LivePerson Announces Third Quarter 2016 Financial Results

-- Holds Industry Summit on Messaging, Hosted by T-Mobile --

-- On Target for Approximately $14 Million of Expense Reductions in 2016 as Compared to 2015 --

NEW YORK, Nov. 8, 2016 /PRNewswire/ -- LivePerson, Inc. (NASDAQ: LPSN), a leading provider of mobile and online business messaging solutions, today announced financial results for the third quarter ended September 30, 2016.

LivePerson Logo. (PRNewsFoto/LivePerson, Inc.)

Highlights

The third quarter was highlighted by the strengthening of LivePerson's leadership in business-to-consumer messaging, advancing into the later stages of the migration, and capturing additional operating efficiencies.

Total revenue of $54.5 million met the midpoint of guidance for the third quarter of 2016, decreasing 10% as compared to the same period last year. Within total revenue, business operations revenue for the third quarter of 2016 was $50.5 million, a decrease of 12%. Revenue from consumer operations was $4.0 million, an increase of 10%.

LivePerson signed a total of 83 deals in the quarter, which includes the addition of 28 new customers. Trailing-twelve-months average revenue per enterprise and mid-market customer topped $200,000 for the third consecutive quarter.

"With solid third quarter execution, we now have more than one-third of software revenue on LiveEngage and a similar amount already in the process of migrating," said CEO Robert LoCascio. "We also strengthened our industry leadership by expanding our portfolio of messaging solutions, adding new messaging customers, and holding an exclusive industry summit alongside flagship customer T-Mobile. Finally, we continued to enhance our operating model by leveraging the shift to LiveEngage. The tools to transform the customer care industry and our own business are now firmly in our hands."

Customer Expansion

During the third quarter, the Company signed contracts with the following new customers:

  • Elizabeth Arden, a leading cosmetics and fragrance company
  • Travel Republic, one of the largest and most well-established online travel agents in Europe
  • A national retailer of home furnishings and lighting
  • A provider of digital marketing and customer acquisition solutions
  • A government agency in Australia

The Company also expanded business with:

  • One of the leading mortgage lending companies
  • A leading video game developer and publisher
  • A multi-billion provider of beauty, household, and personal care products
  • A premier online electronics retailer
  • A leading telecommunications company in Europe

Net (Loss) Income and Adjusted Net (Loss) Income

Net loss for the third quarter of 2016 was $5.9 million or $0.10 per share, as compared to net income of $1.9 million or $0.03 per share in the third quarter of 2015. Adjusted net loss for the third quarter of 2016 was $2.9 million or $0.05 per share, as compared to adjusted net income of $2.1 million or $0.04 per share in the third quarter of 2015. Adjusted net income excludes amortization, stock-based compensation, restructuring costs, acquisition costs, deferred tax asset valuation allowance, other non-recurring charges and the related income tax effect of these adjustments.

Net loss in the third quarter of 2016 included $0.5 million ($0.01 per share) of net non-recurring expenses primarily associated with IP litigation. Net loss and adjusted net loss in the third quarter of 2016 included taxes of $3.2 million, which were approximately $2.2 million ($0.04 per share) higher than anticipated due to a larger increase in the taxable income in foreign jurisdictions in relation to the overall loss and the adjustment of prior net operating losses. This change has no effect on cash taxes paid. Net profit in the third quarter of 2015 included a net gain of $3.1 million ($0.04 per share) primarily tied to the reversal of the contingent earn-out associated with Contact At Once.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of 2016 was $4.6 million or $0.08 per share, as compared to $6.5 million or $0.11 per share in the third quarter of 2015. Adjusted EBITDA excludes provision for (benefit from) income taxes, other (income)/expense, net, depreciation and amortization, stock-based compensation, restructuring costs, acquisition costs and other non-recurring charges.

A reconciliation of the non-GAAP financial measures to GAAP measures has been provided in the financial tables included in this press release. An explanation of the non-GAAP financial measures and how they are calculated is included below under the heading "Non-GAAP Financial Measures."

Cash and Cash Equivalents

The Company's cash balance was $55.4 million at September 30, 2016, including $4.0 million of cash being used as collateral for foreign currency hedging instruments.  The Company generated approximately $1.8 million of cash from operations and incurred capital expenditures of approximately $2.6 million. The Company also spent approximately $1.2 million to repurchase shares of its common stock during the third quarter of 2016. As of September 30, 2016, approximately $14.3 million remained available for purchases under the previously announced stock repurchase program.

Financial Expectations

LivePerson is on target to hit the midpoint of the previously issued 2016 revenue guidance range, despite incrementally challenging foreign exchange headwinds, especially tied to the British Pound. We are focused on capturing operating efficiencies as we center our business on LiveEngage, and the Company is tracking toward a $14.0 million reduction of expenses in 2016, as compared to 2015.

The Company's detailed financial expectations are as follows:

Fourth Quarter 2016


Guidance

Revenue (in millions)

$55.8 - $56.8

GAAP net loss per share

$(0.05) - $(0.03)

Adjusted net income per share

$0.01 - $0.02

Diluted adjusted EBITDA per share

$0.09 - $0.10

Adjusted EBITDA (in millions)

$5.2 - $5.6

Fully diluted share count

56.7 million

 

Full Year 2016




Updated
Guidance


Previous
Guidance

Revenue (in millions)



$222.5 - $223.5


$221.0 - $225.0

GAAP net loss per share



$(0.34) - $(0.32)


$(0.34) - $(0.28)

Diluted adjusted net loss per share



$(0.09) - $(0.07)


$(0.08) - $(0.03)

Diluted adjusted EBITDA per share



$0.34 - $0.35


$0.32 - $0.37

Adjusted EBITDA (in millions)



$19.1 - $19.6


$18.2 - $20.5

Fully diluted share count



56.5 million


56.5 million

 

Other Full Year 2016 Assumptions

  • A negative foreign exchange impact on revenue of approximately $3.6 million, from $3.0 million previously
  • GAAP gross margin of approximately 71%, from 70% previously
  • Amortization of purchased intangibles of approximately $6.7 million, from $6.5 million previously
  • Stock-compensation expense of approximately $10.0 million, from $10.5 million previously
  • Depreciation of approximately $12.0 million, from $13.0 million previously
  • Cash taxes paid of $1.0 million to $3.0 million, unchanged
  • Tax rate of 35% on non-GAAP items used to calculate adjusted net income, unchanged
  • Capital expenditures of approximately $12.5 million, unchanged

Stock-Based Compensation

Included in the accompanying financial results are expenses related to stock-based compensation, as follows (in thousands):


Three Months Ended


Nine Months Ended


September 30,


September 30,


2016


2015


2016


2015

Cost of revenue

$

121



$

288



$

342



$

1,092


Sales and marketing

502



760



1,936



2,292


General and administrative

759



911



2,552



2,590


Product development

873



927



2,770



2,819


  Total

$

2,255



$

2,886



$

7,600



$

8,793


 

Amortization of Purchased Intangibles

Included in the accompanying financial results are expenses related to the amortization of purchased intangibles, as follows (in thousands):


Three Months Ended


Nine Months Ended


September 30,


September 30,


2016


2015


2016


2015

Cost of revenue

$

697



$

760



$

2,091



$

2,439


Amortization of purchased intangibles

1,013



1,193



2,954



3,683


  Total

$

1,710



$

1,953



$

5,045



$

6,122


 

Supplemental Third Quarter 2016 Presentation

LivePerson will post a presentation providing supplemental information for the third quarter 2016 on the investor relations section of the Company's web site at http://www.liveperson.com/ir.

Earnings Teleconference and Video Discussion Information

The Company will discuss its third quarter 2016 financial results during a teleconference today, November 8, 2016.  To participate via telephone, callers should dial in five to ten minutes prior to the 5:00 p.m. Eastern start time; domestic callers (U.S. and Canada) should dial 877-507-3684, while international callers should dial 928-328-1244, and both should reference the conference ID "4874151."

The conference call will also be simulcast live on the Internet and can be accessed by logging onto the investor relations section of the Company's web site at http://www.liveperson.com/company/ir.

If you are unable to participate in the live call, the teleconference will be available for replay approximately two hours after the call.  To access the replay, please call 855-859-2056 (U.S. and Canada) or 404-537-3406 (international).  Please reference the conference ID "4874151."  A replay will also be available on the investor relations section of the Company's web site at http://www.liveperson.com/company/ir.

About LivePerson

LivePerson, Inc. (NASDAQ: LPSN) is a leading provider of mobile and online business messaging solutions, enabling a meaningful connection between brands and consumers. LiveEngage, the Company's enterprise-class, cloud-based platform, empowers consumers to stop wasting time on hold with 1-800 numbers, and instead message their favorite brands, just as they do with friends and family. More than 18,000 businesses, including Adobe, Citibank, EE, HSBC, IBM, Orbitz, PNC, The Home Depot, and Walt Disney rely on the unparalleled intelligence, security and scalability of LiveEngage to reduce costs, increase lifetime value and create meaningful connections with consumers.

For more information, please visit www.liveperson.com.  To view other global press releases about LivePerson, please visit pr.liveperson.com.

Non-GAAP Financial Measures

Investors are cautioned that the following financial measures used in this press release are defined as "non-GAAP financial measures" by the Securities and Exchange Commission: adjusted EBITDA, or earnings/(loss) before provision for (benefit from) income taxes, other (income)/expense, depreciation and amortization, stock-based compensation, restructuring costs, acquisition costs and other non-recurring charges; and adjusted net income, or net income excluding amortization, stock-based compensation, restructuring costs, acquisition costs, deferred tax asset valuation allowance, other non-recurring charges and the related income tax effect of these adjustments.  These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation.  In addition, although we have provided a reconciliation of these measures to the nearest comparable GAAP measures, they should not be construed as alternatives to any other measures of performance determined in accordance with generally accepted accounting principles, or as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address.  We present this financial information because we believe that it is helpful to some investors as a measure of our performance.  We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

Safe Harbor Provision

Statements in this press release regarding LivePerson that are not historical facts are forward-looking statements and 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, including but not limited to financial guidance, 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 quarter and year progress, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change.  Although these expectations may change, we are under no obligation to inform you if they do.  Actual events or results may differ materially from those contained in the projections or forward-looking statements.  Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: potential fluctuations in our quarterly revenue and operating results; competition in the markets for digital engagement technology, and web and mobile based consumer-facing services, and online consumer services; our ability to retain existing clients and attract new clients; potential adverse impact due to foreign currency exchange rate fluctuations; privacy concerns relating to the Internet that could result in new legislation or negative public perception; risks related to new regulatory or other legal requirements that could materially impact our business; our ability to effectively operate on mobile devices; responding to rapid technological change and changing client preferences; additional regulatory requirements, tax liabilities, currency exchange rate fluctuations and other risks as we expand internationally and/or as we expand into direct-to-consumer services; impairments to goodwill that result in significant charges to earnings; the adverse effect that the global economic downturn may have on our business and results of operations; our ability to retain key personnel, attract new personnel and to manage staff attrition; risks related to the ability to successfully integrate past or potential future acquisitions; our ability to expand our operations internationally; failures or security breaches in our services, those of our third party providers, or in the websites of our customers; risks related to the regulation or possible misappropriation of personal information belonging to our customers' Internet users; potential failure to meeting service level commitments to certain customers; technology systems beyond our control and technology-related defects that could disrupt the LivePerson services; risks related to protecting our intellectual property rights or potential infringement of the intellectual property rights of third parties; legal liability and/or negative publicity for the services provided to consumers via our technology platforms; risks related to technological or other defects disrupting our services; errors, failures or "bugs" in our products may be difficult to correct; increased allowances for doubtful accounts as a result of an increasing amount of receivables due from customers with greater credit risk; payment-related risks; delays in our implementation cycles; risks associated with the recent volatility in the capital markets; our ability to secure additional financing to execute our business strategy; risks associated with our current or any future stock repurchase programs, including whether such programs will enhance long-term stockholder value, and whether such stock repurchases could increase the volatility of the price of our common stock and diminish our cash reserves; our ability to license necessary third party software for use in our products and services, and our ability to successfully integrate third party software; changes in accounting principles generally accepted in the United States; our ability to maintain our reputation; risks related to our recognition of revenue from subscriptions; our lengthy sales cycles; risks related to our operations in Israel, and the civil and political unrest in that region; natural catastrophic events and interruption to our business by man-made problems; the high volatility of our stock price; and risks related to our common stock being traded on more than one securities exchange. This list is intended to identify only certain of the principal factors that could cause actual results to differ from those discussed in the forward-looking statements.  Readers are referred to the reports and documents filed from time to time by us with the Securities and Exchange Commission for a discussion of these and other important factors that could cause actual results to differ from those discussed in forward-looking statements.

 

LivePerson, Inc.
Condensed Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Data)
(Unaudited)







Three Months Ended


Nine Months Ended







September 30,


September 30,







2016


2015


2016


2015


Revenue

$

54,518



$

60,757



$

166,662



$

179,861
















Costs and expenses:










Cost of revenue

14,837



18,225


(1)

48,210



52,531


(1)


Sales and marketing

22,067



23,286



67,831



71,962




General and administrative

10,069



6,587


(1)

29,758



27,058


(1)


Product development

9,495



9,567



29,428



29,476




Restructuring costs

(384)





(384)



2,988




Amortization of purchased intangibles

1,013



1,193



2,954



3,683





Total costs and expenses

57,097



58,858



177,797



187,698
















(Loss) income from operations

(2,579)



1,899



(11,135)



(7,837)
















Other expense

(123)



(369)



(135)



(371)
















(Loss) income before provision for (benefit from) income taxes

(2,702)



1,530



(11,270)



(8,208)
















Provision for (benefit from) income taxes

3,177



(395)



5,038



(2,721)
















Net (loss) income

$

(5,879)



$

1,925



$

(16,308)



$

(5,487)
















Net (loss) income per share of common stock:










Basic

$

(0.10)



$

0.03



$

(0.29)



$

(0.10)




Diluted

$

(0.10)



$

0.03



$

(0.29)



$

(0.10)
















Weighted-average shares used to compute net (loss) income per share:










Basic

56,047,645



56,525,647



56,131,818



56,437,198




Diluted

56,047,645



57,084,437



56,131,818



56,437,198
















(1)

The Company reclassified $1.3 million and $1.5 million in the three and nine months ended September 30, 2016, respectively,  related to the fair value adjustment of the contingent earn-out for CAO! and Engage from cost of revenue to general and administrative expenses to conform to the full year presentation.

 

 


LivePerson, Inc.
Reconciliation of Non-GAAP Financial Information to GAAP

(In Thousands, Except Share and Per Share Data)
(Unaudited)


Unaudited Supplemental Data
The following information is not a financial measure under generally accepted accounting principles (GAAP). In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with GAAP, or as an indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities as there may be significant factors or trends that it fails to address. We present this financial information because we believe that it is helpful to some investors as one measure of our operations. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our results with our results from other reporting periods and with the results of other companies.





Three Months Ended


Nine Months Ended




September 30,


September 30,




2016


2015


2016


2015


Reconciliation of Adjusted EBITDA (1):









Net (loss) income in accordance with GAAP

$

(5,879)



$

1,925



$

(16,308)



$

(5,487)




Add/(less):










Amortization of purchased intangibles

1,710



1,953



5,045



6,122




Stock-based compensation

2,255



2,886



7,600



8,793




Depreciation

2,650



2,939



9,445



8,599




Other non-recurring costs

930


(2)



3,368


(3)




Contingent earn-out adjustments



(3,132)


(5)



(3,792)


(5)


Restructuring costs

(384)


(6)



(384)


(6)

2,988




Provision for (benefit from) income taxes

3,177



(395)



5,038



(2,721)




Other expense

123



369



135



371



Adjusted EBITDA (1)

$

4,582



$

6,545



$

13,939



$

14,873



Diluted adjusted EBITDA per common share

$

0.08



$

0.11



$

0.25



$

0.26













Weighted average shares used in diluted adjusted EBITDA per common share

56,438,763



57,084,437



56,405,945



57,137,938













Reconciliation of Adjusted Net (Loss) Income:









Net (loss) income in accordance with GAAP

$

(5,879)



$

1,925



$

(16,308)



$

(5,487)




Add/(less):










Amortization of purchased intangibles

1,710



1,953



5,045



6,122




Stock-based compensation

2,255



2,886



7,600



8,793




Other non-recurring costs

930


(2)



3,718


(4)




Contingent earn-out adjustments



(3,132)


(5)



(3,792)


(5)


Deferred tax asset valuation allowance





692






Restructuring costs

(384)


(6)



(384)


(6)

2,988


(7)


Income tax effect of non-GAAP items

(1,579)


(8)

(1,580)


(9)

(5,593)


(8)

(3,810)


(9)

Adjusted net (loss) income

$

(2,947)



$

2,052



$

(5,230)



$

4,814



Diluted adjusted net (loss) income per common share

$

(0.05)



$

0.04



$

(0.09)



$

0.08













Weighted average shares used in diluted adjusted net (loss) income per common share

56,438,763



57,084,437



56,405,945



57,151,181























(1)  Earnings/(loss) before provision for (benefit from) income taxes, other (income)/expense, net, depreciation and amortization, stock-based compensation, restructuring costs, acquisition costs and other non-recurring charges.

(2) Includes litigation costs of $0.9 million for the three months ended.

(3) Includes litigation costs of $2.9 million and severance costs of $0.5 million for the nine months ended. For comparability, amounts have been reclassified where appropriate, to conform to current period presentation.

(4) Includes litigation costs of $2.9 million, write off of office facility depreciation of $0.3 million and severance costs of $0.5 million for the nine months ended. For comparability, amounts have been reclassified where appropriate, to conform to current period presentation.

(5) For comparability, amounts have been reclassified where appropriate, to conform to prior period presentation.

(6) Includes $0.4 million of cash collected on previously written off bad debt.

(7)  Includes approximately $1.7 million of termination costs associated with a large customer contract that ended in 2015 and $1.3 million of severance and other associated costs.

(8)  The Company's non-GAAP income tax effect for the current period uses a long-term projected tax rate of 35%.

(9)  The Company's non-GAAP income tax effect was based on the effective tax rate, excluding discrete items.

 

 

LivePerson, Inc.
Reconciliation of Non-GAAP Financial Information to GAAP - (continued)
(In Thousands)
(Unaudited)




Three Months Ended


Nine Months Ended



September 30,


September 30,



2016


2015


2016


2015

Reconciliation of Net Cash Provided By Operating Activities:








Adjusted EBITDA (1)

$

4,582



$

6,545



$

13,939



$

14,873



Add/(less):









Changes in operating assets and liabilities

(46)



6,302



6,381



(3,943)



Provision for doubtful accounts

533



651



1,240



1,688



(Provision for) benefit from income taxes

(3,177)



395



(5,038)



2,721



Deferred income taxes

19



(2,989)



163



(4,103)



Other expense

(123)



(369)



(135)



(371)


Net cash provided by operating activities

$

1,788



$

10,535



$

16,550



$

10,865











(1)  Earnings/(loss) before provision for (benefit from) income taxes, other (income)/expense, net, depreciation and amortization, stock-based compensation, restructuring costs, acquisition costs and other non-recurring charges.

 

 

 


LivePerson, Inc.
Projected Reconciliation of Non-GAAP Financial Information to GAAP

(In Thousands)
(Unaudited)





Three Months Ended


Twelve Months Ended




December 31, 2016


December 31, 2016

Projected Reconciliation of Adjusted EBITDA:





Net loss in accordance with GAAP


$(2,500) - $(1,800)


$(18,800) - $(18,100)


Add/(less):






Amortization of purchased intangibles


1,600


6,700


Stock-based compensation


2,400


10,000


Depreciation


2,500


12,000


Other non-recurring costs


500


3,500


Provision for income taxes


700 - 400


5,800 - 5,500


Other (income) expense, net



Adjusted EBITDA


$5,200 - $5,600


$19,100 - $19,600







Projected Reconciliation of Adjusted Net Income (Loss) :





Net loss in accordance with GAAP


$(2,500) - $(1,800)


$(18,800) - $(18,100)


Add/(less):






Amortization of purchased intangibles


1,600


6,700


Stock-based compensation


2,400


10,000


Other non-recurring costs


500


3,800


Deferred tax asset valuation allowance



700


Income tax effect of non-GAAP items


(1,600)


(7,200)

Adjusted net income (loss)


$400 - $1,100


$(4,900) - $(4,100)

 

 

LivePerson, Inc.
Condensed Consolidated Balance Sheets

(In Thousands)
(Unaudited)







September 30, 2016


December 31, 2015









ASSETS













CURRENT ASSETS:





Cash and cash equivalents

$

51,405



$

48,803



Cash held as collateral

3,966



5,409



Accounts receivable, net

29,488



30,388



Prepaid expenses and other current assets

10,847



9,327



Deferred tax assets, net



455




Total current assets

95,706



94,382











Property and equipment, net

24,111



24,129



Intangibles, net

20,012



24,619



Goodwill

80,381



80,322



Deferred tax assets, net

1,076



785



Other assets

2,425



1,957




Total assets

$

223,711



$

226,194










LIABILITIES AND STOCKHOLDERS' EQUITY












CURRENT LIABILITIES:





Accounts payable

$

5,768



$

7,102



Accrued expenses and other current liabilities

32,601



34,296



Deferred revenue

26,454



13,862




Total current liabilities

64,823



55,260











Other liabilities

3,254



3,270



Deferred tax liability

4,236



2,359




Total liabilities

72,313



60,889










Commitments and contingencies





Total stockholders' equity

151,398



165,305




Total liabilities and stockholders' equity

$

223,711



$

226,194


 

Investor contact:
Matthew Kempler
212-609-4214
mkempler@liveperson.com

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SOURCE LivePerson, Inc.