lpsn-20240331
0001102993--12-312024Q1falseTrue.0259182.0132933P5YP5Y.0259182.0132933P1YP3Y359360xbrli:sharesiso4217:USDiso4217:USDxbrli:sharesiso4217:AUDxbrli:shareslpsn:connectionxbrli:purelpsn:segmentlpsn:daylpsn:corporation00011029932024-01-012024-03-310001102993us-gaap:CommonStockMember2024-01-012024-03-310001102993us-gaap:RightsMember2024-01-012024-03-3100011029932024-05-0600011029932024-03-3100011029932023-12-3100011029932023-01-012023-03-310001102993us-gaap:RetainedEarningsMember2023-01-012023-03-310001102993us-gaap:CommonStockMember2023-12-310001102993us-gaap:TreasuryStockCommonMember2023-12-310001102993us-gaap:AdditionalPaidInCapitalMember2023-12-310001102993us-gaap:RetainedEarningsMember2023-12-310001102993us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001102993us-gaap:CommonStockMember2024-01-012024-03-310001102993us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001102993us-gaap:RetainedEarningsMember2024-01-012024-03-310001102993us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001102993us-gaap:CommonStockMember2024-03-310001102993us-gaap:TreasuryStockCommonMember2024-03-310001102993us-gaap:AdditionalPaidInCapitalMember2024-03-310001102993us-gaap:RetainedEarningsMember2024-03-310001102993us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001102993us-gaap:CommonStockMember2022-12-310001102993us-gaap:TreasuryStockCommonMember2022-12-310001102993us-gaap:AdditionalPaidInCapitalMember2022-12-310001102993us-gaap:RetainedEarningsMember2022-12-310001102993us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-3100011029932022-12-310001102993us-gaap:CommonStockMember2023-01-012023-03-310001102993us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001102993us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001102993us-gaap:CommonStockMember2023-03-310001102993us-gaap:TreasuryStockCommonMember2023-03-310001102993us-gaap:AdditionalPaidInCapitalMember2023-03-310001102993us-gaap:RetainedEarningsMember2023-03-310001102993us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-3100011029932023-03-310001102993lpsn:HostedServicesBusinessMember2024-01-012024-03-310001102993lpsn:HostedServicesBusinessMember2023-01-012023-03-310001102993lpsn:ProfessionalServicesMember2024-01-012024-03-310001102993lpsn:ProfessionalServicesMember2023-01-012023-03-310001102993lpsn:HostedServicesConsumerMemberlpsn:KasambaIncMember2023-01-012023-03-310001102993country:US2024-01-012024-03-310001102993country:US2023-01-012023-03-310001102993lpsn:OtherAmericasMember2024-01-012024-03-310001102993lpsn:OtherAmericasMember2023-01-012023-03-310001102993srt:AmericasMember2024-01-012024-03-310001102993srt:AmericasMember2023-01-012023-03-310001102993us-gaap:EMEAMember2024-01-012024-03-310001102993us-gaap:EMEAMember2023-01-012023-03-310001102993exch:XPST2024-01-012024-03-310001102993exch:XPST2023-01-012023-03-310001102993country:GB2024-01-012024-03-310001102993country:GB2023-01-012023-03-310001102993us-gaap:BilledRevenuesMember2022-12-310001102993us-gaap:UnbilledRevenuesMember2022-12-310001102993us-gaap:BilledRevenuesMember2023-01-012023-12-310001102993us-gaap:UnbilledRevenuesMember2023-01-012023-12-3100011029932023-01-012023-12-310001102993us-gaap:BilledRevenuesMember2023-12-310001102993us-gaap:UnbilledRevenuesMember2023-12-310001102993us-gaap:BilledRevenuesMember2024-01-012024-03-310001102993us-gaap:UnbilledRevenuesMember2024-01-012024-03-310001102993us-gaap:BilledRevenuesMember2024-03-310001102993us-gaap:UnbilledRevenuesMember2024-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2024Member2019-03-310001102993lpsn:SharesSubjectToOutstandingCommonStockOptionsAndEmployeeStockPurchasePlanMember2024-01-012024-03-310001102993lpsn:SharesSubjectToOutstandingCommonStockOptionsAndEmployeeStockPurchasePlanMember2023-01-012023-03-310001102993us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001102993us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-03-310001102993lpsn:FairValueEarnoutMember2024-01-012024-03-310001102993lpsn:FairValueEarnoutMember2023-01-012023-03-310001102993lpsn:ConvertibleSeniorNotesDue2024Memberus-gaap:ConvertibleDebtSecuritiesMember2024-01-012024-03-310001102993lpsn:ConvertibleSeniorNotesDue2024Memberus-gaap:ConvertibleDebtSecuritiesMember2023-01-012023-03-310001102993lpsn:ConvertibleSeniorNotesDue2026Memberus-gaap:ConvertibleDebtSecuritiesMember2024-01-012024-03-310001102993lpsn:ConvertibleSeniorNotesDue2026Memberus-gaap:ConvertibleDebtSecuritiesMember2023-01-012023-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2024Member2019-03-012019-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2026Member2020-12-312020-12-310001102993country:US2024-03-310001102993country:US2023-12-310001102993country:DE2024-03-310001102993country:DE2023-12-310001102993country:AU2024-03-310001102993country:AU2023-12-310001102993country:NL2024-03-310001102993country:NL2023-12-310001102993lpsn:UnitedKingdomGermanyJapanFranceItalyMember2024-03-310001102993lpsn:UnitedKingdomGermanyJapanFranceItalyMember2023-12-310001102993lpsn:BusinessMember2022-12-310001102993lpsn:BusinessMember2023-01-012023-12-310001102993lpsn:BusinessMember2023-12-310001102993lpsn:BusinessMember2024-01-012024-03-310001102993lpsn:BusinessMember2024-03-310001102993lpsn:WildHealthMember2024-01-012024-03-310001102993lpsn:TechnologyMember2024-03-310001102993lpsn:TechnologyMember2024-01-012024-03-310001102993us-gaap:CustomerContractsMember2024-03-310001102993us-gaap:CustomerContractsMember2024-01-012024-03-310001102993us-gaap:PatentsMember2024-03-310001102993us-gaap:PatentsMember2024-01-012024-03-310001102993us-gaap:TrademarksMember2024-03-310001102993us-gaap:TrademarksMember2024-01-012024-03-310001102993us-gaap:TradeNamesMember2024-03-310001102993us-gaap:TradeNamesMember2024-01-012024-03-310001102993us-gaap:OtherIntangibleAssetsMember2024-03-310001102993us-gaap:OtherIntangibleAssetsMember2024-01-012024-03-310001102993lpsn:TechnologyMember2023-12-310001102993lpsn:TechnologyMember2023-01-012023-12-310001102993us-gaap:CustomerContractsMember2023-12-310001102993us-gaap:CustomerContractsMember2023-01-012023-12-310001102993us-gaap:TradeNamesMember2023-12-310001102993us-gaap:TradeNamesMember2023-01-012023-12-310001102993us-gaap:PatentsMember2023-12-310001102993us-gaap:TrademarksMember2023-01-012023-12-310001102993us-gaap:TrademarksMember2023-12-310001102993us-gaap:PatentsMember2023-01-012023-12-310001102993us-gaap:OtherIntangibleAssetsMember2023-12-310001102993us-gaap:OtherIntangibleAssetsMember2023-01-012023-12-310001102993us-gaap:CostOfSalesMember2024-01-012024-03-310001102993us-gaap:CostOfSalesMember2023-01-012023-03-310001102993lpsn:ComputerEquipmentAndSoftwareMember2024-03-310001102993lpsn:ComputerEquipmentAndSoftwareMember2023-12-310001102993us-gaap:SoftwareDevelopmentMember2024-03-310001102993us-gaap:SoftwareDevelopmentMember2023-12-310001102993srt:MinimumMemberus-gaap:SoftwareDevelopmentMember2024-03-310001102993srt:MaximumMemberus-gaap:SoftwareDevelopmentMember2024-03-310001102993lpsn:FurnitureEquipmentAndBuildingImprovementsMember2024-03-310001102993lpsn:FurnitureEquipmentAndBuildingImprovementsMember2023-12-310001102993us-gaap:SellingAndMarketingExpenseMember2024-01-012024-03-310001102993us-gaap:SellingAndMarketingExpenseMember2023-01-012023-03-310001102993us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001102993us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-310001102993us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001102993us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2024Member2024-03-3100011029932023-03-2100011029932023-03-212023-03-210001102993lpsn:ConvertibleSeniorNotesDue2024Membersrt:ScenarioPreviouslyReportedMember2023-01-012023-03-310001102993lpsn:ConvertibleSeniorNotesDue2024Membersrt:RestatementAdjustmentMember2023-01-012023-12-310001102993lpsn:ConvertibleSeniorNotesDue2024Member2023-01-012023-12-310001102993lpsn:ConvertibleSeniorNotesDue2024Member2023-03-212023-03-210001102993lpsn:ConvertibleSeniorNotesDue2024Member2024-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2026Member2022-12-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2026Member2020-01-012020-12-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2026Member2020-12-012020-12-310001102993lpsn:ConvertibleSeniorNotesDue2026Member2024-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2026Member2024-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesDue2026Member2024-01-012024-03-310001102993lpsn:CappedCallsMember2022-12-3100011029932020-12-012020-12-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesMember2024-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesMember2023-12-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesMember2024-01-012024-03-310001102993us-gaap:ConvertibleDebtMemberlpsn:ConvertibleSeniorNotesMember2023-01-012023-03-310001102993srt:MinimumMember2024-03-310001102993srt:MaximumMember2024-03-310001102993us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-310001102993us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2024-03-310001102993us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2024-03-310001102993us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-12-310001102993us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310001102993us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-310001102993us-gaap:FairValueInputsLevel2Memberlpsn:ConvertibleSeniorNotesDue2024And2026Member2024-03-310001102993us-gaap:FairValueInputsLevel2Memberlpsn:ConvertibleSeniorNotesDue2024And2026Member2023-12-310001102993lpsn:ContingentLiabilityMember2023-01-012023-12-310001102993lpsn:LiabilityAwardsMember2023-01-012023-12-310001102993lpsn:VoiceBaseIncMember2024-01-012024-03-310001102993lpsn:TenfoldMember2024-01-012024-03-310001102993lpsn:Ebot7Member2024-01-012024-03-310001102993lpsn:WildHealthMember2024-01-012024-03-310001102993lpsn:MatchingTrancheOneMember2024-01-012024-03-310001102993lpsn:MatchingTrancheTwoMember2024-01-012024-03-310001102993us-gaap:LetterOfCreditMemberlpsn:LetterOfCreditForSecurityDepositMember2024-03-310001102993us-gaap:EmployeeStockOptionMember2024-03-310001102993us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001102993us-gaap:EmployeeStockOptionMemberlpsn:A2019StockIncentivePlanMember2024-03-310001102993lpsn:EmployeeStockPurchasePlanMember2024-03-310001102993lpsn:IncentiveStockOptionMember2024-03-310001102993lpsn:IncentiveStockOptionMember2024-03-082024-03-080001102993us-gaap:RestrictedStockUnitsRSUMember2023-12-310001102993us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001102993us-gaap:RestrictedStockUnitsRSUMember2024-03-310001102993us-gaap:RestrictedStockUnitsRSUMembersrt:MinimumMember2024-01-012024-03-310001102993us-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMember2024-01-012024-03-3100011029932023-01-012023-06-300001102993us-gaap:OtherRestructuringMember2024-01-012024-03-310001102993us-gaap:OtherRestructuringMember2023-01-012023-03-310001102993us-gaap:ContractTerminationMember2024-01-012024-03-310001102993us-gaap:ContractTerminationMember2023-01-012023-03-310001102993us-gaap:EmployeeSeveranceMember2024-01-012024-03-310001102993us-gaap:EmployeeSeveranceMember2023-01-012023-03-310001102993us-gaap:ForeignCountryMember2023-01-012023-12-310001102993us-gaap:ForeignCountryMember2024-01-012024-03-310001102993us-gaap:AccountingStandardsUpdate202006Member2023-01-012023-12-310001102993lpsn:ClaireHoldingsIncMember2022-02-132022-02-1300011029932022-02-130001102993lpsn:ClaireHoldingsIncMember2022-02-130001102993lpsn:ClaireHoldingsIncMemberlpsn:PasacaCapitalIncPasacaMember2022-02-132022-02-130001102993lpsn:ClaireHoldingsIncMemberlpsn:PasacaCapitalIncPasacaMember2022-02-130001102993lpsn:ClaireHoldingsIncMember2023-01-012023-03-310001102993lpsn:ClaireHoldingsIncMember2023-12-310001102993lpsn:ClaireHoldingsIncMember2024-03-3100011029932022-02-280001102993us-gaap:RelatedPartyMember2024-01-012024-03-310001102993us-gaap:RelatedPartyMember2023-01-012023-03-310001102993us-gaap:RelatedPartyMember2024-03-310001102993us-gaap:RelatedPartyMember2023-12-310001102993lpsn:KasambaIncMember2024-01-012024-03-310001102993lpsn:KasambaIncMember2023-12-310001102993lpsn:KasambaIncMember2023-01-012023-12-310001102993lpsn:KasambaIncMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2023-01-012023-12-310001102993lpsn:KasambaIncMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2024-01-012024-03-310001102993lpsn:BruceHansenMember2024-01-012024-03-310001102993lpsn:BruceHansenMember2024-03-310001102993lpsn:AlexKromanMember2024-01-012024-03-310001102993lpsn:AlexKromanMember2024-03-31

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 March 31, 2024
or
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)
Delaware13-3861628
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareLPSN
The Nasdaq Stock Market LLC
Rights to Purchase Series A Junior
Participating Preferred Stock
None
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 FilerAccelerated Filer
Non-accelerated FilerSmaller 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 May 6, 2024, 88,614,097 shares of the registrant’s common stock were outstanding.
1


LIVEPERSON, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024


INDEX
Page
   
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


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 in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2024 (as amended on April 29, 2024) in the section entitled Part I, Item 1A. “Risk Factors” and in this Quarterly Report on Form 10-Q in the section entitled Part II, 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.





























3


Part I — FINANCIAL INFORMATION
Item 1. Financial Statements
LIVEPERSON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 March 31,
2024
December 31,
2023
(In thousands)
ASSETS  
Current assets:  
Cash and cash equivalents$127,057 $210,782 
   Restricted cash1,960 2,143 
Accounts receivable, net of allowance for credit losses of $9,235 and $9,290 as of March 31, 2024 and December 31, 2023, respectively
71,365 81,802 
Prepaid expenses and other current assets (Note 1)
20,954 26,981 
Total current assets221,336 321,708 
Operating lease right-of-use assets (Note 9)
3,431 4,135 
Property and equipment, net (Note 6)
117,893 119,325 
Contract acquisition costs, net
39,326 37,354 
Intangible assets, net (Note 5)
56,009 61,625 
Goodwill (Note 5)
280,956 285,631 
Deferred tax assets4,473 4,527 
Other assets1,264 1,208 
Total assets$724,688 $835,513 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$14,528 $13,555 
Accrued expenses and other current liabilities (Note 7)
75,506 97,024 
Deferred revenue (Note 2)
92,414 81,858 
Convertible senior notes (Note 8) 72,393 
Operating lease liabilities (Note 9)
2,632 2,719 
Total current liabilities185,080 267,549 
Convertible senior notes, net of current portion (Note 8)
512,076 511,565 
Operating lease liabilities, net of current portion (Note 9)
1,466 2,173 
Deferred tax liabilities3,002 2,930 
Other liabilities3,881 3,158 
Total liabilities705,505 787,375 
Commitments and contingencies (Note 11)
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, 91,131,823 and 90,603,519 shares issued, 88,365,750 and 87,837,446 shares outstanding as of March 31, 2024 and December 31, 2023, respectively.
92 91 
Treasury stock - 2,766,073 shares at March 31, 2024 and December 31, 2023
(3)(3)
Additional paid-in capital921,895 913,522 
Accumulated deficit(892,619)(856,988)
Accumulated other comprehensive loss(10,182)(8,484)
Total stockholders’ equity19,183 48,138 
Total liabilities and stockholders’ equity
$724,688 $835,513 
    
    See accompanying notes to condensed consolidated financial statements.
4


LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
 20242023
(In thousands, except share and per share amounts)
Revenue$85,149 $107,661 
Costs, expenses and other:
  
Cost of revenue
29,463 43,096 
Sales and marketing30,130 34,470 
General and administrative21,752 31,447 
Product development30,120 36,519 
Impairment of goodwill
3,627  
Impairment of intangibles and other assets
2,221  
Restructuring costs3,309 11,515 
Gain on divestiture
(17,591)
Amortization of purchased intangible assets
891 874 
Total costs, expenses and other
121,513 140,330 
Loss from operations(36,364)(32,669)
Other income (expense), net:
     Interest income, net
1,332 1,801 
Other (expense) income, net(237)14,662 
Total other income, net
1,095 16,463 
Loss before provision for income taxes(35,269)(16,206)
Provision for income taxes362 1,214 
Net loss$(35,631)$(17,420)
Net loss per share of common stock:
Basic $(0.40)$(0.23)
Diluted $(0.40)$(0.23)
Weighted-average shares used to compute net loss per share:
Basic 88,081,654 75,774,812 
Diluted88,081,654 75,774,812 
See accompanying notes to condensed consolidated financial statements.
5


LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
Three Months Ended
March 31,
 20242023
(In thousands)
Net loss$(35,631)$(17,420)
Foreign currency translation adjustment(1,698)866 
Total comprehensive loss$(37,329)$(16,554)
    See accompanying notes to condensed consolidated financial statements.

6


LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Common StockTreasury StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total Equity
SharesAmountSharesAmount
(In thousands, except share data)
Balance at December 31, 202390,603,519 $91 (2,766,073)$(3)$913,522 $(856,988)$(8,484)$48,138 
Common stock issued upon vesting of restricted stock units 432,701 1 — — 1 — — 2 
Stock-based compensation— — — — 8,251 — — 8,251 
Common stock issued under Employee Stock Purchase Plan (ESPP)95,603 — — — 121 — — 121 
Net loss— — — — — (35,631)— (35,631)
Other comprehensive loss— — — — — — (1,698)(1,698)
Balance at March 31, 202491,131,823 $92 (2,766,073)$(3)$921,895 $(892,619)$(10,182)$19,183 

Common StockTreasury StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total Equity
SharesAmountSharesAmount
(In thousands, except share data)
Balance at December 31, 202278,350,984 $78 (2,766,073)$(3)$771,052 $(692,362)$(10,677)$68,088 
Common stock issued upon exercise of stock options18,687 — — — 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 ESPP87,794 — — — 724 — — 724 
Issuance of common stock in connection with acquisitions — — — — 380 — — 380 
Activity related to divestiture
— — — — 66,775 (64,100)57 2,732 
Net loss— — — — — (17,420)— (17,420)
Other comprehensive income
— — — — — — 809 809 
Balance at March 31, 202378,870,717 $79 (2,766,073)$(3)$848,621 $(773,882)$(9,811)$65,004 

See accompanying notes to condensed consolidated financial statements.
7


LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
 20242023
(In thousands)
OPERATING ACTIVITIES:
Net loss
$(35,631)$(17,420)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense7,558 11,332 
Depreciation8,225 7,362 
Reduction of operating lease right-of-use assets653 658 
Amortization of purchased intangible assets and finance leases4,217 5,435 
Amortization of debt issuance costs610 920 
Impairment of goodwill
3,627  
Impairment of intangible and other assets
2,221  
Change in fair value of contingent consideration (1,709)
Gain on repurchase of convertible notes (6,100)
Allowance for credit losses 4,722 1,079 
Gain on divestiture (17,591)
Deferred income taxes75 589 
Equity loss in joint venture 618 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable5,422 (34,731)
Prepaid expenses and other current assets5,854 (6,262)
Contract acquisition costs
(2,370)530 
Other assets(75)79 
Accounts payable1,966 (9,910)
Accrued expenses and other current liabilities(16,976)41,266 
Deferred revenue10,852 24,750 
Operating lease liabilities
(738)(944)
Other liabilities887 (5,869)
Net cash provided by (used in) operating activities
1,099 (5,918)
INVESTING ACTIVITIES:
Purchases of property and equipment, including capitalized software(11,501)(9,625)
Purchases of intangible assets(1,209)(1,355)
Proceeds from divestiture 13,819 
Net cash (used in) provided by investing activities
(12,710)2,839 
FINANCING ACTIVITIES:
Principal payments for financing leases(327)(958)
Proceeds from issuance of common stock in connection with the exercise of options and ESPP122 854 
Payments on repurchase of convertible senior notes(72,492)(149,702)
Net cash used in financing activities(72,697)(149,806)
Effect of foreign exchange rate changes on cash and cash equivalents400 2,849 
Net decrease in cash, cash equivalents, and restricted cash(83,908)(150,036)
Cash, cash equivalents, and restricted cash - beginning of year212,925 392,197 
8


Three Months Ended March 31,
 20242023
(In thousands)
Plus: cash classified within current assets held for sale - beginning of year 10,011 
Cash, cash equivalents, and restricted cash - end of period $129,017 $252,172 
Reconciliation of cash, cash equivalents, and restricted cash to condensed consolidated balance sheets
Cash and cash equivalents$127,057 $239,975 
Restricted cash1,960 12,197 
Total cash, cash equivalents, and restricted cash - end of period$129,017 $252,172 
Supplemental disclosure of other cash flow information:
Cash paid for income taxes, net$451 $187 
Cash paid for interest292 888 
Supplemental disclosure of non-cash investing and financing activities:
Purchase of property and equipment and intangible assets recorded in accounts payable$50 $790 



See accompanying notes to condensed consolidated financial statements.
9

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 the enterprise leader in digital customer conversation. Over the past two decades, consumers have made digital conversations a primary way to communicate with others. Since 1998, we have enabled meaningful connections between consumers and our customers through our platform and currently power more than one billion connections and conversations each month. These digital and artificial intelligence (“AI”)-powered conversations decrease costs and increase revenue for our brands, resulting in more convenient, personalized and content-rich journeys across the entire consumer lifecycle, and across consumer channels. AI has accelerated our capability to leverage prior conversations and our customers’ existing investments in Generative AI and Large Language Models (“LLMs”) to enhance the consumer experience and to improve results for our customers by empowering them to leverage the latest developments in AI and LLMs, in a safe and secure environment.

The Conversational Cloud, the Company’s enterprise-class digital customer conversation platform, is trusted by the world’s top brands to accelerate their contact center transformation, orchestrate conversations across all channels, departments and systems, increase agent productivity, and deliver more personalized, AI-empowered customer experiences. The Conversational Cloud powers conversations across each of a brand’s primary digital channels, including mobile apps, mobile and desktop web browsers, short messaging service (“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 and wait on hold. Most recently, the Conversational Cloud has been enhanced to provide a secure platform with appropriate guardrails to deploy Generative AI and LLMs in ways that help consumers and drive results for brands without sacrificing trust.

LivePerson’s digital customer conversation platform enables what the Company calls “the tango” of humans, LivePerson bots, third-party bots and LLMs, whereby humans act as bot managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed. Agents become highly efficient, leveraging the AI engine (including generative AI capabilities) to surface 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 bots, the Conversational Cloud offers brands a comprehensive approach to scaling automations across their millions of customer conversations.

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 March 31, 2024 and for the three months ended March 31, 2024 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 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, 2023 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 accounting principles generally accepted 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, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 4, 2024.

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.

Use of Estimates

10

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. These estimates are based on information available as of the date of the condensed consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions.

Items subject to such estimates and assumptions include, but are not limited to:
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.

Significant Accounting Policies

The Company’s significant accounting policies are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to these policies that have had a material impact on the Company’s condensed consolidated financial statements and related notes for the three months ended March 31, 2024.

Prepaid expenses and other current assets

The following table presents the detail of prepaid expenses and other current assets as of the dates presented:

March 31,
2024
December 31,
2023
(In thousands)
Prepaid software maintenance
$6,065 $8,592 
VAT receivable4,168 4,399 
Prepaid server maintenance
2,824 2,634 
Prepaid - other
2,743 2,599 
Other assets
5,154 8,757 
Total prepaid expenses and other current assets$20,954 $26,981 

Recently Adopted Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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
11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






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 adopted this guidance on January 1, 2024, which did not have a material effect on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

On March 21, 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, which provides illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of FASB Accounting Standards Codification (“ASC”) 718, “Compensation—Stock Compensation.” Specifically, the amendments in ASU 2024-01 add an illustrative example that includes four fact patterns to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with Topic 718. The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or non-employees in exchange for goods or services. The amendments in this update are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. ASU 2024-01 should be applied either retrospectively or prospectively. The Company does not expect this this standard to have a material impact on its condensed consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for annual periods beginning after December 15, 2023. The Company is currently evaluating the potential impact of adopting this new guidance on its condensed consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company does not expect this standard to have a material impact on its condensed consolidated financial statements and related disclosures.

In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, 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.

Note 2. Revenue Recognition 

The majority of the Company’s revenue is generated from hosted service revenues, which is inclusive of its platform pricing model, and related professional services. Revenues are recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. No single customer accounted for 10% or more of total revenue for the three months ended March 31, 2024 and 2023.

12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






The following table presents the Company’s revenues disaggregated by revenue source:
Three Months Ended March 31,
20242023
(In thousands)
Revenue:
Hosted services (1)
$71,495 $87,338 
Professional services13,654 20,323 
Total revenue$85,149 $107,661 
(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 condensed consolidated segment. Hosted services includes $7.2 million of revenue for the three months ended March 31 2023, relating to Kasamba.

Remaining Performance Obligation

As of March 31, 2024, 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 $296.7 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. The Company has elected the optional exemption, which allows for the exclusion of the amounts for remaining performance obligations that are part of contracts with an original expected duration of less than one year. Such remaining performance obligations represent unsatisfied or partially unsatisfied performance obligations pursuant to ASC 606, “Revenue from Contracts with Customers.”

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:

Three Months Ended March 31,
20242023
(In thousands)
United States$60,507 $68,509 
Other Americas (1)
1,518 3,805 
Total Americas62,025 72,314 
EMEA (2) (3)
14,221 16,182 
APAC (4)
8,903 19,165 
Total revenue$85,149 $107,661 
——————————————
(1)Canada, Latin America and South America
(2)Europe, the Middle East and Africa (“EMEA”)
(3)Includes revenue from the United Kingdom of $10.7 million and $15.3 million for the three months ended March 31, 2024 and 2023, respectively.
(4)Asia-Pacific (“APAC”)

Information about Contract Balances

The deferred revenue balance consists of services, which have been invoiced upfront, and are recognized as revenue only when the revenue recognition criteria are met.

13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






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, net of allowance for credit losses on the condensed consolidated balance sheets.

The Company recognized revenue of $42.5 million and $44.1 million for the three months ended March 31, 2024 and 2023, respectively, which was included in the corresponding deferred revenue balance at the beginning of the year.

The deferred revenue balance consists of services, which have been invoiced upfront, and are recognized as revenue only when the revenue recognition criteria are met. Our long-term deferred revenues are included in Other liabilities on the condensed consolidated balance sheets. The opening and closing balances of the Company’s accounts receivable, unbilled receivables, and deferred revenues are as follows:

Accounts ReceivableUnbilled Receivable
Contract Acquisition
Costs, Net
(Non-current)
Deferred Revenue (Current)Deferred Revenue
(Non-current)
(In thousands)
Balance as of December 31, 2022
$53,468 $33,069 $43,804 $84,494 $174 
  Increase (decrease), net6,914 (11,649)(6,450)(2,636)9 
Balance as of December 31, 2023
$60,382 $21,420 $37,354 $81,858 $183 
Increase (decrease), net(6,177)(4,260)1,972 10,556 (60)
Balance as of March 31, 2024
$54,205 $17,160 $39,326 $92,414 $123 

Amortization expense in connection with contract acquisition cost was approximately $4.9 million and $8.3 million for the three months ended March 31, 2024 and 2023, respectively.

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, based on both specific and general reserves. The Company maintains general reserves on a collective basis by considering factors such as historical experience, creditworthiness, the age of the trade receivable balances, and current economic conditions. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers. The activity in the allowance for credit losses is as follows:

March 31,
2024
December 31,
2023
(In thousands)
Balance, beginning of year$9,290 9,239 
Additions charged to costs and expenses4,722 3,319 
Deductions/write-offs(4,777)(3,268)
Balance, end of period
$9,235 $9,290 


Note 3. Net Loss Per Share

14

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






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 0.750% Convertible Senior Notes due 2024 (“2024 Notes”) at a ratio of 25.9182 shares of its common stock per $1,000 principal amount of the 2024 Notes. Assumed converted shares of the Company’s common stock are weighted for the period the 2024 Notes were outstanding. In applying the “if-converted” method for diluted EPS, the Company would assume conversion of its 0% Convertible Senior Notes due 2026 at a ratio of 13.2933 shares of its common stock per $1,000 principal amount of such notes. See Note 8 – Convertible Senior Notes, Net of Current Portion and Capped Call Transactions for additional information about the 2024 Notes and 2026 Notes.
The following table presents shares used in calculating basic and diluted EPS for the three months ended March 31, 2024 and 2023, as follows:
Three Months Ended March 31,
20242023
(In thousands, except per share amounts)
Net loss $(35,631)$(17,420)
Weighted average number of shares outstanding, basic and diluted88,081,654 75,774,812 
Net loss per share, basic and diluted$(0.40)$(0.23)

Further, the following securities were excluded from the computation of diluted EPS, as their effect would have been anti-dilutive:
As of March 31,
20242023
Shares subject to outstanding common stock options and employee stock purchase plan3,251,520 4,078,938 
Restricted stock units8,052,908 4,331,255 
Earn-outs 23,818,594 
Conversion option of the 2024 Notes 1,878,862 
Conversion option of the 2026 Notes6,879,283 6,879,283 
Total18,183,711 40,986,932 
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 chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, evaluates performance, makes operating decisions, and allocates resources based on the financial information presented on a consolidated basis. Accordingly, management has determined that the Company operates as one operating and reportable segment.

The Company was previously organized into two operating segments for purposes of making operating decisions and assessing performance: the Business segment and the Consumer segment. During the first quarter of 2023, the Consumer segment (consisting solely of the Kasamba business) was divested. As a result, the divestiture of Kasamba eliminated the Company’s Consumer segment. See Note 19 – Divestiture for additional information.
15

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






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 March 31, 2024 and December 31, 2023:

March 31,December 31,
20242023
(In thousands)
United States$430,731 $438,420 
Germany41,778 45,424 
Australia11,865 11,660 
Netherlands5,843 5,863 
Other (1)
13,135 12,438 
Total long-lived assets$503,352 $513,805 
——————————————
(1)United Kingdom, Japan, France, Italy, Spain, Canada, and Singapore

Note 5. Goodwill and Intangible Assets, Net

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. 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, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from the Company’s business. If these estimates or their related assumptions change in the future, the Company may be required to record impairment for these assets.
The changes in the carrying amount of goodwill as of March 31, 2024 and December 31, 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 adjustment1,312 
Balance as of December 31, 2023$285,631 
Adjustments to goodwill:
Goodwill impairment (1)
(3,627)
Foreign exchange adjustment(1,048)
Balance as of March 31, 2024$280,956 

(1) These amounts represent the entire accumulated goodwill impairment balance as of March 31, 2024.


16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






As a result of the Company’s intention to sell or dispose of its WildHealth reporting unit, the Company recorded a non-cash impairment charge of $3.6 million in the condensed consolidated statements of operations during the three months ended March 31, 2024, to recognize a full impairment of goodwill associated with its WildHealth reporting unit. There were no impairments in the Company’s Business reporting unit during the three months ended March 31, 2024. There were no impairments of goodwill during the three months ended March 31, 2023.

Intangible Assets, Net

Intangible assets are summarized as follows:
March 31, 2024
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying AmountWeighted
Average
Amortization
Period
(In thousands)(In years)
Amortizing intangible assets:
Technology$94,562 $(65,107)$29,455 5.0
Customer relationships32,060 (20,057)12,003 10.0
Patents15,895 (2,066)13,829 12.9
Trademarks1,404 (761)643 5.0
Trade names1,044 (1,044) 2.8
Other914 (835)79 4.1
Total$145,879 $(89,870)$56,009 


December 31, 2023
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying AmountWeighted
Average
Amortization
Period
(In thousands)(In years)
Amortizing intangible assets:
Technology$94,549 $(60,465)$34,084 5.0
Customer relationships32,025 (19,542)12,483 10.0
Patents15,350 (1,916)13,434 12.9
Trademarks
1,400 (707)693 5.0
Trade names1,044 (672)372 2.8
Other914 (355)559 4.1
Total$145,282 $(83,657)$61,625 
 
Amortization expense is calculated over the estimated useful life of the asset. Aggregate amortization expense for intangible assets and finance leases, net was $4.2 million and $5.4 million for the three months ended March 31, 2024 and 2023, respectively. Amortization expense included in cost of revenue in our condensed consolidated statements of operations was $3.3 million and $4.6 million for the three months ended March 31, 2024 and 2023, respectively.

As a result of our impairment test in the first quarter of 2024, the Company recognized an immaterial non-cash impairment charge of $2.2 million included in impairment of intangibles and other assets in the condensed consolidated statements of operations, related to intangible assets associated with its WildHealth reporting unit, due to a plan to sell or dispose of the WildHealth reporting unit, as discussed above. There were no impairments of intangible assets during the three months ended March 31, 2023.

17

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






As of March 31, 2024, estimated annual amortization expense for the next five years and thereafter is as follows:  
Estimated Amortization Expense
(In thousands)
Remainder of 2024
$11,567 
202514,996 
202612,160 
20271,004 
2028821 
Thereafter15,461 
Total$56,009 

Note 6. Property and Equipment, Net

Property and equipment are stated at cost, net of accumulated depreciation, and amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. The Company reviews the estimated useful lives of its property and equipment on an ongoing basis. The following table presents the detail of property and equipment, net for the periods presented:

March 31,
2024
December 31,
2023
Useful life
(In thousands)
(In years)
Internal-use software development costs$186,746 $181,079 5
Computer equipment and software126,728 123,580 
3 to 5
Furniture, equipment and building improvements329 327 
The lesser of 5 or estimated useful life
Finance lease right-of-use assets128 3,060 2
Property and equipment, at cost313,931 308,046 
Less: accumulated depreciation(196,038)(188,721)
Property and equipment, net $117,893 $119,325 
Depreciation and amortization expense of property and equipment was $8.2 million and $7.4 million during the three months ended March 31, 2024 and 2023, respectively.

Expenditures for routine maintenance and repairs are charged to operating expense as incurred. Major renewals and improvements are capitalized and depreciated over their estimated useful lives.

There were no impairments of property and equipment during the three months ended March 31, 2024 and 2023.

Total depreciation included in our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 is as follows:

18

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






March 31,
2024
March 31,
2023
(In thousands)
Cost of revenue $1,682 $2,247 
Sales and marketing 900 726 
General and administrative 158 161 
Product development 5,485 4,228 
Total
$8,225 $7,362 
Note 7. Accrued Expenses and Other Current Liabilities
The following table presents the detail of accrued expenses and other current liabilities for the periods presented:
March 31,
2024
December 31,
2023
(In thousands)
Professional services and consulting and other vendor fees$56,593 $67,585 
Payroll and other employee-related costs13,214 20,767 
Finance lease liability 104 3,037 
Restructuring1,808 2,076 
Sales commissions1,645 734 
Non-income tax 556 556 
Other1,586 2,269 
Total$75,506 $97,024 


Note 8. Convertible Senior Notes, Net of Current Portion and Capped Call Transactions

Convertible Senior Notes due 2024 and Capped Calls

In March 2019, the Company issued $230.0 million aggregate principal amount of its 0.750% Convertible Senior Notes due 2024 (the “2024 Notes”) in a private placement. Interest on the 2024 Notes was payable semi-annually in arrears on March 1 and September 1 of each year. The 2024 Notes matured on March 1, 2024, on which date the Company repaid in full the outstanding $72.5 million in aggregate principal amount of the 2024 Notes.    

On March 21, 2023, the Company entered into individual privately negotiated transactions (the “Note Repurchase Agreements”) with certain holders of its 2024 Notes, pursuant to which the Company agreed to pay an aggregate of approximately $149.7 million in cash for the repurchase of approximately $157.5 million in aggregate principal amount of the 2024 Notes (the “Note Repurchases”). During the first quarter of 2023, the Company recognized a $6.1 million gain, net of transaction costs of $0.5 million on debt extinguishment, which represented the difference between the carrying value and the fair value of the 2024 Notes just prior to the Note Repurchases, which was recorded in Other (expense) income, net in the condensed consolidated statements of operations. The gain on debt extinguishment was subsequently adjusted by an immaterial amount of $1.1 million with a total gain of $7.2 million reported as of December 31, 2023.

Upon completion of the Note Repurchases, the aggregate principal amount of the 2024 Notes was reduced by $157.5 million to $72.5 million and the carrying amount of the 2024 Notes reduced by $228.3 million to $72.0 million. A corresponding portion of the 2024 capped calls were terminated in connection following the Note Repurchases as required by their terms for minimal consideration.

As of March 31, 2024, there was no outstanding principal amount of the 2024 Notes.

Convertible Senior Notes due 2026 and Capped Calls

19

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






In December 2020, the Company issued $517.5 million aggregate principal amount of its 0% Convertible Senior Notes due 2026 (the “2026 Notes” and together with the 2024 Notes, the “Notes”) in a private placement.

The 2026 Notes will mature on December 15, 2026, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. The total net proceeds from the offering of the 2026 Notes, after deducting debt issuance costs, was approximately $505.3 million.

Each $1,000 in principal amount of the 2026 Notes is initially convertible into 13.2933 shares of the Company’s common stock par value $0.001, which is equivalent to an initial conversion price of approximately $75.23 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its 2026 Notes in connection with such a corporate event. The 2026 Notes are not redeemable prior to the maturity date of the 2026 Notes and no sinking fund is provided for the 2026 Notes. If the Company undergoes a fundamental change (as defined in the indenture governing the 2026 Notes), which includes the failure of our common stock to be listed or quoted on any of the Nasdaq Global Select Market, The Nasdaq Global Market or the New York Stock Exchange, holders may require the Company to repurchase for cash all or any portion of their 2026 Notes in principal amounts of $1,000 or a multiple thereof at a fundamental change repurchase price equal to 100% of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid special interest to, but excluding, the fundamental change repurchase date.

Holders of the 2026 Notes may convert their 2026 Notes at their option at any time prior to the close of business on the business day immediately preceding August 15, 2026, in multiples of $1,000 principal amount, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2026 Notes on each applicable trading day as determined by the Company; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the indenture governing the 2026 Notes) per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the 2026 Notes on each such trading day; (3) with respect to any 2026 Notes that the Company calls for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after August 15, 2026, holders may convert all or any portion of their 2026 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

During the three months ended March 31, 2024, the conditions allowing holders of the 2026 Notes to convert were not met.

The 2026 Notes are senior unsecured obligations of the Company.

As a result of the adoption of ASU 2020-06, the 2026 Notes are accounted for as a single liability, and the carrying amount of the 2026 Notes is $512.1 million as of March 31, 2024, consisting of principal of $517.5 million, net of unamortized issuance costs of $5.4 million. The 2026 Notes were classified as long term liabilities in the accompanying condensed consolidated balance sheets as of March 31, 2024. The remaining term over which the 2026 Notes’ debt issuance costs will be amortized is 2.7 years at an effective interest rate of 0.40% for the three months ended March 31, 2024.

In connection with the offering of the 2026 Notes, the Company entered into privately-negotiated capped call option transactions with certain counterparties (the “2026 capped calls”). The 2026 capped calls each have an initial strike price of approximately $75.23 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2026 Notes. The 2026 capped calls have initial cap prices of $105.58 per share, subject to certain adjustment events. The 2026 capped calls cover, subject to anti-dilution adjustments, approximately 6.88 million shares of common stock. The 2026 capped calls are generally intended to reduce or offset the potential dilution to the common stock upon any conversion of the 2026 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. The 2026 capped calls expire on December 15, 2026, subject to earlier exercise. The 2026 capped calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event, a tender offer, and a
20

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






nationalization, insolvency or delisting involving the Company. In addition, the 2026 capped calls are subject to certain specified additional disruption events that may give rise to a termination of the 2026 capped calls, including changes in law, failure to deliver, and hedging disruptions. The 2026 capped calls are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost of $46.1 million incurred to purchase the 2026 capped calls was recorded as a reduction to additional paid-in capital in the accompanying condensed consolidated balance sheets.

Unamortized debt issuance costs incurred in connection with securing the Company’s financing arrangements are presented in the condensed consolidated balance sheets as a direct deduction from the carrying amount of the outstanding borrowings, consistent with debt discounts. All deferred financing costs are amortized to interest expense. The net carrying amount of the liability component of the Notes as of March 31, 2024 and December 31, 2023 is as follows:

March 31,
2024
December 31,
2023
(In thousands)
Principal$517,500 $589,992 
Unamortized issuance costs(5,424)(6,034)
Total net carrying value$512,076 $583,958 
Less: short-term debt, net 72,393 
Long-term debt, net$512,076 $511,565 


The following table sets forth the interest expense recognized related to the Notes:
Three Months Ended March 31,
20242023
(In thousands)
Contractual interest expense$91 $441 
Amortization of debt issuance costs610 920 
Total interest expense$701 $1,361 

Interest expense of $0.7 million and $1.4 million is reflected as a component of interest expense, net in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023, respectively.

Note 9. Leases

The Company has non-cancelable operating and finance leases for its corporate offices and other service agreements. Its leases have remaining lease terms of less than one to five years, some of which include options to extend. The Company uses the non-cancelable lease term when recognizing the right-of-use (“ROU”) assets and lease liabilities, unless it is reasonably certain that a renewal or termination option will be exercised.

The Company continues to actively assess its global lease portfolio. However, any additional de-recognition of ROU assets and incurrence of various one-time expenses in connection with early termination of additional leases are not expected to be material to its financial condition or results of operations.

21

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






Supplemental cash flow information related to leases for the periods ended March 31, 2024 and 2023 is as follows:

Three Months Ended
March 31,
20242023
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows for operating leases$842 $974 
   Operating cash flows for finance leases18 24 
   Financing cash flows for finance leases327 958 

The components of lease costs for the periods ended March 31, 2024 and 2023 are as follows:

Three Months Ended
March 31,
20242023
(In thousands)
Finance lease cost
   Amortization of right of use assets$334$911
   Interest1824
Operating lease cost2,9022,740
   Total lease cost$3,254$3,675

March 31,
2024
March 31,
2023
Weighted Average Remaining Lease Term:
Operating leases2.0 years1.7 years
Finance leases1.6 years1.0 year
Weighted Average Discount Rate:
Operating leases7 %7 %
Finance leases7 %4 %

Supplemental balance sheet information related to leases is as follows:
22

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






Financial Statement ClassificationMarch 31,
2024
December 31,
2023
(In thousands)
Assets
Operating right-of-use assets
Operating lease right-of-use assets
$3,431 $4,135 
Finance right-of-use assets
Property and equipment, net128 3,060 
Liabilities
Current liabilities:
Operating lease liabilitiesOperating lease liabilities$2,632 $2,719 
Finance lease liabilitiesAccrued expenses and other current liabilities104 3,037 
Non-current liabilities:
Operating lease liabilities
Operating lease liabilities, net of current portion
1,466 2,173 
Finance lease liabilitiesOther liabilities55 85 

Future minimum lease payments under non-cancellable operating and finance leases (with an initial or remaining lease term in excess of one year) are as follows:
March 31, 2024
Operating
Leases
Finance
Leases
(In thousands)
2024 (remaining nine months for March 31, 2024)
$2,186 $83 
2025
1,689 83 
2026
316  
2027
172  
2028
86  
Thereafter  
Total minimum lease payments4,449 166 
Less: present value adjustment(351)(7)
Present value of lease liabilities$4,098 $159 

Note 10. Fair Value Measurements

The Company measures its cash equivalents at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs reflect: quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
23

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

Financial Assets and Liabilities

The carrying amount of cash, accounts receivable, and accounts payable approximate their fair value due to their short-term nature. The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2024 and December 31, 2023, are summarized as follows:

March 31, 2024
Level 1Level 2Level 3
Total
(In thousands)
Assets
Cash equivalents:
Money market funds$84,990 $ $ $84,990 
Total assets$84,990 $ $ $84,990 

December 31, 2023
Level 1Level 2Level 3
Total
(In thousands)
Assets
Cash equivalents:
Money market funds$174,701 $ $ $174,701 
Total assets$174,701 $ $ $174,701 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions based on the best information available.

The Company’s money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as Level 1 within the fair value hierarchy. The Company’s contingent earn-out liability was measured at fair value on a recurring basis and was classified as Level 3 within the fair value hierarchy. For 2023, the fair value was based on the negotiated contracts with the selling shareholders. Significant changes in unobservable inputs could result in significantly lower or higher fair value measurements.

On a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. The Company uses an income approach and inputs that constitute Level 3.

The estimated fair value of outstanding balances of our 2024 Notes and 2026 Notes are as follows:

24

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






Level of HierarchyFair ValuePrincipal BalanceUnamortized Issuance CostsNet Carrying Value
(In thousands)
March 31, 2024
2026 Notes2$367,497 $517,500 $(5,424)$512,076 
December 31, 2023
2024 and 2026 Notes2$435,883 $589,992 $(6,034)$583,958 

Management determines the fair value by using Level 2 inputs based on antithetic variable technique done by an independent valuation specialist. Refer to Note 8Convertible Senior Notes, Net of Current Portion and Capped Call Transactions for additional information.
The Company did not have Level 3 liabilities during the three months ended March 31, 2024. The changes in fair value of the Level 3 liabilities during the annual period ended December 31, 2023 are as follows:
December 31,
2023
Balance, beginning of year$72,221 
Additions in the period 
Change in fair value of contingent consideration4,629 
Change in fair value of liability awards(27,857)
Payments(48,993)
Balance, end of year
$ 
Certain former stakeholders of the Company’s acquisitions were eligible to receive additional cash or share considerations based on the attainment of certain operating metrics in the periods subsequent to the acquisitions. These earn-out arrangements were accounted for as either contingent considerations arrangements or compensation arrangements. Contingent considerations were fair valued using significant inputs that are not observable in the market.
The earn-outs determined to be compensatory were remeasured each reporting period based on whether the performance targets were probable of being achieved and recognized over the related service periods. During the year ended December 31, 2023, the Company settled the VoiceBase, Tenfold and e-Bot7 and WildHealth, Inc. earn-outs for approximately $19.9 million, $9.3 million, $7.7 million, and $12.0 million, respectively.

Changes to the fair value of the earnouts were recognized as a component of stock-based compensation expense and other income (expense), net in the accompanying condensed consolidated statements of operations. Payments in cash were recognized as a component of compensation expense and payments in stock were recognized as a component of equity in the accompanying condensed consolidated statements of operations. There were no outstanding earnout liabilities as of March 31, 2024 based on settlements that were completed as of December 31, 2023.
Note 11. Commitments and Contingencies

Employee Benefit Plans

The Company has a 401(k) defined contribution plan covering all eligible employees. The Company’s 401(k) policy is a Safe Harbor Plan, whereby the Company matches 100% of the first 3% of eligible compensation and 50% of the next 2% of eligible compensation. Furthermore, the match is immediately vested. Salaries and related expenses include $1.1 million and $1.4 million of employer matching contributions for the three months ended March 31, 2024 and 2023, respectively.

Letters of Credit

As of March 31, 2024, the Company had letters of credit totaling $0.5 million outstanding as a security deposit for the due performance by the Company of the terms and conditions of a supply contract.
25

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)







Contractual obligations

The Company’s purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business. These purchase obligation agreements are primarily related to contracts with vendors in connection with Information Technology (“IT”) infrastructure and cloud computing-related services with remaining terms of two years or less. Our contractual obligations as of March 31, 2024, did not materially change from the amounts disclosed in our 2023 Annual Report on Form 10-K.

Indemnifications

The Company enters into service and license agreements in its ordinary course of business. Pursuant to some of these agreements, the Company agrees to indemnify certain customers from and against certain types of claims and losses suffered or incurred by them as a result of using the Company’s products.

The Company also has agreements whereby its executive officers and directors are indemnified for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a directors and officers insurance policy that reduces its exposure and enables the Company to recover a portion of any future amounts paid subject to customary deductibles. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of March 31, 2024 and December 31, 2023.

Non-Income Related Taxes

The Company is subject to sales tax liabilities, plus applicable interest, for states in which it has an economic nexus. The accrual balance for sales tax liabilities included within the condensed consolidated balance sheets was $0.6 million as of March 31, 2024 and December 31, 2023.

Note 12. Stockholders’ Equity

Stock-Based Compensation

The Company’s stock-based compensation generally includes stock options, restricted stock units (“RSUs”), performance-vesting restricted stock units (“PRSUs”), and purchases under the Company’s 2019 Employee Stock Purchase Plan. Stock-based compensation expense related to RSUs is based on the market value of the underlying stock on the date of grant and the related expense is recognized ratably over the requisite service period. The stock-based compensation expense related to PRSUs is estimated at the grant date based on the expectation that performance goals will be achieved at the stated target level. The amount of compensation cost recognized depends on the relative satisfaction of the performance condition based on performance to date.

Stock Option Plans

The Company’s 2019 Stock Incentive Plan became effective on April 11, 2019. The 2019 Stock Incentive Plan, as amended and restated, allows the Company to grant incentive stock options and restricted stock units to its employees and directors to participate in the Company’s future performance through stock-based awards at the discretion of the board of directors. The number of shares authorized for issuance as of March 31, 2024 was 42,367,744 shares in the aggregate. Options to acquire common stock granted thereunder have ten-year terms. As of March 31, 2024, 2,286,084 shares of common stock remained available for issuance (taking into account all option exercises and other equity award settlements through March 31, 2024).

Employee Stock Purchase Plan

As of March 31, 2024, there were 2,000,000 shares authorized and reserved for issuance under the 2019 ESPP. As of March 31, 2024, 948,453 shares of common stock remained available for issuance under the ESPP (taking into account all share purchases through March 31, 2024).

26

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






Inducement Plan

There are 11,459,009 shares of common stock authorized and reserved for issuance under the 2018 Inducement Plan. On March 8, 2024, the Company’s board of directors amended the plan and authorized 5,300,000 new shares for issuance. As of March 31, 2024, 5,994,216 shares of common stock remained available for issuance under the Inducement Plan (taking into account all option exercises and other equity award settlements through March 31, 2024).

Stock Option Activity

The following table is a summary of the Company’s stock option activity for the three months ended March 31, 2024:
Stock Option ActivityWeighted Average Remaining Contractual Term
(In years)
Aggregate Intrinsic Value
(In thousands)
Options
(In thousands)
Weighted
Average
Exercise Price
Balance outstanding at December 31, 20233,137 $22.68 4.84$40 
Granted1,000 
(1)
1.02 
Exercised  
Cancelled or expired(885)23.65 
Balance outstanding at March 31, 20243,252 15.75 5.993 
Options vested and expected to vest 647 9.30 3.71 
Options exercisable at March 31, 20241,977 $21.56 9.35$3 

(1) Represents a stock option award, granted to the Company’s new Chief Executive Officer, to acquire shares of the Company’s common stock that will vest upon the satisfaction of certain performance-based and time-based vesting conditions. This award, provided for under the terms of the Chief Executive Officer’s employment agreement, was approved by the Compensation Committee of the Company’s board of directors (the “Board”) as a standalone inducement award under applicable Nasdaq rules and does not count against the number of shares reserved for issuance under the Company’s 2019 Stock Incentive Plan or the Company’s 2018 Inducement Plan.

As of March 31, 2024, there was approximately $2.8 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of approximately 1.9 years.

Restricted Stock Unit and Performance-Vesting Restricted Stock Unit Activity

The following table is a summary of the Company’s RSUs and PRSUs activity for the three months ended March 31, 2024:
Number of Shares
Weighted Average Grant Date Fair Value
Aggregate Fair Value
(In thousands)(Per share)(In thousands)
Balance outstanding at December 31, 20235,064 $12.53 $19,193 
Awarded3,893 1.17 
Vested(433)16.94 
Forfeited(471)16.61 
Non-vested and outstanding at March 31, 20248,053 6.56 7,879 
Expected to vest 5,285 $7.02 $5,153 
RSUs granted to employees generally vest over a three to four-year period or upon achievement of certain performance conditions. As of March 31, 2024, total unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested RSUs and PRSUs was approximately $37.7 million and the weighted-average remaining vesting period was 1.9 years.
27

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)







PRSUs granted are generally subject to both a service-based vesting condition and a performance-based vesting condition. PRSUs will vest upon the achievement of specified performance targets and subject to continued service through the applicable vesting dates. The associated compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied. There were no PRSUs granted during the three months ended March 31, 2024. PRSUs granted during the three months ended March 31, 2023 were immaterial.

Total stock-based compensation costs included in our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 are as follows:

Three Months Ended March 31,
20242023
(In thousands)
Cost of revenue $343 $2,035 
Sales and marketing 2,455 2,404 
General and administrative 1,798 2,632 
Product development 2,962 4,261 
Total
$7,558 $11,332 

Note 13. Restructuring

During the second quarter of 2022, LivePerson began a restructuring initiative to realign the Company’s cost structure to better reflect significant product and business model innovation and then-recent changes due to acquisitions and factors outside the control of the Company. As part of the restructuring initiative, the Company reoriented its global product and engineering organization for greater efficiency and focus, and reallocated some spending to increase its investment in customer success and go-to-market initiatives. In 2023, due to the changing technology landscape related to the evolution of LLMs, we were able to identify opportunities for significant cost savings because the latest generation of LLMs is able to build a bot in minutes, enabling reduction of headcount previously devoted to bot-building. Additionally, we have moved to a product-led growth structure where we flattened the organization to align to more efficient sales and service support ratios. In connection with the restructuring initiatives, the Company recognized restructuring costs of $3.3 million and $11.5 million during the three months ended March 31, 2024 and 2023, respectively, which is included in restructuring costs in the accompanying condensed consolidated statements of operations. Such costs primarily include severance and other compensation costs as well as IT infrastructure contract termination costs.

The following table presents the detail of the liability for the Company’s restructuring charges, which is included within accrued expenses and other current liabilities within the accompanying condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023:

March 31,
2024
December 31,
2023
(In thousands)
Balance, beginning of the year$2,076 $803 
IT contract termination costs715 5,744 
Severance and other compensation associated costs2,594 16,920 
Cash payments(3,577)(21,391)
Balance, end of period$1,808 $2,076 

The Company anticipates that payments associated with the employee severance and other compensation associated costs reflected in the table above will be substantially completed by December 31, 2024.

28

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






The following table presents the detail of expenses for the Company’s restructuring charges for the three months ended March 31, 2024 and 2023:

Three Months Ended
March 31,
20242023
(In thousands)
Lease restructuring costs
$ $1 
IT contract termination costs715  
Severance and other associated costs2,594 11,514 
Total restructuring costs$3,309 $11,515 



Note 14. Legal Matters

Stockholder Litigation

In December 2023, a putative stockholder class action entitled Damri v. LivePerson, Inc., No. 1:23-cv-10517, was filed under the federal securities laws against the Company, its former Chief Executive Officer, and its Chief Financial Officer in the United States District Court for the Southern District of New York. The complaint alleges that the Company’s Form 10-Q filings and forecasts for the first, second, and third quarters of fiscal year 2022 were false and misleading in violation of Section 10(b) of the Securities Exchange Act of 1934, based on the Company’s later disclosures and report on Form 10-K on March 16, 2023. A parallel litigation on behalf of stockholders who purchased their shares on the Tel Aviv Stock Exchange, entitled Weissbrod v. LivePerson, Inc., is pending in the Tel Aviv District Court in Israel, but has been stayed pending further developments in the Damri case.

In January 2024, a purported derivative action entitled Marti v. LoCascio, No. 1:24-cv-00598, was filed in the United States District Court for the Southern District of New York by a purported stockholder of the Company against the Company’s former Chief Executive Officer, its Chief Financial Officer, most of the members of the current board of directors and several former directors. The derivative litigation claims that the Company itself was harmed by the same acts and omissions underlying the Damri federal securities lawsuit, and seeks to recover unspecified losses on behalf of the Company. The Marti case is stayed pending further developments in the Damri case.

In January 2024, a purported stockholder of the Company filed a lawsuit against the Company and its Board of Directors entitled Browne v. Layfield, No. 2024-0079, in the Court of Chancery of the State of Delaware. The complaint asserted a claim for breach of fiduciary duty based upon a Tax Benefits Preservation Plan. In February 2024, the Board approved technical amendments to the Tax Benefits Preservation Plan which were filed by the Company on Form 8-K, and the case was dismissed as moot, subject to attorneys’ fees on behalf of the plaintiff.

In February 2024, Starboard Value LP and several of its related entities and investment funds filed a lawsuit against the Company, its former Chief Executive Officer and its Chief Financial Officer entitled Starboard Value LP v. LivePerson, Inc., No. 2024-0103, in the Court of Chancery of the State of Delaware. The complaint alleges common law fraud, fraudulent inducement and negligent misrepresentation in connection with an alleged scheme to induce Starboard to settle its 2022 proxy contest against the Company and, as stated in the complaint, involves previous Starboard allegations of misrepresentations in the Company's public disclosures that the Company previously informed Starboard were found to be unsubstantiated following an independent investigation. The complaint seeks unspecified damages. The defendants have filed an answer denying the substantive allegations of the compliant.

COVID-Related Matters

As has been widely reported, there is heightened scrutiny by the federal government across many programs related to global novel coronavirus disease (“COVID-19”) that were introduced during the COVID-19 pandemic. The Company previously provided products and services related to COVID-19 testing and accompanying software. Those products and
29

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






services have been the subject of inquiry and review by Medicare, the Department of Justice and the U.S. Food and Drug Administration.

The Company has discontinued all products and services related to COVID-19, and has responded to and intends to continue to cooperate with governmental inquiries related to its previous engagement in COVID-19 related product and service offerings.

Other Legal, Administrative, Governmental and Regulatory Matters

From time to time, the Company is or may be subject to or involved in legal, administrative, governmental and/or regulatory proceedings, inquiries and investigations as well as actual or threatened litigation, claims and/or demands (each an “Action” and collectively “Actions”). These have included and may include (without limitation) Actions brought by or against the Company, its affiliates, subsidiaries, directors and/or officers with respect to intellectual property, contracts, financial, commercial, employment, legal, compliance, privacy, data security, regulatory and/or other matters related to our business, as well as Actions brought against the Company’s customers for which the Company has a contractual indemnification obligation.

Regardless of the outcome, Actions can have an adverse impact on the Company because of defense and/or settlement costs, diversion of management resources, reputational risks and other factors.

Accruals

The Company accrues for certain contingencies when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated and discloses certain contingencies for which no accrual has been made as appropriate and in compliance with ASC 450, “Contingencies”. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. The accruals or estimates, if any, resulting from the foregoing analysis, are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter.


Note 15. Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are expected to become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

The Company includes interest accrued on the underpayment of income taxes and certain interest expense and penalties, if any, related to unrecognized tax benefits as a component of the income tax provision. The Company maintains a valuation allowance against its U.S., e-bot7 Germany and Bulgaria deferred tax assets as it considered its cumulative losses in recent years as a significant piece of negative evidence. Since valuation allowances are evaluated by jurisdiction, the Company believes that the deferred tax assets related to LivePerson Australia Pty. Ltd., Engage Pty. Ltd., LivePerson (UK) Ltd., LivePerson Japan, and LivePerson Ltd. (Israel) are more likely than not to be realized as these jurisdictions have positive cumulative pre-tax book income after adjusting for permanent and one-time items. During the year ended December 31, 2023, there was an increase in the valuation allowance recorded of $23.7 million.

For the three months ended March 31, 2024, the Company recorded a tax provision of $0.4 million. This entire amount consists of a tax provision on operating earnings of non-US subsidiaries and interest accrual on unrecognized tax benefits in Israel.

30

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






The Company had a valuation allowance on certain deferred tax assets for the year ended December 31, 2023 of $211.2 million. Inherent in the Company’s 2024 annual effective tax rate is an estimated increase in the valuation allowance of $24.9 million, all of which would be recorded as an expense. During 2023, an increase in the valuation allowance in the amount of $23.7 million was recorded as an expense.


Note 16. Equity Method Investment

On February 13, 2022, the Company and Pasaca Capital Inc. (“Pasaca”) entered into a joint venture agreement (the “JV Agreement”) to form Claire Holdings, Inc. (“Claire”), a joint venture to build, create, and administer a marketplace for health and well-being diagnostic testing. Pursuant to the terms of the JV Agreement, the Company agreed to contribute a total of $19.0 million over a five-year period in exchange for a 19.2% ownership interest in Claire. Pasaca agreed to contribute $80.0 million to Claire over a five-year period in exchange for an 80.8% ownership interest in Claire. The Company accounts for its 19.2% interest in Claire using the equity method of accounting. The Company recorded its ownership percentage of losses of Claire in Other income (expense), net in the amount of $0.6 million for the three months ended March 31, 2023. The Company’s equity method investment in joint venture was reduced to zero during the prior year, based on the prior year losses, and remained at zero on the condensed consolidated balance sheet as of March 31, 2024. Refer to Note 18 – Related Parties for additional information.


Note 17. Variable Interest Entities

The Company prepares its condensed consolidated financial statements in accordance with ASC 810, “Consolidation”, which provides for the consolidation of variable interest entities (“VIEs”) of which the Company is the primary beneficiary.

In February 2022, the Company acquired WildHealth as well as certain variable interests that WildHealth has in four Professional Corporations (“PCs”). The PCs are owned by a medical practitioner in accordance with certain state laws which restrict the corporate practice of medicine and require medical practitioners to own such entities. WildHealth provides management and other services to the PCs in exchange for a management fee and provides financial support to the PCs through a revolving credit arrangement. WildHealth also has separate agreements with the equity holder of the PCs where it may acquire and assign such equity interests for certain PCs. The agreement entitles WildHealth to control rights sufficient to require the Company to consolidate the balance sheet and results of operations of the PCs as VIEs. The Company determined that the PCs are VIEs as WildHealth is the primary beneficiary of the PCs.

The assets, liabilities, revenues, and operating results of the VIEs after elimination of intercompany transactions were not material as of and for the three months ended March 31, 2024.


Note 18. Related Parties

Related parties are defined as entities related to the Company’s directors or main shareholders as well as equity method affiliates. During the year ended December 31, 2023, the Company provided services to Claire, an equity method affiliate (refer to Note 16 – Equity Method Investment for additional information on the equity method affiliate) in exchange for fees through certain commercial arrangements. These arrangements facilitated Claire’s build out and operations.

In connection with the JV Agreement, the Company entered into commercial agreements with Claire, under which the Company agreed to provide custom software development and managed services in exchange for fees governed by the terms and conditions set forth therein. In accordance with guidance under ASC 606, Claire is considered a customer of the Company. No revenues were recognized for the services provided to Claire included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2024, compared to revenues of $3.8 million for the three months ended March 31, 2023. As of March 31, 2024, the Company has accounts receivable of $2.1 million included in the Company’s condensed consolidated balance sheet, which is fully recognized in its allowance for credit losses. Total accounts receivable of $2.1 million as of December 31, 2023 was included in the Company’s condensed consolidated balance sheet, for which the Company recognized $1.5 million in its allowance for credit losses.


Note 19. Divestiture

31


Fiscal 2023 Divestitures

In the fourth quarter of 2022, the Company entered into a non-binding Letter of Intent to divest Kasamba, Inc. and Kasamba LTD (together “Kasamba”), which represented the Company’s Consumer segment. Pursuant to ASC Subtopic 360-10, “Impairment or Disposal of Long-Lived Assets”, the Company applied held for sale accounting treatment to the assets and liabilities of Kasamba. Accordingly, the related net assets were separately presented in current assets and current liabilities as held for sale on the consolidated balance sheets as of December 31, 2022, up until the close of the transaction. The held for sale classification also resulted in ceasing depreciation and amortization on the designated assets.

The Share Purchase Agreement between Ingenio, LLC (“Ingenio”) and the Company closed on March 20, 2023. In accordance with the Share Purchase Agreement, the Company sold all of the issued and outstanding shares of Kasamba for $16.9 million which was received in cash upon closing; and $2.6 million deferred payment to be received within a year of the close transaction date, which was included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets as of March 31, 2023. $11.8 million was required to be held in various escrow accounts for up to 15 months, and was included in restricted cash on the Company’s consolidated balance sheets; however, $9.8 million of this escrow amount was released as of December 31, 2023. The transaction resulted in a gain of $17.6 million, which was recognized and presented separately as a gain on divestiture on the Company’s consolidated statements of operations during the year ended December 31, 2023. During the three months ended March 31, 2024, the Company recognized a post-closing adjustment pertaining to the final agreement in the amount of $1.8 million, which is recorded in General and administrative expenses in the condensed consolidated statement of operations.



32




Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors.”

Key Metrics

Average Annual Revenue Per Enterprise and Mid-market Customer (“ARPC”) and revenue retention are currently the key performance metrics our management uses to assess the health and trajectory of the Company. These metrics should be viewed independently of revenue, deferred revenue and remaining performance obligations. ARPC increased to approximately $625,000 for the trailing twelve months ended March 31, 2024, as compared to approximately $560,000 for the trailing twelve months ended March 31, 2023. Revenue retention for our enterprise and mid-market customers on the Conversational Cloud, which represents the trailing twelve month change in total revenue from existing customers after upsells, downsells and attrition, was approximately 89% in the first quarter of 2024, below our target range of 105% to 115% and below the comparable period in 2023.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). As such, we are required to make certain estimates, judgments and assumptions that management believes are reasonable based upon the information available. We base these estimates on our historical experience, future expectations and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments that may not be readily apparent from other sources.

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2024, as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 4, 2024.

Recently Issued Accounting Standards

See Note 1 – Description of Business and Basis of Presentation under Item 1 of this Quarterly Report on Form 10-Q for additional information about recent accounting guidance not yet adopted and recently adopted accounting pronouncements.


33


Results of Operations

We enable 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 Conversational Cloud enables businesses to have conversations with millions of consumers as personally as they would with one consumer.


Comparison of the Three Months Ended March 31, 2024 and March 31, 2023

Revenue

The following tables set forth our results of operations for the periods presented and as a percentage of our revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.    

Three Months Ended March 31,
20242023% Change
(Dollar in thousands)
Revenue
$85,149 $107,661 (21)%

Revenue decreased by 21% to $85.1 million for the three months ended March 31, 2024 from $107.7 million for the comparable period in 2023. This decrease in revenue is driven primarily by decreases in hosted services of $15.8 million and professional services of approximately $6.7 million. Included in hosted services is a decrease in revenue that is variable based on interactions and usage of approximately $4.5 million for the three months ended March 31, 2024. Further, 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. This sale eliminated the entire Consumer segment, as a result of which revenue is presented within a single consolidated segment. Hosted services for Consumer included $7.1 million for the three months ended March 31, 2023 relating to Kasamba.


Cost of Revenue

Cost of revenue consists of compensation costs relating to employees who provide customer service to our customers, compensation costs relating to our network support staff, outside labor provider costs, the cost of supporting our server and network infrastructure, and allocated occupancy costs and related overhead.

Three Months Ended March 31,
20242023% Change
(Dollar in thousands)
Cost of revenue$29,463 $43,096(32)%
Percentage of total revenue35 %40 %
Headcount (at period end)229 226%

Cost of revenue decreased by 32% to $29.5 million for the three months ended March 31, 2024, from $43.1 million for the comparable period in 2023. This decrease in expense is primarily attributable to a decrease in outsourced labor and related costs of approximately $6.6 million, a decrease in salary and employee-related expenses due to attrition from prior period of approximately $3.9 million, a decrease in compensation expense of $1.7 million, a decrease in amortization expenses of approximately $1.8 million related to purchased intangible assets associated with prior period acquisitions and finance leases settled during the three months ended March 31, 2024. These decreases were partially offset by an increase in software, hosting and other expenses of approximately $0.5 million.


34


Sales and Marketing

Sales and marketing expenses consist of compensation and related expenses for sales and marketing personnel, as well as advertising, marketing events, public relations, trade show exhibit expenses and allocated occupancy costs and related overhead.
Three Months Ended March 31,
20242023% Change
(Dollar in thousands)
Sales and marketing$30,130 $34,470(13)%
Percentage of total revenue35 %32 %
Headcount (at period end)287 405(29)%

Sales and marketing expenses decreased by 13% to $30.1 million for the three months ended March 31, 2024 from $34.5 million for the comparable period in 2023. This decrease was primarily attributable to a decrease in marketing expense of approximately $4.3 million, a decrease in salary and employee-related expenses of approximately $0.7 million, and a decrease in software and hosting expenses of approximately $0.6 million, partially offset by an increase in business services and outsourced subcontracted labor of approximately $1.1 million.

General and Administrative

Our general and administrative expenses consist of compensation and related expenses for executive, accounting, legal, human resources and administrative personnel, professional fees and other general corporate expenses.

Three Months Ended March 31,
2024