Good afternoon, ladies and gentlemen, and welcome to LiveRamp's Fiscal 2026 First 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, everyone, and thank you for joining our fiscal 2026 first 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'll turn the call over to Scott.

Thank you, Drew, and thank you to everyone joining us today. Q1 was a good way to start the year, balancing both strong performance and optimism for the future. We had a very strong start to fiscal 2026 with first quarter results exceeding our expectations on both the top and bottom lines. We can also see opportunities to improve our performance that could impact the back half of the year and the years to come. Total revenue increased at a double-digit rate for the sixth consecutive quarter with double-digit growth in both subscription revenue as well as marketplace and other. Looking ahead, we have a robust new business pipeline and good sales momentum across several solutions on which I will elaborate in a minute. On the bottom line, non-GAAP operating income increased by 34%, driven by 3 points of margin expansion to a record first quarter high of 18%. Our organization continues to become more and more efficient, thanks to initiatives like our growing offshore presence in India and our forthcoming new pricing model. Q1 GAAP operating margin also reached a record high, expanding by 7 points, driven in part by lower stock-based compensation, reflecting new grant policies to rationalize these costs and better align with performance. Finally, we increased our FY '26 guidance for revenue and free cash flow. There's a lot to like in Q1, and Lauren will provide additional details later in the call. My remarks today will cover 3 main topics. First, an update on the products driving our current sales momentum, including Cross-Media Intelligence, Commerce Media Networks and CTV. Second, insights into our new pricing model and its potential to accelerate growth. And third, our perspective on how AI will transform digital advertising and its implications for LiveRamp's long-term significance and prospects. Let's start with…

Thanks, Scott, and thank you all for joining us. Today, I'll review our Q1 financial results and then discuss our updated outlook for FY '26 and Q2. Unless otherwise indicated, my remarks pertain to non-GAAP results and 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 Q1. In summary, we delivered solid results, exceeding our expectations due to strong execution amidst a more favorable macro and selling environment. Revenue increased by 11% and was $4 million above our guide. Non-GAAP operating income increased by 34% and was $3 million above our guide. Operating margin on both a GAAP and non-GAAP basis were record first quarter highs, expanding by 3 and 7 points, respectively. And finally, our free cash flow outlook for the year is materially better, driven by the recent tax legislation. Let me provide some additional details. Please turn to Slide 5. Total revenue was $195 million, up 11%, exceeding our expectation and consensus. Subscription revenue was $148 million, up 10%. Fixed subscription revenue was up 6%, in line with our expectation. Subscription usage revenue was up approximately 40%, mostly driven by an easy year ago comp and a couple of onetime positive items that benefited the quarter. ARR was up 5% year-on-year. This was in line with our first half expectations due to the softer selling environment in the first half of last year and some unusual but known churn events, such as Oracle exiting their ad tech business. We expect net new ARR to pick back up starting in Q2. Subscription net retention was 104%, stable with the prior quarter and in line with our 100% to 105% near- term expectation. Total RPO or contracted backlog was up 29% to…

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

Congrats on the strong first quarter and increase to the full year guide. I just had a quick question. Just when you look at the second quarter, can you elaborate on the assumptions behind the revenue growth?

Sure. Shyam, Lauren here. I'm happy to take that. So as you may remember, we always expected growth in the first half of this fiscal year to be lighter than the second half. And as it turns out, we outperformed considerably in Q1 on subscription usage. It was up 40% year-on-year in the quarter. And again, some of this was simply timing related. We're not forecasting the same level of performance for usage in Q2. In fact, we're conservatively guiding it flat year-on-year. And this is really the delta or bridge or kind of key assumption you're probably looking for. All that said, we're happy to be able to raise our outlook for the full year. And given our recent sales momentum, we have even more confidence sitting here today than we did in May in our back half and in our ability to drive higher revenue growth as we move beyond the second quarter.

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

This is Cal on for Jason. So maybe first, great to hear about the ongoing momentum in Commerce Media Networks. Just wondering if you can expand on the outlook and what gives you confidence that the strength can continue?

Yes, Cal, thanks for the question. This is Scott. I hope everyone on the call has a chance to visit our website because on it, you'll find a bunch of press releases I referenced some of them today and case studies on Commerce Media. I think we're really seen as the leader in the space. And that started with kind of classic retail. This quarter -- that continues, this quarter, we talked about WAG, Walgreens Advertising Group. WAG has 101 million loyalty members. And that generates literally billions of useful signals about which -- all of which can fuel partner efforts. And it's not just retail, and I think this is the big aha. What started in retail is really spreading to commerce. So many of our companies, so many prospects have incredible audiences, customer interactions and even captive screen time. And so this quarter, I talked about RE/MAX, for instance. They have nearly 8 million users per month going to the website. And so you can just imagine the melange of other activities someone looking to buy a home might also pursue. But then there's just so much more. So like we work with the major food delivery companies, and that should give us access to partner networks of all the local restaurants. We're working with the major payments platforms, and that's going to give us access to SMBs and QSRs and other merchant partners that we haven't historically had relationships with. We're starting to work with the connected car companies, which gives us access to the regional and local dealers and all of their partners. And we're working with a variety of the big travel companies, including some of the biggest airlines in the world, and they all have just enormous partner networks. And so this network flywheel…

Great. Appreciate that. And then maybe secondly, you touched on this a little bit earlier, but particularly now that upfronts have largely ramped up. Just curious if there's any perspective on how more budgets moving into CTV and programmatic execution may be resulting in things like deeper integration of publishers or more advertiser adoption of clean rooms.

Yes, sure. And going to the guidance, I mean, I think where you really can start to see it will be the back half of the year. We've had a lot of success doing the CTV integrations. But this is the slow quarter for television spending overall. That said, what we're going to continue to see is a lot of what we have seen, which is a flow from linear into accountable television, the kind that you get through CTV. And that also plays to our clean room capabilities in as much as you can combine audiences and develop new segments in concert, an advertiser and their publisher partner. A major CTV provider has rich viewing information, all of it permissioned and authenticated. And then when that can be combined with the rich CRM files of some of our clients, really interesting things could happen. And then on the flip side, it's not just the segment, the precision targeting, but it's actually the measurement capabilities. And so the ability to actually understand who actually saw an app? What did they do? Maybe even link that to downstream activities that occurred at the advertiser's own dealership or cash register, that becomes fascinating. And so again, it all plays to what our advertisers are looking for right now in a period of economic uncertainty. They want greater targeting. They want to reach their consumers wherever they are, and they want to know what they're doing actually works. And so CTV relative to linear delivers against all those things.

[Operator Instructions] The next question comes from the line of Mark Zgutowicz with Benchmark.

Just a qualification I was hoping for in terms of relative momentum that you're seeing across clean room, CMI and Commerce Media. It sounds like you're adding some nice scaled customers. However, I also saw that you had a slight sequential downtick on $1 million- plus revenue customers in the quarter. So perhaps you can provide a little balance on those dynamics.

Yes. I'm happy to address the $1 million-plus customer question, and then maybe Scott can kind of tackle the relative contribution from the different initiatives he spoke about in his prepared remarks. With respect to $1 million-plus customers, I called out in my prepared remarks, a couple of large known churn events with what we would characterize as atypical circumstances that impacted the quarter. For example, one of the churn events is Oracle as a result of them exiting their ad tech business. We knew this was coming. It hit in Q1. It impacted our $1 million-plus metric in the quarter. That said, I also spoke about our sales momentum quarter-to-date and the success we've had signing large multiyear deals so far -- multiyear, multimillion dollar deals so far in Q2, which should benefit our $1 million-plus customer count in Q2 and beyond. So in terms of the quarter, I wouldn't read too much into it. We feel confident that this metric will rebound next quarter and throughout the remaining quarters of this year.

And then Mark, in terms of your other question around relative size or contribution to growth of Cross-Media, CTV and Commerce Media. We don't break it out that way because it's all just subscription growth largely for us. But what I really liked about the quarter is when I look ahead, all of these things are still in the early stages. So the cross-media insights initiative is one that we just launched this past quarter, and it's off to a strong start. And so I'm hopeful that the case studies that emerge from that start to go viral because I think virtually all of our current customers should be availing themselves of cross-media insights. And I think it could be a really good way to attract new prospects as the year progresses because it just -- it makes everything accountable. On the Commerce Media front, the way I view that is we're planning the tent poles, the major nodes. And then you got to fill in the density around it and you get a flywheel effect going. And so the wins that we talked about even this quarter or more broadly, what I was sharing just a second ago with Cal, those are flywheels that over the back half of this year and in the coming years could really take off for us. And so even CTV, the flip is happening as linear increasingly flows to CTV. But you look at a company like Netflix, they are an amazing partner. I mean I just -- I can't say enough good things about Netflix, and we worked really closely with them as we've scaled, as we've stood things up over the last quarter. We got dozens of clients live. But I would imagine a year from now, that number should look more like hundreds because if you're doing any television advertising, a really good place to start is Netflix. And so I think there's a really nice opportunity there as well.

That's helpful. Separate question just around where we're at with offshoring, the initiatives there and perhaps even automation leverage. Perhaps, Lauren, you might share sort of the leverage that we've seen there last 12 months and what you maybe expect this fiscal year? And also, if you're ready to start qualifying sort of the pricing incrementality that you expect later this year or if there's a plan to provide more tangibles on that?

Yes, happy to. And with respect to offshoring and automation, our offshoring initiative continues to just go really well for us, Mark. And while it's hard to perfectly measure, we believe the combination of offshoring plus just general smart cost management, in part driven by automation is driving low double-digit millions of cost savings for us this year. This is really what's giving us the ability to decrease OpEx slightly year-on-year, drive 4 points of margin expansion while at the same time, continuing to invest in the areas that we believe will support our future growth. And then with respect to pricing, first, we haven't included any upside to our revenue guidance this year associated with our new pricing model. As Scott mentioned, we're in the very early stages of our pilot, but the reaction from both sellers and customers has been very positive. In fact, it was a key selling point for the couple of customer wins Scott discussed in his prepared remarks. As we move through the pilot and round out this year, we expect to have more specifics to share. But at a very high level, we believe this model will unlock meaningful benefits for both our customers as well as for us internally. And just a few highlights I'd call out. With respect to our land and expand motion, this model should benefit deal velocity. It has a lower cost of entry and if customers so choose a more flexible usage-based option. We believe it will also help our expand motion because the new model has usage tokens that can be seamlessly and fungibly used across the entirety of our platform and for different use cases. And then finally, and we've talked about this before, it should unlock some internal efficiencies as well as it will enable us to streamline our deal desk and billing processes. So to summarize, the pricing initiative is off to a great start and expect to share more specifics as we move through the year.

Your next question comes from the line of Clark Wright with D.A. Davidson.

Sticking to the pricing changes, I would love to understand how conversations around the actual pricing and all changes are impacting new deals or potentially reducing friction in the new business process. And I have a follow-up.

Yes, Mark, I would tell you it's viewed as very favorable. Most SaaS companies have a usage-based entry-level product where clients can try and then you can scale together. We've been slow to offer that. This is a game changer for us. And a couple of clients, the new logos that we won and arguably the world's biggest QSR, we were doing a little bit of work with them. But this is a much bigger opportunity for us. I mean they specifically called it out as one of the reasons they chose us because they didn't have to make that big upfront commitment. There was a way to grow into it together and so that, coupled with the opportunity that we see in terms of getting some of these network flywheels up and started, it solves the problem for us. There's kind of 3 things going on. One is the network flywheel. Two is the platform modernization that should make our products simpler and more accessible to anyone, lowering our cost to serve. And then three is the new pricing model. And so although it's early, we're pretty optimistic about this. That said, and I think this is an important thing, we are going to be very methodical about how we roll this out to our existing clients. And so we know when our renewals are scheduled. We'll start those conversations well in advance. And we're not going to do anything that impacts our financials or hurts our clients. So we're going to be really smart and very methodical step-by-step about this with existing clients and very opportunistic with new prospects.

Got it. Appreciate that clarity. And then, Scott, maybe another one for you here. There's -- you talked about the fact that several technology providers are competing for a share of brand's AI budget to solve for data-driven marketing and advertising use cases. What do you think LiveRamp's right to win is in this rapidly changing environment?

I love this question because it allows me to say something definitively to the market and to all of our folks internally as well. We are not an AI company, all right? We're just not. We are utilizing AI in a lot of the things that we do and building in to make our products better. And so for example, at RampUp this year, we had a demo of something that will go live next quarter. I'm really excited about it. Instead of creating segments using Boolean logic and SQL queries, you literally use AI. And we're going to be the only company in the world that can allow a client to combine first-party, second-party and third-party data to make really amazing AI segments. That's an example of how we use AI to improve our current products. And we'll do that in our queries. We'll do that in our reporting. We'll do that in our QA. We'll do that to enable our engineers to code faster, a whole host of things. But in terms of how we interact with all of the AI companies that are out there doing amazing things, we're an enabler. We're not an AI company. We're an AI enabler because the big challenge that all of our clients have is that they're looking at all the things they can do. And the common denominator is if you build AI using the world's public information, you hit an asymptote, the models aren't good enough. If you start to fuel it with your own proprietary information, then you can unlock significantly better performance, greater personalization, everything just performs better. But the threat there is the complexity of wiring your data to all those different touch points and also the security will enter us because our clean rooms can be configured to go right into AI. And so we can configure -- I have a vision of like if someone is doing something interesting in AI that matters to our clients, we're going to have an integration partnership with them with the right controls in place such that our clients can very easily activate their data into those models. Now I have a view that there won't be a single company that wins on all these models. And we already see that, that it's hyperfragmentation. A couple of companies might buy all the companies that build these models over time, over the next 10 to 20 years. But there's hyperfragmentation, and so that really plays to our advantage. That complexity is exactly the problem that we've always solved with data activation. And now we're just extending data activation to AI activation. So I think it's a really interesting opportunity for us. You can see that we already announced like our partnership with Perplexity. We announced with Chalice. And I think you'll see a host of other partnerships because literally, it's a big priority for our business development team.

And it seems that we have no further questions. I would now like to turn the conference back over to Lauren Dillard for closing remarks.

Great. Well, thank you. First, to close, Q1 was a strong start to the year, marked by double-digit revenue growth, first quarter -- record first quarter margins and continued discipline in both execution and capital allocation. Second, recent sales momentum has been strong, and our clean room strategy is landing, and we're on track to deliver progressively stronger top line performance as the year unfolds. And finally, we expect another year of strong cash flow and plan to deploy a substantial portion of this higher cash flow toward opportunistic share repurchases, reflecting both our confidence in the business and our continued commitment to driving long-term shareholder value. With that, thanks again for joining us today. We look forward to speaking with many of you in the days and weeks ahead.

This concludes the conference call. You may now disconnect your lines. Have a pleasant day, everyone.