LivePerson Reports Fourth Quarter Revenue Increase of 64% to $10.3 million
* Quarterly Revenue Increases 16% from Prior Quarter
* Company Expects Annual Revenue Growth of 45% in 2007
* Announces Stock Repurchase Program
PRNewswire-FirstCall

NEW YORK, NY - February 8, 2007 - LivePerson, Inc. (NASDAQ: LPSN), a provider of online conversion solutions, today announced financial results for the fourth quarter ended December 31, 2006.

Revenue for the fourth quarter was $10.3 million, a 64% increase from the fourth quarter of 2005, and a 16% sequential increase versus the third quarter of 2006. Revenue for the full year 2006 was $33.5 million, a 50% increase from $22.3 million in the prior year. Revenue growth was due primarily to expansion of existing deployments of Timpani™ Sales & Marketing, continuing strong sales of LivePerson Pro to small and mid-size business customers, as well as the impact of the midyear acquisition of Proficient Systems. Excluding the impact of Proficient in both the third and fourth quarters, organic sequential quarterly revenue growth was approximately 15%.

"The fourth quarter was a very strong finish for us," CEO Robert LoCascio said. "It capped off a terrific year where we delivered 50% revenue growth, solidified our position as a market leader in proactive online sales support and completed the acquisition of Proficient Systems."

LivePerson signed several new blue-chip clients during the quarter including Verizon Wireless, Panasonic, Sandals & Beaches Resorts and Halifax Bank of Scotland, and expanded business with several existing customers including Royal Bank of Scotland, Bluefly and one of the nation's largest home improvement retailers. With the expansion at Royal Bank of Scotland and the signing of Halifax Bank of Scotland, LivePerson now counts two of the top five banks in the United Kingdom as customers.

Through the acquisition of Proficient, the company solidified or expanded business with global leaders in technology services, internet networking and financial services.

Net income for the fourth quarter of 2006 was $1.2 million or $0.03 per share as compared to net income of $1.1 million or $0.03 per share in the fourth quarter of 2005, and net income of $0.3 million or $0.01 per share in the third quarter of 2006. Net income for the year was $2.2 million or $0.05 per share, as compared to $2.5 million or $0.06 per share in the prior year.

Included in the net income for the three and twelve months ending December 31, 2006 is a net tax benefit of $0.4 million, resulting from a partial release of the company's valuation allowance against deferred tax assets based on current estimates of future taxable income.

Also included in the net income figures for the three and twelve months ended December 31, 2006 is the impact of amortization of stock-based compensation expense of $0.6 million and $2.2 million respectively, related to the adoption of SFAS No. 123®. There was no stock-based compensation expense in the prior year periods as the company was not required to adopt SFAS No. 123® until January 1, 2006.

Earnings before interest, taxes, depreciation, amortization and stock- based compensation (EBITDA) for the fourth quarter of 2006 was $1.9 million as compared to $1.3 million in the fourth quarter of 2005 and $1.3 million in the third quarter of 2006. EBITDA for the year was $5.3 million as compared to $4.0 million in the prior year.

The difference between EBITDA per share, a non-GAAP measure, and GAAP EPS, is interest, taxes, depreciation, amortization and stock-based compensation. A reconciliation of the differences between EBITDA and the most comparable financial measure calculated and presented in accordance with generally accepted accounting principles (GAAP) is located under the heading "Reconciliation of Non-GAAP Financial Information to GAAP" immediately following the Condensed Consolidated Statements of Income included in this press release.

LivePerson considers EBITDA and cash from operations to be important financial indicators of the company's operational strength and the performance of its business. EBITDA should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure in the table below.

The Company's cash balance increased by $4.6 million or 27% to $21.7 million at December 31, 2006 as compared to the prior year.

  Financial Expectations
  The company currently expects the following financial results:

  * Revenue of $10.8-$10.9 million for the first quarter of 2007

  * EBITDA of $0.05 per share and GAAP EPS of $0.02 for the first quarter of
    2007

  * Revenue of $48.5 - $49.5 million for the full year 2007

  * EBITDA of $0.24 per share and GAAP EPS of $0.09 for the full year 2007

  * An assumed effective tax rate of 42% for the full year 2007

These GAAP EPS expectations already include the estimated impact of a change in accounting policy related to adopting SFAS 123® as of January 1, 2006. This change is expected to decrease net income per share by $0.08 and $0.02, for the full year 2007 and the first quarter of 2007, respectively. This impact may change based upon additional stock option grants, if any, methodology refinement or other factors.

Stock Repurchase Program

As part of the company's ongoing strategy to enhance value to its stockholders, the company's Board of Directors continues to evaluate the most appropriate actions to best utilize LivePerson's excess cash balances. Recognizing that historical volatility in the company's stock price has on occasion resulted in prices at which the Board felt that the company's stock was undervalued, the Board has approved a stock repurchase program to give the company the ability to repurchase its shares, only if and when such occasions arise in the future and it would be in the best interest of stockholders to do so. The stock repurchase program authorizes the company to repurchase shares of its common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by the company depending upon prevailing market conditions and other corporate considerations. The program limits the company to an aggregate purchase price of $8 million. It is expected that repurchases, if any, would be completed no later than the end of the first quarter of 2008.

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

                                Three Months Ended          Year Ended
                                    December 31,            December 31,
                                  2006        2005        2006        2005

  Total revenue                 $10,347      $6,316     $33,521     $22,277

  Operating expenses:
    Cost of revenue               2,376       1,300       7,621       4,297
    Product development           1,783         672       5,062       2,699
    Sales and marketing           3,258       2,086      11,864       6,975
    General and administrative    1,853       1,058       6,542       4,458
    Amortization of intangibles     472         232       1,383         931
       Total operating expenses   9,742       5,348      32,472      19,360

  Income from operations            605         968       1,049       2,917

  Other income, net                 202         117         715         300

  Income before provision
   for income taxes                 807       1,085       1,764       3,217

  Benefit from (provision
   for) income taxes                438          63         438        (675)

  Net income                     $1,245      $1,148      $2,202      $2,542

  Basic net income per common
   share                          $0.03       $0.03       $0.06       $0.07

  Diluted net income per
   common share                   $0.03       $0.03       $0.05       $0.06

  Weighted average shares
   outstanding used in basic
   net income per common
   share calculation         40,979,922  37,750,875  39,680,182  37,557,722

  Weighted average shares
   outstanding used in
   diluted net income
   per common share
   calculation               44,591,617  40,616,738  43,345,232  39,885,328



                             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          Year Ended
                                     December 31,            December 31,
                                   2006        2005        2006        2005
  Net income in accordance
   with generally accepted
   accounting principles         $1,245      $1,148      $2,202      $2,542
    Add/(less):
    (a) Amortization of
         intangibles                472         232       1,383         931
    (b) Stock-based
         compensation               600           -       2,179           -
    (c) Depreciation/Loss on
         disposal of fixed assets   216          56         666         171
    (d) Benefit from
        (provision for)
        income taxes               (438)        (63)       (438)        675
    (e) Interest income, net       (202)       (117)       (715)       (300)

  EBITDA (1)                     $1,893      $1,256      $5,277      $4,019
  Diluted EBITDA per common
   share                          $0.04       $0.03       $0.12       $0.10

  Weighted average shares
   used in diluted EBITDA
    per common share         44,591,617  40,616,738  43,345,232  39,885,328

  EBITDA                         $1,893      $1,256      $5,277      $4,019
    Add/(less):
    Changes in operating
     assets and liabilities        (316)        255      (2,025)        263
    Provision for doubtful
     accounts                         8           -          38          30
    Benefit from (provision
     for) income taxes              438          63         438        (675)
    Tax benefit from
     employee stock option
     exercises                        -         (32)          -         666
    Interest income, net            202         117         715         300
  Net cash provided by
   operating activities          $2,225      $1,659      $4,443      $4,603

   (1) Earnings before interest, taxes, depreciation, amortization and
       stock-based compensation.



                             LivePerson, Inc.
                  Condensed Consolidated Balance Sheets
                              (In Thousands)
                                Unaudited

                                       December 31, 2006  December 31, 2005

  ASSETS

  Current assets:
    Cash and cash equivalents                    $21,729            $17,117
    Accounts receivable, net                       4,269              1,727
    Prepaid expenses and other current assets      1,317                591
      Total current assets                        27,315             19,435

    Property and equipment, net                    1,124                575
    Intangibles, net                               2,640                790
    Goodwill                                       7,865                  -
    Deferred tax assets, net                       1,580                  -
    Security deposits                                299                180
    Other assets                                     684                446
      Total assets                               $41,507            $21,426

  LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities:
    Accounts payable                                $813               $346
    Accrued expenses                               3,754              1,803
    Deferred revenue                               3,256              1,618
    Deferred tax liabilities, net                    259                  -
      Total current liabilities                    8,082              3,767

  Other liabilities                                  684                446

  Commitments and contingencies

  Total stockholders' equity                      32,741             17,213
          Total liabilities and stockholders'
           equity                                $41,507            $21,426

  About LivePerson

LivePerson (NASDAQ: LPSN) is a provider of online conversion solutions. Our hosted software enables companies to identify and proactively engage online visitors-increasing sales, satisfaction and loyalty while reducing service costs. Combining web-interaction technology (chat, email, voice and a self-service knowledgebase) with a deep understanding of consumer behavior and industry best practices, LivePerson's Timpani™ platform engages the right customer, at the right time, with the right communications channel. This Engagement Marketing platform creates more relevant, compelling and personalized experiences-converting traffic into revenues, and facilitating real-time sales and customer service. More than 5,000 companies including EarthLink, Hewlett-Packard, Microsoft, Qwest and Verizon, rely on LivePerson to help maximize the return on their marketing and e-commerce investments. LivePerson is headquartered in New York City.

EBITDA Financial Disclosure

Investors are cautioned that the EBITDA, or earnings before interest, taxes, depreciation, amortization and stock-based compensation, information contained in this press release is not a financial measure under generally accepted accounting principles. In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with generally accepted accounting principles, 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 performance. We caution investors that non-GAAP financial information such as EBITDA, 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 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 progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of the quarter. Although these expectations may change, we are under no obligation to inform you if they do. Our company policy is generally to provide our expectations only once per quarter, and not to update that information until the next quarter. Actual events or results may differ materially from those contained in the projections or forward-looking statements. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: risks related to the operational integration of acquisitions; risks related to our international operations, particularly our operations in Israel, and the current civil and political unrest in that region; our history of losses; potential fluctuations in our quarterly and annual results; impairments to goodwill that result in significant charges to earnings; responding to rapid technological change and changing client preferences; competition in the real-time sales, marketing and customer service solutions market; continued use by our clients of the LivePerson services and their purchase of additional services; technology systems beyond our control and technology-related defects that could disrupt the LivePerson services; risks related to adverse business conditions experienced by our clients; our dependence on key employees; competition for qualified personnel; the impact of new accounting rules, including the requirement to expense stock options; the possible unavailability of financing as and if needed; risks related to protecting our intellectual property rights or potential infringement of the intellectual property rights of third parties; our dependence on the continued use of the Internet as a medium for commerce and the viability of the infrastructure of the Internet; and risks related to the regulation or possible misappropriation of personal information. 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 risk factors that could cause actual results to differ from those discussed in forward-looking statements.

First Call Analyst:
FCMN Contact: mgoodwin@liveperson.com

SOURCE: LivePerson, Inc.

CONTACT: Younjee Kim, +1-212-609-4222, ykim@liveperson.com

Web site: http://www.liveperson.com/