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LivePerson, Inc. (NASDAQ:LPSN) Q4 2020 Earnings Conference Call February 25, 2020 5:00 PM ET Company Participants Idalia Rodriguez - IR Rob LoCascio - Founder, Chairman & CEO John Collins - EVP & CFO Conference Call Participants Richard Baldry - ROTH Capital Partners Mohit Gogia - Barclays Siti Panigrahi - Mizuho Ryan MacDonald - Needham & Company Jeff Van Rhee - Craig-Hallum Brett Knoblauch - Berenberg Capital Markets Peter Levine - Evercore Steve Enders - KeyBanc Capital Markets Ryan Koontz - Rosenblatt S ...

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |---------------------------------------|----------------------------------------------------------------------------------------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|---------------|-------|-------|-------|---------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | VEPERSON | | ...

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 September 30, 2020 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 | 1 ...

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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, 2020 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 ...

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 March 31, 2020 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) (State or Other Ju ...

PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) LivePerson offers AI and human-powered messaging solutions via its LiveEngage platform, focusing on conversational AI expansion and market growth - LivePerson's core business is making life easier for people and brands through messaging powered by **AI and humans**, leveraging mobile devices as the center of digital communication[12](index=12&type=chunk)[266](index=266&type=chunk) - The **LiveEngage platform** enables businesses to deploy messaging, bots, and AI at scale across various digital channels (mobile apps, web, SMS, social media, third-party messaging platforms like WhatsApp, Apple Business Chat, Alexa)[13](index=13&type=chunk)[54](index=54&type=chunk)[267](index=267&type=chunk) - Key benefits for customers include increased **agent efficiency** (up to **40 conversations per agent**), **labor cost reduction** (at least **50%**), improved **customer satisfaction** (up to **20 percentage points**), increased **sales conversion** (up to **20%**), and reduced **agent churn** (up to **50%**)[17](index=17&type=chunk)[271](index=271&type=chunk) - The company views the shift from 1-800 numbers, websites, and apps to conversational messaging as a significant market opportunity, estimating a **$60 billion** go-to-market opportunity, with nearly half tied to service and the other half to sales, marketing, social, and brick-and-mortar use cases[24](index=24&type=chunk) - LivePerson's strategy includes building awareness and adoption of the **Conversational Space**, increasing messaging volumes through a broad ecosystem and **AI/automation**, attracting top **AI talent**, and bringing best-in-class **AI/ML technologies** to market[32](index=32&type=chunk)[34](index=34&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) Revenue Contribution by Service Type (2017-2019) | Service Type | 2019 (% of total revenue) | 2018 (% of total revenue) | 2017 (% of total revenue) | | :--------------------- | :------------------------ | :------------------------ | :------------------------ | | Hosted Business Services | 77% | 79% | 82% | | Professional Services | 14% | 13% | 10% | | Consumer Services | 8% | 8% | 8% | Key Business Metrics (2018-2019) | Metric | 2019 ($) | 2018 ($) | Change (YoY) | | :----------------------------------------- | :---------- | :---------- | :----------- | | Enterprise & Mid-Market ARPU | $345,000 | $285,000 | +21.05% | | Enterprise & Mid-Market Revenue Retention | 105%-115% | ~110% | Maintained | | Enterprise Customers on Messaging | ~55% | ~40% | +15 pp | | Messaging Conversations with Automation | ~60% | ~25% (2017) | +35 pp | [Item 1A. Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from fluctuating results, intense competition, evolving regulations, operational challenges, AI technology, and financial instruments - Quarterly revenue and operating results may **fluctuate significantly** due to factors such as customer acquisition/retention, service innovation, pricing changes, third-party integrations, and economic conditions[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - The markets for mobile and online business messaging and digital engagement are **highly competitive**, with risks from existing competitors and new entrants, potentially leading to pricing pressure and loss of market share[76](index=76&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - The business is subject to **evolving U.S. and international privacy laws** (e.g., GDPR, CCPA), which can increase compliance costs, limit service adoption, and expose the company to fines, litigation, and reputational harm[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[107](index=107&type=chunk) - Exposure to **foreign currency exchange rate fluctuations**, particularly with the U.S. dollar against NIS, Pound Sterling, Euro, AUS dollar, and Japanese Yen, can adversely affect results of operations[129](index=129&type=chunk)[130](index=130&type=chunk) - Failures or **security breaches** in services or systems, including cyber-attacks, could lead to loss of proprietary/personal data, litigation, regulatory investigations, and damage to reputation[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - The use of **Artificial Intelligence (AI)** in product offerings presents risks such as flawed algorithms, biased datasets, and ethical issues, which could lead to reputational harm or legal liability[175](index=175&type=chunk) - The company has incurred **net losses** in recent years, with an accumulated deficit of **$283.6 million** as of December 31, 2019, and may continue to incur losses in the future[187](index=187&type=chunk) [Item 1B. Unresolved Staff Comments](index=45&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments[233](index=233&type=chunk) [Item 2. Properties](index=46&type=section&id=Item%202.%20Properties) LivePerson's headquarters are in New York City, with major R&D, sales, and support offices globally, and data centers across three continents - Corporate headquarters are in New York City (**37,000 sq ft**, lease expires **2021**)[234](index=234&type=chunk) - Major international office in Ra'anana, Israel (**68,000 sq ft**, lease expires **2020**) for R&D, sales, and support[234](index=234&type=chunk) - Key U.S. offices in Alpharetta, Georgia (**40,000 sq ft**, lease expires **2024**) for sales/support, and Seattle, Washington (**38,000 sq ft**, lease expires **2020**) for R&D[234](index=234&type=chunk) - Global presence includes approximately **45,000 sq ft** of office space in various locations in the United States, Europe, Asia, and Australia, along with data centers in the U.S., Europe, and Australia[235](index=235&type=chunk) [Item 3. Legal Proceedings](index=46&type=section&id=Item%203.%20Legal%20Proceedings) LivePerson is in an IP lawsuit against [24]7 Customer, Inc., with most of [24]7's patents invalidated, expecting no material adverse financial impact - LivePerson filed an intellectual property suit against **[24]7 Customer, Inc.** in **March 2014**, alleging reverse engineering and misappropriation of technology[236](index=236&type=chunk)[594](index=594&type=chunk) - **[24]7 Customer, Inc.** filed two patent infringement suits against LivePerson in **2015**, which were consolidated with LivePerson's original suit in California[236](index=236&type=chunk)[594](index=594&type=chunk) - Rulings by the Court and the U.S. Patent Office have invalidated the majority of **[24]7's asserted patents**[236](index=236&type=chunk)[594](index=594&type=chunk) - Trial for LivePerson's claims is set for **April 27, 2020**, and for **[24]7's patent infringement claims** for **March 15, 2021**[236](index=236&type=chunk)[594](index=594&type=chunk) - The company accrues for probable losses that can be reasonably estimated and believes current litigation will not have a **material adverse effect** on its business, results of operations, financial condition, or cash flows[238](index=238&type=chunk)[239](index=239&type=chunk)[596](index=596&type=chunk)[597](index=597&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company is not subject to Item 4, Mine Safety Disclosures - Not Applicable[240](index=240&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=46&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) LivePerson's common stock trades on NASDAQ and TASE, with no cash dividends declared, and a discontinued stock repurchase program saw minor activity - Common stock is traded on **The NASDAQ Global Select Market (LPSN)** and the **Tel Aviv Stock Exchange (LPSN TA)**[242](index=242&type=chunk) - As of **February 11, 2020**, there were approximately **148 holders of record** of common stock[243](index=243&type=chunk) - The company has **not declared or paid any cash dividends** since its inception and does not anticipate doing so in the foreseeable future[244](index=244&type=chunk) Issuer Purchases of Equity Securities (Q4 2019) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | | :----------------------- | :------------------------------- | :--------------------------- | | 10/1/2019 - 10/31/2019 | — | $— | | 11/1/2019 - 11/30/2019 | — | — | | 12/1/2019 - 12/31/2019 | 5,124 | $37.82 | | **Total** | **5,124** | **$—** | - A stock repurchase program was in place from **2012 through 2018** and was discontinued at the end of **2018**[203](index=203&type=chunk)[553](index=553&type=chunk) [Item 6. Selected Consolidated Financial Data](index=49&type=section&id=Item%206.%20Selected%20Consolidated%20Financial%20Data) Selected consolidated financial data from 2015-2019 highlights increasing revenue, net losses, operating expenses, and significant growth in stock-based compensation Selected Consolidated Statement of Operations Data (2015-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | 2015 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Revenue | $291,609 | $249,838 | $218,876 | $222,779 | $239,012 | | Total costs and expenses | $378,641 | $273,541 | $236,702 | $242,188 | $249,440 | | Loss from operations | $(87,032) | $(23,703) | $(17,826) | $(19,409) | $(10,428) | | Net loss | $(96,071) | $(25,032) | $(18,191) | $(25,873) | $(26,646) | | Basic Net loss per share | $(1.53) | $(0.42) | $(0.32) | $(0.46) | $(0.47) | | Diluted Net loss per share | $(1.53) | $(0.42) | $(0.32) | $(0.46) | $(0.47) | | Adjusted EBITDA | $(13,612) | $19,090 | $18,400 | $19,198 | $21,244 | | Adjusted operating (loss) income | $(29,978) | $4,902 | $6,042 | $7,503 | $9,130 | Selected Consolidated Balance Sheet Data (2015-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | 2015 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Cash and cash equivalents | $176,523 | $66,449 | $56,115 | $50,889 | $48,803 | | Working capital | $107,674 | $7,873 | $13,789 | $17,548 | $39,122 | | Total assets | $512,710 | $290,103 | $232,799 | $219,638 | $226,194 | | Total stockholders' equity | $148,535 | $170,729 | $140,063 | $138,476 | $165,305 | Stock-Based Compensation Expense by Category (2015-2019, in thousands) | Category | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | 2015 (in thousands) | | :------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Cost of revenue | $4,218 | $996 | $448 | $429 | $1,396 | | Sales and marketing | $10,010 | $5,374 | $2,500 | $2,515 | $3,088 | | General and administrative | $12,216 | $4,921 | $3,691 | $3,304 | $3,692 | | Product development | $17,661 | $3,550 | $2,305 | $3,488 | $3,638 | | **Total** | **$44,105** | **$14,841** | **$8,944** | **$9,736** | **$11,814** | | **YoY Change** | **+197.18%**| **+65.93%** | **-8.13%** | **-17.59%** | **-** | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This analysis details LivePerson's financial condition and operations, covering AI-powered messaging, revenue growth, rising expenses, net losses, liquidity, and strategic investments - LivePerson's strategy focuses on building awareness and adoption of the **Conversational Space**, increasing messaging volumes through a broad ecosystem and **AI/automation**, attracting top **AI talent**, and bringing best-in-class **AI/ML technologies** to market[273](index=273&type=chunk)[275](index=275&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) Key Financial Highlights (2018-2019) | Metric | 2019 (3 months, $ million) | 2019 (12 months, $ million) | 2018 (3 months, $ million) | 2018 (12 months, $ million) | | :----------------------------------------- | :------------------------- | :-------------------------- | :------------------------- | :-------------------------- | | Revenue | $79.1 | $291.6 | $65.7 | $249.8 | | Revenue Growth | +20% | +17% | - | - | | Business Segment Revenue | $72.8 | $267.1 | $60.7 | $230.3 | | Business Segment Revenue Growth | +20% | +16% | - | - | | Gross Profit Margin | 72% | 73% | 74% | 75% | | Costs and Expenses | $103.6 | $378.6 | $73.0 | $273.5 | | Costs and Expenses Growth | +42% | +38% | - | - | | Net Loss | $27.3 | $96.1 | $6.5 | $25.0 | | Trailing-twelve-month ARPU (Enterprise/Mid-Market) | - | $345,000 | - | $285,000 | | Revenue Retention Rate (Enterprise/Mid-Market) | - | 105%-115% | - | ~110% | Revenue by Segment (2017-2019, in thousands) | Segment | 2019 (in thousands) | 2018 (in thousands) | % Change (2019 vs 2018) | 2017 (in thousands) | % Change (2018 vs 2017) | | :-------- | :---------- | :---------- | :---------------------- | :---------- | :---------------------- | | Business | $267,129 | $230,285 | 16% | $201,426 | 14% | | Consumer | $24,480 | $19,553 | 25% | $17,450 | 12% | | **Total** | **$291,609**| **$249,838**| **17%** | **$218,876**| **14%** | Cost of Revenue - Business (2017-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | % Change (2019 vs 2018) | 2017 (in thousands) | % Change (2018 vs 2017) | | :------------------------- | :---------- | :---------- | :---------------------- | :---------- | :---------------------- | | Cost of revenue - Business | $74,460 | $58,420 | 27% | $54,600 | 7% | | Percentage of total revenue| 26% | 23% | +3 pp | 25% | -2 pp | | Headcount (at period end) | 257 | 228 | 13% | 205 | 11% | Sales and Marketing - Business (2017-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | % Change (2019 vs 2018) | 2017 (in thousands) | % Change (2018 vs 2017) | | :----------------------------- | :---------- | :---------- | :---------------------- | :---------- | :---------------------- | | Sales and Marketing - Business | $140,880 | $94,339 | 49% | $82,420 | 14% | | Percentage of total revenue | 48% | 38% | +10 pp | 38% | 0 pp | | Headcount (at period end) | 449 | 352 | 28% | 291 | 21% | Product Development Costs (2017-2019, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | % Change (2019 vs 2018) | 2017 (in thousands) | % Change (2018 vs 2017) | | :----------------------------- | :---------- | :---------- | :---------------------- | :---------- | :---------------------- | | Product development | $82,145 | $55,707 | 47% | $40,034 | 39% | | Percentage of total revenue | 28% | 22% | +6 pp | 18% | +4 pp | | Headcount (at period end) | 451 | 369 | 22% | 342 | 8% | Net Loss (2017-2019, in thousands) | Year | Net Loss (in thousands) | YoY Change | | :--- | :---------- | :--------- | | 2019 | $(96,071) | +283.79% | | 2018 | $(25,032) | +37.60% | | 2017 | $(18,191) | - | Cash Flows Summary (2017-2019, in thousands) | Activity | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :----------------------------- | :---------- | :---------- | :---------- | | Operating Activities | $(59,158) | $4,779 | $10,290 | | Investing Activities | $(48,506) | $(27,773) | $(15,320) | | Financing Activities | $217,851 | $33,926 | $7,209 | | Cash and Cash Equivalents (End of Year) | $176,523 | $66,449 | $56,115 | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines LivePerson's market risks, including currency fluctuations, accounts receivable collection, and interest rate exposure, with mitigation strategies - The company is exposed to **currency rate fluctuation risk**, particularly with the U.S. dollar against the New Israeli Shekel (NIS), Pound Sterling, Euro, AUS dollar, and Japanese Yen, due to international operations[381](index=381&type=chunk)[382](index=382&type=chunk) - A **1% increase or decrease** in the value of the NIS would impact income before income taxes by approximately **$0.7 million**, based on 2018 exposure[381](index=381&type=chunk) - Accounts receivable are subject to collection risks; the allowance for doubtful accounts increased from **$2.3 million** in 2018 to **$3.1 million** in 2019, reflecting ongoing assessment of credit risks and longer payment cycles from large corporate customers[383](index=383&type=chunk) - The company's investments primarily consist of cash and cash equivalents, which are **not materially affected** by changes in market interest rates[384](index=384&type=chunk) - Inflation has **not had a material effect** on the business, but significant inflationary pressures could harm financial results if not offset by price increases[385](index=385&type=chunk) [Item 8. Consolidated Financial Statements and Supplementary Data](index=72&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This item presents LivePerson's audited consolidated financial statements for 2017-2019, covering balance sheets, operations, comprehensive loss, equity, cash flows, and detailed notes - The consolidated financial statements were audited by **BDO USA, LLP**, who expressed an **unqualified opinion**[390](index=390&type=chunk) - The company adopted **ASC Topic 842, Leases**, on **January 1, 2019**, resulting in the recording of approximately **$10.0 million** in additional net lease assets and lease liabilities[392](index=392&type=chunk)[479](index=479&type=chunk) Consolidated Balance Sheets (as of December 31, in thousands) | Asset/Liability | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------ | :---------- | :---------- | | Cash and cash equivalents | $176,523 | $66,449 | | Accounts receivable, net | $87,620 | $46,023 | | Total current assets | $278,107 | $121,724 | | Property and equipment, net | $76,236 | $43,735 | | Goodwill | $94,987 | $95,031 | | Total assets | $512,710 | $290,103 | | Accounts payable | $12,302 | $8,174 | | Accrued expenses | $62,778 | $50,662 | | Deferred revenue | $88,751 | $55,015 | | Convertible senior notes, net | $179,012 | $— | | Total liabilities | $364,175 | $119,374 | | Total stockholders' equity | $148,535 | $170,729 | Consolidated Statements of Operations (Year Ended December 31, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | | Revenue | $291,609 | $249,838 | $218,876 | | Cost of revenue | $78,878 | $62,479 | $58,205 | | Sales and marketing | $156,814 | $103,344 | $90,905 | | General and administrative | $56,967 | $45,873 | $43,124 | | Product development | $82,145 | $55,707 | $40,034 | | Loss from operations | $(87,032) | $(23,703) | $(17,826) | | Net loss | $(96,071) | $(25,032) | $(18,191) | | Basic Net loss per share | $(1.53) | $(0.42) | $(0.32) | | Diluted Net loss per share | $(1.53) | $(0.42) | $(0.32) | Consolidated Statements of Cash Flows (Year Ended December 31, in thousands) | Activity | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :----------------------------------------- | :---------- | :---------- | :---------- | | Net cash (used in) provided by operating activities | $(59,158) | $4,779 | $10,290 | | Net cash used in investing activities | $(48,506) | $(27,773) | $(15,320) | | Net cash provided by financing activities | $217,851 | $33,926 | $7,209 | | Change in cash and cash equivalents | $110,074 | $10,334 | $5,226 | | Cash and cash equivalents - End of year | $176,523 | $66,449 | $56,115 | - In **March 2019**, the company issued **$230.0 million** in **0.750% Convertible Senior Notes due 2024**, with net proceeds of approximately **$221.4 million** after deducting issuance costs. The notes are convertible into common stock under certain conditions[504](index=504&type=chunk)[505](index=505&type=chunk)[509](index=509&type=chunk) - The company entered into capped call option transactions for **$23.2 million** to reduce potential dilution from note conversions, recorded as a reduction to additional paid-in capital[517](index=517&type=chunk) - Goodwill and intangible assets are tested for impairment annually; **no impairment** was recognized for 2019, 2018, or 2017[499](index=499&type=chunk) - Restructuring costs in 2019 were **$2.0 million**, a **54% decrease** from **$4.5 million** in 2018, primarily due to resource reallocation for platform transformation and severance costs[336](index=336&type=chunk)[599](index=599&type=chunk)[600](index=600&type=chunk) [Report of Independent Registered Public Accounting Firm](index=73&type=section&id=Report%20of%20BDO%20USA%2C%20LLP%2C%20An%20Independent%20Registered%20Public%20Accounting%20Firm) BDO USA, LLP issued an unqualified opinion on LivePerson's 2019 financial statements and internal control, noting ASC Topic 842 adoption and critical audit matters - **BDO USA, LLP** issued an **unqualified opinion** on LivePerson's consolidated financial statements for the period ended **December 31, 2019**[390](index=390&type=chunk) - The firm also audited the company's internal control over financial reporting and expressed an **unqualified opinion** on its effectiveness as of **December 31, 2019**[391](index=391&type=chunk) - A change in accounting principle for leases due to the adoption of **ASC Topic 842** became effective **January 1, 2019**[392](index=392&type=chunk) - Critical audit matters included **revenue recognition** for contracts with multiple performance obligations and the **accounting evaluation of convertible notes**, both requiring significant auditor judgment and specialized knowledge[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk)[400](index=400&type=chunk) [Consolidated Balance Sheets](index=75&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20December%2031%2C%202019%20and%202018) LivePerson's Consolidated Balance Sheets as of December 31, 2019 and 2018, detail assets, liabilities, and stockholders' equity Consolidated Balance Sheets (as of December 31, in thousands) | Asset/Liability | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------ | :---------- | :---------- | | Cash and cash equivalents | $176,523 | $66,449 | | Accounts receivable, net | $87,620 | $46,023 | | Prepaid expenses and other current assets | $13,964 | $9,252 | | Total current assets | $278,107 | $121,724 | | Operating lease right of use asset | $15,680 | $— | | Property and equipment, net | $76,236 | $43,735 | | Contract acquisition costs | $31,965 | $13,361 | | Intangibles, net | $11,812 | $13,832 | | Goodwill | $94,987 | $95,031 | | Deferred tax assets | $2,179 | $713 | | Other assets | $1,744 | $1,707 | | **Total assets** | **$512,710**| **$290,103**| | Accounts payable | $12,302 | $8,174 | | Accrued expenses and other current liabilities | $62,778 | $50,662 | | Deferred revenue | $88,751 | $55,015 | | Operating lease liability | $6,602 | $— | | Total current liabilities | $170,433 | $113,851 | | Deferred revenue, net of current portion | $438 | $222 | | Convertible senior notes, net | $179,012 | $— | | Other liabilities | $72 | $4,205 | | Operating lease liability, net of current portion | $12,865 | $— | | Deferred tax liability | $1,355 | $1,096 | | **Total liabilities** | **$364,175**| **$119,374**| | Common stock | $67 | $64 | | Additional paid-in capital | $436,557 | $362,590 | | Treasury stock, at cost | $(3) | $(3) | | Accumulated deficit | $(283,562) | $(187,491) | | Accumulated other comprehensive loss | $(4,524) | $(4,431) | | **Total stockholders' equity** | **$148,535**| **$170,729**| | **Total liabilities and stockholders' equity** | **$512,710**| **$290,103**| [Consolidated Statements of Operations](index=76&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20each%20of%20the%20years%20ended%20December%2031%2C%202019%2C%202018%20and%202017) This section presents LivePerson's Consolidated Statements of Operations for 2017-2019, detailing revenue, expenses, and net loss Consolidated Statements of Operations (Year Ended December 31, in thousands, except per share data) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | | Revenue | $291,609 | $249,838 | $218,876 | | Cost of revenue | $78,878 | $62,479 | $58,205 | | Sales and marketing | $156,814 | $103,344 | $90,905 | | General and administrative | $56,967 | $45,873 | $43,124 | | Product development | $82,145 | $55,707 | $40,034 | | Restructuring costs | $2,043 | $4,468 | $2,594 | | Amortization of purchased intangibles | $1,794 | $1,670 | $1,840 | | Total costs and expenses | $378,641 | $273,541 | $236,702 | | Loss from operations | $(87,032) | $(23,703) | $(17,826) | | Interest (expense) income | $(7,407) | $22 | $26 | | Other income (expense), net | $1,213 | $(493) | $110 | | Total Other (expense) income, net | $(6,194) | $(471) | $136 | | Loss before provision for income taxes | $(93,226) | $(24,174) | $(17,690) | | Provision for income taxes | $2,845 | $858 | $501 | | Net loss | $(96,071) | $(25,032) | $(18,191) | | Net loss per share (Basic) | $(1.53) | $(0.42) | $(0.32) | | Net loss per share (Diluted) | $(1.53) | $(0.42) | $(0.32) | | Weighted-average shares (Basic) | 62,593,026 | 59,203,400 | 56,358,017 | | Weighted-average shares (Diluted) | 62,593,026 | 59,203,400 | 56,358,017 | Stock Compensation Expense (Year Ended December 31, in thousands) | Category | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :------------------------- | :---------- | :---------- | :---------- | | Cost of revenue | $4,218 | $996 | $448 | | Sales and marketing | $10,010 | $5,374 | $2,500 | | General and administrative | $12,216 | $4,921 | $3,691 | | Product development | $17,661 | $3,550 | $2,305 | Depreciation and Amortization Expense (Year Ended December 31, in thousands) | Category | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :------------------------- | :---------- | :---------- | :---------- | | Cost of revenue | $8,557 | $7,831 | $7,150 | | Sales and marketing | $1,642 | $1,520 | $1,625 | | General and administrative | $908 | $1,083 | $1,226 | | Product development | $5,259 | $3,754 | $2,357 | Amortization of Purchased Intangibles (Year Ended December 31, in thousands) | Category | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :------------------------- | :---------- | :---------- | :---------- | | Cost of revenue | $1,138 | $1,143 | $2,842 | [Consolidated Statements of Comprehensive Loss](index=77&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss%20for%20each%20of%20the%20years%20ended%20December%2031%2C%202019%2C%202018%20and%202017) This section presents LivePerson's Consolidated Statements of Comprehensive Loss for 2017-2019, including net loss and foreign currency translation adjustments Consolidated Statements of Comprehensive Loss (Year Ended December 31, in thousands) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--------------------------- | :---------- | :---------- | :---------- | | Net loss | $(96,071) | $(25,032) | $(18,191) | | Foreign currency translation adjustment | $(93) | $(1,896) | $3,625 | | **Comprehensive loss** | **$(96,164)**| **$(26,928)**| **$(14,566)**| [Consolidated Statements of Stockholders' Equity](index=78&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20for%20each%20of%20the%20years%20ended%20December%2031%2C%202019%2C%202018%20and%202017) LivePerson's Consolidated Statements of Stockholders' Equity for 2017-2019 detail changes in common stock, paid-in capital, accumulated deficit, and comprehensive loss Consolidated Statements of Stockholders' Equity (Year Ended December 31, in thousands, except share data) | Metric | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :--------------------------------------- | :---------- | :---------- | :---------- | | Balance at December 31 (Shares) | 66,543,073 | 63,676,229 | 59,663,969 | | Common Stock Amount | $67 | $64 | $60 | | Treasury Stock Shares | (2,709,830) | (2,681,285) | (2,587,535) | | Treasury Stock Amount | $(3) | $(3) | $(3) | | Additional Paid-in Capital | $436,557 | $362,590 | $305,676 | | Accumulated Deficit | $(283,562) | $(187,491) | $(163,135) | | Accumulated Other Comprehensive Loss | $(4,524) | $(4,431) | $(2,535) | | **Total Stockholders' Equity** | **$148,535**| **$170,729**| **$140,063**| - Key changes in stockholders' equity for **2019** include proceeds from common stock issuance (**$16,918k**), stock-based compensation (**$25,083k**), equity component of convertible senior notes (**$52,900k**), and purchase of capped call option (**$(23,184)k**)[415](index=415&type=chunk) [Consolidated Statements of Cash Flows](index=79&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20each%20of%20the%20years%20ended%20December%2031%2C%202019%2C%202018%20and%202017) This section presents LivePerson's Consolidated Statements of Cash Flows for 2017-2019, detailing cash flows from operating, investing, and financing activities Consolidated Statements of Cash Flows (Year Ended December 31, in thousands) | Activity | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | | :----------------------------------------- | :---------- | :---------- | :---------- | | Net cash (used in) provided by operating activities | $(59,158) | $4,779 | $10,290 | | Net cash used in investing activities | $(48,506) | $(27,773) | $(15,320) | | Net cash provided by financing activities | $217,851 | $33,926 | $7,209 | | Effect of foreign exchange rate changes on cash and cash equivalents | $(113) | $(598) | $3,047 | | Change in cash and cash equivalents | $110,074 | $10,334 | $5,226 | | Cash and cash equivalents - Beginning of the year | $66,449 | $56,115 | $50,889 | | Cash and cash equivalents - End of the year | $176,523 | $66,449 | $56,115 | - Net cash used in operating activities was **$(59.2) million** in 2019, a significant decrease from **$4.8 million** provided in 2018, primarily due to increased net loss and changes in working capital[351](index=351&type=chunk)[418](index=418&type=chunk) - Net cash provided by financing activities increased substantially to **$217.9 million** in 2019, driven by proceeds from convertible senior notes issuance (**$230.0 million**) and common stock issuance (**$21.1 million**), partially offset by capped call purchases (**$23.2 million**)[353](index=353&type=chunk)[418](index=418&type=chunk) - Capital expenditures, including capitalized software, were **$47.6 million** in 2019, up from **$21.9 million** in 2018[352](index=352&type=chunk)[418](index=418&type=chunk) [Notes to Consolidated Financial Statements](index=82&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to LivePerson's consolidated financial statements, explaining significant accounting policies and other financial disclosures [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=119&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants on accounting and financial disclosure matters - Not Applicable[601](index=601&type=chunk) [Item 9A. Controls and Procedures](index=119&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and BDO USA, LLP concluded LivePerson's internal control over financial reporting and disclosure controls were effective as of December 31, 2019 - Management concluded that internal control over financial reporting was **effective** as of **December 31, 2019**, based on the COSO framework[602](index=602&type=chunk) - **BDO USA, LLP** provided an **unqualified opinion** on the effectiveness of internal control over financial reporting[603](index=603&type=chunk)[608](index=608&type=chunk) - Management also concluded that disclosure controls and procedures were **effective** as of **December 31, 2019**[606](index=606&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control during the quarter ended **December 31, 2019**[605](index=605&type=chunk) [Item 9B. Other Information](index=121&type=section&id=Item%209B.%20Other%20Information) The company reported no other information required by this item - None[615](index=615&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=121&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance, including the Code of Ethics, is incorporated by reference from the 2020 proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the **2020 Annual Meeting of Stockholders proxy statement**[617](index=617&type=chunk) - The company has a **Code of Ethics** for its CEO and senior financial officers, available on its investor relations website[619](index=619&type=chunk) [Item 11. Executive Compensation](index=121&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details, including the Compensation Discussion and Analysis, are incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information on executive compensation is incorporated by reference from the **2020 Annual Meeting of Stockholders proxy statement**[620](index=620&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=121&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership details for beneficial owners and management, along with equity compensation plan information, are incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information on security ownership and related stockholder matters is incorporated by reference from the **2020 Annual Meeting of Stockholders proxy statement**[621](index=621&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=122&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the **2020 Annual Meeting of Stockholders proxy statement**[623](index=623&type=chunk) [Item 14. Principal Accountant Fees and Services](index=122&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services, including pre-approval policies, is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information on principal accountant fees and services is incorporated by reference from the **2020 Annual Meeting of Stockholders proxy statement**[624](index=624&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=122&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits filed with the Form 10-K, with financial statements incorporated by reference from Item 8 - Financial statements are incorporated by reference to **Item 8** of this Annual Report on Form 10-K[626](index=626&type=chunk) - No financial statement schedules are filed[626](index=626&type=chunk) - Exhibits are incorporated by reference to the Exhibit Index[626](index=626&type=chunk) [Item 16. Form 10-K Summary](index=122&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reported no Form 10-K Summary - None[627](index=627&type=chunk)

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 September 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 13-38 ...

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 ...