LivePerson Inc.

08/13/2025 | Press release | Distributed by Public on 08/13/2025 15:13

Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's 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 and Current Trends
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 $655,000 for the trailing twelve months ended June 30, 2025, as compared to approximately $630,000 for the trailing twelve months ended June 30, 2024. Revenue retention for our enterprise and mid-market customers on the LivePerson Platform, which represents the trailing twelve month change in total revenue from existing customers after upsells, downsells and attrition, was approximately 78% in the second quarter of 2025, belowour target range of105% to 115% and below the comparable period in 2024.
We have observed heightened renewal hesitation and slower than anticipated new business bookings, primarily driven by customer uncertainty regarding our financial stability as well as broader macroeconomic factors extending enterprise buying cycles.
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. We evaluate these estimates on an annual basis. Actual results could differ from those estimates under different assumptions or conditions, and any differences could be material.
There have been no significant changes in our critical accounting policies and estimates during the three and six months ended June 30, 2025, as compared to the critical accounting policies and estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operationsincluded in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 14, 2025.
Recently Issued Accounting Standards
See Note 1 - Description of Business and Basis of Presentationunder Item 1 of this Quarterly Report on Form 10-Q for additional information about recent accounting guidance.
Results of Operations
We enable brands to leverage the LivePerson Platform's sophisticated intelligence engine to connect with consumers through an integrated suite of mobile and online business messaging technologies. Our platform enables businesses to have conversations with millions of consumers as personally as they would with one consumer.
Comparison of the Three and Six Months Ended June 30, 2025 and June 30, 2024
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.
Revenue
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Revenue
$ 59,600 $ 79,875 $ (20,275) (25) % $ 124,300 $ 165,024 $ (40,724) (25) %
Revenue decreased by 25%to $59.6 millionand by 25% to $124 million for the three and six months ended June 30, 2025, respectively,from $79.9 million and $165.0 million for the comparable periods in 2024. This decrease in revenue is due to a decrease in hosted services of $17.0 million and $33.4 million primarily driven by customer cancellations and downsells and a decrease in professional services of $3.3 million and $7.4 millionfor the three and six months ended June 30, 2025, respectively. Included in hosted services is a decrease of $2.6 millionand $8.0 million inrevenue that is variable based on interactions and usage for the three and six months ended June 30, 2025, respectively.
Cost of Revenue (exclusive of depreciation and amortization shown separately below)
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 June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Cost of revenue $ 18,038 $ 16,432 $ 1,606 10 % $ 36,256 $ 40,887 $ (4,631) (11) %
Percentage of total revenue 30 % 21 % 29 % 25 %
Headcount (at period end) 176 202 (13) % 176 202 (13) %
Cost of revenue increased by 10% to $18.0 million for the three months ended June 30, 2025 from $16.4 million for the comparable period in 2024. This increase in expense is primarily attributable to an increase in software and hosting expenses of $3.9 million, partially offset by a decrease in salary and employee-related expenses of $1.8 million due to attrition from prior periods, and a decrease in business services and outsourced contracted labor of $0.5 million.
Cost of revenue decreasedby 11% to $36.3 million for the six months ended June 30, 2025 from $40.9 million for the comparable period in 2024. This decrease in expense is primarily attributable to a decrease in salary and employee-related expenses of $4.2 million due to attrition from prior periods and a decrease in business services and outsourced contracted labor of $3.6 million, partially offset by an increase in software and hosting expenses of $3.2 million.
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 June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Sales and marketing $ 19,888 $ 25,733 $ (5,845) (23) % $ 43,373 $ 54,963 $ (11,590) (21) %
Percentage of total revenue 33 % 32 % 35 % 33 %
Headcount (at period end) 221 250 (12) % 221 250 (12) %
Sales and marketing expenses decreased by 23% to $19.9 million for the three months ended June 30, 2025 from $25.7 million for the comparable period in 2024. This decrease was primarily attributable to a decrease in salary and employee-related expenses of $1.9 million due to attrition from prior periods, a decrease in marketing expenses of $1.8 million, a decrease in business services and outsourced contracted labor of $1.2 million, and a decrease in software and hosting expenses of $1.0 million.
Sales and marketing expenses decreased by 21% to $43.4 million for the six months ended June 30, 2025 from $55.0 million for the comparable period in 2024. This decrease was primarily attributable to a decrease in salary and employee-related expenses of $5.4 million due to attrition from prior periods, a decrease in business services and outsourced contracted labor of $2.4 million, a decrease in software and hosting expenses of $1.9 million, and a decrease in marketing expenses of $1.8 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 June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
General and administrative $ 7,945 $ 24,415 $ (16,470) (67) % $ 24,729 $ 46,009 $ (21,280) (46) %
Percentage of total revenue 13 % 31 % 20 % 28 %
Headcount (at period end) 138 138 - % 138 138 - %
General and administrative expenses decreased by 67% to $7.9 million for the three months ended June 30, 2025 from $24.4 million for the comparable period in 2024. This decrease is primarily due to a decrease in legal and other consulting costs of $7.6 million, a decrease in bad debt expense of $4.8 million, a decrease in salary and employee-related expenses of $1.8 million, and a decrease in business services and outsourced contracted labor of $1.2 million.
General and administrative expenses decreased by 46% to $24.7 million for the six months ended June 30, 2025 from $46.0 million for the comparable period in 2024. This decrease is primarily due to a decrease in legal and other consulting fees of $6.2 million, a decrease in bad debt expense of $9.1 million, a divestiture-related working capital adjustment of $1.8 million in the first quarter of 2024, a decrease in salary and employee-related expenses of $1.5 million, a decrease in leadership transition costs of $1.1 million, and a decrease in business services and outsourced contracted labor of $1.1 million.
Product Development
Our product development expenses consist of compensation and related expenses for product development personnel as well as allocated occupancy costs and related overhead and outsourced labor and expenses for testing new versions of our software.
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Product development $ 13,843 $ 19,674 $ (5,831) (30) % $ 29,877 $ 44,309 $ (14,432) (33) %
Percentage of total revenue 23 % 25 % 24 % 27 %
Headcount (at period end) 358 424 (16) % 358 424 (16) %
Product development costs decreased by 30% to $13.8 million for the three months ended June 30, 2025 from $19.7 million forthe comparable period in 2024. This decrease is primarily attributable to a decrease in software and hosting expenses of $2.2 million a decrease in salary and employee-related expenses of $1.5 million due to attrition from prior periods, and a decrease in business services and outsourced contracted labor of $1.2 million.
Product development costs decreased by 33% to $29.9 million for the six months ended June 30, 2025 from $44.3 million for the comparable period in 2024. This decrease is primarily attributable to a decrease in salary and employee-related expenses of $5.4 million due to attrition from prior periods, a decrease in business services and outsourced contracted labor of $3.9 million and a decrease in software and hosting expenses of $3.8 million.
We continued to make investments in public cloud migration, and in enhancing and expanding new features of the LivePerson Platform. For the three and six months ended June 30, 2025, $3.0 million and $6.3 million was capitalized for internal-use software, respectively, compared to $4.8 million and $10.5 million, respectively, for the comparable periods in 2024.
Depreciation and Amortization Expense
Our depreciation and amortization expense relates to depreciation and amortization of our property and equipment and to amortization of our intangible assets and finance leases.
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Depreciation and amortization expense $ 5,758 $ 11,396 $ (5,638) (50) % $ 11,576 $ 23,838 $ (12,262) (51) %
Percentage of total revenue 10 % 14 % 9 % 14 %
Total depreciation and amortization expense decreased by 50% to $5.8 million for the three months ended June 30, 2025 from $11.4 million for the comparable period in 2024. The decrease was primarily driven by the lower intangible asset balance due to impairments during 2024, which drove a reduction in amortization of $3.5 million, in addition to a reduction in depreciation of $2.1 million primarily related to a lower internal-use software balance due to impairments during 2024.
Total depreciation and amortization expense decreased by 51% to $11.6 million for the six months ended June 30, 2025 from $23.8 million for the comparable period in 2024. The decrease was primarily driven by the lower intangible asset balance due to impairments during 2024, which drove a reduction in amortization of $7.5 million, in addition to a reduction in depreciation of $4.8 million primarily related to a lower internal-use software balance due to impairments during 2024.
Impairment of Goodwill
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Impairment of goodwill
$ - $ - $ - - % $ - $ 3,627 $ (3,627) (100) %
Percentage of total revenue - % - % - % 2 %
There were no goodwill impairment charges for the three and six months ended June 30, 2025, and the three months ended June 30, 2024. The impairment charge during the six months ended June 30, 2024 was a result of our impairment test in the first quarter of 2024, attributable to the goodwill associated with our WildHealth reporting unit, which was fully divested in 2024.
Impairment of Intangibles and Other Assets
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Impairment of intangibles and other assets
$ - $ 8,347 $ (8,347) (100) % $ - $ 10,568 $ (10,568) (100) %
Percentage of total revenue - % 10 % - % 6 %
There were no impairment charges related to intangibles and other assets during the three and six months ended June 30, 2025. For the three months ended June 30, 2024, impairment of intangibles and other assets represents a non-cash charge of $8.3 million related to the impairment of internal-use software. Impairment of intangibles and other assets for the six months ended June 30, 2024 also includes a non-cash charge of $2.2 million as a result of our impairment test in the first quarter of 2024, attributable tothe intangible assets associated with our WildHealth reporting unit.
Restructuring Costs
We maintain restructuring initiatives to realign our cost structure with our current business model, in which we have flattened the organization to align to more efficient sales and service support. While the Company's restructuring efforts are ongoing, the 2024 restructuring activities were considered to be substantially completed as of December 31, 2024.
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Restructuring costs $ 561 $ 3,119 $ (2,558) (82) % $ 1,866 $ 6,428 $ (4,562) (71) %
Percentage of total revenue 1 % 4 % 2 % 4 %
Restructuring costs decreased by 82% to $0.6 million for the three months ended June 30, 2025, from $3.1 million for the comparable period in 2024. This decrease is attributable to a $3.8 million decrease in severance and other associated costs due to fewer reductions in our workforce compared to the comparable period, partially offset by a $1.3 million increase in IT infrastructure contract termination costs due to a reversal in the comparable period which did not recur in the current period.
Restructuring costs decreased by 71% to $1.9 million for the six months ended June 30, 2025, from $6.4 million for the comparable period in 2024. This decrease is attributable to a $5.1 million decrease in severance and other associated costs due to fewer reductions in our workforce compared to the comparable period, partially offset by a $0.6 million increase in IT infrastructure contract termination costs due to a reversal in the comparable period which did not recur in the current period.
Total Other (Expense) Income, net
Interest expense represents interest expense from our convertible senior notes, and amortization of debt issuance costs and debt discount. Interest income represents interest earned from cash deposits. Other (expense) income, net consists primarily of fair value adjustments for our Warrants and foreign currency gains and losses.
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Interest expense $ (7,866) $ (2,051) $ (5,815) (284) % $ (15,344) $ (2,752) $ (12,592) (458) %
Interest income 1,493 1,214 279 23 % 2,950 3,247 (297) (9) %
Gain on debt extinguishment - 73,083 (73,083) (100) % - 73,083 (73,083) (100) %
Other (expense) income, net (2,520) 606 (3,126) (516) % 5,967 369 5,598 1,517 %
Total other (expense) income, net
$ (8,893) $ 72,852 $ (81,745) (112) % $ (6,427) $ 73,947 $ (80,374) (109) %
Total other (expense) income, net decreased by 112% to expense of $8.9 million for the three months ended June 30, 2025 from income of $72.9 million for the comparable period in 2024. This decrease is primarily due to a gain of $73.1 million on the extinguishment of the 2026 Notes during the comparable period. In addition, a $3.0 million loss in the fair value of our Warrants was recorded in other (expense) income, net during the current period. The remaining amount of total other (expense) income, net, is primarily attributable to interest income on our money market accounts, and the impact of currency rate fluctuations.
Total other (expense) income, net decreased by 109% to expense of $6.4 million for the six months ended June 30, 2025 from income of $73.9 million for the comparable period in 2024. This decrease is primarily due to a gain of $73.1 million on the extinguishment of the 2026 Notes during the comparable period. In addition, a $5.8 million gain in the fair value of our Warrants was recorded in other (expense) income, net during the current period. The remaining amount of total other (expense) income, net, is primarily attributable to interest income on our money market accounts, and the impact of currency rate fluctuations.
Provision for Income Taxes
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 $ Change % Change 2025 2024 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Provision for income taxes
$ 384 $ 1,258 $ (874) (70) % $ 39 $ 1,620 $ (1,581) (98) %
Provision for income taxes was $0.4 million and a less than $0.1 million for the three and six months ended June 30, 2025, compared to $1.3 million and $1.6 million for the comparable periods in 2024. Our consolidated effective tax rate was impacted by the statutory income tax rates applicable to each of the jurisdictions in which we operate, valuation allowance recorded against losses generated in the U.S. and Germany, a tax benefit related to an increase in tax receivables, and changes to unrecognized tax benefits in Israel. The overall tax provision recorded represents tax on non-U.S. earnings in the various jurisdictions in which we operate and the provision for U.S. state and local impacts. The total tax expense associated with non-U.S. jurisdictions is relatively consistent between periods.
Liquidity and Capital Resources
The following describes the Company's cash flows for the six months ended June 30, 2025 and 2024:
Six Months Ended June 30,
2025 2024
(In thousands)
Condensed Consolidated Statements of Cash Flows Data:
Net cash used in operating activities $ (14,772) $ (16,832)
Net cash used in investing activities (7,947) (17,716)
Net cash provided by (used in) financing activities $ 444 $ (31,797)
As of June 30, 2025, we had approximately $162.0 million in cash and cash equivalents, a decrease of $21.3 million from December 31, 2024. The decrease is primarily attributable to various uses of cash for operating purposes, and purchases of property and equipment.
Cash Flows from Operating Activities
Net cash used in operating activities was $14.8 million for the six months ended June 30, 2025. Our net loss of $29.8 million includes the effect of non-cash expenses of depreciation of $11.6 million, stock-based compensation of $9.0 million, interest expense of $7.7 million, and amortization of debt issuance costs and accretion of debt discount of $3.7 million, partially offset by a gain from the change in the fair value of our Warrants of $5.8 million. Net cash used in operating activities was further driven by an increase in prepaid expenses and other current assets of $25.3 million anda decrease in deferred revenue of $2.1 million, partially offset by a decrease in accounts receivable of $5.7 million, a decrease in contract acquisition costs of $4.2 million, and an increase in accounts payable, accrued expenses and other current liabilities of $6.4 million.
Net cash used in operating activities was $16.8 million for the six months ended June 30, 2024. Our net income of $6.2 million includes the effect of non-cash expenses related to depreciation of $15.9 million,stock-based compensation of $13.5 million, amortization of purchased intangible assets and finance leases of $7.9 million, allowance for credit losses of $8.9 million, intangible and other assets impairment of $10.6 millionand goodwill impairment of $3.6 million, partially offset by gain on debt extinguishment of $73.1 million, in connection with the exchange of our 2026 Notes. Cash used in operating activities was further driven by a decrease in accrued expenses and other current liabilities of $36.9 million, partially offset by decreases in accounts receivable of $16.2 million and prepaid expenses and other current assets of $8.7 million.
Cash Flows from Investing Activities
Net cash used in investing activities was $7.9 million for the six months ended June 30, 2025, and was primarily driven by purchases of property and equipment.
Net cash used in investing activities was $17.7 million for the six months ended June 30, 2024, and was primarily driven by purchases of property and equipment
Cash Flows from Financing Activities
Net cash used in financing activities was $0.4 millionfor the six months ended June 30, 2025, and was primarily driven by proceeds from the issuance of common stock under our ESPP.
Net cash used in financing activities was $31.8 million for the six months ended June 30, 2024, which was driven primarily by the full repayment of our 2024 Notes for $72.5 million, the repurchase of 2026 Notes for $4.9 million and payments of debt issuance costs of $4.2 million in connection with the debt exchange transaction, partially offset by proceeds of $50 million from the issuance of 2029 Notes.
We have incurred significant expenses to develop our technology and services, to hire employees in our customer service and sales and marketing departments, and for the amortization of purchased intangible assets, as well as acquisition costs and non-cash compensation costs. Historically, we have incurred net losses and negative cash flows for various quarterly
and annual periods since our inception, including during numerous quarters and annual periods in the past several years. As of June 30, 2025, we had an accumulated deficit of $1,021.1 million.
Our principal sources of liquidity are the net proceeds from the issuance of our convertible senior notes, after deducting purchaser discounts as applicable and debt issuance costs paid by us, and payments received from customers using our products. We anticipate that our current cash and cash equivalents will be sufficient to satisfy our working capital and capital requirements for at least the next 12 months. However, we cannot assure you that we will not require additional funds prior to such time, and we would then seek to sell additional equity or debt securities through public financings, or seek alternative sources of financing. Further, we continue to plan to refinance the remaining balance of the 2026 Notes on or prior to their maturity. If greater than $60.0 million principal amount of 2026 Notes remains outstanding 91 days prior to their maturity date, then the 2029 Notes will immediately become due and payable. We cannot assure you that additional funding will be available on favorable terms, when needed, if at all. If we are unable to obtain any necessary financing, we may be required to further reduce the scope of our planned sales and marketing and product development efforts, which could materially adversely affect our financial condition and operating results. In addition, we may require additional funds in order to fund more rapid expansion, to develop new or enhanced services or products or to invest in or acquire complementary businesses, technologies, services or products.
The indenture governing the 2029 Notes includes a financial covenant that requires the Company to maintain a minimum cash balance of $60 million (excluding the proceeds of the 2029 Notes) at all times. Proceeds of the 2029 Notes may be used only to (i) pay interest, or cash settle, the 2029 Notes, (ii) cash settle the Warrants, (iii) exchange, repurchase, redeem, replace or otherwise refinance 2026 Notes (or refund or replenish cash of the Company or any of its subsidiaries used to do so after May 13, 2024) or (iv) pay or reimburse certain fees, costs and expenses related to the foregoing and the other transactions contemplated by the Exchange and Purchase Agreement as amended or otherwise modified from time to time.
Upon conversion or exercise, the 2029 Notes and cash-settled warrants would be settled for cash. In addition, the 2026 Notes and the 2029 Notes are subject to repurchase at the option of holders if the Company undergoes a "Fundamental Change" (as defined in the indentures governing the 2026 Notes and the 2029 Notes, as applicable), and the 2026 Notes and the 2029 Notes are subject to events of default customary for notes issued in connection with similar transactions, which could result in the acceleration of amounts owed. See Note 8 - Convertible Senior Notes, Capped Call Transactions and Warrantsfor additional information.
The Company may from time to time, subject to board authorization and any applicable restrictions under contracts to which it may be or become a party, depending upon market conditions and the Company's financing needs, use available funds to refinance or repurchase its outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms the Company deems appropriate (which, in the case of debt securities, may be below par) and subject to the Company's cash requirements for other purposes and other factors management deems relevant.
We do not engage in off-balance sheet financing arrangements.
LivePerson Inc. published this content on August 13, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on August 13, 2025 at 21:13 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]