LiveRamp Holdings, Inc. (RAMP) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call shows strong financial performance, with revenue and ARR growth, and optimistic guidance. The Q&A section supports this with positive sentiment on growth opportunities, particularly in AI and new pricing models. Despite some lack of clarity on specifics, the overall sentiment is positive, with a focus on future growth and shareholder returns. The market cap suggests a moderate reaction, placing the stock price movement in the 'Positive' category (2% to 8%).
Key Financial Performance
Q2 Revenue $200 million, an increase of 8% year-over-year. This growth was led by an 18% increase in Marketplace and other revenue and a 5% increase in Subscription revenue. The reasons for the growth include strong execution, sales momentum, and stable macroeconomic conditions.
Net New ARR $14 million, the largest organic increase in the past 7 quarters, equating to a 7% year-over-year growth. This was driven by momentum in use cases like Commerce Media, CTV, and Cross-Media measurement.
Non-GAAP Operating Income $45 million, a 10% increase year-over-year. This improvement was attributed to cost efficiencies achieved through expanding offshore operations in India.
GAAP Operating Income $21 million, more than double the previous year, with a margin expansion of 7 points to a record quarterly high. This was driven by sustainably lower stock-based compensation.
Gross Margin 72%, down 3 points year-over-year due to higher cloud hosting expenses related to platform modernization.
Free Cash Flow $57 million, of which $50 million was used for share repurchases. This reflects strong cash generation and a focus on returning value to shareholders.
Million-Dollar Plus Subscription Customers 132, a 5% sequential increase to a new high. This growth reflects strong customer acquisition and retention.
Data Marketplace Revenue Grew by 14%, driven by stable ad spending and new CTV integrations.
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Operating Highlights
AI product enhancements: Invested in AI product enhancements, including a new AI-powered audience segment builder and AI Agentic orchestration for marketers.
Usage-based pricing model: Rolled out a new usage-based pricing model to attract midsized brands and expand sales motions.
Commerce Media: Expanded partnerships with companies like Uber, PayPal, and General Motors to enhance customer experiences through data-driven collaboration.
CTV and publisher integrations: Extended Netflix connectivity integrations to 10 new international markets and introduced Meta attribution insights for retail media networks.
Cost efficiencies: Achieved cost efficiencies through expanded offshore operations in India, contributing to a 10% increase in non-GAAP operating income.
Revenue growth: Q2 revenue increased by 8%, with Marketplace and other revenue growing by 18%.
AI integration: Positioned to guide customers in leveraging AI for marketing outcomes, with partnerships spanning search, commerce, and creative applications.
Rule of 40 target: Focused on achieving Rule of 40 financial targets by FY '28, with current progress at Rule of 31.
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Risk or Challenges
Macroeconomic Risks: The company acknowledges a relatively stable macro backdrop but narrows its revenue guidance range to reflect less macroeconomic risk halfway through the fiscal year. However, economic uncertainties could still impact subscription usage and marketplace revenue.
Gross Margin Pressure: Gross margin declined to 72%, down 3 points year-on-year, due to higher cloud hosting expenses related to platform modernization. The cost optimization from migrating customers to an upgraded back end is taking longer than expected, which could delay financial benefits.
Customer Churn and Sales Cycle: While churn was better than expected, the average deal cycle remains lengthy at roughly 9 months. This could pose challenges in maintaining sales momentum and achieving revenue targets.
Platform Modernization Costs: The ongoing platform modernization effort, including running two platforms simultaneously, is incurring higher costs and delaying expected savings. This could impact operating margins in the short term.
Regulatory and Compliance Risks: The company operates in a highly regulated environment, and any changes in data privacy laws or regulations could impact its operations and customer relationships.
Competitive Pressures: The company faces competition in areas like AI, Commerce Media, and CTV. Maintaining leadership in these areas requires continuous innovation and investment, which could strain resources.
Ad Spending Volatility: Marketplace revenue growth is tied to ad spending, which, while stable now, could be subject to volatility, impacting revenue from the Data Marketplace.
Execution Risks in New Pricing Model: The rollout of the new usage-based pricing model is in its pilot phase. While early feedback is positive, there is a risk that the model may not scale as anticipated, potentially affecting revenue growth.
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Guidance & Outlook
Revenue Growth: FY '26 revenue is expected to be between $804 million and $818 million, reflecting growth of 8% to 10%. Subscription revenue is projected to grow mid- to high single digits, while Marketplace and other revenue is expected to grow mid-teens.
Gross Margin: Gross margin is expected to be approximately 72% for FY '26, slightly lower than prior expectations due to delays in cost optimization from platform migration.
Operating Income: Non-GAAP operating income for FY '26 is expected to be between $178 million and $182 million, with a margin of 22%. GAAP operating income is projected to be between $83 million and $87 million, with a margin of 10% to 11%.
Free Cash Flow: Free cash flow is expected to increase in FY '26, with a substantial portion allocated to share repurchases.
New Pricing Model: The usage-based pricing model is being expanded beyond the initial pilot due to positive feedback. This model is expected to drive incremental revenue growth by improving land and expand sales motions.
AI and Technology Integration: AI is expected to drive incremental growth opportunities, with new tools like the AI-powered audience segment builder and AI Agentic orchestration. Expanding partnerships with AI application providers and platforms like Netflix are anticipated to contribute to future growth.
Rule of 40 Target: The company remains confident in achieving its Rule of 40 target by FY '28, with expectations of 10%+ revenue growth and operating margin expansion driven by fixed cost efficiencies and AI-driven growth.
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Shareholder Return Plan
Free Cash Flow Allocation: $57 million in free cash flow was generated in Q2, with $50 million allocated to opportunistic share repurchases. Fiscal year-to-date, $80 million has been spent on stock repurchases.
Remaining Authorization: $177 million remains under the share repurchase authorization, which expires on December 31, 2026.
Share Repurchase Activity: The company repurchased $50 million worth of shares in Q2 and $80 million fiscal year-to-date.
Future Plans: The company plans to continue deploying a substantial portion of free cash flow towards share repurchases, depending on market conditions.
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Key Q&A
Q:Can you elaborate on some of the drivers of the improvement in ARR in the quarter?
A:The improvement in ARR was driven by strong gross new ARR, cross-sell and upsell of the clean room solution, increased new logo activity due to a dedicated new logo sales team and new pricing model, and much lower customer churn compared to Q1. These trends are considered durable, and the team is focused on achieving faster growth over time.
Q:How do you feel about the upsell opportunity over the next 2 quarters with new solutions and integrations coming to market?
A:Management feels optimistic about the upsell opportunity, citing multiple growth levers such as XMI Cross-Media Intelligence, commerce-media networks, CTV expansion, and AI opportunities. Clients are reportedly excited about these offerings, and management is confident in their ability to deliver.
Q:How are AI search and AI overviews affecting click-through rates to the open web, and what are the implications for your business?
A:Management stated that their exposure to the open web is low, as their top destinations (e.g., Meta, Roku, LinkedIn) are not impacted by open web shifts. They also see high upside from AI, as their first and second-party data enhances AI models. Investments in AI readiness and usage-based pricing are expected to drive future growth.
Q:Can you provide an update on the degree of macro conservatism baked into the revenue guide for the year and potential incrementality from pilots and AI labs?
A:The revenue guide includes conservatism, with the midpoint assuming consistent macro conditions and the low end assuming major deterioration. No upside from pricing pilots or AI labs has been baked into this year's guide. The pricing pilot is expected to unlock incremental revenue growth over time, but benefits will accrue in the next fiscal year.
Q:Can you elaborate on the mix of retail in CPG versus non-retail in terms of incremental ARR in the second half?
A:Management did not provide specific numbers but noted growth in both retail and non-retail commerce-media. Traditional retail media focuses on usage increases and scaling merchant partners, while non-retail commerce-media (e.g., PayPal, Uber) opens new TAM and accelerates growth.
Q:Can you elaborate on the step-up in platform investments this year and whether it stretches into fiscal 2027?
A:Platform investments focus on upgrading the platform for better customer experience, AI product capabilities, and a new usage-based pricing model. These investments are expected to drive incremental revenue and will abate by the end of this fiscal year, positioning the company for growth in FY '27.
Q:Is the stabilization in direct subscription customer count a potential inflection point for growth?
A:Management believes the customer count is stabilizing, supported by a dedicated new logo sales force and a new pricing model. They see meaningful levers for growth, including the Clean Room strategy and high-quality new customer additions like GM and Uber.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numbers for the mix of retail versus non-retail incremental ARR and did not detail the potential incrementality from pilots and AI labs in the current fiscal year. Additionally, while optimistic about growth opportunities, some responses lacked detailed data or clarity on timelines for achieving specific outcomes.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CTV streaming
Commerce Media
Media CTV
Meta
New York
RMNs
Rule
area
audience segment
auto
campaign
commitment
cost efficiency
experience
feedback usage
figure
fungibility usage
indicator
industry leader
insight medium
land sale
list model
model feedback
model land
model pilot
pilot list
platform capability
publisher integration
sale motion
search
solution marketer
target term
term target
token platform
update pricing
usage pricing
RAMP Transcript
LiveRamp Holdings, Inc. (RAMP) Presents at Morgan Stanley Technology, Media & Telecom Conference 2026 Transcript
Neutral3-2
LiveRamp Holdings, Inc. (RAMP) Q3 2026 Earnings Call Transcript
Positive2-6
The earnings call reveals strong sales growth, strategic AI partnerships, and successful CTV integrations, which are positive indicators. The usage-based pricing model and AI-driven initiatives are expected to drive future growth, despite some management opacity. The market cap suggests a moderate reaction, leading to a positive stock price prediction.
LiveRamp Holdings, Inc. (RAMP) Q2 2026 Earnings Call Transcript
Positive11-5
The earnings call shows strong financial performance, with revenue and ARR growth, and optimistic guidance. The Q&A section supports this with positive sentiment on growth opportunities, particularly in AI and new pricing models. Despite some lack of clarity on specifics, the overall sentiment is positive, with a focus on future growth and shareholder returns. The market cap suggests a moderate reaction, placing the stock price movement in the 'Positive' category (2% to 8%).
LiveRamp Holdings, Inc. (RAMP) Q1 2026 Earnings Call Transcript
Positive8-7
The earnings call indicates a positive sentiment with several growth catalysts. The company has raised its full-year outlook due to recent sales momentum and confidence in higher revenue growth in the second half. Partnerships with major companies and new pricing models are expected to drive further growth. The Q&A section revealed management's confidence in their strategies, despite some uncertainties. The market cap suggests a moderate reaction, leading to a positive prediction of 2% to 8% stock price increase over the next two weeks.
RAMP Slides
RAMP Report
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