UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 20192020
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ----- to -----
Commission file number 1-38669001-38669
| | | | | | | | |
LiveRamp Holdings, Inc. | | |
(Exact Name of Registrant as Specified in Its Charter) | | |
| | |
Delaware (State or Other Jurisdiction of Incorporation or Organization) | | 83-1269307 (I.R.S. Employer Identification No.) |
225 Bush Street, Seventeenth Floor San Francisco, CA (Address of Principal Executive Offices) | | 94104 (Zip Code) |
(866) 352-3267 (Registrant's Telephone Number, Including Area Code) | | |
Securities registered pursuant to Section 12(b) of the Act: | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $.10 Par Value | RAMP | New York Stock Exchange |
| | |
Securities registered pursuant to Section 12(g) of the Act: None |
| | | | | | | | | | | |
| | | |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |
| Yes [X] | No [ ] | |
| | | |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). |
| Yes [X] | No [ ] | |
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. |
Large accelerated filer [X] | Accelerated filer [ ] |
| |
Non-accelerated filer [ ] | Smaller reporting company ☐ |
| |
| Emerging growth company ☐ |
| | | | | | | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] |
| | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |
| Yes ☐ | No [X] | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No [X]
The number of shares of common stock, $ 0.10 par value per share, outstanding as of January 31, 2020February 3, 2021 was 67,362,204.
66,919,411.
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
REPORT ON FORM 10-Q
December 31, 20192020
Forward-looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements, which are not statements of historical fact, may contain estimates, assumptions, projections and/or expectations regarding the Company’s financial position, results of operations, market position, product development, growth opportunities, economic conditions, and other similar forecasts and statements of expectation. Forward-looking statements are often identified by words or phrases such as “anticipate,” “estimate,” “plan,” “expect,” “believe,” “intend,” “foresee,” or the negative of these terms or other similar variations thereof. These forward-looking statements are not guarantees of future performance and are subject to a number of factors and uncertainties that could cause the Company’s actual results and experiences to differ materially from the anticipated results and expectations expressed in the forward-looking statements.
Forward-looking statements may include but are not limited to the following:
•management’s expectations about the macro economy;
•our expectations regarding the potential impact of the pandemic related to the current and continuing outbreak of a novel strain of coronavirus ("COVID-19") on our business, operations, and the markets in which we and our partners and customers operate;
•statements containing a projection of revenues, operating income (loss), income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure, or other financial items;
•statements of the plans and objectives of management for future operations;
•statements of future performance, including, but not limited to, those statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q;
•statements containing any assumptions underlying or relating to any of the above statements; and
•statements containing a projection or estimate.
Among the factors that may cause actual results and expectations to differ from anticipated results and expectations expressed in such forward-looking statements are the following:
•the risk factors described in Part I, “Item 1A. Risk Factors” included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed with the Securities and Exchange Commission ("SEC") on May 26, 2020, as revised and updated by the supplemental risk factors in Part II, Item 1A "Risk Factors" of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August 10, 2020, and those described from time to time in our future reports filed with the SEC;
•the possibility that, in the event a change of control of the Company is sought, certain clients may attempt to invoke provisions in their contracts allowing for termination upon a change in control, which may result in a decline in revenue and profit;
•the possibility that the integration of acquired businesses may not be as successful as planned;
•the possibility that the fair value of certain of our assets may not be equal to the carrying value of those assets now or in future time periods;
•the possibility that sales cycles may lengthen;
•the possibility that we will not be able to properly motivate our sales force or other associates;
•the possibility that we may not be able to attract and retain qualified technical and leadership associates, or that we may lose key associates to other organizations;
•the possibility that competent, competitive products, technologies or services will be introduced into the marketplace by other companies;
•the possibility that there will be changes in consumer or business information industries and markets that negatively impact the Company;
•the possibility that we will not be able to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms;
•the possibility that there will be changes in the legislative, accounting, regulatory and consumer environments affecting our business, including but not limited to litigation, legislation, regulations and customs impairing our ability to collect, manage, aggregate and use data;
•the possibility that data suppliers might withdraw data from us, leading to our inability to provide certain products and services;
•the possibility that data purchasers will reduce their reliance on us by developing and using their own, or alternative, sources of data generally or with respect to certain data elements or categories;
•the possibility that we may enter into short-term contracts that would affect the predictability of our revenues;
•the possibility that the amount of volume-based and other transactional based work will not be as expected;
•the possibility that we may experience a loss of data center capacity or interruption of telecommunication links or power sources;
•the possibility that we may experience failures or breaches of our network and data security systems, leading to potential adverse publicity, negative customer reaction, or liability to third parties;
•the possibility that our clients may cancel or modify their agreements with us, or may not make timely or complete payments due to the COVID-19 pandemic or other factors;
•the possibility that we will not successfully meet customer contract requirements or the service levels specified in the contracts, which may result in contract penalties or lost revenue;
•the possibility that we experience processing errors that result in credits to customers, re-performance of services or payment of damages to customers;
•the possibility that our performance may decline and we lose advertisers and revenue if the use of "third-party cookies" or other tracking technology is rejected by Internet users, restricted or otherwise subject to unfavorable regulation, blocked or limited by technical changes on end users' devices, or our or our clients' ability to use data on our platform is otherwise restricted;
•general and global negative conditions;
•the potential adverse impacts of the COVID-19 pandemic on our employees, our business, our operations, the business of our customers and other business partners, and the markets and communities in which we and our partners and customers operate; and
•our tax rate and other effects of the changes to U.S. federal tax law, including the impact of the 2017 U.S tax reform legislation, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), and the Consolidated Appropriations Act of 2021.
With respect to the provision of products or services outside our primary base of operations in the United States, all of the above factors apply, along with the difficulty of doing business in numerous sovereign jurisdictions due to differences in scale, competition, culture, laws and regulations.
Other factors are detailed from time to time in periodic reports and registration statements filed with the SEC. The Company believes that it has the product and technology offerings, facilities, associates and competitive and financial resources for continued business success, but future revenues, costs, margins and profits are all influenced by a number of factors, including those discussed above, all of which are inherently difficult to forecast.
In light of these risks, uncertainties and assumptions, the Company cautions readers not to place undue reliance on any forward-looking statements. Forward-looking statements and such risks, uncertainties and assumptions speak only as of the date of this Quarterly Report on Form 10-Q, and the Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein, to reflect any change in our expectations with regard thereto, or any other change based on the occurrence of future events, the receipt of new information or otherwise, except to the extent otherwise required by law.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | | December 31, | | March 31, | | December 31, 2020 | | March 31, 2020 |
| | 2019 | | 2019 | | (unaudited) | |
ASSETS | ASSETS | | (Unaudited) | | | ASSETS | | | | |
Current assets: | Current assets: | | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 767,200 | | | $ | 1,061,473 | | Cash and cash equivalents | | $ | 663,401 | | | $ | 717,811 | |
Restricted cash | Restricted cash | | 14,815 | | | — | | Restricted cash | | 0 | | | 14,815 | |
Trade accounts receivable, net | Trade accounts receivable, net | | 87,709 | | | 78,563 | | Trade accounts receivable, net | | 115,858 | | | 92,761 | |
Refundable income taxes | Refundable income taxes | | 17,129 | | | 7,890 | | Refundable income taxes | | 47,709 | | | 38,340 | |
Other current assets | Other current assets | | 46,219 | | | 44,150 | | Other current assets | | 31,685 | | | 32,666 | |
Total current assets | Total current assets | | 933,072 | | | 1,192,076 | | Total current assets | | 858,653 | | | 896,393 | |
| | | | | | | | |
Property and equipment, net of accumulated depreciation and amortization | Property and equipment, net of accumulated depreciation and amortization | | 20,382 | | | 26,043 | | Property and equipment, net of accumulated depreciation and amortization | | 13,521 | | | 19,321 | |
Software, net of accumulated amortization | | 24,891 | | | 6,861 | | |
Intangible assets, net | | Intangible assets, net | | 32,577 | | | 45,200 | |
Goodwill | Goodwill | | 297,780 | | | 204,656 | | Goodwill | | 301,321 | | | 297,796 | |
Deferred income taxes | | 36 | | | 35 | | |
Deferred commissions, net | Deferred commissions, net | | 13,451 | | | 10,741 | | Deferred commissions, net | | 21,096 | | | 16,014 | |
Other assets, net | Other assets, net | | 54,240 | | | 32,499 | | Other assets, net | | 32,332 | | | 27,165 | |
| | $ | 1,343,852 | | | $ | 1,472,911 | | | $ | 1,259,500 | | | $ | 1,301,889 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
Current liabilities: | Current liabilities: | | | | | Current liabilities: | |
Trade accounts payable | Trade accounts payable | | $ | 34,417 | | | $ | 31,203 | | Trade accounts payable | | $ | 44,464 | | | $ | 42,204 | |
Accrued payroll and related expenses | Accrued payroll and related expenses | | 21,211 | | | 18,715 | | Accrued payroll and related expenses | | 28,599 | | | 28,791 | |
Other accrued expenses | Other accrued expenses | | 74,079 | | | 40,916 | | Other accrued expenses | | 72,480 | | | 68,991 | |
Acquisition escrow payable | Acquisition escrow payable | | 14,815 | | | — | | Acquisition escrow payable | | 0 | | | 14,815 | |
Deferred revenue | Deferred revenue | | 4,553 | | | 4,284 | | Deferred revenue | | 11,789 | | | 6,581 | |
Total current liabilities | Total current liabilities | | 149,075 | | | 95,118 | | Total current liabilities | | 157,332 | | | 161,382 | |
| | | | | | | | |
Deferred income taxes | | 1,505 | | | 39 | | |
Other liabilities | Other liabilities | | 50,731 | | | 46,922 | | Other liabilities | | 43,667 | | | 52,995 | |
| | | | | |
Commitments and contingencies | Commitments and contingencies | | | | | Commitments and contingencies | | 0 | | 0 |
| | | | | |
Stockholders' equity: | Stockholders' equity: | | | | | Stockholders' equity: | |
Preferred stock | | Preferred stock | | 0 | | | 0 | |
Common stock | Common stock | | 14,343 | | | 14,187 | | Common stock | | 14,647 | | | 14,394 | |
Additional paid-in capital | Additional paid-in capital | | 1,479,018 | | | 1,406,813 | | Additional paid-in capital | | 1,574,347 | | | 1,496,565 | |
Retained earnings | Retained earnings | | 1,549,223 | | | 1,669,605 | | Retained earnings | | 1,487,673 | | | 1,545,094 | |
Accumulated other comprehensive income | Accumulated other comprehensive income | | 6,776 | | | 7,801 | | Accumulated other comprehensive income | | 7,814 | | | 5,745 | |
Treasury stock, at cost | Treasury stock, at cost | | (1,906,819) | | | (1,767,574) | | Treasury stock, at cost | | (2,025,980) | | | (1,974,286) | |
Total stockholders' equity | Total stockholders' equity | | 1,142,541 | | | 1,330,832 | | Total stockholders' equity | | 1,058,501 | | | 1,087,512 | |
| | $ | 1,343,852 | | | $ | 1,472,911 | | | $ | 1,259,500 | | | $ | 1,301,889 | |
See accompanying notes to condensed consolidated financial statements.
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
| | | | | | | | | | | | | | |
| | For the three months ended | | |
| | December 31, | | |
| | 2019 | | 2018 |
Revenues | | $ | 102,217 | | | $ | 80,021 | |
Cost of revenue | | 37,966 | | | 34,838 | |
Gross profit | | 64,251 | | | 45,183 | |
Operating expenses: | | | | |
Research and development | | 27,403 | | | 20,469 | |
Sales and marketing | | 51,993 | | | 40,054 | |
General and administrative | | 26,107 | | | 27,828 | |
Gains, losses and other items, net | | 233 | | | 5,043 | |
Total operating expenses | | 105,736 | | | 93,394 | |
Loss from operations | | (41,485) | | | (48,211) | |
Total other income | | 3,158 | | | 10,404 | |
Loss from continuing operations before income taxes | | (38,327) | | | (37,807) | |
Income taxes (benefit) | | (287) | | | (22,546) | |
Net loss from continuing operations | | (38,040) | | | (15,261) | |
Earnings from discontinued operations, net of tax | | — | | | 1,071,661 | |
Net earnings (loss) | | $ | (38,040) | | | $ | 1,056,400 | |
| | | | |
Basic earnings (loss) per share: | | | | |
Continuing operations | | $ | (0.56) | | | $ | (0.20) | |
Discontinued operations | | — | | | 13.85 | |
Net earnings (loss) | | $ | (0.56) | | | $ | 13.65 | |
| | | | |
Diluted earnings (loss) per share: | | | | |
Continuing operations | | $ | (0.56) | | | $ | (0.20) | |
Discontinued operations | | — | | | 13.85 | |
Net earnings (loss) | | $ | (0.56) | | | $ | 13.65 | |
| | | | | | | | | | | | | | |
| | For the three months ended |
| | December 31, |
| | 2020 | | 2019 |
Revenues | | $ | 119,753 | | | $ | 102,217 | |
Cost of revenue | | 37,085 | | | 37,966 | |
Gross profit | | 82,668 | | | 64,251 | |
Operating expenses: | | | | |
Research and development | | 30,608 | | | 27,403 | |
Sales and marketing | | 43,904 | | | 51,993 | |
General and administrative | | 23,943 | | | 26,107 | |
Gains, losses and other items, net | | (6) | | | 233 | |
Total operating expenses | | 98,449 | | | 105,736 | |
Loss from operations | | (15,781) | | | (41,485) | |
Total other income (expense) | | (86) | | | 3,158 | |
Loss from operations before income taxes | | (15,867) | | | (38,327) | |
Income tax benefit | | (4,142) | | | (287) | |
| | | | |
| | | | |
Net loss | | $ | (11,725) | | | $ | (38,040) | |
| | | | |
| | | | |
| | | | |
| | | | |
Basic loss per share | | $ | (0.18) | | | $ | (0.56) | |
| | | | |
| | | | |
| | | | |
| | | | |
Diluted loss per share | | $ | (0.18) | | | $ | (0.56) | |
See accompanying notes to condensed consolidated financial statements.
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
| | | For the nine months ended | | | For the nine months ended |
| | December 31, | | | December 31, |
| | 2019 | | 2018 | | 2020 | | 2019 |
Revenues | Revenues | | $ | 274,871 | | | $ | 207,304 | | Revenues | | $ | 323,851 | | | $ | 274,871 | |
Cost of revenue | Cost of revenue | | 115,852 | | | 82,958 | | Cost of revenue | | 106,447 | | | 115,852 | |
Gross profit | Gross profit | | 159,019 | | | 124,346 | | Gross profit | | 217,404 | | | 159,019 | |
Operating expenses: | Operating expenses: | | | | | Operating expenses: | | | | |
Research and development | Research and development | | 77,570 | | | 54,379 | | Research and development | | 88,632 | | | 77,570 | |
Sales and marketing | Sales and marketing | | 140,341 | | | 109,317 | | Sales and marketing | | 124,236 | | | 140,341 | |
General and administrative | General and administrative | | 78,687 | | | 71,129 | | General and administrative | | 71,806 | | | 78,687 | |
Gains, losses and other items, net | Gains, losses and other items, net | | 2,554 | | | 5,533 | | Gains, losses and other items, net | | 1,370 | | | 2,554 | |
Total operating expenses | Total operating expenses | | 299,152 | | | 240,358 | | Total operating expenses | | 286,044 | | | 299,152 | |
Loss from operations | Loss from operations | | (140,133) | | | (116,012) | | Loss from operations | | (68,640) | | | (140,133) | |
Total other income | Total other income | | 13,820 | | | 10,479 | | Total other income | | 152 | | | 13,820 | |
Loss from continuing operations before income taxes | Loss from continuing operations before income taxes | | (126,313) | | | (105,533) | | Loss from continuing operations before income taxes | | (68,488) | | | (126,313) | |
Income taxes (benefit) | | (5,931) | | | (21,274) | | |
Net loss from continuing operations | | (120,382) | | | (84,259) | | |
Earnings from discontinued operations, net of tax | | — | | | 1,158,267 | | |
Net earnings (loss) | | $ | (120,382) | | | $ | 1,074,008 | | |
Income tax benefit | | Income tax benefit | | (11,067) | | | (5,931) | |
| Basic earnings (loss) per share: | | |
Continuing operations | | $ | (1.77) | | | $ | (1.09) | | |
Discontinued operations | | — | | | 14.99 | | |
Net earnings (loss) | | $ | (1.77) | | | $ | 13.90 | | |
| | | | | | |
Diluted earnings (loss) per share: | | |
Continuing operations | | $ | (1.77) | | | $ | (1.09) | | |
Discontinued operations | | — | | | 14.99 | | |
Net earnings (loss) | | $ | (1.77) | | | $ | 13.90 | | |
Net loss | | Net loss | | $ | (57,421) | | | $ | (120,382) | |
| | Basic loss per share | | Basic loss per share | | $ | (0.87) | | | $ | (1.77) | |
| | Diluted loss per share | | Diluted loss per share | | $ | (0.87) | | | $ | (1.77) | |
See accompanying notes to condensed consolidated financial statements.
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)LOSS
(Unaudited)
(Dollars in thousands)
| | | For the three months ended | | | For the nine months ended | | | For the three months ended | | For the nine months ended |
| | December 31, | | | December 31, | | | December 31, | | December 31, |
| | 2019 | | 2018 | | 2019 | | 2018 | | 2020 | | 2019 | | 2020 | | 2019 |
Net earnings (loss) | | $ | (38,040) | | | $ | 1,056,400 | | | $ | (120,382) | | | $ | 1,074,008 | | |
Net loss | | Net loss | | $ | (11,725) | | | $ | (38,040) | | | $ | (57,421) | | | $ | (120,382) | |
Other comprehensive income (loss): | Other comprehensive income (loss): | | Other comprehensive income (loss): | |
Change in foreign currency translation adjustment | Change in foreign currency translation adjustment | | 157 | | | (2,301) | | | (1,025) | | | (2,876) | | Change in foreign currency translation adjustment | | 870 | | | 157 | | | 2,069 | | | (1,025) | |
Comprehensive income (loss) | | $ | (37,883) | | | $ | 1,054,099 | | | $ | (121,407) | | | $ | 1,071,132 | | |
Comprehensive loss | | Comprehensive loss | | $ | (10,855) | | | $ | (37,883) | | | $ | (55,352) | | | $ | (121,407) | |
|
See accompanying notes to condensed consolidated financial statements.
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
THREE AND NINE MONTHS ENDED DECEMBER 31, 2020
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | | | other | | Treasury Stock | | |
| | Number | | | | paid-in | | Retained | | comprehensive | | Number | | | | Total |
For the three months ended December 31, 2020 | | of shares | | Amount | | Capital | | earnings | | income | | of shares | | Amount | | Equity |
Balances at September 30, 2020 | | 145,705,138 | | | $ | 14,570 | | | $ | 1,552,303 | | | $ | 1,499,398 | | | $ | 6,944 | | | (79,516,592) | | | $ | (2,022,353) | | | $ | 1,050,862 | |
Employee stock awards, benefit plans and other issuances | | 371,888 | | | 37 | | | 5,079 | | | — | | | — | | | (61,010) | | | (3,627) | | | 1,489 | |
Non-cash stock-based compensation | | 3,997 | | | 1 | | | 17,004 | | | — | | | — | | | — | | | — | | | 17,005 | |
Restricted stock units vested | | 391,912 | | | 39 | | | (39) | | | — | | | — | | | — | | | — | | | 0 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | | — | | | — | | | — | | | 870 | | | — | | | — | | | 870 | |
Net loss | | — | | | — | | | — | | | (11,725) | | | — | | | — | | | — | | | (11,725) | |
Balances at December 31, 2020 | | 146,472,935 | | | $ | 14,647 | | | $ | 1,574,347 | | | $ | 1,487,673 | | | $ | 7,814 | | | (79,577,602) | | | $ | (2,025,980) | | | $ | 1,058,501 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
For the nine months ended December 31, 2020 | | | | | | | | | | | | | | | | |
Balances at March 31, 2020 | | 143,938,753 | | | $ | 14,394 | | | $ | 1,496,565 | | | $ | 1,545,094 | | | $ | 5,745 | | | (78,081,314) | | | $ | (1,974,286) | | | $ | 1,087,512 | |
Employee stock awards, benefit plans and other issuances | | 566,704 | | | 56 | | | 8,621 | | | — | | | — | | | (174,622) | | | (9,382) | | | (705) | |
Non-cash stock-based compensation | | 17,548 | | | 2 | | | 44,915 | | | — | | | — | | | — | | | — | | | 44,917 | |
Restricted stock units vested | | 1,169,530 | | | 117 | | | (117) | | | — | | | — | | | — | | | — | | | 0 | |
Liability-classified restricted units vested | | 780,400 | | | 78 | | | 24,363 | | | — | | | — | | | — | | | — | | | 24,441 | |
| | | | | | | | | | | | | | | | |
Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (1,321,666) | | | (42,312) | | | (42,312) | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | | — | | | — | | | — | | | 2,069 | | | — | | | — | | | 2,069 | |
Net loss | | — | | | — | | | — | | | (57,421) | | | — | | | — | | | — | | | (57,421) | |
Balances at December 31, 2020 | | 146,472,935 | | | $ | 14,647 | | | $ | 1,574,347 | | | $ | 1,487,673 | | | $ | 7,814 | | | (79,577,602) | | | $ | (2,025,980) | | | $ | 1,058,501 | |
See accompanying notes to condensed consolidated financial statements
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
THREE AND NINE MONTHS ENDED DECEMBER 31, 2019
(Unaudited)
(Dollars in thousands)
| | | Accumulated | | | Accumulated | |
| | Common Stock | | | Additional | | other | | Treasury Stock | | | | Common Stock | | Additional | | other | | Treasury Stock | |
| | Number | | | paid-in | | Retained | | comprehensive | | Number | | | Total | | Number | | | paid-in | | Retained | | comprehensive | | Number | | | Total |
For the three months ended December 31, 2019 | For the three months ended December 31, 2019 | | of shares | | Amount | | Capital | | earnings | | income (loss) | | of shares | | Amount | | Equity | For the three months ended December 31, 2019 | | of shares | | Amount | | Capital | | earnings | | income (loss) | | of shares | | Amount | | Equity |
Balances at September 30, 2019 | Balances at September 30, 2019 | | 143,096,272 | | | $ | 14,310 | | | $ | 1,460,120 | | | $ | 1,587,263 | | | $ | 6,619 | | | (75,558,291) | | | $ | (1,881,954) | | | $ | 1,186,358 | | Balances at September 30, 2019 | | 143,096,272 | | | $ | 14,310 | | | $ | 1,460,120 | | | $ | 1,587,263 | | | $ | 6,619 | | | (75,558,291) | | | $ | (1,881,954) | | | $ | 1,186,358 | |
Employee stock awards, benefit plans and other issuances | Employee stock awards, benefit plans and other issuances | | 75,557 | | | 7 | | | 1,304 | | | — | | | — | | | (95,378) | | | (4,150) | | | (2,839) | | Employee stock awards, benefit plans and other issuances | | 75,557 | | | 7 | | | 1,304 | | | — | | | — | | | (95,378) | | | (4,150) | | | (2,839) | |
Non-cash stock-based compensation | Non-cash stock-based compensation | | 5,935 | | | 1 | | | 17,619 | | | — | | | — | | | — | | | — | | | 17,620 | | Non-cash stock-based compensation | | 5,935 | | | 1 | | | 17,619 | | | — | | | — | | | — | | | — | | | 17,620 | |
Restricted stock units vested | Restricted stock units vested | | 250,082 | | | 25 | | | (25) | | | — | | | — | | | — | | | — | | | — | | Restricted stock units vested | | 250,082 | | | 25 | | | (25) | | | — | | | — | | | — | | | — | | | 0 | |
| Acquisition of treasury stock | Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (423,953) | | | (20,715) | | | (20,715) | | Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (423,953) | | | (20,715) | | | (20,715) | |
Comprehensive income (loss): | Comprehensive income (loss): | | | Comprehensive income (loss): | |
Foreign currency translation | Foreign currency translation | | — | | | — | | | — | | | — | | | 157 | | | — | | | — | | | 157 | | Foreign currency translation | | — | | | — | | | — | | | — | | | 157 | | | — | | | — | | | 157 | |
Net loss | Net loss | | — | | | — | | | — | | | (38,040) | | | — | | | — | | | — | | | (38,040) | | Net loss | | — | | | — | | | — | | | (38,040) | | | — | | | — | | | — | | | (38,040) | |
Balances at December 31, 2019 | Balances at December 31, 2019 | | 143,427,846 | | | $ | 14,343 | | | $ | 1,479,018 | | | $ | 1,549,223 | | | $ | 6,776 | | | (76,077,622) | | | $ | (1,906,819) | | | $ | 1,142,541 | | Balances at December 31, 2019 | | 143,427,846 | | | $ | 14,343 | | | $ | 1,479,018 | | | $ | 1,549,223 | | | $ | 6,776 | | | (76,077,622) | | | $ | (1,906,819) | | | $ | 1,142,541 | |
| For the nine months ended December 31, 2019 | For the nine months ended December 31, 2019 | | For the nine months ended December 31, 2019 | |
Balances at March 31, 2019 | Balances at March 31, 2019 | | 141,865,888 | | | $ | 14,187 | | | $ | 1,406,813 | | | $ | 1,669,605 | | | $ | 7,801 | | | (73,167,892) | | | $ | (1,767,574) | | | $ | 1,330,832 | | Balances at March 31, 2019 | | 141,865,888 | | | $ | 14,187 | | | $ | 1,406,813 | | | $ | 1,669,605 | | | $ | 7,801 | | | (73,167,892) | | | $ | (1,767,574) | | | $ | 1,330,832 | |
Employee stock awards, benefit plans and other issuances | Employee stock awards, benefit plans and other issuances | | 194,743 | | | 19 | | | 3,386 | | | — | | | — | | | (350,847) | | | (18,057) | | | (14,652) | | Employee stock awards, benefit plans and other issuances | | 194,743 | | | 19 | | | 3,386 | | | — | | | — | | | (350,847) | | | (18,057) | | | (14,652) | |
Non-cash stock-based compensation | Non-cash stock-based compensation | | 64,130 | | | 7 | | | 48,945 | | | — | | | — | | | — | | | — | | | 48,952 | | Non-cash stock-based compensation | | 64,130 | | | 7 | | | 48,945 | | | — | | | — | | | — | | | — | | | 48,952 | |
Restricted stock units vested | Restricted stock units vested | | 884,235 | | | 88 | | | (88) | | | — | | | — | | | — | | | — | | | — | | Restricted stock units vested | | 884,235 | | | 88 | | | (88) | | | — | | | — | | | — | | | — | | | 0 | |
Liability-classified restricted stock units vested | Liability-classified restricted stock units vested | | 418,850 | | | 42 | | | 17,662 | | | — | | | — | | | — | | | — | | | 17,704 | | Liability-classified restricted stock units vested | | 418,850 | | | 42 | | | 17,662 | | | — | | | — | | | — | | | — | | | 17,704 | |
Acquisition-related replacement stock options | Acquisition-related replacement stock options | | — | | | — | | | 2,300 | | | — | | | — | | | — | | | — | | | 2,300 | | Acquisition-related replacement stock options | | — | | | — | | | 2,300 | | | — | | | — | | | — | | | — | | | 2,300 | |
Acquisition of treasury stock | Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (2,558,883) | | | (121,188) | | | (121,188) | | Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (2,558,883) | | | (121,188) | | | (121,188) | |
Comprehensive loss: | Comprehensive loss: | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive loss: | |
Foreign currency translation | Foreign currency translation | | — | | | — | | | — | | | — | | | (1,025) | | | — | | | — | | | (1,025) | | Foreign currency translation | | — | | | — | | | — | | | — | | | (1,025) | | | — | | | — | | | (1,025) | |
Net loss | Net loss | | — | | | — | | | — | | | (120,382) | | | — | | | — | | | — | | | (120,382) | | Net loss | | — | | | — | | | — | | | (120,382) | | | — | | | — | | | — | | | (120,382) | |
Balances at December 31, 2019 | Balances at December 31, 2019 | | 143,427,846 | | | $ | 14,343 | | | $ | 1,479,018 | | | $ | 1,549,223 | | | $ | 6,776 | | | (76,077,622) | | | $ | (1,906,819) | | | $ | 1,142,541 | | Balances at December 31, 2019 | | 143,427,846 | | | $ | 14,343 | | | $ | 1,479,018 | | | $ | 1,549,223 | | | $ | 6,776 | | | (76,077,622) | | | $ | (1,906,819) | | | $ | 1,142,541 | |
See accompanying notes to condensed consolidated financial statements
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
THREE AND NINE MONTHS ENDED DECEMBER 31, 2018
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | |
| | Common Stock | | | | Additional | | | | other | | Treasury Stock | | | | |
| | Number | | | | paid-in | | Retained | | comprehensive | | Number | | | | Total |
For the three months ended December 31, 2018 | | of shares | | Amount | | Capital | | earnings | | income (loss) | | of shares | | Amount | | Equity |
Balances at September 30, 2018 | | 138,356,148 | | | $ | 13,836 | | | $ | 1,277,614 | | | $ | 658,666 | | | $ | 10,192 | | | (60,650,555) | | | $ | (1,199,630) | | | $ | 760,678 | |
| | | | | | | | | | | | | | | | |
Employee stock awards, benefit plans and other issuances | | 683,542 | | | 69 | | | 9,165 | | | — | | | — | | | (457,468) | | | (22,282) | | | (13,048) | |
Non-cash stock-based compensation | | 93,641 | | | 9 | | | 16,751 | | | — | | | — | | | — | | | — | | | 16,760 | |
Non-cash stock-based compensation from discontinued operations | | — | | | — | | | 62,861 | | | — | | | — | | | — | | | — | | | 62,861 | |
Restricted stock units vested | | 1,704,408 | | | 170 | | | (170) | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | |
Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (400,194) | | | (18,341) | | | (18,341) | |
Tender offer | | — | | | — | | | — | | | — | | | — | | | (11,235,955) | | | (503,393) | | | (503,393) | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | | — | | | — | | | — | | | (2,301) | | | — | | | — | | | (2,301) | |
Net earnings | | — | | | — | | | — | | | 1,056,400 | | | — | | | — | | | — | | | 1,056,400 | |
Balances at December 31, 2018 | | 140,837,739 | | | $ | 14,084 | | | $ | 1,366,221 | | | $ | 1,715,066 | | | $ | 7,891 | | | (72,744,172) | | | $ | (1,743,646) | | | $ | 1,359,616 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
For the nine months ended December 31, 2018 | | | | | | | | | | | | | | | | | |
Balances at March 31, 2018 | | 136,079,676 | | | $ | 13,609 | | | $ | 1,235,679 | | | $ | 628,331 | | | $ | 10,767 | | | (58,304,917) | | | $ | (1,139,291) | | | $ | 749,095 | |
Cumulative-effect adjustment from adoption of ASU 2014-09 | | — | | | — | | | — | | | 12,727 | | | — | | | — | | | — | | | 12,727 | |
Employee stock awards, benefit plans and other issuances | | 1,122,879 | | | 113 | | | 17,242 | | | — | | | — | | | (953,523) | | | (36,906) | | | (19,551) | |
Non-cash stock-based compensation | | 334,225 | | | 33 | | | 50,819 | | | — | | | — | | | — | | | — | | | 50,852 | |
Non-cash stock-based compensation from discontinued operations | | — | | | — | | | 62,861 | | | — | | | — | | | — | | | — | | | 62,861 | |
Restricted stock units vested | | 3,300,959 | | | 329 | | | (329) | | | — | | | — | | | — | | | — | | | — | |
Warrant exercises | | — | | | — | | | (51) | | | — | | | — | | | 3,488 | | | 51 | | | — | |
Acquisition of treasury stock | | — | | | — | | | — | | | — | | | — | | | (2,253,265) | | | (64,107) | | | (64,107) | |
Tender offer | | — | | | — | | | — | | | — | | | — | | | (11,235,955) | | | (503,393) | | | (503,393) | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | — | | | — | | | — | | | — | | | (2,876) | | | — | | | — | | | (2,876) | |
Net earnings | | — | | | — | | | — | | | 1,074,008 | | | — | | | — | | | — | | | 1,074,008 | |
Balances at December 31, 2018 | | 140,837,739 | | | $ | 14,084 | | | $ | 1,366,221 | | | $ | 1,715,066 | | | $ | 7,891 | | | (72,744,172) | | | $ | (1,743,646) | | | $ | 1,359,616 | |
See accompanying notes to condensed consolidated financial statements
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
| | | For the nine months ended | | | For the nine months ended |
| | December 31, | | | December 31, |
| | 2019 | | 2018 | | 2020 | | 2019 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | | Cash flows from operating activities: | | | | |
Net earnings (loss) | | $ | (120,382) | | | $ | 1,074,008 | | |
Earnings from discontinued operations | | — | | | (1,158,267) | | |
Net loss | | Net loss | | $ | (57,421) | | | $ | (120,382) | |
| Non-cash operating activities: | Non-cash operating activities: | | Non-cash operating activities: | |
Depreciation and amortization | Depreciation and amortization | | 27,958 | | | 25,274 | | Depreciation and amortization | | 21,464 | | | 27,958 | |
Loss (gain) on disposal or impairment of assets | Loss (gain) on disposal or impairment of assets | | (140) | | | 3,345 | | Loss (gain) on disposal or impairment of assets | | 334 | | | (140) | |
Provision for doubtful accounts | Provision for doubtful accounts | | 3,683 | | | 1,259 | | Provision for doubtful accounts | | 3,346 | | | 3,683 | |
Deferred income taxes | Deferred income taxes | | 1,465 | | | 28,533 | | Deferred income taxes | | 0 | | | 1,465 | |
Non-cash stock compensation expense | Non-cash stock compensation expense | | 72,279 | | | 61,547 | | Non-cash stock compensation expense | | 64,583 | | | 72,279 | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
Accounts receivable | | (11,851) | | | (35,011) | | |
Accounts receivable, net | | Accounts receivable, net | | (26,646) | | | (11,851) | |
Deferred commissions | Deferred commissions | | (2,710) | | | (3,035) | | Deferred commissions | | (5,082) | | | (2,710) | |
Other assets | Other assets | | 2,404 | | | (4,887) | | Other assets | | 7,511 | | | 2,404 | |
Accounts payable and other liabilities | Accounts payable and other liabilities | | 12,597 | | | 18,504 | | Accounts payable and other liabilities | | (6,847) | | | 12,597 | |
Income taxes | | (13,423) | | | (50,047) | | |
Income taxes, net | | Income taxes, net | | (8,982) | | | (13,423) | |
Deferred revenue | Deferred revenue | | (235) | | | (1,555) | | Deferred revenue | | 5,067 | | | (235) | |
Net cash used in operating activities | Net cash used in operating activities | | (28,355) | | | (40,332) | | Net cash used in operating activities | | (2,673) | | | (28,355) | |
| Cash flows from investing activities: | Cash flows from investing activities: | | | | | Cash flows from investing activities: | |
Capitalized software | | — | | | (1,322) | | |
| Capital expenditures | Capital expenditures | | (10,302) | | | (3,973) | | Capital expenditures | | (1,806) | | | (10,302) | |
Proceeds from sale of assets | | 517 | | | — | | |
Proceeds from sales of assets | | Proceeds from sales of assets | | 0 | | | 517 | |
Cash paid in acquisitions, net of cash received | Cash paid in acquisitions, net of cash received | | (105,365) | | | — | | Cash paid in acquisitions, net of cash received | | (17,748) | | | (105,365) | |
Payments for investments | | — | | | (2,500) | | |
Purchases of investments | | Purchases of investments | | (3,000) | | | 0 | |
Purchases of strategic investments | | Purchases of strategic investments | | (2,200) | | | 0 | |
Net cash used in investing activities | Net cash used in investing activities | | (115,150) | | | (7,795) | | Net cash used in investing activities | | (24,754) | | | (115,150) | |
| Cash flows from financing activities: | Cash flows from financing activities: | | | | | Cash flows from financing activities: | |
Payments of debt | | — | | | (233,293) | | |
Fees from debt refinancing | | — | | | (300) | | |
| Proceeds related to the issuance of common stock under stock and employee benefit plans | Proceeds related to the issuance of common stock under stock and employee benefit plans | | 3,405 | | | 17,355 | | Proceeds related to the issuance of common stock under stock and employee benefit plans | | 8,676 | | | 3,405 | |
Shares repurchased for tax withholdings upon vesting of stock-based awards | Shares repurchased for tax withholdings upon vesting of stock-based awards | | (18,057) | | | (36,906) | | Shares repurchased for tax withholdings upon vesting of stock-based awards | | (9,382) | | | (18,057) | |
Acquisition of treasury stock from tender offer | | — | | | | (503,393) | | |
| Acquisition of treasury stock | Acquisition of treasury stock | | (121,188) | | | (64,107) | | Acquisition of treasury stock | | (42,312) | | | (121,188) | |
Net cash used in financing activities | Net cash used in financing activities | | $ | (135,840) | | | $ | (820,644) | | Net cash used in financing activities | | $ | (43,018) | | | $ | (135,840) | |
|
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(Dollars in thousands)
| | | For the nine months ended | | | For the nine months ended |
| | December 31, | | | December 31, |
| | 2019 | | 2018 | | 2020 | | 2019 |
Cash flows from discontinued operations: | | | | | |
From operating activities | | $ | — | | | $ | 40,980 | | |
From investing activities | | — | | | 2,236,530 | | |
Effect of exchange rate changes on cash | | — | | | (172) | | |
Net cash provided by discontinued operations | | — | | | 2,277,338 | | |
| | Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | | (113) | | | (1,811) | | Effect of exchange rate changes on cash | | $ | 1,220 | | | $ | (113) | |
| Net change in cash, cash equivalents and restricted cash | Net change in cash, cash equivalents and restricted cash | | (279,458) | | | 1,406,756 | | Net change in cash, cash equivalents and restricted cash | | (69,225) | | | (279,458) | |
Cash, cash equivalents and restricted cash at beginning of period | Cash, cash equivalents and restricted cash at beginning of period | | 1,061,473 | | | 140,018 | | Cash, cash equivalents and restricted cash at beginning of period | | 732,626 | | | 1,061,473 | |
Cash, cash equivalents and restricted cash at end of period | Cash, cash equivalents and restricted cash at end of period | | $ | 782,015 | | | $ | 1,546,774 | | Cash, cash equivalents and restricted cash at end of period | | $ | 663,401 | | | $ | 782,015 | |
| Supplemental cash flow information: | Supplemental cash flow information: | | Supplemental cash flow information: | |
Cash paid during the period for: | | |
Income taxes | | $ | 6,171 | | | $ | 666 | | |
Cash paid (received) for income taxes, net | | Cash paid (received) for income taxes, net | | $ | (2,092) | | | $ | 6,171 | |
|
See accompanying notes to condensed consolidated financial statements.
LIVERAMP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
These condensed consolidated financial statements have been prepared by LiveRamp Holdings, Inc. ("Registrant", "LiveRamp", "we", "us" or the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Registrant’s management, all adjustments necessary for a fair presentation of the results for the periods included have been made, and the disclosures are adequate to make the information presented not misleading. All such adjustments are of a normal recurring nature. Certain note information has been omitted because it has not changed significantly from that reflected in Notes 1 through 18 of the Notes to Consolidated Financial Statements filed as part of Item 8 of the Registrant’s annual report on Form 10-K for the fiscal year ended March 31, 20192020 (“20192020 Annual Report”), as filed with the SEC on May 28, 2019.26, 2020. This quarterly report and the accompanying condensed consolidated financial statements should be read in connection with the 20192020 Annual Report. The financial information contained in this quarterly report is not necessarily indicative of the results to be expected for any other period or for the full fiscal year ending March 31, 2020.2021.
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Actual results could differ from those estimates. Certain of the accounting policies used in the preparation of these condensed consolidated financial statements are complex and require management to make judgments and/or significant estimates regarding amounts reported or disclosed in these financial statements. Additionally, the application of certain of these accounting policies is governed by complex accounting principles and their interpretation. A discussion of the Company’s significant accounting principles and their application is included in Note 1 of the Notes to Consolidated Financial Statements and in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s 20192020 Annual Report.
Accounting Pronouncements Adopted During the Current Year
In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, goodwill impairment is recognized based on step one of the preceding guidance, which calculates the carrying value in excess of the reporting unit's fair value. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 (fiscal 2021 for the Company), including interim periods within those fiscal years; earlier adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. In the first quarter of fiscal 2020, we early adopted ASU 2017-04. The standard did not have an impact to our qualitative assessment for goodwill impairment that we performed in the first quarter of fiscal 2020.
In February 2016,Due to the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02")COVID-19 Coronavirus pandemic (COVID-19 or COVID-19 pandemic), as a comprehensive new standard that amended various aspects of existing guidance for leasesthere has been uncertainty and requires additional disclosures about leasing arrangements. The new standard requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases except short-term leases. For lessees, leases will continue to be classified as either operating or financingdisruption in the income statement. The Company adoptedglobal economy and financial markets. We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the updated guidancecarrying value of our assets or liabilities as of April 1, 2019 usingDecember 31, 2020. While there was not a modified retrospective transition method. See Note 2 of these Notesmaterial impact to condensed consolidated financial statements for further details.
Recent Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", which simplifies the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The Company is currently assessing the impact of this new standard on our condensed consolidated financial statements as of and does not expectfor the adoption will have athree and nine months ended December 31, 2020, these estimates may change, as new events occur and additional information is obtained, as well as other factors related to COVID-19 pandemic that could result in material impact onimpacts to our condensed consolidated financial statements.statements in future reporting periods.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework”, which eliminates, modifies and adds disclosure requirements for fair value measurements. The update is effective for annual periods beginning after December 15, 2019 (fiscal 2021 for the Company), including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact of this new standard on our condensed consolidated financial statements and does not expect the adoption will have a material impact on our condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract" ("ASU 2018-15"). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Previously, all implementation costs for a hosting arrangement that was a service contract were expensed when incurred.
CCAs, such as software as a service and other hosting arrangements, are evaluated for capitalized implementation costs in a similar manner as capitalized software development costs. If a CCA includes a software license, the software license element of the arrangement is accounted for in a manner consistent with the acquisition of other software licenses. If a CCA does not include a software license, the service element of the arrangement is accounted for as a service contract. ASU 2018-15 is effective for annual periods beginning after December 15, 2019 (fiscal 2021 for the Company), including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact of this new standard on our condensed consolidated financial statements and does not expect the adoption will have a material impact on our condensed consolidated financial statements. | | | | | | | | | | | |
Accounting pronouncements adopted during the current year |
Standard | Description | Date of Adoption | Effect on Financial Statements or Other Significant Matters |
Accounting Standards Update ("ASU") ASU 2018-15 Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract ("ASU 2018-15") | ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal use software license. Previously, all implementation costs for a hosting arrangement that was a service contract were expensed when incurred. | April 1, 2020 | The effect of prospectively adopting ASU 2018-15 on our condensed consolidated financial statements and related disclosures was not material. |
ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework ("ASU 2018-13") | ASU 2018-13 eliminates, modifies and adds disclosure requirements for fair value measurements. | April 1, 2020 | The effect of adopting ASU 2018-13 on our condensed consolidated financial statements and related disclosures was not material. |
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) ("ASU 2016-13") | ASU 2016-13 introduces new methodology for accounting for credit losses on financial instruments. The guidance establishes a new forward looking "expected loss model" that requires entities to estimate expected credit losses on accounts receivable and other financial instruments by using all practical and relevant information. | April 1, 2020 | The effect of adopting ASU 2016-13 on our condensed consolidated financial statements and related disclosures was not material. |
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments)" ("ASU 2016-13"). ASU 2016-13 introduces new methodology for accounting for credit losses on financial instruments. The guidance establishes a new forward-looking "expected loss model" that requires entities to estimate current expected credit losses on accounts receivable and other financial instruments by using all practical and relevant information. ASU 2016-13 is effective for annual periods beginning after December 15, 2019 (fiscal 2021 for the Company), including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact of this new standard on our condensed consolidated financial statements and does not expect the adoption will have a material impact on our condensed consolidated financial statements.
The Company does not anticipate that the adoption of any other recent accounting pronouncements will have a material impact on the Company's consolidated financial position, results of operations or cash flows.
2. TOPIC 842 ADOPTION IMPACT AND LEASES
On April 1, 2019, the Company adopted the new lease guidance using a modified retrospective transition method applied to existing leases as of April 1, 2019. Results for reporting periods beginning after March 31, 2019 are presented under the new guidance, while prior period comparative amounts are not adjusted and continue to be reported in accordance with historical guidance. The Company applied the new standard using the practical expedients permitted under the transition guidance where the Company:
•did not reassess whether any expired or existing contracts contain a lease;
•did not reassess the classification of existing leases; and
•did not reassess initial direct costs for any existing leases.
The Company uses its incremental borrowing rate at commencement date in determining the present value of lease payments. The Company uses judgment in determining its incremental borrowing rate, which includes selecting a yield curve based on a hypothetical credit rating.
The resulting impact, as of the adoption date, to the condensed consolidated balance sheet of applying the new guidance in fiscal 2020 was an increase to right-of-use assets included in other assets, net of $22.9 million, an increase to short-term lease liabilities included in other accrued expenses of $8.4 million, an increase to long-term lease liabilities included in other liabilities of $17.9 million, and a decrease to deferred rent included in other liabilities of $3.4 million. There was no impact to stockholders' equity or the condensed consolidated statements of operations as a result of adopting the new guidance.
The Company determines if an arrangement contains a lease or is a lease at inception, and whether lease and non-lease components are combined or not. Operating leases with a duration of one year or less are excluded from right-of-use assets and lease liabilities and related expense is recorded as incurred.
As of December 31, 2019, right-of-use assets included in other assets, net were $17.9 million, short-term lease liabilities included in other accrued expenses were $8.6 million, and long-term lease liabilities included in other liabilities were $12.6 million.
The Company leases its office facilities under non-cancellable operating leases that expire at various dates through fiscal 2025. Operating lease costs were $7.2 million for the nine months ended December 31, 2019.
Future minimum payments under all operating leases (including operating leases with a duration of one year or less) as of December 31, 2019 are as follows (dollars in thousands):
| | | | | | | | | | | |
Year | | AmountRecent accounting pronouncements not yet adopted |
Fiscal 2020 | | $Standard | 2,725 Description | Date of Adoption | Effect on Financial Statements or Other Significant Matters |
ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12") | ASU 2019-12 simplifies the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 (fiscal 2022 for the Company), including interim periods within those fiscal years. | FiscalApril 1, 2021 | | 10,187 | |
Fiscal 2022 | | 9,147 | |
Fiscal 2023 | | 2,670 | |
Fiscal 2024 | | 725 | |
Thereafter | | 33 | |
Total undiscounted lease commitments | | 25,487 | |
Less: Interest | | 4,370 | |
Total discounted operating lease liabilities | | $ | 21,117 | The Company does not expect the adoption of this guidance will have a material impact on our condensed consolidated financial statements. |
2. LOSS PER SHARE AND STOCKHOLDERS’ EQUITY:
Loss Per Share
A reconciliation of the numerator and denominator of basic and diluted loss per share is shown below (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Basic loss per share: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net loss | | $ | (11,725) | | | $ | (38,040) | | | $ | (57,421) | | | $ | (120,382) | |
| | | | | | | | |
Basic weighted-average shares outstanding | | 66,523 | | | 67,473 | | | 66,034 | | | 68,021 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Basic loss per share | | $ | (0.18) | | | $ | (0.56) | | | $ | (0.87) | | | $ | (1.77) | |
| | | | | | | | |
Diluted loss per share: | | | | | | | | |
Basic weighted-average shares outstanding | | 66,523 | | | 67,473 | | | 66,034 | | | 68,021 | |
Dilutive effect of common stock options and restricted stock as computed under the treasury stock method (1) | | 0 | | | 0 | | | 0 | | | 0 | |
Diluted weighted-average shares outstanding | | 66,523 | | | 67,473 | | | 66,034 | | | 68,021 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Diluted loss per share | | $ | (0.18) | | | $ | (0.56) | | | $ | (0.87) | | | $ | (1.77) | |
(1) The number of common stock options and restricted stock units as computed under the treasury stock method that would have otherwise been dilutive but are excluded from the table above because their effect would have been anti-dilutive due to the net loss position of the Company were 3.3 million and 2.6 million in the three and nine months ended December 31, 2020, respectively and 2.5 million and 2.6 million in the three and nine months ended December 31, 2019, related to restructuring plans as a result of the Company's exit from certain leased office facilities (see Note 14) are: Fiscal 2020: $636; Fiscal 2021: $2,560; Fiscal 2022: $2,610; Fiscal 2023: $2,663; Fiscal 2024: $2,699; and Thereafter: $4,497.
Supplemental information related to operating leases is as follows (dollars in thousands):
| | | | | | | | |
| | Nine Months Ended |
| | December 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities: | | |
Operating cash flows used in operating leases | | $ | 6,483 | |
Weighted average remaining lease term | | 3.61 years |
Weighted average discount rate | | 5.0 | % |
respectively.
As previously disclosedRestricted stock units that were outstanding during the periods presented but were not included in our Fiscal 2019 Annual Report on Form 10-K and under the previous lease accounting standard,computation of diluted loss per share because their effect would have been anti-dilutive (other than due to the future minimum payments under all operating leases asnet loss position of March 31, 2019 was as follows (dollarsthe Company) are shown below (shares in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, | | | | | | | | | | | | |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total |
Operating leases | | $ | 12,057 | | | $ | 11,253 | | | $ | 10,865 | | | $ | 5,160 | | | $ | 3,270 | | | $ | 4,497 | | | $ | 47,102 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Number of shares underlying restricted stock units | | 0 | | | 961 | | | 141 | | | 732 | |
Stockholders’ Equity
Under the modified common stock repurchase program, the Company may purchase up to $1.0 billion of its common stock through the period ending December 31, 2022. During the nine months ended December 31, 2020, the Company repurchased 1.3 million shares of its common stock for $42.3 million under the stock repurchase program. Through December 31, 2020, the Company had repurchased a total of 28.2 million shares of its stock for $673.6 million under the stock repurchase program, leaving remaining capacity of $326.4 million.
Accumulated other comprehensive income balances of $7.8 million and $5.7 million at December 31, 2020 and March 31, 2020, respectively, reflect accumulated foreign currency translation adjustments.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS:
Disaggregation of Revenue
In the following table, revenue is disaggregated by primary geographical market and major service offerings (dollars in thousands).
| | | For the nine months ended | | | For the nine months ended |
| | December 31, | | | December 31, |
Primary Geographical Markets | Primary Geographical Markets | | 2019 | | 2018 | Primary Geographical Markets | | 2020 | | 2019 |
United States | United States | | $ | 255,895 | | | $ | 189,997 | | United States | | $ | 303,893 | | | $ | 255,895 | |
Europe | Europe | | 15,103 | | | 13,858 | | Europe | | 16,370 | | | 15,103 | |
APAC | | 3,873 | | | 3,449 | | |
Asia-Pacific ("APAC") | | Asia-Pacific ("APAC") | | 3,588 | | | 3,873 | |
| | $ | 274,871 | | | $ | 207,304 | | | $ | 323,851 | | | $ | 274,871 | |
| Major Offerings/Services | Major Offerings/Services | | Major Offerings/Services | |
Subscription | Subscription | | $ | 221,847 | | | $ | 171,184 | | Subscription | | $ | 262,130 | | | $ | 221,847 | |
Marketplace and Other | Marketplace and Other | | 53,024 | | | 36,120 | | Marketplace and Other | | 61,721 | | | 53,024 | |
| | $ | 274,871 | | | $ | 207,304 | | | $ | 323,851 | | | $ | 274,871 | |
Transaction Price Allocated to the Remaining Performance Obligations
We have performance obligations associated with fixed commitments in customer contracts for future services that have not yet been recognized in our condensed consolidated financial statements. The amount of fixed revenue not yet recognized was $344.4$333.1 million as of December 31, 2019. Additionally, the amount to2020, of which $230.9 million will be recognized over the next twelve months was $200.4 million.months. The Company expects to recognize revenue on substantially all of these remaining performance obligations by March 31, 2024.
4. LEASES:
Right-of-use asset and lease liability balances consist of the following (dollars in millions):
| | | | | | | | | | | | | | |
| | | | |
| | December 31, 2020 | | March 31, 2020 |
Right-of-use assets included in other assets, net | | $ | 12.5 | | | $ | 17.8 | |
Short-term lease liabilities included in other accrued expenses | | $ | 9.6 | | | $ | 9.6 | |
Long-term lease liabilities included in other liabilities | | $ | 5.3 | | | $ | 11.4 | |
The Company leases its office facilities under non-cancellable operating leases that expire at various dates through fiscal 2025. Certain leases contain provisions for property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services. These costs are calculated based on a variety of factors including property values, tax and utility rates, property service fees, and other factors. Operating lease costs were $8.7 million and $7.5 million for the nine months ended December 31, 2020 and 2019, respectively.
4. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS’ EQUITY:
Earnings (Loss) Per Share
A reconciliationFuture minimum payments under all operating leases (including operating leases with a duration of the numerator and denominatorone year or less) as of basic and diluted earnings (loss) per share is shown below (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | | | For the nine months ended | | |
| | December 31, | | | | December 31, | | |
| | 2019 | | 2018 | | 2019 | | 2018 |
Basic earnings (loss) per share: | | | | | | | | |
Net loss from continuing operations | | $ | (38,040) | | | $ | (15,261) | | | $ | (120,382) | | | $ | (84,259) | |
Earnings from discontinued operations, net of tax | | — | | | 1,071,661 | | | — | | | 1,158,267 | |
Net earnings (loss) | | $ | (38,040) | | | $ | 1,056,400 | | | $ | (120,382) | | | $ | 1,074,008 | |
| | | | | | | | |
Basic weighted-average shares outstanding | | 67,473 | | | 77,398 | | | 68,021 | | | 77,260 | |
| | | | | | | | |
Continuing operations | | $ | (0.56) | | | $ | (0.20) | | | $ | (1.77) | | | $ | (1.09) | |
Discontinued operations | | — | | | 13.85 | | | — | | | 14.99 | |
Basic earnings (loss) per share | | $ | (0.56) | | | $ | 13.65 | | | $ | (1.77) | | | $ | 13.90 | |
| | | | | | | | |
Diluted earnings (loss) per share: | | | | | | | | |
Basic weighted-average shares outstanding | | 67,473 | | | 77,398 | | | 68,021 | | | 77,260 | |
Dilutive effect of common stock options, warrants, and restricted stock as computed under the treasury stock method | | — | | | — | | | — | | | — | |
Diluted weighted-average shares outstanding | | 67,473 | | | 77,398 | | | 68,021 | | | 77,260 | |
| | | | | | | | |
Continuing operations | | $ | (0.56) | | | $ | (0.20) | | | $ | (1.77) | | | $ | (1.09) | |
Discontinued operations | | — | | | 13.85 | | | — | | | 14.99 | |
Diluted earnings (loss) per share | | $ | (0.56) | | | $ | 13.65 | | | $ | (1.77) | | | $ | 13.90 | |
Due to the net loss from continuing operations during the three and nine months ended December 31, 2019 and 2018, the dilutive effect of options, warrants, and restricted stock units was excluded from the diluted loss per share calculation since the impact on the calculation was anti-dilutive. These anti-dilutive units2020 are shown below (shares in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | | | For the nine months ended | | |
| | December 31, | | | | December 31, | | |
| | 2019 | | 2018 | | 2019 | | 2018 |
Number of shares outstanding under options, warrants and restricted stock units plans | | 2,483 | | | 3,276 | | | 2,551 | | | 3,458 | |
Restricted stock units that were outstanding during the periods presented but were not included in the computation of diluted loss per share because the effect was anti-dilutive are shown below (shares in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | | | For the nine months ended | | |
| | December 31, | | | | December 31, | | |
| | 2019 | | 2018 | | 2019 | | 2018 |
Number of shares outstanding under restricted stock units plans | | 961 | | | 22 | | | 732 | | | 235 | |
Stockholders’ Equity
Under the modified common stock repurchase program, the Company may purchase up to $1.0 billion of its common stock through the period ending December 31, 2020. During the nine months ended December 31, 2019, the Company repurchased 2.6 million shares of its common stock for $121.2 million under the stock repurchase program. Through December 31, 2019, the Company had repurchased a total of 25.1 million shares of its stock for $570.2 million under the stock repurchase program, leaving remaining capacity of $429.8 million.
Accumulated other comprehensive income balances of $6.8 million and $7.8 million at December 31, 2019 and March 31, 2019, respectively, reflect accumulated foreign currency translation adjustments.
5. ACQUISITIONS:
Data Plus Math
On July 2, 2019, the Company closed its merger with Data Plus Math Corporation ("DPM"), a media measurement company that works with brands, agencies, cable operators, streaming TV services and networks to tie cross-screen ad exposure with real-world outcomes. The Company has included the financial results of DPM in the condensed consolidated financial statements from the acquisition date. The acquisition date fair value of the consideration transferred for DPM was approximately $118.0 million, which consisted of the followingas follows (dollars in thousands):
| | | | | | | | |
| | |
Cash, net of $0.4 million cash acquired | | $ | 100,886 | Amount |
Restricted cash held in escrow | | 14,815 | |
Fair value of replacement stock options considered a component of purchase price | | 2,300 | |
Total fair value of consideration transferredFiscal 2021 | | $ | 118,0012,920 | |
Fiscal 2022 | | 9,303 | |
Fiscal 2023 | | 2,780 | |
Fiscal 2024 | | 785 | |
Fiscal 2025 | | 72 | |
Thereafter | | 0 | |
Total undiscounted lease commitments | | 15,860 | |
Less: Interest and short-term leases | | 962 | |
Total discounted operating lease liabilities | | $ | 14,898 | |
Future minimum payments as of December 31, 2020 related to restructuring plans as a result of the Company's exit from certain leased office facilities (see Note 14) are as follows (dollars in thousands): Fiscal 2021: $648; Fiscal 2022: $2,611; Fiscal 2023: $2,663; Fiscal 2024: $2,698; Fiscal 2025: $2,698; and Thereafter: $1,799.
5. ACQUISITIONS:
Acuity Data
On July 16, 2020, the Company completed the acquisition date,of Acuity Data, a team of global retail and consumer packaged goods ("CPG") experts, for approximately $2.9 million in cash. The acquisition also included a three-year performance plan having a maximum potential attainment of $5.1 million that would be recorded as non-cash stock compensation if achieved. The acquisition strengthens the Company delivered $14.8 millionretail analytics capabilities of cash to an escrow agent according toour Safe Haven platform by enabling better reporting, insights, and collaboration for retailers and CPG companies, bridging the terms of the purchase agreement. The principal escrow amount is ownedgap between trade and media by the Company until funds are delivered to the DPM sellers one year from the acquisition date. All interestbringing consumers' digital signals and earnings on the principal escrow amount remain the property of the Company.retail transaction data together in a privacy-conscious manner.
The total fair value offollowing table presents the replacement stock options issued was $7.4 million of which $2.3 million was allocated to the purchase consideration and $5.1 million was allocated to future services and will be expensed over the future requisite service periods (see Note 7).
In connection with the DPM acquisition, the Company agreed to pay $24.7 million to certain key employees (see "Consideration Holdback" in Note 7). The consideration holdback is payable in 3 equal, annual increments, based on the anniversary dates of the acquisition, and is payable in shares of Company common stock. The number of shares to be issued annually will vary depending on the market price of the shares on the date of issuance. The consideration holdback is not part of thepreliminary purchase price as vesting is dependent on continued employment of the key employees. It will be recorded as non-cash stock-based compensation expense over the three-year earning period.
The following table summarizes the preliminary estimated fair values ofallocation related to assets acquired and liabilities assumed as of the date of acquisition (dollars in thousands):
| | | | | | | | |
| | July 2, 201916, 2020 |
Assets acquired: | | |
Cash | | $ | 438184 | |
Trade accounts receivable | | 957156 | |
Goodwill | | 89,9422,011 | |
Intangible assets (Other assets) | | 35,0001,100 | |
Other current and noncurrent assets | | 1,18643 | |
Total assets acquired | | 127,5233,494 | |
Deferred income taxes | | (6,357)(288) | |
Accounts payable and accrued expenses | | (2,727)(89) | |
Net assets acquired | | 118,4393,117 | |
Less: | | |
Cash acquired | | (438)(184) | |
Net purchase price allocated | | 118,001 | |
Less: | | |
Fair value of replacement stock options considered a component of purchase price | | (2,300) | |
Net cash paid in acquisition | | $ | 115,7012,933 | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balanceand is not deductible for U.S. income tax purposes. The Company initially recognized the assetsprimarily attributed to development of future technology and liabilities acquired based on its preliminary estimatesproducts, development of their fair values as of the acquisition date. As additional information becomes known concerning the acquired assets and assumed liabilities, management may make adjustments to the opening balance sheet of the acquired company up to the end of the measurement period, which is not longer than a one-year period following the acquisition date. The determination of the fair values of the acquired assets and liabilities assumed (and the related determination of the estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. As of December 31, 2019, the Company has not completed its fair value analysis and calculation in sufficient detail necessary to arrive at the final estimate of the fair value. The fair values currently assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on the information that was available as of the date of the acquisition. The Company expects to finalize the valuation as soon as practical.
The amounts allocated to intangible assets in the table above included developed technology, data supply relationships,future customer relationships, and trademarks. Intangible assets will be amortized on a straight-line basis over the estimated useful lives. The following table presents the components of intangible assets acquired and their estimated useful lives as of the acquisition date (dollars in thousands):
| | | | | | | | | | | | | | |
| | | | Useful life |
| | Fair value | | (in years) |
Developed technology | | $ | 23,000 | | | 4 |
Data supply relationships | | 7,000 | | | 4 |
Customer relationships | | 4,000 | | | 4 |
Trademarks | | 1,000 | | | 2 |
Total intangible assets | | $ | 35,000 | | | |
The Company has omitted disclosures of revenue and net loss of the acquired company from the acquisition date to December 31, 2019 as the amounts are not material.
The pro forma financial information in the table below summarizes the combined results of operations for LiveRamp and DPM for the purposes of pro forma financial information disclosures as if the companies were combined as of the beginning of fiscal 2019. The pro forma financial information for all periods presented included the business combination accounting effects resulting from these acquisitions, including amortization charges from acquired intangible assets (certain of which are preliminary), stock-based compensation charges for unvested restricted stock-based awards and stock options assumed, if any, and the related tax effects as though the aforementioned companies were combined as of the beginning of fiscal 2019. The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal 2019.
The pro forma financial information for the three months ended December 31, 2018 combined the historical results of LiveRamp for the three months ended December 31, 2018 and the historical results of DPM for the three months ended September 30, 2018 (adjusted due to differences in reporting periods) and the effects of the pro forma adjustments listed above. The pro forma financial information for the nine months ended December 31, 2019 and 2018, respectively, combined the historical results of LiveRamp for the nine months ended December 31, 2019 and 2018, and the historical results of DPM for the six months ended June 30, 2019 and the nine months ended September 30, 2018 (adjusted due to differences in reporting periods) and the effects of the pro forma adjustments listed above. The pro forma financial information was as follows (dollars in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | |
| | | | For the three months ended | | For the nine months ended | | |
| | | | December 31, | | December 31, | | |
| | | | 2018 | | 2019 | | 2018 |
Revenues | | | | $ | 80,458 | | | $ | 277,063 | | | $ | 207,813 | |
Net earnings (loss) | | | | $ | 1,053,849 | | | $ | (132,279) | | | $ | 1,064,413 | |
Basic earnings (loss) per share | | | | $ | 13.62 | | | $ | (1.94) | | | $ | 13.78 | |
Diluted earnings (loss) per share | | | | $ | 13.62 | | | $ | (1.94) | | | $ | 13.78 | |
Faktor
On April 2, 2019, the Company acquired all of the outstanding shares of Faktor B. V. ("Faktor"). Faktor is a global consent management platform that allows consumers to control how their data is collected, used, and transferred for usage to another party. Faktor's platform provides individuals with notice and choice on websites and mobile apps and allows them to opt-in or opt-out via a visible banner on the page. The Company paid approximately $4.5 million in cash for the acquired shares.Acuity assembled workforce. The Company has omitted pro forma disclosures related to this acquisition as the pro forma effect of this acquisition is not material. The results of operations for the acquisition are included in the Company's condensed consolidated results beginning April 2, 2019.
The following table presents the purchase price allocation related to assets acquired and liabilities assumed (dollars in thousands):
| | | | | | | | |
| | April 2, 2019 |
Assets acquired: | | |
Cash | | $ | 35 | |
Trade accounts receivable | | 63 | |
Goodwill | | 3,110 | |
Intangible assets (Other assets) | | 1,700 | |
Other current and noncurrent assets | | 126 | |
Total assets acquired | | 5,034 | |
Deferred income taxes | | (194) | |
Accounts payable and accrued expenses | | (326) | |
Net assets acquired | | 4,514 | |
Less: | | |
Cash acquired | | (35) | |
Net cash paid | | $ | 4,479 | |
The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on preliminary calculations and valuations using management's estimates and assumptions and were based on the information that was available as of the date of acquisition. The Company expects to finalize the valuation as soon as practical.
6. DISCONTINUED OPERATIONS:
Acxiom Marketing Solutions ("AMS") businessSTOCK-BASED COMPENSATION:
During fiscal 2019, the Company completed the sale of its AMS business to The Interpublic Group of Companies, Inc. (“IPG”) for $2.3 billion in cash. The business qualified for treatment as discontinued operations during fiscal 2019. Accordingly, the results of operations, cash flows and the balance sheet amounts pertaining to AMS, for all periods reported, have been classified as discontinued operations in the condensed consolidated financial statements.
Results of operations of AMS for the three and nine months ended December 31, 2018 are segregated and included in earnings from discontinued operations, net of tax, in the condensed consolidated statements of operations.
The following is a reconciliation of the major classes of line items constituting earnings from discontinued operations, net of tax (dollars in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | For the three months ended | | | | For the nine months ended |
| | | | December 31, 2018 | | | | |
Revenues | | | | $ | — | | | | | $ | 332,185 | |
Cost of revenue | | | | 24,677 | | | | | 213,512 | |
Gross profit | | | | (24,677) | | | | | 118,673 | |
Operating expenses: | | | | | | | | |
Research and development | | | | 6,703 | | | | | 21,621 | |
Sales and marketing | | | | 18,110 | | | | | 60,743 | |
General and administrative | | | | 27,767 | | | | | 72,150 | |
Gains, losses and other items, net | | | | (1,658,667) | | | | | (1,656,014) | |
Total operating expenses | | | | (1,606,087) | | | | | (1,501,500) | |
Income from discontinued operations | | | | 1,581,410 | | | | | 1,620,173 | |
Interest expense | | | | — | | | | | (5,702) | |
Other, net | | | | 74 | | | | | 97 | |
Earnings from discontinued operations before income taxes | | | | 1,581,484 | | | | | 1,614,568 | |
Income taxes | | | | 509,823 | | | | | 456,301 | |
Earnings from discontinued operations, net of tax | | | | $ | 1,071,661 | | | | | $ | 1,158,267 | |
| | | | | | | | |
Substantially all interest expense was allocated to discontinued operations.
The Company entered into certain agreements with AMS in which services will be provided from the Company to AMS, and from AMS to the Company. The terms of these agreements are primarily 60 months from the date of sale.
Cash inflows and outflows related to the agreements are included in cash flows from operating activities in the condensed consolidated statements of cash flows. Revenues and expenses related to the agreements are included in loss from operations in the condensed consolidated statement of operations. The related cash inflows and outflows and revenues and costs for the nine months ended December 31, 2019 was (dollars in thousands):
| | | | | | | | |
| | |
| | For the nine months ended December 31, 2019 |
Cash inflows | | $ | 37,150 | |
Cash outflows | | $ | 8,381 | |
| | |
Revenues | | $ | 39,494 | |
Costs | | $ | 5,216 | |
The revenues amount includes approximately $15.5 million of revenue from AMS's resale of LiveRamp services to its customers. These amounts were also reported in the prior year as revenues in the condensed consolidated statement of operations.
7. STOCK-BASED COMPENSATION:
Stock-based Compensation Plans
The Company has stock option and equity compensation plans for which a total of 42.3 million shares of the Company’s common stock have been reserved for issuance since the inception of the plans. At December 31, 2019,2020, there were a total of 10.36.9 million shares available for future grants under the plans.
Stock-based Compensation Expense
The Company's stock-based compensation activity for the nine months ended December 31, 2019,2020, by award type, was (dollars in millions):
| | | For the nine months ended | | | For the nine months ended |
| | December 31, | | | December 31, |
| | 2019 | | 2018 | | 2020 | | 2019 |
Stock options | Stock options | | $ | 2.8 | | | $ | 2.6 | | Stock options | | $ | 1.9 | | | $ | 2.8 | |
| Restricted stock units | Restricted stock units | | 40.5 | | | 34.6 | | Restricted stock units | | 40.5 | | | 40.5 | |
Arbor acquisition consideration holdback | Arbor acquisition consideration holdback | | 2.6 | | | 11.5 | | Arbor acquisition consideration holdback | | 0 | | | 2.6 | |
DPM acquisition consideration holdback | DPM acquisition consideration holdback | | 4.1 | | | — | | DPM acquisition consideration holdback | | 6.0 | | | 4.1 | |
PDP assumed performance plan | PDP assumed performance plan | | 21.4 | | | 11.8 | | PDP assumed performance plan | | 13.8 | | | 21.4 | |
Other non-employee stock-based compensation | | 0.9 | | | 0.9 | | |
Acuity performance plan | | Acuity performance plan | | 1.4 | | | 0 | |
Other stock-based compensation | | Other stock-based compensation | | 1.0 | | | 0.9 | |
Total non-cash stock-based compensation included in the condensed consolidated statements of operations | Total non-cash stock-based compensation included in the condensed consolidated statements of operations | | 72.3 | | | 61.6 | | Total non-cash stock-based compensation included in the condensed consolidated statements of operations | | 64.6 | | | 72.3 | |
Less expense related to liability-based equity awards | Less expense related to liability-based equity awards | | (23.3) | | | (10.8) | | Less expense related to liability-based equity awards | | (19.7) | | | (23.3) | |
Stock-based compensation of discontinued operations | | — | | | 62.9 | | |
| Total non-cash stock-based compensation included in the condensed consolidated statements of equity | Total non-cash stock-based compensation included in the condensed consolidated statements of equity | | $ | 49.0 | | | $ | 113.7 | | Total non-cash stock-based compensation included in the condensed consolidated statements of equity | | $ | 44.9 | | | $ | 49.0 | |
The effect of stock-based compensation expense on income, by financial statement line item, was (dollars in millions):
| | | For the nine months ended | | | For the nine months ended |
| | December 31, | | | December 31, |
| | 2019 | | 2018 | | 2020 | | 2019 |
Cost of revenue | Cost of revenue | | $ | 2.8 | | | $ | 2.6 | | Cost of revenue | | $ | 2.7 | | | $ | 2.8 | |
Research and development | Research and development | | 17.3 | | | 14.0 | | Research and development | | 21.0 | | | 17.3 | |
Sales and marketing | Sales and marketing | | 34.4 | | | 29.2 | | Sales and marketing | | 25.6 | | | 34.4 | |
General and administrative | General and administrative | | 17.8 | | | 15.8 | | General and administrative | | 15.3 | | | 17.8 | |
Total non-cash stock-based compensation included in the condensed consolidated statements of operations | Total non-cash stock-based compensation included in the condensed consolidated statements of operations | | $ | 72.3 | | | $ | 61.6 | | Total non-cash stock-based compensation included in the condensed consolidated statements of operations | | $ | 64.6 | | | $ | 72.3 | |
The following table provides the expected future expense for all of the Company's outstanding equity awards at December 31, 2019,2020, by award type. The amount for 20202021 represents the remaining three months ending March 31, 2020.2021. All other periods represent fiscal years ending March 31 (dollars in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | During the year ended: | | | | | | | | | | |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Total |
Stock options | | $ | 0.9 | | | $ | 2.3 | | | $ | 1.1 | | | $ | 0.3 | | | $ | — | | | $ | 4.6 | |
Restricted stock units | | 14.4 | | | 49.9 | | | 38.5 | | | 22.8 | | | 3.7 | | | 129.3 | |
DPM acquisition consideration holdback | | 2.1 | | | 8.3 | | | 8.2 | | | 2.1 | | | — | | | 20.7 | |
PDP assumed performance plan | | 6.5 | | | 19.4 | | | — | | | — | | | — | | | 25.9 | |
| | $ | 23.9 | | | $ | 79.9 | | | $ | 47.8 | | | $ | 25.2 | | | $ | 3.7 | | | $ | 180.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Total |
Stock options | | $ | 0.3 | | | $ | 1.1 | | | $ | 0.3 | | | $ | 0 | | | $ | 0 | | | $ | 1.7 | |
Restricted stock units | | 59.4 | | | 42.9 | | | 43.9 | | | 24.1 | | | 4.4 | | | 174.7 | |
DPM acquisition consideration holdback | | 2.0 | | | 8.1 | | | 2.1 | | | 0 | | | 0 | | | 12.2 | |
PDP assumed performance plan | | 4.6 | | | 9.2 | | | 0 | | | 0 | | | 0 | | | 13.8 | |
Acuity performance plan | | 0.8 | | | 1.9 | | | 0.8 | | | 0.2 | | | 0 | | | 3.7 | |
Other stock-based compensation | | 0.6 | | | 0.4 | | | 0 | | | 0 | | | 0 | | | 1.0 | |
| | $ | 67.7 | | | $ | 63.6 | | | $ | 47.1 | | | $ | 24.3 | | | $ | 4.4 | | | $ | 207.1 | |
Stock OptionOptions Activity
In connection with the acquisition of DPM, the Company replaced all outstanding stock options held by DPM associates immediately prior to the acquisition with options to acquire shares of LiveRamp common stock having substantially the same terms and conditions as were applicable under the original options. In total, the Company issued 162,481 replacement options at a weighted-average exercise price of $1.64 per share. The acquisition-date fair value of the replacement stock options was $7.4 million and was determined using a binomial lattice model with the following assumptions: dividend yield of 0.0% since LiveRamp is currently not paying dividends and there are no plans to pay dividends; risk-free interest rates from 1.86% to 1.96%, based on the rate of U.S. Treasury securities with a term equal to the remaining term of each option; remaining terms of each option from 7.33 years to 9.55 years; expected volatility of 45.00% considering the implied volatility of publicly traded LiveRamp options and historical volatility of LiveRamp stock.
Of the total replacement options issued, 48,619 were fully vested and required no post-combination employee service. The remaining replacement options had components of both pre-combination and post-combination service requirements. As a result, $2.3 million of the acquisition-date fair value of the replacement options was calculated and identified as consideration transferred in the DPM acquisition. The remaining $5.1 million acquisition-date fair value is considered future compensation costs and will be recognized as stock-based compensation cost over the remaining service period.
Stock option activity for the nine months ended December 31, 20192020 was:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Weighted-average | | |
| | | | Weighted-average | | remaining | | Aggregate |
| | Number of | | exercise price | | contractual term | | Intrinsic value |
| | shares | | per share | | (in years) | | (in thousands) |
Outstanding at March 31, 2019 | | 1,374,430 | | | $ | 14.81 | | | | | |
DPM replacement stock options issued | | 162,481 | | | $ | 1.64 | | | | | |
Exercised | | (134,509) | | | $ | 5.73 | | | | | $ | 5,468 | |
Forfeited or canceled | | (8,138) | | | $ | 5.13 | | | | | |
Outstanding at December 31, 2019 | | 1,394,264 | | | $ | 14.21 | | | 3.9 | | $ | 47,212 | |
Exercisable at December 31, 2019 | | 1,281,248 | | | $ | 15.31 | | | 3.6 | | $ | 41,973 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Weighted-average | | |
| | | | Weighted-average | | remaining | | Aggregate |
| | Number of | | exercise price | | contractual term | | Intrinsic value |
| | shares | | per share | | (in years) | | (in thousands) |
Outstanding at March 31, 2020 | | 1,350,658 | | | $ | 14.43 | | | | | |
| | | | | | | | |
Exercised | | (524,085) | | | $ | 12.37 | | | | | $ | 22,271 | |
Forfeited or canceled | | (6,124) | | | $ | 5.24 | | | | | |
Outstanding at December 31, 2020 | | 820,449 | | | $ | 15.81 | | | 3.4 | | $ | 47,075 | |
Exercisable at December 31, 2020 | | 783,303 | | | $ | 16.47 | | | 3.2 | | $ | 44,431 | |
The aggregate intrinsic value at period end represents the total pre-tax intrinsic value (the difference between LiveRamp’s closing stock price on the last trading day of the period and the exercise price for each in-the-money option) that would have been received by the option holders had they exercised their options on December 31, 2019.2020. This amount changes based upon changes in the fair market value of LiveRamp’s common stock.
A summary of stock options outstanding and exercisable as of December 31, 20192020 was:
| | | Options outstanding | | | Options exercisable | | | Options outstanding | | Options exercisable |
Range of | Range of | | | | Weighted-average | | Weighted-average | | | Weighted-average | Range of | | | Weighted-average | | Weighted-average | | | Weighted-average |
exercise price | exercise price | | | Options | | remaining | | exercise price | | Options | | exercise price | exercise price | | Options | | remaining | | exercise price | | Options | | exercise price |
per share | per share | | | outstanding | | contractual life | | per share | | exercisable | | per share | per share | | outstanding | | contractual life | | per share | | exercisable | | per share |
$ | 0.61 | | | — | | | $ | 9.99 | | | 264,245 | | | 5.8 years | | $ | 1.60 | | | 151,229 | | | $ | 1.52 | | 0.61 | | | — | | $ | 9.99 | | | 125,984 | | | 4.6 years | | $ | 1.52 | | | 88,838 | | | $ | 1.32 | |
$ | 10.00 | | | — | | | $ | 19.99 | | | 709,672 | | | 2.8 years | | $ | 14.69 | | | 709,672 | | | $ | 14.69 | | 10.00 | | | — | | $ | 19.99 | | | 346,807 | | | 3.0 years | | $ | 15.50 | | | 346,807 | | | $ | 15.50 | |
$ | 20.00 | | | — | | | $ | 24.99 | | | 420,347 | | | 4.6 years | | $ | 21.32 | | | 420,347 | | | $ | 21.32 | | 20.00 | | | — | | $ | 24.99 | | | 347,658 | | | 3.3 years | | $ | 21.31 | | | 347,658 | | | $ | 21.31 | |
| | | 1,394,264 | | | 3.9 years | | $ | 14.21 | | | 1,281,248 | | | $ | 15.31 | | | 820,449 | | | 3.4 years | | $ | 15.81 | | | 783,303 | | | $ | 16.47 | |
PerformanceRestricted Stock Option Unit Activity
PerformanceTime-vesting restricted stock option unit activity for the nine months ended December 31, 2019 was:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Weighted-average | | |
| | | | Weighted-average | | remaining | | Aggregate |
| | Number | | exercise price | | contractual term | | intrinsic value |
| | of shares | | per share | | (in years) | | (in thousands) |
Outstanding at March 31, 2019 | | 130,154 | | | $ | 21.44 | | | | | |
| | | | | | | | |
| | | | | | | | |
Forfeited or canceled | | (130,154) | | | $ | 21.44 | | | | | |
Outstanding at December 31, 2019 | | — | | | $ | — | | | | | $ | — | |
Exercisable at December 31, 2019 | | — | | | $ | — | | | — | | | $ | — | |
The performance stock option units outstanding at March 31, 2019 reached maturity of the relevant performance period at March 31, 2019. The units attained a 0% attainment level, resulting in cancellation of the units in the current fiscal year.
Restricted Stock Unit Activity("RSUs") -
During the nine months ended December 31, 2019,2020, the Company granted time-vesting restricted stock unitsRSUs covering 1,388,5071,969,500 shares of common stock and having a fair value at the date of grant of $72.9$81.5 million. All of the restricted stock unitsThe RSUs granted in the current period vest over four years. Grant date fair value of these units is equal to the quoted market price for the shares on the date of grant. Included in the restricted stock units granted in the current fiscal year were units related to the DPM acquisition. Following the closing of the DPM acquisition, the Company granted new awards of restricted stock units covering 155,346 shares of common stock to select employees to induce them to accept employment with the Company (the "DPM inducement awards"). The DPM inducement awards had a grant date fair value of $7.3 million.
Time-vesting restricted stock unitRSU activity for the nine months ended December 31, 20192020 was:
| | | Weighted-average | | | Weighted-average | |
| | fair value per | | Weighted-average | | fair value per | | Weighted-average |
| | Number | | share at grant | | remaining contractual | | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) | | of shares | | date | | term (in years) |
Outstanding at March 31, 2019 | | 3,054,750 | | | $ | 30.91 | | | 2.47 | |
Outstanding at March 31, 2020 | | Outstanding at March 31, 2020 | | 3,351,638 | | | $ | 40.68 | | | 2.51 |
Granted | Granted | | 1,388,507 | | | $ | 52.51 | | | Granted | | 1,969,500 | | | $ | 41.36 | | |
Vested | Vested | | (506,732) | | | $ | 28.73 | | | Vested | | (1,011,380) | | | $ | 41.43 | | |
Forfeited or canceled | Forfeited or canceled | | (330,752) | | | $ | 37.34 | | | Forfeited or canceled | | (459,731) | | | $ | 41.35 | | |
Outstanding at December 31, 2019 | | 3,605,773 | | | $ | 38.94 | | | 2.37 | |
Outstanding at December 31, 2020 | | Outstanding at December 31, 2020 | | 3,850,027 | | | $ | 40.75 | | | 2.57 |
The total fair value of time-vesting restricted stock unitsRSUs vested forduring the nine months ended December 31, 20192020 was $24.2$53.4 million and is measured as the quoted market price of the Company's common stock on the vesting date for the number of shares vested.
Performance-based restricted stock units ("PSUs") -
Fiscal 2021 plans:
During the nine months ended December 31, 2019,2020, the Company granted performance-based restricted stock unitsPSUs covering 202,818246,524 shares of common stock having a fair value at the date of grant of $12.3$10.7 million. The grants were made under two separate performance plans.
Under the first performance plan, units covering 60,84473,950 shares of common stock were granted having a fair value at the date of grant of $4.4$4.2 million, determined using a Monte Carlo simulation model. The units vest subject to attainment of market conditions established by the compensation committee of the board of directors (“compensation committee”) and continuous employment through the vesting date. The 60,844 units may vest in a number of shares from 0% to 200% of the award, based on the total shareholder return of LiveRamp common stock compared to total shareholder return of the Russell 2000 market index for the period from April 1, 20192020 to March 31, 2022. 2023.
Under the second performance plan, units covering 141,974172,574 shares of common stock were granted having a fair value at the date of grant of $7.9$6.5 million, which was equal to the quoted market price for the shares on the date of grant. The units vest subject to attainment of performance criteria established by the compensation committee ofand continuous employment through the board of directors. 59,480 units may vest in three equal annual increments in a number of shares from 0% to 200% of the award, based on attainment of year-over-year revenue growth targets for each annual period from April 1, 2019 to March 31, 2022.vesting date. The remaining 82,494 units may vest in a number of shares from 0% to 200% of the award, based on the attainment of the Company's three-yeartrailing twelve-month revenue compound annual growth rate targetand EBITDA margin targets for the period from April 1, 20192020 to March 31, 2022.2023. Performance will be measured and vesting evaluated on a quarterly basis beginning with the period ending June 30, 2021 and continuing through the end of the performance period. To the extent that shares are earned in a given quarter, 50% vest immediately and 50% vest on the one-year anniversary of attainment approval, except that all earned but unvested shares will vest fully at the end of the measurement period.
Fiscal 2020 plans:
During the first quarter of fiscal 2021, the compensation committee approved the final performance attainment on a fiscal 2020 performance plan covering 59,480 PSUs. The awards reached maturity of the relevant performance period at March 31, 2020, and final attainment of these awards was determined by the compensation committee during the quarter ended June 30, 2020 to be 164% resulting in an additional award of 38,063 units (for a total earned amount of 97,543 units). Of the earned amount, one-third vested immediately, while the remaining two-thirds will vest in equal increments in first quarters of fiscal years 2022 and 2023.
Non-vested performance-based restricted stock unitFiscal 2019 plans:
The initial measurement date for the fiscal 2019 performance plan, covering 307,897 PSUs, was the period ended June 30, 2020. During the quarter ended September 30, 2020, the compensation committee approved performance measurements for the quarter ended June 30, 2020 totaling 57% attainment, resulting in a total earned amount of 178,146 units. Of the earned amount, one-half vested immediately, while the remaining one-half will vest one year later.
The performance measurements occurring as of September 30, 2020 and December 31, 2020 resulted in no additional attainment. As of December 31, 2020, there remains a maximum potential of 437,648 additional units eligible for attainment under the plan. Quarterly measurements of attainment will continue through September 30, 2022.
PSU activity for the nine months ended December 31, 20192020 was:
| | | | | | | | | | | | | | | | | | | | |
| | | | Weighted-average | | |
| | | | fair value per | | Weighted-average |
| | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) |
Outstanding at March 31, 2020 | | 545,446 | | | $ | 51.01 | | | 2.24 |
Granted | | 246,524 | | | $ | 43.40 | | | |
Additional earned performance shares | | 38,063 | | | $ | 55.48 | | | |
Vested | | (121,587) | | | $ | 48.88 | | | |
Forfeited or canceled | | (34,731) | | | $ | 34.94 | | | |
Outstanding at December 31, 2020 | | 673,715 | | | $ | 49.69 | | | 1.78 |
| | | | | | | | | | | | | | | | | | | | |
| | | | Weighted-average | | |
| | | | fair value per | | Weighted-average |
| | Number | | share at grant | | remaining contractual |
| | of shares | | date | | term (in years) |
Outstanding at March 31, 2019 | | 394,188 | | | $ | 43.88 | | | 3.23 |
Granted | | 202,818 | | | $ | 60.65 | | | |
| | | | | | |
| | | | | | |
Forfeited or canceled | | (49,443) | | | $ | 33.91 | | | |
Outstanding at December 31, 2019 | | 547,563 | | | $ | 50.99 | | | 2.49 |
The total fair value of PSUs vested in the nine months ended December 31, 2020 was $6.1 million and is measured as the quoted market price of the Company’s common stock on the vesting date for the number of shares vested.
Acquisition-related Performance Plan
As part of the Company's acquisition of Acuity Data in July 2020, the Company will be obligated to pay up to an additional $5.1 million, settled in a variable number of shares of Company stock, and subject to certain performance conditions and continued employment of each participant. Performance will be measured and vesting evaluated in three annual increments on the anniversary of the closing date (which date may be changed by the board of directors to an earlier date). Through December 31, 2020, the Company had recognized a total of $1.4 million related to the plan. At December 31, 2020, the recognized, but unpaid, balance in other accrued expense in the condensed consolidated balance sheet was $1.4 million.
Consideration Holdback
As part of the Company's fiscal 2020 acquisition of DPM in the current fiscal year, $24.7Data Plus Math ("DPM"), $24.4 million of the acquisition consideration otherwise payable with respect to shares of DPM common stock held by certain key employees was subject to holdback by the Company pursuant to agreements with those employees (each, a "Holdback Agreement"). TheEach Holdback Agreement specifies that the consideration holdback will vest in 3 equal annual increments on the anniversary of the closing date.date (which date may be changed by the board of directors to an earlier date). Vesting is subject to the DPM key employees' continued employment through each annual vesting date and will be settled in shares of Company common stock. Through December 31, 2019,2020, the Company hashad recognized a total of $4.1$12.2 million related to the DPM consideration holdback. At December 31, 2019,2020, the recognized, but unpaid, balance related to the DPM consideration holdback in other accrued expenses in the condensed consolidated balance sheet was $4.1 million. The next annual settlement is expected to occur at the end of the first quarter of fiscal 2022.
As part of the Company’s acquisition of Arbor in fiscal 2017, $38.3 million of the acquisition consideration otherwise payable with respect to shares of restricted Arbor common stock held by certain key employees was subject to holdback by the Company pursuant to agreements with those employees (each, a “Holdback Agreement”Pacific Data Partners ("PDP"). The Holdback Agreement specifies the payment of the consideration in monthly installments using LiveRamp shares over a thirty-month period, ending in the quarter ended June 30, 2019. As of June 30, 2019, the Company had met its full obligation for the consideration holdback due to the Arbor key employees. Through December 31, 2019, the Company had recognized a total of $38.3 million expense related to the Holdback Agreements.
PDP Assumed Performance Plan
In connection with the fiscal 2018 acquisition of PDP, the Company assumed the outstanding performance compensation plan under the PDP 2018 Equity Compensation Plan ("PDP PSU plan"). During fiscal 2020, the current fiscal year,Company converted the year-one performance payout under the plan was finalized resulting in a $19.7 million payout to the plan participants. On the settlement date, a total of 465,389 shares of Company common stock was delivered to theoutstanding PDP PSU plan participants to settle the year-one performance payout obligation, of which 418,850 shares represented the liability-classified portion of the award.a time-vesting restricted stock plan ("PDP RSU plan").
Through December 31, 2019,2020, the Company has recognized a total of $39.1$51.8 million related to the PDP PSURSU plan. At December 31, 2019,2020, the recognized, but unpaid, balance related to the PDP PSURSU plan in other accrued expenses in the condensed consolidated balance sheet was $17.5$12.2 million.
8.7. OTHER CURRENT AND NONCURRENT ASSETS:
Other current assets consist of the following (dollars in thousands):
| | | December 31, 2019 | | March 31, 2019 | | December 31, 2020 | | March 31, 2020 |
Prepaid expenses and other | Prepaid expenses and other | | $ | 12,628 | | | $ | 9,058 | | Prepaid expenses and other | | $ | 12,260 | | | $ | 13,385 | |
Post-closing receivable from IPG | | 17,625 | | | 17,625 | | |
Interest receivable | | 1,080 | | | 2,497 | | |
Receivable for cash settlement of withheld income tax withholdings on equity award releases | | Receivable for cash settlement of withheld income tax withholdings on equity award releases | | 0 | | | 7,658 | |
| Certificates of deposit | | Certificates of deposit | | 3,000 | | | 0 | |
Assets of non-qualified retirement plan | Assets of non-qualified retirement plan | | 14,886 | | | 14,970 | | Assets of non-qualified retirement plan | | 16,425 | | | 11,623 | |
Other current assets | Other current assets | | $ | 46,219 | | | $ | 44,150 | | Other current assets | | $ | 31,685 | | | $ | 32,666 | |
Other noncurrent assets consist of the following (dollars in thousands):
| | | December 31, 2019 | | March 31, 2019 | | December 31, 2020 | | March 31, 2020 |
Acquired intangible assets, net | | $ | 27,702 | | | $ | 24,217 | | |
Right of use asset | | 17,947 | | | — | | |
Long-term prepaid data revenue share | | Long-term prepaid data revenue share | | $ | 8,873 | | | $ | 0 | |
| Right-of-use asset (see Note 4) | | Right-of-use asset (see Note 4) | | 12,536 | | | 17,830 | |
Deferred tax asset | | Deferred tax asset | | 905 | | | 852 | |
Deposits | | Deposits | | 2,793 | | | 2,562 | |
Strategic investments (see Note 17) | | Strategic investments (see Note 17) | | 5,700 | | | 3,500 | |
Other miscellaneous noncurrent assets | Other miscellaneous noncurrent assets | | 8,591 | | | 8,282 | | Other miscellaneous noncurrent assets | | 1,525 | | | 2,421 | |
Other assets, net | Other assets, net | | $ | 54,240 | | | $ | 32,499 | | Other assets, net | | $ | 32,332 | | | $ | 27,165 | |
9.
8. OTHER ACCRUED EXPENSES:
Other accrued expenses consist of the following (dollars in thousands):
| | | December 31, 2019 | | March 31, 2019 | | December 31, 2020 | | March 31, 2020 |
Liabilities of non-qualified retirement plan | Liabilities of non-qualified retirement plan | | $ | 14,886 | | | $ | 14,970 | | Liabilities of non-qualified retirement plan | | $ | 16,425 | | | $ | 11,623 | |
Short-term lease liabilities | | 8,550 | | | — | | |
PDP performance plan liability (see Note 7) | | 17,481 | | | — | | |
DPM consideration holdback (see Note 7) | | 4,123 | | | — | | |
Accrued Data Marketplace expenses | | Accrued Data Marketplace expenses | | 18,955 | | | 12,023 | |
Short-term lease liabilities (see Note 4) | | Short-term lease liabilities (see Note 4) | | 9,590 | | | 9,641 | |
PDP performance plan liability (see Note 6) | | PDP performance plan liability (see Note 6) | | 12,239 | | | 16,318 | |
DPM consideration holdback (see Note 6) | | DPM consideration holdback (see Note 6) | | 4,061 | | | 6,185 | |
Acuity performance earnout liability (see Note 6) | | Acuity performance earnout liability (see Note 6) | | 1,429 | | | 0 | |
Other miscellaneous accrued expenses | Other miscellaneous accrued expenses | | 29,039 | | | 25,946 | | Other miscellaneous accrued expenses | | 9,781 | | | 13,201 | |
Other accrued expenses | Other accrued expenses | | $ | 74,079 | | | $ | 40,916 | | Other accrued expenses | | $ | 72,480 | | | $ | 68,991 | |
9. PROPERTY AND EQUIPMENT:
Property and equipment is summarized as follows (dollars in thousands):
| | | December 31, 2019 | | March 31, 2019 | | | December 31, 2020 | | March 31, 2020 |
| Leasehold improvements | Leasehold improvements | | $ | 24,964 | | | $ | 20,097 | | Leasehold improvements | | $ | 26,058 | | | $ | 25,614 | |
Data processing equipment | Data processing equipment | | 9,552 | | | 37,678 | | Data processing equipment | | 8,821 | | | 9,499 | |
Office furniture and other equipment | Office furniture and other equipment | | 9,003 | | | 7,077 | | Office furniture and other equipment | | 9,197 | | | 9,673 | |
| | 43,519 | | | 64,852 | | | 44,076 | | | 44,786 | |
Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | | 23,137 | | | 38,809 | | Less accumulated depreciation and amortization | | 30,555 | | | 25,465 | |
| | $ | 20,382 | | | $ | 26,043 | | | $ | 13,521 | | | $ | 19,321 | |
|
Depreciation expense on property and equipment was $12.8$7.0 million and $10.7$12.8 million for the nine months ended December 31, 20192020 and 2018,2019, respectively. Depreciation expense for the nine months ended December 31, 2019 and 2018 included $3.6 million and $2.0 million, respectively, of accelerated depreciation expense associated with the reduced useful life of certain IT equipment in connection with the Company's migration to a cloud-based data center solution.
11. GOODWILL AND INTANGIBLE ASSETS:10. GOODWILL:
GoodwillChanges in goodwill for the nine months endedDecember 31, 20192020 were as follows (dollars in thousands) was as follows::
| | | | | | | | |
| | Total |
Balance at March 31, 20192020 | | $ | 204,656297,796 | |
Acquisition of FaktorAcuity Data | | 3,1102,011 | |
Acquisition of DPM | | 89,942 | |
Change in foreign currency translation adjustment | | 721,514 | |
Balance at December 31, 20192020 | | $ | 297,780301,321 | |
Goodwill by geography as of December 31, 20192020 was:
| | | | | | | | |
| | Total |
U.S. | | $ | 294,563297,723 | |
APAC | | 3,2173,598 | |
Balance at December 31, 20192020 | | $ | 297,780301,321 | |
11. INTANGIBLE ASSETS:
The amounts allocated to intangible assets from acquisitions include developed technology, customer relationships, trade names, and publisher and data supply relationships. Amortization lives for those intangibles range from two years to six years. The following table shows the amortization activity of intangible assets (dollars in thousands):
| | | December 31, 2019 | | March 31, 2019 | | | December 31, 2020 | | March 31, 2020 |
Developed technology, gross (Software) | | $ | 78,500 | | | $ | 54,000 | | | |
Developed technology, gross | | Developed technology, gross | | $ | 67,582 | | | $ | 66,451 | |
Accumulated amortization | Accumulated amortization | | (54,796) | | | (49,625) | | | Accumulated amortization | | (59,063) | | | (54,713) | |
Net developed technology | Net developed technology | | $ | 23,704 | | | $ | 4,375 | | | Net developed technology | | $ | 8,519 | | | $ | 11,738 | |
| Customer relationship/Trade name, gross (Other assets, net) | | $ | 41,000 | | | $ | 35,800 | | | |
Customer relationship/Trade name, gross | | Customer relationship/Trade name, gross | | $ | 43,110 | | | $ | 42,993 | |
Accumulated amortization | Accumulated amortization | | (30,992) | | | (26,128) | | | Accumulated amortization | | (36,655) | | | (33,109) | |
Net customer/trade name | Net customer/trade name | | $ | 10,008 | | | $ | 9,672 | | | Net customer/trade name | | $ | 6,455 | | | $ | 9,884 | |
| Publisher relationship, gross (Other assets, net) | | $ | 30,800 | | | $ | 23,800 | | | |
Publisher/Data supply relationships, gross | | Publisher/Data supply relationships, gross | | $ | 39,800 | | | $ | 39,800 | |
Accumulated amortization | Accumulated amortization | | (13,106) | | | (9,255) | | | Accumulated amortization | | (22,197) | | | (16,222) | |
Net publisher relationship | Net publisher relationship | | $ | 17,694 | | | $ | 14,545 | | | Net publisher relationship | | $ | 17,603 | | | $ | 23,578 | |
| Total intangible assets, gross | Total intangible assets, gross | | $ | 150,300 | | | $ | 113,600 | | | Total intangible assets, gross | | $ | 150,492 | | | $ | 149,244 | |
Total accumulated amortization | Total accumulated amortization | | (98,894) | | | (85,008) | | | Total accumulated amortization | | (117,915) | | | (104,044) | |
Total intangible assets, net | Total intangible assets, net | | $ | 51,406 | | | $ | 28,592 | | | Total intangible assets, net | | $ | 32,577 | | | $ | 45,200 | |
|
Total amortization expense related to intangible assets was $13.9 million and $13.9 million for the nine months ended December 31, 2020 and 2019, and 2018 was $13.9 million and $13.0 million, respectively.
The following table presents the estimated future amortization expenses related to purchased intangible assets. The amount for 20202021 represents the remaining three months ending March 31, 2020. All other periods represent fiscal years ending March 312021 (dollars in thousands):
| Fiscal Year: | Fiscal Year: | | Fiscal Year: | |
2020 | | $ | 5,356 | | |
2021 | 2021 | | 17,650 | | 2021 | | $ | 3,899 | |
2022 | 2022 | | 14,342 | | 2022 | | 14,458 | |
2023 | 2023 | | 11,933 | | 2023 | | 12,050 | |
2024 | 2024 | | 2,125 | | 2024 | | 2,170 | |
| | | $ | 51,406 | | | $ | 32,577 | |
12. OTHER LIABILITIES:
Other liabilities consist of the following (dollars in thousands):
| | | | | | | | | | | | | | |
| | December 31, 2020 | | March 31, 2020 |
Uncertain tax positions | | 25,645 | | | 25,007 | |
Long-term leases liabilities (see Note 4) | | 5,309 | | | 11,449 | |
Restructuring accruals | | 4,760 | | | 6,839 | |
Other | | 7,953 | | | 9,700 | |
| | | | |
Other liabilities | | $ | 43,667 | | | $ | 52,995 | |
12. SOFTWARE:
Software is summarized as follows (dollars in thousands):
| | | | | | | | | | | | | | |
| | December 31, 2019 | | March 31, 2019 |
Internally developed computer software | | $ | 51,525 | | | $ | 51,525 | |
Acquired developed technology | | 78,500 | | | 54,000 | |
| | 130,025 | | | 105,525 | |
Less accumulated amortization | | 105,134 | | | 98,664 | |
| | $ | 24,891 | | | $ | 6,861 | |
Amortization expense was $6.5 million and $7.3 million for the nine months ended December 31, 2019 and 2018, respectively, including $5.2 million and $5.6 million, respectively, related to acquired developed technology as part of recent acquisitions.
13. ALLOWANCE FOR DOUBTFUL ACCOUNTS:CREDIT LOSSES:
Trade accounts receivable are presented net of allowances for doubtful accounts,credit losses, returns and credits based on the probability of $4.2 million atfuture collections. The probability of future collections is based on specific considerations of historical loss patterns and an assessment of the continuation of such patterns based on past collection trends and known or anticipated future economic events that may impair collectability. We are monitoring the impacts from the COVID-19 pandemic on our customers and various counterparties, and have recorded an incremental reserve associated with the pandemic during the three and nine months ended December 31, 20192020.
A summary of the activity of the allowance for credit losses, returns and $3.0 million at March 31, 2019.credits was (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at beginning of period | | Additions charged to costs and expenses | | Other changes | | Bad debts written off, net of amounts recovered | | Balance at end of period |
For the three months ended December 31, 2020 | | $ | 9,012 | | | $ | 824 | | | $ | 72 | | | $ | (590) | | | $ | 9,318 | |
| | | | | | | | | | |
For the nine months ended December 31, 2020 | | $ | 7,575 | | | $ | 3,346 | | | $ | 128 | | | $ | (1,731) | | | $ | 9,318 | |
14. RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
The following table summarizes the Company's restructuring activity for the nine months ended December 31, 20192020 (dollars in thousands):
| | | Associate-related reserves | | Lease accruals | | Total | | Associate-related reserves | | Lease accruals | | Total |
March 31, 2019 | | $ | 4,595 | | | $ | 5,688 | | | $ | 10,283 | | |
Balances at March 31, 2020 | | Balances at March 31, 2020 | | $ | 450 | | | $ | 6,243 | | | $ | 6,693 | |
Restructuring charges and adjustments | Restructuring charges and adjustments | | 1,970 | | | (80) | | | 1,890 | | Restructuring charges and adjustments | | 1,130 | | | 67 | | | 1,197 | |
Payments | Payments | | (6,039) | | | (614) | | | (6,653) | | Payments | | (1,284) | | | (2,142) | | | (3,426) | |
December 31, 2019 | | $ | 526 | | | $ | 4,994 | | | $ | 5,520 | | |
Balances at December 31, 2020 | | Balances at December 31, 2020 | | $ | 296 | | | $ | 4,168 | | | $ | 4,464 | |
The above balances are included in other accrued expenses and other liabilities onin the condensed consolidated balance sheets.
Restructuring Plans
InDuring the nine months ended December 31, 2019,2020, the Company recorded a total of $1.9$1.2 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations. The currentexpense included severance and other associate-related charges in the United States and Europe of $1.1 million and lease accruals and adjustments of $0.1 million. The lease accruals included the full $1.0 million settlement cost for an office space lease cancellation that was paid out during the quarter ended September 30, 2020, net of a $(0.9) million adjustment to existing restructured leases. Of the associate-related accruals of $1.1 million, $0.1 million remained accrued as of December 31, 2020 and is expected to be paid out during fiscal 2021.
In fiscal 2020, the Company recorded a total of $3.4 million in restructuring charges and adjustments. The fiscal year 2020 expense included severance and other associate-related charges in APAC of $0.2$0.6 million, adjustments to fiscal 2019 restructuring plans for associates in the United States of $1.8$1.7 million, and lease accruals and adjustments of -$0.1$1.1 million. The associate-related accruals of $0.6 million, were paid out in fiscal 2021.
In fiscal 2019, the Company recorded a total of $7.7 million in restructuring charges and adjustments included in gains, losses and other items, net in the consolidated statement of operations.adjustments. The fiscal 2019 expense included restructuring plans primarily for associates in the United States and APAC of $6.1 million, lease accruals and adjustments of $0.8 million, and leasehold improvement write-offs of $0.8 million. Of the total fiscal 2019 plansThe associate-related accruals $0.3of $6.1 million remained accrued at December 31, 2019. The associate-related costs are expected to bewere paid out in fiscal 2020.
In fiscal 2018, the Company recorded a total of $2.7 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations.adjustments. The expense included severance and other associate-related charges of $0.2 million, and lease accruals and adjustments of $2.5 million. The associate-related accruals of $0.2 million were paid out in fiscal 2019. The lease accruals and adjustments of $2.5 million result from the Company's exit from certain leased office facilities.
In fiscal 2017, the Company recorded a total of $3.0 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations.adjustments. The expense included lease accruals and adjustments of $3.0 million resulting from the Company's exit from certain leased office facilities ($1.5 million) and adjustments to estimates related to the fiscal 2015 lease accruals ($1.5 million).
In fiscal 2015, the Company recorded a total of $9.3 million in restructuring charges and adjustments included in gains, losses and other items, net in the condensed consolidated statement of operations.adjustments. The expense included severance and other associate-related charges of $2.6 million, lease accruals of $4.7 million, and the write-off of leasehold improvements of $2.0 million. Of the associate-related accruals of $2.6 million, $0.2 million remained accrued as of December 31, 2019.2020. These amounts are expected to be paid out in fiscal 2021.
With respect to fiscal 2015, 2017, 2018, 2019, 2020, and 20202021 lease accruals and adjustments described above, the Company intends to continue subleasing the facilities to the extent possible. The liabilities will be satisfied over the remainder of the leased properties' terms, which continue through November 2025. Of the total amount accrued, $5.0$4.2 million remained accrued as of December 31, 2019.2020. Actual sublease receipts may differ from the estimates originally made by the Company. Any future changes in the estimates or in the actual sublease income could require future adjustments to the liabilities, which would impact net earnings (loss) in the period the adjustment is recorded.
Gains, Losses and Other Items, net
Gains,The following table summarizes the activity included in gains, losses and other items, net in the condensed consolidated statements of operations for each of the periods presented are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | | | For the nine months ended | | |
| | December 31, | | | | December 31, | | |
| | 2019 | | 2018 | | 2019 | | 2018 |
Restructuring plan charges and adjustments | | $ | 233 | | | $ | 5,043 | | | $ | 1,890 | | | $ | 5,533 | |
| | | | | | | | |
| | | | | | | | |
Other | | — | | | — | | | 664 | | | — | |
| | $ | 233 | | | $ | 5,043 | | | $ | 2,554 | | | $ | 5,533 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the nine months ended |
| | December 31, | | December 31, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Restructuring plan charges and adjustments | | $ | (5) | | | $ | 233 | | | $ | 1,197 | | | $ | 1,890 | |
| | | | | | | | |
Other | | (1) | | | 0 | | | 173 | | | 664 | |
| | $ | (6) | | | $ | 233 | | | $ | 1,370 | | | $ | 2,554 | |
15. COMMITMENTS AND CONTINGENCIES:
Legal Matters
The Company is involved in various claims and legal proceedings.proceedings that arise in the ordinary course of business. Management routinely assesses the likelihood of adverse judgments or outcomes to these matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. The Company records accruals for these matters to the extent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. These accruals are adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertinent to a particular matter. These accruals are reflected in the Company’s condensed consolidated financial statements. In management’s opinion, the Company has made appropriate and adequate accruals for these matters, and management believes the probability of a material loss beyond the amounts accrued to be remote. However, the ultimate liability for these matters is uncertain, and if accruals are not adequate, an adverse outcome could have a material effect on the Company’s consolidated financial condition or results of operations. The Company maintains insurance coverage above certain limits. There are currently no matters pending against
Commitments
The following table presents the Company’s purchase commitments at December 31, 2020. Purchase commitments primarily include contractual commitments for the purchase of data, and other commitments primarily include contractual commitments related to hosting services and software as a service arrangements. The table does not include the future payment of liabilities related to uncertain tax positions of $25.6 million as the Company or its subsidiaries foris not able to predict the periods in which the potential exposure is consideredpayments will be made (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the years ending March 31, |
| | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total |
Purchase commitments | | $ | 6,841 | | | $ | 7,485 | | | $ | 4,094 | | | $ | 346 | | | $ | 48 | | | $ | 0 | | | $ | 18,814 | |
Other commitments | | 11,873 | | | 47,211 | | | 46,640 | | | 45,380 | | | 44,200 | | | 33,150 | | | 228,454 | |
Total purchase and other commitments | | $ | 18,714 | | | $ | 54,696 | | | $ | 50,734 | | | $ | 45,726 | | | $ | 44,248 | | | $ | 33,150 | | | $ | 247,268 | |
While the Company does not have any other material contractual commitments for capital expenditures, certain levels of investments in facilities and computer equipment continue to be necessary to support the Company’s condensed consolidated financial statements.growth of the business.
16. INCOME TAX:
In determining the quarterly provision for income taxes, the Company applies its estimated annual effective income tax rate to its year-to-date pretax income or loss and adjusts for discrete tax items in the period. The estimated annual effective income tax rate for the current fiscal year is primarily driven by nondeductible stock-based compensation and the valuation allowance, with a lesser impact attributable to federal research tax credits and the benefit of certain state tax losses, offset by income tax expenses in profitable foreign jurisdictions.allowance. Realization of the Company's net deferred tax assets is dependent upon its generation of sufficient taxable income of the proper character in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences andas well as net operating loss carryforwards. During the nine months ended December 31, 2019, the Company released a portion of its valuation allowance in connection with deferredand tax liabilities associated with DPM acquired intangibles (see Note 5).credit carryforwards. As of December 31, 2019,2020, the Company continues to maintain a full valuation allowance on its net deferred tax assets except in certain foreign jurisdictions.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions wereCompany measures certain financial assets at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to estimate thederive fair value of each class of financial instruments for which it is practicable to estimate that value.values are classified based on a three-level hierarchy, as follows:
Cash and cash equivalents, trade receivables, unbilled and notes receivable, and trade payables - The carrying amount approximates fair value because of the short maturity of these instruments.
•
Under applicable accounting standards financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company assigned assets and liabilities to the hierarchy in the accounting standards, which is Level 1 - quotedQuoted prices in active markets for identical assets or liabilities, Level 2 - significant other observable inputs and Level 3 - significant unobservable inputs.
The following table presents the balances of assets measured at fair value as of December 31, 2019 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | | |
Other current assets | | $ | 14,886 | | | $ | — | | | $ | — | | | $ | 14,886 | |
Total assets | | $ | 14,886 | | | $ | — | | | $ | — | | | $ | 14,886 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
liabilities.
•Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
For certain financial instruments, including accounts receivable, certificates of deposit, and accounts payable, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.
The following tables detail the fair value measurements within the fair value hierarchy of the Company's financial assets and liabilities at December 31, 2020 and March 31, 2020 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Other current assets: | | | | | | | | |
| | | | | | | | |
Assets of non-qualified retirement plan | | $ | 16,425 | | | $ | 0 | | | $ | 0 | | | $ | 16,425 | |
Total | | $ | 16,425 | | | $ | 0 | | | $ | 0 | | | $ | 16,425 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Other current assets: | | | | | | | | |
| | | | | | | | |
Assets of non-qualified retirement plan | | $ | 11,623 | | | $ | 0 | | | $ | 0 | | | $ | 11,623 | |
Total | | $ | 11,623 | | | $ | 0 | | | $ | 0 | | | $ | 11,623 | |
Strategic investments consist of non-controlling equity investments in privately held companies. The Company elected the measurement alternative for these investments without readily determinable fair values and for which the Company does not have the ability to exercise significant influence. These investments are accounted for under the cost method of accounting. Under the cost method of accounting, the non-marketable equity securities are carried at cost less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, which is recorded within the statement of operations. The Company held $5.7 million of strategic investments without readily determinable fair values at December 31, 2020 and $3.5 million of strategic investments without readily determinable fair values at March 31, 2020. These investments are included in other assets on the condensed consolidated balance sheets. There were 0 impairment charges for the nine months ended December 31, 2020 and 2019, respectively.
18. SUBSEQUENT EVENT
DataFleets, Ltd
On February 8, 2021, the Company announced it had entered into an agreement to acquire DataFleets, Ltd for approximately $68 million plus assumed equity and additional retention incentives. The acquisition is expected to close by March 31, 2021.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction and Overview
LiveRamp is a global technology company with a vision of becoming the trusted platform that makes all customermaking it safe and easy for companies to use data accessible and meaningful.effectively. We provide ana best-in-class enterprise customer managementdata connectivity platform that helps organizations better leverage customer data to deliver innovative productswithin and meaningful experiences.outside their four walls. Powered by its core identity capabilities inand an extensive network, LiveRamp enables companies and their partners to better connect, control, and activate data accessibility, identity, connectivityto transform customer experiences and data stewardship, LiveRamp makes it safe and easy to connect the world's data, people and applications.generate more valuable business outcomes.
LiveRamp is a Delaware corporation headquartered in San Francisco, California. Our common stock is listed on the New York Stock Exchange under the symbol “RAMP.” We serve a global client base from locations in the United States, Europe, and the Asia-Pacific (“APAC”) region. Our direct client list includes many of the world’s largest and best-known brands across most major industry verticals, including but not limited to financial, insurance and investment services, retail, automotive, telecommunications, high tech, consumer packaged goods, healthcare, travel, entertainment, non-profit, and government. Through our extensive reseller and partnership network, we serve thousands of additional companies, establishing LiveRamp as a foundational and neutral enabler of the customer experience economy.
Operating Segment
The Company operates as one operating segment. An operating segment is defined as a component of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker. Our chief operating decision maker evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. Since we operate as one operating segment, all required financial segment information can be found in the consolidated financial statements.
Sources of Revenues
LiveRamp recognizes revenue from the following sources: (i) subscription revenue, which consists primarily of subscription fees from clients accessing our platform; and (ii) marketplace and other revenue,, which primarily consists of revenue-sharing fees generated from data transactions through our LiveRamp Data Store platform,Marketplace, and transactional usage-based revenue from arrangements with certain publishers and addressable TV providers. Our platform subscription pricing is tiered based on data volume supported by our platform.
The majority of our subscription revenue is derived from subscriptions that are one year in duration and invoiced on a monthly basis, although some of our clients are entering into multi-year subscriptions.
The LiveRamp Platform
As depicted in the graphic below, we power the industry’s leading enterprise customer managementdata connectivity platform. We enable organizations to access and leverage data more effectively across the applications they use to interact with their customers. A core component of our platform is the omnichannel, deterministic identity graph that sits at its center. Leveraging this knowledgebase, the LiveRamp platform resolves a customer’s data (first-, second-, or third-party) to consumer identifiers that represent real people in a way that protects consumer privacy. This omnichannel view of the consumer can then be activated across any of the 550 plus partnerspartners in our ecosystem in order to support a variety of people-based marketing solutions, including:
•Onboarding. We enable customers to leverage their first-party data in the digital and TV ecosystems through a safe and secure data matching process called data onboarding. Our technology ingests a customer’s first-party data, removes all offline data (personally identifiable information or "PII"), and replaces them with de-identifiedpseudonymous IDs called IdentityLinks, IdentityLink™, a true people-based identifier. IdentityLinksIdentityLink can then be distributed through direct integrations towith the top platforms in the digital ecosystem, including leading DMPs and DSPs, publishers and social networks, personalization tools, and connected TV services.
•Identity Resolution. We provide enterprise-level identity resolution with accuracy, reach, privacy, flexibility and scale. Our identity resolution capabilities are built from two complementary graphs, combining offline data and online data and providing the highest level of accuracy while still being privacy compliant.privacy-focused. LiveRamp technology for PII gives brands and platforms the ability to connect and update what they know about consumers, resolving PII across enterprise databases and systems to deliver better customer experiences in a privacy-conscious manner. Our digital identity graph associates anonymouspseudonymous device IDs, cookie IDs and other online customer IDs from premium publishers, platforms or data providers, around an IdentityLink. This allows marketers to perform the personalized segmentation, targeting, and measurement use cases that require a consistent view of the user in non-identifiable spaces. Our Authenticated Traffic Solution enables authenticated identity for visitor traffic to provide addressability across all browsers.
•Safe HavenData Networks. We enable the search, discovery. Our Safe Haven helps data owners maximize value by breaking down internal and distribution of data, with access to trusted industry leading third-party data globally. The LiveRamp platform allows users to organize, groupexternal silos in a privacy-first and access customer data, connected via IdentityLink, to benefit from better campaign targeting and audience intelligence. Our platform also provides the toolssecure environment. Safe Haven's built-in privacy controls include provisions for data providers to manage the organization,availability, user access, and operationappropriate usage rights, allowing data owners to retain full control of their dataassets. Safe Haven offers powerful applications including reports, dashboards and services available across platforms, publishers, agencies, brands,synthesized audience segments for both marketers and data companies. Providers and buyers can also choose to leverage our neutral data marketplace (see below for discussion on Data Store), featuring 180 providers across all verticals and data types.scientists.
•MeasurementAnalytics & Analytics.Measurement. We power highly accurate and complete measurement with the measurement vendors and partners our customers use. Our platform allows customers to combine disparate data files (typically ad exposure and customer events, like transactions), replacing customer identifiers with IdentityLinks.IdentityLink. Customers then can use that aggregated view of each consumer for measurement of reach and frequency, sales lift, closed loop offline to online conversion and cross-channel attribution.
•Analytics Environments. We also help enable in-house data science analytics, providing an end-to-end customized measurement solution designed for marketers looking to create an omnichannel view of their customer journey. Leveraging our identity graph, we help organizations control and aggregate all their customer data to interrogate, explore, analyze and report within our data science environment, that powers the deep functionality of a data lake.
•Consent Management. Our Consent Management Platform ("CMP") empowers consumers to maintain their privacy while facilitating business for brands and publishers.Our CMP informs website visitors about the data being collected on them and how it will be used. We provide the tools to give consumers control and choice over their personal data, publishers the solutions to operate sustainable business models, and brands the ability to advertise more relevantly and effectively.
Consumer privacy and data protection, what we call Data Ethics, are at the center of how we design our products and services. Accordingly, the LiveRamp platform operates with technical, operational, and personnel controls designed to keep our customers’ data private and secure.
Our solutions are sold to enterprise marketers and the companies they partner with to execute their marketing, including agencies, marketing technology providers, publishers and data providers. Today, we work with over 770810 direct customers world-wide, including approximately 21% of the Fortune 500, and serve thousands of additional customers indirectly through our reseller partnership arrangements.
•Brands and Agencies. We work with over 400475 of the largest brands and agencies in the world, helping them execute people-based marketing by creating an omni-channelomni-channel understanding of the consumer and activating that understanding across their choice of best-of-breed digital marketing platforms.
•Marketing Technology Providers. We provide marketing technology providers with the identity foundation required to offer people-based targeting, measurement and personalization within their platforms. This adds value for brands by increasing reach, as well as the speed at which they can activate their marketing data.
•Publishers. We enable publishers of any size to offer people-based marketing on their properties. This adds value for brands by providing direct access to their customers and prospects in the publisher's premium inventory.
•Data Owners. Leveraging our vast network of integrations, we allow data owners to easily connect to the digital ecosystem and monetize their own data. Data can be distributed to clients or made available through the LiveRamp Data StoreMarketplace feature. This adds value for brands as it allows them to augment their understanding of consumers and increase both their reach against and understanding of customers and prospects.
We generally charge for IdentityLink on an annual subscription basis. Our subscription pricing is based primarily on data volume supported by our platform.
Data StoreMarketplace and Other
As we have scaled the LiveRamp network and technology, we have found additional ways to leverage our platform, deliver more value to clients and create incremental revenue streams. Leveraging our common identity system and broad integration network, the LiveRamp Data StoreMarketplace is a data marketplacesolution that seamlessly connects data owners’ audience data across the marketing ecosystem. The Data StoreMarketplace allows data owners to easily monetize their data across hundreds of marketing platforms and publishers with a single contract. At the same time, the Data Storeit provides a single gateway where data buyers, including platforms and publishers, in addition to brands and their agencies, can access ethically sourced, high-quality third-party data from more than 180 data owners, supporting all industries and encompassing all types of data. Data providers include sources andbrands exclusive to LiveRamp, emerging platforms with access to previously unavailable deterministic data, and data partnerships enabled by our platform.
We primarily generate revenue from the Data StoreMarketplace primarily through revenue-sharing arrangements with data owners that are monetizing their data assets on our marketplace. ThisWe also generate Marketplace and Other revenue is typicallythrough transactional in nature, tied to data volume purchased on the Data Store.usage-based arrangements with certain publishers and addressable TV providers.
COVID-19 Update
The COVID-19 pandemic has continued to spread across the world. The pandemic and the public health measures taken in response to it have adversely affected workforces, organizations, customers, economies, and financial markets globally, leading to an economic downturn and increased market volatility. We are continuing to monitor the actual and potential effects of the pandemic across our business. Because these effects are dependent on highly uncertain future developments, including the duration, spread and severity of the outbreak, the actions taken to contain the virus, and how quickly and to what extent normal economic and operating conditions can resume, they are extremely difficult to predict, and it is not possible at this time to estimate the full impact that COVID-19 could have on our business going forward. While our revenues, billings and earnings are relatively predictable as a result of our subscription-based business, our revenues have been negatively impacted due to short-term service concessions granted to certain customers, and it is expected that certain of these concessions will extend into subsequent periods.
Since mid-March, we have taken a number of precautionary measures to ensure the health and safety of our employees, partners and customers. LiveRamp shifted to a remote workplace, requiring nearly all employees to work from home. We suspended all business travel other than for essential functions. We have cancelled or replaced planned events with virtual-only experiences. We have incurred expenses to support our employees working from home, including reimbursements for home office equipment, and may incur similar expenses in the future as remote operations continue. While the COVID-19 pandemic had some favorable impacts on our results of operations during the nine months ended December 31, 2020, such as reduced travel, entertainment and promotional costs, there is no assurance that those favorable impacts will recur in the future, or if they do recur would be enough to offset expenses incurred to support our employees working from home and to otherwise combat the impact COVID-19 has had and may continue to have on the Company.
Summary Results and Notable Events
A financial summary of the quarter ended December 31, 20192020 is presented below:
•Revenues were $119.8 million, a 17.2% increase from $102.2 million a 27.7% increase from $80.0 million in the same quarter a year ago.fiscal 2020.
•Cost of revenue was $37.1 million, a 2.3% decrease from $38.0 million a 9.0% increase from $34.8 million in the same quarter a year ago.fiscal 2020.
•Gross margin increased to 69.0% from 62.9% from 56.5% in the same quarter a year ago.fiscal 2020.
•Total operating expenses were $98.4 million, a 6.9% decrease from $105.7 million a 13.2% increase from $93.4 million in the same quarter a year ago.fiscal 2020.
•Cost of revenue and operating expenses for the quarters ended December 31, 2019fiscal 2021 and 20182020 include the following items:
◦Non-cash stock compensation of $30.3$23.9 million and $26.1$30.3 million, respectively (cost of revenue and operating expenses)
◦Purchased intangible asset amortization of $5.4$4.2 million and $3.4$5.4 million, respectively (cost of revenue)
◦Accelerated depreciation of $2.0 million in fiscal 2019 (cost of revenue and operating expenses)
◦Restructuring and merger charges of $0.2 million and $5.0 million, respectivelyin fiscal 2020 (gains, losses and other)
◦Separation and transformation costs of $0.7 million in fiscal 2019 (operating expenses)
•Net loss was $38.0$11.7 million, a loss of $0.56$0.18 per diluted share, compared to a net loss from continuing operations of $15.3$38.0 million or $0.20$0.56 per diluted share in the same quarter a year ago.fiscal 2020.
•Net cash provided by operating activities was $15.8$14.7 million compared to net cash usedprovided by operating activities of $10.9$15.8 million in the same quarter a year ago.
•The Company repurchased 0.4 million shares of its common stock for $20.7 million under the Company's common stock repurchase program.fiscal 2020.
This summary highlights financial results as well as other significant events and transactions of the Company during the quarter ended December 31, 2019.2020. However, this summary is not intended to be a full discussion of the Company’s results. This summary should be read in conjunction with the following discussion of Results of Operations and Capital Resources and Liquidity and with the Company’s condensed consolidated financial statements and footnotes accompanying this report.
Results of Operations
A summary of selected financial information for each of the periods reported is presented below (dollars in thousands, except per share amounts):
| | | For the three months ended | | | For the nine months ended | | | For the three months ended | | For the nine months ended |
| | December 31, | | | December 31, | | | December 31, | | December 31, |
| | | % | | | % | | | % | | | % |
| | 2019 | | 2018 | | Change | | 2019 | | 2018 | | Change | | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
Revenues | Revenues | | $ | 102,217 | | | $ | 80,021 | | | 28 | | | $ | 274,871 | | | $ | 207,304 | | | 33 | | Revenues | | $ | 119,753 | | | $ | 102,217 | | | 17 | | | $ | 323,851 | | | $ | 274,871 | | | 18 | |
Cost of revenue | Cost of revenue | | 37,966 | | | 34,838 | | | 9 | | | 115,852 | | | 82,958 | | | 40 | | Cost of revenue | | 37,085 | | | 37,966 | | | (2) | | | 106,447 | | | 115,852 | | | (8) | |
Gross profit | Gross profit | | 64,251 | | | 45,183 | | | 42 | | | 159,019 | | | 124,346 | | | 28 | | Gross profit | | 82,668 | | | 64,251 | | | 29 | | | 217,404 | | | 159,019 | | | 37 | |
Total operating expenses | Total operating expenses | | 105,736 | | | 93,394 | | | 13 | | | 299,152 | | | 240,358 | | | 24 | | Total operating expenses | | 98,449 | | | 105,736 | | | (7) | | | 286,044 | | | 299,152 | | | (4) | |
Loss from operations | Loss from operations | | (41,485) | | | (48,211) | | | (14) | | | (140,133) | | | (116,012) | | | 21 | | Loss from operations | | (15,781) | | | (41,485) | | | (62) | | | (68,640) | | | (140,133) | | | (51) | |
Net earnings (loss) | | $ | (38,040) | | | $ | 1,056,400 | | | (104) | | | $ | (120,382) | | | $ | 1,074,008 | | | (111) | | |
Diluted earnings (loss) per share: | | $ | (0.56) | | | $ | 13.65 | | | (104) | | | $ | (1.77) | | | $ | 13.90 | | | (113) | | |
Net loss | | Net loss | | $ | (11,725) | | | $ | (38,040) | | | (69) | | | $ | (57,421) | | | $ | (120,382) | | | (52) | |
Diluted loss per share | | Diluted loss per share | | $ | (0.18) | | | $ | (0.56) | | | (69) | | | $ | (0.87) | | | $ | (1.77) | | | (51) | |
Revenues
The Company's revenues for each of the periods reported is presented below (dollars in thousands):
| | | For the three months ended | | | For the nine months ended | | | For the three months ended | | For the nine months ended |
| | December 31, | | | December 31, | | | December 31, | | December 31, |
| | | % | | | % | | | % | | | % |
| | 2019 | | 2018 | | Change | | 2019 | | 2018 | | Change | | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
Revenues: | | Revenues: | | | | | | | | | | | | |
Subscription | Subscription | | $ | 81,554 | | | $ | 65,003 | | | 25 | | | $ | 221,847 | | | $ | 171,184 | | | 30 | | Subscription | | $ | 93,431 | | | $ | 81,554 | | | 15 | | | $ | 262,130 | | | $ | 221,847 | | | 18 | |
Marketplace and Other | Marketplace and Other | | 20,663 | | | 15,018 | | | 38 | | | 53,024 | | | 36,120 | | | 47 | | Marketplace and Other | | 26,322 | | | 20,663 | | | 27 | | | 61,721 | | | 53,024 | | | 16 | |
Total revenues | Total revenues | | $ | 102,217 | | | $ | 80,021 | | | 28 | | | $ | 274,871 | | | $ | 207,304 | | | 33 | | Total revenues | | $ | 119,753 | | | $ | 102,217 | | | 17 | | | $ | 323,851 | | | $ | 274,871 | | | 18 | |
Total revenuerevenues for the quarter ended December 31, 2019 was $102.22020 were $119.8 million, a $22.2$17.5 million, or 27.7%,17.2% increase compared tofrom the same quarter a year ago. The increase was due to Subscription growth of $16.6$11.9 million, or 25.5%14.6%, primarily due to new logo deals and upsell to existing customers andpartially offset by lower variable revenue of $1.3 million. Marketplace and Other growth of $5.6was $5.7 million, or 37.6%27.4%, primarily due to Data store and TVMarketplace growth. On a geographic basis, U.S. revenue increased $21.6$17.0 million, or 29.3%17.8%. International revenue increased $0.6 million, or 8.5%, from the same quarter a year ago. Approximately one-half of the International revenue increased $0.6 million, or 9.0%, fromgrowth was due to exchange rate impacts. Revenues in the same quarter a year ago.three months ended December 31, 2020 were not materially impacted by the COVID-19 pandemic.
Subscription revenue could be negatively impacted by approximately $30 million in our fiscal year 2022 as we transition a few platform customer relationships that license cookie-based components of our digital identity graph. This small customer set licenses our digital graph to support their own identity solutions. As such, our overall subscription growth could be impacted by these contract changes.
Total revenue for the nine months ended December 31, 20192020 was $274.9$323.9 million, a $67.6$49.0 million or 32.6%17.8%, increase compared to the same period a year ago. The increase was due to Subscription growth of $50.7$40.3 million, or 29.6%,18.2% increase, primarily due to new logo deals and upsell to existing customers, and Marketplace and Other growth of $16.9$8.7 million, or 46.8%.16.4% increase , primarily due to Data Marketplace and Other revenue growth was negatively impacted in the amount of $4.6 million from a revenue-sharing arrangement related to a lost customer.TV transactional growth. On a geographic basis, U.S. revenue increased $65.9$48.0 million, or 34.7%, from the same period a year ago.18.8%. International revenue increased $1.7$1.0 million, or 9.7%5.2%. Again, both U.S and International revenue wasRevenues in the nine months ended December 31, 2020 were negatively impacted by $2.1 million due to short-term service concessions related to the lost customer.
COVID-19 pandemic.
Cost of revenue and Gross profit
The Company’s cost of revenue and gross profit for each of the periods reported isare presented below (dollars in thousands):
| | | For the three months ended | | | For the nine months ended | | | For the three months ended | | For the nine months ended |
| | December 31, | | | December 31, | | | December 31, | | December 31, |
| | | % | | | % | | | % | | | % |
| | 2019 | | 2018 | | Change | | 2019 | | 2018 | | Change | | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
Cost of revenue | Cost of revenue | | $ | 37,966 | | | $ | 34,838 | | | 9 | | | $ | 115,852 | | | $ | 82,958 | | | 40 | | Cost of revenue | | $ | 37,085 | | | $ | 37,966 | | | (2) | | | $ | 106,447 | | | $ | 115,852 | | | (8) | |
Gross profit | Gross profit | | $ | 64,251 | | | $ | 45,183 | | | 42 | | | $ | 159,019 | | | $ | 124,346 | | | 28 | | Gross profit | | $ | 82,668 | | | $ | 64,251 | | | 29 | | | $ | 217,404 | | | $ | 159,019 | | | 37 | |
Gross margin | Gross margin | | 62.9 | % | | 56.5 | % | | 11 | | | 57.9 | % | | 60.0 | % | | (4) | | Gross margin | | 69.0 | % | | 62.9 | % | | 10 | | | 67.1 | % | | 57.9 | % | | 16 | |
Cost of revenue: Includesrevenue includes third-party direct costs including Identity Graphidentity graph data, other data and cloud andcloud-based hosting costs, as well as costs of IT, security and product operations functions. Cost of revenue also includes amortization of internally developed software and other acquisition relatedacquisition-related intangibles.
Cost of revenue was $38.0$37.1 million for the quarter ended December 31, 2019,2020, a $3.1$0.9 million, or 9.0%2.3%, increasedecrease from the same quarter a year ago. Gross margins increased to 62.9%69.0% compared to 56.5%62.9% in the same quarter of the prior year.a year ago. The gross margin increase iswas primarily due to revenue growth, lower identity graph costs of $1.7 million from contract consolidations and lower purchased asset intangible amortization of $1.2 million. These cost decreases were offset partially by increases in cloud infrastructure costs of $2.7 million. U.S. gross margins increased to 69.9% for the three months ended December 31, 2020 from 64.2% in the same quarter a year ago. International gross margins increased to 56.0% from 44.9%.
Cost of revenue was $106.4 million for the nine months ended December 31, 2020, a $9.4 million, or 8.1%, decrease from the same period a year ago. Gross margins increased to 67.1% compared to 57.9% in the prior year period. The gross margin increase was primarily due to decreasedrevenue growth, lower identity graph and cloud infrastructure costs of $5.8 million from contract consolidations, decreased security costs of $2.1 million from ending AMS disposition transition spend, as well as $2.7 million of accelerated depreciation in the prior year,year. These decreases were offset partially by increases in hosting and TV direct costs.costs of $3.1 million. U.S. gross margins increased to 64.2%68.2% in the current year from 57.6%59.3% in the prior year. International gross margins increased to 44.9%50.9% from 42.4%.
Cost of revenue was $115.9 million for the nine months ended December 31, 2019, a $32.9 million, or 39.7%, increase from the same period a year ago. Gross margins decreased to 57.9% compared to 60.0% in the prior year period. The gross margin decrease is due primarily to increased hosting and security costs, as well as accelerated depreciation. U.S. gross margins decreased to 59.3% in the current year from 62.0% in the prior year. International gross margins increased to 38.2% from 37.4%.
Operating Expenses
The Company’s operating expenses for each of the periods reported is presented below (dollars in thousands):
| | | For the three months ended | | | For the nine months ended | | | For the three months ended | | For the nine months ended |
| | December 31, | | | December 31, | | | December 31, | | December 31, |
| | | % | | | % | | | % | | | % |
Operating expenses | | 2019 | | 2018 | | Change | | 2019 | | 2018 | | Change | |
| | | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
Operating expenses: | | Operating expenses: | | | | | | | | | | | | |
Research and development | Research and development | | $ | 27,403 | | | $ | 20,469 | | | 34 | | | $ | 77,570 | | | $ | 54,379 | | | 43 | | Research and development | | $ | 30,608 | | | $ | 27,403 | | | 12 | | | $ | 88,632 | | | $ | 77,570 | | | 14 | |
Sales and marketing | Sales and marketing | | 51,993 | | | 40,054 | | | 30 | | | 140,341 | | | 109,317 | | | 28 | | Sales and marketing | | 43,904 | | | 51,993 | | | (16) | | | 124,236 | | | 140,341 | | | (11) | |
General and administrative | General and administrative | | 26,107 | | | 27,828 | | | (6) | | | 78,687 | | | 71,129 | | | 11 | | General and administrative | | 23,943 | | | 26,107 | | | (8) | | | 71,806 | | | 78,687 | | | (9) | |
Gains, losses and other items, net | Gains, losses and other items, net | | 233 | | | 5,043 | | | (95) | | | 2,554 | | | 5,533 | | | (54) | | Gains, losses and other items, net | | (6) | | | 233 | | | (103) | | | 1,370 | | | 2,554 | | | (46) | |
Total operating expenses | Total operating expenses | | $ | 105,736 | | | $ | 93,394 | | | 13 | | | $ | 299,152 | | | $ | 240,358 | | | 24 | | Total operating expenses | | $ | 98,449 | | | $ | 105,736 | | | (7) | | | $ | 286,044 | | | $ | 299,152 | | | (4) | |
|
Research and development (“R&D”): Includes expense includes operating expenses for the Company’s engineering and product/project management functions supporting research, new development, and related product enhancement.
R&D expenses were $27.4$30.6 million for the quarter ended December 31, 2019,2020, an increase of $6.9$3.2 million, or 33.9%11.7% compared to the same quarter a year ago, and are 26.8%were 25.6% of total revenues compared to 25.6%26.8% in the same quarter of the prior year.a year ago. The increase iswas primarily due to an increase in ongoing investment in LiveRamp products and an increase in non-cash stock-based compensation expense, of $0.6 million, and ongoing investment in LiveRamp products.offset partially by reduced travel costs.
R&D expenses were $77.6$88.6 million for the nine months ended December 31, 2019,2020, an increase of $23.2$11.1 million, or 42.6%14.3%, compared to the same period a year ago, and are 28.2%were 27.4% of total revenues compared to 26.2%28.2% in the prior year. The increase is due primarily to an increase in non-cash stock-based compensation of $3.3$3.7 million, and ongoing investment in LiveRamp products.products, offset partially by reduced travel costs.
Sales and marketing (“S&M”): Includes expense includes operating expenses for the Company’s sales, marketing, and product marketing functions.
S&M expenses were $52.0$43.9 million for the quarter ended December 31, 2019, an increase2020, a decrease of $11.9$8.1 million, or 29.8%15.6%, compared to the same quarter a year ago, and are 50.9%were 36.7% of total revenues compared to 50.1%50.9% in the same quarter of the prior year. Current quartera year ago. The decrease in S&M expenses included $15.7 million ofwas due to a decrease in non-cash stock-based compensation expense compared to $9.5of $6.5 million as a result of expected attainment adjustments for performance-based awards in the prior year. The increase in stock-based compensation is primarily due to performance-based awards based on expected levelsyear and timing of performance. The additional increase in S&M expenses is due to increaseddecreased travel, entertainment and promotional costs partially offset by headcount to support revenue growth initiatives and increased bad debt expense on growing revenue levels.investments. Since mid-March we have suspended all business travel other than for essential functions. We also cancelled or replaced planned events with virtual-only experiences.
S&M expenses were $140.3$124.2 million for the nine months ended December 31, 2019, an increase2020, a decrease of $31.0$16.1 million, or 28.4%11.5%, compared to the same period a year ago, and are 51.1%were 38.4% of total revenues compared to 52.7% in the prior year. Current year expenses included $34.3 million of non-cash stock-based compensation expense compared to $29.2 million51.1% in the prior year. The increasedecrease in S&M expenses iswas due to increaseda decrease in non-cash stock-based compensation expense of $8.7 million as a result of expected attainment adjustments for performance-based awards, and decreased travel, entertainment and promotional costs partially offset by headcount to support revenue growth initiatives and increased bad debt expense on growing revenue levels.investments.
General and administrative (G&A): Represents("G&A") expense represents operating expenses for the Company's finance, human resources, legal, corporate IT, and other corporate administrative functions.
G&A expenses were $26.1$23.9 million for the quarter ended December 31, 2019,2020, a decrease of $1.7$2.2 million, or 6.2%8.3% compared to the same quarter a year ago, and are 25.5%were 20.0% of total revenues compared to 34.8%25.5% in the same quarter of the prior year. G&A expenses included $7.1 million of non-cash stock-based compensation compared to $9.6 million in the same quarter of the prior year.a year ago. The prior year stock-based compensation included performance awards adjustments due to the sale of AMS and award modifications (revised vesting terms) for transition associates. The non-cash stock based compensation decrease in G&A expenses is partially offset by an increasewas due to a decrease in headcount to support business growth.non-cash stock-based compensation expense of $0.8 million, as well as decreased controllable non-headcount expenses, including travel and entertainment and professional services.
G&A expenses were $78.9$71.8 million for the nine months ended December 31, 2019, an increase2020, a decrease of $7.6$6.9 million, or 10.6%8.7%, compared to the same period a year ago, and are 28.6%were 22.2% of total revenues compared to 34.3%28.6% in the prior year. The decrease in G&A expenses included $17.8 million ofwas due to a decrease in non-cash stock-based compensation compared to $15.7expense of $2.4 million as a result of expected attainment adjustments for performance-based awards in the same period of the prior year. The priorCurrent year periodexpenses also included $2.8$3.9 million of third-party transformation costs incurred in separation and transformation costs.response to the potential COVID-19 pandemic impact on our business. The remaining increase in G&A expensesdecrease of $8.4 million is primarily headcount relateddue to support business growth.decreased controllable non-headcount expenses, including travel and entertainment and professional services.
Gains, losses, and other items, net: Representsnet represents restructuring costs and other adjustments.
Gains, losses and other items, net of $0.2 millionwas not material for the quarter ended December 31, 2019 decreased $4.82020, a decrease of $0.2 million compared to the same quarter a year ago.
Gains, losses and other items, net of $2.6was $1.4 million for the nine months ended December 31, 2019 decreased $3.02020, a decrease of $1.2 million compared to the same period a year ago.
The current year amount includes a lease settlement of $1.0 million and $1.0 million of restructuring charges (severance) offset by a lease reserve adjustment. The prior year amount included $2.6 million in restructuring charges (primarily severance).
Loss from Operations and Operating Margin
Loss from operations was $41.5$15.8 million for the quarter ended December 31, 20192020 compared to $48.2$41.5 million forin the same quarter a year ago. Operating margin was anegative 13.2% compared to negative 40.6% compared. The improvement was primarily due to increased gross profit from an increase in revenue, lower cost of revenue due to decreased identity graph and security costs, and decreased operating expenses due to a negative 60.2%.decrease in non-cash stock-based compensation expense of $6.4 million as well as decreased travel and entertainment and professional services.
Loss from operations was $140.1$68.6 million for the nine months ended December 31, 20192020 compared to $116.0$140.1 million for the same period a year ago. Operating margin was a negative 51.0%21.2% compared to a negative 56.0%51.0%. The improvement was primarily due to increased gross profit from an increase in revenue, lower cost of revenue due to decreased identity graph and security costs, and decreased operating expenses due to a decrease in non-cash stock-based compensation expense of $7.7 million as well as decreased travel and entertainment and professional services.
Other IncomeIncome/Expense and Income Taxes
Other incomeexpense was $3.2$0.1 million for the quarter ended December 31, 20192020 compared to $10.4other income of $3.2 million forin the same quarter a year ago.
Other income was $13.8$0.2 million for the nine months ended December 31, 20192020 compared to $10.5$13.8 million for the same period a year ago. Other income is primarily consists of interest income related tofrom invested cash proceedsbalances, which, along with interest rates, has decreased significantly from the saleprior year. The current period also included losses on disposal of AMS in October 2018.assets offsetting approximately $0.5 million of interest income.
Income tax benefit was $4.1 million on a pretax loss of $15.9 million for the quarter ended December 31, 2020, resulting in a 26.1% effective tax rate. This compares to a prior year income tax benefit of $0.3 million on a pretax loss of $38.3 million, for the quarter ended December 31, 2019 compared to incomeor a 0.7% effective tax rate. The current period tax benefit reflects anticipated refunds from the carryback of $22.5 millionnet operating losses under the CARES Act, which was enacted on a pretax loss of $37.8 million for the same quarter last year. Except for certain states, no income tax benefit was recorded for the current year pretax losses due to uncertainty of realization of our deferred taxes.March 27, 2020.
Income tax benefit was $11.1 million on a pretax loss of $68.5 million for the nine months ended December 31, 2020, resulting in a 16.2% effective tax rate. This compares to a prior year income tax benefit of $5.9 million on a pretax loss of $126.3 million, foror a 4.7% effective tax rate. Due to the nine months ended December 31, 2019 comparedenactment of the CARES Act and its loss carryback provisions, the Company is able to income tax benefit of $21.3 million on a pretax loss of $105.5 million for the same period last year. Except for certain states, no income tax benefit was recorded for thefrom current year pretax losses due to uncertainty of realization of our deferred taxes.losses. The currentprior year benefit was primarily due to a $4.9 million valuation allowance release in connection with deferred tax liabilities associated with DPM acquired intangibles.
Discontinued Operations
Summary results of operations of AMS are segregated and included in earnings from discontinued operations, net of tax, in the Company's condensed consolidated statements of operations for the period presented below (dollars in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | For the three months ended December 31, 2018 | | | | For the nine months ended December 31, 2018 |
Revenues | | | | $ | — | | | | | $ | 332,185 | |
Cost of revenue | | | | 24,677 | | | | | 213,512 | |
Gross profit | | | | (24,677) | | | | | 118,673 | |
Operating expenses: | | | | | | | | |
Research and development | | | | 6,703 | | | | | 21,621 | |
Sales and marketing | | | | 18,110 | | | | | 60,743 | |
General and administrative | | | | 27,767 | | | | | 72,150 | |
Gains, losses and other items, net | | | | (1,658,667) | | | | | (1,656,014) | |
Total operating expenses | | | | (1,606,087) | | | | | (1,501,500) | |
Income from discontinued operations | | | | 1,581,410 | | | | | 1,620,173 | |
Interest expense | | | | — | | | | | (5,702) | |
Other, net | | | | 74 | | | | | 97 | |
Earnings from discontinued operations before income taxes | | | | 1,581,484 | | | | | 1,614,568 | |
Income taxes | | | | 509,823 | | | | | 456,301 | |
Earnings from discontinued operations, net of tax | | | | $ | 1,071,661 | | | | | $ | 1,158,267 | |
Capital Resources and Liquidity
The Company’s cash isand cash equivalents are primarily located in the United States. Approximately $7.9At December 31, 2020, approximately $11.7 million of the total cash balance of $767.2$663.4 million, or approximately 1.0%1.8%, iswas located outside of the United States. The Company has no current plans to repatriate this cash to the United States.
Net accounts receivable balances were $115.9 million at December 31, 2020, an increase of $23.1 million, compared to $92.8 million at March 31, 2020. Days sales outstanding, a measurement of the time it takes to collect receivables, were 89 days at December 31, 2020, compared to 80 days at March 31, 2020. DSO can fluctuate due to the timing and nature of contracts that lead to up-front billings related to deferred revenue on services not yet performed, and Marketplace and other contracts which are billed on a gross basis but for which the amount that is due to data providers is not reflected as revenues. All customer accounts are actively managed, and no losses in excess of amounts reserved are currently expected. We are also actively evaluating the potential negative impact of COVID-19on our customers’ ability to pay our accounts receivable.
Working capital at December 31, 20192020 totaled $784.0$701.3 million, a $313.0$33.7 million decrease when compared to $1.1 billion$735.0 million at March 31, 2019.2020.
Management believes that the Company's existing available cash will be sufficient to meet the Company's working capital and capital expenditure requirements for the foreseeable future. However, wein light of the current global COVID-19 pandemic, our liquidity position may change due to the inability to collect from our customers, inability to raise new capital via issuance of equity or debt, and disruption in completing repayments or disbursements to our creditors. We have historically taken and may continue to take advantage of opportunities to generate additional liquidity through capital market transactions. The outbreak of COVID-19 has caused significant disruptions to the global financial markets, which could increase the cost of capital and adversely impact our ability to raise additional capital, which could negatively affect our liquidity in the future. The amount, nature, and timing of any capital market transactions will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature, and timing of our capital requirements; and overall market conditions. If we are unable to raise funds as and when we need them, we may be forced to curtail our operations.
Cash Flows
The following table summarizes our cash flows for the periods presentedreported (dollars in thousands):
| | | For the nine months ended | | | For the nine months ended |
| | December 31, | | | December 31, |
| | 2019 | | 2018 | | 2020 | | 2019 |
| Net cash used in operating activities | Net cash used in operating activities | | $ | (28,355) | | | $ | (40,332) | | Net cash used in operating activities | | $ | (2,673) | | | $ | (28,355) | |
Net cash used in investing activities | Net cash used in investing activities | | $ | (115,150) | | | $ | (7,795) | | Net cash used in investing activities | | $ | (24,754) | | | $ | (115,150) | |
Net cash used in financing activities | Net cash used in financing activities | | $ | (135,840) | | | $ | (820,644) | | Net cash used in financing activities | | $ | (43,018) | | | $ | (135,840) | |
Net cash provided by discontinued operations | | $ | — | | | $ | 2,277,338 | | |
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Operating Activities - Continuing Operations
Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our clients and related payments to our suppliers. The timing of cash receipts from clients and payments to suppliers can significantly impact our cash flows from operating activities. Our collection and payment cycles can vary from period to period.
For the nine months ended December 31, 2020, net cash used in operating activities of $2.7 million resulted primarily from net earnings adjusted for non-cash items of $32.3 million offset by cash used by operating assets and liabilities of $35.0 million. The net unfavorable change in operating assets and liabilities was primarily related to unfavorable changes in accounts receivable of $26.6 million, accounts payable and other liabilities of $6.8 million, and deferred commissions of $5.1 million partially offset by favorable changes in other assets of $7.5 million and deferred revenue of $5.1 million. The change in accounts receivable is primarily due to the growth in our subscription and marketplace and other revenue and the timing of cash receipts from clients. The change in accounts payable and other liabilities is primarily due to the timing of payments to suppliers. The change in other assets was impacted by a $10 million data revenue share prepayment to a data partner.
For the nine months ended December 31, 2019, net cash used in operating activities of $28.4 million resulted primarily from net loss adjusted for non-cash items of $15.2 million and an increase in cash used by operating assets and liabilities of $13.2 million. The net unfavorable change in operating assets and liabilities was primarily related to unfavorable changes in accounts receivable of $11.9 million and income taxes of $13.4 million partially offset by favorable changes in accounts payable and other liabilities of $12.6 million. The increase in accounts receivable was primarily due to the growth in our subscription and marketplace and other revenue and the timing of cash receipts from clients. The change in income taxes was primarily due to extension payments related to fiscal 2019 state income tax returns and deferred tax liabilities associated with DPM acquired intangibles.
For the nine months ended December 31, 2018, net cash used in operating activities of $40.3 million resulted primarily from net earnings adjusted for non-cash items of $35.7 million offset by a decrease in cash provided by operating assets and liabilities of $76.0 million. The net unfavorable change in operating assets and liabilities was primarily related to unfavorable changes in income taxes of $50.0 million and accounts receivable of $35.0 million, offset partially by favorable changes in accounts payable and other liabilities of $18.5. The change in income taxes was primarily due to the sale of AMS. The increase in accounts receivable was primarily due to the growth in our subscription and marketplace and other revenue and the timing of cash receipts from clients. The increase in accounts payable and other liabilities was primarily due to the timing of payments to suppliers.
Investing Activities - Continuing Operations
Our primary investing activities have consisted of acquisitions and capital expenditures in support of our expanding headcount as a result of our growth. Capital expenditures may vary from period to period due to the timing of the expansion of our operations, the addition of new headcount, new facilities and acquisitions. Expenditures related to our capitalized software may also vary from period to period based on development cycles. As development cycles shorten, we expect our capitalized costs to continue to decrease. Other periodic
In the nine months ended December 31, 2020, net cash used in investing activities include cash paid in acquisitions, cash received in dispositions that are not classified as discontinued operations,of $24.8 million consisted of capital expenditures of $1.8 million, investments of $3.0 million, strategic investments of $2.2 million, $2.9 million for the Acuity acquisition, and payments for investments.the final release of the DPM escrow of $14.8 million funded from restricted cash.
For the nine months ended December 31, 2019, we used $115.2 million of cash in investing activities, primarily consisting of $10.3 million for capital expenditures, and $105.4 million for the acquisitions of DPM and Faktor.
For the nine months ended December 31, 2018, we used $7.8 million of cash in investing activities, consisting primarily of $4.0 million for capital expenditures, $2.5 million payment for an investment and $1.3 million for capitalized software.
Financing Activities - Continuing Operations
Our financing activities have consisted of acquisition of treasury stock, proceeds from our equity compensation plans, and shares repurchased for tax withholdings upon vesting of stock-based awards.
In the nine months ended December 31, 2020, net cash used in financing activities was $43.0 million, consisting of the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $42.3 million (1.3 million shares), and $9.4 million for shares repurchased for tax withholdings upon vesting of stock-based awards (0.2 million shares). These uses of cash were partially offset by proceeds of $8.7 million from the sale of common stock from our equity compensation plans.
For the nine months ended December 31, 2019, we used $135.8 million of cash in financing activities, consisting of the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $121.2 million (2.6 million shares), and $18.1 million for shares repurchased for tax withholdings upon vesting of stock-based awards (0.1(0.4 million shares). These uses of cash were partially offset by proceeds of $3.4 million from the sale of common stock from our equity compensation plans.
For the nine months ended December 31, 2018, we used $820.6 million of cash in financing activities, consisting primarily of the acquisition of treasury stock from the tender offer of $503.4 million (11.2 million shares), the payoff of the revolver debt of $230.0 million, the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $64.1 million (2.3 million shares), $36.9 million for shares repurchased for tax withholdings upon vesting of stock-based awards (1.0 million shares), and other payments of debt of $3.3 million. These uses of cash were partially offset by proceeds of $17.4 million from the sale of common stock from our equity compensation plans.
Discontinued operations
Net cash provided by discontinued operations was $2.3 billion in the prior year, primarily due to the net cash received in the sale of AMS.
Off-Balance Sheet Items and Commitments
As of the date of this Quarterly Report on Form 10-Q, we do not have any off-balance sheet arrangements.
Common Stock Repurchase Program
Under the modified common stock repurchase program, the Company may purchase up to $1.0 billion of its common stock through the period ending December 31, 2020.2022. During the nine months ended December 31, 2019,2020, the Company repurchased 2.61.3 million shares of its common stock for $121.2$42.3 million under the stock repurchase program. Through December 31, 2019,2020, the Company had repurchased a total of 25.128.2 million shares of its stock for $570.2$673.6 million under the stock repurchase program, leaving remaining capacity of $429.8$326.4 million.
Contractual Commitments
The following table presents the Company’s contractual cash obligations and purchase commitments at December 31, 2019.2020. Operating leases primarily consist of our various office facilities, purchase commitments primarily include contractual commitments for the purchase of data, and other commitments primarily include contractual commitments related to hosting services and software as a service providers.arrangements. The table does not include the future payment of liabilities related to uncertain tax positions of $22.4$25.6 million as the Company is not able to predict the periods in which the payments will be made. The amounts for 20202021 represent the remaining three months ending March 31, 2020.2021. All other periods represent fiscal years ending March 31 (dollars in thousands).
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| | For the years ending March 31, | | | | | | | | | | | | |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total |
Operating leases | | $ | 2,725 | | | $ | 10,187 | | | $ | 9,147 | | | $ | 2,670 | | | $ | 725 | | | $ | 33 | | | $ | 25,487 | |
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| | For the years ending March 31, |
| | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | | | Total |
Operating leases | | $ | 2,920 | | | $ | 9,303 | | | $ | 2,780 | | | $ | 785 | | | $ | 72 | | | | | $ | 15,860 | |
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Future minimum payments as of December 31, 20192020 related to restructuring plans as a result of the Company's exit from certain leased office facilities are:are (dollars in thousands): Remainder of Fiscal 2020: $636; Fiscal 2021: $2,560;$648; Fiscal 2022: $2,610;$2,611; Fiscal 2023: $2,663; Fiscal 2024: $2,699;$2,698; Fiscal 2025: $2,698; and Thereafter: $4,497.$1,799.
| | | For the years ending March 31, | | | For the years ending March 31, |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | | Total |
Purchase commitments | Purchase commitments | | $ | 5,220 | | | | $ | 9,531 | | | | $ | 5,201 | | | | $ | 3,308 | | | | $ | 96 | | | | $ | 48 | | | | $ | 23,404 | | Purchase commitments | | $ | 6,841 | | | $ | 7,485 | | | $ | 4,094 | | | $ | 346 | | | $ | 48 | | | | $ | 18,814 | |
Other commitments | Other commitments | | 6,215 | | | | 21,912 | | | | 25,575 | | | | 27,720 | | | | 7,525 | | | | — | | | | 88,947 | | Other commitments | | 11,873 | | | 47,211 | | | 46,640 | | | 45,380 | | | 44,200 | | | | 228,454 | |
Total purchase and other commitments | Total purchase and other commitments | | $ | 11,435 | | | $ | 31,443 | | | $ | 30,776 | | | $ | 31,028 | | | $ | 7,621 | | | $ | 48 | | | $ | 112,351 | | Total purchase and other commitments | | $ | 18,714 | | | $ | 54,696 | | | $ | 50,734 | | | $ | 45,726 | | | $ | 44,248 | | | | $ | 247,268 | |
While the Company does not have any other material contractual commitments for capital expenditures, certain levels of investments in facilities and computer equipment continue to be necessary to support the growth of the business.
For a description of certain risks that could have an impact on results of operations or financial condition, including liquidity and capital resources, see “Risk Factors” contained in Part I, Item 1A, of the Company’s 2019Company's 2020 Annual Report.Report as revised and updated by the supplemental risk factors in Part II, Item 1A "Risk Factors" of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August 10, 2020.
Non-U.S. Operations
The Company has a presence in the United Kingdom, France, Netherlands, Australia, China, Singapore and Japan. Most of the Company’s exposure to exchange rate fluctuation is due to translation gains and losses as there are no material transactions that cause exchange rate impact. In general, each of the foreign locations is expected to fund its own operations and cash flows, although funds may be loaned or invested from the U.S. to the foreign subsidiaries. These advances are considered long-term investments, and any gain or loss resulting from changes in exchange rates as well as gains or losses resulting from translating the foreign financial statements into U.S. dollars are included in accumulated other comprehensive income. Therefore, exchange rate movements of foreign currencies may have an impact on the Company’s future costs or on future cash flows from foreign investments. The Company has not entered into any foreign currency forward exchange contracts or other derivative instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Critical Accounting Policies
We prepare our condensed consolidated financial statements in conformity with U.S. GAAP as set forth in the FASB ASC and we consider the various staff accounting bulletins and other applicable guidance issued by the SEC. These accounting principles require management to make certain judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The consolidated financial statements in the Company’s 20192020 Annual Report include a summary of significant accounting policies used in the preparation of the Company’s consolidated financial statements. In addition, the Management’s Discussion and Analysis filed as part of the 2019Company's 2020 Annual Report contains a discussion of the policies that management has identified as the most critical because they require management’s use of complex and/or significant judgments. None of the Company’s critical accounting policies have materially changed since the date of the last annual reportCompany's 2020 Annual Report other than as described in the Accounting Pronouncements Adopted During the Current Year section of Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements.Statements accompanying this report.
Recent Accounting Pronouncements Adopted During the Current Year
SeeFor information on recent accounting pronouncements, see “Accounting Pronouncements Adopted During the Current Year” under Note 1, “Basis of PresentationYear" and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements for a discussion of certain accounting standards that have been issued and were adopted during the current fiscal year.
New Accounting Pronouncements Not Yet Adopted
See “Recent Accounting Pronouncements Not Yet Adopted” under Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements for a discussion of certain accounting standards that have been issued but not yet adopted.accompanying this report.
Forward-looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements, which are not statements of historical fact, may contain estimates, assumptions, projections and/or expectations regarding the Company’s financial position, results of operations, market position, product development, growth opportunities, economic conditions, and other similar forecasts and statements of expectation. Forward-looking statements are often identified by words or phrases such as “anticipate,” “estimate,” “plan,” “expect,” “believe,” “intend,” “foresee,” or the negative of these terms or other similar variations thereof. These forward-looking statements are not guarantees of future performance and are subject to a number of factors and uncertainties that could cause the Company’s actual results and experiences to differ materially from the anticipated results and expectations expressed in the forward-looking statements.
Forward-looking statements may include but are not limited to the following:
•management’s expectations about the macro economy;
•statements containing a projection of revenues, operating income (loss), income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure, or other financial items;
•statements of the plans and objectives of management for future operations, including, but not limited to, those statements contained under the heading “Growth Strategy” in Part I, Item 1 of the Company's 2019 Annual Report on Form 10-K;
•statements of future economic performance, including, but not limited to, those statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 2019 Annual Report on Form 10-K;
•statements containing any assumptions underlying or relating to any of the above statements; and
•statements containing a projection or estimate.
Among the factors that may cause actual results and expectations to differ from anticipated results and expectations expressed in such forward-looking statements are the following:
•the risk factors described in Part I, “Item 1A. Risk Factors” included in the Company's 2019 Annual Report and those described from time to time in our future reports filed with the SEC;
•the possibility that, in the event a change of control of the Company is sought, certain clients may attempt to invoke provisions in their contracts allowing for termination upon a change in control, which may result in a decline in revenue and profit;
•the possibility that the integration of acquired businesses may not be as successful as planned;
•the possibility that the fair value of certain of our assets may not be equal to the carrying value of those assets now or in future time periods;
•the possibility that sales cycles may lengthen;
•the possibility that we will not be able to properly motivate our sales force or other associates;
•the possibility that we may not be able to attract and retain qualified technical and leadership associates, or that we may lose key associates to other organizations;
•the possibility that competent, competitive products, technologies or services will be introduced into the marketplace by other companies;
•the possibility that there will be changes in consumer or business information industries, markets or regulations that negatively impact the Company;
•the possibility that we will not be able to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms;
•the possibility that there will be changes in the legislative, accounting, regulatory and consumer environments affecting our business, including but not limited to litigation, legislation, regulations and customs impairing our ability to collect, manage, aggregate and use data;
•the possibility that due to changes in culture, legislation or regulation, such as the California Consumer Protection Act (and regulations thereunder) and analogous laws and regulations, that greater numbers of consumers will exercise rights to prevent the use of personal data and reduce the amount of data available for our use and for the advertising and marketing ecosystem in which we operate leading to a reduction in our revenue;
•the possibility that data suppliers might withdraw data from us, leading to our inability to provide certain products and services;
•the possibility that data purchasers will reduce their reliance on us by developing and using their own, or alternative, sources of data generally or with respect to certain data elements or categories;
•the possibility that we may enter into short-term contracts that would affect the predictability of our revenues;
•the possibility that the amount of volume-based and other transactional based work will not be as expected;
•the possibility that we may experience a loss of data center capacity or interruption of telecommunication links or power sources;
•the possibility that we may experience failures or breaches of our network and data security systems, leading to potential adverse publicity, negative customer reaction, or liability to third parties;
•the possibility that our clients may cancel or modify their agreements with us;
•the possibility that we will not successfully complete customer contract requirements or the service levels specified in the contracts, which may result in contract penalties or lost revenue;
•the possibility that we may experience processing errors that result in credits to customers, re-performance of services or payment of damages to customers or regulatory error;
•the possibility that our performance may decline and we may lose advertisers and revenue if the use of "third-party cookies" or other tracking technology is rejected by Internet users, restricted or otherwise subject to unfavorable regulation, blocked or limited by technical changes on end users' devices, or our clients' ability to use data on our platform is otherwise restricted;
•general and global negative economic conditions; and
•our tax rate and other effects of the changes to U.S. federal tax law.
With respect to the provision of products or services outside our primary base of operations in the United States, all of the above factors apply, along with the difficulty of doing business in numerous sovereign jurisdictions due to differences in scale, competition, culture, laws and regulations.
Other factors are detailed from time to time in periodic reports and registration statements filed with the SEC. The Company believes that it has the product and technology offerings, facilities, associates and competitive and financial resources for continued business success, but future revenues, costs, margins and profits are all influenced by a number of factors, including those discussed above, all of which are inherently difficult to forecast.
In light of these risks, uncertainties and assumptions, the Company cautions readers not to place undue reliance on any forward-looking statements. Forward-looking statements and such risks, uncertainties and assumptions speak only as of the date of the Quarterly Report on Form 10-Q, and the Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein, to reflect any change in our expectations with regard thereto, or any other change based on the occurrence of future events, the receipt of new information or otherwise, except to the extent otherwise required by law.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We believe there have been no material changes in our market risk exposures for the nine months ended December 31, 2019,2020, as compared with those discussed in ourthe Company's 2020 Annual Report on Form 10-K for the fiscal year ended March 31, 2019.Report.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
Our management, with the participation of our Chief Executive Officer (our principal executive officer) and our President, Chief Financial Officer and Executive Managing Director of International (our principal financial and accounting officer), evaluated the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended). Based on this evaluation, our principal executive officer and our principal financial and accounting officer concluded that as of December 31, 2019,2020, our disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting.
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We continue to monitor the impact of the COVID-19 pandemic and, despite many of our employees working remotely, we have not experienced any changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are currently no matters pending against the Company or its subsidiaries for which the potential exposureThe information required by this item is considered materialset forth under Note 15, “Commitments and Contingencies,” to the Company’sour unaudited condensed consolidated financial statements.statements in Part I, Item 1 of this Quarterly Report and is incorporated herein by reference.
Item 1A. Risk Factors
The risks described in Part I, Item 1A, “Risk Factors” in ourthe Company's 2020 Annual Report, as revised and updated by the supplemental risk factors included in Part II, Item 1A "Risk Factors" of the Company's Quarterly Report on Form 10-K10-Q for the yearquarter ended March 31, 2019 (the "2019 Form 10-K"), which wasJune 30, 2020 filed with the Securities and Exchange CommissionSEC on May 29, 2019,August 10, 2020, remain current in all material respects. The risk factors in our 2019 Form 10-K2020 Annual Report do not identify all risks that we face. Our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. If any of the identified risks or others not specified in our SEC filings materialize, our business, financial condition, or results of operations could be materially adversely affected. In these circumstances, the market price of our common stock could decline.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
a.Not applicable.
b.Not applicable.
c.The table below provides information regarding purchases by LiveRamp of its common stock during the periods indicated.
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Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchasesd as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
October 2019 | | — | | | $ | — | | | — | | | $ | 450,473,075 | |
November 2019 | | 195,500 | | | $ | 48.44 | | | 195,500 | | | $ | 441,002,759 | |
December 2019 | | 228,453 | | | $ | 49.22 | | | 228,453 | | | $ | 429,757,545 | |
Total | | 423,953 | | | $ | 48.86 | | | 423,953 | | | N/A |
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Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
October 1, 2020 - October 31, 2020 | | — | | | $ | — | | | — | | | $ | 326,443,254 | |
November 1, 2020 - November 30, 2020 | | — | | | $ | — | | | — | | | $ | 326,443,254 | |
December 1, 2020 - December 31, 2020 | | — | | | $ | — | | | — | | | $ | 326,443,254 | |
Total | | — | | | $ | — | | | — | | | |
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was subsequently modified and expanded, most recently on November 3, 2020. Under the modified common stock repurchase program, the Company may purchase up to $1.0 billion of its common stock through the period ending December 31, 2020.2022. Through December 31, 2019,2020, the Company had repurchased a total of 25.128.2 million shares of its stock for $570.2$673.6 million, leaving remaining capacity of $429.8$326.4 million under the stock repurchase program.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
The following exhibits are filed with this quarterly report:
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10.1 | | | |
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31.1 | | | |
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31.2 | | | |
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32.1 | | | |
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32.2 | | | |
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101 | | | The following financial information from our Quarterly Report on Form 10-Q for the quarter ended December 31, 2019,2020, formatted in inline XBRL: (i) Condensed Consolidated Balance Sheets at December 31, 2019,2020 and March 31, 2019,2020, (ii) Condensed Consolidated Statements of Operations for the Three and Nine Months endedEnded December 31, 20192020 and 2018,2019, (iii) Condensed Consolidated Statements of OperationsComprehensive Loss for the Three and Nine Months endedEnded December 31, 20192020 and 2018,2019, (iv) Condensed Consolidated Statements of Comprehensive Income (Loss)Equity for the Three Months and Nine Months endedEnded December 31, 2019 and 2018,2020, (v) Condensed Consolidated StatementStatements of Equity for the Three Months and Nine Months endedEnded December 31, 2019, and December 31, 2018, (vi) Condensed Consolidated Statements of Cash Flows for the Nine Months endedEnded December 31, 20192020 and 2018,2019, and (vii) the Notes to Condensed Consolidated Financial Statements, tagged in detail. |
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104 | | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| LiveRamp Holdings, Inc. | |
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Dated: February 5, 20208, 2021 | | |
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| By: | /s/ Warren C. Jenson |
| | (Signature) |
| | Warren C. Jenson |
| | President, Chief Financial Officer and Executive Managing Director of International |
| | (principal financial and accounting officer) |