What happened
Shares of advertising technology (adtech) company LiveRamp Holdings (RAMP -1.14%) soared on Wednesday after the company reported financial results for the second quarter of its fiscal 2023. The company beat expectations, despite challenging headwinds, and raised expectations for the rest of the year. That's why LiveRamp stock was up 20% as of 2:20 p.m. ET.
So what
LiveRamp provides middleware software so that companies can anonymize and pool their first-party data and make their ad campaigns more targeted. Many advertising companies are struggling right now, but LiveRamp generated Q2 revenue of $147 million, an increase of 16% year over year and more than the $144 million that management had guided for.
Some other Q2 metrics for LiveRamp were also encouraging. Most of its revenue (81%) is subscription-based, and annual recurring revenue is currently at $420 million, up from $409 million in the prior quarter. Moreover, the company added two new customers, spending at a rate of $1 million per year, increasing its million-dollar customer count to 92. Not bad for a small-cap stock.
Now what
For the upcoming third quarter, LiveRamp management expects to generate revenue of $158 million, which would be a 12% year-over-year increase. Additionally, the company raised the low end of its revenue guidance and now expects full-year fiscal 2023 revenue to be between $595 million and $600 million.
LiveRamp plans to repurchase $50 million of its stock in the coming quarter, adding to the $100 million it's repurchased so far during its fiscal 2023. However, keep in mind that it's paid out $51.5 million in stock-based compensation during the first two quarters of the year, so the net benefit to shareholders is far less than one would expect.
Indeed, LiveRamp initiated a repurchase plan with a $1 billion authorization back in 2011 and has used $832 million so far. However, the share count is only down 16% over these 11 years because management keeps issuing new shares as it buys them, as the chart below shows.
RAMP Average Diluted Shares Outstanding (Quarterly) data by YCharts.
My point is, don't expect share repurchases to be a driver for LiveRamp stock -- it hasn't been in the past. Rather, business results will need to be the catalyst for share-price appreciation. Since the company is guiding for just 12% to 13% year-over-year growth for this fiscal year, it's fair to wonder if that will be enough to produce market-beating returns.
