LiveRamp Holdings, Inc. (NYSE:RAMP), a company that provides enterprise data connectivity platform solutions in various markets around the world, had slight beats on the top and bottom lines in its latest earnings report, but with economic conditions getting tougher, it's going to primarily focus on the bottom line while it waits for the economy to improve.
Since January 4, 2022, when the share price of the company hit approximately $51.00 per share, the stock has been in freefall, eventually hitting its 52-week low of $15.37.
After that it rebounded to about $29.00 per share on February 2, 2023, before pulling back to around $21.00 per share. It has had a triple bottom at that price since it hit its 52-week low, and looks like the floor for the company, based upon current visibility.
That said, any negative economic catalyst would likely push the stock below $20.00 per share again, where it's likely to linger if that's how it plays out. The reason its share price would probably remain subdued is because of the weak outlook for revenue growth in calendar 2023.
In this article, we'll look at its latest numbers, its defensive strategy, and how it's positioning itself for when the inevitable economic reversal arrives.
Revenue in the third fiscal quarter of 2023 was $159.00 million, up 13 percent from revenue of $141.00 million in the third fiscal quarter of 2021. Revenue for the first nine months of fiscal 2023 was $448.00 million, compared to revenue for the first nine months of fiscal 2022 of $387.00 million.
Management guides for full year 2023 revenue to be in a range of $595.00 million to $600.00 million.
Gross margin in the third quarter of fiscal 2023 was 72.7 percent, slightly up from gross margin of 72.6 percent in the third quarter of fiscal 2022.
Cost of revenue climbed from $38.6 million in the third quarter of fiscal 2022 to $43.3 million in the third quarter of fiscal 2023. Total operating expenses jumped from $115.8 million in the third quarter of fiscal 2022 to $139.3 million in the third quarter of fiscal 2023.
Non-cash stock compensation was a hefty $29.6 million in the third fiscal quarter of 2023, compared to non-cash stock compensation of $23.8 million in the third fiscal quarter of 2022.
Net loss in the reporting period was -$(29.7) million, or -$(0.46) per diluted share, compared to a net loss of -$(15.38) million, or -$(0.23) per diluted share for the third fiscal quarter of 2021. Net loss for the first nine months of fiscal 2023 was -$(87.34) million, or -$(1.32) per diluted share, compared to a net loss of -$(4.44) million, or -$(0.07) per diluted share for the first nine months of fiscal 2021.
Cash and cash equivalents at the end of calendar 2022 were $453.5 million, compared to cash and cash equivalents of $600.2 million at the end of March 31, 2022.
With losses continuing to mount for RAMP, the company has been focused on improving operating income, in both dollars and margin. To that end, in 2023 the company is looking to boost non-GAAP operating profit by close to 50 percent. It has also seen operating margin improvement in the quarter, reaching a record 16 percent, and expects that to continue to improve going forward.
In 2024, management expects to continue to grow operating income at a similar pace as in 2023, primarily from cutting costs by approximately $30.00 million to $35.00 million, with most of that coming from the reduction in headcount and real estate. For fiscal 2024, the company has the goal of increasing non-GAAP operating profit by roughly 50 percent year-over-year.
As for gross bookings, the company saw sequential growth of 30 percent in the third fiscal quarter of 2023, and guides for that to continue on into the fourth fiscal quarter of 2023 and the first fiscal quarter of 2024.
Concerning operating profit for full year 2023, it's projected to be in a range of $60.00 million to $63.00 million, up close to 45 percent year-over-year. In the second half of fiscal 2023 the company is looking for operating margin to improve by approximately 7 points year-over-year.
When all is said and done though, uncertainty surrounding the macro-economic environment could result in the company missing on some of its guidance, as evidenced by management commentary on it facing bookings pressure during the last reporting period.
That has resulted in the company having a modest outlook for top line growth in fiscal 2024 in marketplace and subscription.
Based upon its location strategy initiatives in the second half of fiscal 2024, the company is looking to have strong operating income in fiscal 2025.
In light of the current challenging environment the company is operating in, it's clear it's focusing using this time to improve operations and strengthen its bottom line, while increasing cash flow.
It would be nice to see the company sustainably turn the corner on its losses and become profitable.
As for top line growth, the company said it's continuing with its strategy of improving its U.S. sales force productivity, deepening channel partnerships, expanding its network of destinations, and working on improving its products.
Only time will tell if it's focusing on the right things in regard to revenue growth, and if so, whether or not it can execute on them. For now, I think it's going to continue to face top line challenges as companies tighten up on spend in the current uncertain economic environment.
Investors should take management at its word concerning being conservative in modeling growth for the company over next year or so; there's a reason its primary focus is on the bottom line instead of the top line, and that's because of observable limitations in its growth potential in the near term.
Management clearly stated that it is encountering pressure in regard to its ability to attract new logos, contraction, and in maintaining decent conversion rates. In light of comments and expectations of actions to be taken by the Federal Reserve, this is almost certain to get worse before it gets better.
When considering the past performance of the company, today it is trading almost exactly where it was trading in March 2016, and while it of course jumped much higher, it has proven difficult for the company to sustain that growth, meaning, it has shown the propensity for prolonged periods of trading flat in the past, and we could be facing that again at this time. I see it continuing to struggle on the top line, but if it can prove it can become profitable, and show it can maintain that profitability while it grows its top line in the future, it should result in a higher, sustainable trading range that would reflect the potential the company has if it can execute on its business plan.
On the other hand, if it's not able to do that, it could remain an unpredictable, volatile stock that has no real direction in regard to its share price and value.
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