Good afternoon, ladies and gentlemen, and welcome to LiveRamp Holdings, Inc.'s Fiscal 2026 Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And to withdraw your question, simply press star one again. 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. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining our fiscal 2026 third quarter earnings call. With me today are our CEO, Scott Howe, and CFO, Lauren Dillard. Today's call and the earnings press release 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 reconciliation 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 IR website. With that, I'll turn the call over to Scott. Thank you, Drew, and thanks to everyone joining us today.

You'll hear three main themes during my remarks today. First, our business continues to demonstrate durability, predictability, and scalability, as evidenced by our solid performance in Q3. Second, AI is a tailwind for our business since we provide critical foundational infrastructure that allows our partners to utilize AI more effectively. And third, our focus on rule of 40 is unwavering, and we intend to achieve membership in this exclusive club in FY 28. Let's start with the quarter. Yet another proof point of the durability, predictability, and scalability of our business. We delivered a solid third quarter with revenue and operating income exceeding our guidance for the eleventh consecutive quarter. Overall, our team is executing well, and we made notable progress with several key growth initiatives, including expanding our data marketplace to include AI models, agents, and applications, and strengthening our go-to-market by expanding our usage-based pricing model to reseller customers. More on these in a minute. First, let me hit the highlights from Q3. Q3 revenue growth was 9%.

Inclusive of a four-point acceleration in subscription revenue also to 9%. ARR increased $11 million quarter over quarter and 7% year over year, driven by use cases for commerce media, CTV, and cross-platform measurement. Total customer count increased by quarter over quarter, the largest increase in more than three and a half years. And our million-dollar-plus customers increased by eight to a high of 140. In Q3, we signed several million-dollar-plus upsell deals, including with the world's largest e-commerce retailer, a major social media platform, and a leading QSR. The deals were mostly for expansions for connectivity and clean room insights. We had record quarterly operating margins on both a non-GAAP and GAAP basis, and record quarterly free cash flow. We continue using the bulk of our free cash flow for share repurchases. Clearly, there was much to like about the Q3 results, and we'll provide additional details. While the quarter's performance highlighted our durability and predictability, I'm bullish on the future. In contrast to what Wall Street may believe about the software overall, we believe AI is a tailwind, a true force multiplier for our platform as the advertising ecosystem looks to adopt AI in a trusted, secure way. While AI is capturing headlines, its real-world impact in advertising depends on something far less visible but absolutely essential. A trusted data network that allows AI to operate across partners, clouds, and platforms, while meeting rising privacy and regulatory expectations. And this is where LiveRamp Holdings, Inc. plays a critical role. We are starting from a position of strength, with competitive advantages that become even more powerful in an AI-driven world. Some of you will recall the four strategic moats we outlined at our Investor Day just last year. Each of these directly maps to what AI systems require to…

Today, I'll review our Q3 financial results and then discuss our updated outlook for FY '26 and Q4. 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 posted to our IR website. Starting with Q3, in summary, we delivered strong results exceeding our expectations on the top and bottom line, reflecting strong execution by the team, and continued sales momentum. Revenue increased by 9% and was $1 million above the midpoint of our guide. Non-GAAP operating income increased by 36% and was $6 million above our midpoint. GAAP operating income more than doubled for a second consecutive quarter, net new ARR was $11 million plus, and finally, we had strong growth in total subscription customers as well as million-dollar-plus customers. Let me provide some additional details. Please turn to slide six. Total revenue was $212 million, up 9%. Subscription revenue was $158 million, also up 9%. Within subscription revenue, fixed grew 8%, accelerating by two points and solidly in the high single-digit range. And usage increased by 13% year over year. ARR increased by $11 million quarter over quarter, and 7% on a year-over-year basis. Our million-dollar-plus subscription customers increased by eight, quarter on quarter to a new high of 140. Total customers increased by 15, the best performance in the past twelve quarters. This improvement was driven by both lower customer churn and higher gross ads. Next, subscription net retention was 101%, in line with our 100 to 105% near-term expectation. Total RPO or contracted backlog was up 23% to $710 million and current RPO was up 9% to $471 million. RPO and CRPO increased nicely sequentially, consistent with the historical pattern driven by seasonality in contract renewals which skew to our…

Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your questions, press star one again. Our first question comes from the line of Jason Kreyer with Craig Hallum. Please go ahead.

Great. Nice quarter, guys. Good to see the growth in customer count. Scott, I wanted to double click on your comments on Publicis. Maybe if you can just talk about what key features or functionality that LiveRamp Holdings, Inc. brings to the table that was kind of the reason why they selected to work with you guys.

Yeah. Well, first, Craig, thank you. And I would tell you that this is probably a few years in the making, not with Publicis, but just our readiness for really expanding our partnerships with all potential resellers. If you recall over the last few years, I've talked a lot about our efforts in terms of modernizing our platform. And then more recently, over the last year, we've been rolling out changes to our pricing model. And the combination of those two things really makes us ready to work in a different way with these reseller partners and not have any fear of cannibalizing ourselves. And in particular, you know, Craig, if you remember the old Intel Inside campaigns from I don't know what fifteen, twenty years ago. I mean, we kinda have a similar philosophy here at LiveRamp Holdings, Inc. We want every major platform and agency to use our modular composable platform and innovate on top of it. And so, you know, I talked about how they are working with us in a really different way that's gonna add value to their clients. And Jason, I think that there's an opportunity to do this with dozens of these kinds of partners, each of whom are already competing in their own unique way. But by building on top of LiveRamp Holdings, Inc., by building using LiveRamp Holdings, Inc. pieces, they can deliver better products to their customers.

That's great. Thank you. Maybe a Lauren question here. So we're solidly into the back of your fiscal year. We know that you've got a lot more customer renewals in the back half of the fiscal year. Maybe you can just give us a little bit more on what kind of the upsell cross-sell conversations, how those progress. And, again, you know, what kind of capabilities, like cross-media intelligence or what kind of capabilities customers are looking for. Thank you.

Yeah. Happy to. And maybe just to re-highlight something in my prepared remarks. Q3 was a very strong sales quarter for the business. In fact, our bookings were up in the quarter strong double digits, and this was mostly driven by expansion with existing customers. And specifically, to your question, the cross-sell of our clean room to support things like cross-media intelligence, but also just to support broader commerce media use cases as well as other measurement use cases. So we continue to see clean room be a catalyst for expanding with existing customers upon renewal.

Great. Thank you.

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

Hey, guys. Congrats on the results, really appreciate all of your commentary on AI. I wanted to focus my question there. Scott, with all of the AI partnerships that you guys have, and just kind of you know, how you talked about the importance of it and being a tailwind. Can you just talk about your approach to prioritizing these different opportunities, especially given kinda how large and dynamic the market is?

Yeah, Shyam. You know, on this, we are remarkably consistent. Because we have always been all about client and partner-led innovation. And so in this case, we already know what we need to do. And that's ask our clients and partners what use cases they find most important. And so we prioritize that. Not surprisingly, as a result, if you look at the 20 or I guess 21, different live partnerships that we have active. You know, the majority of them, call it two-thirds, are kinda legacy companies that you've heard of that have built AI. And so there's just an opportunity when you're talking about, you know, Google is the example I gave in the prepared remarks. Our clients are already working with companies like that, they're spending a lot of money there. And so naturally, those are the first priorities in terms of AI adoption. But at the same time, we're also making a real effort to prioritize some of the native use cases. And so those count for about a third of the partnerships that we've signed, and we have a lot more of those in the hopper. Those are things that either our clients tell us are important or we believe are going to grow in importance as they roll out their advertising models. And so we think you have to have a portfolio approach here because across the incumbents versus the new start-ups, I don't think anybody in the market has evidence by the chaos on Wall Street this week, knows who the winners and losers are gonna be. The good news is we're betting on all of them, and so we know that we will be affiliated with the folks who emerge as the winners.

Great. Thank you, guys. Thank you, Scott.

Our next question comes from the line of Elizabeth Porter with Morgan Stanley.

Hey, Scott. Lauren, this is Lucas on for Elizabeth Porter. Thanks for taking my questions here. So the first is, as you expand commerce media with new partners like Uber and PayPal, in which other verticals are you seeing the most growth? And then could you talk about the revenue opportunity from these non-retail commerce networks compared to the traditional ones? Thanks.

Yeah, I think these are gonna grow very fast because they're coming off a smaller base right now. And we're seeing it in a few areas. So travel, nearly every major airline has launched a commerce media network. It just makes sense because they already have their travel partnerships in place, they have a captive audience when you're flying with the feedbacks. So that's one. A second would be kind of the food delivery, the Uber's DoorDash's of the world. Once again, they have a captive audience. Sometimes when you're traveling where you're looking at the back of a screen, or you're looking at your phone and maybe potentially ordering food. So there's a lot they can do there. And then finance is a really nice one for us. Now, in each case, it exposes us to very different type clients than we've historically worked with. And this is what gets us back to why the pricing model we talked about, super important for the resellers, it's also really important for all these commerce media networks who we look at as potential reseller partners as well. Because so often, they have smaller SMB type clients with food delivery. It might be the local or chain restaurants. And travel, it could be any number of different hotels or travel partners. And in payments, it's anything any vendor that a merchant that a user spends money with. So all of those become potential clients. Historically, we couldn't have served those clients. Because our product didn't have enough self-serve capabilities, nor did we have the pricing model. But the things that we've done over the last couple of years, we feel have positioned us to really take advantage of this. And so I think those three areas will be really for us in the next couple of years.

Great. That's super helpful. Then I was hoping you guys could talk a little bit more about CTV. With the Netflix integration gaining strong momentum over the past couple of quarters, great if you could share, you know, more about how many brands are leveraging the integration, the typical spend levels, and then how it compares to other CTV platforms in the network.

Sure. I'm happy to take that. And I would just note that CTV continues to be a very strong growing component of both our data marketplace and then just traditional activation network. We talked about, you know, Netflix earlier in the year as well as a handful of other new CTV integrations. They continue to perform very well for us. Scaling nicely, albeit off small bases. Today. With respect to our data marketplace, we continue to expect CTV data purchased off our marketplace to outpace the growth of overall Data Marketplace growth. And of course, this is just one of many areas where CTV is benefiting our business. As an example, across our activation or connectivity network, about 70% of our largest our 50 largest integrations today are either pure play CTV providers or ad tech or media platforms enabled to buy CTV. Then a final point I would just make is it continues to also be a catalyst for clean room adoption, especially for measurement use cases. So, you know, taken together, it's a nice tailwind for our business this year and one we expect to continue in FY '27 and beyond.

Thanks, guys.

Our next question comes from the line of Timothy Nolan with SSR. Hi, everyone. Sorry for the background noise. Warren, hope you can hear me okay.

Yeah. It's fine, Tim.

Okay. Great. Thanks. I've got a couple if I could. One is a follow-up on the AI topic. Again, appreciate you addressing it head-on, Scott. I'm curious. One of the concerns, I guess, is that AI will disrupt, you know, the software subscription business model. But that's gonna be a very general statement. I just wonder if you could maybe give us some assurance that your customers are doing well. Everything is going well. Spending looks intact. Just any comments you could make as to that concern? To help maybe ease some of the worries that are out there? And, actually, indeed, maybe if you could talk to any acceleration that you may be able to see in your business, to respond to that. My second question is to come back on the topic of AgenTik AI. And the universal complex protocol. I remember the name right, UCP that you've developed and made available to organizations like the IAB. Can you just talk if there's any progress toward commercialization of these and what the status of those efforts might be? Because I think it's very important for the future of ad transactions. Thanks.

Yeah. Tim, we agree. So handling your questions in turn, first off, on AI, I think 40 and what our targets are, you know, I'm very firmly committed to getting back to double-digit growth. I think AI helps us do that. Because after all, even if AI does disrupt elements of software, for AI to perform you need to have data. In the marketing space. And if all you're doing is using models that are based on the world's publicly available information, then you're gonna be accessing the same models that everyone else is. And there will be no competitive advantage. The advantage comes from every client's ability to bring their own first-party data. But to bring your own first-party data, you better be darn sure that you have control and visibility over it. And that is what we do. And so you should think about us as an enabler of AI. We are essential for safe AI usage. And so as these AI use cases expand, we think that is really good for our business. Now in your second question, you get to, you know, what are the conditions of more widespread adoption of AI in the marketing space, and that is standards control and visibility. We developed something that we gave to the IAB, which has continued to commercialize it. They talked about that a lot in their annual meeting this week that I was at. In addition, there's another standard out there called ADCP that one of my board members has developed, Brian O'Kelly. I will tell you we don't care which standard is adopted. It is good for the industry to have common standards about how data is going to be organized such that it can be ingested by large models. And so, yeah, again, there are at least two, there may be more, we don't care. As long as one standard emerges. And the fact that we have line of sight to two of them suggests that one of those, if not a combination of them, is ultimately going to emerge as the standard of choice.

And, Tim, I might just provide a little bit of quantitative color against your first question, which is around whether or not we're seeing AI impact demand for our products. The short answer is we're not. As I mentioned in my prepared remarks, we had a remarkably strong sales quarter in the third quarter. Conversion rates, deal cycle length, consistent sequentially, our average deal size was up double digits. Individual rep productivity up as well. And so we're simply not seeing that dynamic right now.

Yeah, and you know, the last data point that might be useful, and it's a little squishy. There's a little squishy math, I'll tell you. But we tried to look at all of our different activations and say, all right, what percentage of the activations are already going to things that we would consider AI? And if you look at either AI partnerships or AI-enabled partnerships, because we don't always have visibility into what algorithmic logic is driving a decision at a partner. We think there's probably 10% of our activations already going to AI. Again, it's a little bit of a squishy number, but we just wanted to get a sense of what that looks like and start to extrapolate what that looks like over time because I think it's gonna be an important stat to share with Wall Street, something like that. Because, you know, we don't see a threat here, and we wanna make sure our understand that this is a tailwind, not a headwind.

K. Thank you both. It just seems like you could be a good gauge on this health of the market here. And so to hear those comments from you is helpful.

Our next question comes from the line of Mark Zgutowicz from Benchmark Company.

Thank you. Good evening. I wanted to maybe address the, you know, just the pricing tests that you're doing. And maybe you could just back up a second and just talk about sort of the go-to-market there. Like, how are you, you know, going after these clients? What's the what are the I guess, the challenges there in terms of finding those clients, acquiring those clients versus the pricing itself. And then if you think about next year, in ARR incrementality from SMB, if you have something that you're targeting or if there's a point in time where you think you might have better visibility on what kind of incrementality you expect from SMB, that'd be helpful.

Yes. And I'll start here and then Lauren will, I'm sure, come in with some analytical support. But I would tell you, that since we launched the pilot, we've taken a very methodical approach to how we are communicating this. And more specifically, you know, we're not going to clients who are under contract and retrading their deals. Rather, our priority to date has been new logo opportunities. And the new pricing has helped us land those new logos. What we found historically is one of the sticking points in a conversation has been the presence of a large fixed upfront commitment. And so to the extent that we can lower that and have more of the ultimate value be usage-based, then we win together. And they can scale into the opportunity. Over time, we think that will improve our churn as well because we're not gonna be in the position where we're, you know, renegotiating with a client that signed up for a large fixed price contract and then grow into that. This is particularly important as we approach those smaller type clients. And in fact, you see that in the numbers like so far, like the average contract for someone on one of these new usage-based pricing is a lower ACV than a legacy contract. Well, stands to reason because they tend to be smaller and they're newer and we haven't grown them over time yet. Now, based on what we've learned, it's gonna be it's gonna put us in a position to again be very methodical as how we roll this out with existing clients. So as clients come up for renewal, in the coming year, then we will introduce this as part of the renewal process to existing clients, and we'll continue to use it as a I think a really attractive feature for new clients.

And then just with respect to revenue incrementality, Mark, I would expect we'd have more to share on our May call. It's certainly gonna take a few quarters for this to play out in our results, but we do expect some modest upside in the back half of next year as a result of this pricing initiative.

That's helpful. Thank you. And maybe just a couple quick follow-ups so I could. Lauren, your OpEx guide looks like upper teens sequentially. I'm just curious what may be driving that. In this course specifically. And then if you can or else we can take it offline, just curious if you look at your SNR and adjust that for the two large clients that churned earlier in the year, what that might look like in might have looked like in the quarter? Thanks.

Yeah. Happy to. And you're right. Sequentially OpEx is growing about $15 million quarter on quarter. And this is very consistent with the step up we've seen in prior years. So in FY '25, that sequential increase was about $12 million in 'twenty-four, 'eighteen. So as a reminder, Q4 is our seasonally high expense quarter. Due to events and conferences like ramp-up as well as just some compensation-related step up. This accounts for the majority of the sequential increase. In addition, and I noted this in my prepared remarks, we also had some projects spend related to our growth initiatives that shifted from Q3 into Q4. You know, all that said, we're still projecting very healthy year over year growth in OpBank north of 50% in the fourth quarter. And a six-point margin improvement year on year in the fourth quarter. And for the full year, expect op inc to grow north of 30% and for a four-point margin expansion. So, you know, rest assured, we're in a good position to deliver on our operating margin targets and, you know, continue to do so as we look ahead to FY twenty-seven. And then on SNR, I would expect if you normalized for the couple large events in the early part of the year, SNR would be closer to the high end of our 100 to 105% near-term range.

Perfect. Super helpful. Thank you both.

Our next question comes from the line of Alec Brondolo with Wells Fargo. Please go ahead.

Trade Desk is implementing a new data pricing model. You white-labeled their current data I think both their model and the broader industry trend to be shifting from purchasing data on an a la carte basis to data and audiences automatically being appended to campaigns by AI. Could you help us what that trend means for the data marketplace business, either on kind of a Trade Desk specific basis or the broader industry trend? Thanks.

Yeah. I think you're referring to some of the changes that Trade Desk announced in the fall of last year, which I believe were implemented in December. So not really a factor in Q3 and would likely take some time to scale. At a high level, you know, we're aligned with Trade Desk on these initiatives to stimulate incremental demand from customers who didn't historically purchase data either because it was too complicated or costly in their view. From our perspective, if the scales, it would represent incremental transaction volume above our base case. And shouldn't change our take rate. So potential upside but not anything we're seeing in our numbers today.

Thank you. Next question. Our next question comes from the line of Peter Burkly with Evercore ISI. Please go ahead.

Yeah. Thanks, guys. This is Peter Burkly on for Kirk Materne. This guy's maybe just to start with you, kind of on the topic of AI again. You've talked fairly explicitly in the past about not being an AI company, but rather being the pipe and the plumbing that sort of enables your customers to have success with AI. Just given the increased volume and velocity of data that AI requires. So I'm curious if you could just give us any updated thoughts on that front. Any change in your thinking there that sort of continue to be the core strategy? And then, Lauren, maybe for you, you know, really nice solid accelerating ARR growth sounds like really continued strong bookings. Just curious with the CRVO growth sort of bit. And, again, understanding that, you know, you're up against tougher comparing at three q. So mechanically, that's an impact. But I'm wondering if you could help bridge that gap, maybe if it's the mix shift towards the usage-based pricing that's not being captured in CRPO or if there's anything with timing of renewals or any duration changes that might be impacting that. Thanks.

Yeah. Boy, Peter, I hesitate to make the comparison I'm about to make. And you'll realize why when I talk about Apple. And when they launched the iPhone, you'll remember that you know, they built an app store. And you could access anything. And, you know, they enabled all kinds of functionality on top of the iPhone. But at the same time, what did they have like seven or eight organic native apps that they built? And in part, it was because they thought it was core, or no one else was building them. And so, I would tell you our philosophy is very similar that, you know, the vast majority of the AI functionality we think our clients are going to unlock is going to be through our partners. It's their business. And what we do is enable the data utilization of the signals that make the models better, into those AI applications. At the same time, don't for a second think that we don't talk about AI all the time internally in our own product builds. In fact, I am pulling up on my own computer screen a slide that someone gave me yesterday right now of the twelve Hack Week projects that we have underway that our engineers are working on. And all of them are improving our core capabilities and allow our clients to extract better value from working with LiveRamp Holdings, Inc. Things like, you know, automated error signaling. So if someone like writes the wrong query, immediately flags it and corrects it, or I talked in my prepared remarks about building more AI models into data marketplace. So there's a lot we can do internally. And, you know, I'll talk about that if it's interesting to people. But make no mistake, I don't want anybody to think that we're trying to out AI companies that specialize in AI, we're trying to accelerate their growth. We're trying to catalyze their success by connecting to them.

And then, Peter, with respect to CRPO, as we've discussed in the past, our RPO metric is very sensitive to the timing of renewals and the length of contracts. I mean, you called those two factors out. Specifically, quarter, CRPO was impacted by the runoff of some large multiyear deals that are in their final year. Expect these deals will renew ahead of their next renewal cycle, and we Importantly though, I would point you to the strength of total RPO, which was up 23% in the quarter and reflects the recent sales momentum Scott and I talked about today.

Very helpful. Thank you both.

Thank you. At this time, we have no further questions. I will now turn the call back over to Lauren Dillard for closing remarks.

Great. Well, thanks again for joining us today. We're very pleased with the quarter we reported and with our building top-line momentum. As Scott mentioned, investors and analysts are invited to join us at Ramp Up San Francisco on March. Where we plan to host a Q and A session for analysts and investors. We'd love to have you. Please reach out to Drew for more information and to RSVP. So with that, appreciate your time today and look forward to catching up over the coming days and months. Thanks.

This concludes today's conference. You may now disconnect your lines.