed remains a big lever for the business, over the medium term and we continue to execute really nicely here. Today we have about 250 roles offshore, up from 60 at the same time last year. The savings benefit this year is being somewhat masked by the addition of Habu related expenses, but would expect this to be a more meaningful driver of margin expansion in FY '26. In addition, as we mentioned, we're looking carefully at our cost structure, to ensure every dollar of investment is aligned to the key growth initiatives that Scott discussed. And we're driving efficiencies where we can. So for example, as we continue to modernize our platform, which we discuss, and paydown technical debt, we expect to slow the rate of hiring and investment in our product and engineering function. And similarly, we would expect to see continued leverage on our GA investments.

Perfect. Thank you very much.

Your next question comes from the line of Shyam Patil with Susquehanna. Please go ahead.

Good afternoon, this is Aaron on for Shyam. Thanks for taking our questions. Can you talk about CTV and how that's contributing to the growth that we're seeing? And then relatedly, are there any more details that you can share to help us better understand the clean room partnership that you recently announced with Netflix? Thank you.

Yes, hi Aaron, it's Scott. First off on CTV, it's not something we breakout any more specifically, because we're not a media take rate business. That said, I would tell you that I think, we are absolutely instrumental in the future of CTV, where it's going and how those CTV players are going to in future partner with major advertisers. And let me unpack that a little bit. It used to be that if you were buying television, you would go do panel based, add it with some panel based data to plan your buy. Well, it is now the case that every major CTV provider has an authenticated audience, and they have deep valuable data. And so, the combination of that valuable CTV data along with the valuable first party advertiser data, which is authenticated as well. Well, when you start to collaborate across those two deep data sets, that's when the magic happens. And that requires clean rooms. So when I talked earlier in my prepared remarks about the 35 publishers that we had targeted, a big chunk of those are the major CTV companies. And we are working with virtually all of them. And the ways that we're working with them, is to set up this clean room, so there can be audience collaboration that also facilitates measurement. So advertisers are getting just a fundamentally better experience when they're placing their ad buys on those CTV providers. And that's so important now, because we passed this tipping point for CTV. So I think that's going to be a really interesting part of our business. We've talked so much over the last couple of years about retail media networks, but add in here, kind of these entertainment networks that we're going to start to see. Virtually every major advertiser is going to be collaborating with, call it the top dozen CTV providers and doing really, really interesting things. And remind me again your second question. It was Netflix, right? So on the Netflix side, I talked in my prepared remarks, about what we're doing with Disney, and the Netflix partnership is just very similar. We announced it last quarter. I think it goes live in early January. I mean it's really hard to take things live in Q4, which is kind of the height of the silly season from a publisher technology perspective. But I tell you, advertiser demand for this off the charts. It's going to be the measurement, the audience collaboration. I had lunch with or dinner with some of the Netflix folks last month. They're super excited about it. So I expect good things. But don't expect to see any growth from that this coming quarter. That will be in calendar Q1 or Q4.

Great. Thanks Scott.

[Operator Instructions] Your next question comes from the line of Elizabeth Porter with Morgan Stanley. Please go ahead.

Hi, this is Josh Baer on for Elizabeth. I wanted to ask one on the FY '26 operating margin guidance. Really appreciate the early color. Wondering what would land you at 20% versus 25%. Especially now looking for 18% or so for this year. The difference between sort of solid modest expansion and really significant expansion. I'm wondering if you're managing costs to manage to some rule of metric that, goes beyond the 30% this year or if it's a dynamic where top line upside is going to flow through. If you could talk to like what would land you at the top and bottom of that range, that would be great? Thanks.

Yes, it's a great question. I'm happy to. And I'll start by just acknowledging it's probably too premature to talk about top line growth next year. We still have two quarters to go in this fiscal year. That said, under all reasonable revenue scenarios, we believe we have the levers to drive the margin expansion that both Scott and I discussed. Revenue, of course is going to be a lever on the 20% to 25% range. Just given that the high fall through of our model. In addition that the pace at, which we continue to offshore is a big lever. And then finally, as we mentioned, we have kind of levers in other areas of our business, to just run a better business and drive greater efficiencies. And how quickly we harvest those opportunities will also dictate margin expansion next year.

Okay. Got it, thank you.

Your next question comes from the line of Alex Lavigne with The Benchmark Company. Please go ahead.

Hi guys, thanks for taking the question. This is Alex Lavigne with The Benchmark Company. Just curious if you could provide an update to the Oracle related marketplace pipeline progression, and whether or not the raise guidance in fact reflects that. And then secondly, curious if you could quantify perhaps I missed this, the contribution on revenue and ARR from Habu in the quarter? Thank you.

Yes, hi Alex. I am happy to take both of those. And so first, with respect to the Oracle impact, we continue to expect a modest positive impact in Q3, associated with the shutdown of Oracle's ad business. As a reminder, this shutdown happened at the end of September, so still relatively new. And we'll continue to tread lightly, with respect to guidance until we have more of a trend line to forecast against. But do continue to expect it to be, to represent a nice opportunity for us in the back half of this year. And with respect to Habu, what I can share is we remain on track for the 18 million of synergized revenue this year, and tracking toward that in the first half. At this point, just given the integration of Habu into our broader suite of clean room solutions, it's hard to pull it out, to pull out the contribution perfectly. But would reiterate, we are on track to deliver the $18 million we committed to at the beginning of this year.

Got it. Thank you very much.

Seeing as we do not have any more questions at this time, I will now turn the call back over to Lauren Dillard for closing remarks.

Thanks so much. And I'll conclude with a few final thoughts. First, we delivered another strong quarter with both revenue and operating income ahead of our expectations. Next, we're pleased to take up our full year outlook, for both revenue and operating income. And as we look ahead, we like our strategic position, and our conviction about the long-term has never been greater. And finally, we hope you join us at RAMP up in February in San Francisco. So with that, thank you again for joining us today. We look forward to speaking in the days and weeks ahead.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.