LiveRamp Holdings is well-positioned to leverage the growing requirement for secure first-party data collaboration and to ensure addressable digital advertising in the face of third-party signal loss.
The company’s operational plan and profit growth align well with the high likelihood of market growth and the company’s potential for good performance.
Business Overview
LiveRamp Holdings, Inc. operates as a premier data collaboration program, allowing firms to develop and use data securely to enhance customer experience and generate business growth opportunities.
The products offered by the company are central to the digital advertising ecosystem through data-driven marketing. LiveRamp’s technology innovation and cooperation with reputable brands confirm its role as an essential player in the transition from third-party to first-party tactics.
Financial Performance
Last year, LiveRamp had remarkable financial results. Revenue rose significantly from $148.6 million in March 2023 to $171.9 million in March 2024, driven by a more productive sales force and a stronger-than-expected digital advertising market.
However, while the company grew its profit, operating income fluctuated, hitting a low of -$8.7 million in March 2024 after peaking at $16.5 million in December 2023. This fluctuation is attributed to higher performance-based compensation and the acquisition of Habu, which increased both revenue and costs (Q1 2024 earnings call).
LiveRamp’s gross margin remained stable, averaging around 72-74% throughout the year, reflecting efficient cost management despite fluctuating revenue costs. The company’s operating margin grew in the second quarter of 2023 but faced setbacks by the end of the financial year due to higher SG&A expenses, indicating struggles in maintaining profitability.
Similarly, the profit margin was positive in December 2023 but turned negative at -3.13% in March 2024, showing ongoing efforts to balance growth with profitability (Q1 2024 earnings call).
Opportunities
LiveRamp plans to further develop its data collaboration platform and partner ecosystem. A major opportunity lies in integrating and scaling Habu’s Clean Room technology, which has received favorable customer feedback and has a growing sales pipeline. The industry’s shift towards first-party data should drive demand for LiveRamp’s solutions, contributing to increased top-line revenue and profitability.
The company also has a promising partnership with Google’s DSP, Display & Video 360, and the PAIR project. This initiative enables advertisers and publishers to securely align their first-party data for personalized advertising, a critical capability as third-party cookies phase out.
The early success of PAIR implementations has improved conversion and match rates, positioning LiveRamp to attract new logo opportunities and retarget existing customers.
Challenges
LiveRamp faces several challenges, including the delay in Google’s launch of changes to third-party cookies until early 2025. This postponement disrupts LiveRamp’s PAIR implementation schedule, causing short-term uncertainty and potential interruptions in customer advertising strategies.
While the company is preparing for the switch, industry inertia and the need for customer education pose additional hurdles.
The competitive environment is another challenge, requiring continuous product upgrades and customer loyalty efforts. Growth should be driven by product innovation and a customer-first approach.
The company must excel in customer care and data provision, as well as manage major technological changes inherent to digital advertising, such as transitioning from large top-tier customers to numerous smaller ones.
Valuation Metrics
LiveRamp’s valuation metrics indicate its growth potential compared to the sector median. The company’s gross margin of 72.79% is substantially higher than the sector median of 48.96%, demonstrating effective cost management and strong profitability.
The P/E ratio of 211.4, however, is significantly above the sector’s 30.55, reflecting high market expectations for future growth. The P/S ratio is relatively close to the sector median, with LiveRamp’s 3.19 versus the sector’s 3.01.
This suggests that while sales volume is viewed as a sector norm, there are higher growth expectations for earnings in the future.
To fairly assess LiveRamp’s price-to-earnings (P/E) ratio and price-to-sales (P/S) ratio, assuming consistent revenue growth and profitability trends, a P/E ratio of approximately 100 and a P/S ratio of approximately 3.5 are reasonable estimates. These adjustments consider the potential gains from new services and strategic partnerships, as well as operational risks that could affect profitability.
Solid Long-Term Prospects
Strategic campaigns, well-executed by LiveRamp, and solid financial performance predict future growth for the company. Despite challenges such as delays in third-party cookie deprecation and competitive pressures, LiveRamp continues to innovate and maintain a strong market position, enabling it to adapt to industry trends.
The company’s long-term prospects remain sound due to its robust data collaboration platform and new partnerships.
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Faith is an enthusiastic freelancer and regular contributor to numerous finance blogs, creating valuable pieces to educate individuals on finance and fintech options. As a skilled writer, Faith has created content for diverse industries—if it exists, she’s likely written about it!
