LivePerson(LPSN) - 2022 Q1 - Quarterly Report

General Information Filing Information Details LivePerson, Inc.'s Form 10-Q filing for Q1 2022, covering registration, stock exchange listing, and filer status - The registrant is LIVEPERSON, INC., a Delaware corporation, filing its Quarterly Report on Form 10-Q for the period ended March 31, 2022[2] - The company's Common Stock, par value $0.001 per share, is traded on The Nasdaq Stock Market LLC[3] - LivePerson, Inc. is classified as a Large Accelerated Filer[4] - As of May 2, 2022, 74.4 million shares of the registrant's common stock were outstanding[4] Forward-Looking Statements Outlines forward-looking statements, emphasizing reliance on current expectations and susceptibility to material risks and uncertainties - Statements in this report that are not historical facts are forward-looking, based on current expectations, assumptions, estimates, and projections about LivePerson and its industry[9] - Forward-looking statements are subject to risks and uncertainties that could cause actual future events or results to differ materially, including those detailed in the Annual Report on Form 10-K[9] PART I. Financial Information Item 1. Financial Statements (Unaudited) Presents LivePerson, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, with explanatory notes Condensed Consolidated Balance Sheets | Metric | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $1,204,073 | $1,186,656 | | Total Liabilities | $1,023,727 | $837,219 | | Total Stockholders' Equity | $180,346 | $349,437 | | Cash and cash equivalents | $480,676 | $521,846 | | Convertible senior notes, net | $734,586 | $574,238 | Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | Change (YoY) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------ | | Revenue | $130,197 | $107,891 | +20.7% | | Total costs and expenses | $195,324 | $121,520 | +60.7% | | Loss from operations | $(65,127) | $(13,629) | -377.9% | | Net loss | $(65,364) | $(21,195) | -208.4% | | Basic Net loss per share | $(0.86) | $(0.31) | -177.4% | | Diluted Net loss per share | $(0.86) | $(0.31) | -177.4% | Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | Change (YoY) | | :----------------------- | :------------------------------------- | :------------------------------------- | :------------ | | Net loss | $(65,364) | $(21,195) | -208.4% | | Foreign currency translation adjustment | $(1,699) | $(1,746) | +2.7% | | Comprehensive loss | $(67,063) | $(22,941) | -192.3% | Condensed Consolidated Statements of Stockholders' Equity | Metric | December 31, 2021 (In thousands) | March 31, 2022 (In thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Stockholders' Equity | $349,437 | $180,346 | | Cumulative adjustment due to adoption of ASU 2020-06 | N/A | $(159,407) | | Net loss | N/A | $(65,364) | | Stock-based compensation | N/A | $20,522 | Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | | Net cash (used in) provided by operating activities | $(22,872) | $25,229 | | Net cash used in investing activities | $(19,899) | $(11,437) | | Net cash provided by financing activities | $1,001 | $3,015 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(41,170) | $14,073 | | Cash, cash equivalents, and restricted cash - end of year | $482,362 | $668,225 | Notes to Condensed Consolidated Financial Statements Note 1. Description of Business and Basis of Presentation LivePerson, a Conversational AI company, presents unaudited GAAP financials, with ASU 2020-06 impacting convertible instrument accounting - LivePerson is a leading Conversational Artificial Intelligence (AI) company, creating digital experiences that are 'Curiously Human' through its Conversational Cloud platform for businesses and an online marketplace for consumer services[24][25][28] - The company adopted ASU 2020-06 on January 1, 2022, which simplifies the accounting for convertible instruments. This resulted in a $50.2 million decrease in accumulated deficit, a $209.7 million decrease in additional paid-in capital, and a $159.5 million increase in convertible senior notes, net[48] Note 2. Revenue Recognition Revenue primarily from hosted services (Business segment), recognized over time, with total revenue increasing 21% year-over-year to $130.2 million | Revenue Source | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | Change (YoY) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------ | | Hosted services – Business | $106,324 | $83,640 | +27.1% | | Hosted services – Consumer | $9,122 | $9,011 | +1.2% | | Professional services – Business | $14,751 | $15,240 | -3.1% | | Total revenue | $130,197 | $107,891 | +20.7% | | Geographic Location | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | Change (YoY) | | :------------------ | :------------------------------------- | :------------------------------------- | :------------ | | United States | $87,137 | $68,782 | +26.7% | | Other Americas | $5,039 | $3,913 | +28.8% | | EMEA | $23,820 | $21,760 | +9.5% | | APAC | $14,201 | $13,436 | +5.7% | | Total revenue | $130,197 | $107,891 | +20.7% | - As of March 31, 2022, the aggregate amount of the total transaction price allocated to remaining performance obligations for contracts with an original duration of one year or greater was $448.0 million, with approximately 91% expected to be recognized within the next 24 months[51] | Deferred Revenue | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Total deferred revenue - short term | $112,323 | $98,808 | | Total deferred revenue - long term | $188 | $54 | Note 3. Net Loss Per Share Basic and diluted net loss per share for Q1 2022 was $(0.86), a significant increase from $(0.31) in the prior year, with anti-dilutive securities excluded | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss (in thousands) | $(65,364) | $(21,195) | | Weighted average shares outstanding, basic and diluted | 75,812,405 | 67,901,809 | | Net loss per share, basic and diluted | $(0.86) | $(0.31) | | Anti-Dilutive Securities (as of March 31) | 2022 | 2021 | | :--------------------------------------- | :--------- | :--------- | | Shares subject to outstanding common stock options and employee stock purchase plan | 5,027,605 | 4,172,765 | | Restricted stock units | 4,292,153 | 2,530,542 | | Conversion option of the 2024 Notes | 5,961,186 | 5,961,186 | | Conversion option of the 2026 Notes | 6,879,283 | 6,879,283 | | Total Anti-Dilutive Securities | 22,160,227 | 19,543,776 | Note 4. Segment Information Business segment revenue increased 22% to $121.1 million, but operating income decreased significantly, while Consumer segment revenue remained stable | Metric (Three Months Ended March 31, 2022) | Business (In thousands) | Consumer (In thousands) | Corporate (In thousands) | Consolidated (In thousands) | | :--------------------------------------- | :---------------------- | :---------------------- | :----------------------- | :-------------------------- | | Total revenue | $121,075 | $9,122 | $0 | $130,197 | | Cost of revenue | $48,221 | $1,346 | $0 | $49,567 | | Sales and marketing | $52,283 | $5,849 | $0 | $58,132 | | Amortization of purchased intangibles | $1,841 | $0 | $0 | $1,841 | | Unallocated corporate expenses | $0 | $0 | $85,784 | $85,784 | | Operating income (loss) | $18,730 | $1,927 | $(85,784) | $(65,127) | | Metric (Three Months Ended March 31, 2021) | Business (In thousands) | Consumer (In thousands) | Corporate (In thousands) | Consolidated (In thousands) | | :--------------------------------------- | :---------------------- | :---------------------- | :----------------------- | :-------------------------- | | Total revenue | $98,880 | $9,011 | $0 | $107,891 | | Cost of revenue | $31,610 | $1,909 | $0 | $33,519 | | Sales and marketing | $30,203 | $6,750 | $0 | $36,953 | | Amortization of purchased intangibles | $375 | $0 | $0 | $375 | | Unallocated corporate expenses | $0 | $0 | $50,672 | $50,672 | | Operating income (loss) | $36,692 | $352 | $(50,672) | $(13,629) | | Long-Lived Assets by Geographic Region | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :----------------------------------- | :----------------------------- | :----------------------------- | | United States | $429,761 | $444,318 | | Germany | $96,885 | $52,342 | | Israel | $21,430 | $20,754 | | Australia | $13,094 | $12,771 | | Netherlands | $6,948 | $4,566 | | Other | $16,644 | $15,629 | | Total long-lived assets | $584,762 | $550,380 | Note 5. Goodwill and Intangible Assets Goodwill increased by $15.3 million to $305.4 million, and total intangible assets, net, rose to $90.2 million, with increased amortization expense | Goodwill | December 31, 2021 (In thousands) | March 31, 2022 (In thousands) | | :----------------------- | :----------------------------- | :----------------------------- | | Business Segment | $283,191 | $282,111 | | Consumer Segment | $8,024 | $23,315 | | Consolidated Total | $291,215 | $305,426 | | Intangible Assets (Net Carrying Amount) | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :------------------------------------- | :----------------------------- | :----------------------------- | | Technology | $63,272 | $59,869 | | Customer relationships | $16,374 | $16,998 | | Patents | $7,688 | $6,851 | | Trademarks | $1,232 | $1,339 | | Trade names | $942 | $417 | | Other | $674 | $80 | | Total Intangibles, net | $90,182 | $85,554 | - Aggregate amortization expense for intangible assets was $4.4 million for the three months ended March 31, 2022, a significant increase from $1.6 million for the comparable period in 2021[73] Note 6. Property and Equipment Total property and equipment, net, increased to $131.8 million, driven by computer equipment and internal-use software development costs | Property and Equipment | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :------------------------------------- | :----------------------------- | :----------------------------- | | Computer equipment and software | $125,609 | $120,685 | | Internal-use software development costs | $132,279 | $122,479 | | Finance lease right of use assets | $5,896 | $6,797 | | Furniture, equipment, and building improvements | $550 | $258 | | Less: accumulated depreciation | $(132,568) | $(125,493) | | Total Property and Equipment, net | $131,766 | $124,726 | Note 7. Accrued Expenses and Other Current Liabilities Total accrued expenses and other current liabilities increased to $106.8 million, with professional services and consulting fees remaining the largest component | Accrued Expenses and Other Current Liabilities | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :--------------------------------------------- | :----------------------------- | :----------------------------- | | Professional services and consulting and other vendor fees | $60,957 | $58,811 | | Payroll and other employee related costs | $17,926 | $29,855 | | Short-term contingent earn-out | $12,234 | $0 | | Sales commissions | $4,294 | $4,269 | | Finance lease liability | $3,781 | $3,738 | | Unrecognized tax benefits | $2,377 | $2,424 | | Restructuring | $1,603 | $1,694 | | Taxes other than income tax | $1,195 | $918 | | Other | $2,411 | $2,588 | | Total | $106,778 | $104,297 | Note 8. Convertible Senior Notes and Capped Call Transactions The company's $230.0 million 2024 Notes and $517.5 million 2026 Notes are now single liabilities, increasing their net carrying amount to $734.6 million - The company issued $230.0 million aggregate principal amount of 0.750% Convertible Senior Notes due 2024 (2024 Notes) and $517.5 million aggregate principal amount of 0% Convertible Senior Notes due 2026 (2026 Notes)[77][87] - The 2024 Notes are initially convertible at $38.58 per share, and the 2026 Notes at $75.23 per share[79][90] - After the adoption of ASU 2020-06, the 2024 Notes and 2026 Notes are accounted for as single liabilities. Their net carrying amounts as of March 31, 2022, were $226.6 million and $507.9 million, respectively[85][97] | Metric | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Principal | $747,500 | $747,500 | | Unamortized discount | $0 | $(162,500) | | Unamortized issuance costs | $(12,914) | $(10,762) | | Net carrying amount | $734,586 | $574,238 | | Interest Expense | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | | :-------------------------- | :------------------------------------- | :------------------------------------- | | Contractual interest expense | $431 | $431 | | Amortization of issuance costs | $941 | $609 | | Amortization of debt discount | $0 | $8,118 | | Total interest expense | $1,372 | $9,158 | Note 9. Acquisitions LivePerson acquired WildHealth, Inc. for $22.3 million, aiming to accelerate healthcare offerings, resulting in $15.3 million goodwill and $8.3 million intangible assets - In February 2022, LivePerson acquired 100% of WildHealth, Inc. for a total purchase price of $22.3 million, consisting of approximately $4.6 million in cash and $17.7 million in common stock[101] - The acquisition is part of LivePerson's strategy to accelerate its technology-driven healthcare offerings by combining a rich healthcare data platform with Conversational AI[101] | Acquisition Impact (WildHealth, Inc.) | Amount (In thousands) | | :------------------------------------ | :-------------------- | | Total acquisition consideration | $22,265 | | Goodwill | $15,301 | | Intangible assets acquired | $8,300 | | Deferred tax liability | $(1,603) | | Intangible Assets Acquired (WildHealth) | Fair Value (In thousands) | Useful life | | :-------------------------------------- | :------------------------ | :---------- | | Developed technology | $7,100 | 5.0 years | | Trade name | $600 | 5.0 years | | Fellowship content | $600 | 5.0 years | | Total | $8,300 | | Note 10. Leases The company holds operating and finance leases for offices, with total lease cost for Q1 2022 at $4.0 million and total lease liabilities at $7.7 million | Lease Metrics | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating right of use assets | $4,085 | $1,977 | | Finance right of use assets | $5,896 | $6,797 | | Operating lease liability (current) | $4,864 | $3,380 | | Finance lease liability (current) | $3,781 | $3,738 | | Operating lease liability (non-current) | $2,795 | $2,733 | | Finance lease liability (non-current) | $1,829 | $2,780 | | Lease Cost (Three Months Ended March 31) | 2022 (In thousands) | 2021 (In thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Finance lease cost (Amortization + Interest) | $976 | $982 | | Operating lease cost | $3,002 | $1,857 | | Total lease cost | $3,978 | $2,839 | | Future Minimum Lease Payments (March 31, 2022) | Operating Leases (In thousands) | Finance Leases (In thousands) | | :--------------------------------------------- | :------------------------------ | :---------------------------- | | 2022 (remaining nine months) | $4,188 | $2,955 | | 2023 | $2,744 | $2,627 | | 2024 | $512 | $127 | | 2025 | $608 | $95 | | 2026 | $263 | $0 | | Total minimum lease payments | $8,315 | $5,804 | Note 11. Fair Value Measurements Cash equivalents are measured at Level 1, contingent earn-out liabilities at Level 3, and convertible senior notes at Level 2 fair value | Fair Value Item (March 31, 2022) | Level 1 (In thousands) | Level 2 (In thousands) | Level 3 (In thousands) | Total (In thousands) | | :------------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Money market funds | $392,703 | $0 | $0 | $392,703 | | Contingent earn-out | $0 | $0 | $42,456 | $42,456 | - As of March 31, 2022, the fair value of the Convertible Senior Notes was approximately $622.7 million, determined using an independent valuation specialist with the antithetic variable technique (Level 2 fair value measurement)[121] Note 12. Commitments and Contingencies The company contributes to a 401(k) plan, with sales tax liabilities accrued at $1.1 million as of March 31, 2022 | Employee Benefit Plan (401k) | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | | :--------------------------- | :------------------------------------- | :------------------------------------- | | Employer matching contributions | $1,600 | $900 | - As of March 31, 2022, the accrual balance for sales tax liabilities was $1.1 million, a decrease from the initial $2.5 million accrued as of March 31, 2020, due to payments made[126] Note 13. Stockholders' Equity As of March 31, 2022, 74.3 million common shares were outstanding, with Q1 2022 stock-based compensation expense at $31.9 million | Common Stock (as of March 31, 2022) | Shares | | :---------------------------------- | :--------- | | Authorized | 200,000,000 | | Issued | 77,062,637 | | Outstanding | 74,316,394 | | Stock Option Activity (March 31, 2022) | Options (In thousands) | Weighted Average Exercise Price | | :------------------------------------- | :--------------------- | :------------------------------ | | Balance outstanding at December 31, 2021 | 4,782 | $27.52 | | Granted | 445 | $28.73 | | Exercised | (40) | $12.50 | | Cancelled or expired | (159) | $47.31 | | Balance outstanding at March 31, 2022 | 5,028 | $27.24 | | Restricted Stock Unit Activity (March 31, 2022) | Number of Shares (In thousands) | Weighted Average Grant Date Fair Value (Per share) | | :---------------------------------------------- | :------------------------------ | :----------------------------------------------- | | Balance outstanding at December 31, 2021 | 3,732 | $43.63 | | Awarded | 2,049 | $24.87 | | Vested | (1,180) | $24.58 | | Forfeited | (309) | $41.16 | | Non-vested and outstanding at March 31, 2022 | 4,292 | $40.10 | | Stock-Based Compensation Expense | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | | :------------------------------- | :------------------------------------- | :------------------------------------- | | Total expense | $31,866 | $14,611 | Note 14. Restructuring Restructuring costs decreased significantly to less than $0.1 million for Q1 2022, with a $1.6 million liability primarily for lease restructuring | Restructuring Costs | Three Months Ended March 31, 2022 (In thousands) | Three Months Ended March 31, 2021 (In thousands) | Change (YoY) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------ | | Lease restructuring costs | $(23) | $294 | -107.8% | | Severance and other compensation associated costs | $0 | $2,438 | -100% | | Total restructuring costs | $(23) | $2,732 | -100.8% | | Restructuring Liability | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :---------------------- | :----------------------------- | :----------------------------- | | Balance, end of period | $1,603 | $1,694 | Note 15. Legal Matters A jury awarded LivePerson $30.3 million in an intellectual property suit, but no amounts are reflected due to anticipated challenges - A jury awarded LivePerson approximately $30.3 million in an intellectual property suit against [24]7 Customer, Inc. in May 2021, including $6.7 million in compensatory damages and $23.6 million in punitive damages[145] - The company believes the remaining claims filed by [24]7 are without merit and intends to defend them vigorously. No amounts for the settlement have been reflected in the financial statements due to anticipated challenges[145] Note 16. Income Taxes The company recorded a $0.2 million tax benefit for Q1 2022, with a $107.1 million valuation allowance against deferred tax assets - For the three months ended March 31, 2022, the company recorded a tax benefit of $0.2 million, which includes a tax provision on operating earnings, a stock compensation tax deficiency, and a tax benefit from the release of valuation allowance due to the WildHealth acquisition[149] - As of December 31, 2021, the company had a valuation allowance of $107.1 million on certain deferred tax assets, with an estimated increase of $28.7 million inherent in the 2022 annual effective tax rate[150] Note 17. Equity Method Investments LivePerson entered a joint venture with Pasaca Capital Inc. to form Claire Holdings, Inc., with a $2.8 million equity method investment - LivePerson and Pasaca Capital Inc. entered into a joint venture agreement to form Claire Holdings, Inc., a marketplace for health and well-being diagnostic testing. LivePerson will contribute $19.0 million over five years for a 19.2% ownership interest[151] - As of March 31, 2022, the company's equity method investment in Claire Holdings, Inc. was $2.8 million[152] Note 18. Variable Interest Entity Through the WildHealth acquisition, LivePerson consolidated four Physician Corporations (PCs) as VIEs, with WildHealth as the primary beneficiary - In February 2022, LivePerson acquired WildHealth, which consolidates four Physician Corporations (PCs) as Variable Interest Entities (VIEs). WildHealth is determined to be the primary beneficiary of the PCs[154] - The assets, liabilities, revenues, and operating results of the consolidated VIEs were not material as of and for the three months ended March 31, 2022[156] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses LivePerson's Q1 2022 financial performance, highlighting revenue growth, increased expenses, and net loss General Discussion and analysis are based on GAAP condensed consolidated financial statements, requiring management estimates and assumptions influenced by the COVID-19 pandemic - The discussion and analysis are based on condensed consolidated financial statements prepared in conformity with GAAP, requiring management to make estimates and assumptions that may be affected by the COVID-19 pandemic[158] Overview LivePerson, a Conversational AI company, leverages its platform for business-consumer engagement, focusing on strategic growth, AI talent, and technology integration - LivePerson is a leading Conversational AI company, leveraging its Conversational Cloud platform to enable businesses to engage with consumers through preferred conversational interfaces (e.g., Facebook Messenger, SMS, WhatsApp)[160][161] - Key strategic elements include building awareness for the Conversational Space, increasing messaging volumes through a broad ecosystem and AI/automation, attracting top AI talent, and bringing best-in-class AI/machine learning technologies to market[170][172][178][179] - The company's offerings have led to significant benefits for customers, including agents managing up to 40 messaging conversations simultaneously, labor efficiency gains of at least two times, and increases in customer satisfaction and sales conversion by up to 20%[167] - Strategic acquisitions in 2021-2022 (e-bot7, VoiceBase, Tenfold, WildHealth) aim to enhance self-service capabilities, real-time speech recognition, conversational analytics, and technology-driven healthcare offerings, integrating AI and automation across all channels[195] Key Metrics Total revenue increased 21% to $130.2 million, with gross profit margin at 62% and a net loss of $(65.4) million for Q1 2022 | Financial Overview (Three Months Ended March 31) | 2022 (In millions) | 2021 (In millions) | Change (YoY) | | :----------------------------------------------- | :----------------- | :----------------- | :----------- | | Total revenue | $130.2 | $107.9 | +21% | | Revenue from Business segment | $121.1 | $98.9 | +22% | | Gross profit margin | 62% | 69% | -7 ppts | | Total costs and expenses | $195.3 | $121.5 | +61% | | Net loss | $(65.4) | $(21.2) | -208% | - Average annual revenue per enterprise and mid-market customer increased approximately 32% to $645 thousand for the trailing twelve months ended March 31, 2022, compared to $490 thousand for the comparable period in 2021[197] - Revenue retention rate for enterprise and mid-market customers on the Conversational Cloud was within the target range of 105% to 115% in Q1 2022 and exceeded the high end of this range in Q1 2021[197] | Non-GAAP Financial Measures (Three Months Ended March 31) | 2022 (In thousands) | 2021 (In thousands) | | :------------------------------------------------------- | :-------------------- | :-------------------- | | Adjusted EBITDA (loss) | $(17,633) | $13,348 | | Adjusted operating (loss) income | $(24,857) | $6,743 | Critical Accounting Policies and Estimates Key accounting policies include revenue recognition, stock-based compensation, goodwill valuation, and income taxes; hosted services generated 82% of Q1 2022 revenue - Critical accounting policies and estimates include revenue recognition, depreciation, stock-based compensation, accounts receivable, valuation of goodwill and intangible assets, income taxes, and legal contingencies[210] - The majority of revenue (82% for Q1 2022) is from hosted services, recognized over time. Professional services accounted for 11%, and Consumer segment revenue for 7%[211][216][218][220] - Deferred revenue increased as of March 31, 2022, primarily due to cash payments received in advance of performance obligations. Contract acquisition costs (prepaid sales commissions) are amortized over 3-5 years[223][213] - Stock-based compensation expense for Q1 2022 was $31.9 million, with significant unrecognized compensation costs for nonvested share-based awards and RSUs. The allowance for doubtful accounts increased to $7.2 million as of March 31, 2022[228][227][229] Results of Operations Q1 2022 net loss was $65.4 million, compared to $21.2 million in Q1 2021, driven by increased operating expenses despite 21% revenue growth | Revenue by Segment (Three Months Ended March 31) | 2022 (In thousands) | 2021 (In thousands) | % Change | | :----------------------------------------------- | :------------------ | :------------------ | :------- | | Business | $121,075 | $98,880 | 22% | | Consumer | $9,122 | $9,011 | 1% | | Total | $130,197 | $107,891 | 21% | | Expense Category (Three Months Ended March 31) | 2022 (In thousands) | 2021 (In thousands) | % Change | | :--------------------------------------------- | :------------------ | :------------------ | :------- | | Cost of revenue - business | $48,221 | $31,610 | 53% | | Cost of revenue - consumer | $1,346 | $1,909 | (29)% | | Sales and marketing - business | $52,283 | $30,203 | 73% | | Sales and marketing - consumer | $5,849 | $6,750 | (13)% | | General and administrative | $29,735 | $14,486 | 105% | | Product development | $56,072 | $33,455 | 68% | | Restructuring costs | $(23) | $2,732 | (101)% | | Amortization of purchased intangibles | $1,841 | $375 | 391% | | Other Expense, net (Three Months Ended March 31) | 2022 (In thousands) | 2021 (In thousands) | % Change | | :----------------------------------------------- | :------------------ | :------------------ | :------- | | Interest expense | $(490) | $(9,129) | (94.6)% | | Other income, net | $60 | $712 | (91.6)% | | Total Other expense, net | $(430) | $(8,417) | (94.9)% | - Net loss for Q1 2022 was $65.4 million, compared to $21.2 million for Q1 2021, driven by increased operating expenses despite revenue growth[270] Liquidity and Capital Resources Cash, cash equivalents, and restricted cash totaled $482.4 million, a $41.2 million decrease, sufficient for 12 months of working capital | Cash Flow Activities (Three Months Ended March 31) | 2022 (In thousands) | 2021 (In thousands) | | :----------------------------------------------- | :------------------ | :------------------ | | Net cash (used in) provided by operating activities | $(22,872) | $25,229 | | Net cash used in investing activities | $(19,899) | $(11,437) | | Net cash provided by financing activities | $1,001 | $3,015 | - As of March 31, 2022, cash, cash equivalents, and restricted cash totaled $482.4 million, a decrease of $41.2 million from December 31, 2021, primarily due to the WildHealth acquisition costs[273] - The company anticipates current cash and cash equivalents will be sufficient to satisfy working capital and capital requirements for at least the next 12 months, but may require additional funds for expansion or acquisitions[278] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces foreign currency exchange risks, manages collection risks for accounts receivable, and considers interest rate and inflation risks immaterial - The company faces foreign currency exchange risk from operations in Israel, the UK, Netherlands, Germany, France, Italy, Australia, and Japan, with the U.S. dollar depreciating approximately 3% against the NIS in Q1 2022[282] - The allowance for doubtful accounts increased by $0.9 million to approximately $7.2 million during the three months ended March 31, 2022, reflecting ongoing assessment of collection risks[283] - Changes in market interest rates do not materially affect the value of the company's cash and cash equivalents, and inflation has not had a material effect on the business[285][286] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the company's disclosure controls and procedures and concluded they were effective as of March 31, 2022[289] - There were no changes in the company's internal control over financial reporting during the three months ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[290] PART II. Other Information Item 1. Legal Proceedings A jury awarded LivePerson $30.3 million in an intellectual property suit, but no amounts are reflected due to anticipated challenges - A jury awarded LivePerson approximately $30.3 million in an intellectual property suit against [24]7 Customer, Inc. in May 2021, including $6.7 million in compensatory damages and $23.6 million in punitive damages[293] - The company believes the remaining claims filed by [24]7 are without merit and intends to defend them vigorously. No amounts for the settlement have been reflected in the financial statements due to anticipated challenges[293] Item 1A. Risk Factors No material changes to the risk factors described in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 28, 2022[299] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On February 7, 2022, the company issued 545,629 common shares as partial consideration for the WildHealth acquisition, exempt from registration - On February 7, 2022, the company issued 545,629 shares of common stock as partial consideration for the WildHealth acquisition and an additional 231,194 shares into escrow accounts, in a transaction exempted from registration under Section 4(a)(2) of the Securities Act of 1933[301] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities during the three months ended March 31, 2022[304] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[305] Item 5. Other Information The company reported no other information for this item - No other information was reported under this item[306] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and Inline XBRL documents - The exhibits include certifications by the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[309] Signatures Signatures The report was duly signed on May 10, 2022, by Robert P. LoCascio, Chief Executive Officer, and John D. Collins, Chief Financial Officer - The report was duly signed on May 10, 2022, by Robert P. LoCascio, Chief Executive Officer, and John D. Collins, Chief Financial Officer[313]