LiveRamp Holdings, Inc.: Form 10-Q for the period ended Dec 31, 2023

Introduction and Overview

LiveRamp Holdings, Inc. ("LiveRamp", "we", "us", or the "Company") is a global technology company that helps companies build enduring brand and business value by collaborating responsibly with data. A groundbreaking leader in consumer privacy, data ethics and foundational identity, LiveRamp offers a connected customer view with unmatched clarity and context while protecting brand and consumer trust. Our best-in-class enterprise platform enables data collaboration, where companies can share first-party consumer data with trusted business partners securely and in a privacy conscious manner. We offer flexibility to collaborate wherever data lives to support a wide range of data collaboration use cases—within organizations, between brands, and across our global network of premier partners. Global innovators, from iconic consumer brands and tech platforms to retailers, financial services, and healthcare leaders, turn to LiveRamp to deepen customer engagement and loyalty, activate new partnerships, and maximize the value of their first-party data while staying on the forefront of rapidly evolving compliance and privacy requirements.

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 customer base from locations in the United States, Europe, and the Asia-Pacific (“APAC”) region. Our direct customer list includes many of the world’s best-known and most innovative 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 and non-profit. Through our expansive partner ecosystem we serve thousands of additional companies, unlocking access to unique customer moments and creating powerful network effects.

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 condensed consolidated financial statements.

Sources of Revenues

LiveRamp recognizes revenue from the following sources: (i) Subscription revenue, which consists primarily of subscription fees from customers accessing our platform; and (ii) Marketplace and Other revenue, which primarily consists of revenue-sharing fees generated from data transactions through our LiveRamp Data Marketplace, transactional usage-based revenue from arrangements with certain publishers and addressable TV providers, and professional services.

LiveRamp Data Collaboration Platform

As depicted in the graphic below, we power the industry’s leading enterprise platform for data collaboration. We enable organizations to access and leverage data more effectively across the applications they use to interact with their customers. At the core of our platform is an omnichannel, deterministic identity resolution technology that offers unparalleled accuracy, breadth, and depth. Leveraging deep expertise in data collaboration, the LiveRamp Data Collaboration platform (formerly branded as Safe Haven) enables an organization to unify customer and prospect data (first-, second-, or third-party) to build a single view of the customer in a way that protects consumer privacy. This single customer view can then be enhanced and activated across any of the over 500 partners in our ecosystem in order to support a variety of people-based marketing solutions, including:

• Data Collaboration. We enable second-party data collaboration between organizations and their trusted partners in a neutral, manageable environment. Our platform provides customers with collaborative opportunities to safely and securely build a more accurate, dynamic view of their customers leveraging partner data. Advanced measurement and analytics use cases can be performed on this shared data without either party giving up control or compromising privacy.
• Activation. We enable organizations to leverage their customer and prospect data in the digital and TV ecosystems and across the customer experience applications they use through a safe and secure data matching process called data onboarding. Our technology ingests a customer’s first-party data, removes all offline data (directly identifiable information or "DII"), and replaces them with pseudonymized IDs called RampID™, a durable identifier for connecting to the digital ecosystem. RampID can then be distributed through direct integrations to the top platforms our customers work with, including leading marketing cloud providers, publishers and social networks, personalization tools, and connected TV services.
• Measurement & Analytics. We power more accurate, more complete measurement with the measurement vendors and partners our customers use. Our platform allows our customers to combine disparate data files (typically ad exposure and customer events, such as transactions), replacing customer identifiers with RampID. Our customers then can use that aggregated view of each customer for measurement of reach and frequency, sales lift, closed loop offline to online conversion and cross-channel attribution.
• Identity. We provide enterprise-level identity solutions that enable organizations to: 1) resolve and connect disparate identities, 2) enrich data sets with hygiene capabilities and additional audience data from the LiveRamp Data Marketplace providers, and 3) translate data between different systems. Our approach to identity is built from two complementary graphs, combining offline data and online data and providing accuracy with a focus on privacy. LiveRamp technology for DII gives brands and platforms the ability to connect and update what they know about consumers, resolving DII across enterprise databases and systems to deliver better customer experiences. Our digital identity graph powered by our Authenticated Traffic Solution (or "ATS") associates pseudonymous device IDs, TV IDs and other online customer IDs from premium publishers, platforms or data providers, around a RampID. This allows marketers to perform personalized segmentation, targeting, and measurement in use cases that require a consistent view of the user. There are currently more than 165 supply-side platforms and demand-side platforms live or committed to bid on RampID or ATS. In addition, to date more than 18,000 publisher domains, and 70% of the comScore 100 largest digital publishers, have adopted ATS.
• Data Marketplace. Our Data Marketplace provides customers with simplified access to industry-leading third-party data providers globally. The LiveRamp Data Collaboration Platform allows for the search, discovery and distribution of data from data providers to improve targeting, measurement, and customer intelligence. Our customers may license data through the LiveRamp Data Marketplace and connect via RampID to enrich their first-party data, leveraging across technology and media platforms, agencies, analytics environments, and TV partners. Our platform provides tools for data providers to manage the organization, distribution, and operation of their data and services across our network of customers and partners. Today we work with approximately 200 data providers across all verticals and many data types (see below for discussion on Marketplace and Other).

Subscription

We primarily charge for our platform services on an annual basis. Our subscription pricing is based primarily on data volume, which is a function of data input records and connection points.

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 895 direct customers world-wide and serve thousands of additional customers indirectly through our reseller partnership arrangements.

• Brands and Agencies. We work with over 500 of the largest brands and agencies in the world, helping them execute people-based marketing by creating an omni-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 audience 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 Sellers. Leveraging our vast network of integrations, we allow data sellers to easily connect to the digital ecosystem and monetize their own data. Data can be distributed to customers or made available through the LiveRamp Data Marketplace feature. This adds value for brands as it allows them to augment their understanding of consumers and increase their understanding of customers and prospects.

Marketplace and Other

As we have scaled the LiveRamp network and technology, we have found additional ways to leverage our platform, deliver more value to customers and create incremental revenue streams. Leveraging our common identity system and broad integration network, the Data Marketplace seamlessly connects data sellers’ audience data across the marketing ecosystem. The Data Marketplace enables data sellers to easily monetize their data across hundreds of marketing platforms and publishers. At the same time, it provides a single platform where data buyers, including platforms and publishers, in addition to brands and their agencies, access third-party data from data sellers supporting all industries and encompassing all types of data. Data providers include sources and brands exclusive to LiveRamp, emerging platforms with access to previously unavailable deterministic data, and data partnerships enabled by our platform.

We generate revenue from the Data Marketplace primarily through revenue-sharing arrangements with data sellers that are monetizing their data assets via our marketplace platform service. We also generate Marketplace and Other revenue through transactional usage-based arrangements with certain publishers and addressable TV providers.

To complement our product offering, we provide professional services and enhanced support entitlements to help customers leverage our platform and drive business outcomes. Our services offering includes product implementation, data science analytics, audience measurement and general advisory. We generate revenue from services primarily from project fees paid by subscribers to our platform. Service projects are sold on an ad hoc basis as well as bundled with platform subscriptions. Services revenue is less than 5% of total Company revenue.

Summary Results and Notable Events

A financial summary of the quarter ended December 31, 2023 compared to the same period in fiscal 2023 is presented below:

• Revenues were $173.9 million, a 9.6% increase from $158.6 million.
• Cost of revenue was $44.9 million, a 3.8% increase from $43.3 million.
• Gross margin increased to 74.2% from 72.7%.
• Total operating expenses were $113.7 million, an 18.3% decrease from $139.3 million.
• Cost of revenue and operating expenses for fiscal 2024 and 2023 included the following items:
• Non-cash stock compensation of $17.5 million and $29.6 million, respectively (cost of revenue of $0.8 million and $1.2 million, respectively, and operating expenses of $16.7 million and $28.4 million, respectively)
• Purchased intangible asset amortization of $1.2 million and $4.2 million, respectively (cost of revenue)
• Transformation costs of $1.9 million in fiscal 2023 (general and administrative)
• Restructuring charges of $2.5 million and $11.7 million, respectively (gains, losses, and other items, net)
• Total other income, net was $6.6 million, an increase of $7.3 million from total other expense, net of $0.7 million.
• Net earnings were $14.0 million, or $0.21 per diluted share compared to net loss of $29.7 million, or $0.46 per diluted share.
• Net cash provided by operating activities was $16.6 million compared to $15.8 million.
• The Company repurchased 0.3 million shares of its common stock for $10.0 million compared to 2.3 million shares for $49.9 million under the Company's common stock repurchase program.

This summary and the following discussion and analysis highlight financial results as well as other significant events and transactions of the Company during the fiscal quarter ended December 31, 2023 compared to the same period in fiscal 2023, unless otherwise stated. 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.

Recent Development

On January 31, 2024, the Company completed the acquisition of Habu, Inc. ("Habu"), a data clean room software provider that works with global brands and companies to securely share first-party customer data with business partners and publishers to enable more effective and personalized marketing, for approximately $174 million in cash. The aggregate value of merger consideration with respect to assumed unvested stock options and consideration holdback amounts under holdback agreements with certain key employees is expected to equal approximately $26 million and will be reported as non-cash stock compensation over the applicable vesting periods. In connection with the acquisition, the Company assumed approximately $16 million of unvested restricted stock units to induce certain employees of Habu to accept employment with the Company.

Key Performance Metrics

In addition to measures of financial performance presented in our condensed consolidated financial statements, we monitor the key metrics set forth below to help us evaluate revenue growth trends, establish budgets and measure the effectiveness of our sales and marketing efforts. The below data is presented in millions, except for percentages.

Subscription Net Retention

Subscription net retention (“SNR”) is defined as the current quarter subscription revenue (net) from customers who have been on our platform for one year or more, divided by the prior year quarter subscription revenue (net), inclusive of upsell, churn (lost contract), downsell (contract reduction), and variable revenue changes. SNR excludes revenue from new customers that have not been on our platform for one year or more. We believe our SNR is an important metric that provides insight into the long-term value of our subscription agreements and our ability to retain and grow revenue from our subscription customer base. SNR rate is an operational metric and there is no comparable GAAP financial measure to which we can reconcile this particular key metric.

SNR at December 31, 2023 compared to December 31, 2022 was flat. Increasing levels of downsell and churn activity continue to substantially offset customer upsell revenue. The levels of downsell and churn activity were driven in part by budget and economic pressures on our customers.

Annualized Recurring Revenue

Annualized Recurring Revenue (“ARR”) is defined as the last month of quarter recurring revenue annualized. Recurring revenue is fixed and contracted subscription revenue and does not include any variable or non-recurring revenue amounts. We believe ARR provides important information about our future revenue potential, our ability to acquire new customers, and our ability to maintain and expand our relationship with existing customers. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or replace these items. Our use of ARR has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate ARR differently, which reduces its usefulness as a comparative measure.

Our ARR growth of 6.0% was primarily attributable to new customer revenue. The lower growth rate compared to the 10.6% growth in the previous year is due to similar reasons as those impacting SNR results, namely downsell and churn from customers, due in part to budget pressures, offsetting existing customer upsell activity in the current period as well as lower contribution from new customer activity.

Remaining Performance Obligations and Current Remaining Performance Obligations

Remaining performance obligations (“RPO”) is defined as all future revenue under contract that has not yet been recognized as revenue. Future invoicing is determined to be certain when we have an executed non-cancellable contract or a significant penalty that is due upon cancellation, and invoicing is not dependent on a future event such as the delivery of a specific new product or feature, or the achievement of contractual contingencies. Current RPO

("CRPO") represents RPO to be recognized over the next twelve months. Subscription CRPO represents CRPO associated with subscription-only RPO to be recognized over the next twelve months.

While the Company believes RPO, CRPO, and Subscription CRPO are leading indicators of revenue as they represent sales activity not yet recognized in revenue, they are not necessarily indicative of future revenue growth as they are influenced by several factors, including seasonality of contract renewal timing and average contract terms. The Company monitors RPO, CRPO, and Subscription CRPO to manage the business and evaluate performance. RPO increased due to several large, multi-year renewals. CRPO and Subscription CRPO growth was due to new customer additions, as well as the multi-year renewals.

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):

Revenues

The Company's revenues for each of the periods reported is presented below (dollars in thousands):

Total revenues for the quarter ended December 31, 2023 were $173.9 million, a $15.3 million or 9.6% increase from the same quarter a year ago. The increase was due to revenue growth in both Subscription and Marketplace and Other. Subscription revenue growth was $5.9 million, or 4.7%, primarily due to upsell to existing customers, new logo deals and higher variable revenue. Subscription revenue in the prior year quarter also included a one-time $4.0 million positive revenue impact stemming from a customer contract settlement. Marketplace and Other revenue growth was $9.3 million, or 29.0%, primarily due to Data Marketplace and Services volume growth. On a geographic basis, U.S. revenue increased $15.2 million, or 10.3%. International revenue increased $0.1 million, or 0.5%. The differences in exchange rates in the current year quarter compared to those in the prior year quarter favorably impacted international revenue growth by approximately 3 percentage points.

Total revenues for the nine months ended December 31, 2023 were $487.8 million, a $39.9 million or 8.9% increase compared to the same period a year ago. The increase was due to revenue growth in both Subscription and Marketplace and Other. Subscription revenue growth was $18.1 million, or 5.0%, primarily due to upsell to existing customers, new logo deals and higher variable revenue. Subscription revenue in the prior year also included a one-time $4.0 million positive revenue impact stemming from a customer contract settlement. Marketplace and Other revenue growth was $21.8 million, or 25.3%, primarily due to Data Marketplace and Services volume growth. On a geographic basis, U.S. revenue increased $39.3 million, or 9.4%. International revenue increased $0.6 million, or 1.9%. The differences in exchange rates in the current year compared to those in the prior year favorably impacted international revenue growth by approximately 3 percentage points.

Cost of Revenue and Gross Profit

The Company’s cost of revenue and gross profit for each of the periods reported is presented below (dollars in thousands):

Cost of revenue includes third-party direct costs including identity graph data, other data and cloud-based hosting costs, as well as costs of IT, security and product operations functions. Cost of revenue also includes amortization of acquisition-related intangibles.

Cost of revenue was $44.9 million for the quarter ended December 31, 2023, a $1.6 million, or 3.8%, increase from the same quarter a year ago. Gross margins increased to 74.2% from 72.7% in the prior year quarter due to revenue increases and a $3.0 million decrease in intangible asset amortization offset partially by an increase in cost of revenue primarily from services support costs. U.S. gross margins increased to 76.4% from 74.2% while International gross margins decreased to 39.6% from 51.6%.

Cost of revenue was $131.8 million for the nine months ended December 31, 2023, a $5.2 million, or 4.1%, increase from the same period a year ago. Gross margins increased to 73.0% from 71.7% in the prior year due to revenue increases and a $7.8 million decrease in intangible amortization offset partially by an increase in cost of revenue primarily from services support costs. U.S. gross margins increased to 75.0% from 73.1%, and International gross margins decreased to 43.1% from 53.2%.

Operating Expenses

The Company’s operating expenses for each of the periods reported is presented below (dollars in thousands):

Research and development (“R&D”) 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 $37.8 million for the quarter ended December 31, 2023, a decrease of $5.4 million, or 12.5%, compared to the same quarter a year ago, and are 21.7% of total revenues compared to 27.2% in the same quarter a year ago. The decrease is primarily due to stock-based compensation expense (decreased $3.7 million), hosting and software expenses (decreased $0.7 million) and professional services (decreased $0.4 million). Headcount related expenses were approximately flat.

R&D expenses were $106.0 million for the nine months ended December 31, 2023, a decrease of $30.9 million, or 22.6%, compared to the same period a year ago, and are 21.7% of total revenues compared to 30.6% in the prior year. The decrease is primarily due to stock-based compensation expense (decreased $17.3 million), headcount related costs (employee-related expenses decreased $8.0 million primarily as a result of the headcount reduction that occurred in the quarter ended December 31, 2022) and professional services (decreased $1.3 million). The decrease in stock-based compensation is primarily due to the prior year-end accelerated vesting of awards that would have otherwise vested over the first six months of fiscal 2024 to take advantage of cash tax savings opportunities.

Sales and marketing (“S&M”) expense includes operating expenses for the Company’s sales, marketing, and product marketing functions.

S&M expenses were $46.2 million for the quarter ended December 31, 2023, a decrease of $1.5 million, or 3.1%, compared to the same quarter a year ago, and are 26.6% of total revenues compared to 30.1% in the same quarter a year ago. The decrease is primarily due to stock-based compensation expense (decreased $1.8 million) and professional services (decreased $0.4 million), offset partially by an increase in headcount related costs due to incentive compensation.

S&M expenses were $135.2 million for the nine months ended December 31, 2023, a decrease of $9.7 million, or 6.7%, compared to the same period a year ago, and are 27.7% of total revenues compared to 32.4% in the prior year. The decrease is primarily due to stock-based compensation expense (decreased $5.3 million), professional services (decreased $1.8 million), and administrative expenses (decreased $1.5 million from lower bad debt expense). The decrease in stock-based compensation is primarily due to the prior year-end accelerated vesting of awards that would have otherwise vested over the first six months of fiscal 2024 to take advantage of cash tax savings opportunities.

General and administrative ("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 $27.2 million for the quarter ended December 31, 2023, a decrease of $9.4 million, or 25.7%, compared to the same quarter a year ago, and are 15.7% of total revenues compared to 23.1% in the same quarter a year ago. The decrease is primarily due to decreases in stock-based compensation expense (decreased $6.3 million) and transformation costs (decreased $4.1 million), offset partially by an increase in headcount related costs due to incentive compensation.

G&A expenses were $79.9 million for the nine months ended December 31, 2023, a decrease of $12.6 million, or 13.6%, compared to the same period a year ago, and are 16.4% of total revenues compared to 20.7% in the prior year. The decrease is primarily due to decreases in stock-based compensation expense (decreased $10.4 million) and transformation costs (decreased $3.5 million), offset partially by higher employee-related expenses due to increased incentive compensation costs. The decrease in stock-based compensation is primarily due to the prior year-end accelerated vesting of awards that would have otherwise vested over the first six months of fiscal 2024 to take advantage of cash tax savings opportunities and current period forfeitures.

Gains, losses, and other items, net represents restructuring costs and other adjustments.

Gains, losses and other items, net was $2.5 million for the quarter ended December 31, 2023, a decrease of $9.2 million compared to the same quarter a year ago. The current quarter amount includes $1.3 million related to termination benefits for employees whose positions were or will be eliminated and $1.2 million of third party merger costs associated with the Habu acquisition. The prior year quarter amount included $5.9 million in lease impairments and restructuring and $5.8 million related to termination benefits for employees whose positions were eliminated.

Gains, losses and other items, net was $9.2 million for the nine months ended December 31, 2023, a decrease of $16.4 million compared to the same period a year ago. The current year amount includes $2.8 million related to the impairment of APAC goodwill, $2.3 million in lease impairments and restructuring, $2.8 million related to termination benefits for employees whose positions were or will be eliminated, and $1.2 million of third party merger costs associated with the Habu acquisition. The prior year amount included $15.5 million in lease impairments and restructuring, and $7.4 million related to termination benefits for employees whose positions were eliminated.

Income (Loss) from Operations and Operating Margin

Income from operations was $15.2 million for the quarter ended December 31, 2023 compared to a loss from operations of $23.9 million in the same quarter a year ago. Operating margin was positive 8.7% compared to negative 15.1%. Margins were positively impacted by revenue growth, and operating expense reductions related to the prior year headcount reduction, reduced stock-based compensation due to prior year accelerated vesting of awards, and lower gains, losses and other items.

Income from operations was $25.7 million for the nine months ended December 31, 2023 compared to a loss from operations of $78.7 million in the same period a year ago. Operating margin was positive 5.3% compared to negative 17.6% in the prior year. Margins were positively impacted by revenue growth, and operating expense reductions related to the prior year headcount reduction, reduced stock-based compensation due to prior year accelerated vesting of awards, and lower gains, losses and other items.

Total Other Income (Expense) and Income Taxes

Total other income was $6.6 million for the quarter ended December 31, 2023 compared to total other expense of $0.7 million in the same quarter a year ago. Total other income was $17.9 million for the nine months ended December 31, 2023 compared to $2.2 million in the same period a year ago. The quarter and year-to-date increases are primarily attributable to higher interest rates on invested cash and short-term investments, and a $4.1 million impairment of a strategic investment in the prior year.

Income tax expense was $8.4 million on pretax income of $21.8 million for the quarter ended December 31, 2023, resulting in a 39% effective tax rate. This compares to a prior year income tax expense of $5.8 million on pretax loss of $24.7 million, or a negative 24% effective tax rate. Tax expense for both periods reflects the impact of the capitalization of research and development expenditures in accordance with Internal Revenue Code ("IRC") Section 174, as modified by the Tax Cuts and Jobs Act of 2017, the valuation allowance, and nondeductible stock-based compensation.

Income tax expense was $27.3 million on pretax income of $43.6 million for the nine months ended December 31, 2023, resulting in an 63% effective tax rate. This compares to a prior year income tax expense of $11.7 million on pretax loss of $76.5 million, or a negative 15% effective tax rate. Tax expense for both periods reflects the impact of the capitalization of research and development expenditures in accordance with IRC Section 174, as modified by the Tax Cuts and Jobs Act of 2017, the valuation allowance, and nondeductible stock-based compensation.

Discontinued Operations

Earnings from discontinued operations, net of tax, was $0.6 million for the three months ended December 31, 2023 compared to $0.8 million in the same quarter a year ago. Earnings from discontinued operations, net of tax, was $1.0 million for the nine months ended December 31, 2023 compared to $0.8 million in the same period a year ago. During fiscal 2019, the Company completed the sale of its Acxiom Marketing Solutions ("AMS") business, and the business qualified for treatment as discontinued operations. Significant income taxes were incurred and paid on the gain from the sale of AMS. During fiscal 2024 and fiscal 2023, the Company recovered certain previously paid state income taxes arising from the sale of AMS.

Capital Resources and Liquidity

The Company’s cash and cash equivalents are primarily located in the United States. At December 31, 2023, approximately $18.0 million of the total cash balance of $498.9 million, or approximately 3.6%, was 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 $199.4 million at December 31, 2023, an increase of $42.0 million, compared to $157.4 million at March 31, 2023. Days sales outstanding ("DSO"), a measurement of the time it takes to collect receivables, was 106 days at December 31, 2023, compared to 95 days at March 31, 2023. 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, recognized on a net basis, but for which the amount that is due to data sellers is not reflected as an offset to accounts receivable. Compared to March 31, 2023, DSO at December 31, 2023 was negatively impacted by approximately 8 days by the increased impact of Data Marketplace gross accounts receivable. All customer accounts are actively managed, and no losses in excess of amounts reserved are currently expected.

Working capital at December 31, 2023 totaled $560.9 million, a $21.2 million increase when compared to $539.7 million at March 31, 2023.

Subsequent to December 31, 2023, the Company closed its acquisition of Habu, which included the payment of approximately $174 million in cash at closing.

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, in light of the risk of recession, the military conflicts in Europe and the Middle East, cost increases, rising interest rates, capital markets volatility, bank failures and general inflationary pressures, 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. These impacts have 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 reported (dollars in thousands):

Operating Activities

Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our customers, and related payments to our suppliers and employees. The timing of cash receipts from customers and payments to suppliers can significantly impact our cash flows from operating activities. Our collection and payment cycles can vary from period to period.

In the nine months ended December 31, 2023, net cash provided by operating activities of $78.0 million resulted primarily from net earnings adjusted for non-cash items of $77.2 million and changes in operating assets and liabilities of $0.8 million. Net cash provided by changes in operating assets and liabilities was primarily related to a $29.2 million Internal Revenue Service refund related to fiscal 2021, an increase in deferred revenue of $9.7 million, and an increase in other assets of $8.8 million, offset partially by an increase in accounts receivable of $41.0 million. The change in accounts receivable is primarily due to revenue growth and the timing of cash receipts from customers.

In the nine months ended December 31, 2022, net cash provided by operating activities of $3.8 million resulted primarily from net loss adjusted for non-cash items of $33.6 million offset by changes in operating assets and liabilities of $29.8 million. Net cash used by changes in operating assets and liabilities was primarily related to an increase in accounts receivable of $27.2 million and a decrease in accounts payable and other liabilities of $9.3 million, offset partially by a decrease in income taxes of $7.0 million. The change in accounts receivable is primarily due to revenue growth and the timing of cash receipts from customers. The change in accounts payable and other liabilities is primarily due to the payment of annual incentive compensation and the timing of payments to suppliers.

Investing Activities

Our primary investing activities have historically consisted of capital expenditures. 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.

In the nine months ended December 31, 2023, net cash used in investing activities consisted of capital expenditures of $2.5 million, purchases of strategic investments of $1.0 million, and purchases of investments of $24.4 million partially offset by the proceeds from the sale of investments of $25.8 million.

In the nine months ended December 31, 2022, net cash used in investing activities consisted of capital expenditures of $4.6 million and purchases of investments of $3.5 million, offset partially by proceeds from the sale of investments of $3.0 million and the sale of a strategic investment of $0.4 million.

Financing Activities

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, 2023, net cash used in financing activities was $43.2 million, consisting of the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $45.3 million (1.7 million shares) and $5.1 million for shares repurchased for tax withholdings upon vesting of stock-based awards. These uses of cash were partially offset by proceeds of $7.2 million from the sale of common stock from our equity compensation plans.

In the nine months ended December 31, 2022, net cash used in financing activities was $145.8 million, consisting of the acquisition of treasury shares pursuant to the board of directors' approved stock repurchase plan of $150.0 million (6.1 million shares), and $2.1 million for shares repurchased for tax withholdings upon vesting of stock-based awards. These uses of cash were partially offset by proceeds of $6.3 million from the sale of common stock from our equity compensation plans.

Common Stock Repurchase Program

On December 20, 2022, the Company's board of directors approved an amendment to the existing common stock repurchase program, which was initially adopted in 2011. The amendment authorized an additional $100.0 million in share repurchases, increasing the total amount authorized for repurchase under the common stock repurchase program to $1.1 billion. In addition, it extended the common stock repurchase program duration through December 31, 2024.

During the nine months ended December 31, 2023, the Company repurchased 1.7 million shares of its common stock for $45.3 million under the modified common stock repurchase program. Through December 31, 2023, the Company had repurchased a total of 37.3 million shares of its common stock for $927.5 million under the program, leaving remaining capacity of $172.5 million.

Pursuant to the Inflation Reduction Act of 2022 (the "Act"), share repurchases made after December 31, 2022 are subject to a 1% excise tax. In determining the total taxable value of shares repurchased, a deduction is allowed for the fair market value of any newly issued shares during the fiscal year. The excise tax and other corporate income tax changes included in the Act did not have, and are not expected to have, a material impact on our condensed consolidated financial statements.

Contractual Commitments

The following tables present the Company’s contractual cash obligations and purchase commitments at December 31, 2023 (dollars in thousands). Operating leases primarily consist of our various office facilities. Purchase commitments primarily include contractual commitments for the purchase of data, hosting services, software-as-a-service arrangements, and leasehold improvements. The tables do not include the future payment of liabilities related to uncertain tax positions of $25.5 million as the Company is not able to predict the periods in which the payments will be made. The amounts for 2024 represent the remaining three months ending March 31, 2024. All other periods represent fiscal years ending March 31 (dollars in thousands):

Future minimum payments as of December 31, 2023 related to restructuring plans as a result of the Company's exit from certain leased office facilities are (dollars in thousands): Fiscal 2024: $675; Fiscal 2025: $2,698; and Fiscal 2026: $1,799.

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 Annual Report on Form 10-K for the fiscal year ended March 31, 2023 ("2023 Annual Report"), as filed with the SEC on May 24, 2023.

Non-U.S. Operations

The Company has a presence in the United Kingdom, France, Netherlands, Italy, Spain, Brazil, India, 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 2023 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 of Financial Condition and Results of Operations filed as part of the 2023 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 2023 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 accompanying this report.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see “Accounting Pronouncements Adopted During the Current Year" and “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 accompanying this report.

We believe there have been no material changes in our market risk exposures for the nine months ended December 31, 2023, as compared with those discussed in the Company's 2023 Annual Report.

(a) Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (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 (the "Exchange Act")). Based on this evaluation, our principal executive officer and our principal financial and accounting officer concluded that as of December 31, 2023, 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, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The risks described in Part I, Item 1A, “Risk Factors” in the Company's 2023 Annual Report, remain current in all material respects. The risk factors in our 2023 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.