SEC Filing | LivePerson, Inc.

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lpsn-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ 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
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

530 7th Ave, Floor M1
New York, New York						10018
(Address of principal executive offices)						(Zip Code)

(212) 609-4200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

LPSN

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On November 3, 2023, 80,842,202 shares of the registrant’s common stock were outstanding.

LIVEPERSON, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

INDEX


		Page
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):	3
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	4
	Condensed Consolidated Statements of Operations for the Three and N ine Months Ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4.	Controls and Procedures	51
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
Signatures		55

FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q about LivePerson, Inc. (“LivePerson”, the “Company,” “we,” “our” or “us”) that are not historical facts are forward-looking statements. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about LivePerson and our industry. Our expectations, assumptions, estimates and projections are expressed in good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations, assumptions, estimates and projections will be realized. Examples of forward-looking statements include, but are not limited to, statements regarding future business, future results of operations or financial condition (including based on examinations of historical operating trends) and management strategies. Many of these statements are found in the “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Quarterly Report on Form 10-Q. When used in this Quarterly Report on Form 10-Q, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects” and variations of such words or similar expressions are intended to identify forward-looking statements. However, not all forward-looking statements contain these words. Forward-looking statements are subject to risks and uncertainties that could cause actual future events or results to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q include those set forth our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2023 (as amended on May 1, 2023) in the section entitled Part I, Item 1A. “Risk Factors”. It is routine for our internal projections and expectations to change as the year or each quarter in the year 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 each quarter or the year. Although these expectations may change, we are under no obligation to inform you if they do. Our policy is generally to provide our expectations only once per quarter, and not to update that information until the next quarter. We do not undertake any obligation to revise forward-looking statements to reflect future events or circumstances. All forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements

LIVEPERSON, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	September 30, 2023		December 31, 2022

	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	212,189	$	391,781
Restricted cash	2,143		417
Accounts receivable, net of allowance for credit losses of $8,728 and $9,239 as of September 30, 2023 and December 31, 2022, respectively	99,867		86,537
Prepaid expenses and other current assets	41,201		23,747
Assets held for sale	—		30,984
Total current assets	355,400		533,466
Operating lease right of use assets (Note 10)	4,386		1,604
Property and equipment, net (Note 6)	123,468		126,499
Contract acquisition costs	35,953		43,804
Intangible assets, net (Note 5)	64,781		78,103
Goodwill (Note 5)	283,759		296,214
Deferred tax assets	4,486		4,423
Investment in joint venture (Note 17)	—		2,264
Other assets	1,212		2,563
Total assets	$	873,445	$	1,088,940
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,098	$	25,303
Accrued expenses and other current liabilities (Note 7)	123,132		129,244
Deferred revenue (Note 2)	96,783		84,494
Convertible senior notes (Note 8)	72,245		—
Operating lease liabilities (Note 10)	2,194		2,160
Liabilities associated with assets held for sale	—		10,357
Total current liabilities	308,452		251,558
Deferred revenue, net of current portion (Note 2)	393		174
Convertible senior notes, net of current portion (Note 8)	511,055		737,423
Operating lease liabilities, net of current portion (Note 10)	2,932		682
Deferred tax liabilities	2,762		2,550
Other liabilities	2,770		28,465
Total liabilities	828,364		1,020,852
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.001 par value - 5,000,000 shares authorized, none issued	—		—
Common stock, $0.001 par value - 200,000,000 shares authorized, 81,190,772 and 78,350,984 shares issued, 78,424,699 and 75,584,911 shares outstanding as of September 30, 2023 and December 31, 2022, respectively	81		78
Additional paid-in capital	872,958		771,052
Treasury stock - 2,766,073 shares at September 30, 2023 and December 31, 2022	(3)		(3)
Accumulated deficit	(816,372)		(692,362)
Accumulated other comprehensive loss	(11,583)		(10,677)
Total stockholders’ equity	45,081		68,088
Total liabilities and stockholders’ equity	$	873,445	$	1,088,940

See accompanying notes to unaudited condensed consolidated financial statements.

LIVEPERSON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(In thousands, except share and per share amounts)
Revenue	$	101,332	$	129,561	$	306,515	$	392,323
Costs, expenses and other: (1) (2)
Cost of revenue (3)	31,980		43,681		105,964		138,297
Sales and marketing	32,118		49,448		93,312		167,563
General and administrative	30,448		32,171		70,065		92,152
Product development	35,575		44,744		94,933		156,568
Impairment of goodwill	11,895		—		11,895		—
Restructuring costs	2,097		7,111		15,999		17,949
Gain on divestiture	—		—		(17,591)		—
Amortization of purchased intangible assets	894		920		2,644		2,742
Total costs, expenses and other	145,007		178,075		377,221		575,271
Loss from operations	(43,675)		(48,514)		(70,706)		(182,948)
Other income (expense), net:
Interest income (expense), net	1,068		401		3,005		(1,713)
Other (expense) income, net	(10,164)		5,114		9,391		1,908
Total other (expense) income	(9,096)		5,515		12,396		195
Loss before provision for income taxes	(52,771)		(42,999)		(58,310)		(182,753)
Provision for income taxes	541		249		1,600		1,270
Net loss	$	(53,312)	$	(43,248)	$	(59,910)	$	(184,023)

Net loss per share of common stock:
Basic	$	(0.68)	$	(0.56)	$	(0.78)	$	(2.39)
Diluted	$	(0.68)	$	(0.56)	$	(0.78)	$	(2.39)
Weighted average shares outstanding:
Basic	78,005,210		77,784,346		76,902,316		76,969,629
Diluted	78,005,210		77,784,346		76,902,316		76,969,629

(1) Amounts include stock-based compensation expense, as follows:
Cost of revenue	$	76	$	2,905	$	879	$	9,156
Sales and marketing	2,726		6,021		7,429		18,612
General and administrative	5,180		12,034		(6,070)		35,703
Product development	3,314		10,980		2,242		36,852

(2) Amounts include depreciation expense, as follows:
Cost of revenue	$	1,949	$	2,402	$	6,382	$	7,398
Sales and marketing	809		637		2,276		1,794
General and administrative	73		109		373		342
Product development	4,933		3,915		15,821		11,880

(3) Amounts include amortization of purchased intangibles and finance leases, as follows:
Cost of revenue	$	7,545	$	4,811	$	16,684	$	13,788

See accompanying notes to unaudited condensed consolidated financial statements

LIVEPERSON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(In thousands)
Net loss	$	(53,312)	$	(43,248)	$	(59,910)	$	(184,023)
Foreign currency translation adjustment	(2,158)		(5,026)		(906)		(11,524)
Comprehensive loss	$	(55,470)	$	(48,274)	$	(60,816)	$	(195,547)

See accompanying notes to unaudited condensed consolidated financial statements.

LIVEPERSON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)



	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
	(In thousands, except share data)
Balance as of December 31, 2022	78,350,984	$	78	(2,766,073)	$	(3)	$	771,052	$	(692,362)	$	(10,677)	$	68,088

Common stock issued upon exercise of stock options	18,687	—		—	—		130		—		—		130
Common stock issued upon vesting of restricted stock units	413,252	1		—	—		—		—		—		1
Stock-based compensation	—	—		—	—		9,560		—		—		9,560

Common stock issued under Employee Stock Purchase Plan (ESPP)	87,794	—		—	—		724		—		—		724
Issuance of common stock in connection with acquisitions (Note 9)	—	—		—	—		380		—		—		380
Activity related to divestiture (Note 20)	—	—		—	—		66,775		(64,100)		57		2,732
Net loss	—	—		—	—		—		(17,420)		—		(17,420)
Other comprehensive loss	—	—		—	—		—		—		809		809
Balance as of March 31, 2023	78,870,717	$	79	(2,766,073)	$	(3)	$	848,621	$	(773,882)	$	(9,811)	$	65,004
Common stock issued upon exercise of stock options	11,154	—		—	—		8		—		—		8
Common stock issued upon vesting of restricted stock units	295,564	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		8,380		—		—		8,380

Common stock issued under ESPP	97,832	—		—	—		397		—		—		397
Issuance of common stock in connection with acquisitions (Note 9)	1,036,823	1		—	—		5,147		—		—		5,148
Net income	—	—		—	—		—		10,822		—		10,822
Other comprehensive loss	—	—		—	—		—		—		386		386
Balance as of June 30, 2023	80,312,090	$	80	(2,766,073)	$	(3)	$	862,553	$	(763,060)	$	(9,425)	$	90,145
Common stock issued upon exercise of stock options	17,727	—		—	—		15		—		—		15
Common stock issued upon vesting of restricted stock units	588,159	1		—	—		1		—		—		2
Issuance of common stock in connection with acquisitions (Note 9)	190,042	—		—	—		1,192		—		—		1,192
Stock-based compensation	—	—		—	—		8,849		—		—		8,849
Common stock issued under ESPP	82,747	—		—	—		348		—		—		348

Net loss	—	—		—	—		—		(53,312)				(53,312)
Other comprehensive loss	—	—		—	—		—		—		(2,158)		(2,158)
Balance as of September 30, 2023	81,190,765	$	81	(2,766,073)	$	(3)	$	872,958	$	(816,372)	$	(11,583)	$	45,081

See accompanying notes to unaudited condensed consolidated financial statements.



	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
	(In thousands, except share data)
Balance as of December 31, 2021	74,980,546	$	75	(2,746,243)	$	(3)	$	871,788	$	(516,859)	$	(5,564)	$	349,437
Cumulative adjustment due to adoption of ASU 2020-06	—	—		—	—		(209,651)		50,244		—		(159,407)
Common stock issued upon exercise of stock options	40,483	—		—	—		506		—		—		506
Common stock issued upon vesting of RSUs	444,043	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		20,522		—		—		20,522
Cash awards settled in shares of the Company’s common stock	735,519	1		—	—		17,298		—		—		17,299
Common stock issued under Employee Stock Purchase Plan	82,100	—		—	—		1,415		—		—		1,415
Issuance of common stock in connection with acquisitions	779,946	1		—	—		17,636		—		—		17,637
Net loss	—	—		—	—		—		(65,364)		—		(65,364)
Other comprehensive loss	—	—		—	—		—		—		(1,699)		(1,699)
Balance as of March 31, 2022	77,062,637	$	77	(2,746,243)	$	(3)	$	719,514	$	(531,979)	$	(7,263)	$	180,346
Common stock issued upon exercise of stock options	25,295	—		—	—		389		—		—		389
Common stock issued upon vesting of RSUs	372,500	1		—	—		—		—		—		1
Stock-based compensation	—	—		—	—		18,826		—		—		18,826
Common stock issued under Employee Stock Purchase Plan	99,495	—		—	—		1,403		—		—		1,403
Net loss	—	—		—	—		—		(75,411)		—		(75,411)
Other comprehensive loss	—	—		—	—		—		—		(4,799)		(4,799)
Balance as of June 30, 2022	77,559,927	$	78	(2,746,243)	$	(3)	$	740,132	$	(607,390)	$	(12,062)	$	120,755
Common stock issued upon exercise of stock options	134,423	—		—	—		343		—		—		343
Common stock issued upon vesting of RSUs	161,272	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		15,843		—		—		15,843
Common stock issued under Employee Stock Purchase Plan	78,818	—		—	—		844		—		—		844
Net loss	—	—		—	—		—		(43,248)		—		(43,248)
Other comprehensive loss	—	—		—	—		—		—		(5,026)		(5,026)
Balance as of September 30, 2022	77,934,440	$	78	(2,746,243)	$	(3)	$	757,162	$	(650,638)	$	(17,088)	$	89,511

See accompanying notes to unaudited condensed consolidated financial statements.

LIVEPERSON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended September 30,
	2023		2022

	(In thousands)
OPERATING ACTIVITIES:
Net Loss	$	(59,910)	$	(184,023)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	4,480		100,323
Depreciation	24,852		21,414
Amortization of purchased intangible assets and finance leases	16,369		16,530
Amortization of debt issuance costs	3,384		2,831
Impairment of goodwill	11,895		—
Impairment of intangible assets	2,959		—
Change in fair value of contingent consideration	5,442		(8,568)
Gain on repurchase of convertible notes	(7,200)		—
Allowance for credit losses	2,653		4,669
Gain on divestiture	(17,591)		—
Deferred income taxes	741		770
Equity loss in joint venture	2,264		—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(16,390)		(13,856)
Prepaid expenses and other current assets	(18,028)		(13,519)
Contract acquisition costs non-current	6,189		(2,842)
Other assets	1,390		(123)
Accounts payable	(13,420)		(4,229)
Accrued expenses and other current liabilities	21,225		(12,234)
Deferred revenue	12,691		7,450
Operating lease assets and liabilities, net	(500)		(2,148)
Other liabilities	(7,797)		8,084
Net cash used in operating activities	(24,302)		(79,471)
INVESTING ACTIVITIES:
Purchases of property and equipment, including capitalized software	(22,437)		(35,212)
Payments for acquisitions, net of cash acquired	—		(3,458)
Purchases of intangible assets	(3,245)		(1,394)
Proceeds from divestiture	13,819		—
Investment in joint venture	—		(3,993)
Net cash used in investing activities	(11,863)		(44,057)
FINANCING ACTIVITIES:
Principal payments for financing leases	(2,468)		(2,785)
Proceeds from issuance of common stock in connection with the exercise of options and ESPP	1,622		1,238
Payments on repurchase of convertible senior notes	(149,702)		—
Net cash used in financing activities	(150,548)		(1,547)
Effect of foreign exchange rate changes on cash and cash equivalents	(1,164)		(4,713)
Net decrease in cash, cash equivalents, and restricted cash	(187,877)		(129,788)
Cash, cash equivalents, and restricted cash - beginning of year	392,198		523,532
Plus: cash classified within current assets held for sale - beginning of year	10,011		—
Cash, cash equivalents, and restricted cash - end of period	$	214,332	$	393,744


	Nine Months Ended September 30,
	2023		2022

	(In thousands)


Reconciliation of cash, cash equivalents, and restricted cash to condensed consolidated balance sheets
Cash and cash equivalents	$	212,189	$	393,330
Restricted cash	2,143		414
Total cash, cash equivalents, and restricted cash - end of period	$	214,332	$	393,744

Supplemental disclosure of other cash flow information:
Cash paid for income taxes, net	$	998	$	3,079
Cash paid for interest	909		1,895
Supplemental disclosure of non-cash investing and financing activities:
Purchase of property and equipment and intangible assets recorded in accounts payable	$	548	$	113
Right of use assets obtained in exchange for operating lease liabilities	4,817		2,417
Increase in convertible senior notes, net upon adoption of ASU 2020-06 (Note 1)	—		159,407
Issuance of shares of common stock to settle cash awards	—		17,298
Supplemental disclosure of non-cash financing activities related to the WildHealth acquisition in February 2022 (Note 9):
Issuance of shares of common stock	$	—	$	17,675
Fair value of contingent earn-out recorded in connection with WildHealth transaction	—		38,151
Supplemental disclosure of non-cash financing activities related to the e-bot7 acquisition in July 2021:
Fair value of contingent earn-out recorded in connection with e-bot7 transaction	$	—	$	6,113

See accompanying notes to unaudited condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Description of Business and Basis of Presentation

LivePerson, Inc. (“LivePerson”, the “Company”, “we”, “our” or “us”) is a global leader in AI-powered customer conversations. Consumers have made mobile devices the center of their digital lives, and they have made digital conversational experiences the center of communication with friends, family and peers. Since 1998, LivePerson has enabled billions of meaningful connections between consumers and our customers on our platform. These speech or text conversations decrease costs and increase revenue for our brands by harnessing the power of AI for convenient, personalized and content-rich journeys across the entire consumer lifecycle, and across consumer platforms. AI has accelerated our capability to leverage those prior conversations to enhance the consumer experience and to improve results for our customers by empowering them to leverage the latest developments in AI, including Generative AI and Large Language Models (“LLMs”), in a safe and secure environment.

The Conversational Cloud, the Company’s enterprise-class cloud-based platform, enables businesses to have conversations with millions of consumers as personally as they would with a single consumer. The Conversational Cloud powers conversations across each of a brand’s primary digital channels, including mobile apps, mobile and desktop web browsers, SMS, social media and third-party consumer messaging platforms. Brands can also use the Conversational Cloud to message consumers when they dial a 1-800 number instead of forcing them to navigate interactive voice response systems (“IVRs”) and wait on hold. Similarly, the Conversational Cloud can ingest traditional emails and convert them into messaging conversations, or embed messaging conversations directly into web advertisements, rather than redirect consumers to static website landing pages. Agents can manage all conversations with consumers through a single console interface, regardless of where the conversations originated. Most recently, the Conversational Cloud has been enhanced to provide a secure platform with the necessary guardrails to deploy Generative AI and LLMs in ways that help consumers and drive results for brands without sacrificing trust.

LivePerson’s robust, cloud-based suite of rich messaging, real-time chat, LLM, AI and automation offerings features consumer and agent facing bots, intelligent routing and capacity mapping, real-time intent detection and analysis, queue prioritization, customer sentiment, analytics and reporting, content delivery, Payment Card Industry (“PCI”) compliance, co-browsing and a sophisticated proactive targeting engine. An extensible application programming interface (“API”) stack facilitates a lower cost of ownership by facilitating robust integration into back-end systems, as well as enabling developers to build their own programs and services on top of the platform. More than 40 APIs and software development kits are available on the Conversational Cloud.

LivePerson’s Conversational AI platform enables what the Company calls “the tango” of humans, AI and bots, whereby human agents act as bot managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed. Agents become ultra-efficient, leveraging the AI engine to serve up relevant content, define next-best actions and take over repetitive transactional work so that the agent can focus on relationship building. By seamlessly integrating messaging with the Company’s proprietary Conversational AI, as well as third-party bots, the Conversational Cloud offers brands a comprehensive approach to scaling automations across their millions of customer conversations.

Complementing the Company’s proprietary messaging and Conversational AI offerings are teams of technical, solutions and consulting professionals that have developed deep domain expertise in the implementation and optimization of conversational services across industries and messaging endpoints. LivePerson’s products, coupled with our domain knowledge, industry expertise and professional services, have been proven to maximize the impact of Conversational AI, unlock the power of Generative AI and LLMs in safe and responsible ways, and deliver measurable return on investment for our customers.

LivePerson was incorporated in the State of Delaware in November 1995 and the LivePerson service was introduced in November 1998. The Company completed an initial public offering in April 2000 and is currently traded on the Nasdaq Global Select Market (“Nasdaq”) and the Tel Aviv Stock Exchange. LivePerson is headquartered in New York City.

Basis of Presentation

The accompanying condensed consolidated financial statements, and the financial data and other information disclosed in the notes to the condensed consolidated financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 are unaudited. In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

only normal recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated financial position, results of operations, comprehensive loss, and cash flows for the interim periods presented. The results of operations for any interim period are not necessarily indicative of the results of operations for any other future interim period or for a full fiscal year. The condensed consolidated balance sheet as of December 31, 2022 has been derived from audited consolidated financial statements at that date.

Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2023.

Principles of Consolidation

The unaudited condensed consolidated financial statements reflect the operations of LivePerson and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Equity Method Investment

The Company utilizes the equity method to account for investments when it possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when an investor possesses 20% or more of the voting interests of the investee, and conversely, the ability to exercise significant influence is presumed not to exist when an investor possesses less than 20% of the voting interests of the investee. These presumptions may be overcome based on specific facts and circumstances that demonstrate an ability to exercise significant influence is restricted or demonstrate an ability to exercise significant influence notwithstanding a smaller voting interest, such as with the Company’s 19.2% equity method investment in Claire Holdings, Inc. (“Claire”), due to the Company’s seat on the entity’s board of directors, which provides the Company the ability to exert significant influence. In applying the equity method, the Company records the investment at cost and subsequently increases or decreases the carrying amount of the investment by its proportionate share of the net earnings or losses. The Company records dividends or other equity distributions as reductions in the carrying value of the investment. The Company assesses the carrying value of equity method investment on a periodic basis to see if there has been a decline in carrying value that is not temporary. When deciding whether a decline in carrying value is more than temporary, a number of factors are considered, including the investee’s financial condition and business prospects, as well as the Company’s investment intentions.

Variable Interest Entities

The condensed consolidated financial statements include the financial statements of LivePerson, its wholly owned subsidiaries, and each variable interest entity (“VIE”) for which the Company is the primary beneficiary. The Company consolidates entities in which it has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

The Company evaluates whether an entity in which it has a variable interest is considered a variable interest entity. VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights and a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity).

Under the provisions of Accounting Standards Codification (“ASC”) 810, “Consolidation”, an entity consolidates a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company periodically reassesses whether it is the primary beneficiary of a VIE. See Note 18 – Variable Interest Entities for the Company’s assessment of VIEs.

Use of Estimates

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

Significant items subject to such estimates and assumptions include:

•stock-based compensation expense;

•allowance for credit losses;

•the period of benefit for deferred contract acquisition costs;

•valuation of goodwill;

•valuation and useful lives of other long-lived assets;

•fair value of assets acquired and liabilities assumed in business combinations;

•income taxes; and

•recognition, measurement, and disclosure of contingent liabilities.

As of the date of issuance of the financial statements, the Company is not aware of any material specific events or circumstances that would require it to update its estimates, judgments, or to revise the carrying values of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s condensed consolidated financial statements.

Goodwill

The Company evaluates goodwill for impairment on an annual basis in the third quarter, and more frequently whenever events or substantive changes in circumstances indicate that it is more likely than not that the carrying value of reporting unit exceeds its fair value in accordance with ASC 820, “Fair Value Measurement.” In performing the goodwill impairment test, the Company first assesses qualitative factors to determine the existence of impairment. If the qualitative factors indicate that the carrying value of a reporting unit more likely than not exceeds its fair value, the Company proceeds to a quantitative test to measure the existence and amount, if any, of goodwill impairment. The Company may also choose to bypass the qualitative assessment and proceed directly to the quantitative test.

In performing the quantitative test, impairment loss is recorded to the extent that the carrying value of the reporting unit exceeds its assessed fair value.

Foreign Currency Translation

The Company’s operations are conducted in various countries around the world and the financial statements of its foreign subsidiaries are reported in the applicable foreign currencies (functional currencies). Financial information is translated from the applicable functional currency to the U.S. dollar (the reporting currency) for inclusion in the Company’s condensed consolidated financial statements. Income, expenses, and cash flows are translated at weighted average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of accumulated other comprehensive loss in stockholders’ equity. Foreign exchange transaction gain or losses are included in other (expense) income, net in the accompanying condensed consolidated statements of operations.

Divestitures

The Company classifies assets and liabilities to be disposed of as held for sale in the period in which they are available for immediate sale in their present condition and the sale is probable and expected to be completed within one year. The Company initially measures assets and liabilities held for sale at the lower of their carrying value or fair value less costs to sell. When the divestiture represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results, the disposal is presented as a discontinued operation. See Note 20 – Divestiture for additional information.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Recently Issued Accounting Pronouncements

In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”), which addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. The amendments require certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially measuring most of their assets and liabilities at fair value. The objectives of the amendments are to provide decision-useful information to investors and other allocators of capital in a joint venture’s financial statements and also to reduce diversity in practice. ASU 2023-05 is effective for both public and private joint venture entities with a formation date on or after January 1, 2025. Early adoption is permitted. Entities may elect to apply the guidance retrospectively to joint ventures with a formation date prior to January 1, 2025. The Company does not expect the adoption of this standard to have a material impact on its condensed consolidated financial statements and related disclosures.

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. Specifically, the ASU: 1) Offers private companies, as well as not-for-profit entities that are not conduit bond obligors, a practical expedient that gives them the option of using the written terms and conditions of a common-control arrangement when determining whether a lease exists and the subsequent accounting for the lease, including the lease’s classification and 2) Amends the accounting for leasehold improvements in common-control arrangements for all entities. ASU 2023-01 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted in any annual or interim period as of the beginning of the related fiscal year. The Company does not expect the adoption of this standard to have a material impact on its condensed consolidated financial statements and related disclosures.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to clarify that a contractual restriction on the sale of an equity security is not considered part of a unit of account of the equity security, and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments also require the following disclosures for equity securities subject to the contractual sale restrictions.

1.The fair value of equity securities subject to the contractual sale restrictions reflected on the balance sheet.

2.The nature and remaining duration of the restriction(s).

3.The circumstances that could cause a lapse in the restriction(s).

This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those financial years. The Company does not expect the adoption of this standard to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Note 2. Revenue Recognition

The majority of the Company’s revenue is generated from hosted service revenues, which is inclusive of its platform usage pricing model, and related professional services from the sale of its services. Revenues are recognized when control of these services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those services. No single customer accounted for 10% or more of total revenue for the three and nine months ended September 30, 2023 and 2022.

Remaining Performance Obligation

As of September 30, 2023, the aggregate amount of the total transaction price allocated in contracts with original duration of one year or greater to the remaining performance obligations was $312.9 million. Approximately 91% of the Company’s remaining performance obligations is expected to be recognized during the next 24 months, with the balance recognized thereafter. The aggregate balance of unsatisfied performance obligations represents contracted revenue that has not yet been recognized, and does not include contract amounts that are cancellable by the customer, amounts associated with optional renewal periods, and any amounts related to performance obligations, which are billed and recognized as they are delivered.

Deferred Revenues

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company records deferred revenues when cash payments are received or due in advance of its performance. The increase in the deferred revenue balance as of September 30, 2023 is primarily driven by cash payments received or due in advance of its performance obligations, partially offset by $83.7 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2022.

The following table presents deferred revenue by revenue source:


	September 30, 2023		December 31, 2022

	(In thousands)
Hosted services	$	96,022	$	83,561
Professional services	761		933
Total deferred revenue - short term	$	96,783	$	84,494

Hosted services	$	111	$	—
Professional services	282		174
Total deferred revenue - long term	$	393	$	174

Disaggregated Revenue

The following table presents the Company’s revenues disaggregated by revenue source:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(In thousands)
Revenue:
Hosted services (1)	$	85,747	$	98,951	$	254,371	$	318,382
Professional services	15,585		30,610		52,144		73,941
Total revenue	$	101,332	$	129,561	$	306,515	$	392,323

—————————————

(1)On March 20, 2023, the Company completed the sale of Kasamba and therefore ceased recognizing revenue related to Kasamba effective on the transaction close date. Further, this sale eliminated the entire Consumer segment, as a result of which revenue is presented within a single consolidated segment. Hosted services includes $7.2 million for the nine months ended September 30, 2023, and $9.5 million and $27.7 million of revenue for the three and nine months ended September 30, 2022, respectively, relating to Kasamba.

Revenue by Geographic Location

The Company is domiciled in the United States and has international operations around the globe. The following table presents the Company’s revenues attributable to domestic and foreign operations for the periods presented:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(In thousands)
United States	$	71,911	$	89,619	$	209,275	$	267,189
Other Americas (1)	1,828		2,470		7,685		10,484
Total Americas	73,739		92,089		216,960		277,673
EMEA (2) (3)	16,165		16,107		47,280		57,890
APAC (4)	11,428		21,365		42,275		56,760
Total revenue	$	101,332	$	129,561	$	306,515	$	392,323

—————————————

(1)Canada, Latin America and South America

(2)Europe, the Middle East and Africa (“EMEA”)

(3)Includes revenues from the United Kingdom of $16.2 million and $13.1 million for the three months ended September 30, 2023 and 2022, respectively, and from the Netherlands of $0.2 million and $1.3 million for the three months ended September 30, 2023 and 2022, respectively. Includes revenues from the United Kingdom of $46.8 million and $41.6 million for the nine months ended September 30, 2023 and 2022, respectively, and from the Netherlands of $0.8 million and $4.8 million for the nine months ended September 30, 2023 and 2022, respectively.

(4)Asia-Pacific (“APAC”)

Information about Contract Balances

Amounts collected in advance of services being provided are accounted for as deferred revenue. Nearly all of the Company’s deferred revenue balance is related to Hosted services revenue.

In some arrangements, the Company allows customers to pay for access to the Conversational Cloud over the term of the software license. The Company refers to these as subscription transactions. Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables. Unbilled receivables, anticipated to be invoiced in the next twelve months, are included in accounts receivable on the condensed consolidated balance sheets. Contract acquisition costs represent prepaid sales commissions. The opening and closing balances of the Company’s accounts receivable, unbilled receivables, and deferred revenues are as follows:


	Accounts Receivable		Unbilled Receivable		Contract Acquisition Costs (Non-current)		Deferred Revenue (Current)		Deferred Revenue (Non-current)

	(In thousands)
Opening balance as of December 31, 2021	$	69,259	$	24,545	$	40,675	$	98,808	$	54
Increase (decrease), net	(15,791)		8,524		3,129		(14,314)		120
Opening balance as of December 31, 2022	$	53,468	$	33,069	$	43,804	$	84,494	$	174
Increase (decrease), net	26,351		(13,021)		(7,851)		12,289		219
Ending balance as of September 30, 2023	$	79,819	$	20,048	$	35,953	$	96,783	$	393

Accounts Receivable, Net

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for credit losses monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Allowance for credit losses
	(In thousands)
Balance at beginning of the year	$	9,239
Additions charged to costs and expenses	2,653
Deductions/write-offs	(3,164)
Balance as of September 30, 2023	$	8,728

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 3. Net Loss Per Share

Basic earnings per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period. Potentially dilutive securities consist of common stock options, restricted stock units, contingently issuable shares and convertible securities. The dilutive effect of stock options, restricted stock units and contingently issuable shares is reflected in diluted EPS by application of the treasury stock method. The dilutive effect of convertible securities is reflected in the diluted EPS by application of the “if-converted” method. The “if-converted” method is only assumed in periods where such application would be dilutive. In applying the “if-converted” method for diluted EPS, the Company would assume conversion of the 2024 Notes at a ratio of 25.9182 shares of its common stock per $1,000 principal amount of the 2024 Notes. The Company would assume conversion of the 2026 Notes at a ratio of 13.2933 shares of its common stock per $1,000 principal amount of the 2026 Notes. Assumed converted shares of the Company’s common stock are weighted for the period the Notes were outstanding. See Note 8 – Convertible Senior Notes, Net and Capped Call Transactions for additional information about the Notes.

Reconciliation of shares used in calculating basic and diluted EPS for the three and nine months ended September 30, 2023 and 2022, were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(In thousands, except per share amounts)
Net loss	$	(53,312)	$	(43,248)	$	(59,910)	$	(184,023)
Weighted average number of shares outstanding, basic and diluted	78,005,210		77,784,346		76,902,316		76,969,629
Net loss per share, basic and diluted	(0.68)		(0.56)		(0.78)		(2.39)

During the three months ended September 30, 2023, the Company reached settlement agreements regarding the final portions of the VoiceBase and Tenfold earn-outs for approximately $15.0 million and $13.0 million, respectively. These settlements are to be paid in cash or shares as determined by the Company during the fourth quarter of 2023. Additionally, subsequent to September 30, 2023, the Company reached a settlement agreement regarding the eBot-7 earn-out for approximately $8.0 million, which was paid in shares. The assumed conversion of the earn-out settlements would have no impact on the basic and diluted EPS as presented in the table above. Further, the following securities were excluded from the computation of diluted EPS for the three and nine months ended September 30, 2023 and 2022, as their effect would have been anti-dilutive:


	As of September 30
	2023	2022

Shares subject to outstanding common stock options and employee stock purchase plan	3,256,397	4,514,229
Restricted stock units	4,570,885	5,246,300
Earn-outs	8,255,818	11,996,072
Conversion option of the 2024 Notes	1,878,862	5,961,186
Conversion option of the 2026 Notes	6,879,283	6,879,283
Total	24,841,245	34,597,070

Note 4. Segment Information

The Company accounts for its segment information in accordance with the provisions of ASC 280-10, “Segment Reporting.” ASC 280-10 establishes annual and interim reporting standards for operating segments of a company. ASC 280-10 requires disclosures of selected segment-related financial information about products, major customers, and geographic areas based on the Company’s internal accounting methods. The Company was previously organized into two operating segments for purposes of making operating decisions and assessing performance. The Business segment enables brands to leverage the Conversational Cloud’s sophisticated intelligence engine to connect with consumers through an integrated suite of mobile and online business messaging technologies. The Consumer segment facilitated online transactions between Experts and Users

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

seeking information and knowledge for a fee via mobile and online messaging. During the first quarter of 2023, the Consumer segment (comprised solely of the Kasamba business) was divested (see Note 20 – Divestiture). The chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, evaluates performance, makes operating decisions, and allocates resources based on the operating income of the remaining Business segment. The Business reporting segment follows the same accounting policies used in the preparation of the Company’s consolidated financial statements which are described in the summary of significant accounting policies.

During the first quarter of 2023, the Company completed the sale of Kasamba, which was reported under the Consumer segment, and had ceased recognizing revenues and expenses effective the transaction close date. As a result, the divestiture of Kasamba eliminates the Company’s Consumer segment as the Company focuses on the core Business segment. See Note 20 –Divestiture, for additional information.

Geographic Information

The Company is domiciled in the United States and has international operations around the globe. The following table presents the Company’s long-lived assets by geographic region as of the dates set forth below:


	September 30, 2023		December 31, 2022

	(In thousands)
United States	$	444,219	$	476,040
Germany	44,180		46,323
Israel	—		4,064
Australia	11,313		12,057
Netherlands	5,802		3,470
Other (1)	12,531		13,520
Total long-lived assets	$	518,045	$	555,474

——————————————

(1)United Kingdom, Japan, France, Italy, Spain, Canada, and Singapore.

Note 5. Goodwill and Intangible Assets, Net

Goodwill

The changes in the carrying amount of goodwill for the nine months ended September 30, 2023 are as follows:


	Consolidated
	(In thousands)
Balance as of December 31, 2022	$	296,214
Adjustments to goodwill:
Goodwill impairment (1)	$	(11,895)
Foreign exchange adjustment	(560)
Balance as of September 30, 2023	$	283,759

(1)The amount represents the entire accumulated goodwill impairment balance as of September 30, 2023.

Goodwill is not amortized, but is tested for impairment at the reporting unit level using either a qualitative or quantitative assessment on an annual basis during third quarter of each fiscal year, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment of goodwill is measured at the reporting unit level by comparing the carrying amount, including goodwill, to the fair market value of the reporting unit. As of September 30, 2023, our reporting units consisted of Business and WildHealth.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In connection with the annual impairment test completed as of September 30, 2023 using the quantitative “Step 1” assessment, we determined the fair value of our reporting units, using both an income approach and a market approach. The income approach uses a discounted cash flow model that reflects our assumptions regarding revenue growth rates, operating margins, risk-adjusted discount rate, terminal period growth rate, economic and market trends and other expectations about the anticipated operating results of the reporting units. Under the market approach, we estimate the fair value based on market multiples of revenues derived from comparable publicly traded companies with operating characteristics similar to the reporting units.

Based on our 2023 annual goodwill impairment test, the Company recorded a non-cash impairment charge of $11.9 million in our condensed consolidated statements of operations, representing a portion of goodwill related to the WildHealth reporting unit. This conclusion was primarily based upon slower growth in existing revenue streams and strategic decisions to reduce or eliminate investment in new and existing revenue streams previously planned for expansion. Our latest available financial forecasts at the time of the annual goodwill impairment test reflected lower cash flows than previously projected related to the WildHealth reporting unit.

There were no impairments of our Business reporting unit, as the fair value of this reporting unit substantially exceeded its carrying value.

In connection with the divestiture of Kasamba under the Consumer segment, the Company recorded a reduction to its goodwill of $8.0 million during the year ended December 31, 2022, based on the relative fair value of the segment. See Note 20 - Divestiture, for additional information.

Intangible Assets, Net

Intangible assets are summarized as follows:


	As of September 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life

	(In thousands)						(In years)
Amortizing intangible assets:
Technology	$	97,475	$	(59,936)	$	37,539	5.0
Customer relationships	32,004		(18,982)		13,022		10.0
Patents	14,342		(1,770)		12,572		12.9
Trademarks	1,388		(608)		780		5.0
Trade names	1,044		(627)		417		2.8
Other	776		(325)		451		4.1
Total	$	147,029	$	(82,248)	$	64,781

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	As of December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life

	(In thousands)						(In years)
Amortizing intangible assets:
Technology	$	97,454	$	(45,907)	$	51,547	5.0
Customer relationships	31,987		(17,392)		14,595		10.0
Patents	11,088		(1,419)		9,669		12.8
Trademarks	1,044		(364)		680		5.0
Trade names	1,378		(402)		976		2.8
Other	979		(343)		636		4.1
Total	$	143,930	$	(65,827)	$	78,103

Amortization expense is calculated over the estimated useful life of the asset. Aggregate amortization expense for intangible assets and finance leases, net, including impairments, was $8.4 million and $5.7 million for the three months ended September 30, 2023 and 2022, respectively, and $19.3 million and $16.5 million for the nine months ended September 30, 2023 and 2022, respectively, a portion of this amortization was included in cost of revenue in the condensed consolidated statements of operations.

Our intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable and the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows that are expected to result from the use of the asset. Based on our impairment test as of September 30, 2023, the Company recognized a immaterial non-cash impairment charge of $3.0 million in the cost of revenue line in our condensed consolidated statements of operations, related to our intangible assets - developed technology associated with WildHealth, due to updated forecasts as explained above. The fair value of our intangible assets as of September 30, 2023 was estimated using a relief from royalty method. A terminal multiple was applied on an assumed sale of the asset group subsequent to the life of the primary asset.

There were no impairments of intangible assets during the three and nine months ended September 30, 2022.

As of September 30, 2023, estimated annual amortization expense for the next five years and thereafter is as follows:


	Estimated Amortization Expense
	(In thousands)
Remainder of 2023	$	4,283
2024	15,355
2025	14,912
2026	12,211
2027	1,436
Thereafter	16,584
Total	$	64,781

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)