Company Quick10K Filing
Quick10K
Liveperson
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$28.33 65 $1,840
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-31 Earnings, Exhibits
8-K 2019-06-06 Shareholder Vote
8-K 2019-05-02 Earnings, Exhibits
8-K 2019-03-11 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-02-21 Officers
8-K 2019-02-21 Earnings, Exhibits
8-K 2018-11-08 Earnings, Exhibits
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-06-05 Shareholder Vote
8-K 2018-05-03 Earnings, Officers, Exhibits
8-K 2018-02-16 Earnings, Officers, Exhibits
8-K 2017-12-27 Officers
NWS News Corp 6,820
LANC Lancaster Colony 4,090
CLDR Cloudera 2,850
BITA Bitauto Holdings 790
MCHX Marchex 219
EXFO Exfo 112
MSBF MSB Financial 90
TURN 180 Degree Capital 61
BLRX Biolinerx 53
AHPA Avista Healthcare Public Acquisition 0
LPSN 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 a2019q2livepersonex311.htm
EX-31.2 a2019q2livepersonex312.htm
EX-32.1 a2019q2livepersonex321.htm
EX-32.2 a2019q2livepersonex322.htm

Liveperson Earnings 2019-06-30

LPSN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________

Commission file number: 000-30141
LIVEPERSON, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
13-3861628
(State or Other Jurisdiction of Incorporation or Organization)
 
(IRS Employer Identification No.)
 
 
 
 
 
475 Tenth Avenue, 5th Floor
 
 
New York
,
New York
 
10018
(Address of Principal Executive Offices)
 
(Zip Code)
(212) 609-4200
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
LPSN
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 
Accelerated Filer
 
Non-accelerated Filer
 
Smaller Reporting Company
 
 
 
 
Emerging Growth Company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
On July 30, 2019, 65,527,788 shares of the registrant’s common stock were outstanding.

1



LIVEPERSON, INC.
June 30, 2019
FORM 10-Q
INDEX

 
 
PAGE
Part I.
Financial Information

 
 
 
Item 1.
Financial Statements (Unaudited):

 
 
 
 
Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

 
 
 
 
Condensed Consolidated Statements of Operations for the Three And Six Months Ended June 30, 2019 and 2018

 
 
 
 
Condensed Consolidated Statements of Comprehensive Loss for the Three And Six Months Ended June 30, 2019 and 2018

 
 
 

 
Condensed Consolidated Statements of Stockholder's Equity for the Three And Six Months Ended June 30, 2019 and 2018
7

 
 
 

 
Condensed Consolidated Statements of Cash Flows for the for the Three And Six Months Ended June 30, 2019 and 2018

 
 
 
 
Notes to Condensed Consolidated Financial Statements

 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk

 
 
 
Item 4.
Controls and Procedures

 
 
 
Part II.
Other Information

 
 
 
Item 1.
Legal Proceedings

 
 
 
Item 1A.
Risk Factors

 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

 
 
 

Item 3.
Defaults Upon Senior Securities

 
 
 

Item 4.
Mine Safety Disclosures

 
 
 

Item 5.
Other Information

 
 
 

Item 6.
Exhibits

 
 
 
Signatures
 


2



FORWARD-LOOKING STATEMENTS
 
STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q ABOUT LIVEPERSON, INC. (“LIVEPERSON”) THAT ARE NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT LIVEPERSON AND OUR INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL FUTURE EVENTS OR RESULTS TO DIFFER MATERIALLY FROM SUCH STATEMENTS. ANY SUCH FORWARD-LOOKING STATEMENTS ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. IT IS ROUTINE FOR OUR INTERNAL PROJECTIONS AND EXPECTATIONS TO CHANGE AS THE YEAR OR EACH QUARTER IN THE YEAR PROGRESSES, AND THEREFORE IT SHOULD BE CLEARLY UNDERSTOOD THAT THE INTERNAL PROJECTIONS AND BELIEFS UPON WHICH WE BASE OUR EXPECTATIONS MAY CHANGE PRIOR TO THE END OF EACH QUARTER OR THE YEAR. ALTHOUGH THESE EXPECTATIONS MAY CHANGE, WE ARE UNDER NO OBLIGATION TO INFORM YOU IF THEY DO. OUR POLICY IS GENERALLY TO PROVIDE OUR EXPECTATIONS ONLY ONCE PER QUARTER, AND NOT TO UPDATE THAT INFORMATION UNTIL THE NEXT QUARTER. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN THE PROJECTIONS OR FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN PART II, ITEM 1A, “RISK FACTORS.”

3



Part I. Financial Information
Item 1. Financial Statements
LIVEPERSON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
 
June 30,
2019
 
December 31,
2018
 
 
 
(Note 1)
ASSETS
 

 
 

CURRENT ASSETS:
 

 
 

Cash and cash equivalents
$
224,727

 
$
66,449

Accounts receivable, net of allowance for doubtful accounts of $2,914 and $2,276 as of June 30, 2019 and December 31, 2018, respectively
51,467

 
46,023

Prepaid expenses and other current assets
35,317

 
22,613

Total current assets
311,511

 
135,085

Operating lease right of use asset
15,956

 

Property and equipment, net
58,294

 
43,735

Intangibles, net
12,652

 
13,832

Goodwill
95,016

 
95,031

Deferred tax assets
710

 
713

Other assets
1,880

 
1,707

Total assets
$
496,019

 
$
290,103

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

CURRENT LIABILITIES:
 

 
 

Accounts payable
$
8,320

 
$
8,174

Accrued expenses and other current liabilities
45,208

 
50,662

Deferred revenue
69,359

 
55,015

Operating lease liability
6,442

 

Total current liabilities
129,329

 
113,851

Deferred revenue
710

 
222

Convertible senior notes, net
173,817

 

Other liabilities
198

 
4,205

Operating lease liability, net of current portion
13,443

 

Deferred tax liability
1,206

 
1,096

Total liabilities
318,703

 
119,374

 
 
 
 
Commitments and contingencies (see note 11 in the notes to the Condensed Consolidated Financial Statement)


 


STOCKHOLDERS’ EQUITY:
 

 
 

Common stock
65

 
64

Additional paid-in capital
412,253

 
362,590

Treasury stock
(3
)
 
(3
)
Accumulated deficit
(230,368
)
 
(187,491
)
Accumulated other comprehensive loss
(4,631
)
 
(4,431
)
Total stockholders’ equity
177,316

 
170,729

Total liabilities and stockholders’ equity
$
496,019

 
$
290,103

 
See Notes to Condensed Consolidated Financial Statements (unaudited).

4



LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenue
 
$
70,959

 
$
61,660

 
$
137,361

 
$
119,901

Costs and expenses (1) (2)
 
 

 
 

 
 
 
 

Cost of revenue (3)
 
18,049

 
16,036

 
36,698

 
29,990

Sales and marketing
 
39,343

 
25,392

 
72,379

 
49,523

General and administrative
 
13,763

 
11,499

 
27,930

 
21,622

Product development
 
20,182

 
14,219

 
38,355

 
27,471

Restructuring costs
 
205

 
1,906

 
484

 
2,084

Amortization of purchased intangibles
 
438

 
424

 
899

 
848

Total costs and expenses
 
91,980

 
69,476

 
176,745

 
131,538

Loss from operations
 
(21,021
)
 
(7,816
)
 
(39,384
)
 
(11,637
)
Other (expense) income , net
 
(2,267
)
 
31

 
(2,201
)
 
160

Loss before provision for income taxes
 
(23,288
)
 
(7,785
)
 
(41,585
)
 
(11,477
)
Provision for income taxes
 
699

 
536

 
1,292

 
47

Net loss
 
$
(23,987
)
 
$
(8,321
)
 
$
(42,877
)
 
$
(11,524
)
 
 
 
 
 
 
 
 
 
Net loss per share of common stock:
 
 
 
 
 
 
 
 
Basic
 
$
(0.38
)
 
$
(0.14
)
 
$
(0.69
)
 
$
(0.20
)
Diluted
 
$
(0.38
)
 
$
(0.14
)
 
$
(0.69
)
 
$
(0.20
)
 
 
 
 
 
 
 
 
 
Weighted-average shares used to compute net loss per share:
 
 
 
 
 
 
 
Basic
 
62,350,787

 
58,648,195

 
61,889,072

 
57,982,648

Diluted
 
62,350,787

 
58,648,195

 
61,889,072

 
57,982,648

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Amounts include stock-based compensation expense, as follows:
 
 
 
 
 
 
 
Cost of revenue
 
$
528

 
$
230

 
$
1,148

 
$
384

Sales and marketing
 
2,095

 
1,373

 
3,694

 
2,259

General and administrative
 
2,825

 
1,182

 
5,391

 
2,022

Product development
 
3,857

 
1,041

 
6,238

 
1,599

 
 
 
 
 
 
 
 
 
(2) Amounts include depreciation expense, as follows:
 
 
 
 
 
 
 
Cost of revenue
 
$
1,954

 
$
1,931

 
$
3,981

 
$
3,847

Sales and marketing
 
429

 
371

 
786

 
727

General and administrative
 
225

 
274

 
456

 
520

Product development
 
1,154

 
852

 
2,420

 
1,692

(3) Amounts include amortization of purchased intangibles, as follows:
 
 
 
 
 
 
 
Cost of revenue
 
$
285

 
$
287

 
$
570

 
$
574

 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements (unaudited).


5



LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
(UNAUDITED)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Net loss
$
(23,987
)
 
$
(8,321
)
 
$
(42,877
)
 
$
(11,524
)
Foreign currency translation adjustment
(7
)
 
1,486

 
200

 
927

Comprehensive loss
$
(23,994
)
 
$
(6,835
)
 
$
(42,677
)
 
$
(10,597
)
 
See Notes to Condensed Consolidated Financial Statements (unaudited).


6



LIVEPERSON, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
Three Months Ended June 30,
 
2019
 
2018
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
 
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
Balance at March 31
64,748

 
$
65

 
(2,705
)
 
$
(3
)
 
$
401,996

 
$
(206,381
)
 
$
(4,638
)
 
$
191,039

 
60,538

 
$
60

 
(2,681
)
 
$
(3
)
 
$
313,698

 
$
(165,662
)
 
$
(1,976
)
 
$
146,117

Common stock issued upon exercise of stock options
263

 

 

 

 
2,604

 

 

 
2,604

 
1,663

 
2

 

 

 
18,974

 

 

 
18,976

Common stock issued upon vesting of restricted stock units
339

 

 

 

 

 

 

 

 
121

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 
6,501

 

 

 
6,501

 

 

 

 

 
3,827

 

 

 
3,827

Common stock issued under Employee Stock Purchase Plan
49

 

 

 

 
1,152

 

 

 
1,152

 
45

 

 

 

 
739

 

 

 
739

Net loss

 

 

 

 

 
(23,987
)
 

 
(23,987
)
 

 

 

 

 

 
(8,321
)
 

 
(8,321
)
Other comprehensive income (loss)
 
 

 

 

 

 

 
7

 
7

 
 
 

 

 

 

 

 
(1,486
)
 
(1,486
)
Balance at June 30
65,399

 
$
65

 
(2,705
)
 
$
(3
)
 
$
412,253

 
$
(230,368
)
 
$
(4,631
)
 
$
177,316

 
62,367

 
$
62

 
(2,681
)
 
$
(3
)
 
$
337,238

 
$
(173,983
)
 
$
(3,462
)
 
$
159,852

Six Months Ended June 30,
 
2019
 
2018
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
 
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
Balance at December 31, 2018 and 2017
63,676

 
$
64

 
(2,681
)
 
$
(3
)
 
$
362,590

 
$
(187,491
)
 
$
(4,431
)
 
$
170,729

 
59,664

 
$
60

 
(2,588
)
 
$
(3
)
 
$
305,676

 
$
(163,135
)
 
$
(2,535
)
 
$
140,063

Common stock issued upon exercise of stock options
890

 
1

 

 

 
9,080

 

 

 
9,081

 
2,308

 
2

 

 

 
24,414

 

 

 
24,416

Common stock issued upon vesting of restricted stock units
754

 

 

 

 

 

 

 

 
224

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 
11,689

 

 

 
11,689

 

 

 

 

 
6,264

 

 

 
6,264

Common stock issued under Employee Stock Purchase Plan
79

 

 

 

 
1,873

 

 

 
1,873

 
85

 

 

 

 
1,229

 

 

 
1,229

Common stock repurchase

 

 
(23
)
 

 
(709
)
 

 

 
(709
)
 

 

 
(94
)
 

 
(1,345
)
 

 

 
(1,345
)
ASC 606 prior period adjustment (see note 1)

 

 

 

 

 

 

 

 

 

 

 

 

 
676

 

 
676

Issuance of common stock in connection with acquisitions (see note 9)

 

 

 

 

 

 

 

 
86

 

 

 

 
1,000

 

 

 
1,000

Equity component of convertible senior notes

 

 

 

 
52,900

 

 

 
52,900

 

 

 

 

 

 

 

 

Equity component of convertible senior notes issuance costs

 

 

 

 
(1,986
)
 

 

 
(1,986
)
 

 

 

 

 

 

 

 

Purchase of capped call option

 

 

 

 
(23,184
)
 

 

 
(23,184
)
 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 
(42,877
)
 

 
(42,877
)
 

 

 

 

 

 
(11,524
)
 

 
(11,524
)
Other comprehensive loss

 

 

 

 

 

 
(200
)
 
(200
)
 

 

 

 

 

 

 
(927
)
 
(927
)
Balance at June 30
65,399

 
$
65

 
(2,705
)
 
$
(3
)
 
$
412,253

 
$
(230,368
)
 
$
(4,631
)
 
$
177,316

 
62,367

 
$
62

 
(2,681
)
 
$
(3
)
 
$
337,238

 
$
(173,983
)
 
$
(3,462
)
 
$
159,852


7



See Notes to Condensed Consolidated Financial Statements (unaudited).
LIVEPERSON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
 
Six Months Ended
 
June 30,
 
2019
 
2018
OPERATING ACTIVITIES:
 

 
 

Net loss
$
(42,877
)
 
$
(11,524
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Stock-based compensation expense
16,471

 
6,264

Depreciation
7,643

 
6,786

Amortization of purchased intangibles
1,469

 
1,422

Amortization of debt issuance costs
376

 

Accretion of debt discount on convertible senior notes
2,990

 

Amortization of tenant allowance
(258
)
 
(83
)
Deferred income taxes
114

 
41

Provision for doubtful accounts
938

 
862

Changes in operating assets and liabilities:
 

 
 

Accounts receivable
(6,383
)
 
(1,045
)
Prepaid expenses and other current assets
(12,704
)
 
(9,531
)
Other assets
(169
)
 
(187
)
Accounts payable
(418
)
 
34

Accrued expenses and other current liabilities
(11,114
)
 
(8,771
)
Deferred revenue
14,832

 
13,943

Other liabilities
178

 
(218
)
Net cash used in operating activities
(28,912
)
 
(2,007
)
 
 
 
 
INVESTING ACTIVITIES:
 

 
 

Purchases of property and equipment, including capitalized software
(21,382
)
 
(9,664
)
Cash held as collateral for foreign exchange forward contracts

 
1,235

Payments for acquisitions and intangible assets, net of cash acquired
(293
)
 
(392
)
Net cash used in investing activities
(21,675
)
 
(8,821
)
 
 
 
 
FINANCING ACTIVITIES:
 

 
 

Proceeds from issuance of convertible senior notes
230,000

 

Payment of issuance costs in connection with convertible senior notes
(7,587
)
 

Purchase of capped call option
(23,184
)
 

Payments related to contingent consideration
(487
)
 

Proceeds from issuance of common stock in connection with the exercise of options
10,953

 
25,667

Repurchase of common stock
(709
)
 
(1,345
)
Net cash provided by financing activities
208,986

 
24,322

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
(121
)
 
138

CHANGE IN CASH AND CASH EQUIVALENTS
158,278

 
13,632

CASH AND CASH EQUIVALENTS - Beginning of the period
66,449

 
56,115

CASH AND CASH EQUIVALENTS - End of the period
$
224,727

 
$
69,747

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW INFORMATION: 
 
 
 
Cash paid for income taxes
$
1,606

 
$
5,553

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
Purchase of property and equipment recorded in accounts payable
$
861

 
$
774

Issuance of 85,861 shares of common stock in connection with the BotCentral transaction on January 22, 2018
$

 
$
1,000

Debt offering costs, accrued but not paid
$
1,048

 
$


8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



1.
Description of Business and Basis of Presentation
LivePerson, Inc. (the “Company” or “LivePerson”) was incorporated in the State of Delaware in November 1995 and the LivePerson service was introduced in November 1998. In April 2000, the Company completed an initial public offering and is currently traded on the NASDAQ Global Select Market and the Tel Aviv Stock Exchange. LivePerson is headquartered in New York City with U.S. offices in Alpharetta (Georgia), Austin (Texas), Mountain View (California) and Seattle (Washington), and international offices in Amsterdam (Netherlands), Berlin (Germany), London (United Kingdom), Mannheim (Germany), Melbourne (Australia), Milan (Italy), Paris (France), Ra'anana (Israel), Reading (United Kingdom), Sydney (Australia), Tel Aviv (Israel), and Tokyo (Japan).
LivePerson makes life easier by transforming how people communicate with brands. During the past decade, the consumer has made the mobile device the center of their digital lives, and they have made mobile messaging the center of communication with friends, family and peers. The Company’s technology enables consumers to connect with businesses through these same preferred conversational interfaces, including Facebook Messenger, WhatsApp, Apple Business Chat, Google Rich Business Messenger and Alexa. These messaging conversations harness human agents, bots and Artificial Intelligence (AI) to power convenient, personalized and content-rich journeys across the entire consumer lifecycle, from discovery and research, to sales, service and support, and even marketing and brick and mortar engagements. For example, consumers can look up product info like ratings, images and pricing, search for stores, see products in the store, schedule appointments, apply for credit, approve repairs, make purchases or payments - all without ever leaving the messaging channel. LivePerson calls these AI and human-assisted conversational experiences over messaging Conversational Commerce.
LiveEngage, the Company’s enterprise-class, cloud-based platform, was designed for Conversational Commerce, enabling businesses to securely deploy messaging, coupled with bots and AI, at scale for brands with tens of millions of customers and many thousands of customer care agents. LiveEngage powers conversations across each of a brand’s primary digital channels, including mobile apps, mobile and desktop web browsers, short message service (SMS), social media and third-party consumer messaging platforms. Brands can also use LiveEngage to message consumers when they dial a 1-800 number instead of having them navigate interactive voice response systems (IVRs) and wait on hold.
The robust, cloud-based suite of rich mobile messaging and real-time chat offerings features intelligent routing and capacity mapping, queue prioritization, customer sentiment, real-time analytics and reporting, content delivery, Payment Card Industry (PCI) compliance, cobrowsing and a sophisticated proactive targeting engine. With LiveEngage, agents can manage all conversations with consumers through a single console interface, regardless of which disparate messaging endpoints the consumers originate from: i.e., WhatsApp, Line, Apple Business Chat, IVR, or Google Home. An extensible application programming interface (API) stack facilitates a lower cost of ownership by facilitating robust integration into back-end systems, as well as enabling developers to build their own programs and services on top of the platform. More than three dozen APIs are available on LiveEngage.
LiveEngage also features Maven, a robust AI engine that was custom designed for Conversational Commerce. Maven, announced in December 2018, puts the power of bot development, training and management into the hands of the contact center and its agents, the teams most familiar with how to structure sales and service conversations to drive successful outcomes. The platform enables what the Company calls “the tango” of humans, AI and bots, whereby human agents act as bot managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed. Through Maven Assist, agents become ultra-efficient, leveraging the AI engine to serve up relevant content, define next-best actions and take over repetitive transactional work, so that the agent can focus on relationship building. By seamlessly integrating LiveEngage with Maven, as well as third-party bots, the platform provides businesses with a comprehensive view of all AI-based and human-based conversations from a single console.
Complementing LiveEngage are teams of technical, solutions and consulting professionals that have developed deep domain expertise in Conversational Commerce across industries and messaging endpoints. The Company is positioned as an authority in Conversational Commerce, publishing a proprietary Conversational Quotient™ Index that measures each customer across multiple key indicators to ascertain the sophistication and breadth of their conversational commerce capabilities. Each business is then benchmarked against industry peers to determine their relative progression. The Company has developed a Transformation Model that is introduced to existing and prospective customers to help guide them on their journeys from legacy and oftentimes inefficient legacy voice, email and chat solutions to modern conversational ones powered by messaging and AI. LivePerson’s products, coupled with our domain knowledge, industry expertise and professional services, have been proven to maximize the effectiveness of Conversational Commerce and deliver measurable return on investment.
As a “cloud computing” or software-as-a-service (SaaS) provider, LivePerson provides solutions on a hosted basis. This model offers significant benefits over premise-based software, including lower up-front costs, faster implementation, lower total cost of ownership, scalability, cost predictability, and simplified upgrades. Organizations that adopt a fully-hosted, multi-tenant

9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


architecture that is maintained by LivePerson eliminate the majority of the time, server infrastructure costs, and IT resources required to implement, maintain, and support traditional on-premise software.
The Company's consumer services offering is an online marketplace that connects independent service providers (Experts) who provide information and knowledge for a fee via mobile and online messaging with individual consumers (Users). Users seek assistance and advice in various categories including personal counseling and coaching, computers and programming, education and tutoring, spirituality and religion, and other topics.
Basis of Presentation
The accompanying condensed consolidated financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018 are unaudited. In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the consolidated financial position of LivePerson as of June 30, 2019, and the consolidated results of operations, comprehensive loss and cash flows for the interim periods ended June 30, 2019 and 2018. The financial data and other information disclosed in these notes to the condensed consolidated financial statements related to these periods are unaudited. The results of operations for any interim period are not necessarily indicative of the results of operations for any other future interim period or for a full fiscal year. The condensed consolidated balance sheet at December 31, 2018 has been derived from audited consolidated financial statements at that date.
Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2019.
Principles of Consolidation
The condensed consolidated financial statements include the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management’s estimates.
Recently Issued Accounting Standards    
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2018-15 , "Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract; Disclosures for Implementation Costs Incurred for Internal-Use Software and Cloud Computing Arrangements" (“ASU 2018-15”). This standard aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under Accounting Standards Codification ("ASC") 350-40, in order to determine which costs to capitalize and recognize as an asset. ASU 2018-15 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019, and can be applied either prospectively to implementation costs incurred after the date of adoption or retrospectively to all arrangements. The Company is currently in the process of evaluating the impact of the adoption of ASU 2018-230 on its consolidated financial statements.
In January 2017, FASB issued ASU No. 2017-04, "Intangibles -Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" (“ASU 2017-04”). This update addresses concerns over the cost and complexity of the two-step goodwill impairment test. The amendments in this update remove the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. ASU 2017-04 is effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods. The Company does not expect the adoption of ASU 2017-04 will have a material effect on its financial position, results of operations or cash flows.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which

10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) may apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented.

The Company adopted ASU No. 2016-02, "Leases" (Topic 842), as of January 1, 2019 using the modified transition approach. The modified transition approach provides a method for recording existing leases at adoption. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption (i.e. January 1, 2019). For its long-term operating lease, the Company recognized a right-of-use asset and a lease liability on its balance sheet. The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would have to pay to borrow equivalent funds on a collateralized basis at the lease commencement date. The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent. The lease term at the commencement date is determined by considering whether renewal options and termination options are reasonably assured of exercise. Rent expense for the operating lease is recognized on a straight-line basis over the lease term and is included in operating expenses on the statements of operations. Variable lease payments include lease operating expenses. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $16.0 million and $19.9 million, respectively, as of June 30, 2019. The standard did not materially impact the Company's consolidated net earnings and had no impact on cash flows.

In June 2018, the FASB issued ASU No. 2018-07, "Compensation -Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting" ("ASU 2018-07"). This new standard expands the scope of Topic 718, Compensation-Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. ASU 2018-07 is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The standard did not materially impact the Company's consolidated net earnings and had no impact on cash flows.
2.
Revenue Recognition 
The majority of the Company’s revenue is generated from monthly service revenues and related professional services from the sale of the LivePerson services. Revenues are recognized when control of these services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company determines revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies a performance obligation.
    
Total revenue of $71.0 million and $61.7 million recognized during the three months ended June 30, 2019 and 2018 and $137.4 million and $119.9 million recognized during the six months ended June 30, 2019 and 2018, respectively, under Topic 606, was not materially different from what would have been recognized under Topic 605.


11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


Hosted Services- Business Revenue

Hosted Services Business revenue is reported at the amount that reflects the ultimate consideration expected to be received and primarily consist of fees that provide customers access to LiveEngage, the Company’s enterprise-class, cloud-based platform. The Company has determined such access represents a stand-ready service provided continually throughout the contract term. As such, control and satisfaction of this stand-ready performance obligation is deemed to occur over time. The Company recognizes this revenue over time on a ratable basis over the contract term, beginning on the date that access to the LiveEngage platform is made available to the customer. The passage of time is deemed to be the most faithful depiction of the transfer of control of the services as the customer simultaneously receives and consumes the benefit provided by the Company’s performance. Subscription contracts are generally one year or longer in length, billed, monthly, quarterly or annually in advance. There is no significant variable consideration related to these arrangements. Additionally, for certain of the Company's larger customers, the Company may provide call center labor through an arrangement with one or more of several qualified vendors. For most of these customers, the Company passes the fee it incurs with the labor provider and its fee for the hosted services through to its customers in the form of a fixed fee for each order placed via the Company's online engagement solutions. For these Gainshare (formerly Pay for Performance) arrangements in accordance with ASC-606, "Principal Agent Considerations", the Company acts as a principal in a transaction if it controls the specified goods or services before they are transferred to the customer.

Professional Services Revenues

Professional services revenue primarily consists of fees for deployment and optimization services, as well as training delivered on an on-demand basis which is deemed to represent a distinct stand-ready performance obligation. Professional Services Revenues are reported at the amount that reflects the ultimate consideration the Company expects to receive in exchange for such services. Control for the majority of the Company's Professional Services contracts passes over time to the customer and is recognized ratably over the contracted period, as the passage of time is deemed to be the most faithful depiction of the transfer of control. For certain deployment services, which are not deemed to represent a distinct performance obligation, revenue will be recognized in the same manner as the fee for access to the LiveEngage platform, and as such will be recognized on a straight-line basis over the contract term. For services billed on a fixed price basis, revenue is recognized over time based on the proportion performed using inputs as the measure of progress toward complete satisfaction of the performance obligation. Professional service contracts are generally one year or longer in length, billed, monthly, quarterly or annually in advance. There is no significant variable consideration related to these arrangements.

Contracts with Multiple Performance Obligations

Some of the Company's contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, the cloud applications sold, and the number and types of users within its contracts.

Hosted Services- Consumer Revenue

For revenue from the Company's Consumer segment generated from online transactions between Experts and Users, revenue is recognized at an amount net of Expert fees in accordance with ASC 606, “Principal Agent Considerations,” due primarily to the fact that the Expert is the primary obligor. Additionally, the Company performs as an agent without any risk of loss for collection, and is not involved in selecting the Expert or establishing the Expert’s fee.  The Company collects a fee from the consumer and retains a portion of the fee, and then remits the balance to the Expert. Revenue from these transactions is recognized at the point in time when the transaction is complete and no significant performance obligations remain.

Deferred Revenues

The Company records deferred revenues when cash payments are received or due in advance of its performance. The increase in the deferred revenue balance as of June 30, 2019 is primarily driven by cash payments received or due in advance of satisfying its performance obligations, partially offset by $30.1 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2018.
    

12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


The following table presents deferred revenue by revenue source (amounts in thousands):
 
 
Deferred Revenue
 
 
 As of June 30, 2019
 
As of December 31, 2018
Hosted services – Business
 
$
63,949

 
$
52,232

Professional services – Business
 
5,410

 
2,783

Total deferred revenue - short term
 
$
69,359

 
$
55,015

 
 
 
 
 
Hosted services – Business
 
$
333

 
$
19

Professional services – Business
 
377

 
203

Total deferred revenue - long term
 
$
710

 
$
222


Disaggregated Revenue

The following table presents the Company's revenues disaggregated by revenue source (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
Hosted services – Business
$
53,672

 
$
48,331

 
$
105,209

 
$
95,759

Hosted services – Consumer
6,124

 
4,952

 
11,531

 
9,632

Professional services
11,163

 
8,377

 
20,621

 
14,510

Total revenue
$
70,959

 
$
61,660

 
$
137,361

 
$
119,901

 

Revenue by Geographic Location

The following table presents the Company’s revenues attributable to domestic and foreign operations for the periods presented (amounts in thousands):