Q3 2024 Liveramp Holdings Inc Earnings Call

Participants

Shyam Patil; Analyst; Susquehanna International Group

Elizabeth Porter; Analyst; Morgan Stanley

Brian Nicholas Fitzgerald; Analyst; Wells Fargo Securities, LLC

Jason Kreyer; Analyst; Craig-Hallum Capital Group LLC

Mark John Zgutowicz; Analyst; The Benchmark Company, LLC

Kirk Materne; Analyst; Evercore ISI Institutional Equities

Presentation

Good afternoon, and welcome. Thank you for joining our fiscal 2024 third quarter earnings call. With me today are Scott Howe, our CEO, and Lauren Dillard, our CFO. Today's press release and this call may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed description of these risks, please read the Risk Factors section of our public filings and the press release. A copy of our press release and financial schedules, including any reconciliations to non-GAAP financial measures, is available at liveramp.com. Also during the call today, we'll be referring to the slide deck posted on our website.
And with that, let me turn the call over to Scott.

Thank you, Drew. And thanks to everyone joining our call today. Q3 represented another quarter of improved momentum for LiveRamp. So my initial remarks today will focus on our recent accomplishments in greater detail as we look forward. However, we see a watershed year for the digital marketing industry and a significant opportunity for live ramp. So I'll also spend some time talking about our goals for FY 25 so that we can revisit our progress against these ambitions in the coming quarters.
Q3 revenue growth exceeded our expectations across the board with total revenue up 10% subscription revenue up 5% and marketplace up 29%. Non-gaap operating income was up 40% year on year and was $7 million or 25% ahead of our guidance a year ago, you may recall we had a nonrecurring contract settlement. Adjusting for this, our underlying subscription growth was 8%, which is a notable acceleration from the 5% rate we posted in the trailing three quarters. This acceleration reflects the turnaround in sales productivity that has been building over the past several quarters. As I often say, the gift and Curse of SaaS model is reported. Revenue growth is slow to decelerate and also slow to accelerate. The quarter seemingly demonstrates that we are now on the upswing. And encouragingly, the leading indicators of our revenue growth give us increased confidence about the fiscal year ahead.
Our ARR or annual recurring revenue in Q3 was $447 million, increasing by $19 million quarter on quarter, which is the largest dollar increase in the last nine quarters. Building on the new logo bookings strength of Q2, Q3 represented our best new logo quarter. In over two years, we signed a major health insurance company to a seven figure annual contract with a three year term for our identity and clean room products. A U.S. supermarket chain signed a two year contract with a seven figure ACV for identity and data onboarding.
Finally, we signed a new financial services customer to a two year seven-figure annual contract for our identity activation and measurement products. We also continue to perform well upselling existing clients, particularly large enterprise customers. In Q3, we upsold 42 Fortune 500 customers spanning a wide range of sector verticals. We had a seven figure ACV upsell with a premium credit card company for data onboarding and activation. We upsold a major CPG company to an incremental seven figure annual contract for multiple products, including our data, clean-room activation and measurement.
Finally, we had another seven-figure upsell with a global beauty and cosmetics company for our identity and clean room products. I am extremely proud of our recent sales performance and the turnaround our sales team has orchestrated over the past year, plus our sales capacity and productivity have turned the corner, setting us up for continued gains capacity sales attrition this year after spiking in FY 23 has normalized back to FY 22 levels. And our direct seller headcount is approximately 10% higher than it was in FY 22. Our sales capacity is in a healthy position, and that means we can proactively optimize for sales performance, sales productivity not only has our capacity at a level sufficient for faster revenue growth. We are also seeing improving productivity. Average bookings per rep were up over 20% year on year in both Q3 as well as fiscal year to date, our conversion of sales pipeline to contract signings has improved for four consecutive quarters now and in Q three was a 10 quarter high. Much of this improvement is coming from sellers. We onboarded last year a testament to both our revised hiring strategy that focuses on experienced enterprise sellers with vertical expertise as well as our revamped onboarding and enablement process that is accelerated the ramp time for our new reps, cloud partnerships. We also continue to make progress with our cloud channel partnerships and bookings from this channel will double this fiscal year.
In Q. three, we were selected as a 2023 Amazon Web Services global industry Partner of the Year for playing a key role, helping customers drive innovation and build solutions on AWS. This accolade should sound familiar because last August and Google Cloud also selected us as Partner of the Year. We also continue to gain traction with our Snowflake sales partnership and our embedded identity and activation products. As for Azure and Databricks, we expect these partnerships to scale more meaningfully in the coming year.
Thanks in part to how Booz strong relationship.
Let me turn to our major areas of focus for the year ahead, starting with how do we announced the acquisition of Hubbell and January 18th and closed on January 31st. We have had many conversations with customers, partners, employees, and shareholders. I'm pleased to share that the feedback has been overwhelmingly positive across the board. Our stakeholders and partners recognize the importance of first-party data collaboration for personalized marketing and a world of diminishing third party signals. They appreciate that no single company has enough data on their own to have a complete and comprehensive view of the customer journey, making data collaboration imperative, the combination of LiveRamp and hub, you create the software platform that makes this type of data sharing safe, simple, scalable and smart LiveRamp data collaboration platform has long been a leader in the clean room space. In fact, we launched the first commercially scaled clean room more than 40 years ago. The acquisition of hobby helps us take our clean room offering to the next level by adding three critical capabilities. First, streamlined and simplified cross cloud collaboration that will allow customers to seamlessly connect data across clouds, warehouses and clean rooms while reducing complexity and IT infrastructure constraints.
On this point, it is important to understand that hobbies clean room architecture is complementary to live ramps, legacy Clean Room offerings, how we bring that software to the clients' cloud environment, where is our clean room as a fully managed and hosted environment. In effect, the customer sends their data to our environment and sits on our cloud. Some customers prefer a hosted environment because it requires no internal IT resources and or their data is not yet in the cloud. We have a significant number of current clients using our clean room and we continue to add new customers every quarter, including Q. three looking forward as more data moves to the cloud, we expect the embedded cloud architecture to become more prominent in our clean room product roadmap prior to the Hubzu acquisition included the conversion of our clean room to the cloud embed architecture. But with this acquisition, this conversion is no longer necessary. We are saving time and R&D dollars that will be redeployed to other product enhancements. And in the meantime, our combined clean room offering can meet any customer's technical requirements, whether it's cloud, embedded or hosted.
Second, first-of-its-kind single view of measurement across any walled garden, programmatic channel or media partner, including media networks and all major sea TV and TV platforms. Cabo enhances our ability to measured walled gardens, which is critical given that walled gardens account for nearly three quarters of non-search digital advertising. This single view of measurement is incredibly powerful for brands looking to compare audience measurement and return on ad spend across platforms third and perhaps most importantly, hobbies provides an exceptional user experience with an easy-to-use self-service interface. How these unique architecture allows customers to create a clean room with a click of the button, accelerating the time to value this benefits all customers, but especially nontechnical customers, SMBs and international customers that often have less internal technology resources. Our customers care about scale and simplicity and this combination delivers more of both to everyone in the ecosystem, allowing us to accelerate the scaling of our collaboration network for all customers. The early feedback from customers supports our belief in the power of this combination.
Last week, I attended the Internet advertising Bureau's annual leadership meeting where I received first-hand feedback. Our customers are especially excited to have a cloud native identity plus clean rooms plus activation in a single unified platform and the opportunity for a more scaled collaboration partner network. They are also excited about the improved ease of use in fact, we had a large publisher reengage with us about a clean room solution after our initial discussions went dormant over the implementation time retail media network customers with managed service platforms are excited to have a platform that makes data collaboration more self-serve, collaborate with a wider set of partners. Our sales team has hit the ground running. We have already completed a full training on August product and have been actively engaging with customers in just the first two weeks since announcing the Hobbit acquisition, our sales team has conducted well over 100 customer calls and meetings to discuss the combination and our sales pipeline has expanded already by several million last week. As an example, at the IAB. meeting, Prabhu CEO, Matt Gilmartin told me he felt like a rock star given the dozens of meeting requests that he fielded from clients and prospects. He was absolutely the most popular man at the IAB. It's a tremendous start and the momentum is building and we are thrilled to welcome hobby to the live ramp team and are very optimistic about what we will accomplish for our existing and new customers in the coming years.
2024 will also be the year of the advertising industry embraces true people-based marketing that leverages authenticated identity as the third party cookie has retired. Consequently, this will be a second major focus area for us in the coming year. We view cookie deprecation as a significant opportunity for library because we believe first-party data collaboration will be one of the primary solutions for marketers to sustain personalized advertising in the absence of third party signals on January fourth, Google deprecation of third-party cookies for 1% of chrome users globally. The next milestone in Google's announced plan to phase out third party cookies for all chrome users globally in the second half of 2024, given Krones 60% plus browser market share globally and given past delays with its cookie deprecation time line, this 1% deprecation of third-party cookies was a notable step forward in the industry's transition to people-based marketing, leveraging authenticated identity. We have been preparing for this signaling future for some time now, and we are excited to continue helping our partners customers and stakeholders on the journey to a more privacy friendly approach. Our dedicated traffic solution or ATS is more than four years in the making and was purpose built for this signal less marketing environment. We are about to enter ATS safely and securely connects the first-party data for marketers and publishers to personalize and measure advertising on authenticated inventory. Additionally, we have partnered with Google's display and video three 60 DV. three 60 on its pair initiative. DV. three 60 is Google's demand-side platform and is the market share leader DV. three, 60 gives advertisers programmatic access to display and video ad inventory from Google's owned and operated sites such as YouTube as well as third party publishers pair, which stands for publisher and advertiser identity reconciliation is DB. three 60s answer to third party cookie deprecation and allows advertisers and publishers to securely and privately reconcile their first-party data to enable personalized advertising why brand's role and payer is twofold. First, Google has mandated the use of an independent clean room partner for payer and announced three launch partners live ramp and at Hubzu. Now the same company or two of those three partners. And our combined scale and readiness vastly exceeds the third partner. Second pair of fuels adoption of LiveRamp's authenticated traffic solution since both advertiser and publisher audience must now be consented for more than six months. Now we have been testing pair with our publisher and advertiser partners. Last week, we published our first pair case study with Omni Hotels and Resorts, the results are truly out standing pair campaign showed a four times increase in conversion rate over traditional cookie-based first-party audience targeting in DV. three, 60 indicating pair delivered better performing impressions four times. This is a big deal. Liveramp has long championed. The idea that personalization and privacy is not an either or proposition. The results of this case study demonstrate that campaigns based on authenticated first-party data are not just more effective than third party cookie campaigns. They're significantly more effective. We are excited to move into the post cookie world. And based on these results, advertisers should be also before turning the call over to Lauren, let me touch on our bottom line results. Rule of 40 including bottom line performance is a third major focus area for us in the coming year. We have certainly not lost sight of the bottom line. While we've been delivering better top line performance. We started this fiscal year expecting to deliver margin expansion of 500 basis points to now based on our updated guidance, we expect to deliver 600 basis points candidly, we could have delivered even more margin upside this year, but we chose to reinvest some of this upside into our product and people so we can return to sustainable double-digit top-line growth. We are all also now steadily producing a meaningful amount of operating cash flow. Q3 was our sixth consecutive quarter of positive operating cash flow and in the trailing four quarters, we produced nearly $110 million in operating cash flow. As proud as I am of this, there is more work to be done. And as you know, our medium term goal is to be a Rule of 40 company with sustainable 10% to 15% revenue growth and a 25% to 30% non-GAAP operating margin. Given our guidance. We will end FY 24 as a rule of 24 company. But our current momentum and ongoing operational focus gives me confidence that in FY 25, we will continue to make progress toward our medium term goal. In almost every area of our business, we see opportunities to further improve our efficiency and effectiveness will continue to make pipeline and bookings a top priority. Knowing these are the drivers of future SaaS revenue across our organization. We will continue to push for productivity gains through scale automation and improved performance. We'll continue to re-architect to improve product scalability. We'll push to make our technology even more simple, intuitive and increasingly self-serve to broaden our of our available market and improve our cost to serve and finally, we'll continue to make client satisfaction a top priority, always trying to reduce churn and create even more reference clients.
In closing, let me reiterate what I believe to be the key themes from the quarter. First, I am really pleased with the organic momentum in our business, particularly with subscription revenue growth turning towards high single digits. As a result, we have again raised our FY 24 guidance. Second, the acquisition of Hubble will further accelerate this organic momentum by establishing the industry-leading interoperable platform for data collaboration across all clouds, all walled gardens globally, strategically expanding our collaboration network and driving further adoption of our core identity and connectivity solutions.
Third, industry trends, well, there are a wind at our back over the long term. This includes the deprecation of third-party cookies as well as the shift to cloud computing, retail and Commerce Media Networks and CTV. We are well positioned to benefit from all of these megatrends in the years ahead. And thank you again for joining us today and a special thanks to our exceptional customers, partners and all live wrappers, including our new have new colleagues for their ongoing hard work and support. We look forward to updating you on our progress in the coming quarters.
I will now turn the call over to Lauren.

Thanks, Scott, and thank you all for joining us today. I will cover key topics first, a review of our Q3 financial results, and second, our updated outlook for FY 24 and Q4 unless otherwise indicated.
My remarks pertain to non-GAAP results and growth is relative to the year ago period. Starting with Q3 results, revenue and operating income were consistent with the preliminary results we reported on January 18th. Revenue came in at 174 million, 9 million above our guidance and operating income was 36 million, 7 million above our guide operating margin expanded by five percentage points to a record high of 21%, and we generated $17 million in operating cash flow or six consecutive quarter of positive OCF.
Let me now provide some additional details. Please turn to Slide 5. Total revenue was $174 million, up 10% with subscription revenue and marketplace, another significantly ahead of expectations, driven primarily by continued sales execution and a stronger than expected digital advertising market. Subscription revenue was $132 million, up 5%. Recall that the year-ago quarter benefited from a $4 million nonrecurring contract settlement with a large customer fixed subscription growth accelerated from our most recent quarter by approximately 150 basis points to 5% usage as a percentage of total subscription revenue was 16%, a tick above our historical 10% to 15% range. Arr was 447 million, up 6%. Arr improved quarter on quarter by 5% or 19 million. The sequential dollar increase was the largest increase in the last nine quarters. The improvement was primarily driven by continued good growth in customer upsell and new logo as well as lower customer churn and down-sell subscription. Net retention was 101%, stable sequentially and in line with our expectation. Current RPO or our next 12 month contracted backlog was $382 million, up 18%. Total RPO, including contracted backlog beyond the next 12 months was up 35% to $546 million. Like with recent quarters, there is a large difference between CRPO and ARR growth as we've discussed previously, CRPO is very sensitive to the timing of renewals and to contract durations. And given our enterprise focus and shift to more multiyear deals, both of these factors again benefited CRPO growth in the quarter. Overall, the Q3 selling environment was fairly healthy. We continued to see an improvement in the conversion of pipeline to signed deals and our US conversion rate was a 10 quarter high on a dollar basis. Our new logo signings were also a 10 quarter high as our strategy of prioritizing larger customers continues to bear fruit also our quarterly contraction or the combination of down-sell and customer churn was a two year low. Our average deal cycle continued to run at eight to nine months, consistent with the trailing five quarters, one area of continued softness to call out and with small low ACV customers, both brands as well as tech platforms, including ad tech that is experiencing structural change marketplace and other revenue of $42 million increased 29%, driven by data marketplace, which grew 24% and accounted for 79% of marketplace and other revenue data marketplace growth was fueled by the strong digital advertising environment and in particular, CTV as well as enhancements we've made to our data marketplace to make the buying and selling of data more seamless. We also continue to see strong growth in professional services, which accounted for nearly one-third of the revenue growth in marketplace and other moving beyond revenue, gross margin was 75%, down one point year on year and 100 basis points higher than our guidance, driven primarily by the timing of planned investments and services growth. Operating expenses were flat at $95 million was savings from last year's restructuring, offset by the normalization of sales commissions and incentive comp. Operating income was $36 million, up from $26 million a year ago, and our operating margin expanded by 500 basis points to a record high of 21%. Gaap operating income was $15 million representing a GAAP operating margin of 9%. We incurred $3 million in restructuring charges, primarily due to our A-Pac restructuring and Hubzu acquisition related expenses. Stock-based compensation was 17 million down from $30 million a year ago due to the accelerated vesting of certain non NEO, our issues in Q4 of FY 23 for tax planning purposes, operating cash flow was $17 million, up from 16 million a year ago. The year-on-year comparison was negatively impacted by the timing of current year tax payments. Fiscal year to date operating cash flow of $78 million, up from $4 million last year. We repurchased 347,000 shares for $10 million in Q3, bringing the year-to-date total to EUR45 million. We have approximately $173 million remaining under the current authorization that expires on December 31st, 2024.
In summary, Q3 was a strong quarter. Revenue growth improved to 10% with both subscription and marketplace exceeding our expectations. Arr grew by $19 million quarter on quarter, the largest quarterly increase in over two years, our non-GAAP operating margin expanded by approximately 500 basis points. We generated $17 million in operating cash flow in the quarter and 109 million in the trailing four quarters. Finally, fiscal year to date, we have returned 45 million to shareholders through our share repurchase program.
Next, let me now turn to our financial outlook for FY 24 and for Q4. Please turn to Slides 12 and 13. Please keep in mind our non-GAAP guidance excludes intangible amortization, stock-based compensation and restructuring and related charges. Starting with Q4, we expect total revenue of between 158 and $162 million, up 6% to 9% year-on-year. Non-gaap operating income of 13 to $14 million and an operating margin of 8% to 9%.
A few other callouts for Q4, we expect subscription net retention in Q4 to be 100%, roughly stable quarter on quarter, we expect customer count to be flat to down, reflecting ongoing changes and consolidation in the digital advertising market that may impact smaller tech platform customers, including ad tech While this would impact customer count, we don't expect the revenue impact to be material. We expect subscription revenue to be up mid single digits, but fixed also up mid-single digits, similar to q three and usage flat in the name of conservatism. We expect marketplace and other to be up mid to high 10s based on current trends quarter to date and assuming the current digital advertising market remained stable throughout the course of the quarter, we expect gross margin to be approximately 75%. We expect operating expenses to be up roughly 10% year on year.
Let me spend a moment here first hub who is going to add roughly three points of OpEx in the quarter. Next in Q4, we will start lapping the savings from last year's cost restructuring, which provided a meaningful benefit to our expense growth fiscal year to date.
And finally, with respect to the sequential dollar increase, recall that Q4 is seasonally our highest operating expense quarter of the year due to our ramp-up conference, payroll taxes and incentive comp. The quarter-over-quarter increase in Q4 is consistent with historical seasonality. Excluding the impact of onetime cost restructurings like we had last year, we expect GAAP operating loss to be between 18 and $17 million, inclusive of 5 to 6 million of additional expense associated with Hubzu, stock-based compensation, intangible amortization and acquisition related expenses.
Now for the full year, we are increasing our total revenue guidance by approximately 13.5 million at the midpoint compared to a $9 million beat in the quarter. We now expect revenue to be between 646 and $650 million, up 8% to 9% year on year. Non-gaap operating income is increased by 4 million at the midpoint and is expected to be between 103 and $104 million at the midpoint of our guidance range. The operating margin is approximately 16%, up 600 basis points year on year. We expect stock-based compensation to be approximately $71 million, which benefits from the $23 million in accelerated vesting in FY 23. We expect $12 million in restructuring charges, 1 million higher than our prior guide due to acquisition related expenses. We expect GAAP operating income to be between eight and 9 million.
Before opening the call to questions, I'll conclude with a few final thoughts. First, 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 next, as we look ahead, there are a couple of initiatives that we believe will help our top and bottom line both next year and beyond. First and foremost is efficiently and effectively integrating Hubbell. Additionally, we will make incremental progress with our India offshoring initiatives, and we intend to roll out back-end product improvements that will allow us to more efficiently process our customers' data and finally, our financial North Star remains Rule of 40. On the top line. We're encouraged by the positive trends in sales, productivity and the hub of opportunity and ultimately what that implies for subscription growth next year.
On the margin front, the leverage in our model, combined with the expansion of our new India office, gives us a path for steady margin expansion in the coming years, while continuing to appropriately invest to support healthy top line growth.
With that on behalf of all labor members, thank you for joining us today. Operator, we will now open the call to questions.

Question and Answer Session

Operator

If you would like to ask a question, please press star followed by the number one on your telephone keypad. We also ask that you limit yourself to one question and one follow-up. Your first question comes from the line of Shyam Patil from Susquehanna International Group.

Shyam Patil

Please go ahead.
Hi, Scott.
Hi, Lauren. This is Aaron Daniels on for Sean. Thank you for taking our question. Maybe starting off, Scott, thank you for the details. On the pair case study, could you just elaborate on your expectations for how the DB. 30 60 partnership into payer could impact the business moving forward and then we've got a follow up as well.

Sure.
And thanks for asking that, Aaron. I was essentially kind of hoping someone would ask about pair because this is such a fun story. You know, at LiveRamp, we always tried balance kind of our relentless operating focus.
You know, month over month, quarter over quarter and balanced that with a long-term view.
And when I look back, I mean, we started working on ATS. as a response to payer over four years ago. And so that journey can really be divided into three phases.
And we're hitting the really fun part right now.
So it started with preparing for the future and building the attack during COVID connecting and to all the DSPs and SSPs brands, publishers and agencies.
And we've shared the market share stats there.
We're in really good shape in terms of connecting all the different nodes of the industry. The second piece is proving that it works and that's squarely what we're doing right now. So we release the OMNI case study. That's the first of many, and that was phenomenal. I mean, results that almost defies logic for X improvement for consented users versus targeting the same users on cookies. So really nice lift there. Remember, we also published a publisher case study going back a year. I can see that in my blog at blog yesterday and linked to it that showed that publishers also get a nice lift. So they generate higher yield when they use authenticated solutioning and soon to come is we'll show that reach also increases right now, even without them cookie is fully dedicated. We have effective reach that generates meaningful volume. And at scale, we think we're going to once everyone's fully implemented, we think the reach to authenticated traffic will exceed the targeted reach to that those same users on cookies, it's just more persistent. So this is one where like it's better for consumers, it's better for advertisers.
It's better for publishers, really nice story.
So now what we reached the third part of the journey, and this is where the real fun happens, it's evangelization time. It is about telling the industry that we're ready when they are. And oh, by the way, for those in the industry, they need to be ready a little bit sooner than they think. So Google talked about 1% starting in January, scaling to full deprecation of cookies by fall. Well, if that's a radical deprecation, which will be by summer, cookies won't work are not effectively because already Safari is out ages out, Firefox is out and then when 50% or more of Google cookies are out, cookies are done. So we need to educate clients on how to get started and how to get going quickly. Now this is also fueling demand for Hubbell, so gives us potential access to new clients, but it also fuels demand for clean rooms because the only way you can do this kind of targeting is by having a clean room and anonymize and securing the data, which is what we do. And and you know, while this makes so much sense for clients in retail and travel and Financial Services who have deep loyalty databases, it also makes sense for companies that don't have that. And so hence the growth of things like retail media networks because since the retailer themselves can identify the customer, a company like P&G or Kraft or Coca-Cola can benefit from that through data collaboration.
And so this really is something that's good for everyone.
We're going to hear a lot of noise over the next couple of months about companies saying they're not ready and that we should delay. And I would say there is no stop in this train because it works better. The tech is ready and dumb. I don't think Google stop any there so this is going to be a really fun time for us.
Really interesting. Thanks, Scott. And then Loren, just a quick one for you. You talked about an OpEx step-up from 3Q to 4Q as being seasonally typical. I just wanted to double click on this. Is there any color you can share on sizing the typical seasonal step-up? Thanks again.
Sure.
Thanks, Aaron, I'm happy to say at the midpoint of our guidance, we are expecting OpEx to increase both by roughly 12 million quarter on quarter, of which you can assume 5 to 6 million is related to seasonal items such as ramp up payroll taxes and incentive comp adjustments. And so I wouldn't expect that to carry forward into our Q2 Q1 run rate and the remaining portion is being driven by the addition of cabo, which is adding about $3 million of OpEx in the quarter. And just underlying expense increases were reflecting some of the investments we're making now to support future topline growth. So as an example, we are choosing to pull forward some some some sales hiring as well. Services hiring to ensure we have really strong capacity entering FY 25.
Great.
Thank you again.

Operator

Your next question comes from the line of Elizabeth Porter from Morgan Stanley.
Please go ahead.
Great.

Elizabeth Porter

Thank you so much of my first question was on the large customer count. The one million-plus customers increased really nicely because we're the highest net adds we've seen about a year and a half, and you also referenced a lot of upsells in the quarter. So I was wondering what is driving some of the loosening of spend now after being in a tight environment is it customers feeling better about macro kind of the cookie deadline coming up, sales execution? I appreciate probably a lot of factors in there, but if you could just help us unpack what's driving greater uptake now that be really helpful. Thank you.
So the answer is yes, all of those things certainly do play a factor. But I think to two things in particular, are really driving the interest in clean rooms and connectivity. Number one is an increasing recognition amongst sophisticated advertisers that they are all competing around data. And when they look across the landscape and we can name that. We could point to the walled gardens companies that collect information from us as consumers across multiple touch points. And they are really well positioned to compete effectively. So everyone else at an industry is saying how do I catch up? And they can't not everybody can out Amazon Amazon unless they collaborate and win.

They start to pool their data together in a privacy compliant way.
They can actually extract insights that are far more interesting than that of any any data giant.
And then the second thing is around measurability and loss of signal as media plans expand.
There are more and more line items on media and those media plans just take linear television, for instance, it's all been tipped towards CTV.
And there are so many different choices for placing your ads on different viewership than they previously previously existed with linear. And with that explosion of choices comes the need for personalization, not necessarily just message personalization, but the kind of technology that also allows companies to do ad suppression. So just simple frequency capping, for instance, is so important on CTB. and programmatic. And you can't do that unless you have a measurement standard of measurement technology such as LiveRamp, has that facilitates the data going out, but also the measurement data coming back. And then I'll throw one other thing into the mix that is that we work in a copycat industry. And so every company is looking out there and saying who's doing it better than me and Elizabeth, you've been to ramp up before, you know what we do.
We we don't talk ourselves. We put our clients and partners on stage.
And right now, our clients and partners are all talking about the successes that they're having an escalating viral and attracting other clients. And there's a network effect that just takes off when our retailers bring us packaged goods partners and those packaged goods partners bring us more retailers.
So we're starting to benefit from that, rightfully, as you point out with our upselling efforts, but also with our new logo efforts.
So since the pandemic, really, this has been our biggest percentage of new logo business, about a third of our bookings this quarter was new logo, and that's the network effect in the cloud partnerships starting to bear some fruit.
Great.
Thank you so much. And just as a follow-up, I wanted to ask on the expense side. I appreciate the extra color on Q4. Is it fair for us to look at that is $3 million from holidays in the quarter and extrapolate that and into next year, you have additional offshoring and ongoing savings initiatives. So just how should we think about the net of those two things going into fiscal 25?
Yes. And Elizabeth, I'll just start by saying we're going to give a lot more color on both the top and bottom line for FY 25 on our May call. So perhaps stay tuned for for precise detail. But with respect too hard, though, in particular, it's going to contribute 3 million of expense in Q4. That's a partial quarter impact given and we closed that deal January 31st. So you can assume it should it should add anywhere from, call it 16 to $18 million in expense and FY 25.
Great.

Thank you so much.

Operator

Your next question comes from the line of Brian Fitzgerald from Wells Fargo.
Please go ahead.

Brian Nicholas Fitzgerald

I start this is actually Rob on the call. I wanted to ask you as your customers are absorbing the 1% chrome cookie deprecation impact, but also at least attempting to start evaluating Privacy Sandbox. What do you what do you hear from them you we've heard of you at some of the frustrations there early on, but is that enhancing your sort of conviction and confidence and for the future of content ID based advertising and I know you talked about a little bit of an evangelization, but wanted to ask a little bit more about your go to market right now. You've done a ton of ground work obviously over the past four years, but how you sort of reinforcing this reinforcing that we are right now during the sort of critical transition phase? Thanks.
Yes, Rob. First off in terms of the go to market, you know, I would say while we're developing really nice case studies, the frustration that we hear from clients has been fairly consistent. They just don't know how to get started and it's different. I mean, cookies have been embedded in their workflow for over 20 years. And so this represents a change to how media is bought and sold, but we think it's a change for the better and we don't think that this is going to be slowed down materially. If it is, we'll be fine but we think that that better future is just within our grasp as an industry. But to get there, we have to make it simple, and we'll do that through evangelization sharing case studies, we have a bunch of webinars upcoming. Some of our big partners, including Google, will start to evangelize this themselves in the market that this is no longer a product initiative. This becomes a commercial initiative for them, and we'll certainly make this a priority at ramp up. We'll have entire tracks devoted to this to teach people what to do, but ultimately our efforts to evangelize and make it simple to get up and started. That will go so far. What will ultimately carry the day is just more companies having success because it will go viral.
All that said, I would end by saying I feel like I've seen this movie before I lived through Y2K in 1999. I lived through GDPR a few years ago. And in both cases, there were people that just didn't want to recognize what was coming. And they said, hey, this isn't real. I'm not going to be concerned about it, it will all work itself out. And then on the eve of both those events, it was panic. It was P and ammonium. And what I would tell you is if history follows true to that, we're ready for it and we will have our entire selling capacity geared towards fielding those requests answering the questions and getting clients and publishers who wait to implement up and running quickly.
And Laurence, just a follow-up on Abbott. Was there is there any purchase accounting impact or anything else to call out there on the cost side or in terms of the profit impact?
Yes, absolutely. So we talked about Hubzu adding roughly, call it, 6 to 18 million in non-GAAP expense next year. And we also expect it to impact GAAP expense and by about $25 million, with about 15 million of that being driven by incremental stock-based comp and the balance being driven by our purchased intangible asset amortization.
Thank you very much.

Operator

Your next question comes from the line of Jason Kreyer from Craig-Hallum.
Please go ahead.

Perfect.

Jason Kreyer

Thank you, Laura. And 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 from the December quarter? Just trended to see if we can reconcile that slowdown a little bit.
Yes.
And we would expect subscription growth to improve slightly quarter-on-quarter with fixed subscription being stable 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 we've chosen rather to just model pretty conservatively in our outlook, given given the variability and sometimes kind of historical quarterly variability in particular. And so that's the piece of the business that we do much better on subscription revenue. It will be because we outperform there.
Okay.
Appreciate that. One follow up for me just on 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 hub and thanks for the question.
No, no, the headline is no major changes, and I'd want to acknowledge that this is a multiyear process, and we're in the very early phases of implementation, and 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. And to date, we have just north of 100 roles 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.
Thank you.

Operator

Your next question comes from the line of Mark Zgutowicz from The Benchmark Company.
Please go ahead.

Mark John Zgutowicz

Thank you. I apologize if you addressed this in your opening I think on the call a little bit late, but I was just hoping you could flesh out a bit the acceleration that you saw in the total RPO relative to current and maybe what's what's sort of driving that and whether that gives you confidence in accelerating revenues, Telering revenue over the next 12 months?

And then I have a follow-up.
Thanks.
Yes, happy to. So total RPO in the quarter was up 35% CR PR or the current portion at 18%. And the delta there market 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 multi-year 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 on during our May call.
Okay.
Super. And then as it relates to Hubzu, not to get to in front of you guys, given 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, but you had some really nice growth this year, given how Booz SMB focus, if that could perhaps you add a little bit momentum on your services line, if you could comment on that, I'd appreciate it.
Thanks.
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 harbor team was very busy meeting with clients and prospects with their Lybrand counterparts. We have ramp up coming up at the end of this month where we'll invite several thousand 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, 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 a final purchase price.
And as a result, we have hit the ground running and Hey, Mark and for everyone's benefit, maybe I could just put a couple of numbers again that comment. So in Q4, we expect hobby 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 how those standalone momentum, the synergies, at least the revenue synergies began to show up in the back half of 25.
But we think get really interesting as we look ahead to FY 20 as an operator, we are now for sorry, operator, we have time for one more question, please.

Certainly.

Operator

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, can 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 remind us or sequentially, maybe which ones are contributing perhaps a little bit more now and what your expectations are for the calendar year?

Yes.
Kirk, did I think there's kind of a pre hub, you answer the pro forma answer, and that was one of the drivers of that acquisition. So if you look back in time, Lybrand made the decision to standardize initially on GCP as our cloud partner for our own tech. And so that was that truly 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 cabo 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 and 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, it can't be interoperable interoperable across all of them, then your growth is going to be inhibited.
So I think this goes back to why why were we so excited about how though 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.
Thanks That's super helpful. And then just a quick one for Loren. You learned on your guide. I was a little surprised subscription net revenue is going back down towards 100. I know that probably some 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're talking about are smaller customers that might still be a there's 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 stabilizing last couple of quarters?
Yes.
So two things I would call out it 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.
Okay.
That's super helpful. Thank you.
All.

Operator

Yes, thank you. I will now turn the call over to Lauren Dillard for closing remarks.
Thanks so much.

And first thing, 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 top-line growth and margin expansion. And finally, as Scott referenced during the call, we have our annual rampup conference coming up at 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 or Chris Sondra and hopefully we'll see you at at the end of the month.
And with that, thanks again for joining us today, and 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.