Advertising data platform LiveRamp (NYSE:RAMP) reported Q4 CY2024 results topping the market’s revenue expectations, with sales up 12.4% year on year to $195.4 million. On the other hand, next quarter’s revenue guidance of $185 million was less impressive, coming in 0.9% below analysts’ estimates. Its non-GAAP profit of $0.55 per share was 18.8% above analysts’ consensus estimates.
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LiveRamp (RAMP) Q4 CY2024 Highlights:
- Revenue: $195.4 million vs analyst estimates of $192.1 million (12.4% year-on-year growth, 1.7% beat)
- Adjusted EPS: $0.55 vs analyst estimates of $0.46 (18.8% beat)
- Adjusted Operating Income: $45.27 million vs analyst estimates of $38.97 million (23.2% margin, 16.2% beat)
- Revenue Guidance for Q1 CY2025 is $185 million at the midpoint, below analyst estimates of $186.6 million
- Operating Margin: 7.5%, down from 8.7% in the same quarter last year
- Free Cash Flow Margin: 22.9%, down from 29.7% in the previous quarter
- Customers: 865, down from 885 in the previous quarter
- Net Revenue Retention Rate: 108%, up from 107% in the previous quarter
- Annual Recurring Revenue: $491 million at quarter end, up 9.8% year on year
- Market Capitalization: $2.25 billion
Company Overview
Started in 2011 as a spin-out of RapLeaf, LiveRamp (NYSE:RAMP) is a software-as-a-service provider that helps companies better target their marketing by merging offline and online data about their customers.
Advertising Software
The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, LiveRamp grew its sales at a 12.9% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our benchmark for the software sector, which enjoys a number of secular tailwinds.
This quarter, LiveRamp reported year-on-year revenue growth of 12.4%, and its $195.4 million of revenue exceeded Wall Street’s estimates by 1.7%. Company management is currently guiding for a 7.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 7.9% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and implies its products and services will face some demand challenges.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
LiveRamp’s ARR punched in at $491 million in Q4, and over the last four quarters, its growth slightly outpaced the sector as it averaged 11.3% year-on-year increases. This alternate topline metric grew slower than total sales, which likely means that the recurring portions of the business are growing slower than less predictable, choppier ones such as implementation fees. If this continues, the quality of its revenue base could decline. 
Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
LiveRamp’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 106% in Q4. This means LiveRamp would’ve grown its revenue by 5.8% even if it didn’t win any new customers over the last 12 months.
Trending up over the last year, LiveRamp has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.
Key Takeaways from LiveRamp’s Q4 Results
We were impressed by how significantly LiveRamp blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter slightly missed and it lost some customers. Overall, this quarter could have been better. The stock remained flat at $34.57 immediately following the results.
Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.