Unidentified Participant: Got it. And, Lauren, just a follow-up, on Habu, is there any purchase getting impact or anything else to call out there, on the cost side or in terms of, the profit impact?
Lauren Dillard: Yes, absolutely. So, we talked about, Habu adding roughly, call it, $16 million to $18 million in non-GAAP expense next year. We also expect it to impact GAAP expense by about $25 million with about $15 million of that being driven by incremental stock-based comp and the balance being driven by purchased intangible asset amortization.
Unidentified Participant: Got it. Thank you very much.
Operator: Your next question comes from the line of Jason Kreyer from Craig Hallum. Please go ahead.
Jason Kreyer: Perfect. Thank you. Lauren, maybe just wanted to spend a second dissecting the guide, specifically the subscription revenue guide. We’ve seen nice improvement in the key metrics like ARR and net retention, RPO. But, if we contrast that with the Q4 guide kind of consistent or maybe a little bit of a slowdown in subscription revenue from the December quarter. Just trying to see if we can reconcile that slowdown a little bit?
Lauren Dillard: Yes. And, we would expect subscription growth to improve slightly quarter-on-quarter with fixed subscription being gable to slightly up in Q4 and usage being roughly flat. I mean usage has been one of the areas of our business where we’ve chosen rather, to just model pretty conservatively in our outlook, given the variability and sometimes kind of historical quarterly variability in particular. So, that’s the piece of the business that if we do much better on subscription revenue, it will be because we outperformed there.
Jason Kreyer: Okay. Appreciate that. One follow-up for me. Just on the offshoring initiatives that you’ve had in place over the last year, just wondering if there’s any changes to the expectation there now as you’re integrating Habu?
Lauren Dillard: Thanks for the question. No, no, the headline is no major changes. I’d want to acknowledge that this is a multiyear and we’re in the very early phases of implementation. We’re pleased with our progress to-date. But of course, with any project of this magnitude, there are early learnings and moving pieces, and we’re just really focused on making sure we get it right for the business for the long-term. To-date, we have just north of a 100 rolls offshore, and continue to take a very measured and thoughtful approach to how we transition future roles. So, we are still expecting cost savings in FY ‘25, but the really meaningful savings we expect to accrue in FY ‘26 and beyond.
Jason Kreyer: Thank you.
Operator: Your next question comes from the line of Mark Zgutowicz from The Benchmark Company. Please go ahead.
Mark Zgutowicz: Thank you. And apologies if you, addressed this in your opening. I got on the call a little bit late, but I was just hoping you could flush out, a bit the acceleration that you saw in the total RPO relative to current, and maybe what’s sort of driving that and whether that gives you confidence in accelerating revenues over the next 12 months? And then I have a follow-up. Thanks.
Lauren Dillard: Yes. Happy to, so total RPO, in the quarter was up 35%. The RPO or the current portion up 18%. And the delta there, Mark, is entirely being driven by multiyear deals, which as we’ve mentioned now for a few quarters, we’ve seen really nice success landing larger enterprise accounts on multiyear terms, which is a really positive thing for the business over the medium to long-term. I mean to answer your question directly, yes, this does give us increased confidence in our outlook for next year, and we’ll, of course, share a lot more there during our May call.
Mark Zgutowicz: Okay. Super. And then, as it relates to Habu, not to get too in front of you guys because it was just recently closed, but just trying to get a sense of when the revenue synergies sort of materialize and possibly more near-term, just looking at your services line, which you had some really nice growth this year. Given Habu’s SMB focus, if that could perhaps add a little bit momentum on your services line? If you could comment on that, I’d appreciate it. Thanks.
Scott Howe: Yes. I can start. And I think I talked about it a little bit in my prepared remarks. We don’t expect to wait to get synergies. Synergies start with pipeline and commercial conversations and those are already well underway. So, over the last two weeks, we have had over 200 face-to-face meetings. Last week was, the IAB Annual Leadership Meeting, and the Habu team was very busy, meeting with clients and prospects, with their LiveRamp counterparts. We have RampUp coming up at the end of this month, where we’ll invite several 1,000 clients and prospects to San Francisco. Once again, that’s going to be a great opportunity to get in front of clients. We’re already seeing that in our pipeline. So, several million dollars increase already.
And then the question is, how long does it take for those to convert into revenue. But, we feel pretty optimistic about it. We’ve hit the ground running. One of the things that we do, as a matter of course, when we are having conversations with companies, from a corp dev perspective, is we co-author a Google document with them. And, it gives us a chance to see how they think because what we do is map out a shared vision and our implementation strategy together. So, all of that was written, revised, iterated, discussed well before we ever agreed on our final purchase price. And as a result, we have hit the ground running.
Lauren Dillard: And hi, Mark, for everyone’s benefit, maybe I could just put a couple of numbers against Scott’s comment. So in Q4, we expect Habu to contribute roughly $2 million in revenue. Consistent with what we mentioned when we announced the deal, we expect it to contribute roughly $18 million in FY ‘25, and a lot of that assumption is predicated on Habu’s standalone momentum. The synergies, at least the revenue synergies, begin to show up in the back half of ‘25, but we think it really interesting as we look ahead to FY ’26.
Mark Zgutowicz: Super.
Drew Borst: Operator, we have time for, sorry, operator, we have time for one more question, please.
Operator: Certainly. Your next question comes from the line of Kirk Materne from Evercore ISI. Please go ahead.
Kirk Materne: Yes. Thanks very much. Scott, I guess just to start, could you just give a little bit more color on the cloud partnerships, maybe where each of those are? I know you said they’re doubling. Can you just remind us sort of sequentially maybe which ones are contributing perhaps a little bit more now and what your expectations are for the calendar year?
Scott Howe: Yes, Kirk, and I think there’s kind of a pre-Habu answer and a pro-forma answer. And that was one of the drivers of that acquisition. So, if you look back in time, LiveRamp made the decision to standardize initially on GCP as our, cloud partner for our own tech. And so, that was naturally an easy way to get started. And Google has always throughout the 10-year history of LiveRamp been one of the biggest, if not single biggest sources of new client originations. So, that will continue, but more recently, we had made some nice inroads with AWS. I mentioned in my prepared remarks being named one of their partners of the year. And then also Snowflake, which I think last quarter I talked about how effective they’ve been at walking us into their clients.
In each of those cases, when they bring us in, we drive more storage and compute. So, it really is a nice collaboration. Admittedly, we hadn’t made as much progress, with some of the other partners like Databricks or Azure. And in those cases, the good news is Habu has great relationships pretty much across the board. Now, this is really important because if I go back to one of our client advisory boards from last year, we asked the question, how many of you are using the cloud? And every single hand in the room went up. And then we asked, how many of you are using multiple clouds? Every single hand in the room went up. So, you need to have a relationship with every different cloud provider, because not only do individual companies utilize multiple clouds, but when they start to collaborate, it is absolutely the case that you have a Snowflake cloud talking to an Amazon cloud talking to an Azure cloud.
And if you can’t service, if you can’t be interoperable across all of them, then your growth is going to be inhibited. So, I think this goes back to why were we so excited about Habu. One of the big reasons is, we think it accelerates our traction with Cloud. We’re already pleased. We talked about the doubling, but we think this is going to be an area of the business in the coming years that should grow faster, than the rest of the business.
Kirk Materne: Thanks guys. That’s super helpful. And then just a quick one for, Lauren. Hey, Lauren, on your guide, I was a little surprised subscription net revenue is going back down towards a 100, and I know that’s probably conservatism in there, but given the trends in ARR, I guess, is that related to the lower, I guess, the lower ARR business that you were talking about sort of smaller customers that might still be there still might be some churn going on in that part of the customer base. Is that the reason for that, or is there something else that would push it back down after sort of stabilizing the last couple of quarters?
Lauren Dillard: Yes. So, two things I would call out. It’s, first, what you just mentioned, Kirk, and then also, we are assuming a lower contribution from variable revenue in Q4 consistent with the seasonal trends there.
Kirk Materne: Okay. That’s super helpful. Thank you all.
Operator: Thank you. I will now turn the call over to Lauren Dillard, for closing remarks.
Lauren Dillard: Thanks so much. And first, thank you again everyone for joining us today. Q3 was strong on both the top and bottom lines. Our growth in Subscription revenue and ARR is trending higher, and we are positioned for further acceleration exiting this year. And as we look ahead, we believe we have several growth levers to drive continued strong topline growth and margin expansion. And finally, as Scott referenced, during the call, we have our annual RampUp conference coming up the end of February in San Francisco. We invite all of you to join. We’d love to have you there. If you have any questions or need help registering, please reach out to me, Drew, or Cassandra, and hopefully, we see you at the end of the month. With that, thanks again for joining us today. We look forward to updating everyone on our progress in the quarters ahead.
Operator: This concludes today’s conference call. Thank you for your participation and you may now disconnect.
