LivePerson(LPSN) - 2018 Q4 - Annual Report

Business Efficiency and Revenue Growth - LivePerson's LiveEngage platform enables businesses to manage up to 40 messaging conversations simultaneously per agent, compared to one for voice agents, resulting in labor efficiency gains of at least 50%[21] - LivePerson's customers have reported increases in website sales of up to 20% while reducing engagement costs compared to traditional voice or email methods[33] - The company estimates that businesses spend approximately $1.5 trillion annually on 1-800 number call centers, representing a significant addressable market of nearly $200 billion for Conversational Commerce[28] - LivePerson's enterprise and mid-market revenue retention rate exceeded 110% in 2018, indicating strong customer loyalty and upsell success[43] - Average revenue per user (ARPU) for enterprise and mid-market customers increased over 25% in 2018 to approximately $285,000, with ARPU for customers adopting messaging reaching approximately $500,000[43] - More than 40% of enterprise customers adopted messaging by the end of 2018, a significant increase from approximately 20% at the end of 2017[38] - A major retail brand that adopted the Conversation Manager approach increased agent productivity by up to 220% within 12 weeks of launch[73] Technology and Innovation - The company's AI engine, Maven, enhances agent efficiency by providing relevant content and automating repetitive tasks, allowing agents to focus on relationship building[19] - LivePerson's Maven AI engine, announced in December 2018, is designed to scale conversational AI to millions of interactions while improving customer satisfaction and conversion rates[46] - The company added over 70 machine learning, AI, and Conversational Commerce developers in 2018, enhancing its R&D capabilities[45] - The LiveEngage platform is designed for AI-assisted and human-powered messaging, offering best-in-class security and scalability, with robust real-time reporting and predictive intelligence capabilities[88] - The company emphasizes that messaging and AI are foundational for Conversational Commerce, transforming how brands engage with consumers[86] Market Presence and Customer Base - LivePerson's Conversational Commerce solutions are utilized by over 18,000 businesses, including major brands like Citibank and The Home Depot[23] - More than 18,000 customers have deployed the company's business solutions, including Fortune 500 companies and various organizations[70] - The company plans to focus on key target markets including consumer/retail, telecommunications, financial services, travel/hospitality, technology, and automotive[70] - The number of partners focused on small and medium-sized businesses (SMBs) increased by over 300% in 2018, contributing to nearly one-third of annual contract value signed[58] Revenue Composition and Financial Performance - Revenue from monthly hosted business services accounted for 79% of total revenue for the year ended December 31, 2018, compared to 82% in 2017 and 2016[61] - Revenue attributable to professional services accounted for 13% of total revenue for the year ended December 31, 2018, and 10% for each of the years ended December 31, 2017 and 2016[68] - Revenue from the consumer segment accounted for approximately 8% of total revenue for the years ended December 31, 2018 and 2017, and 7% for 2016[69] Regulatory and Compliance Challenges - The company faces competition from major technology providers like Salesforce.com and Oracle, which have larger financial and marketing resources[90] - Compliance with evolving privacy laws, such as the GDPR, imposes significant costs and operational challenges for the company[97] - The company is monitoring legislative trends to assess their impact and develop strategic responses to regulatory changes[148] - The evolving regulatory landscape may require the company to implement material changes to business practices, affecting service delivery and financial performance[147] - The California Consumer Privacy Act (CCPA) took effect on January 1, 2020, granting California residents new data privacy rights that may require the company to make new disclosures[103] Risks and Operational Challenges - The company faces potential legal liabilities due to evolving laws and regulations, which could negatively affect its business operations and financial condition[112] - The company is exposed to risks from cybersecurity threats, with regular cyber-attacks that could lead to significant legal and financial exposure, damage to reputation, and loss of customer confidence[150] - The company may face regulatory challenges related to export controls and economic sanctions, which could impair its ability to compete in international markets and affect revenue[168] - The company faces payment-related risks, including interchange fees for credit and debit card transactions, which may increase over time and impact profit margins[208] - The company may incur significant costs related to security breaches, which could harm its reputation and financial condition[182] Strategic Focus and Future Outlook - The pilot accelerator program introduced in 2018 is expected to be a larger component of the sales pipeline in 2019, based on initial success[77] - The company anticipates that additional investments in internal infrastructure, data center capacity, and customer support will be required to scale operations and increase productivity[164] - The company is investing in mobile solutions to support transactions on mobile devices, with the need for rapid innovation to meet customer demands and avoid losing market share[169] - The company has made several acquisitions in the past, including AdvantageTec, Conversable, and BotCentral, to enhance its product offerings and capabilities[177]