Annual Report 2018
OUR MISSION IS TO MAKE LIFE EASIER BY TRANSFORMING HOW PEOPLE COMMUNICATE WITH BRANDS.
LivePerson 475 10th Ave, 5th Floor, New York, NY 10018 ©2019 LivePerson, Inc. All rights reserved. BRINGING MESSAGING TO THE MAINSTREAM About LivePerson Board of Directors Executive Officers
LivePerson, Inc. (NASDAQ: LPSN) makes life easier by transforming how people communicate with brands. LiveEngage, the Robert P. LoCascio Robert P. LoCascio Company’s enterprise-class, cloud-based platform was designed for Conversational Commerce, enabling businesses and Chairman of the Board, Chairman of the Board, consumers to connect through conversational interfaces, such as in-app and mobile messaging, while leveraging bots and Chief Executive Officer Chief Executive Officer Artificial Intelligence (AI) to increase efficiency. LivePerson, Inc. More than 18,000 businesses, including Adobe, EE, HSBC, IBM, L'Oreal, Orange, PNC, and The Home Depot use our Christopher Greiner Conversational Commerce solution to orchestrate humans and AI, at scale, and create a convenient and deeply Peter Block Executive Vice President, personal relationship. Independent Consultant and Chief Financial Officer Partner in Designed Learning Inc. LivePerson is headquartered in New York City, with U.S. offices in Alpharetta (GA), Austin (TX), Mountain View (CA), Alexander Spinelli San Rafael (CA), Seattle (WA), and international offices in Amsterdam, Berlin, London, Mannheim, Melbourne, Milan, Kevin C. Lavan Paris, Ra'anana (Israel), Reading (UK), Sydney, Tel Aviv, and Tokyo. Executive Vice President, CFO, Autoclear LLC Global Chief Technology Officer
Jill Layfield Monica L. Greenberg Co-founder & CEO, Tamara Mellon Brand Executive Vice President, Business Affairs and General Counsel Total revenue (in millions) Annual revenue per user (in thousands) Fred Mossler Independent Consultant Daryl J. Carlough Senior Vice President, $65.7 $285 $61.7 $64.2 $270 William G. Wesemann Global and Corporate Controller $58.2 $255 $240 Independent Consultant
Shareholders Information
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Corporate Headquarters Counsel LivePerson, Inc. Fried, Frank, Harris, Shriver & Jacobson LLP ENTERPRISE ADOPTION OF MESSAGING 475 Tenth Avenue One New York Plaza New York, NY 10004 40% New York, NY 10018
20% Investor Relations Independent Registered 50% 200+ 1,100 Public Accounting Firm OF MESSAGING BRANDS POWERING EMPLOYEES Copies of our Annual Report on Form 10-K for the 0 CONVERSATIONS CONVERSATIONAL GLOBALLY 2016 2017 2018 year ended December 31, 2018 are available free BDO USA, LLP USE AUTOMATION COMMERCE ON LIVEENGAGE of charge, upon request to: 100 Park Avenue *ARPU is for enterprise and midmarket customers New York, NY 10017 Investor Relations LivePerson, Inc. Transfer Agent 475 Tenth Avenue American Stock Transfer & Trust Company New York, NY 10018 6201 15th Avenue Safe Harbor Statement Brooklyn, NY 11219 Statements in this report regarding LivePerson that are not historical facts are forward-looking statements and are subject to risks and uncertainties that Stock Listing could cause actual future events or results to differ materially from such statements. Any such forward-looking statements, including but not limited to financial Our common stock is listed on the Nasdaq Global Company Information on the Web guidance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. It is routine for our internal projections and Select Market and Tel Aviv Stock Exchange under expectations to change as the quarter and year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which Current information about LivePerson, press releases the symbol “LPSN” we base our expectations may change. Although these expectations may change, we are under no obligation to inform you if they do. Actual events or results and investor information are available on our website may differ materially from those contained in the projections or forward-looking statements. Readers are referred to the reports and documents filed by us from at www.liveperson.com time to time with the U.S. Securities and Exchange Commission, including the Annual Report on Form 10-K enclosed herein, for a discussion of risks and other important factors that could cause actual results to differ from those discussed in the projections or the forward-looking statements. C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75% C+M K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% M+Y K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% C+Y K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75% C+M K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% M+Y K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% C+Y K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75
Dear Fellow Stockholders,
2018 was the year that LivePerson drove the Conversational Commerce industry forward into the mainstream. After laying the foundation with early adopters and innovators, by the end of 2018, more than 40% of our enterprise customer base and over 200 of the world’s largest and most admired brands were powering Conversational Commerce on our LiveEngage platform.
We set our sites on the 270 billion calls made to customer care each year as our first beachhead. Our premise was that consumers would be eager to use their favorite messaging apps as an alternative to calling a 1-800 number and being put on hold, while brands were tired of supporting expensive, inefficient call centers that led to poor user experiences. We weren’t wrong. We are typically seeing 10% to 30% of call volumes switch to messaging when our customers simply offer consumers, who have called into the 1-800 number, the option to message with a brand, rather than wait on hold to speak with an agent.
Taking this strategy one step further, in August, 2018, T-Mobile, launched Team of Experts nationwide and turned traditional customer service on its head by ending the customer service runaround and hated phone menu. With Team of Experts, when T-Mobile customers call or message T-Mobile, they get a dedicated tight-knit team. This was an industry first, and it was made possible just a brief two years after we launched Conversational Commerce. I expect other brands to follow suit in the months to come.
As more and more brands lit up on our platform in 2018, each of the leading consumer technology companies, from Apple to Google, WhatsApp, Facebook and Amazon, also added their momentum to the industry, integrating into LiveEngage and reinforcing the view that consumers should message brands rather than call them. With a robustly evolving ecosystem, we expect that the pace of adoption will accelerate, and that by 2020, virtually 100% of our enterprise customers will be powering amazing conversational experiences leveraging messaging with human agents, bots and AI.
The Internet of the Conversational Economy By 2020, we won’t just be talking customer care either. The ability to connect with consumers through persistent, personalized, content rich experiences is igniting the imagination of business leaders, and driving discussions around sales and marketing use cases that could rival care in volume.
We are already seeing the first instances of this progression unfold. BuddyBank, a subsidiary of Unicredit, launched as the world’s first purely conversational bank, providing not just banking, but a full range of concierge services, all powered by messaging and AI. Aramark, one of the world’s largest hospitality companies, launched Brew-to-You, creating a new stadium experience, where fans sitting in a sports arena can order food and beverages directly to their seats, through Apple Business Chat and bots. The Cosmopolitan hotel in Las Vegas launched Rose, an irresistible companion bot that rolls out the red carpet to guests, making each one feel like a VIP by offering them access to the hottest clubs, restaurants and Vegas experiences.
These customers are what we call “Firsts” or the pioneers building out what will emerge as the new Internet of the conversational economy. On the new Internet, consumers will have fulfilling conversations with any brand about any product or service they are interested in, see reviews, pictures and videos, and then make purchases or set appointments, all without ever dialing a 1-800 number, navigating around on a website or downloading another app. Brands will introduce a new product or campaign that reaches billions of interested consumers through unique, engaging, conversational marketing experiences, rather than continue spending on low-return email blasts and digital ads that redirect consumers to generic website landing pages or 1-800 numbers.
159263 TOPPAN live person AR_Text_Insert Signature 1 Side A 6th5thBlackYellowMagentaCyan ] 4 Page Out DTP SB To Match Hant 8.25x10.75 (25 X38) .25 HT C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75% C+M K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% M+Y K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% C+Y K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75% C+M K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% M+Y K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% C+Y K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75
In order to make the new Internet work, LivePerson is aligning all the conversational interfaces we’ve come to rely upon in our daily lives, such as Apple iMessages, SMS, WhatsApp, Alexa and Facebook Messenger, so that consumers can engage brands through any channel they prefer. We are then connecting brands to these channels with a platform that leverages the combination of powerful AI, bots and human agents to provide delightful and highly efficient experiences. Finally, we are bringing our expert perspective, which stems from hundreds of millions of hosted conversations spanning a 20 year history, that will guide brands on how to build successful, lasting relationships with consumers.
I was around at the beginning of the first Internet, when everyone knew that something really powerful was being built. Conversational Commerce feels much bigger, and I believe it will have an even bigger impact on the overall global economy. This new conversational economy will create many new technology leaders and we believe we are in a position today to be one of the largest. Thank you for supporting us on this journey and I look forward to another year of great progress.
Best regards,
159263 TOPPAN live person AR_Text_Insert Signature 1 Side B 6th5thBlackYellowMagentaCyan ] 4 Page In
2
h aehro,aeicroae yrfrneit tm 0 1 2 3ad1 fPr I fti om10-K. Form this of III Part of 14 and 13 12, 11, 10, Items into reference by incorporated are hereof, date the
otoso h eitatsdfntv rx ttmn o h 09Ana etn fSokodr,wihw lnt iesbeun to subsequent file to plan we which Stockholders, of Meeting Annual 2019 the for statement proxy definitive registrant’s the of Portions
OUET NOPRTDB REFERENCE BY INCORPORATED DOCUMENTS
nFbur 9 09 39665sae ftergsrn’ omnsokwr outstanding. were stock common registrant’s the of shares 63,936,625 2019, 19, February On
rc nTeNsa lblSlc akto htdt) h eitatde o aeaynnvtn omnsokoutstanding. stock common non-voting any have not does registrant The date). that on Market Select Global Nasdaq The on price
h eitatsms eetycmltdscn iclqatr a prxmtl 1272386(optdb eeec otels eotdsale reported last the to reference by (computed $1,207,203,816 approximately was quarter) fiscal second completed recently most registrant’s the
h grgt aktvleo h oigcmo tc edb o-fiitso h eitata fJn 0 08(h atbsns a of day business last (the 2018 30, June of as registrant the of non-affiliates by held stock common voting the of value market aggregate The
No Yes Act). Exchange the of 12b-2 Rule in defined (as company shell a is registrant the whether mark check by Indicate ☒ ☐
opyn ihaynwo eie iaca conigsadrspoie usatt eto 3a fteEcag Act. Exchange the of 13(a) Section to pursuant provided standards accounting financial revised or new any with complying ☐
fa mriggot opn,idct ycekmr ftergsrn a lce o oueteetne rniinpro for period transition extended the use to not elected has registrant the if mark check by indicate company, growth emerging an If
mriggot company growth Emerging company reporting Smaller filer Non-accelerated filer Accelerated filter accelerated Large ☐ ☐ ☐ ☐ ☒
eegn rwhcmay nRl 2- fteEcag Act. Exchange the of 12b-2 Rule in company” growth “emerging
opn ra mriggot opn.Sedfnto f“ag ceeae ie, aclrtdflr”“mle eotn opn”and company” reporting “smaller filer,” “accelerated filer,” accelerated “large of definition See company. growth emerging an or company
niaeb hc akwehrtergsrn salreaclrtdflr naclrtdflr o-ceeae ie,salrreporting smaller filer, non-accelerated a filer, accelerated an filer, accelerated large a is registrant the whether mark check by Indicate
om1- rayaedett hsFr 10-K. Form this to amendment any or 10-K Form ☐
otie,t h eto eitatskolde ndfntv rx rifrainsaeet noprtdb eeec nPr I fthis of III Part in reference by incorporated statements information or proxy definitive in knowledge, registrant’s of best the to contained,
niaeb hc aki icoueo eiqetflr usatt tm45o euainSKi o otie een n ilntbe not will and herein, contained not is S-K Regulation of 405 Item to pursuant filers delinquent of disclosure if mark check by Indicate
No Yes files). ☐ ☒
oRl 0 fRglto - uigtepeeig1 ots(rfrsc hre eidta h eitatwsrqie osbi such submit to required was registrant the that period shorter such for (or months 12 preceding the during S-T Regulation of 405 Rule to
niaeb hc akwehrtergsrn a umte lcrnclyeeyItrcieDt ierqie ob umte pursuant submitted be to required File Data Interactive every electronically submitted has registrant the whether mark check by Indicate
2 a ensbett uhfln eurmnsfrteps 0dy.Yes days. 90 past the for requirements filing such to subject been has (2) No ☐ ☒
xhneAto 94drn h rcdn 2mnh o o uhsotrpro httergsrn a eurdt iesc eot) and reports), such file to required was registrant the that period shorter such for (or months 12 preceding the during 1934 of Act Exchange
niaeb hc akwehrtergsrn:()hsfldalrprsrqie ob ie yScin1 r1()o h Securities the of 15(d) or 13 Section by filed be to required reports all filed has (1) registrant: the whether mark check by Indicate
niaeb hc aki h eitati o eurdt ierprsprun oScin1 rScin1()o h c.Yes Act. the of 15(d) Section or 13 Section to pursuant reports file to required not is registrant the if mark check by Indicate No ☒ ☐
niaeb hc aki h eitati elkonsaoe sur sdfndi ue45o h euiisAt Yes Act. Securities the of 405 Rule in defined as issuer, seasoned well-known a is registrant the if mark check by Indicate No ☒ ☐
euiisrgsee usatt eto 2g fteAct: the of 12(g) Section to pursuant registered Securities None
omnSok a au 001prsaeTeNSA tc aktLLC Market Stock NASDAQ The share per $0.001 value par Stock, Common
il fEc ls aeo ahEcag nWihRegistered Which on Exchange Each of Name Class Each of Title
euiisrgsee usatt eto 2b fteAct: the of 12(b) Section to pursuant registered Securities
Rgsrn’ eehn ubr nldn raCode) Area Including Number, Telephone (Registrant’s
22 609-4200 (212)
Adeso rnia xctv fie)(i Code) (Zip Offices) Executive Principal of (Address
e ok e ok10018 York New York, New
Floor 5 Avenue, Tenth 475
th
dniiainNumber) Identification
Saeo noprto)(...Employer (I.R.S. Incorporation) of (State
eaae13-3861628 Delaware
EatNm fRgsrn sSeiidi t Charter) Its in Specified As Registrant of Name (Exact
IEESN INC. LIVEPERSON, omsinFl ubr000-30141 Number File Commission
159263 TOPPAN live person AR_Text_Insert Sig 2 ] Sig 2 person AR_Text_Insert TOPPAN live 159263 o h rniinPro rmto from Period Transition the For
FTESCRTE XHNEATO 1934 OF ACT EXCHANGE SECURITIES THE OF
RNIINRPR USATT ETO 3O 15(d) OR 13 SECTION TO PURSUANT REPORT TRANSITION ☐
OR
o h iclYa ne eebr3,2018 31, December Ended Year Fiscal the For
FTESCRTE XHNEATO 1934 OF ACT EXCHANGE SECURITIES THE OF
NULRPR USATT ETO 3O 15(d) OR 13 SECTION TO PURSUANT REPORT ANNUAL ☒
OM10-K FORM
ahntn ..20549 D.C. Washington,
EUIISADECAG COMMISSION EXCHANGE AND SECURITIES NTDSTATES UNITED
159263 TOPPAN live person AR_Text_Insert Signature 2 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 2 159263 TOPPAN live person AR_Text_Insert Sig 2 ]
] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Black
222
i
...... 119 ...... Summary 10-K Form 16. Item
...... 119 ...... Schedules Statement Financial and Exhibits 15. Item
ATIV PART
...... 118 ...... Services and Fees Accountant Principal 14. Item
tm1.CranRltosisadRltdTascin,adDrco Independence Director and Transactions, Related and Relationships Certain 13. Item ... 118 ......
...... 118 ...... Matters Stockholder
tm1.Scrt wesi fCranBnfca wesadMngmn n Related and Management and Owners Beneficial Certain of Ownership Security 12. Item
...... 118 ...... Compensation Executive 11. Item
tm1.Drcos xctv fiesadCroaeGovernance Corporate and Officers Executive Directors, 10. Item ...... 118 ......
ATIII PART
...... 118 ...... Information Other 9B. Item
...... 116 ...... Procedures and Controls 9A. Item
...... 116 ...... Disclosure
tm9 hne nadDsgemnsWt conat nAcutn n Financial and Accounting on Accountants With Disagreements and in Changes 9. Item
tm8 osldtdFnnilSaeet n upeetr aa.. . Data Supplementary and Statements Financial Consolidated 8. Item ...... 76 ......
tm7.Qatttv n ulttv icoue bu aktRisk Market About Disclosures Qualitative and Quantitative 7A. Item ...... 75 ......
...... 55 ...... Operations
tm7 aaeetsDsuso n nlsso iaca odto n eut of Results and Condition Financial of Analysis and Discussion Management’s 7. Item
...... 50 ...... Data Financial Consolidated Selected 6. Item
...... 49 ...... Securities Equity of Purchases
tm5 aktfrRgsrn’ omnEut,RltdSokodrMtesadIssuer and Matters Stockholder Related Equity, Common Registrant’s for Market 5. Item
ATII PART
tm4 ieSft Disclosures Safety Mine 4. Item ...... 48 ......
159263 TOPPAN live person AR_Text_Insert Sig 2 ] Sig 2 person AR_Text_Insert TOPPAN live 159263
tm3 ea Proceedings Legal 3. Item ...... 47 ......
...... 47 ...... Properties 2. Item
tm1.Ursle tf Comments Staff Unresolved 1B. Item ...... 47 ......
...... 20 ...... Factors Risk 1A. Item
...... 1 ...... Business 1. Item
ATI PART
Page
AL FCONTENTS OF TABLE
08ANA EOTO OM10-K FORM ON REPORT ANNUAL 2018 IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 2 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] ORVS HS OWR-OKN TTMNST ELC UUEEET OR EVENTS MAY FUTURE REFLECT ANY RESULTS TO BY CIRCUMSTANCES. STATEMENTS IMPLY FORWARD-LOOKING OBLIGATION ACTUAL THESE ANY OR UNDERTAKE 10-K, REVISE IN NOT OUR TO DO EXPRESS FORM WE WE FORWARD-LOOKING OF STATEMENTS. FORWARD-LOOKING INCORRECT, THIS THAT OUR ANY RESULTS RISK OF IF IN — ARE THE 1A THE OR FROM FORTH SIGNIFICANTLY MATERIALIZE, “ITEM ASSUMPTIONS UNCERTAINTIES DIFFER SET ENTITLED OR UNDERLYING FROM RISKS ARE SECTION THESE OUR THE 10-K MATERIALLY OF OR IN ANY FORM IF DESCRIBED PROJECTIONS FACTORS.” THIS DIFFER FACTORS IN THE THE INCLUDING MAKE TO OUR IN WE CAUSE CONTAINED STATEMENTS RESULTS RESULTS COULD OR THAT THOSE EACH EVENTS FACTORS ACTUAL ACTUAL OF ARE FROM DO. IMPORTANT END WE THEY STATEMENTS. MATERIALLY FORWARD-LOOKING IF THE CHANGE, YOU UPON MAY DIFFER TO INFORM EXPECTATIONS PRIOR BELIEFS MAY TO THESE OBLIGATION CHANGE ALTHOUGH AND NO MAY BE YEAR. UNDER PROJECTIONS EXPECTATIONS SHOULD THE IT OUR INTERNAL OR OUR IS THEREFORE QUARTER SUCH BASE AND THE IT WE PROGRESS, THAT THAT ANY 1995. YEAR WHICH THE THE HARBOR OF YOU AS UNDERSTOOD IN REALIZED. CHANGE ACT QUARTER CLEARLY SAFE A TO EACH ASSURE EXPECTATIONS REFORM AND OR THE BE IS LITIGATION PROJECTIONS YEAR CANNOT INTERNAL TO SECURITIES THERE OUR WILL PRIVATE FOR PURSUANT WE BELIEVE ROUTINE ALL THE PROJECTIONS MADE OF WE BUT PROVISIONS ARE AND AND STATEMENTS. THEM, STATEMENTS AND FAITH, FORWARD-LOOKING BELIEFS BELIEFS FOR GOOD OUR FORWARD-LOOKING EXPECTATIONS, EXPECTATIONS, IN BASIS OUR LIMITATION, EXPRESSED REASONABLE ASSUMPTIONS. IDENTIFY ARE VARIOUS CURRENT WITHOUT PROJECTIONS OUR UPON AND THIS BASED ARE TO INCLUDING, EXPECTATIONS TRENDS, IN OPERATING HISTORICAL USED OF EXAMINATION STATEMENTS, WHEN EXPRESSIONS INTENDED SIMILAR AND 10-K. FORWARD-LOOKING OR WORDS FORM CONDITION SUCH ARE OF THIS VARIATIONS FINANCIAL AND “ANTICIPATES,” OF “PLANS,” “BELIEVES” “PROJECTS,” “EXPECTS,” “ESTIMATES,” “INTENDS,” FORWARD-LOOKING OF WORDS SECTIONS THE 10-K, ANALYSIS OPERATIONS” FORM AND THESE “BUSINESS” OF THE AND IN RESULTS FOUND STATEMENTS. PROVE DISCUSSION ARE NOT STATEMENTS MAY THESE WHICH “MANAGEMENT’S OF SUCH EXPECTATIONS, MANY ACCURATE. CURRENT BE OUR TO TO FROM ON RESULTS BASED OR ARE EVENTS MATERIALLY STATEMENTS FUTURE ACTUAL CAUSE LIVEPERSON DIFFER RISKS COULD TO THAT ABOUT SUBJECT UNCERTAINTIES ARE PROJECTIONS AND STATEMENTS FORWARD-LOOKING THESE INDUSTRY. AND CURRENT OUR OUR AND ESTIMATES ON ASSUMPTIONS, BASED STATEMENTS EXPECTATIONS, FORWARD-LOOKING ARE FACTS HISTORICAL TTMNSI HSRPR BU IEESN N.TA R NOT ARE THAT INC. LIVEPERSON, ABOUT REPORT THIS IN STATEMENTS ATOAYSAEETCNENN OWR-OKN STATEMENTS FORWARD-LOOKING CONCERNING STATEMENT CAUTIONARY ii ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Black
2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] ] 32 Page eaealaigatoiyi ovrainlCmec,pbihn rpitr Conversational proprietary a publishing Commerce, Conversational in authority endpoints. leading messaging and a Quotient industries across are Commerce Conversational in We expertise domain console. deep single developed a from conversations human-based businesses and provides By platform AI-based building. all the relationship Maven bots, of on third-party view Through focus comprehensive as can needed. a well next-best agent with as define the is Maven, that content, with touch relevant so LiveEngage up work, integrating personal transactional to serve seamlessly AI-powered repetitive a to overseeing how over engine managers, take when with AI and bot flow the actions familiar call as leveraging the ultra-efficient, we act most and become agents what into teams agents enables human training stepping Assist, the whereby platform seamlessly bots, development, agents, The and outcomes. and its bot AI conversations successful and humans, drive of center of to power tango” contact conversations “the the service the and puts of sales hands 2018, structure the platform. December into the in management of announced top Maven, on services Commerce. and back-end programs into own LiveEngage. integration on their available robust are build programming facilitating APIs to application dozen by three developers ownership extensible than enabling i.e., More of An as from; cost Home. well originate lower Google as a consumers systems, or facilitates the IVR, stack single proactive endpoints (API) Chat, a messaging interface sophisticated through Business disparate consumers Apple a which with Line, and conversations WhatsApp, of all cobrowsing regardless manage compliance, interface, can agents console (PCI) LiveEngage, reporting, Industry With and engine. analytics Card targeting real-time Payment navigate sentiment, customer delivery, them prioritization, having content queue mapping, of capacity instead and number routing 1-800 a hold. on dial wait also they and can (IVRs) when systems Brands conversations platforms. response consumers voice messaging powers browsers,interactive message consumer web LiveEngage third-party desktop to agents. and and LiveEngage mobile media care apps, use social mobile customer (SMS), including of service channels, tens digital of message with primary short brand’s thousands brands a for many scale of at and each AI, across and customers bots with of coupled millions messaging, deploy securely to and businesses AI enabling approve these call credit, We for channel. apply messaging appointments, the Commerce. leaving Conversational schedule ever messaging images store, over without ratings, experiences the all conversational like marketing - human-assisted in info payments even product products or up and see the purchases look make stores, support, across repairs, can for and journeys consumers search service example, sales, pricing, content-rich For engagements. to and and mortar research, bots personalized and and agents, brick convenient, discovery human and power from with harness lifecycle, to communication conversations consumer messaging (AI) of entire These Intelligence center Alexa. Artificial and the and Messenger Chat, same messaging Business these Business through Apple mobile the WhatsApp, Rich businesses SMS, device made with Google Messenger, connect mobile Facebook have to including the consumers interfaces, they conversational enables made technology preferred and has Our lives, peers. consumer and the digital family decade, friends, their past the of During center brands. with communicate people Overview Business 1. Item rvnt aiieteefcieeso ovrainlCmec n eie esrbertr on return measurable deliver been and LiveEngage: have Commerce from advantages services, following Conversational the professional achieved of have and customers effectiveness our expertise and of the LivePerson’s industry Certain existing legacy investment. AI. knowledge, maximize inefficient and to oftentimes domain messaging to by introduced and our powered proven legacy ones is with conversational from their modern journeys coupled that determine to their products, solutions Model to on chat Transformation them and peers email guide a voice, industry help developed against to customers benchmarked have prospective We then progression. is business relative Each maturity. conversational 159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Black opeetn ienaeaetaso ehia,sltosadcnutn rfsinl hthave that professionals consulting and solutions technical, of teams are LiveEngage Complementing Conversational for designed custom was that engine AI robust a Maven, features also LiveEngage intelligent features offerings chat real-time and messaging mobile rich of suite cloud-based robust, Our Commerce, Conversational for designed was platform, cloud-based enterprise-class, our LiveEngage, how transforming by easier life makes “our”) or “we” “Company”, the (“LivePerson”, Inc. LivePerson, ™ ne htmaue ahcsoe cosmlil e niaost seti hi ee of level their ascertain to indicators key multiple across customer each measures that Index ATI PART 1
222
2
rdwlaiga app. an downloading or
esnlzdadcnetrc omncto satraie ocliga180nme,nvgtn website a navigating number, 1-800 a calling to alternatives as communication content-rich and personalized
utmrstsato,rtninadrvneb tlzn ua gns Iadbt opoieconvenient, provide to bots and AI agents, human utilizing by revenue and retention satisfaction, customer
utmrcr nure.Teecnestoa esgn aaiiistre oe ot n increased and costs lower target capabilities messaging conversational These inquiries. care customer
n nhm esnlassat ieAea nodrgtasest usin,mk ucae n resolve and purchases make questions, to answers get order in Alexa, like assistants personal in-home and
ovrainlitrae uha M,Msegr pl uiesCa,Gol’ ihBsns Messenger, Business Rich Google’s Chat, Business Apple Messenger, SMS, as such interfaces conversational
ieesnsLvEgg ltomealscnuesadbsnse ouentrllnug over language natural use to businesses and consumers enables platform LiveEngage LivePerson’s
aktOpportunity Market
Fac) aaaa(sal,Raig(ntdKndm,TlAi Ire) n oy (Japan). Tokyo and (Israel), Aviv Tel Kingdom), (United Reading (Israel), Ra’anana (France),
Gray,Lno Uie igo) anem(emn) ebun Asrla,Mln(tl) Paris (Italy), Milan (Australia), Melbourne (Germany), Mannheim Kingdom), (United London (Germany),
Clfri)adSate(ahntn,aditrainlofcsi mtra Ntelns,Berlin (Netherlands), Amsterdam in offices international and (Washington), Seattle and (California)
eduree nNwYr iywt ..ofcsi lhrta(eri) utn(ea) a Francisco San (Texas), Austin (Georgia), Alpharetta in offices U.S. with City York New in headquartered
urnl rddo h ADQGoa eetMre n h e vvSokEcag.LvPro is LivePerson Exchange. Stock Aviv Tel the and Market Select Global NASDAQ the on traded currently
a nrdcdi oebr19.I pi 00 h opn opee niiilpbi feigadis and offering public initial an completed company the 2000, April In 1998. November in introduced was
ieesnwsicroae nteSaeo eaaei oebr19 n h ieesnservice LivePerson the and 1995 November in Delaware of State the in incorporated was LivePerson
n te topics. other and
oneigadcahn,cmuesadpormig dcto n uoig prtaiyadreligion, and spirituality tutoring, and education programming, and computers coaching, and counseling
niiulcnues(sr) sr ekassac n diei aiu aeoisicuigpersonal including categories various in advice and assistance seek Users (Users). consumers individual
Eprs h rvd nomto n nweg o e i oieadoln esgn with messaging online and mobile via fee a for knowledge and information provide who (Experts)
u osmrsrie feigi noln aktlc htcnet needn evc providers service independent connects that marketplace online an is offering services consumer Our
esnlrelationship. personal
ovrainlCmec ouin oocetaehmn n I tsae n raeacnein,deeply convenient, a create and scale, at AI, and humans orchestrate to solutions Commerce Conversational
oeta 800bsnse,icuigCtbn,HB,Oag,adTeHm eo s our use Depot Home The and Orange, HSBC, Citibank, including businesses, 18,000 than More
mlmn,miti,adspottaiinlo-rms software. on-premise traditional support and maintain, implement,
ieesneiiaetemjrt ftetm,sre nrsrcuecss n Trsucsrqie to required resources IT and costs, infrastructure server time, the of majority the eliminate LivePerson
prds raiain htaotaflyhse,mlitnn rhtcueta smitie by maintained is that architecture multi-tenant fully-hosted, a adopt that Organizations upgrades.
ot,fse mlmnain oe oa oto wesi,saaiiy otpeitblt,adsimplified and predictability, cost scalability, ownership, of cost total lower implementation, faster costs,
otdbss hsmdlofr infcn eeisoe rms-ae otae nldn oe up-front lower including software, premise-based over benefits significant offers model This basis. hosted
sa“lu optn”o otaea--evc Sa)poie,LvPro rvdssltoso a on solutions provides LivePerson provider, (SaaS) software-as-a-service or computing” “cloud a As
detsmnsadlsig nbaddadtidprywebsites. third-party and branded on listings and advertisements
nraela eeainb rvdn igepafr hteggscnuesthrough consumers engages that platform single a providing by generation lead increase •
eun and return;
eieadipoepromneb nesadn hc ntaie eie h ihs aeof rate highest the deliver initiatives which understanding by performance improve and refine •
eeaesedn htdie iio rfi yicesn iio conversions; visitor increasing by traffic visitor drives that spending leverage •
plctos ests etmsae,o hr-at esgn platforms; messaging third-party or messages, text websites, applications, ananavle oncinwt osmr i oiedvcs ihrtruhnative through either devices, mobile via consumers with connection valued a maintain •
159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2 oestsidcnatcne gns hrb euigaetcunb pt 50%; to up by churn agent reducing thereby agents, center contact satisfied more •
o2% nraeaeaeodrvleadrdc abandonment; reduce and value order average increase 20%, to
oecnein,proaie n otn-ihcnestosta nraeslscneso yup by conversion sales increase that conversations content-rich and personalized convenient, more •
0pretg ons n nacn eeto n loyalty; and retention enhancing and points, percentage 20
mrvn h vrl utmreprec,teeyfeigcsoe aifcinicesso pto up of increases satisfaction customer fueling thereby experience, customer overall the improving •
es 50%; least
ao fiinygiso tlattotmsta fvieaet,efcieyctiglbrcssb at by costs labor cutting effectively agents, voice of that times two least at of gains efficiency labor •
ospoie vngetrsaet h ubro ovrain managed; conversations of number the to scale greater even provides bots
ooea iefravieaetadtot ora iefrago htaet digA and AI Adding agent. chat good a for time a at four to two and agent voice a for time a at one to h blt o ahaett aaea aya 0msaigcnestosa ie scompared as time, a at conversations messaging 40 as many as manage to agent each for ability the •
159263 TOPPAN live person AR_Text_Insert Signature 2 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Black hs al omsaigrpeet h ags oto fwa eetmt sanal 20billion $200 nearly a is estimate considerations: following we to what interaction per calls. revenue of spend moving services average annual current that portion businesses billion our 270 believe extrapolating largest that of We by market target centers. global the estimate the this call at represents we number arrive We messaging Guide, 1-800 approximately market. addressable their of to Decision-Makers’ call billion support calls per Center 270 to cost approximately these annually median Contact report, a trillion US With IBM year. $1.5 2018 approximately each to a centers according contact to to According $5.60, made consumers. are calls with service contact customer of means primary by or invested website previously experiences dollars their Commerce Conversational of visit to billions allocated number, the increasingly history 1-800 result, be entire brand’s LiveEngage. a will their on with channels As that conversation. thread legacy call the the these up renew across to open then brands contact, need and the brand, a select the simply see will with they longer Instead, app. no their will download they app, messaging ebleetecmiaino togainett osmrcmuiainpeeecs high preferences, communication consumer to alignment strong of combination the believe We • over AI and bots agents, human of power the harnesses which Commerce, Conversational • to calls of 50% Roughly experience. customer poor a to leads typically number 1-800 a Calling • lives. personal our in messaging to calling from away shifted already has preference the Consumer cite We transformation. Commerce • Conversational this on capitalizing already is LivePerson the as email using or number 1-800 the calling promoted predominantly have brands Historically, preferred their in contacts as brands favorite their established has consumer a once that is view Our dpe esgn yteedo 08 pfo prxmtl 0 tteedo 07adless and 2017 of end the positioned at has 20% approximately customers from up referenceable had 2018, customers proven enterprise of our end of of the 40% list by than messaging More growing point. adopted inflection a an at and Commerce Conversational with investment them on provide to returns do can company a thing important contact most adults the call the online than US is service. app time of good mobile 73% their a Survey, valuing use Experience that rather Customer similar salessay Research’s would a they Forrester they increased had to wish stating survey According text and consumer consumers center. global who of satisfaction Amdocs consumers 76% An business.” customer of with a 78% finding, with higher conversation least text fueling “at LivePerson a survey, have calls. messaging while RingCentral could for voice a voice, times to two to versus least According alternative conversions. at platform by superior increase our efficiency a agent on provide center contact to see typically demonstrated customers been has messaging experiences. customer of The bad 89% same. to that the due for found staying competitor which wait a best Interactive, to Harris to at go to view, or computer and according worse leave material, or this getting will is phone reinforces consumers are service a centers customer Mattersight, call poor to that firm of tied feeling risk analytics be consumers enterprise to of frustrating by 74% that is with found Research survey it help.” Interactive that service Harris agree 2014 customer consumers a all and IBM, of to “81% according unresolved, go numbers by1-800 survey and A send month. older constrained a calls. messages and been email, text not 55 voice 500 checking has adults nearly messaging Services, messages, on of Marketing average of receiving an Experian day adoption receive messages, to The a According sending clock. generations. alarm most younger behind minutes the sixth to about device, using the six and to spend mobile Web, dropped the to a Americans has surfing calls compared of that phone making use found as that popular Infomate found texting, Hailo, firm app, day booking tracking transportation a Smartphone data International purchase minutes The to mobile 2017. AI 26 in conversational by Gartner, voice-enabled million Report to 160 use According from will Mobility 2015. growing worldwide consumers platforms, in people day commerce million Research, digital a 500 Portio messages on than text to billion more according 23 combined 2020, and, estimated users day, by Facebook an and a send WhatsApp messages to contrast, estimated billion In were 2022. 65 in than communication 12% voice-based more to 2017 send of in proportion 41% the from that drop estimates will firm, research technology a Gartner, 3
2
4
ovrainlCmec n rvn dpin ehv dctdbsnse ntefnniland financial the on businesses educated have We adoption. driving and Commerce Conversational
utmrlv nmsaigi ue21.Sneta ie ehv enfcsdo uligaaeesfor awareness building on focused been have we time, that Since 2016. June in messaging on live customer
ieesnbogtorfirst our brought LivePerson Commerce. Conversational of adoption drive and awareness Build
h e lmnso ieesnsbsns ouin taeyinclude: strategy solutions business LivePerson’s of elements key The
Strategy
ootie ealdifraino htappliance. that on information detailed obtained to
mrvmn tr,adteepoe a naetruhorpafr ihaseils o rhmnagent human or bot specialist a with platform our through engage can employee the and store, improvement
ntesoe.Freape osmrmyhv pcfcqeto bu e plac nahome a in appliance new a about question specific a have may consumer a example, For stores. the in
mlye ntefedwt h blt orpdyoti nwr oqetosa hyegg ihcustomers with engage they as questions to answers obtain rapidly to ability the with field the in employees
osmr htwr oa oissoernswt rd-nofr diinly u ltomcnarm can platform our Additionally, offer. trade-in a with storefronts its to local were that consumers
fes enocn eainhp ttelcllvl o xml,atlcmuiain opn targeted company telecommunications a example, For level. local the at relationships reinforcing offers,
a onc hog esgn ocsoesi hi omnt,wt hc-n,flo p,adspecial and ups, follow check-ins, with community, their in customers to messaging through connect can
dedrn f ekhus ienaeealsorcsoest e pcmagsweeteeemployees these where campaigns up set to customers our enables LiveEngage hours. peak off during idle
opne,aogohr,aloeaebikadmra trfot,weetosnso mlye fe sit often employees of thousands where storefronts, mortar and brick operate all others, among companies,
sa xeso ftecnatcne.Rties eeomnctoscmais n iaca services financial and companies, telecommunications Retailers, center. contact the of extension an as
nte mrigmre potnt o ieesni h eeaigo rc n otroperations mortar and brick of leveraging the is LivePerson for opportunity market emerging Another
niiulapps. individual
oiedvcs at trg,adptnilyipc efrac ydwlaigamliueof multitude a downloading by performance impact potentially and storage, waste devices, mobile
hnes uha pl uiesCa,Wasp,SS esne,o wte,rte hncutrtheir clutter than rather Twitter, or Messenger, SMS, WhatsApp, Chat, Business Apple as such channels,
ocueta osmr ilicesnl p ocnetwt rnstruhterpeerdmessaging preferred their through brands with connect to opt increasingly will consumers that conclude
eas eiv htLvEgg ilsedl lmnt h edfrivsmn nbaddap.We apps. branded in investment for need the eliminate steadily will LiveEngage that believe also We
alt n calendars. and wallets
rv h ovrainwe tmesternes n feigteaiiyt nert ocei ad,pay cards, credit to integrate to ability the offering and needs, their meets it when conversation the drive
otn ih etrn mgs eiw,rtns n ies n hyaecnein,ltigteconsumer the letting convenient, are they and videos, and ratings, reviews, images, featuring rich, content
rn’ nqeiett n oec osmrsuiu itr n rfrne.Teeggmnsare engagements The preferences. and history unique consumer’s each to and identity unique brand’s
aua agaet naecnestoal ihabad hs ovrain a eproaie oeach to personalized be can conversations These brand. a with conversationally engage to language natural
aiaigtruhcik n erhst idasesars utpesai e ae.Isedte use they Instead pages. web static multiple across answers find to searches and clicks through navigating
fu o2% hl oeigtecs feggmn eaiet oc real olne r consumers are longer No email. or voice to relative engagement of cost the lowering while 20%, to up of
rvdsaspro lentv.CranLvPro utmr aedmntae nrae nwbiesales website in increases demonstrated have customers LivePerson Certain alternative. superior a provides
ebleeta h ienaepafr,wihpwr ovrainlCmec,oc again once Commerce, Conversational powers which platform, LiveEngage the that believe We
rmcnuesfrtvstn est n hngtigcnue rntotiigteaseste seek. they answers the obtaining not or confused getting then and website a visiting first consumers from
eeu,btas rvshge ot,a eetmt ht6%8%o l al o180nmesoriginate numbers 1-800 to calls all of 60%-80% that estimate we as costs, higher drives also but revenue,
a’ idqikasest hi usin.Ti ofitbtencnetadcmec o nyimpacts only not commerce and content between conflict This questions. their to answers quick find can’t
codn oFretrRsac,5%o utmr r ieyt bno hi nieprhssi they if purchases online their abandon to likely are customers of 53% Research, Forrester to According
eindfrcnet sopsdt omre ota hycnb nee oso pi e searches. web in up show to indexed be can they that so commerce, to opposed as content, for designed
ae,wihaeaels hn5.Lwcneso ae r ieyafco ftetedfrwbie obe to websites for trend the of factor a likely are rates conversion Low 5%. than less average which rates,
h o eerto ae foln n oieecmec elc iapitn est conversion website disappointing reflect e-commerce mobile and online of rates penetration low The
generated.
prxmtl 1 foealwbietafc u cone o nyapoiaey3%o oa revenue total of 31% approximately only for accounted but traffic, website overall of 51% approximately
159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
scnuesg oie codn oAoeAayis nCbrMna n21,mbl cone for accounted mobile 2018, in Monday Cyber on Analytics, Adobe to According mobile. go consumers as
mzncmacut o prxmtl afo hssae vnmr lrig stegoigdisconnect growing the is alarming, more Even share. this of half approximately for accounts Amazon.com
-omresilol consfrapoiaey1%o oa omread nteUie States, United the in and, commerce total of 11% approximately for accounts only still e-commerce
xeineadtecalne fgtigqetosasee nwbie.I at fe oeta 0years, 20 than more after fact, In websites. on answered questions getting of challenges the and experience
ie pt h xettoso uiessadta osmr r ieiefutae ihtenavigational the with frustrated likewise are consumers that and businesses of expectations the to up lived
ovrainlCmec naeet norpafr.W hn htwbie n -omrehv not have e-commerce and websites that think We platform. our on engagements Commerce Conversational
osmrtafcaddgtlsedn ilicesnl hf wyfo estsadmbl psto apps mobile and websites from away shift increasingly will spending digital and traffic consumer
nadto omre hr potnte ntelgc -0 ubrcl etr ebleethat believe we center, call number 1-800 legacy the in opportunities share market to addition In
ererirperiod. year-earlier
cone o 4 foritrcin ntefut ure f21,u rm4%i the in 44% from up 2018, of quarter fourth the in interactions our of 54% for accounted
uoainatce tteedo 08 pfo prxmtl 5 tteedo 07 Mobile 2017. of end the at 25% approximately from up 2018, of end the at attached automation hn1%a h n f21.I diin oeta 0 fmsaigcnestoshad conversations messaging of 50% than more addition, In 2016. of end the at 10% than
159263 TOPPAN live person AR_Text_Insert Signature 2 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT operational transformation that occurs when a contact center shifts to an asynchronous messaging environment, where the consumer controls the pace of the conversation, which can last minutes, hours or days, from a synchronous call or chat center, where conversations occur in real-time and have a distinct start and end. A key component of our industry awareness marketing strategy has been to hold multiple global customer summits each year that target executives from enterprise customers and prospects, and feature a key theme within Conversational Commerce, such as Apple Business Chat, Google Rich Business Messenger, IVR deflection or AI. LivePerson customers are the centerpoint of these summits, presenting why they chose LivePerson for Conversational Commerce, how they achieved success, and what type of ROI they have realized. Each attendee then receives a blueprint for how they can achieve similar outcomes. We have found this strategy to drive strong results for LivePerson, as we have seen a greater than 40% conversion rate on opportunities that were created or advanced as part of the customer summits. By year end 2018, we had brought more than 200 customers live on messaging and increased adoption within our enterprise customers to more than 40%. In addition, more than 50% of messaging conversations had automation attached. We will continue to focus on building awareness for Conversational Commerce and driving adoption of messaging and AI across our customer base. Increase volumes on LiveEngage by deploying a broad messaging ecosystem and expanding customer use cases. Our strategy is to drive higher volumes on LiveEngage by going both wide across messaging endpoints and deep across consumer use cases. LivePerson offers a platform usage pricing model, where customers are offered access to our entire suite of messaging technologies across their entire agent pool for a pre-negotiated cost per interaction. We believe that over time this model will drive higher revenue for LivePerson by reducing barriers to adoption of new messaging endpoints and use cases. In order to go wide across messaging endpoints, it is imperative that LiveEngage integrates to all of the messaging apps that consumers prefer to use for communication. For example, if a consumer is an avid WhatsApp user, and a brand only offers SMS as a messaging option, that consumer may be reluctant to try messaging the brand. Therefore, a key strategy of ours has been to build one of the industry’s broadest ecosystems of messaging endpoints. In June 2016, we launched with In-App messaging. In 2017, we introduced Facebook Messenger, SMS, Web messaging and IVR deflection integrations. In 2018, we added Apple Business Chat, Google Rich Business Messenger, Line, WhatsApp, Alexa, Google Home, Google Ad Lingo and Twitter. Each channel added opens the door to hundreds of millions of new consumers, providing brands a greater opportunity to shift share away from their legacy contact center channels into messaging. LivePerson makes the management of all these disparate channels seamless to the brand. The LiveEngage intelligent routing, queuing and prioritization software orchestrates these conversations at scale, regardless of which messaging endpoint they originated from, so that human and bot agents can engage with all customers through just one console. In order to go deep across customer use cases, we are focused on extending LiveEngage beyond just taking share of the 270 billion calls made to customer service 1-800 numbers each year, into sales, marketing and brick and mortar conversations. For example, in 2018, a home improvement retailer launched a bot that autonomously sells millions of dollars of grills; a leading global concessions manager launched a service that lets patrons in a sports arena order beverages to their seats through Apple Business Chat; and a telecommunications company used LiveEngage to drive pre-sales for an iPhone series launch. We believe that this strategy has influenced LivePerson’s enterprise and mid-market revenue retention rate, (the trailing-twelve-month change in total revenue from existing customers after upsells, downsells and attrition) which was greater than 110% in 2018. The benefit can also be seen in LivePerson’s average revenue per user (ARPU) for our enterprise and mid-market customers, which increased more than 25% in 2018 to approximately $285,000 from approximately $220,000 in 2017. For this same customer set, when examining only the subset that have adopted messaging, the ARPU in 2018 increased to approximately $500,000. When examining customers that have adopted at least three endpoints, the APRU in 2018 increased into the
2 low seven figures. We believe these ARPU trends are a clear indication of how LivePerson’s strategy to drive messaging adoption has successfully influenced our revenue growth by taking share from legacy communication channels. We will continue to focus on adding new messaging endpoints and driving higher adoption of each of these channels within our customer base.
5 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Black We believe We believe that most contact center technology 6 contact center agents. By putting the power of conversational design and bot management We believe that over the past few years many vendors introduced AI and bot offerings that and employees like contact center agents can design automations time to market safeguarded by a human andmore that successful agents outcomes are continuously training the AI to be smarter andand drive thentransactional suggesting work next best actions, predefinedback-end integrations content, and bots that can take over Globalize R&D to attract the industry’s best AI, machine learning and conversational talent. Some of the key innovations behind Maven include: • bot building software that• is based on dialogue the instead ability to of bootstrap conversations workflow with or existing• transcripts, code, reducing design so effort and non-technical speeding the establishing of contact center agents• as bot managers, ensuring powerful that Assist every technology that conversation multiplies the is efficiency of agents by analyzing• intents in real time pre-built templates for target verticals that• provide out of the box support third-party AI• for NLU the integration, top so customers intents aren’t and boxed into AI oneOur analytics vendor strategy and is reporting to tailored continue to to Conversational Commerce enhance the Maven AI engine and related products, leveraging our global Sustain our leadership position by aligning brands to a vision that transforms how they communicate with Bring to market best-in-class AI and machine learning technologies designed for Conversational Unlike alternative solutions designed solely for IT departments, Maven was built to be used by in the hands ofthe contact customer, those center who agents, are Mavencraft successful gives most outcomes brands versed for the in customer service ability the and to voice sales leverage of journeys. the the employees brand, closest and to with the most expertise in how to R&D footprint and substantial libraryagent of mobile efficiency, and online decreasing conversationalcustomer data, lifetime with value. customer the aim of care increasing costs, improving theconsumers and customer delivers experience a superior and return increasing on investment. that AI andorder machine to learning develop the are industry’sTo critical leading spearhead technology, to we that successfully need globalizationAlexa to scaling Operating effort, open Conversational System offices in Commerce, at where 2018, and Amazon.com, theopened as best LivePerson that an talent our recruited in is Global Advanced Alex located. CTO.Germany Under development Spinelli, Technology Mr. center, and Spinelli’s key Center leadership, added architectMountain LivePerson key in View, development of California talent and Seattle, through the Conversable thelearning, Washington, in acquisitions Austin, AI of in Texas. The and BotCentral 2018, in Company ConversationalNike, added Commerce Amazon.com, expanded more developers than Microsoft our in 70 andtalent machine 2018, across Mannheim, Target. our recruiting global We offices top expect in talent 2019. to from continue firms adding such industry as Commerce. leading development created frustrating experiencesautomation. for Many consumers ofstand and these solutions businesses alone have alike, provenConversational which difficult implementations Commerce to in platforms build turn thatMaven, and such a has scale, lacked patent as and erodedrapidly pending have LiveEngage. trust the been bring AI In in limited engine to measurement, Decembercustomer by that satisfaction market and 2018, is conversion conversational reporting rates. designed LivePerson AI to and announced that overcome can these human scale shortcomingsdevelopers to oversight and millions help of of brands interactions, while increasing vendors incorrectly view messaging asendpoint a feature. and They offering are content messagingthat with as messaging building just integrations and to another AI a product messaging are in the their foundation suite. for LivePerson Conversational holds Commerce, the which perspective transforms how agents operate and how brands engage with consumers across service, sales, marketing, and brick and mortar. Brands must adapt their contact centers to an asynchronous messaging environment and leverage a combination of human agents, bots and AI to achieve scale and efficiencies. When done correctly, the entire consumer lifecycle with a brand will be maintained within the Conversational Commerce relationship, and traffic will steadily shift away from lower returning voice calls, websites and apps to higher returning messaging endpoints. We believe that LivePerson is uniquely positioned to deliver this transformation due to its technology and expertise:
• The LiveEngage enterprise-class, automation-first, cloud-based platform, was designed for AI-assisted and human-powered messaging in mobile and online channels. The platform offers best-in-class security and scalability, offers the broadest ecosystem of messaging endpoints, is designed for ease of use, and features an AI engine custom built for Conversational Commerce, robust real-time reporting, role-based real-time analytics, predictive intelligence, and innovations in customer satisfaction and connection measurement. Additionally, LiveEngage is an open platform with pre-built, enterprise-grade integrations into back-end systems as well as the ability to work across natural language understanding (NLU) providers.
• LivePerson has deep domain expertise across verticals and messaging endpoints, a global footprint, referenceable enterprise brands and a team of technical, solutions and consulting professionals to assist customers along their transformational journeys. We are positioned as an authority in Conversational Commerce, publishing a proprietary Conversational Quotient™ Index that measures each customer across multiple key indicators to ascertain their level of conversational maturity. Each business is then benchmarked against industry peers to determine their relative progression. We have developed a Transformation Model that is introduced to existing and prospective customers to help guide them on their journeys from legacy and oftentimes inefficient legacy voice, email and chat solutions to modern conversational ones powered by messaging and AI. We believe that LivePerson’s differentiated approach to the Conversational Commerce industry, combined with our unique technology and expertise has established us as a market leader, with an ability to deliver superior returns on investment. LivePerson customers manage as many as 40 messaging conversations at a time, as compared to one at a time for a voice agent and two to four at a time for a good chat agent. Adding AI and bots provides even greater scale to the number of conversations managed. Our customers often see labor efficiency gains of at least two times that of voice agents, effectively cutting labor costs by at least 50%. Furthermore, our ability to deliver more convenient, personalized and content-rich conversations often drives increases in customer satisfaction of up to 20 percentage points and increases in sales conversions of up to 20%, while enhancing average order value, customer retention and loyalty. Strengthen our position in both existing and new industries. We plan to continue to develop our market position by increasing our customer base, and expanding within our installed base. We will continue to focus primarily on key target markets: consumer/retail, telecommunications, financial services, travel/ hospitality, technology and automotive within both our enterprise and mid-market sectors, as well as the small business (SMB) sector. Healthcare, insurance, real estate and energy utilities are new target industries and natural extensions of our primary target markets. We are increasingly structuring our field organization to emphasize our domain expertise and strengthen customer relationships across target industries. Continue to build our international presence. We are focused on expanding our international revenue contribution, which increased to 41% of total revenue in 2018, from 37% in 2017 and 34% in 2016. We generated positive results from previous investments in direct sales and services personnel in the United Kingdom and Western Europe. We also continued to focus on expanding our presence in the Asia Pacific region, leveraging our relationships with partners.
2 Leverage our open architecture to support partners and developers. In addition to developing our own applications, we continue to cultivate a partner eco-system capable of offering additional applications and services to our customers. We integrate into nearly a dozen third-party messaging endpoints including SMS, Facebook Messenger, Apple Business Chat, Google Rich Business Messenger, Line, WhatsApp, Alexa,
7 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Black We are focused on As described above, we are We have successfully integrated 8 LiveEngage, LivePerson’s enterprise-class, cloud-based platform, enables businesses and Evaluate Strategic Alliances and Acquisitions When Appropriate. LivePerson’s hosted platforms harness human, AI and bot-powered messaging on mobile apps, mobile LiveEngage. Maintain Market Leadership in Technology and Security Expertise. In addition, we have opened up access to our platform and our products with more than three dozen Expand sales partnerships to broaden our presence and accelerate sales cycles. devoting significant resources toinnovation. creating We new products evaluatetechnology and emerging in enabling order technologies technologiestechnological designed to developments and to in retain accelerate the industry ourand area procedures leadership standards of meet position or information andbelieve exceed security in the and continually each that demands confidentiality update of marketrequirements to these in the we ensure our our world’s rapidly efforts our serve. largest evolving and industry. policies We will most monitor demanding allow legal corporations. We and usseveral to acquisitions over effectively thefuture, anticipate engage past in decade. discussions changing While regardingthat acquisitions we customer or have can strategic in and transactionscommitments or accelerate the with to consumer respect past, acquire our to and other any future companies may growth acquisitions or from strategic or time transactions. Products to and broaden Services time in our the product offerings,Business solutions offerings we currently have noand binding desktop webbusiness-to-business services browsers, are all SMS, managedconsumer from social view, a single our media user solutionsconsumer interface. and experience By enable for supplying heads businesses third-party a ofcenter to complete, consumer digital unified deliver and executives. customer messaging a care,value-added as relevant, In platforms. well timely, business as Our personalized, addition e-commerce, consulting marketing, andsolutions. and Revenue to to seamless attributable contact to our support product monthlyfor hosted complete the offerings, Business year services deployment ended accounted December LivePerson2016. and for 31, 79% 2018 provides optimization of and 82% total of professional of revenue total our revenue services for the enterprise years and ended December 31, 2017 and consumers to connectleveraging through bots conversational andcustomer interfaces, AI care, such to as as increasemobile well in-app efficiency. as and The e-commerce, and online marketing, platform,compelling, mobile measurable and engagement which results messaging, contact is technology by while centerconsumer intelligently targeted with engaging executives, needs. at consumers robust combines based Rich, heads sophisticated business on of contextually intelligence a aware real-time digital and understanding targeting, and of big actionable data insights to and produce personalized experiences, broadening ourtechnology market providers, reach businessformalized and process a outsourcers, accelerating relationship with valueincreased sales IBM added the Global cycles number resellers Business of Servicesfrom and by partners over in 40 other focused partnering 2017 at on sales the andone-third with SMBs start Accenture of partners. by of in annual systems We more contract the 2018. value than year.investment signed integrators, LivePerson These in 300% in efforts our in 2018 are partner was channels increasingly 2018, directly in yielding to influenced 2019. positive over by results partners. 150 for We us, at expect as to year nearly increase end Google Home, Google Adoffering is Lingo AI vendor and agnostic, Twitter,and empowering multiple our customers IVR technologies to vendors manage fromproprietary a and and mix third-party one of dozens AI/bots different of enable control bots,customers. brands human to branded agents panel, partially apps. or fully Our thereby automate communications optimizing with their contact centerAPIs that efficiency. allow customers LivePerson’s and thirdutilize parties these to APIs develop to on buildtheir top our of services. capabilities In our into 2019, platform. their Customers we ownthey and expect applications can partners and to build can programs to increase and enhance our services our marketing on applications efforts top with to of developers, our raising platform. awareness for how
2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 9 a console that suggests automated responses and next best actions to which non-technical staff such as contact center agents use to design . Maven, announced in December 2018, operates as the brains behind new LivePerson Conversation Builder, high-quality automated conversations. The conversations areBuilder not creates built the from scratch. initialindustry Conversation versions by templates mining a arecommon brand’s use existing also cases such conversation as available, transcripts. billing. Prebuilt providing theConversation dialogue Manager, andcontact integrations center agents, necessary whothe edit for responses and and select next best from actions. them. When Edits the and content selections reaches dynamically a improve brand-set accuracy threshold, it LiveEngage was designed for Conversational Commerce, enabling businesses to securely deploy The robust, cloud-based suite of rich mobile messaging and real-time chat offerings features intelligent LiveEngage enables the combination of real time on-site data and off-site behavioral data, with a broad Maven • • empower businesses tobenefits get the of mostcustomer out LiveEngage experiences, higher of conversion include rates their and increased increased existing customer lifetime online, agent value. mobile efficiency, andmessaging, decreased social coupled platforms. customer with Potential botsthousands care and of costs, AI, customer at improved digital care scale channels, agents. for LiveEngage including brandsthird-party powers with consumer conversations mobile tens messaging across apps, of platforms. eachthey Brands mobile millions dial of can a of a also and 1-800hold. customers use brand’s number The desktop primary LiveEngage and instead platform to seamlessly many of web integrates messagebrands LivePerson’s having Maven browsers, to consumers AI them manage engine when navigate SMS, both as interactive AI-based well agents social voice as and response third-party human media bots, systems agents enabling from and and a single wait console. on routing and capacity mapping, queuecontent prioritization, delivery, customer Payment sentiment, Card real-timeengine. Industry analytics With and compliance, LiveEngage, reporting, cobrowsing agents andinterface, can regardless a of manage sophisticated which all proactive disparateLine, conversations messaging targeting Apple endpoints with the Business consumers consumersownership Chat, through originate by from; a IVR, i.e., facilitating single WhatsApp, or robust integrationtheir console Google into own Home. back-end programs An systems, andLiveEngage. as extensible services well API as on stack enabling top developers facilitates to of a build the lower platform. cost Moreset of than of three dozen historicalcompelling APIs engagement and options are at operational available anyLiveEngage data. step on enables in Proprietary the customers conversion analyticsreduce to funnel utilize shopping and maximize cart throughout this the abandonment online by customerright data revenue proactively lifecycle. time. engaging opportunities, to Our the improve right solution targetconvert, visitor, conversion identifies using end and segments rates the engages of right users and channel, them websitesales. with at LiveEngage visitors in the also who real-time reduces demonstrate withmay the costs relevant be highest in content struggling propensity the and with to contactspecialist their offers, via center self-help helping messaging, relative experience, who to and to can generatea proactively manage voice, connecting several incremental by conversations them proven at identifying once. to consumers value-based This aexpertise comprehensive who to live solution methodology increase blends consumer first with care contact resolution, improve an consumer satisfaction, active and reduce rules-based attrition rates. engagement engine and deep domain AI-based products, and was developedinteractions. using our Maven conversational data was setdevelopment, training of custom and millions management of designed intofamiliar the brand-to-consumer with hands for how of Conversational to theenables contact structure Commerce, what center sales we and and putting its call serviceoverseeing agents, “the the the conversations AI-powered teams to tango” power most conversations drive ofneeded. successful and of humans, Through outcomes. Maven AI seamlessly The Assist, bot and agents platform steppingcontent, become bots, define ultra-efficient, into whereby next-best leveraging the actions human the AI andrelationship agents flow engine take building. over act to repetitive when By serve as transactional up seamlessly work, aplatform bot relevant so integrating provides managers, personal that businesses LiveEngage the touch with agent withfrom can a is Maven, a focus single as comprehensive on console. view well Some of of as the all third-party first AI-based products bots, developed and the on the human-based Maven conversations AI engine include: ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Black can be offered to consumers without human intervention. Conversation Manager also includes sentiment monitoring to alert contact center agents to conversations that require their attention. Designed for use in large contact centers, Conversation Manager sends these requests to agents who have the capacity and appropriate skills to respond. A major retail brand that adopted this approach in its sales operation increased agent productivity up to 220% within 12 weeks of launch. • Conversation Intelligence, dashboards and reporting which take the true voice of the customer — their direct discussions with a brand, spoken in their natural language — and turn it into actionable sales and service intelligence. A major wireless provider using early versions of Conversation Intelligence reported the product identifies the root cause of service issues faster than monitoring software, enabling the provider to accelerate the fix and reduce inbound customer inquiries. A leading hospitality firm used Conversation Intelligence to identify and add new, top-selling items to its menu selection. Professional Services. The mission of our Professional Services team is to help customers optimize the performance of our products in order to drive incremental value through their mobile and online sales and/or service channel(s). This talented group utilizes their deep domain expertise and years of hands-on experience to provide customers with detailed analyses and measurements of their LivePerson deployment that drive strategies and decisions on how to optimize mobile and online messaging, real-time chat, and bot and AI integration. Deliverables of the team include scorecards that measure and chart performance trends, analyses and recommendations for conversational design, web design and process improvement, transcript reviews to discover both voice of the consumer insight and agent improvement opportunities, custom training of call center agents and management, and ongoing management of messaging programs to ensure alignment with current business practices and objectives. The team’s value-added methodology and approach to guiding customers towards messaging channel and human/bot agent optimization is an important component of the LivePerson offering, and gives our customers a competitive advantage in the digital world. Revenue attributable to professional services accounted for 13% of total revenue for the year ended December 31, 2018 and 10% of total revenue for each of the years ended December 31, 2017 and 2016.
Consumer offering Our consumer services offering is an online marketplace that connects independent service providers (Experts) who provide information and knowledge for a fee via mobile and online messaging with individual consumers (Users). Users seek assistance and advice in various categories including personal counseling and coaching, computers and programming, education and tutoring, spirituality and religion, and other topics. Revenue from our Consumer segment accounted for approximately 8% of total revenue for the years ended December 31, 2018 and 2017, and 7% of total revenue for the year ended December 31, 2016, respectively.
Customers More than 18,000 customers have deployed our business solutions, including Fortune 500 companies, dedicated Internet businesses, a broad range of online merchants, as well as numerous SMBs, automotive dealers, universities, libraries, government agencies and not-for-profit organizations. Our solutions benefit organizations of all sizes conducting business or communicating with consumers through mobile and online messaging and chat. We plan to continue to focus on key target markets: consumer/retail, telecommunications, financial services, travel/hospitality, technology and automotive, within the United States and Canada, Latin America, Europe and the Asia-Pacific region. No single customer accounted for or exceeded 10% of our total revenue in 2018, 2017 or 2016.
Sales and Marketing
2 Sales We sell our business products and services by leveraging a common methodology through both direct and indirect sales channels.
10 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 11 We target small business and small mid-market customers with We target large mid-market and enterprise businesses primarily with Resources within our organization are focused on developing partnerships to generate Small business and small mid-market. Indirect Sales. In 2018, we introduced a pilot accelerator program, where we offer customers the option to test our For our large and more complex customers, our sales methodology often begins with research and Enterprise and large mid-market. Within the business solutions segment we have aligned our field organization to address the different Our mobile and online messaging solutions are targeted at business executives whose primary Our sales process focuses on the perspective that Conversational Commerce requires an operational revenues via referralcoverage partnerships via partners and who provide indirectchannel lead supports sales revenue referrals opportunities and without through complementary incurring products the channel costs and partners. associated services, with we By traditional believe direct sales. this maximizing market entire platform, across allperiod messaging endpoints of and customer threecustomers use to to cases, rapidly at nine assess anmore the months. entry potential substantial level This ROI price and and pilotcomponent point differentiation of extended for of program our a deployment. our is sales pipelinein solutions We and intended 2018. before initial expect committing deal to activity to pilot in accelerate a 2019, accelerators sales based on to cycles the initial be and success of an enable a the increasingly program mix larger ofcenters direct, online on self-servicepartnerships. We and leveraging also third-party leverage customer marketing partnerproduct programs adoption channels. and within word-of-mouth, these Our partner customers. resources customer our to acquisition promote increased leading strategy usage and brand name, online marketing and discovery meetings thatperformance metrics enable of ussolutions a and prospective to customer. industry Wecapabilities develop expertise then and a present can prove anwherein deep affect financial analytical these return understanding review we value detailing onrecommendations of work drivers how that investment, help our and optimize hand-in-hand the we their metrics. performance transition with value and Once ensure to ongoing drivers the we program a success. validate and customer, program solution management key providing model detailed analysis, measurements and direct sales and customer successthem teams. Across already the customers, globe that we holdof are the targeting agents power a in to select their transform group contact customerthought of centers care. leadership brands, and These and many collectively enterprises of related connect have eventsreference with thousands to billions showcase customers of our consumers strength who each inIncreasingly, share year. messaging we We and leverage their AI, are and successesbusiness highlight also process on existing outsourcers working to our supplement with our platform direct large sales and effort. third-party how system they integrators, achieved technology positive providers ROIs. and sales strategies of our target markets: responsibility is optimization ofacross customer the care, brand’s salesservice, digital and sales and marketing, properties. marketing by or Our deflectingonline optimizing costly messaging solutions phone a channel. calls consumer’s enable and We emails journey focusefficiency, organizations to reduced on the to contact the more center cost value provide efficient costs, thatmaximized mobile effective increased our digital and consumer customer solutions customer acquisition, satisfaction, deliver andsupports improved in optimized customer any the organization website lifetime with form and value, a of mobile company-wideconsumer business strategic increased experience. initiative outcomes. agent to LivePerson improve the overall mobile and online transformation that changes how brandsand engage mortar. with Brands consumersleverage across must a service, combination adapt sales, of marketing human their andentire agents, brick bots contact and consumer AI centers torelationship, achieve to and lifecycle scale traffic and an will efficiencies. with When steadily asynchronous done shiftreturning right, messaging messaging away a from the endpoints. lower environment returning and brand voice calls, websites and will apps to be higher maintained within the Conversational Commerce ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Black Customer Support Our Professional Services group provides deployment support and ongoing business consulting to enterprise and mid-market customers and maintains involvement throughout the engagement lifecycle. All LivePerson customers have access to 24/7 help desk services through messaging, chat, and technical support ticketing.
Marketing Our marketing efforts in support of our business operations are organized around the needs, trends and characteristics of our existing and prospective customer base. Our deep relationship with existing customers fosters continuous feedback and critical data analysis, thereby allowing us to develop and refine marketing programs that drive adoption across multiple customer segments. We have a global team, spread across key geographies that is focused on marketing our brand, products and services to executives responsible for the digital channel, the consumer experience, marketing, sales, IT, and consumer service operations of their organization. Our main focus is on the consumer/retail, telecommunications, financial services, travel/hospitality, technology and automotive industries. Our integrated marketing strategy is focused on driving demand, building customer and consumer advocacy, driving adoption of our LiveEngage platform, and supporting key areas of business, especially large enterprise, but also including mid-sized and small business, partners and international entities. We aim to achieve this by delivering high-touch, small group events for senior executives, to educate them on messaging and the transformational ways that digital communication can help their business. We also market our software via high-level thought leadership campaigns, industry event participation, personalized lead generation campaigns to reach potential and existing customers using mediums such as paid and organic search, direct email and mail, industry- and category-specific tradeshows and events, and telemarketing. Our marketing strategy also encompasses a strategic communications approach that integrates public relations, social media, and analyst/influencer relations. We are focused on using those channels to communicate our brand value, to those key stakeholders, to increase overall brand and technology awareness. Communications seek to highlight key customer success stories, and promote executive thought leadership via contributed content, speaking opportunities and press interviews, to raise LivePerson’s profile and reinforce our position as an industry leader.
Competition The markets for mobile and online business messaging, and digital engagement technology are intensely competitive, rapidly changing and characterized by aggressive marketing, pricing pressure, evolving industry standards, rapid technology developments and frequent new product introductions. We believe that competition will continue to increase as our current competitors increase the sophistication of their offerings and as new participants enter the market, which may cause additional pricing pressure. If we are unable to accurately anticipate technology developments and continue to innovate in the markets in which we compete, or our competitors are more successful than us at developing compelling new products and services or at attracting and retaining customers, we may lose revenue and market share and our operating results could be adversely affected. We believe that most contact center technology vendors incorrectly view messaging as a feature. They are content with building integrations to a messaging endpoint and offering messaging as just another product in their suite. LivePerson holds the perspective that messaging and AI are the foundation for Conversational Commerce, which transforms how agents operate and how brands engage with consumers across service, sales, marketing, and brick and mortar. Brands must adapt their contact centers to an asynchronous messaging environment and leverage a combination of human agents, bots and AI to achieve scale and efficiencies. When done correctly, the entire consumer lifecycle with a brand will be maintained within the Conversational Commerce relationship, and traffic will steadily shift away from lower returning voice calls, websites and apps to higher returning messaging endpoints. 2 We believe that our differentiated approach to the Conversational Commerce industry, combined with our unique technology and expertise, has established the Company as a market leader, with an ability to deliver superior returns on investment:
12 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
3
13
i-tatcUie tts n r upre yatpte akpsre aiiylctdi the in located facility server backup top-tier a by supported are and States, United Mid-Atlantic
rmr evr r otdi ul-eue,tpte,tidprysre etrlctdi the in located center server third-party top-tier, fully-secured, a in hosted are servers primary
espotorcsoestruhascr,saal evrifatutr.I ot mrc,our America, North In infrastructure. server scalable secure, a through customers our support We •
he e ehooia etrsdsigihteLvPro services: LivePerson the distinguish features technological key Three
Technology
o eal ocmeescesul gis u urn n uuecompetitors. future and current our against successfully compete to able be not
opttrspout n evcs vni u evcsaemr fetv.Fralo hs esn,w may we reasons, these of all For effective. more are services our if even services, and products competitor’s
taeiso utmrrqieet.As,bcueo hs datgs oeta utmr a eeta select may customers potential advantages, these of because Also, requirements. customer or strategies
cetneo esgn evcso n e rcagn potnte,tcnlge,sadrs pricing standards, technologies, opportunities, changing or new any or services messaging of acceptance
a eal orsodmr ucl n fetvl hnw a oaycag ntegnrlmarket general the in change any to can we than effectively and quickly more respond to able be may
itiuinrltosis n/rmr ies rdc n evc feig.A eut hs competitors these result, a As offerings. service and product diverse more and/or relationships, distribution
ugt,acs olre utmrado osmrbss agradmr salse aktn and marketing established more and larger bases, consumer and/or customer larger to access budgets,
uha rae rn eonto,sgiiatylre iaca,mreig n eoreaddevelopment and resource and marketing, financial, larger significantly recognition, brand greater as such
nadto,mn forcretadptnilcmeioshv usata opttv advantages, competitive substantial have competitors potential and current our of many addition, In
utmr htdvlpadmng hi esgn ouin in-house solutions messaging their manage and develop that customers •
xsigo uuecpblte n osmrrltosist fe optn 2 ouin;and solutions; B2B competing offer to relationships consumer and capabilities future or existing
aaaayiscmais uha aeok oge n eht hc a eeaetheir leverage may which WeChat, and Google, Facebook, as such companies, analytics data
oilmda oillseig esgn,atfca nelgne os -omre n/rdt and data and/or e-commerce, bots, intelligence, artificial messaging, listening, social media, social •
hreo tsgiiatyrdcdetylvlprices; level entry reduced significantly at or charge
evc rvdr htofrbscmsaigpout rsrie ihlmtdfntoaiyfe of free functionality limited with services or products messaging basic offer that providers service •
une rce aefrecmadTwilio; and Salesforce.com Oracle, Nuance,
etr omnctoso utmrrltosi aaeetsltossc s Gi,Genesys, eGain, as, such solutions management relationship customer or communications center,
ehooyo evc rvdr feigo oeigcmeigdgtleggmn,contact engagement, digital competing powering or offering providers service or technology •
urn n oeta opttr nmn ifrn nutis including: industries, different many in competitors potential and current
ehooypoiesta fe utmrrltosi aaeetadcnatcne ouin.W have We solutions. center contact and management relationship customer offer that providers technology
ouin hteal opne oegg n onc ihtercnue utmr,a elas well as customers, consumer their with connect and engage to companies enable that solutions
ehv urn n oeta optto rmpoieso esgn n iia engagement digital and messaging of providers from competition potential and current have We
50mlin n u 06ca-rvnBBrvneo prxmtl 27million. $207 approximately of revenue B2B chat-driven 2016 our and million, $590
eayca a prxmtl 5 n21,bsdo lidMre eerhsidsr oeatof forecast industry Research’s Market Allied on based 2016, in 35% approximately was chat legacy
otiue oLvPro’ oiinn salae ntelgc htmre.W siaeorsaeof share our estimate We market. chat legacy the in leader a as positioning LivePerson’s to contributed
ebleeti aefcso ehooia noain xets n nepiecascapabilities enterprise-class and expertise innovation, technological on focus same this believe We
oee ymsaigadAI. and messaging by powered
fetmsiefcetlgc oc,ealadca ouin omdr ovrainlones conversational modern to solutions chat and email voice, legacy inefficient oftentimes
xsigadpopciecsoest epgiete nterjuny rmlgc and legacy from journeys their on them guide help to customers prospective and existing
hi eaieporsin ehv eeoe rnfrainMdlta sitoue to introduced is that Model Transformation a developed have We progression. relative their
ovrainlmtrt.Ec uiesi hnbnhakdaantidsr er odetermine to peers industry against benchmarked then is business Each maturity. conversational
htmaue ahcsoe cosmlil e niaost seti hi ee of level their ascertain to indicators key multiple across customer each measures that
159263 TOPPAN live person AR_Text_Insert Sig 3 ] Sig 3 person AR_Text_Insert TOPPAN live 159263
uhrt nCnestoa omre ulsigaporeayCnestoa Quotient Conversational proprietary a publishing Commerce, Conversational in authority Index
™
rfsinl oass utmr ln hi rnfrainljuny.W r oiinda an as positioned are We journeys. transformational their along customers assist to professionals
otrn,rfrnebeetrrs rnsadata ftcncl ouin n consulting and solutions technical, of team a and brands enterprise referenceable footprint,
ieesnhsde oanepriears etcl n esgn npit,aglobal a endpoints, messaging and verticals across expertise domain deep has LivePerson •
owr cosNUproviders. NLU across work to
ltomwt r-ul,etrrs-rd nertosit akedssesa ela h ability the as well as systems back-end into integrations enterprise-grade pre-built, with platform
ncsoe aifcinadcneto esrmn.Adtoal,LvEgg sa open an is LiveEngage Additionally, measurement. connection and satisfaction customer in
outra-ierprig oebsdra-ieaayis rdcieitliec,adinnovations and intelligence, predictive analytics, real-time role-based reporting, real-time robust
eindfres fue n etrsa Iegn utmbitfrCnestoa Commerce, Conversational for built custom engine AI an features and use, of ease for designed
eti-ls euiyadsaaiiy festebods csse fmsaigedons is endpoints, messaging of ecosystem broadest the offers scalability, and security best-in-class
Iasse n ua-oee esgn nmbl n niecanl.Tepafr offers platform The channels. online and mobile in messaging human-powered and AI-assisted h ienaeetrrs-ls,atmto-is,codbsdpafr,wsdsge for designed was platform, cloud-based automation-first, enterprise-class, LiveEngage The •
159263 TOPPAN live person AR_Text_Insert Signature 3 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] rcnlc ihohrrls sw xadoroeain nteecutis u iblt xoueadthe and exposure liability our countries, these jurisdictions in and operations countries our among expand inconsistent we be As may rules. and other with, with comply conflict or to negatively costly could be may and interpretations, not cost is substantial that incur often manner to a are us in security, business. cause jurisdiction and data could given reputation any brand, which and our in practices, risk impact privacy differently a current is applied user our There and States. with to interpreted United and consistent the be related laws outside may the obligations those laws and of these laws including interpretation particularly that and conflicting, us, scope be may The to States. and apply United uncertain regulations have the that don’t and in laws we worldwide, obligations those other if than and accessible other even restrictive privacy, laws, more protection, are their be data with Foreign services often comply infrastructure. may to our or required employees are Because entity, we local developing. property that a intellectual claim and may and jurisdictions evolving processing), of foreign card continuously processing certain credit are contracts, other (including electronic which services or advertising, payment neutrality, rights, transfer online net) (or disposal of internet provision laws technological protection, protection, taxation, as storage, or consumer such content, use, restrictions devices, data, cybersecurity, mobile collection, consumer security, on the information and regarding Internet protection, the requirements data on privacy, business data conducting regarding to related laws including abroad, our enable also We security. systems’ algorithms. Regulation Government encryption our advanced security, more validate using increased data further encryption sensitive For their industry-leading to PCI. encrypt and experts further and architecture to third-party customers firewall SOC2 disaster employ advanced as effective use and with such we standards facilities standards approach, multi-layered server hosting security a primary backup with through our Our comply availability. provides We superior capability. locations redundant enabling recovery separate with infrastructure, at facilities and for other housed co-location capacity in infrastructure network and customers hosted or servers hardware is our new architecture connections, add network network enable to This need customer. not that LivePerson do new we APIs each scalable; is provide network Our architecture. also network customers’ We Web our services. with standard interact LivePerson applications. a to designed custom order only the with in LiveEngage require use LivePerson integrate to from websites third-parties to software customers’ download or to our need operators to not do visitors and and browser customers LiveEngage provider, ..aditrainlpiaylw n euain r vligadcagn,aesbett differing to subject are changing, and evolving are regulations and laws privacy international and U.S. and States United the in regulations and laws of number a to subject are customers our and We Architecture. Network saSa rvdr efcso h eeomn ftgtyitgae otaedsg and design software integrated tightly of development the Design. on Software focus and we quickly provider, features SaaS new a and As capacity additional add • to able are we service, hosted a As • ewr rhtcue eddct infcn eore odsgigorsfwr n network and scalability. software and reliability our security, designing of principles to fundamental the resources on based significant architecture dedicate implementation We and architecture. development network short relatively customer a entire our maintain to to simultaneously us benefits allows these it cycle. provide addition, to In us base. enabled holiday has the This as efficiently. such times customers’ peak our during accommodate and and including to infrastructure UK- service, network designed 24/7 our advanced season. are high-quality shopping Utilizing to within software secure, and service. for and hosted needs of hardware demand customer are level network, to and responsive States superior our flexibility be a protocols, United greater to provide maintain us the to allowing we environment continue directly, of production servers the backup outside over our and control customers managing primary Nearly Australia. By our larger in facilities. region, located Australia-based our Pacific centers backup top-tier, server Asia of top-tier third-party fully-secured, the top-tier, a all fully-secured, a In by in Netherlands. supported in hosted are The are hosted and servers in Kingdom are located United servers facility the primary in server located our center Europe, server third-party In States. United Western u otaedsg sbsdo letsre rhtcue ic eaeaSaaS a are we Since architecture. client-server on based is design software Our h otaeudryn u evcsi nertdwt clbeadreliable and scalable with integrated is services our underlying software The 14 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Black
333
15
n/rpiaeprisadrvee yteErpa ors hc a edt netit bu h legal the about uncertainty to lead may which courts, European the by reviewed and parties private and/or
h UPiaySil,SisPiaySil,adohrfaeok a ecalne yregulators by challenged be may frameworks other and Shield, Privacy Swiss Shield, Privacy EU The
no oteUie ttsuigteE rvc hedo ws rvc heda rnfrmechanism. transfer a as Shield Privacy Swiss or Shield Privacy EU the using States United the to Union
irpiet u uiesi utmr aecnen eadn h rnfro aafo h European the from data of transfer the regarding concerns have customers if business our to disruptive
hedi ujc oa nulrve htcudrsl ncagst u biain.I ol lobe also could It obligations. our to changes in result could that review annual an to subject is Shield
hed)wsanucdi aur 07ta elcstefre ws-..Sf abr h UPrivacy EU The Harbor. Safe Swiss-U.S. former the replaces that 2017 January in announced was Shield”)
ieesncriidt nSpebr21.Smlry e ws-..PiaySil “ws Privacy (“Swiss Shield Privacy Swiss-U.S. new a Similarly, 2016. September in to certified LivePerson
rvdsamcaimfrcmaist rnfrdt rmE ebrsae oteUie ttsadthat and States United the to states member EU from data transfer to companies for mechanism a provides
ntdSae gedt e rmwr aldteE-SPiaySil “UPiaySil” that Shield”) Privacy (“EU Shield Privacy EU-US the called framework new a to agreed States United
aafo h uoenUint ..cmais nldn s nJl 06 h uoenUinadthe and Union European the 2016, July In us. including companies, U.S. to Union European the from data
oteUie tts a naiae nOtbr6 05 eutn nasgiiatipc ntetase of transfer the on impact significant a in resulting 2015, 6, October on invalidated was States, United the to
UU aeHro rga,wihpoie ai ea ai o rnfr fproa aafo Europe from data personal of transfers for basis legal valid a provided which program, Harbor Safe EU-US
oenet raece nteaeso aapiayaddt euiyi ieyt nrae o ntne the instance, For increase. to likely is security data and privacy data of areas the in agencies or governments
diinly swbadmbl omrecniust vle euainb eea,saeadforeign and state federal, by regulation evolve, to continues commerce mobile and web as Additionally,
amorbusiness. our harm
oenetlodr eurn st hneordt rcie,wihcuddmg u euainand reputation our damage could which practices, data our change to us requiring orders governmental
ocmlac ol euti aeilfnsadpnlis iiain euaoyivsiainand/or investigation regulatory litigation, penalties, and fines material in result could Noncompliance
evcs n eur aeilcagsi u uiespatcsta euti eue revenue. reduced in result that practices business our in changes material require and services,
asadrgltosrltdt rvc a eur infcn ot ii h s n dpino our of adoption and use the limit cost, significant require may privacy to related regulations and laws
amnz coscretE ebrsaeepiaydt rtcinlw.Cmlac ihcagsin changes with Compliance laws. protection data e-privacy state member EU current across harmonize
mn h urn -rvc ietv’ ue nteueo oke n te rcigtcnlge,adto and technologies, tracking other and cookies of use the on rules Directive’s e-Privacy current the amend
omnctosDrcie(-rvc ietv)t,aogohrtig,bte lg ihteGP,to GDPR, the with align better things, other among to, Directive) (e-Privacy Directive Communications
omnctos(-rvc euain orpaeteE’ urn rvc n Electronic and Privacy current EU’s the replace to Regulation) (e-Privacy Communications
h uoenUinhsas eesdapooe euaino rvc n Electronic and Privacy on Regulation proposed a released also has Union European The
n u uiescudb eaieyimpacted. negatively be could business our and
oefreetatoso netgtosb UDt rtcinAtoiiso asisb rvt parties private by lawsuits or Authorities Protection Data EU by investigations or actions enforcement to
oiisadpatcs rtoeo u edr,ae raeprevdt e nufcet ecudb subject be could we insufficient, be, to perceived are or are, vendors, our of those or practices, and policies
a eue asn st nu oeta irpinadepnerltdt u uiespoess four If processes. business our to related expense and disruption potential incur to us causing refuse, may
eur edr htpoesproa aat aeo diinlpiayadscrt biain,adsome and obligations, security and privacy additional on take to data personal process that vendors require
uhrte rtidpriswl setta u evcso uiespatcsfi ocml.W lomust also We comply. to fail practices business or services our that assert will parties third or authorities
omtetta novssbtnilcss n ti osbeta ept u fot,governmental efforts, our despite that possible is it and costs, substantial involves that commitment
sadesdi u utmradvno gemns nuigcmlac ihteGP sa ongoing an is GDPR the with compliance Ensuring agreements. vendor and customer our in addressed is
ieesnado u utmr ome h e ea eurmnsadmyipc o aaprotection data how impact may and requirements legal new the meet to customers our and/or LivePerson
moe eti ehooia eurmnsta a eur st aecagst u evcst enable to services our to changes make to us require may that requirements technological certain imposes
mlmnigtcncladognztoa esrs n nacdntfcto ue.TeGP also GDPR The rules. notification enhanced and measures, organizational and technical implementing
rcsos(sta emi eie yapial Udt rtcinlw aedrc biain,including obligations, direct have law) protection data EU applicable by defined is term that (as processors
euaoshv led sudsvrlfnsprun oteGP.Oemtra hnei htdata that is change material One GDPR. the to pursuant fines several issued already have regulators
ihro 0mlinErsad4 fgoa nulrvne ic h umro 08 European 2018, of summer the Since revenue. annual global of 4% and Euros million 20 of higher
n/roeain nteErpa no n,frnnopine rvdsfrcnieal ie pt the to up fines considerable for provides noncompliance, for and, Union European the in operations and/or
aaPoeto ietv n moe infcnl rae opinebreso opne ihusers with companies on burdens compliance greater significantly imposes and Directive Protection Data
eaeefciei a 08adapisars h uoenUin h DRrpae h urn EU current the replaces GDPR The Union. European the across applies and 2018 May in effective became
159263 TOPPAN live person AR_Text_Insert Sig 3 ] Sig 3 person AR_Text_Insert TOPPAN live 159263 which (“GDPR”), Regulation Protection Data General the framework, protection data EU new a to
oni fteErpa no,adteErpa omsin nareetwsanucdwt respect with announced was agreement an Commission, European the and Union, European the of Council
eebr21,floigtecnlso fte“rlge etnsbtenteErpa alaet the Parliament, European the between meetings “trilogue” the of conclusion the following 2015, December
doaygop aecle o nrae euainadcagsi nutypatcs o xml,in example, For practices. industry in changes and regulation increased for called have groups advocacy
oeudricesdpbi cuiy n oenetlette,cnue gnisadconsumer and agencies consumer entities, governmental and scrutiny, public increased under come
asadpatcsrgrighnln n s fproa n te nomto ycmaishave companies by information other and personal of use and handling regarding practices and Laws
ncmnscudhr u euaino tews mattegot forbusiness. our of growth the impact otherwise or reputation our harm could enactments
diin h nrae teto oue pnlaiiya euto asisadlgsaiepooasand proposals legislative and lawsuits of result a as liability upon focused attention increased the addition,
hc ol aeamtra des feto u uies iaca odto n eut foeain.In operations. of results and condition financial business, our on effect adverse material a have could which
euti rceig gis sb oenetlette,csoes osmr,wtho ruso others, or groups watchdog consumers, customers, entities, governmental by us against proceedings in result
eaigt aapiayaddt rtcin rtepiaycmimnscnandi u otat,could contracts, our in contained commitments privacy the or protection, data and privacy data to relating
st opywt u otdpiayplce,apial eea,saeo nentoa asadregulations and laws international or state federal, applicable policies, privacy posted our with comply to us opeiyadcs fcmlac ihdt n rvc eurmnswl ieyices.Ayfiueby failure Any increase. likely will requirements privacy and data with compliance of cost and complexity
159263 TOPPAN live person AR_Text_Insert Signature 3 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] htmyb plcbet u uies opinewt hs asmyrqiesbtnilivsmn or investment substantial require may laws matters these other with and Compliance spam, business. data electronic our data, to of applicable visitor categories be other to website may access and government that of email cybersecurity, advertising, regulation, use content online forgotten,” and information, be personal to collection “right privacy, the protection, concerning our data storage, proposals restrict regulatory potentially and and and application legislative use in we technology changes the significant to apply to business. to our changed could conduct subject were or legislation legislation to entities “spyware” ability data be to such mentioned government previously analytics, the by can the used web enforced that of and be include is scope believe the can evolving example, However, computer, which not for laws. constantly If, user’s applicable of do interpretation. by many are We end regulations, prohibited parties, machine. and are an laws user’s private or foreign “spyware” on end and constitute installed the state employ federal, we when of that control that, methods on take monitoring focuses software deceptively typically legislation of and Such could Internet. intentionally proliferation negatively the over areas the “spyware” could of protection and restricting distribution compliance the consumer prohibiting regulatory by other privacy of and customers our security and data us to and are business. they our cost how privacy impact and the laws data applicable increase to prior Changes significantly to data information. security sensitive protect for data to relating algorithms effort of masking an variety interpreted and in database, a rest our customers at to data our transfer for offer disposal, to We encryption visitors. retention as website storage, such from practices, use, data and collection, procedures of regarding processing laws other data impose or agencies transfer of and perception bodies our government the of foreign acceptance Even market effectively. and services sales inhibit our could use valid, privacy providing not to resist addition, or services. to customers whether and In or products concerns, data our condition. privacy of data financial allow forms and and various to security collect operations necessary that sites may of data online which results avoid business, the to our our consumers and our on cause reputation may effect If our concerns take us. adverse disparaging may example, material on groups for a burdens such by, advocates, business have additional privacy our or place harm groups may watchdog that by that measures unacceptable standards deemed self-regulatory are practices new privacy establish data the to enacted, certain continue currently may of As breaches. out data opt gives for action to which of consumers (“CCPA”), 2020. cause allows 1, new our January also 2018 about on a CCPA effect provides them takes to CCPA and The of disclosures parties, practices. new third Act make sharing with to and sharing us Privacy require use may Consumer collection, and our rights data California impact privacy data adversely the new residents or California passed services and legislature our countries provide California among we and how between affect data move could mechanisms new we which these include how operate, to States on evolve results. we United financial or impact invalidated the which be an to in may have data and regions could personal scrutiny judicial EU that or requirements of regulatory legal transfer to lawful subjected been the also for have reduced allow believe or revenue, in we existing activity. lower changes noncompliant that with alleged costs, require comply the stop to increased may to Failure orders Compliance in or firms. and penalties foreign-based data. significant result customer in with that result that competing our may rules of in systems new of difficulty European management internal greater movement the the or or and efficiency, as in practices, by result location well may business approved reviews the as legal services, previously Ongoing data affecting US. clauses” the employee requirements to impact internal contractual EU inconsistent could the that from “standard or transfers pending data litigation burdensome the for current mechanism is a use there as example, Commission to For EU. ability the outside companies’ transfers data for basis nadto,rgltr uhrte n oenet rudtewrdaecnieiganme of number a considering are world the around governments and authorities regulatory addition, In consumer protect to designed legislation enacted have States United the in states some instance, For and state federal, Various users. their from data collect may services and products our using Businesses and established have groups industry other and advocacy privacy activity, government to addition In of State the 2018, June in Union, European the in landscape regulatory changing the to addition In Clauses, Contractual Model standard as such mechanisms, recognized legally other are there While 16 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Black
3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] ] 32 Page plcto a emdfe;adnwlw a eeatdi h uue n uhdvlpet could developments such technological Any condition. future. financial or the and results in operating restrictions business, enacted our be harm significant and may exposure, laws liability legal new new to us and subject any modified; be of may application imposition and self-regulatory evolving business. the our an released on is impact regulation, this also negative that a have Given have could of breach practices. requirements security and groups and area security privacy industry data data unsettled establish various and and for and maintenance and guidelines data, collection, regulators and products the geolocation industry principles Further, address our and and which browsing to lawmakers requirements. overseas, web and by changes notification States information, proposals make United personal many to the are of us in there use both require Currently area, may business. this practices in our Protection groups our Privacy harm Online Children’s could of the which review as commitments such policies, or security statutes data investigation or regulations or Any privacy with comply Act. their to with fail comply or to consumers, regulations fail to that and companies laws against and services. actions email proposed our enforcement commercial using and of customers delivery Existing of the services. behalf impact on could and or spam us products electronic apply by potentially communications of planned electronic could categories other or legislation other privacy and current online email proposed our to related other “Do of and and proposed devices, laws some collection mobile the and and from proposed to laws as practices data advertising and privacy such targeted of data, certain considering Existing use behavioral restricting and are burdens. at online aimed or compliance regulations of regulations, adopted greater Track” monitoring requirements. have Not and significant notification countries European cybersecurity in the breach of regarding result Outside regulations number data applications. Internet may a mobile new from States, that to and signals United regulations respect Do-Not-Track minors, the with to guidelines and of passed privacy regard Union have information adopted states with also delete other practices has and to California California companies’ ability that of guidelines of State the or the disclosure regulations browsers, example, new For to of services. promulgation relating and the laws products or our laws policies new to security in apply and result privacy may may including online, review business This doing practices. companies and an of have practices could handling laws data personal existing of interpretations new significant and to laws example: subject existing For shifting business. be or our may to proposed on jurisdictions Due other impact various developments. in of rates and range or A trends policies change. regulatory tax conditions, surrounding political direction and economic strategic develop business our and harm impact could liability potential impact this on otherwise of or focused result reputation a our attention as harm increased incurred could results. lawsuits, costs operating any Any or and we business. addition, fines our our if regulatory In affect of or of negatively growth operations. result obligations, the would a legal of which as resources, other delay results or substantial practices, issues, or and business liability expend laws our is and condition these to services It changes with financial material enhanced we comply requirements. business, implement and obligations to to legal legal new forced able and be of such laws not may release new we any are what them, we and with under business liable If comply our become to. to to apply subject will procedures become to laws resources subject may existing and/or and become how effort features will considerable predict we expend to product countries, to difficult of new need number could develop greater We jurisdictions. a to additional in in used some regulations and and offered cause laws are and/or solutions sales our impede and mobile, might the which reduce customers, could Requirements to to technology data. services. provide our technology our technical using we using our before discontinue of services for visitors to use the customers web order existing and its of in from collection value visitors consent the and web obtain on amount first of based must consent website are our a and/or express that we that functions the data, anonymous basic obtain or to certain laws to related perform practices If required visitors. use be website or may of collection privacy data customers are the limit States, invade that United may enacted data the are anonymous including regulations of jurisdictions, collection some the example, For whether us. considering for challenging technologically be 159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Black emgtuitninlyvoaesc asnwadi h uue uhlw rteritrrtto or interpretation their or laws such future; the in and now laws such violate unintentionally might We brought and investigated aggressively has particular in FTC, or Commission, Trade Federal U.S. The the review, to continue will and reviewing are reviewed, have regulators and agencies Government analyze relevance, ascertain to initiatives regulatory and legislation pending monitors Company The to shifts business our of portion increasing an evolves, and grows business our as that, likely also is It 17
333
18
rdctdo u otne use. continued our on predicated
ihsi rdmrs evc ak n rdnmsi h ntdSae,wehrrgsee rnt is not, or registered whether States, United the in tradenames and marks service trademarks, in rights
hlegdb tesbsdo eti s eurmnso te iie rud.Tedrto fproperty of duration The grounds. limited other or requirements use certain on based others by challenged
sdi atclrcuty nadto,ataeakrgsrto a ecneldo naiae if invalidated or cancelled be may registration trademark a addition, In country. particular a in used
uidcin,teemyb cain hr ako il sntrgsrbeo rtcal rcno be cannot or protectable or registrable not is title or mark a where occasions be may there jurisdictions,
eitain a eeal emitie nefc o sln stemr si s nterespective the in use in is mark the as long as for effect in maintained be generally may registrations
nsoeadlmtdt hs onre hr akhsbe eitrdo rtce.Wietrademark While protected. or registered been has mark a where countries those to limited and scope in
tes ihrsett u rdmrsadtaenms rdmr asadrgt r eeal territorial generally are rights and laws trademark names, trade and trademarks our to respect With others.
usin h asadrgltoso h eeatjrsito n h em fislcneareet with agreements license its of terms the and jurisdiction relevant the of regulations and laws the question,
h uaino h rtcinafre ooritleta rprydpnso h yeo rpryin property of type the on depends property intellectual our to afforded protection the of duration The
iaca condition. financial
uhcam ol aeamtra des feto u uies eut foeain,cs lw and flows cash operations, of results business, our on effect adverse material a have could claims such
wihmyb oty nvial ncmecal esnbetrs rntaalbea l) hrfr,any Therefore, all). at available not or terms, reasonable commercially on unavailable costly, be may (which
hti h ujc fayo hs lis nesw ne nolcneareet ihtetidparties third the with agreements license into enter we unless claims, these of any of subject the is that
nelculpoet nn fwihmgtb ucsfl,o ii u blt oueteitleta property intellectual the use to ability our limit or successful), be might which of (none property intellectual
eieyo u evcs eeo o-nrnigsfwr,tcnlg,bsns rcse,sseso other or systems processes, business technology, software, non-infringing develop services, our of delivery
ak foeaigorbsns,pysbtnildmg wrs rvn sfo eln u rdcs delay products, our selling from us prevent awards, damage substantial pay business, our operating of tasks
st pn infcn mut nltgto ee ftecami nai) itatmngmn rmother from management distract invalid), is claim the if (even litigation in amounts significant spend to us
lisaantu.Aycam leigifigmn ftidpryitleta rpryrgt ol require could rights property intellectual third-party of infringement alleging claims Any us. against claims
a nedt ieptn plctoscvrn set ftertcnlg n aeasre rmyassert may or asserted have and technology their of aspects covering applications patent file to intend may
ehooyado e n oiebsdcnue-aigsrie rohrtidprismyhv ie or filed have may parties third other or services consumer-facing based mobile and web and/or technology
ndfeetidsr emnsoelp.Sm forcmeiosi h aktfrdgtlengagement digital for market the in competitors our of Some overlaps. segments industry different in
rvln n stenme fcmeiosi u nutysgetgosadtefntoaiyo services of functionality the and grows segment industry our in competitors of number the as and prevalent
eicesnl ujc otidpryifigmn lisa lisb o-rciigette eoemore become entities non-practicing by claims as claims infringement third-party to subject increasingly be
riaycus forbsns,orsrie n/rorcsoes s forsrie aebe n may and been have services our of use customers’ our and/or services our business, our of course ordinary
usata iiainrgrigitleta rpryrgt xssi h otaeidsr.I the In industry. software the in exists rights property intellectual regarding litigation Substantial
ntdSae rweeefreeto aspoetn rpitr ihsi o omno effective. or common not is rights proprietary protecting laws of enforcement where or States United
evcsaesl rue,weetelw a o rtc rpitr ihsa ul sd h aso the of laws the do as fully as rights proprietary protect not may laws the where used, or sold are services
ehooyo nelculpoet ihs atclryi oeg onre hr ed uies hr our where business, do we where countries foreign in particularly rights, property intellectual or technology
ifcl,adw antb eti httesesw aetknwl rvn iaporaino our of misappropriation prevent will taken have we steps the that certain be cannot we and difficult,
ucinlt sorsrie.Plcn nuhrzdueo u evcsaditleta rpryrgt is rights property intellectual and services our of use unauthorized Policing services. our as functionality
rdsrbt u nelculpoet ihso ehooyo tews eeo evc ihtesame the with service a develop otherwise or technology or rights property intellectual our distribute or
ihs hr ate a,i nuatoie anr tep oue oyo tews banadmarket and obtain otherwise or copy use, to attempt manner, unauthorized an in may, parties third rights,
otae ouetto n te rpitr nomto.Dsieorefrst rtc u proprietary our protect to efforts our Despite information. proprietary other and documentation software,
hog hs n te rte gemns eatmtt oto cest n itiuino our of distribution and to access control to attempt we agreements, written other and these through
mlye,cnutns utmr,ptnilcsoes taei ates n te hr ate,and parties, third other and partners, strategic customers, potential customers, consultants, employees,
ofdnilt n te rte gemns(nldn neto sinetareet)wt our with agreements) assignment invention (including agreements written other and confidentiality
tesmydvlptcnlge htaesmlro ueirt u ehooy eetrinto enter We technology. our to superior or similar are that technologies develop may Others
n eibemitnneaemr seta oetbihn n anann opttv advantage. competitive a maintaining and establishing to essential more are maintenance reliable and
h ehooia n raiesil forpronl e evc eeomns rqetenhancements frequent developments, service new personnel, our of skills creative and technological the
n eti oeg uidcin,a ela otata etitos oee,w eiv htfcossc as such factors that believe we However, restrictions. contractual as well as jurisdictions, foreign certain and
159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3 States United the in otherwise or registration, including rights, law common and state, federal, on relying
motn oorbsns n aktn fot.W ekt rtc u nelculpoet ihsby rights property intellectual our protect to seek We efforts. marketing and business our to important
u otae ulctosadohrdcmnsatoe yu.Teeitleta rpryrgt are rights property intellectual These us. by authored documents other and publications software, our
h ntdSae n ncranlctosotieteUie tts eas w oyihs nldn in including copyrights, own also We States. United the outside locations certain in and States United the
u rdcsadsrie.W usetergsrto fordmi ae,taeak n rd ae in names trade and trademarks names, domain our of registration the pursue We services. and products our
osmrfcn evcs ebleetedrto forptnsi dqaerltv oteepce ie of lives expected the to relative adequate is patents our of duration the believe We services. consumer-facing
nldn nelculpoet eae odgtleggmn ehooyadwbadmbl based mobile and web and technology engagement digital to related property intellectual including
ieptn plctost rtc nelculpoet htw eiv sipratt u business, our to important is believe we that property intellectual protect to applications patent file
w otoi fptnsadptn plctosi h ntdSae n nentoal n regularly and internationally and States United the in applications patent and patents of portfolio a own
otata rvsos opoetorporeaytcnlg,poessadohritleta rpry We property. intellectual other and processes technology, proprietary our protect to provisions, contractual
rtcin nteUie ttsadohrjrsitos swl scnietaiyrqieet and requirements confidentiality as well as jurisdictions, other and States United the in protections
erl nacmiaino aet oyih,taesce,taeakadohrcmo law common other and trademark secret, trade copyright, patent, of combination a on rely We nelculPoet n rpitr Rights Proprietary and Property Intellectual
159263 TOPPAN live person AR_Text_Insert Signature 3 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Black nentst htcnan eot,poyadifrainsaeet n te nomto regarding information other herein. and reference statements by information www.sec.gov. incorporated at and SEC not the proxy part is with considered electronically reports, be and file not that contains 10-K should issuers and that Form not on is site site Report Internet web Company’s Annual the the this on to, 1934 information it of the of furnished and Act hyperlink, or Exchange a with, as Securities material Commission. function such the filed Exchange of to electronically have amendments 15(d) and we and or after Securities 8-K 13(a) practicable Form Sections reasonably on as to reports soon pursuant current as furnished our or and filed 10-Q Form reports on those reports quarterly our 10-K, Form Reports to Access Website satisfactory. are employees our with relations our believe We agreements. bargaining collective Employees emk vial,fe fcag,o u est ( website our on charge, of free by available, covered make not We are employees Our employees. full-time 1,106 had we 2018, 31, December of As h opn’ e ieadespoie bv sntitne to intended not is above provided address site web Company’s The 19 www.liveperson.com ,orana eot on reports annual our ), h E anan an maintains SEC The
3
20
hsocr,tetaigpieo u omnsokcuddciesignificantly. decline could stock common our of price trading the occurs, this
h xettoso euiisaayt n netr rblwaygiac emypoiet h akt If market. the to provide may we guidance any below or investors and analysts securities of expectations the
h oeon atr,i spsil htoroeaigrslsi n rmr uueqatr a albelow fall may quarters future more or one in results operating our that possible is it factors, foregoing the
hudntrl pnteecmaioso u atrslsa niaoso u uuepromne u to Due performance. future our of indicators as results past our or comparisons these upon rely not should
sarsl,cmaigoroeaigrslso eidt-eidbssmyntb ennfl You meaningful. be not may basis period-to-period a on results operating our comparing result, a As
eea,rgoa n/rgoa cnmcadpltclconditions. political and economic global and/or regional general, •
optn;and computing;
cnmccniin pcfct h nent oietcnlg,eetoi omreadcloud and commerce electronic technology, mobile Internet, the to specific conditions economic •
atr htaeetrl usd forcontrol: our of outside entirely are that factors
u eeu n prtn eut a lofutaesgiiatyi h uuedet h following the to due future the in significantly fluctuate also may results operating and revenue Our
forbsns,icuigtoerltdt acquisitions. to related those including business, our of
h mutadtmn fcptlepniue n te ot eae ooeainadexpansion and operation to related costs other and expenditures capital of timing and amount the •
xouet oeg urnyecag aefutain;and fluctuations; rate exchange currency foreign to exposure •
u blt oaodado aaesrieitrutos irpin,o euiyincidents; security or disruptions, interruptions, service manage and/or avoid to ability our •
otne dpinb xet n sr fwbbsdavc services; advice web-based of Users and Experts by adoption continued •
otne dpinb opne fmbl n lu-ae esgn solutions; messaging cloud-based and mobile of companies by adoption continued •
competitors;
hne norpiigmdl rplce rtepiigplce forcretadfuture and current our of policies pricing the or policies or models pricing our in changes •
endpoints;
u blt omiti n d nertoswt hr-at osmrmsaigpafrsand platforms messaging consumer third-party with integrations add and maintain to ability our •
u blt oinvt n rvd e evcsfrorcustomers; our for services new provide and innovate to ability our •
h nrdcino e evcsb so u competitors; our or us by services new of introduction the •
osmrdmn o u services; our for demand consumer •
u utmr’dmn o u evcsadbsns success; business and services our for demand customers’ our •
u blt orti n nraeslst xsigcustomers; existing to sales increase and retain to ability our •
u blt oatatadrti e customers; new retain and attract to ability our •
include:
u oto.Sm fteipratfcosta a as u eeu n prtn eut ofluctuate to results operating and revenue our cause may that factors important the of Some control. our
lcut infcnl.Teefutain a eutfo ait ffcos ayo hc r usd of outside are which of many factors, of variety a from result may fluctuations These significantly. fluctuate
ihro oho hc a esgiiatadmycueorqatryrvneadoeaigrslsto results operating and revenue quarterly our cause may and significant be may which of both or either
ehv nteps nurd n a nteftr nu,lse n xeinengtv ahflows, cash negative experience and losses incur, future the in may and incurred, past the in have We
ntetaigpieo u omnstock. common our of price trading the in
159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3 decline substantial a cause may which significantly, fluctuate may results operating and revenue quarterly Our
ik eae oOrBusiness Our to Related Risks
omnstock. common
n ik e ot nti eotadohrpbi iig eoedcdn oprhs,hl rsl our sell or hold purchase, to deciding before filings public other and report this in forth set risks and
rsetv n xsigivsosaesrnl re ocrflycnie h aiu atoaystatements cautionary various the consider carefully to urged strongly are investors existing and Prospective
htw urnl emimtra,mybcm motn atr htipi u uiesoperations. business our impair that factors important become may immaterial, deem currently we that
ie h ik ecie eo r o h nyoe efc.Adtoa ik o rsnl nw ou,or us, to known presently not risks Additional face. we ones only the not are below described risks The time.
ttmnsmd nti nulRpr nFr 0Ko rsne lehr ymngmn rmtm to time from management by elsewhere presented or 10-K Form on Report Annual this in made statements
culoeaigrslst ifrmtral rmtoeidctd xetdo ugse yforward-looking by suggested or expected indicated, those from materially differ to results operating actual
h olwn r eti fteipratrs atr htcudcue rcnrbt ocuig our causing, to contribute or cause, could that factors risk important the of certain are following The tm1.Rs Factors Risk 1A. Item
159263 TOPPAN live person AR_Text_Insert Signature 3 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT The markets in which we participate are highly competitive, and we may lose customers and revenue if we are not able to innovate or effectively compete. The markets for mobile and online business messaging and digital engagement technology are intensely competitive, rapidly changing and characterized by aggressive marketing, pricing pressure, evolving industry standards, rapid technology developments and frequent new product introductions. We believe that competition will continue to increase as our current competitors increase the sophistication of their offerings and as new participants enter the market, which may cause additional pricing pressure. If we are unable to accurately anticipate technology developments and continue to innovate in the markets in which we compete and develop successful integrations with social media and other third-party consumer messaging platforms and endpoints, or our competitors are more successful than us at developing compelling new products, services and integrations, or at attracting and retaining customers, we may lose revenue and market share and our operating results could be adversely affected. We believe that most online retailers view messaging and Conversational Commerce as a feature. They are content with building integrations to a messaging endpoint and offering messaging as just another product in their suite. LivePerson holds the perspective that Conversational Commerce requires an operational transformation that changes how brands engage with consumers across service, sales, marketing and brick and mortar. Brands must adapt their contact centers to an asynchronous messaging environment and leverage a combination of human agents, bots and AI to achieve scale and efficiencies. When done correctly, the entire consumer lifecycle with a brand will be maintained within the Conversational Commerce relationship, and traffic will steadily shift away from lower returning voice calls, websites and apps to higher returning messaging endpoints. We believe that LivePerson’s differentiated approach to the Conversational Commerce industry, combined with its unique technology and expertise, has established the Company as a market leader, with an ability to deliver superior returns on investment: • The LiveEngage enterprise-class, automation-first, cloud-based platform, was designed for AI-assisted and human-powered messaging in mobile and online channels. The platform offers best-in-class security and scalability, offers the broadest ecosystem of messaging endpoints, is designed for ease of use, and features an AI engine custom built for Conversational Commerce, robust real-time reporting, role-based real-time analytics, predictive intelligence, and innovations in customer satisfaction and connection measurement. Additionally, LiveEngage is an open platform with pre-built, enterprise-grade integrations into back-end systems as well as the ability to work across NLU providers. • LivePerson has deep domain expertise across verticals and messaging endpoints, a global footprint, referenceable enterprise brands and a team of technical, solutions and consulting professionals to assist customers along their transformational journeys. We are positioned as an authority in Conversational Commerce, publishing a proprietary Conversational Quotient™ Index that measures each customer across multiple key indicators to ascertain their level of conversational maturity. Each business is then benchmarked against industry peers to determine their relative progression. We have developed a Transformation Model that is introduced to existing and prospective customers to help guide them on their journeys from legacy and oftentimes inefficient legacy voice, email and chat solutions to modern conversational ones powered by messaging and AI. We have current and potential competition from providers of messaging and digital engagement 3 solutions that enable companies to engage and connect with their consumer customers, as well as technology providers that offer customer relationship management and contact center solutions. We have current and potential competitors in many different industries, including: • technology or service providers offering or powering competing digital engagement, contact center, communications or customer relationship management solutions, such as eGain, Genesys, Nuance. Oracle, Salesforce.com, and Twilio; • service providers that offer basic messaging products or services with limited functionality free of charge or at significantly reduced entry level prices;
21 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
159263 TOPPAN live person AR_Text_Insert Signature 3 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Black 22 data analytics companies,existing such or future as capabilities and Facebook, consumer relationships Google to offer and competing B2B WeChat, solutions; and which may leverage their Our customers typically subscribe for our services for a twelve month term and may have no obligation We depend on monthly fees and interaction-based fees from our services for substantially all of our We collect, process, store and use personal data and other information generated during mobile and The scope of U.S. and international privacy laws and regulations is evolving and changing, subject to • social media, social listening, messaging, artificial intelligence, bots, e-commerce, and/or data• and customers thatIn develop addition, and manage many their of messaging solutions our in-house; current and potential competitors have substantial competitive advantages, such as greater brandbudgets, recognition, significantly access larger to financial,distribution marketing, larger relationships, and and/or customer resource more and and/or diversemay product development consumer and be service bases, able offerings. As larger toacceptance a respond of and result, more these more messaging competitors strategies quickly services established or and or marketing customer effectively any and requirements. than newcompetitor’s Also, products or we and because changing services, can of even opportunities,not to if these be technologies, any our able advantages, standards, to services change potential pricing compete are customers successfully in more against may our the effective. For select current all general and a of futureThe market competitors. these success reasons, we ofservices, may our the migration businessconsumer of depends users of existing on our consumer customers retention services. to of our existing new customers platform,to and and renew their attracting their purchase subscription newterminable after of customers or expiration and may additional of terminate new customers, the upon or twelve 30 any month to one term.services, customer 90 In reduce to days’ some the notice whom cases, amountoperations we without our of provide agreements penalty. may If a are be services significant aservices purchased, negatively amount could significant and or also of number lead fail materially customers of services, affected. to to were terminate our Dissatisfaction purchase to our service. with terminate additional services, the our nature resultsrevenue. As or of part quality of of ourfees. strategy, we our While are increasingly this offering customerspotentially interaction-based subscriptions produce with fee greater interaction-based variability model in ourinteractions has revenue that as demonstrated revenue our in successamount customers this in model of generate is our services through impacted sold business by usesales the in to to of number initial new of date, customers orders, our and we itunless sales products. depend we could of Because significantly are additional able on of to services the obtain to the additional growth our customers of existing historically or customers. alternate our small Our revenueOur customer sources. revenue could business base decline is and subjectprotection, to and a increased variety of publicregulation, industry scrutiny U.S. standards and of and international other privacy laws legal obligations and and that regulations security could regarding adversely issues privacy affect and our could business. data resultonline in messaging between increased brands government andpolicies consumers and and practices between on experts ourbusiness and websites is and consumers. subject We we post to also our numerous oftenprotection, federal, privacy include personal state privacy information, and commitments security, international in data lawsand our collection, and similar contracts. storage, regulations Our use tracking regarding technologies. and privacy, To data transfer, thesuch and extent the that as additional use legislation legislation of regardingthrough governing user cookies the privacy the is use enacted, collection ofrestricting and cookies us or from use collecting similar ofus or technologies, to using the information lawsuits information effectiveness or regarding that of regulatoryresults may Internet investigations. of our be The or operations services valuable foregoing and to could could mobile financial our have condition. be users a customers impaired material and/or by adverse exposing effect our business, differing interpretations, may bejurisdictions costly or to conflictexposure comply with and the with, other complexity and and rules.Any cost may As of failure by compliance be we us with inconsistent data expand to and comply among our privacy with requirements countries operations will our likely posted in and increase. privacy these policies, applicable countries, federal, state our or liability international laws and regulations relating to data privacy and data protection, or the privacy commitments contained in our contracts, could result in proceedings against us by governmental entities, customers, consumers, watchdog groups or others, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the increased attention focused upon liability as a result of lawsuits and legislative proposals and enactments could harm our reputation or otherwise impact the growth of our business.
Laws and practices regarding handling and use of personal and other information by companies have come under increased public scrutiny, and governmental entities, consumer agencies and consumer advocacy groups have called for increased regulation and changes in industry practices. For example, in December 2015, following the conclusion of the “trilogue” meetings between the European Parliament, the Council of the European Union, and the European Commission, an agreement was announced with respect to a new EU data protection framework, the General Data Protection Regulation, which became effective in May 2018 and applies across the European Union. The GDPR replaces the EU Data Protection Directive, imposes significantly greater compliance burdens on companies with users and/or operations in the European Union and, for noncompliance, provides for considerable fines up to the higher of 20 million Euros and 4% of global annual revenue. Since the summer of 2018, European regulators have already issued several fines pursuant to the GDPR. One material change is that data processors (as that term is defined by applicable EU data protection law) have direct obligations, including implementing technical and organizational measures, and enhanced notification rules. The GDPR also imposes certain technological requirements that may require us to make changes to our services to enable LivePerson and/or our customers to meet the new legal requirements and may impact how data protection is addressed in our customer and vendor agreements. Ensuring compliance with the GDPR is an ongoing commitment that involves substantial costs, and it is possible that despite our efforts, governmental authorities or third parties will assert that our services or business practices fail to comply. We also must require vendors that process personal data to take on additional privacy and security obligations, and some may refuse, causing us to incur potential disruption and expense related to our business processes. If our policies and practices, or those of our vendors, are, or are perceived to be, insufficient, we could be subject to enforcement actions or investigations by EU Data Protection Authorities or lawsuits by private parties and our business could be negatively impacted.
The European Union has also released a proposed Regulation on Privacy and Electronic Communications (e-Privacy Regulation) to replace the EU’s Privacy and Electronic Communications Directive (e-Privacy Directive) to, among other things, better align with the GDPR, to amend the current e-Privacy Directive’s rules on the use of cookies and other tracking technologies, and to harmonize across current EU member state e-privacy data protection laws. Compliance with changes in laws and regulations related to privacy may require significant cost, limit the use and adoption of our services, and require material changes in our business practices that result in reduced revenue. Noncompliance could result in material fines and penalties, litigation, regulatory investigation and/or governmental orders requiring us to change our data practices, which could damage our reputation and harm our business.
Additionally, as web and mobile commerce continues to evolve, regulation by federal, state and foreign governments or agencies in the areas of data privacy and data security is likely to increase. For instance, the EU-US Safe Harbor program, which provided a valid legal basis for transfers of personal data from Europe to the United States, was invalidated on October 6, 2015, resulting in a significant impact on the transfer of data from the European Union to U.S. companies, including us. In July 2016, the European Union and the United States agreed to a new framework called the EU-US Privacy Shield (“EU Privacy Shield”) that 3 provides a mechanism for companies to transfer data from EU member states to the United States and that LivePerson certified to in September 2016. Similarly, a new Swiss-U.S. Privacy Shield (“Swiss Privacy Shield”) was announced in January 2017 that replaces the former Swiss-U.S. Safe Harbor. The EU Privacy Shield is subject to an annual review that could result in changes to our obligations. It could also be disruptive to our business if customers have concerns regarding the transfer of data from the European Union to the United States using the EU Privacy Shield or Swiss Privacy Shield as a transfer mechanism.
23 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
159263 TOPPAN live person AR_Text_Insert Signature 3 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Black 24 While there are other legally recognized mechanisms, such as standard Model Contractual Clauses, In addition to the changing regulatory landscape in the European Union, in June 2018, the State of In addition to government activity, privacy advocacy and other industry groups have established and We and our customers are subject to a number of laws and regulations in the United States and Businesses using our products and services may collect data from their users. Various federal, state and The EU Privacy Shield, Swiss Privacy Shield, and other frameworks may be challenged by regulators and/or private parties and reviewedbasis by for the data European transfers courts,companies’ outside which may the ability lead EU. to For toCommission uncertainty example, as there about use a the is mechanism legal current for theburdensome litigation data pending transfers or “standard from that the could inconsistent contractual EUinternal impact to requirements employee the clauses” US. data, affecting Ongoing previouslyservices, legal as the reviews approved business may well location result by practices, as in efficiency, and or or the the movement greater management internal European difficulty ofnew of systems in rules our may competing that that result with in customer data. result significant foreign-based penalties Compliance and firms. or in orders Failure may to increased to stop require the comply costs, changes alleged withthat noncompliant lower activity. in we existing believe revenue, or allow reduced have for also the been lawful subjected transfer tolegal of regulatory requirements or EU that judicial personal scrutiny couldregions and data have may to in an be the which invalidated impact United orfinancial we results. evolve on States, to these operate, how include mechanisms which we new could move data affect between how and we amongCalifornia provide countries our legislature and services passedCalifornia residents or new the adversely data privacy impact Californiadata rights and our collection, Consumer may use require Privacy ussharing and to with sharing make Act third new practices. parties, disclosures of The andCCPA to takes them provides effect CCPA a on about 2018 also January our new 1, allows cause 2020. (“CCPA”), consumers of which to action for gives opt data out breaches. Asmay of currently continue certain enacted, to the data establishprivacy new practices are self-regulatory deemed standards unacceptablemeasures that by that watchdog may groups harm place or our privacy additionalhave business advocates, by, burdens such a for groups on material example, may disparaging us. adverse take concerns our If effect may reputation cause on our and consumers our our tothe business, avoid results which online data of may sites that necessary operations collectsecurity to various and and forms financial allow data of privacy condition. our data concerns,products or In whether and customers to services. or addition, resist to not providing privacy valid, use could our inhibit sales services andOur effectively. market business Even acceptance is of the subject our other perception legal to requirements a of could subject variety us data of to claims U.S. or and materially foreign impact laws, our and business. abroad, existing, including new laws andregarding developing related regulatory data to or privacy, conducting datarequirements business protection, regarding on information the security, collection, thedata, cybersecurity, content, use, Internet restrictions consumer storage, or or protection, protection,provision internet mobile transfer technological of (or or devices, net) online other such neutrality,which payment processing advertising, as are services of electronic laws contracts, continuously (including consumer taxation, foreign evolving credit jurisdictions and card may claim developing. processing), thatentity, Because and we employees are our intellectual or required property to services infrastructure. complyoften rights, Foreign are with be data more their accessible protection, restrictive laws, than even worldwide, privacy,obligations those if and certain in that we other the apply don’t United laws have to States. a and Theand us, local scope may regulations including be and may those conflicting, interpretation particularly of related lawslaws the to and may laws obligations user be and outside privacy other interpreted the and United andwith States. applied data our There differently is security, current in a are practices, risk any oftenbrand, which that given reputation could uncertain these jurisdiction and cause business. in us a to manner incur that substantial is cost not and consistent couldforeign negatively government impact bodies our and agenciestransfer impose or other laws regarding processing of collection,procedures and use, data practices, storage, from such retention, website as visitors. disposal, encryption We offer for our data at customers rest a and variety masking of algorithms data for sensitive security data prior
3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 25 Further, various federal, state and foreign government bodies and agencies are highly focused on In addition, regulatory authorities and governments around the world are considering a number of It is also likely that, as our business grows and evolves, an increasing portion of our business shifts to For instance, some states in the United States have enacted legislation designed to protect consumer privacy by prohibiting the distributionrestricting of “spyware” the over the proliferationintentionally Internet. Such and of legislation typically deceptively software focusesmonitoring take on methods that, control that of when wefederal, employ the state installed constitute and end on “spyware” foreign orprivate user’s laws an are and machine. parties, prohibited regulations, end We are many byinterpretation. do of applicable user’s If, constantly laws. for not which computer, However, example, evolving can the believe is scope beinclude and of that enforced web used the can by the analytics, previously government mentioned to such be data ability “spyware” entities to legislation legislation or subject were conduct could changed our to business. to apply to significant the changes technology we in use applicationconsumer and and protection potentially initiatives, restrict particularly our incorporate in or light use bots, of artificialState intelligence the and/or of increase machine California learning. in legislature For newcompanies example, passed in technologies using the September and bots 2018, B.O.T. Act, services the onclear which that platforms and takes with conspicuous effect disclosure more on toentitled than July inform 10 1, consumers the that 2019, million they “Bot and unique areJune requires not monthly 2018. Disclosure speaking that visitors Regulation to and from in awith human. the this Accountability A consumers U.S. area similar use Act and could bill how impactunique of we how technological businesses provide and 2018” our use legal was challenges,contain services our such products introduced to biased as and our the to information, services customers. possibilityapplications which to the These produce. of can interact Deficiencies new insufficient U.S. such AI negatively data Senateliability, as including tools sets, impact claims or in these can the of data could also product sets decisions, cause liability, present breach that predictions us of warranty or reputational or harm analyses negligence. and that subject AI uslegislative to and legal regulatory proposalsstorage, data concerning protection, the privacy, “right collection topersonal be information, and forgotten,” online content use regulation, advertising, cybersecurity, email ofthat government and access may website to other be categories visitor applicable of tomay data, be our electronic data technologically business. spam, challenging Compliance and for withconsidering us. other whether For these matters example, the laws some collection may jurisdictions, ofregulations require including anonymous are substantial the data enacted investment may United that invade or States, limit the are customers data privacy collection of may or website be use visitors. required If practicesperform related to laws certain to or obtain basic anonymous data, the functions wethat that express and/or a our are website consent must based of firstamount on obtain web and the consent visitors value collection from in of its andexisting order web customers the use to visitors for services of discontinue before our using we using technical our technology our provide data. services. technology to to Requirements could customers, reduce which the might impedemobile, sales and and/or our cause solutions are some laws offered and and regulations used in in additionalto a jurisdictions. We greater develop could number need new of todifficult countries, product to expend we predict considerable will features effort how become and and/or existingmay subject resources laws to become procedures will subject apply to to to.become our comply If liable business under with and we them, what are any we newrelease may not laws such of be and able forced new legal legal to to obligations and implement requirements.business, comply we enhanced material with financial changes It services to these condition and is our laws expendliability business and or issues, practices, substantial results or delay other resources, as which of legal a wouldthe obligations, result operations. growth negatively or of of affect In if regulatory our our fines addition, business. we and or Any any operating costs lawsuits, results. could incurred increased harm as attention our a reputation result focused or of on otherwise this impact potential liability could harm our business to transfer to our database, ininterpreted an effort relating to protect to information.customers Changes of privacy to regulatory applicable laws compliance and and and how could data they negatively impact are security our business. could significantly increase the cost to us and our ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Black The Company monitors pending legislation and regulatory initiatives to ascertain relevance, analyze impact and develop strategic direction surrounding regulatory trends and developments. Due to shifting economic and political conditions, tax policies or rates in various jurisdictions may be subject to significant change. A range of other proposed or existing laws and new interpretations of existing laws could have an impact on our business. For example: Government agencies and regulators have reviewed, are reviewing and will continue to review, the personal data handling practices of companies doing business online, including privacy and security policies and practices. This review may result in new laws or the promulgation of new regulations or guidelines that may apply to our products and services. For example, the State of California and other states have passed laws relating to disclosure of companies’ practices with regard to Do-Not-Track signals from Internet browsers, the ability to delete information of minors, and new data breach notification requirements. California has also recently adopted the California Consumer Privacy Act of 2018. Outside the European Union and the United States, a number of countries have adopted or are considering privacy laws and regulations that may result in significant greater compliance burdens. Existing and proposed laws and regulations regarding cybersecurity and monitoring of online behavioral data, such as the proposed “Do Not Track” regulations, regulations aimed at restricting certain targeted advertising practices and collection and use of data from mobile devices, new and existing tools that allow consumers to block online advertising and other content, and other proposed online privacy legislation could potentially apply to some of our current or planned products and services. Existing and proposed laws and regulations related to email and other categories of electronic spam could impact the delivery of commercial email and other electronic communications by us or on behalf of customers using our services. The FTC in particular has aggressively investigated and brought enforcement actions against companies that fail to comply with their privacy or data security commitments to consumers, or fail to comply with regulations or statutes such as the Children’s Online Privacy Protection Act. Any investigation or review of our practices may require us to make changes to our products and policies, which could harm our business. Currently there are many proposals by lawmakers and industry groups in this area, both in the United States and overseas, which address the collection, maintenance and use of personal information, web browsing and geolocation data, and establish data security and breach notification requirements. Further, regulators and industry groups have also released self-regulatory principles and guidelines for various data privacy and security practices. Given that this is an evolving and unsettled area of regulation, the imposition of any new significant restrictions or technological requirements could have a negative impact on our business.
Failures or security breaches in our services or systems, those of our third party providers, or in the websites of our customers, including those resulting from cyber-attacks, security vulnerabilities, defects or errors, could harm our business. Our products and services involve the storage and transmission of proprietary information and personal data related to our customers and their users, as well as experts and consumers, and theft and security breaches expose us to a risk of loss of such information and data, improper use and disclosure thereof, litigation, regulatory investigation, and potential liability. We experience cyber-attacks of varying degrees on a regular basis. Our security measures may also be breached due to employee or other error, intentional malfeasance and other third party acts, and system errors or vulnerabilities, including vulnerabilities of our third party vendors, or customers, or otherwise. Any such breach or unauthorized access, or attempts by outside parties to fraudulently induce employees, users, vendors or customers to
3 disclose sensitive information in order to gain access to our data or data of our customers, users, experts or consumers, including, but not limited to, individual personal information and financial credit or debit card data that is protected by law or contract, could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our products and services that could potentially have an adverse effect on our business. While we continue to expand our focus on this issue and are taking measures to safeguard our products and services from cybersecurity threats and vulnerabilities in desktop computers, mobile phones, smartphones and handheld devices, cyber-attacks and other security incidents continue to evolve in sophistication and frequency. Because the techniques used to obtain unauthorized access, disable or
26 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
159263 TOPPAN live person AR_Text_Insert Signature 3 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 27 In addition, our customers may authorize third party access to their customer data located in our We conduct business in currencies other than the U.S. dollar in Europe, Australia, Japan and Israel. As Since we conduct business in currencies other than the U.S. dollar but report our financial results in In June 2016, voters in the United Kingdom (“U.K.”) approved a referendum to withdraw the U.K.’s degrade service, or sabotageoften systems, are are not constantly recognized evolving untilor in launched against sophisticated identify a ways target, these to itadvancements may avoid techniques enable be detection more difficult or and or data impossible to andincrease for the processes, us implement risk such to that anticipate as adequate cyber-attacks mobile andand preventative other computing measures. security assist and incidents And mobile will invulnerabilities, occur. payments, while some We they engage safeguarding of technological also third parties which our toincident may review products not of be and any immediatelycustomers’ remedied. services systems, magnitude A could from that significant result cyber-attack,services is such in or or material profiled a retain threats. harm security customers, in Those tofines and or our the expose parties penalties. brand us media, to and may involving lawsuits, reputation, identify regulatory our our, investigations, and ability our significant to service damages, deliver our providers’cloud environment. or Because we our do notor control the the transmissions processing between customersecurity of authorized third such parties, of datacommunication by between such customer our authorizedcomponents, transmissions third materials customers or parties, and software or we orour consumers, those cannot customers used processing. any ensure by and security our thedemand on Because customers integrity failures, for could the our or have defects end our an services,other damage adverse or users financial impact to of services liability errors on our or us, harm their reputation in on to and are websites. our our to Such business. our responsible adverse customerOur impact relationships, legal results for could exposure, of include and fluctuations. operations critical a may decrease be in adversely impacted due to our exposurewe to continue foreign to currency expand exchange ourin rate international currency operations exchange we rates. As becomecurrency a more rate result exposed fluctuation of risk to the associated the with expanding effects the size of exchange and rate fluctuations scope movement of of the our U.S. international dollar operations,U.S. has our dollars, increased. fluctuations inexample, currency during exchange 2018 rates we could experiencedapproximately $3.3 a adversely million foreign affect if currency our held exchange indollar results impact constant relative of of to currency, to other approximately operations. our 1% foreign revenue. For expenses, currencies Fluctuations percent, and in could or result the materially affect value in of our foreignportion revenue, the currency cost of U.S. transaction of our gains revenue foreign and andbetween currency operating losses. the exchange In U.S. rate dollar January exposure; and 2015, however, foreignDecember significant we currencies 31, fluctuations began may in 2018, nonetheless hedging exchange adversely we a affect rates enter are our into no net additional income longer (loss). hedging partyfinancial As transactions to instruments, of in any to the foreign mitigate currency risk, futureterms hedging but or or we transactions. at to all. We may use Additionally, may be theseadditional seek financial programs unable rely risks to to instruments, on enter such that our into ability as couldpredict to them derivative adversely forecast whether successfully, accurately on affect or and acceptable could our not exposecomponent financial we us of to will condition our incur revenues and grows,rate foreign our results fluctuations. exchange results of of losses operations in operations. will We the become cannot future. more To sensitive the toEconomic foreign extent exchange conditions the and international regulatoryUnion could changes negatively caused impact our by business. the United Kingdom’s likely exit frommembership the European fromMarch the 2017, the European U.K. governmentUnion, initiated Union commencing the a exit period process (“E.U.”), of underthe up Article which terms to 50 two of of is years the the forwith the Treaty withdrawal. of the commonly U.K. These and E.U., the negotiations the including European referred will other thein E.U. determine terms member March to the states of 2018 to future an trade negotiate as terms agreement between of in the “Brexit”. principle U.K. the and to U.K.’s In relationship the transitional E.U. provisions The under U.K. which and E.U. E.U. law announced would remain in ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Black force in the U.K. until the end of December 2020, but this remains subject to the successful conclusion of an agreement between the U.K. and the E.U. In the absence of such an agreement, there would be no transitional provisions and the U.K. would exit the E.U. at the end of the two-year period on March 29, 2019. As of February 2019, the process for the U.K. to exit the E.U., and the longer term economic, legal, political and social framework to be put in place between the U.K. and the E.U., remain unclear and may lead to ongoing political, regulatory and economic uncertainty and periods of exacerbated volatility in both the U.K. and in wider European markets for some time. Such uncertainty may have a material adverse effect on our ability to operate in the U.K. and the E.U. The announcement of Brexit and the continued uncertainty resulting from the ongoing negotiations concerning the U.K’s exit from the E.U. has resulted in significant volatility in global stock market and currency exchange rate fluctuations that resulted in strengthening of the U.S. dollar relative to other foreign currencies in which we conduct business. The announcement of Brexit and likely withdrawal of the U.K. from the E.U. has also created global economic uncertainty. The continuing uncertainty may cause our customers to closely monitor their costs and reduce their spending budgets. This could negatively impact our business, including affecting our relationships with our existing and future customers, suppliers and employees, which could have a negative impact on our business, prospects, results of operations, financial condition and cash flows. Further volatility in exchange rates resulting from Brexit is expected to continue in the short term as the U.K. continues to negotiate its exit from the E.U. We translate sales and other results denominated in foreign currency into U.S. dollars for our financial statements. During periods of a strengthening dollar, our reported international sales and earnings could be reduced because foreign currencies may translate into fewer U.S. dollars. The effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. markets either during a transitional period or more permanently and may be significant in the event that the U.K exits the E.U. without a comprehensive transitional agreement in place. The measures could potentially disrupt the markets we serve and the tax jurisdictions in which we operate and adversely change tax benefits or liabilities in these or other jurisdictions. They may also impact how we deliver our products and services to customers in the U.K. and in the E.U., which may cause us to lose customers, suppliers and/or employees and could result in increased operating expenses. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate, as well as other adverse effects that we are unable to anticipate. Any of these effects of Brexit, among others, could negatively impact our prospects, business, financial condition and results of operations.
Our business depends significantly on our ability to retain our key personnel, attract new personnel, and manage attrition. Our success depends largely on the continued services of our senior management team. The loss of one or more members of senior management could have a material adverse effect on our business, results of operations and financial condition. We are also substantially dependent on the continued service of other key personnel, including key sales executives responsible for revenue generation and key development personnel accountable for product and service innovation and timely development and delivery of upgrades and enhancements to our existing products and services. Changes to senior management and key employees could also lead to additional unplanned losses of key employees. The loss of key employees could seriously harm our ability to release new products and services and upgrade existing products and services on a 3 timely basis, pl us at a competitive disadvantage. In the technology industry, there is substantial competition for key personnel, including skilled engineers, sales executives and operations personnel. We may not be able to successfully recruit, integrate and retain qualified personnel in the future, which could impact our ability to innovate and deliver new or updated products to our customers, which could harm our business. If our retention and recruitment efforts are ineffective, employee turnover could increase and our ability to provide services to our customers would be materially and adversely affected. Furthermore, the requirement to expense stock options may discourage us from granting the size or type of stock option awards that job candidates may require in order to join our company.
28 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
159263 TOPPAN live person AR_Text_Insert Signature 3 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
4
29
rdcso rvd u evcst xsigo rsetv utmr ihitrainloeain.Any operations. international with customers prospective or existing to services our provide or products
ol lorsl ndcesdueo u rdcsadsrie,o nordcesdaiiyt xotour export to ability decreased our in or services, and products our of use decreased in result also could
euain,o hnei h onre,gvrmns esn rtcnlge agtdb uhregulations, such by targeted technologies or persons governments, countries, the in change or regulations,
hnei xoto cnmcsntosrgltos hf nteefreeto cp fexisting of scope or enforcement the in shift regulations, sanctions economic or export in change
rvn h xoto u rdcso rvso forsrie ocrancutiso n sr.Any users. end or countries certain to services our of provision or products our of export the prevent
nrdcinaddpomn forpout n evcsi nentoa akt,o,i oecases, some in or, markets, international in services and products our of deployment and introduction
rsrie,o hne napial xoto cnmcsntosrgltosmycet easi the in delays create may regulations sanctions economic or export applicable in changes or services, or
urnedadmyrsl ntedlyo oso ae potnte.I diin hne norproducts our in changes addition, In opportunities. sales of loss or delay the in result may and guaranteed
uhrztos nldn n eurdlcne o atclrdpomn a etm-osmn,i not is time-consuming, be may deployment particular a for license, required any including authorizations,
neteecss h nacrto frsosbeepoeso aaes bann h necessary the Obtaining managers. or employees responsible of incarceration the cases, extreme in
oso xotpiiee;fns hc a eipsdo sadrsosbeepoeso aaes and, managers; or employees responsible and us on imposed be may which fines, privileges; export of loss
eti forepoescudb ujc osbtnilcvlo rmnlpnlis nldn:tepossible the including: penalties, criminal or civil substantial to subject be could employees our of certain
opinewt hs asadrgltos fw alt opywt hs asadrgltos eand we regulations, and laws these with comply to fail we If regulations. and laws these with compliance
oeg sesCnrl.Eprso u rdcsadtepoiino u evcsms emd in made be must services our of provision the and products our of Exports Controls. Assets Foreign
cnmcadtaesntosrgltosamnsee yteUS rauyDprmn’ fieof Office Department’s Treasury U.S. the by administered regulations sanctions trade and economic
euain,icuigteUS xotAmnsrto euain,US utm euain n various and regulations Customs U.S. Regulations, Administration Export U.S. the including regulations,
eti forpout n evcsmyb ujc oepr oto n cnmcsanctions economic and control export to subject be may services and products our of Certain
r o ncmlac ihapial laws. applicable with compliance in not are
blt ocmeei nentoa akt u olcnigrqieet n ol ujc st iblt fwe if liability to us subject could and requirements licensing to due markets international in compete to ability
emyb ujc ogvrmna xotcnrl n cnmcsntosrgltosta ol marour impair could that regulations sanctions economic and controls export governmental to subject be may We
n h arvleo u omnsokcuddecline. could stock common our of value fair the and
ucsflysaeoroeain n nraepoutvt,w a eual oeeueorbsns plan business our execute to unable be may we productivity, increase and operations our scale successfully
aaeetcnrl,orrprigssesadpoeue,adoruiiaino elett.I efi to fail we If estate. real of utilization our and procedures, and systems reporting our controls, management
rwho u prtosadpronl ewl edt otnet mrv u prtoa,fnniland financial operational, our improve to continue to need will we personnel, and operations our of growth
ie ri n aaenwepoesa edd omng h xetddmsi n international and domestic expected the manage To needed. as employees new manage and train hire,
rwhefciey od o ems otnet nraetepoutvt foreitn mlye n to and employees existing our of productivity the increase to continue must we so, do To effectively. growth
u ucs ildpn npr pnteaiiyo u eirmngmn omng u projected our manage to management senior our of ability the upon part in depend will success Our
ol engtvl impacted. negatively be could
wyfo u xsigapiain n ytm,oroeain n u blt omng u business our manage to ability our and operations our systems, and applications existing our from away
plctosaedlyd ri eecutrufrse rbeswt u e ytm ri migrating in or systems new our with problems unforeseen encounter we if or delayed, are applications
erglryugaeo elc u aiu otaesses fteipeettoso hs new these of implementations the If systems. software various our replace or upgrade regularly We
euigepne ntesotterm. short the in expenses reducing
nraeorcs ae hc ilmk tmr ifcl o st fstayftr eeu hrflsby shortfalls revenue future any offset to us for difficult more it make will which base, cost our increase
egahcaes n osaewt u vrl rwh h diinlivsmnsw r aigwill making are we investments additional The growth. overall our with scale to and areas, geographic
drs h ed forcsoes ofrhrdvlpadehneorsrie,t xadit new into expand to services, our enhance and develop further to customers, our of needs the address
eeomn,adra saesedn ilb eurdt cl u prtosadices rdciiy to productivity, increase and operations our scale to required be will spending estate real and development,
diinlivsmnsi u nenlifatutr,dt etrcpct,rsac,csoe upr and support customer research, capacity, center data infrastructure, internal our in investments additional
tano u aaeet diitaie prtoa n iaca nrsrcue eatcpt that anticipate We infrastructure. financial and operational administrative, management, our on strain ecniu oeprec infcn rwhi u utmrbs n esne,wihhspae a placed has which personnel, and base customer our in growth significant experience to continue We
159263 TOPPAN live person AR_Text_Insert Sig 4 ] Sig 4 person AR_Text_Insert TOPPAN live 159263 u uiesplan. business our
fw r nbet cl u prtosadices rdciiy emyntb bet ucsflyimplement successfully to able be not may we productivity, increase and operations our scale to unable are we if
uprigoreitn n rwn utmrbs ol tanorpronlrsucsadifatutr,and infrastructure, and resources personnel our strain could base customer growing and existing our Supporting
infcn muto tf trto ol as u uiesadfnnilrslst suffer. to results financial and business our cause could attrition staff of amount significant
u iaca n aaeilcnrl,bligsses eotn ytm n rcdrs hs any Thus, procedures. and systems reporting systems, billing controls, managerial and financial our
ifcl o st eoepronlrsucsncsayt anano mrv xsigsses including systems, existing improve or maintain to necessary resources personnel devote to us for difficult
uiespa rt epn rmtyt potnte ntemrepae ute,i a eoemore become may it Further, marketplace. the in opportunities to promptly respond to or plan business
n mrv u evc feig.I a lobcm oedfiutfru oipeetcagst our to changes implement to us for difficult more become also may It offerings. service our improve and
omng xsig retbihnw eainhp ihcsoesadohrcutrpris rt expand to or counter-parties, other and customers with relationships new, establish or existing, manage to
forsafi infcnl eue,ete yorcoc rohrie tmybcm oedfiutfrus for difficult more become may it otherwise, or choice our by either reduced, significantly is staff our of
efrac forsafo eidcbss n a hoet aeajsmnsi h uue ftesize the If future. the in adjustments make to choose may and basis, periodic a on staff our of performance nadto,w a o eal ootorecranfntos eepc oeaut u ed n the and needs our evaluate to expect We functions. certain outsource to able be not may we addition, In
159263 TOPPAN live person AR_Text_Insert Signature 4 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] tnad,myhv navreipc norbsns.I eaeual nteftr oaheeor achieve to future the in impacted. unable adversely that be third-party are may standards revenue we or certain our requirements and If business similar of our business. other customers, standards our with our to comply the relevant Security on or are Data certifications satisfy impact (PCI) industry-specific Industry to adverse Card these Payment maintain an inability the have as with an such business to may expect, approval conduct addition, may Standards, to regulatory customers unable In obtain our be that may to industries. financial bodies we unable and certification such require are harmed be customers to that in may unable our business or are customers our if we required, controls or where imposed If service controls, specific functions. have our or certain mandate use regulators guidelines outsourcing that these to services prior services with approval financial comply regulatory computing cloud some obtain cloud example, to of by, providers For of of imposed services use adoption demand. burdens use and the overall other use for regarding customers’ reduce and guidelines our with, positions have and limit compliance interpretive may services industries positions of or our interpretive various costs regulations and The regulations of adopt laws, services. industry-specific Regulators outsourced future other telecommunications. the and in and computing may healthcare and sector, adopted public interpretive the or services, regulations laws, industry-specific unfavorable business. and our harm evolving could positions is regulation for solutions Industry-specific being our continually of are versions developing platforms in encounter and may devices. alternative we devices challenges these with new the on effectively predict use operate As to that standards. difficult products is developing or could it in products released, networks service competitive successful systems, of to be terms technologies, treatment not preferential and may these give not systems We or revenue. such do solutions in our they our changes affect and adversely any of and we functionality systems, that the operating degrade standards iOS that and and Android networks as systems, such operating control, mobile popular with interoperability to continue to ability mobile and grow performance and financial innovate our rapidly affected. effort, negatively to this be unable in may revenue are expenses attracting overall our excessive we subject grow difficulty incur by could have If we which adopted security, may harm. if widely and reputational we or privacy not revenue, or and to are related litigation customers investigations, or risks new existing visitors, to create website retain us also may their to these solutions of fail Such address customers. needs may developednew To have the we we increase. or consumers, solutions and needs and to mobile phone customers’ the customers continue mobile our If on customers. to meet messaging our not projected support and do company to is has our services to and phones, and belonging products applications mobile years our tablet and extend few to tablets past continue handheld we the developments, smartphones, in including dramatically computers, increased desktop than affected. other adversely devices be could services business our or devices, our mobile products on operate our using effectively to of unable and are export we products If the prevent our cases, altogether. and countries deploying some products some to our in from services our or, of of operations systems provision releases prevent markets, globally-distributed new international international and in their to services with sales throughout respect and products with international our customers including of our of introduction services, our export the harm our in to the delays create regarding failure of could may requirements services, provision our applicable, regulatory and or applicable when products, products with products, encryption our Compliance revenue. of our Governmental our restrictions. exports affect for control adversely of approval export regulation to required and subject Encryption technology obtain be countries. encryption also those into may of products technology have our regulation underlying and import of to requirements, the import ability licensing and customers’ the our products and regulate limit permitting we countries could Further, that import Various laws provide condition. products. through enacted and financial our including products and technology, our of operations encryption export certain of certain to into results ability technology business, our our encryption on limitation affect incorporate adversely or could services and services products our our of use decreased u utmr n oeta utmr obsns navreyo nutis nldn financial including industries, of variety a in business do customers potential and customers Our their on depend customers our of those and applications tablet and phone mobile our Additionally, through Internet the over transactions complete and Internet the access who people of number The 30 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Black
444
31
nblt ognrt ufcetrvnet fstaqiiino netetcost; investment or acquisition offset to revenue sufficient generate to inability •
oeta alr oaheeteepce eeiso h obnto racquisition; or combination the of benefits expected the achieve to failure potential •
custosadivsmnsivlenmru ik ou,including: us, to risks numerous involve investments and Acquisitions
platform.
ouin o ao rnsi akn,isrne n rvl unn nLvPro’ conversational LivePerson’s on running travel, and insurance, banking, in brands major for solutions
ehooyast fBteta,Ic,aSlcnVle ae tru hc a rae ubro bot of number a created has which startup based Valley Silicon a Inc., BotCentral, of assets technology
riiilItliec oee ovrainlpafr.I aur 08 eaqie h mlye and employees the acquired we 2018, January In platform. conversational powered Intelligence Artificial
etme 08 eaqie h mlye n ehooyast fCnesbe n.aSa based SaaS a Inc. Conversable, of assets technology and employees the acquired we 2018, September
nbeCnestoa omrears h niedaesi,icuigvral n ie prtos In operations. fixed and variable including dealership, entire the across Commerce Conversational enable
n. edn rvdro etn ouin o evc eatet fatmtv elrhp hthelps that dealerships automotive of departments service for solutions texting of provider leading a Inc.,
ubro custosi h at nldn he n21.I coe 08 eaqie AdvantageTec, acquired we 2018, October In 2018. in three including past, the in acquisitions of number
opeetr uiess rdcs ehoois eeu n nelculpoet ihs ehv aea made have We rights. property intellectual and revenue technologies, products, businesses, complementary
spr forbsns taey ehv aeadwl otnet aeaqiiin oadd to acquisitions make to continue will and made have we strategy, business our of part As
uieso iaca eeisadorbsns ol desl impacted. adversely could business our and benefits financial or business
fw ontscesul nert ato oeta uueaqiiin,w a o elz h expected the realize not may we acquisitions, future potential or past integrate successfully not do we If
aeilyavreyaffected. adversely materially
eevbe natml ai,adorbsns,fnnilcniinadrslso prtoscudbe could operations of results and condition financial business, our and basis, timely a on receivables
orcr hre eaigt etutrn ot rteipimn fast,myntb bet collect to able be not may assets, of impairment the or costs restructuring to relating charges record to
u rdcsadsrie.I cnmccniin eeirt o so u utmr,w ol erequired be could we customers, our or us for deteriorate conditions economic If services. and products our
uiesst otoesedn,wihmycueorcsoest eraeo ea hi ucae of purchases their delay or decrease to customers our cause may which spending, postpone to businesses
aktn ehooy nldn evcssc sor.Eooi odtosmyas edcnuesand consumers lead also may conditions Economic ours. as such services including technology, marketing
asn aia,o a lc osaebc h eore hydvt ocsoe evc n/rslsand sales and/or service customer to devote they resources the back scale to elect may or capital, raising
evcs a o eal odshreterpyetadohrolgtost s a xeinedifficulty experience may us, to obligations other and payment their discharge to able be not may services,
urn prtosadipeetn hi uiespas u utmr a euetersedn nour on spending their reduce may customers Our plans. business their implementing and operations current
ekeooi odtosmyas as u utmr oeprec ifclyi uprigtheir supporting in difficulty experience to customers our cause also may conditions economic Weak
operations.
ik htmyavreyafc u uies ore n sso ah iaca odto n eut of results and condition financial cash, of uses and sources business, our affect adversely may that risks
ol aei oecalnigfru ofrcs u prtn eut,mk uiesdcsosadidentify and decisions business make results, operating our forecast to us for challenging more it make could
cnmcevrneto otepriua nutisi hc u ae r ocnrtd hc,i turn, in which, concentrated, are sales our which in industries particular the to or environment economic
uaino n cnmcsodw rsbeun cnmcrcvr,ete eaigt h global the to relating either recovery, economic subsequent or slowdown economic any of duration
eue eadfrorpout n eue ae.I ol edfiutt rdc h iig teghor strength timing, the predict to difficult be could It sales. reduced and products our for demand reduced
nutis ecudeprec,aogohrtig,cnelto rnnrnwlo xsigcontracts, existing of non-renewal or cancellation things, other among experience, could we industries,
iaca odto n ahfos nteeetta nutycniin eeirt noeo oeo these of more or one in deteriorate conditions industry that event the In flows. cash and condition financial
hs nutiscudhv aeilavreefc norbsns,lqiiy eut foperations, of results liquidity, business, our on effect adverse material a have could industries these
iaca evcs eal uooie elett n ehooyidsre.Adwtr noeo oeof more or one in downturn A industries. technology and estate real automotive, retail, services, financial
u uiesi,adwl otnet e eedn nslst utmr ntetelecommunications, the in customers to sales on dependent be, to continue will and is, business Our
nteftr yaydwtr ngoa cnmcconditions. economic global in downturn any by future the in
autos u uieshsbe fetdb hs odtosi h atadcudb iial impacted similarly be could and past the in conditions these by affected been has business Our valuations.
159263 TOPPAN live person AR_Text_Insert Sig 4 ] Sig 4 person AR_Text_Insert TOPPAN live 159263 market in fluctuations rapid and availability credit and liquidity diminished including disruptions, extreme
lbloeain n u uies lblcei n iaca akt aei h atexperienced past the in have markets financial and credit Global business. our and operations global
eadn oil oiia,imgainadtaeplce nteUie tts hc ol matour impact could which States, United the in policies trade and immigration political, social, regarding
nmlyetrtsaducranyaoteooi tblt.Frhr hr sicesduncertainty increased is there Further, stability. economic about uncertainty and rates unemployment
n ealidsre,rsligi elnsi cnmcgot n osmrcniec,icessin increases confidence, consumer and growth economic in declines in resulting industries, retail and
xeineeooi onunta fet l etr fteeooy atclryi h iaca services financial the in particularly economy, the of sectors all affects that downturn economic experience
h ntdSae n te lbleooishv xeine nteps n ol ntefuture the in could and past the in experienced have economies global other and States United The
a desl fetorbsns n eut foperations. of results and business our affect adversely may
onun ntegoa cnmcevrneto npriua nutisi hc u ae r concentrated are sales our which in industries particular in or environment economic global the in Downturns
aeilavreipc norbsns n eut foperations. of results and business our on impact adverse material
sasriepoie.Ayfiueo ecie alr yu ocml ihsc eurmnscudhv a have could requirements such with comply to us by failure perceived or failure Any provider. service a as nsm ae,idsr-pcfclw,rgltoso nepeiepstosmyas pl ietyt us to directly apply also may positions interpretive or regulations laws, industry-specific cases, some In
159263 TOPPAN live person AR_Text_Insert Signature 4 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] acin gis s u fieso u mlye,poiiin ntecnuto u uiesand business our of conduct the on prohibitions employees, be criminal could our fines, operations in or of result results reputation. officers could our our regulations to our or and damage laws so, us, foreign do any against to of attempt sanctions violations expand our continue addition, to in In expensive unsuccessful prohibitively impacted. adversely or be impossible may it we find or may We internationally unsuccessful. be may and resources of difficulty the and into ever, expand including: or operations, future, consumer to online near and/or foreign continue the in in to achieved possibility ability the be unfamiliar. including are not Our we risks, which will various acquisitions. with investments markets involves in market in such competing consumer on and online returns the initiatives that in to and continued messaging also markets have global We international Kingdom. United in the and invest Singapore Netherlands, Japan, Italy, Israel, Germany, risks, other and services fluctuations direct-to-consumer operations. rate into of exchange results and/or currency our liabilities, affect internationally operations. adversely tax operations could requirements, which our regulatory of expanding additional to in results due unsuccessful our be of may issuance affect We The acquisitions. stockholders. adversely future existing any our for and to pay dilutive to be securities expenses could equity securities issue our equity or debt incur increase may we employees, Furthermore, and management u urn n n uueitrainlepninpaswl eur aaeetatninand attention management require will plans expansion international future any and current Our international other or restrictions, systemic or regulatory political, compliance, and legal, markets; international international specific in requirements taxes; and other preferences and VAT consumer • administer different properly to systems other and financial on • strains rates; exchange currency in • data fluctuations instance, for regulations, and requirements • business country-specific addressing in difficulty liabilities; tax additional intellectual or consequences our tax • for adverse protection sufficient provide not may • that laws property intellectual differing operations; foreign managing and staffing in • difficulties legal • different including restrictions, regulatory and legal changing and unclear unfamiliar, varied, inherent risks other • to due fail also may services direct-to-consumer and operations international Our France, Canada, Australia, in operations have we States, United the in operations our to addition In hs ifcliscuddsutorogigbsns,eps st nxetdcss itatour distract costs, unexpected to us expose business, ongoing our disrupt acquisitions. such could any of difficulties effects tax These the and businesses; acquired the business with acquired associated liabilities the unknown • of potential partners acquire; and we company customers the with relationships of maintain employees to • key may inability or competitors employees where key existing or our experience of no loss • or potential little have we which in • markets new operations; entering existing of to related risks efforts from resources management and financial of • diversion personnel; and products technologies, operations, integrating in • difficulties • onre,icuig u o iie o osbecmlac susivligteUS Foreign U.S. the jurisdictions. involving other in issues laws similar compliance and Act, possible Bribery U.K. to, the foreign limited Act, in Practices operations not Corrupt and but sales with including, companies countries, States United to applicable scrutiny, governmental laws; privacy property; and privacy, communications, services, mobile or Internet protection; data to applicable standards regulatory and aesrne aktpositions; market stronger have 32 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Black
4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] ] 32 Page n oiecnetvt fcnues oho hc r usd forcnrl sarsl,i a be may it related result, problems experienced a have As we control. past, the our In occur. of they outside if are problems which of source of the both identify consumers, to difficult of connectivity mobile control. and our beyond are that content third-party and systems technology on dependent are results. loss,We operating or be and dissatisfaction revenue customer may future substantial service and in current extended we result our or and affect providers, Recurring reputation adversely remedies. our could legal service which to other damage customers pursue third-party cause these also and/or otherwise, provide could contracts our customer contracts outages their our which our terminate or penalties, if to financial even under attempt us pay addition, allowed may and/or In revenue. by credits periods our service service impact stated the caused with significantly the customers could exceed downtime meet these provide that to to to unable downtime obligated are contractually due of we periods whether If service. suffer contracts, our or of commitments uptime level to related affect primarily adversely contracts, could customer which terminations, contract commitments, face contractual or these refunds reputation. meet our or not harm credits do and provide we revenue to our If obligated customers. electronic alleviate be certain to and could to we or commitments services level breaches service our security provide We of of threat reputation the information. against and protect confidential breaches. acceptance to these transmitting general by we costs involve caused ones significant problems the which the incur on as transactions, may online such we depends conduct services commerce, and store, success to online e-commerce using them our and from to using Because transmit people from deter barrier securely concern. could or and and focus significant security offer regulatory of secure, and a consumer compromise properly a publicized been as their Any to highlighted historically increasingly or become need interrupted will has liability and be The to communications, online exposed to litigation. be were information could services or we confidential and these investigations disrupted If similarly costly systems. be could our and operations with business we our integrated breached, or While security parties breaches. third such by losses. of all operated by cover threat to caused insufficient the coverage be insurance problems may against such and alleviate risks, protect exceptions and security and to exclusions cyber certain certain costs with harm to cover subject may, significant the is compliance that results coverage incur mitigate business, insurance to of our may to maintain on costs currently We out effect or other adverse condition. deemed material breaches and financial a be security have damages, and could incident statutory which for operations incidents, penalties, security lawsuits security of subject criminal or a be and breach may fines, to we investigations of lawsuits, respond and and commitments, investigations, government contractual result disruption or government penalties, laws, business breach a international laws, to of to state cause as and myriad may federal lead a may States which with United We could level, compliance for failures. international and liable subject and compliance be be costs, federal could could to we notification we state, and able incident, the extensive harmed security were be at a may parties laws users position of third customers’ competitive notification event our our the If inquiries, trade to In service data. liability. relating our customer data to employee personal of of or misappropriate text disclosure otherwise the supplier or in or customer, security result in confidential network obtain could our sophisticated of penetrate breach to more to or disclosure security becoming techniques hackers or all Any are anticipate secrets by measures. to and unable preventative employed be frequently may adequate breach we change techniques implement detection, a avoiding property systems the and intellectual such sabotage measures our and Because security to including circumventing breached data, information. or be our access business or could data unauthorized measures confidential customers’ security our other to our access and that from unauthorized information possible in this protect still result to could is measures security it information. our demographic access, update and and contact unauthorized test personal continually as and such employ or information, we include systems Although may our users from their data and customers personal or confidential misappropriate or access parties third if services. liable be may We 159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Black h ucs forsrie eed npr norcsoes niesrie swl steInternet the as well as services online customers’ our on part in depends services our of success The our of certain in commitments level service offer we providers, service cloud many for common is As and/or hosted are business our operate to use we that services and software certain Furthermore, our between interactions other and interactions email chats, text-based the of transcripts dialogue The 33
444
34
des feto u uies eut foeain,cs lw n iaca condition. financial and flows cash operations, of results business, our on effect adverse
omrilyraoal em,o o vial tal.Teeoe n uhcam ol aeamaterial a have could claims such any Therefore, all). at available not or terms, reasonable commercially
nesw ne nolcneareet ihtetidpris(hc a ecsl,uaalbeon unavailable costly, be may (which parties third the with agreements license into enter we unless
ucsfl,o ii u blt oueteitleta rpryta stesbeto n fteeclaims, these of any of subject the is that property intellectual the use to ability our limit or successful),
otae ehooy uiespoess ytm rohritleta rpry(oeo hc ih be might which of (none property intellectual other or systems processes, business technology, software,
rmsligorpout,dlydlvr forsrie,rqietedvlpeto non-infringing of development the require services, our of delivery delay products, our selling from
itatmngmn rmohrtsso prtn u uies a usata aaeaad,peetus prevent awards, damage substantial pay business, our operating of tasks other from management distract
rpryrgt ol eur st pn infcn mut nltgto ee ftecami invalid), is claim the if (even litigation in amounts significant spend to us require could rights property
n a nteftr setcam gis s n lisalgn nrneeto hr-at intellectual third-party of infringement alleging claims Any us. against claims assert future the in may and
aefldo a nedt ieptn plctoscvrn set ftertcnlg n aeasserted have and technology their of aspects covering applications patent file to intend may or filed have
naeettcnlg,ado e n oiebsdcnue-aigsrie rohrtidprismay parties third other or services consumer-facing based mobile and web and/or technology, engagement
fsrie ndfeetidsr emnsoelp.Sm forcmeiosi h aktfrdigital for market the in competitors our of Some overlaps. segments industry different in services of
eoemr rvln n h ubro opttr noridsr emn rw n h functionality the and grows segment industry our in competitors of number the and prevalent more become
evcsmyb nraigysbett hr-at nrneetcam scam ynnpatcn entities non-practicing by claims as claims infringement third-party to subject increasingly be may services
otaeidsr.I h riaycus forbsns,orsrie n/rorcsoes s four of use customers’ our and/or services our business, our of course ordinary the In industry. software
rsn rmteueo u evcs usata iiainrgrigitleta rpryrgt xssi the in exists rights property intellectual regarding litigation Substantial services. our of use the from arising
nenfcto biain eurn st nenf u utmr rmcrancam gis hmor them against claims certain from customers our indemnify to us requiring obligations indemnification
rdcsadsrie.Mn forcsoe n ate otat,icuigcransples contain suppliers, certain including contracts, partner and customer our of Many services. and products
fadtoa hr at lisalgn nrneetaantu raantorcsoesfrueo our of use for customers our against or us against infringement alleging claims party third additional of
rdcsadsrie nrnetidpryitleta rpryrgt,adw r ujc oteftr risk future the to subject are we and rights, property intellectual party third infringe services and products
ehv a aetadohrifigmn asisfldaantu liigta eti four of certain that claiming us against filed lawsuits infringement other and patent had have We
ol eur st nu usata ot n a itatormanagement. our distract may and costs substantial incur to us require could
u rdcsadsrie a nrneuo nelculpoet ihso hr ate n n infringement any and parties third of rights property intellectual upon infringe may services and products Our
adaeo otaew a o eal od oo cetbetrs fa all. at if terms, acceptable on so do to able be not may we software or hardware
fot rt aaeise eae ocnet oteetn n uhpolm eur st elc such replace to us require problems such any extent the To content. to related issues manage to or efforts
infcn ot rdvr h teto fortcnclo te esne rmorpoutdevelopment product our from personnel other or technical our of attention the divert or costs significant
rsn rmorueo uhhrwr rsfwr rtidprycnetcudrqieu oincur to us require could content party third or software or hardware such of use our from arising
ate o otn.Sc rdcsadcnetcudcnandfcso ncuaeifrain Problems information. inaccurate or defects contain could content and products Such content. for parties
eas eedo hr ate o adaeadsfwr,adorcnue evcsdpn nthird on depend services consumer our and software, and hardware for parties third on depend also We
tt,fdrladfrinlw rcnrculagreements. contractual or laws foreign and federal state,
eaiepbiiy swl sgvrmn netgtosadcam o aae rijntv eifunder relief injunctive or damages for claims and investigations government as well as publicity, negative
fbsns olbrto n omnctossltosadcudsbetu osgiiatpnlisand penalties significant to us subject could and solutions communications and collaboration business of
uhbec ol aeamtra des feto u prtn eut n u euaina provider a as reputation our and results operating our on effect adverse material a have could breach such
nuhrzdatmt ytidprist ces ban oiyo eeeoro u utmr’dt.Any data. customers’ our or our delete or modify obtain, access, to parties third by attempts unauthorized
nomto ytm a evleal otrassc scmue akn,cbrtroimo other or cyber-terrorism hacking, computer as such threats to vulnerable be may systems information
nomto.Adtoal,dsieorscrt rcdrso hs fortidpryproviders, party third our of those or procedures security our despite Additionally, information.
oetal asn,aogohrtig,a nnetoa icoueo utmrifraino osof loss or information customer of disclosure unintentional an things, other among causing, potentially
hr at rvdr’dt euiy ol irp u blt ofnto ntenra oreo uiesby business of course normal the in function to ability our disrupt could security, data providers’ party third
nomto forcsoes nomto ehooysse alrs nldn raho u rour or our of breach a including failures, system technology Information customers. our of information
eas eyo h euiyo u hr at rvdr opoetorporeayifrainand information proprietary our protect to providers party third our of security the on rely also We
159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4 costs. remediation significant and risk, reputational and legal to exposed be may we and harmed, be
evcseprec nerpin rdly u otidprypoies u euainadbsns could business and reputation our providers, party third to due delays or interruptions experience services
ocniu tlzn h hr-at evcsta upr u e otn n nrsrcueo four if or infrastructure and hosting web our support that services third-party the utilizing continue to
rbesta euti lwrta omlrsos ie n/ritrutosi evc.I eaeunable are we If service. in interruptions and/or times response normal than slower in result that problems
aneac,adsfwr n adaefo ait fvnos hs rvdr a experience may providers These vendors. of variety a from hardware and software and maintenance,
nldn,btntlmtd oItre onciiy ewr nrsrcuehsig euiyand security hosting, infrastructure network connectivity, Internet to limited, not but including,
nadto,w eyi ato hr-at evc rvdr n te hr ate o aiu services, various for parties third other and providers service third-party on part in rely we addition, In
utmrrltosproblems. relations customer
ietteatnino u ehia esne rmorpoutdvlpetefrso as significant cause or efforts development product our from personnel technical our of attention the divert
hi osmr a trbt h rbe ou.Ti ol iiihorbadadhr u business, our harm and brand our diminish could This us. to problem the attribute may consumers their
rnmsin hrfr,ee hncnetvt rbesaentcue yorsrie,orcsoesor customers our services, our by caused not are problems connectivity when even Therefore, transmission.
nerpin nsrie u evcsrl oho h nentado u onciiyvnosfrdata for vendors connectivity our on and Internet the on both rely services Our service. in interruptions ocnetvt hc a eutdi lwrta omlrsos ie oue esgn eussand requests messaging user to times response normal than slower in resulted has which connectivity to
159263 TOPPAN live person AR_Text_Insert Signature 4 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Black ihsi rdmrs evc ak n rdnmsi h ntdSae,wehrrgsee rnt is not, or registered whether if States, invalidated United or the respective cancelled in property the be of tradenames be duration in may and use. The cannot continued grounds. use registration marks or our limited on protectable in trademark other service predicated or or is trademarks, a requirements registrable mark use in addition, not certain the rights is In on trademark title based as country. While others or long protected. particular by mark challenged or as a a registered for where in been effect occasions has used be in mark may a maintained there territorial with where generally be jurisdictions, agreements are countries license generally rights those its and may to laws of registrations trademark limited terms names, and the trade and scope and trademarks jurisdiction in our relevant to the respect of With not others. regulations is and rights laws as proprietary the protecting rights question, laws proprietary protect of enforcement not where may or laws States the United where prevent the used, effective. will of where or or taken laws common countries have sold the foreign we are do in steps services as particularly otherwise our the fully rights, where that and or property business, services certain or intellectual technology do our be or copy we of or cannot technology use, use we our rights unauthorized and to Policing of property services. difficult, misappropriation attempt our is intellectual manner, as rights functionality our unauthorized property same intellectual distribute the an with or to in service access market may, a to develop control efforts parties and our to third Despite obtain attempt information. rights, we otherwise proprietary agreements, proprietary other written and our other documentation software, protect and to our these of essential through distribution and and partners, more parties, invention strategic third customers, (including potential are agreements other customers, written consultants, and or other employees, maintenance similar and our are confidentiality with contractual reliable that agreements) into technologies assignment enter as We develop and technology. may well our personnel, Others to our advantage. as enhancements superior competitive of jurisdictions, a skills frequent foreign maintaining creative and and developments, certain establishing technological the and service as States such documents new factors including United rights, that other law We the believe the efforts. common we and marketing and outside However, in state, restrictions. and federal, publications locations otherwise business on software, relying certain our or by to rights our in registration, our property important intellectual and in are of our rights protect States registration including to property the seek United intellectual copyrights, pursue These the We own us. engagement services. by in also digital authored and names We products to trade States. our related patents and of United our property lives trademarks of expected intellectual names, duration the the domain including the believe to We in relative services. business, consumer-facing adequate applications our based thatis patent mobile property to and and intellectual web protect patents important technology, and/or to technology, applications of is proprietary patent portfolio believe our file a regularly protect we and own internationally as to We and jurisdictions, property. copyright, provisions, States other patent, intellectual United and contractual States other of and United combination and the requirements a processes in confidentiality on protections law rely as We common services. well other and our trademark underlying secret, technology trade rights. the property intellectual to our relating enforce and rights protect to unable are we if suffer would prospects and business Our fetv nelculpoet rtcinmyntb vial neeycutyi hc edo we which in country every in available be not may our protection duplicate property technologies, intellectual effective similar develop independently may • competitors or one future our by and protect challenged current successfully to be enough could future broad the • be in issued not patents may any future or patent the issued any in issued patents or • patent issued any • that: possible is It in property of type the on depends property intellectual our to afforded protection the of duration The property intellectual our of protection the upon part, in depend, compete to ability and success Our ul sd h aso h ntdSae rweeefreeto aspoetn proprietary protecting laws of enforcement where or States as United rights the effective. proprietary or protect of common not not may laws is laws the rights the where do used, as or sold fully are services our where business, and have; may we patents any around design or the services exploiting from others prevent to right the of patents; loss the our in in claimed result inventions could which parties, third more rights; property intellectual 35
4
36
usd h ntdSae hr asgvrigItre rmbl rnatosaeunsettled. are transactions mobile or Internet governing laws where States United the outside
gis sfrcnetpse norwbie.Orlaiiyfrsc lismyb ihri jurisdictions in higher be may claims such for liability Our websites. our on posted content for us against
uhfebc sgnrtdb sr n o yu,cam fdfmto rohrijr ol emade be could injury other or defamation of claims us, by not and users by generated is feedback such
u osmrsriealw osmr opoiefebc eadn evc rvdr.Atog all Although providers. service regarding feedback provide to consumers allows service consumer Our
otyadtm-osmn odefend. to time-consuming and costly
D.I eaentcvrdb aehro,frayrao,w ol eepsdt lis hc ol be could which claims, to exposed be could we reason, any for harbor, safe a by covered not are we If CDA.
iiae,adw antgaateta ewl ettesf abrrqieet fteDC ro the of or DMCA the of requirements harbor safe the meet will we that guarantee cannot we and litigated,
h MA motn usin eadn h aehro ne h MAadteCAhv e obe to yet have CDA the and DMCA the under harbor safe the regarding questions Important DMCA. the
evc rvdr htpoieseii evcs ftepoiestk eti fimtv tp sstfrhin forth set as steps affirmative certain take providers the if services, specific provide that providers service
otn.Asf abrfrcprgtifigmn sas vial ne h MAt eti online certain to DMCA the under available also is infringement copyright for harbor safe A content.
D,aeitne opoiesauoypoetost niesriepoieswodsrbt hr party third distribute who providers service online to protections statutory provide to intended are CDA,
htifig oyihso ihso tes diinly otoso h omnctosDcnyAt or Act, Decency Communications The of portions Additionally, others. of rights or copyrights infringe that
iblt foln evc rvdr o itn rlnigt hr at e rprista nld materials include that properties web party third to linking or listing for providers service online of liability
h iia ilnimCprgtAt rDC,i nedd mn te hns ordc the reduce to things, other among intended, is DMCA, or Act, Copyright Millennium Digital The
aaeetadohrresources. other and management
ees fayo hs cin ol ecsl n nov infcn ieadatnino our of attention and time significant involve and costly be could actions these of any of defense
rhbto moelaiiyfrtetasiso vrteItre fcrantpso nomto.Our information. of types certain of Internet the over transmission the for liability impose or prohibit
u ehooypafrs nadto,dmsi n oeg eilto a enpooe htcould that proposed been has legislation foreign and domestic addition, In platforms. technology our
nrneet rohrtere ae ntentr n otn ftemtrasdseiae yuesof users by disseminated materials the of content and nature the on based theories other or infringement,
uha ru,dfmto,lbl naino rvc,ngiec,dt rah oyih rtrademark or copyright breach, data negligence, privacy, of invasion libel, defamation, fraud, as such
liscudb aeaantoln evcscmaisudrbt ntdSae n oeg law, foreign and States United both under companies services online against made be could Claims
nprpit ciiiscridotb sr fortcnlg platforms. technology our of users by out carried activities inappropriate
emyb ujc oalgtoso ii rciia iblt o elgn,fadln,ulwu or unlawful fraudulent, negligent, for liability criminal or civil of allegations to subject be may we
die nomto rcnetvaortcnlg ltom,o rmbhvn na naflmne,and manner, unlawful an in behaving from or platforms, technology our via content or information advice,
nbet rvn sr fortcnlg ltom rmpoiigngiet naflo inappropriate or unlawful negligent, providing from platforms technology our of users prevent to unable
fueso hi niepafrsi fe hlegdi h ntdSae n nentoal.W a be may We internationally. and States United the in challenged often is platforms online their of users of
i oiedvcs h a eaigt h iblt foln ltompoiessc su o h activities the for us as such providers platform online of liability the to relating law The devices. mobile via
rvdr ocmuiaewt osmr n te esn ekn nomto ravc ntewbor web the on advice or information seeking persons other and consumers with communicate to providers
u ehooypafrseal ersnaie forcsoesa ela niiulservice individual as well as customers our of representatives enable platforms technology Our
ehooyplatforms. technology
emyb ujc olgllaiiyado eaiepbiiyfrtesrie rvddt osmr i our via consumers to provided services the for publicity negative and/or liability legal to subject be may We
a euti u oso infcn rights. significant of loss our in result may
ol ecsl n iecnuigt iiae a itatmngmn rmoeaigorbsns and business our operating from management distract may litigate, to time-consuming and costly be could
desl fetd nadto,dsue ocrigteonrhpo ihst s nelculproperty intellectual use to rights or ownership the concerning disputes addition, In affected. adversely
o t fti cus u uies eut foeain n iaca odto ol emtral and materially be could condition financial and operations of results business, our occurs, this If it. for
u nelculpoet ihscudeal hr ate obnftfo u ehooywtotpyn us paying without technology our from benefit to parties third enable could rights property intellectual our
rpitr ihsi o omno fetv.Teuatoie erdcino te iaporainof misappropriation other or reproduction unauthorized The effective. or common not is rights proprietary rpitr ihsa ul sd h aso h ntdSae rweeefreeto asprotecting laws of enforcement where or States United the of laws the do as fully as rights proprietary
159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4 onre hr ed uies hr u evcsaesl rue,weetelw a o protect not may laws the where used, or sold are services our where business, do we where countries
ae ilpeetmsprpito fortcnlg ritleta rpryrgt,priual nforeign in particularly rights, property intellectual or technology our of misappropriation prevent will taken
u evcsaditleta rpryrgt sdfiut n ecno ecranta h tp ehave we steps the that certain be cannot we and difficult, is rights property intellectual and services our
akuaemyipc u ihsi eti rdmrso evcsmrs oiiguatoie s of use unauthorized Policing marks. services or trademarks certain in rights out impact may usage mark
rsrie ak htw aeue nteUie ttsadorfiuet oio oeg eitain or registrations foreign monitor to failure our and States United the in used have we that marks services or
te nelculpoet.Tidprismyrgse ak htaecnuigysmlrt h trademarks the to similar confusingly are that marks register may parties Third property. intellectual other
iial,tidprismyb bet neednl eeo iia rspro ehooy rcse or processes technology, superior or similar develop independently to able be may parties third Similarly,
dqaet rtc gis nrneetadmsprpito foritleta rpryb hr parties. third by property intellectual our of misappropriation and infringement against protect to adequate
rpitr ehooy rcse n te nelculpoet.Aysesw ih aemyntbe not may take might we steps Any property. intellectual other and processes technology, proprietary
n te uidcin,a ela ofdnilt rcdrsadcnrculpoiin,t rtc our protect to provisions, contractual and procedures confidentiality as well as jurisdictions, other and
onre.W lorl pncprgt rd ert rdmr n te omnlwi h ntdStates United the in law common other and trademark secret, trade copyright, upon rely also We countries.
h iigo h aetapiain emyntb bet banptn rtcini eti foreign certain in protection patent obtain to able be not may we application, patent the of filing the ute,t h xetta h neto ecie nayUie ttsptn a aepbi ro to prior public made was patent States United any in described invention the that extent the to Further,
159263 TOPPAN live person AR_Text_Insert Signature 4 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT If we become liable for information provided by our users and carried via our service in any jurisdiction in which we operate, we could be directly harmed and we may be forced to implement new measures to reduce our exposure to this liability. In addition, the increased attention focused upon liability issues as a result of these lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business.
In addition, negative publicity and user sentiment generated as a result of fraudulent or deceptive conduct by users of our technology platforms could damage our reputation, reduce our ability to attract new users or retain our current users, and diminish the value of our brand.
In the future, we may be required to spend substantial resources to take additional protective measures or discontinue certain service offerings, either of which could harm our business. Any costs incurred as a result of potential liability relating to the sale of unlawful services or the unlawful sale of services could harm our business.
In addition to legislation and regulations relating to privacy and data security and collection, we may be subject to consumer protection laws that are enforced by regulators such as the FTC and private parties, and include statutes that regulate the collection and use of information for marketing purposes. Any new legislation or regulations regarding the Internet, mobile devices, software sales or export and/or the cloud or Software-as-a-Service industry, and/or the application of existing laws and regulations to the Internet, mobile devices, software sales or export and/or the cloud or Software-as-a-Service industry, could create new legal or regulatory burdens on our business that could have a material adverse effect on our business, results of operations and financial condition. Additionally, as we operate outside the United States, the international regulatory environment relating to the Internet, mobile devices, software sales or export, and/ or the Software-as-a-Service industry could have a material adverse effect on our business, results of operations and financial condition.
Technological or other defects could disrupt or negatively impact our services, which could harm our business and reputation. We face risks related to the technological capabilities of our services. We expect the number of interactions between our customers’ operators and consumers over our system to increase significantly as we expand our customer base. Our network hardware and software may not be able to accommodate this additional volume. Additionally, we must continually upgrade our software to improve the features and functionality of our services in order to be competitive in our markets. If future versions of our software contain undetected errors, our business could be harmed. If third-party content is flawed, our business could be harmed. As a result of software upgrades at LivePerson, our customer sites have, from time to time, experienced slower than normal response times and interruptions in service. If we experience system failures or degraded response times, our reputation and brand could be harmed. We may also experience technical problems in the process of installing and initiating the LivePerson services on new web hosting services. These problems, if not remedied, could harm our business. 4 Our services also depend on complex software which may contain defects, particularly when we introduce new versions onto our servers. We may not discover software defects that affect our new or current services or enhancements until after they are deployed. It is possible that, despite testing by us, defects may occur in the software. These defects could result in:
• damage to our reputation;
• lost sales;
• contract terminations;
• loss of market share;
• delays in or loss of market acceptance of our products; and
• unexpected expenses and diversion of resources to remedy errors.
37 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
159263 TOPPAN live person AR_Text_Insert Signature 4 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Black 38 Our products are complex, integrating hardware, software and elements of a customers’ existing During 2018, we increased our allowance for doubtful accounts from $1.3 million to approximately For certain payment methods, including credit and debit cards, we pay interchange and other fees, Through our consumer-facing platform, we facilitate online transactions between individual service We are also subject to a number of other laws and regulations relating to moneyCertain laundering, of our products require some implementation services, including but not limited to, training infrastructure. Despite quality assurance testing conductedmay prior contain to “bugs” the that release ofoperation are of our difficult products a to our solution, software detectaffect which gross and might margins. negatively fix. Depending impact upon Any customer theimpact such satisfaction, size on reduce issues and sales scope could our opportunities of interfere business.result or any with Our such in issue, the the inability remediation failure expected may to havereengineering of a cure expenses. negative an an Our application application insurance orwith or may product such events. not line, product damage cover defect, to or should our may one reputation, be litigation occur, insufficient and/or could The to product non-payment cover expenses ornegatively associated impact our late financial payment condition or of make it difficult amounts to forecast due our revenues$2.3 to accurately. us million. fromapproximately During $1.3 a million. 2017, significant Werisks base we number our of allowance increased of for customers,proportion doubtful customers of our historical accounts receivables are may trends allowance on due fromWe and specifically adjust larger for identified corporate our other customers allowance credit doubtful for that information doubtful typicallyresult have accounts longer accounts that of when payment accounts cycles. we increasingly by previously reserved longresults believe have $0.4 payment been for to collected. cycles, any As million we be given a from have period period, reasonable. to faced to and A period. increased Any have large difficulty failuredecline. experienced to in achieve significant anticipated predicting revenues unanticipated our in fluctuations a operating period in could our cause ourOur revenues stock services price are subject to to payment-related risks. which may increase over timeparties and to raise provide payment our processing operatingit services, costs including could and the disrupt lower processing our our of businessWe profit if credit are margins. cards these We and companies rely also debit on becomegoverning cards subject unwilling third electronic and or to funds unable to transfers, paymentcompliance provide infeasible. these which card If services could to we association fail us. changehigher to operating transaction or comply fees rules, with and be these lose certificationfacilitate reinterpreted rules our other or ability requirements in types to requirements, of such we and accept online may credit payments, a be rules and and subject our way debit business to card as and fines payments operating from to and results our could make customers beproviders or adversely who affected. provide onlineaccept advice payments and using information a to varietysubject of consumers. to methods, In such “chargebacks” connection when as with consumers creditwhether card, dispute these or debit not payments services, card services they we and were have PayPal.at properly These made risk. provided. payments to Susceptibility are We us. to take Chargebacks chargebacks measureshowever, can puts to if a occur manage portion our we of riskadversely are our relative revenue unable affected. to chargebacks to As andregulations, successfully compliance to we requirements, manage recoup and offer properly fraud. this charged new risk fees, our payment business options and to operatinginternational our results money users, could transfers, privacy be wefound and to may information be in security be violation andor of subject forced electronic applicable to laws fund cease to or our transfers. regulations, payments additional we If services could business. we be subject were toDelays civil in and our criminal implementation penalties cycles could have an adverse effect on our resultsour of customers. operations. As anintegrations open into platform, our we platform. We also have work historically with experienced a other lag third between parties signing on a implementing customer a contract variety of Our products are complex, and errors, failures or “bugs” may be difficult to correct. and recognizing revenue from that customer. Although this lag has typically ranged from 30 to 90 days, it may take more time between contract signing and recognizing revenue in certain situations. If we experience delays in implementation or do not meet project milestones in a timely manner, we could be obligated to devote more customer support, engineering and other resources to a particular project. If new or existing customers cancel or have difficulty deploying our products or require significant amounts of our professional services, support, or customized features, revenue recognition could be canceled or delayed and our costs could increase, which could negatively impact our operating results.
If our goodwill or amortizable intangible assets become impaired, we may be required to record a significant charge to earnings. Under accounting principles generally accepted in the United States, we review our amortizable intangible assets for impairment when events or changes in circumstances indicated that the carrying value may not be recoverable. We review our goodwill for impairment at least annually and when events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry. Based on our annual review for 2018, we determined that it is not more-likely than not that the fair value of the reporting units is less than their carrying amount. However, future assessments may yield a different result, and from time to time, we may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill is determined, resulting in a negative impact on our results of operations.
There are inherent limitations on the effectiveness of our controls. We do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that resource constraints exist, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate due to changes in conditions or deterioration in the degree of compliance with policies or procedures. If our controls become inadequate, we could fail to meet our financial reporting obligations, our reputation may be adversely affected, our business and operating results could be harmed, and the market price of our stock could decline.
In the past, we have experienced losses, we had an accumulated deficit of $187.5 million as of December 31, 4 2018 and we may incur losses in the future. We have in the past incurred, and we may in the future, incur losses and experience negative cash flow, either or both of which may be significant. We recorded net losses from inception through the year ended December 31, 2003. We recorded net income for the years ended December 31, 2004 through 2007 and 2009 through 2012, while we recorded net losses for the years ended December 31, 2008, and 2013 through 2018. We recorded a net loss of $25.0 million for the year ended December 31, 2018. As of December 31, 2018, our accumulated deficit was approximately $187.5 million. We cannot assure you that we can sustain or increase profitability on a quarterly or annual basis in the future. Failure to maintain profitability may materially and adversely affect the market price of our common stock.
With the recent volatility in the capital markets, there is a risk that we could suffer a loss of principal in our cash and cash equivalents and short term investments and suffer a reduction in our interest income or in our return on investments. As of December 31, 2018, we had $66.4 million in cash and cash equivalents. We regularly invest excess funds from our cash and cash equivalents in short-term money market funds. We currently hold no
39 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
159263 TOPPAN live person AR_Text_Insert Signature 4 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Black 40 Our services typically appear under the LivePerson brand or as a LivePerson-branded icon on our Third-party licenses may expose us to increased risks, including risks associated with the integration of We license third party software that we plan to incorporate into our products and services. In the To the extent that we require additional funds to support our operations or the expansion of our customers’ websites. Thecustomers’ customer service users operators areemployees and of employees the Experts Company. or As whoand a result, agents the respond we impression to are of that notknow such the able that our to operator the inquiries control or operator the customers or of Expert actionsin Expert leaves of or is our the a these not user operators independent a LivePerson-powered with or LivePerson real-timewhich Experts employee. whom consultants could If dialogue, they diminish it a rather interact. our user is brand A wereservices than and to user possible harm is have may that our a aided not business. negative this by Additionally, experience wehave the believe no experience the prominent control. could success placement of be of our attributed the business chat to icon us, on a customer’s website, over which we also new technology, the impact ofdisclosure new technology integration requirements, on our thetechnology, existing technology, and open diversion source our software acquisition of inability and maintenance to resources costs. generate from revenue the from new developmentOur reputation technology of depends, in sufficient part, on our to factors which own offset are partially associated or proprietary entirely outside of our control. future, we mightrequirements. need These to licenses may licenseSome not other of continue to software this be technology tothese available licenses could on enhance could be commercially result our reasonable difficult inintegrate terms products delays to or or or develop replace and reductions equivalent at once software, of all. meet andunable integrated. our new evolving to products The licenses and could customer loss successfully services require of,functionality until us license or we to and/or and identify, pay inability errors license higher to integrate and or royalties. Ifservices. obtain, third failures we are party of technology, our we products, which could may experience reduce a demand reduction for in our products and business, or to pay for acquisitions,or we obtain may need credit to facilities sellthrough through additional the financial equity, sale issue institutions. of debt In or preferred theissuance convertible stock, past, securities of common we stock debt have and or obtainedsenior warrants. preferred financing If to equity principally additional securities, holders funds these are ofadditional securities raised could through common funds the have stock, rights, are and preferencesstockholders and could could raised privileges have suffer terms throughavailable that dilution. to the impose us We restrictions issuance in cannotavailable on on amounts assure of our acceptable or you operations. terms, on If additionalopportunities, that our terms develop ability equity additional or acceptable to enhance funding, to or fundwould our us. if be any services convertible If significantly potential or required, limited. securities, expansion, sufficient products, Thoseof will or take funds limitations our operations, otherwise advantage be cash would are respond of flows materially not and and to acquisition financial adversely competitive available condition. affect or pressures our are business, results not Failure to license necessaryintegrate third third party party software software, could for cause use delays in or our reductions in products our and sales, services, or or errors failure or failures to of successfully our service. mortgaged-backed or auctioncredit, rate liquidity, market securities. and interest However, rateUnited some risks, States which of may and be global our exacerbatedportfolio by credit may investments any harm markets. ongoing are the In uncertainty results the in subjecthave of the future, to our chosen these operations, liquidity general market a andadequately risks financial protect more associated condition. the Although with cautious value we ourprovide of believe us portfolio investment we with our any designed significant investments. interest Furthermore, income to this in the more preserve near cautious term. our portfolioCapital is needs existing necessary unlikely to to cash executesecure our additional business position, financing strategy to could it execute increase this substantially strategy. may and we not may not be able to
4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 41 Our commercial insurance may not cover losses that could occur as a result of events associated with Further, shifting economic and political conditions in the United States and in other countries may Parties with whom we do business may sometimes decline to travel to Israel during periods of A substantial portion of our product development staff, help desk and online sales support operations Additionally, our quarterly sales have historically reflected an uneven pattern in which a The sales cycle for our products can be several months or more and varies substantially from customer We generally recognize revenue from customers ratably over the terms of their subscription agreements, the security situationadverse in effect the on Middle ourour business. East. business Armed and Any conflicts could losses harm or our political or results instability of damages in operations. incurred the region by could us negatively affect could have a material result in changes inIsrael, how which the may United have an Statesbusiness. and adverse impact other on countries our conduct Israeli business operations and and other a relations material with adverse impact on our heightened unrest or tension, forcingour us business to partners make alternative faceparties arrangements to with when whom necessary face. we in In haveto order agreements addition, to involving the performance perform meet in political their Israel andagreements. claiming security commitments that they situation under are in not those Israel obligated may agreements result pursuant in to force majeure provisions in such are located insubstantially all Israel. of As our salesby of to the date December political, have economic been 31,Israel and made in to 2018, military 1948, customers conditions we a outside affectingHamas number Israel, had Israel. of we (an Since are 365 armed Islamist the directly conflicts militia full-time influencedmilitia establishment have and of and taken employees political place political the group in between based group Staterestrict Israel in that of Israel. doing Lebanon). and controls business In its Although with addition, the neighboring Israel, severalIsrael Gaza countries, countries, and principally and Strip) additional in countries Israeli and the may Middle companies Hezbollah imposeinvolving East, restrictions Israel (an whether on or Islamist as doing the business aadversely interruption with affect result our or operations of and curtailment results hostilities of of in operations. trade the between region Israel and or its otherwise. trading Any partners hostilities could disproportionate percentage ofquarter. a These patterns quarter’s make prediction total ofunanticipated sales revenue variations especially occur in difficult our and in results uncertainthe the of and quarter increase operations. last the As in risk month, a which of derived result, expected weeks we from sales are and large will not days orders occur. alwayslarge able In of from clients, to could addition, precisely large have each predict historically a clients. a material Consequently, impact large on delays portion the in timing of the ofPolitical, our revenue closing economic and revenue and of results has military of conditions sales, operations. in especially Israel could from negatively impact our Israeli operations to customer, particularly for salescan to enterprise take customers. Because manyalternatives we and sell months complex, define integrated to theirmoney solutions, it requirements. educating close We potential are salesneeds customers often of as them required our customers to about customers can contribute expend the to evaluate substantial value a longer time, our of sales effort, cycle. our product and offerings. offering The against increasingly complex available which are typically 12result or of more subscription months. agreements Asrenewed entered a subscriptions into result, or during much cancellations previous of ofour quarters. revenue Consequently, existing the results a subscriptions for revenue decline in that we in quarter.quarters. any report Any new one Our such in or quarter decline, each subscription however, may could quarter notadditional negatively model affect is be sales our also reflected the in revenue makes in in any future itcustomers period, is difficult because generally recognized revenue for over from the us applicable new subscription to customers term, rather and rapidly thanOur additional increase immediately. revenue sales our from cycles revenue existing operating can through results to be vary significantly. lengthy, and the timing of sales can be difficult to predict, which may cause our Because we recognize revenuebusiness from may subscriptions not for be our immediately reflected service in over our the operating results. term of the subscription, declines in ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Black Continued hostilities between Israel and its neighbors and any future armed conflict, terrorist activity or political instability in the region could adversely affect our operations in Israel and adversely affect the market price of our common stock. In addition, escalation of tensions or violence might require more widespread military reserve service by some of our Israeli employees and might result in a significant downturn in the economic or financial condition of Israel, either of which could have a material adverse effect on our operations in Israel and our business.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States. Accounting principles generally accepted in the United States are subject to interpretation by the FASB, the American Institute of Certified Public Accountants, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.
We cannot assure our stockholders that any stock repurchase programs will be fully consummated or will enhance long-term stockholder value, and stock repurchases could increase the volatility of the price of our common stock and will diminish our cash reserves. From 2012 through 2018, the Company had a stock repurchase program in place, pursuant to which the Company was authorized to repurchase shares of its common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by the Board of Directors depending upon prevailing market conditions and other corporate considerations. The timing and actual number of shares repurchased depend on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, and other market conditions. The program was discontinued at the end of 2018. We may or may not enter into a new stock repurchase program in the future. Repurchases pursuant to our stock repurchase program could affect our stock price and increase its volatility. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, repurchases under a stock repurchase program would diminish our cash reserves, which could impact our ability to pursue possible future strategic opportunities and acquisitions and could result in lower overall returns on our cash balances. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of stock.
Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events and to interruption by man-made problems such as terrorism or computer viruses. Our systems and operations are vulnerable to damage or interruption from earthquakes, fires, floods, hurricanes, other acts of nature, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins, cyber-attacks or failures, pandemics or other public health crises, or similar events.
4 For example, a significant natural disaster, such as an earthquake, fire or flood, could have a material adverse impact on our business, operating results and financial condition, and our insurance coverage may be insufficient to compensate us for losses that may occur. In addition, acts of terrorism could cause disruptions in our business or the economy as a whole. Our principal executive offices are located in New York City and our largest office is located in Israel, each of which regions has experienced acts of terrorism in the past. Our servers may also be vulnerable to computer viruses, break-ins, cyber-attacks, such as coordinated denial-of-service attacks or ransomware, or other failures, and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data or the unauthorized disclosure of confidential customer data. Although we have implemented security measures and disaster recovery capabilities, there can be no assurance that we will not suffer from business interruption, or unavailability or loss of data, as a result of any such events. As we rely heavily on our servers, computer and communications systems and the internet to conduct our business and provide high quality service to our customers, such disruptions could negatively impact our ability to run our business, result in loss of existing or potential customers and increased expenses, and/or have an adverse effect on our reputation and the reputation of our products and services, any of which would adversely affect our operating results and financial condition.
42 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
159263 TOPPAN live person AR_Text_Insert Signature 4 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 43 Risks Related to Our Industry As of December 31, 2018, we had federal net operating loss carryforwards (“NOLs”) of approximately On December 22, 2017, H.R.1 (commonly referred to as the “Tax Cuts and Jobs Act”) was signed into State, federal and foreign regulators could adopt laws and regulations that impose additional burdens Our ability to use our net operating losses to offset future taxable income may$73.0 be million subject to which certain are limitations. the available Internal to Revenue Code offset of futurechange” 1986, federal (generally as defined taxable amended as income. (the a In “Code”),ownership greater general, a of than under corporation 50-percentage-point certain that Section cumulative stockholders undergoes change 382utilize an over (by “ownership a of value) its in rolling pre-change the three-year equity period)existing NOLs is NOLs to may subject be to offset subject limitationsownership to post-change on limitations change arising its taxable in from ability income. the previous to ownershipCode, Under future, changes, or our and Section as ability if a 382 to result weof utilize undergo of of an NOLs a which the corresponding could may provision be Code, ofCode. be further our state Federal outside limited law. NOLs Future by of changes generated Section in incarried our our 382 taxable forward stock control, of years ownership, for could ending some the up onUnder result to or the in 20 before Tax an tax Cuts December ownership and 31,December years Jobs 31, 2017, change (and Act 2017, are under carried (discussed are eligible back Section below),of eligible to federal up 382 to be federal NOLs be to taxable of generated carried income two in the of forward earned tax taxable indefinitely, in years our years) but a ending generally approximately following taxable may $73.0 after theirDecember year. only million incurrence. As 31, offset of 2017. of up If to federal Decemberresult our 80% NOLs 31, in ability were 2018, NOLs to generated approximately generated utilize $32.8 on in federalis million or NOLs taxable before conditioned were years December upon limited 31, ending our by 2017, on maintainingSince Section expiring we profitability or unused. 382 do in Our of before not ability the the to know futureour utilize Code, whether and remaining it our or NOLs, generating could NOLs when our U.S. we NOLs federal will generated taxable on generate income. or the prior U.S. federal to taxable December incomeRecently 31, necessary enacted 2017 to changes could to utilize expire the unused. U.S. tax laws may have a material impact onlaw. us. The Tax Cutsthat, and among Jobs other Act things, reduce makesthe the extensive interest U.S. corporate deduction, changes tax limit to rate, the introducethe use the a of federal capital U.S. NOLs investment tax deduction, to international laws offset limit corporations. future and Certain tax taxable provisions includes income, of and provisions system, make theexpire extensive changes Tax including to Cuts on and the Jobs certainlegislation. Act taxation Changes are specified likely in of to futurequestions interpretations undergo that foreign revisions of dates, or arise earnings are the unless becauseincome set of Tax of taxes to such Cuts the or U.S. provisions Tax related andwith Cuts interpretations multinational respect Jobs are and in to Act, Jobs response further thepossible any Act to ultimate that modified and impact legislative the reactionary of any legislation action Tax in or changes Cuts thecould to regulation in ultimately Tax and subsequent may adversely address Cuts accounting be Jobs affect and instituted us standards Acthave by Jobs and/or or for may one Act negate may cause or derive or on from more uncertainty minimize our the foreign some Tax tax authorities Cuts or provisions. that and all In Jobs of Act. addition, the it favorable is impacts that we Future regulation of the Internetservices or and mobile increased costs devices of may slow doing our business. growth, resulting in decreased demand foron our companies that conductmobile business commerce. For online example, or theseother that web-based laws communications, and adversely particularly affect regulations targetedcould could the e-mail of discourage reduce growth communication the demand or by type use fordevices, e-mail facilitated our of including by or our services. the but services, Lawsservices Internet which not or and or regulations limited increase that to ourdiscrimination affect by costs. laws the Internet Some affecting access use jurisdictions providers; netelsewhere. of however, have substantial uncertainty For adopted neutrality the exists regulations example, could Internet in prohibiting theneutrality or in also rules United certain mobile effective States decrease forms the June and 11, of demand United 2018, which for could States, our lead the internet access Federal providers to Communications restrict, block, Commission degrade repealed net ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Black or charge for access to our products and services. Further, regulatory focus on data privacy, data security and consumer protection continues to expand on a worldwide basis and is becoming more complex, which will increase the risks to our business on reputational, operational, and compliance bases. The continued growth and development of the market for online services may prompt calls for more stringent consumer protection laws or laws that will inhibit the use of Internet-based or mobile-based communications or the information contained in these communications or the ways in which information may be collected, stored, used and transferred in the course of providing services. For example, in the United States, the CAN-SPAM Act regulates the transmission and content of commercial emails, and, among other things, obligates the sending of such emails to provide recipients with the ability to opt-out or unsubscribe and other requirements; and the Children’s Online Privacy Protection Act regulates the ability of certain online services to collect or use certain categories of information from children under age 13 absent parental consent. The adoption of any additional laws or regulations, or changes to existing laws or regulations, may decrease the expansion of the Internet or smartphone usage. A decline in the growth of the Internet or smartphone usage, particularly as it relates to online communication, could decrease demand for our services and increase our costs of doing business, or otherwise harm our business. Any new legislation or regulations, application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or application of existing laws and regulations to the Internet, mobile and other online services could increase our costs and harm our growth.
If we are unable to develop and maintain successful relationships with social media and other third-party consumer messaging platforms and endpoints, our business, results of operations and financial condition could be adversely affected. We believe that continued growth for companies in our industry depends, in part, on enabling brands to connect with consumers across consumers’ preferred conversational interfaces and messaging endpoints, such as SMS, Facebook Messenger, WhatsApp, Apple Business Chat, Google Rich Business Messenger, Line and Alexa. In order to grow our business, we have identified and developed, and maintain, strategic relationships with many key technology partners. As part of our growth strategy, we plan to further develop partnerships and specific solution areas with additional technology partners. If we fail to establish these relationships in a timely and cost-effective manner, or at all, or if we lose any or all of our current relationships, then our business, results of operations and financial condition could be adversely affected. Additionally, even if we are successful at developing these relationships, but there are problems or issues with the integrations, or our ability to scale and onboard our customers onto new endpoints, our reputation and ability to grow our business may be adversely affected.
We may be unable to respond to the rapid technological change and changing customer preferences in the online sales, marketing, customer service, and/or online consumer services industries and this may harm our business. If we are unable, for technological, legal, financial or other reasons, to adapt in a timely manner to changing market conditions in the online sales, marketing, customer service and/or e-commerce industry or 4 our customers’ or consumers’ requirements or preferences, our business, results of operations and financial condition would be materially and adversely affected. Online business is characterized by rapid technological change. In addition, the market for online sales, marketing, customer service and expert advice solutions is relatively new. Sudden changes in customer and consumer requirements and preferences, frequent new product and service introductions embodying new technologies, and the emergence of new industry and regulatory standards and practices such as but not limited to data privacy and security standards, could render the LivePerson services and our proprietary technology and systems obsolete. The rapid evolution of these products and services will require that we continually improve the performance, features and reliability of our services. Our success will depend, in part, on our ability to: • enhance the features and performance of our services; • develop and offer new services that are valuable to companies doing business online as well as consumers; and • respond to technological advances and emerging industry and regulatory standards and practices in a cost-effective and timely manner.
44 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
159263 TOPPAN live person AR_Text_Insert Signature 4 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
5
45
euti usata ot n itatmngmn’ teto n resources. and attention management’s distract and costs substantial in result
fscrte ls cinltgto.W a nteftr etetre fsmlrltgto,wihcould which litigation, similar of target the be future the in may We litigation. action class securities of
h at opne hthv xeine oaiiyi h aktpieo hi tc aebe h subject the been have stock their of price market the in volatility experienced have that companies past, the
o ehooycmaisi atclr ol as h aktpiefrorcmo tc odcie In decline. to stock common our for price market the cause could particular, in companies technology for
nadto,eteepieadvlm lcutosi h tc akt eeal,adi h markets the in and generally, markets stock the in fluctuations volume and price extreme addition, In
ntdKingdom. United
tak,o nteseii oain hr eoeae uha h ntdSae,Ire n the and Israel States, United the as such operate, we where locations specific the in or attacks,
eea cnmc oiia n aktcniin,sc srcsin,pltclurs rterrorist or unrest political recessions, as such conditions, market and political economic, general •
diin rdprue fkypronl and personnel; key of departures or additions •
hne nmre autoso opne htivsosbleeaecmaal ous; to comparable are believe investors that companies of valuations market in changes •
sales;
noneet bu utmradtosadcneltoso alr ocmlt significant complete to failure or cancellations and additions customer about announcements •
noneet rrmr bu egr rsrtgcaqiiin yu rb u competitors; our by or us by acquisitions strategic or mergers about rumors or announcements •
hne nrcmedtoso iaca siae yscrte analysts; securities by estimates financial or recommendations in changes •
annsanucmnsta r o nln ihaaytexpectations; analyst with line in not are that announcements earnings •
urel aitosi u prtn eut rtoeo u competitors; our of those or results operating our in variations quarterly •
uue nldn nrsos otefloigfcos oeo hc r eodorcontrol: our beyond are which of some factors, following the to response in including future,
oaie iheteepieadvlm lcutos u rdn rc ol lcut usatal nthe in substantially fluctuate could price trading Our fluctuations. volume and price extreme with volatile,
h rc forcmo tc a lcutdsgiiatyi h atadmycniu ob highly be to continue may and past the in significantly fluctuated has stock common our of price The
netetadsbetu olitigation. to us subject and investment
u tc rc a en n a otnet e ihyvltl,wihcudrdc h au fyour of value the reduce could which volatile, highly be, to continue may and been, has price stock Our
ik eae oOrCmo Stock Common Our to Related Risks
u uies eut foeain n iaca odto ilsuffer. will condition financial and operations of results business, our
h nentde o fetvl upr h rwho h nent emyntmiti rftblt and profitability maintain not may we Internet, the of growth the support effectively not does Internet the
eeal,adorcsoes ie icuigterueo ienae npriua.I h nrsrcueof infrastructure the If particular. in LiveEngage) of use their (including sites customers’ our and generally,
upr h nentas ol euti lwrrsos ie n eaieyipc s fteInternet the of use impact negatively and times response slower in result could also Internet the support
adeicesdlvl fItre ciiy nufcetaalblt ftlcmuiain evcsto services telecommunications of availability Insufficient activity. Internet of levels increased handle
nentcudls t iblt u odly nteaoto fnwsadrsadpooosrqie to required protocols and standards new of adoption the in delays to due viability its lose could Internet
h at sr aeeprecddfiute u osse alrsurltdt u evc.I diin the addition, In service. our to unrelated failures system to due difficulties experienced have users past, the
evc rvdr htpoieorcsoesadItre sr ihacs oteLvPro evcs In services. LivePerson the to access with users Internet and customers our provide that providers service
non ye-tak n eae odc,wihafc l niebsnse.W lodpn nInternet on depend also We businesses. online all affect which conduct, related and cyber-attacks ongoing
niests mi n h ee ftafco h nent h nenti losbett otne and continued to subject also is Internet The Internet. the on traffic of level the and email sites, online
n easa euto aaet otoso t nrsrcue uae rdly ol desl affect adversely could delays or Outages infrastructure. its of portions to damage of result a as delays and
o h nentwl eal ospottedmnspae pni.TeItre a xeine outages experienced has Internet The it. upon placed demands the support to able be will Internet the for
s ycnuesrsligi nrae adit ead,w antasr o htteinfrastructure the that you assure cannot we demands, bandwidth increased in resulting consumers by use oteetn htteItre otne oeprec rwhi h ubro sr n rqec of frequency and users of number the in growth experience to continues Internet the that extent the To
159263 TOPPAN live person AR_Text_Insert Sig 5 ] Sig 5 person AR_Text_Insert TOPPAN live 159263
edpn ntecniudvaiiyo h nrsrcueo h Internet. the of infrastructure the of viability continued the on depend We
foeain n iaca condition. financial and operations of
rwmr lwyta xetdadcudohriehv aeilavreefc norbsns,results business, our on effect adverse material a have otherwise could and expected than slowly more grow
xadoroeain na fiin anrcudcueorepne ogo,orrvnet eln or decline to revenue our grow, to expenses our cause could manner efficient an in operations our expand
mlmn e rugae prtn n iaca ytm,poeue n otos u alr to failure Our controls. and procedures systems, financial and operating upgraded or new implement
prtoa,tcncladfnnilrsucs nodrt aaeorgot,w ol erqie to required be could we growth, our manage to order In resources. financial and technical operational,
fnwsrie eur st rwrpdy hscudpaeasgiiatsri normanagerial, our on strain significant a place could this rapidly, grow to us require services new If
u uies eut foeain n iaca condition. financial and operations of results business, our
ehooymyrqiesgiiatadtoa aia xedtrsadcudmtral n desl affect adversely and materially could and expenditures capital additional significant require may technology
osmr’epcain,w ol oecsoesadorbsns a ehre.Udtn our Updating harmed. be may business our and customers lose could we expectations, consumers’ fayo u e evcs nldn prdst u urn evcs ontme u utmr’or customers’ our meet not do services, current our to upgrades including services, new our of any If
159263 TOPPAN live person AR_Text_Insert Signature 5 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] a aeteefc fdsorgn,dlyn rpeetn hnei oto rcagsi our in changes or control in change a preventing or following: the delaying include provisions discouraging, These advantageous. deem of may that stockholders effect that takeover management a the prevent have or may delay discourage, the could on law have Delaware will and stock favorable. documents consider common may charter our stockholders our of No sales in appropriate. market deem Provisions we that it any, that make price if might and also effect, time stock. sales common the a our These at to future of fall. as price the could market made in stock that securities be common perceives equity market can our sell the prediction to of if us or price for market, market difficult public the more the occur, in warrants, might and sales options these outstanding of exercise price. the stock upon our affect negatively may stock common our of stockholders. amounts other may substantial principal our they stockholders of of and sales those and of stockholders, Future necessarily group other not directors and this of interests interests best of officers, their the interests to advances or that executive The ability interests manner control. company’s a Our in in the the act change with have transactions. coincide a always together, prevent not corporate or acting may delay directors significant stockholders, also of could election these stockholders of the including result, approval stockholders, our a by of approval and 49.6% requiring As approximately matters owned all stock. beneficially influence aggregate significantly common the in outstanding affiliates our their our of and significantly those stock to common necessarily able outstanding not be and may interest best they together, own their act in to acting choose operations, stockholders. stockholders other and largest management and our directors influence negatively officers, of could price our markets trading the two If the in the in on decrease decrease prices Any a trading to factors. cause in other could (due Differences markets price. and market. times these trading other these our different of the impact to one on at due on of stock differ and stock prices common may trading common TASE) our The markets our Israel). the two of and currencies States price these on different United trading on Shekels the in stock in Israeli place holidays common public takes New our and markets days and trading these NASDAQ zones, on time the different stock on common dollars our (U.S. in Trading variations. price (“TASE”). in Exchange result may this and market one than more on traded is stock common Our tchlesms rvd dac oiet oiaeidvdasfreeto oorbadof board our to election by for act individuals not nominate may to and notice meeting advance special provide or must annual Stockholders called duly a at • act only may stockholders Our election the • in voting cumulative prohibits incorporation in of then certificate directors restated of and majority amended a Our of vote a by filled be • only may directors of board our staggered on Vacancies three-year serving class each with • classes, three into divided is directors of board Our • bylaws restated and amended and incorporation of certificate restated and amended our in Provisions issuable shares including stock, common our of amounts substantial sell stockholders our or we If our of more or 5% of holders and directors officers, executive our 2018, 31, December of As Stock Aviv Tel the and Market Select Global NASDAQ the on traded currently is stock common Our ietr rt rps te atr htcnb ce pna tchles meeting. stockholders’ a at upon acted be can that matters other propose to or directors consent. written director elect to stockholders minority of ability the limits This matters. other candidates. any or directors of quorum. a than less if even office, annual any at directors of board new entirely an electing meeting. from stockholders prevents which terms, 46 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Black
555
47
oscnb esnbyetmtd infcn ugeti eurdi ohtedtriaino probability of determination the both in required is judgment Significant estimated. reasonably be can loss
eacu o iblt hni sbt rbbeta iblt a enicre n h muto the of amount the and incurred been has liability a that probable both is it when liability a for accrue We
ela lisbogtaantorcsoesfrwo ehv otata nenfcto obligation. indemnification contractual a have we whom for customers our against brought claims as well
ruh yo gis swt epc oitleta rpry otat,epomn n te atr,as matters, other and employment contracts, property, intellectual to respect with us against or by brought
lis ead n netgtosaiigi h riaycus fbsns,icuigdrc claims direct including business, of course ordinary the in arising investigations and demands claims,
rmtm otm,w r novdi rsbett ea,amnsrtv n euaoyproceedings, regulatory and administrative legal, to subject or in involved are we time, to time From
ieiodo osa probable. as loss of likelihood
nurn iblt,adrcr u etetmt fteutmt osi iutosweew sesthe assess we where situations in loss ultimate the of estimate best our record and liability, a incurring
eruieyass l forltgto n hetndltgto st h rbblt fultimately of probability the to as litigation threatened and litigation our of all assess routinely We
hmvigorously. them
lo o eito.W eiv h lisfldb 2] r nieywtotmrtaditn odefend to intend and merit without entirely are [24]7 by filed claims the believe We mediation. for allow
u nelculpoet n te lisasre gis 2] nteoiia iiaini o ceue to scheduled not is litigation original the in [24]7 against asserted claims other and property intellectual our
u ao aehv naiae h aoiyo 2] aet htwr setdi h aetcss ra for Trial cases. patent the in asserted were that patents [24]7 of majority the invalidated have have favor our
aionafralpetilproe.Rcn uig ybt h or n h ntdSae aetOfc in Office Patent States United the and Court the both by rulings Recent purposes. pre-trial all for California
outrl rnfre n osldtdwt h w aionacssi h otenDsrc of District Northern the in cases California two the with consolidated and transferred voluntarily
gis s loi h otenDsrc fClfri.O ac 6 07 h e okcs was case York New the 2017, 16, March On California. of District Northern the in also us, against
aetifigmn.O eebr7 05 2] utmrIc ie eodptn nrneetsuit infringement patent second a filed Inc. Customer [24]7 2015, 7, December On infringement. patent
ue2,21,[47Csoe,Ic ie utaantu nteNrhr itito aionaalleging California of District Northern the in us against suit filed Inc. Customer, [24]7 2015, 22, June
iaporae u ehooyt eeo optn rdcsadmssdorbsns nomto.On information. business our misused and products competing develop to technology our misappropriated
e oko ac ,21 ekn aae ntegonsta 2] ees nierdand engineered reverse [24]7 that grounds the on damages seeking 2014 6, March on York New
epeiul ie nitleta rprysi gis 2] utmr n.i h otenDsrc of District Southern the in Inc. Customer, [24]7 against suit property intellectual an filed previously We
tm3 ea Proceedings Legal 3. Item
esnbeterms. reasonable
ed.I eurd ebleeta ewl eal ooti utbeadtoa pc ncommercially on space additional suitable obtain to able be will we that believe we required, If needs.
eiv htorcretfclte rprisaei odcniinadaeaeut ome u current our meet to adequate are and condition good in are properties facilities current our that believe
aedt etr nteUie tts uoeadAsrlaprun ovroslaeareet.We agreements. lease various to pursuant Australia and Europe States, United the in centers data have
500sur eti aiu oain nteUie tts uoe saadAsrla nadto,we addition, In Australia. and Asia Europe, States, United the in locations various in feet square 45,000
so eebr3,21,w lolaeofc pc o aktn,slsadspoto approximately of support and sales marketing, for space office lease also we 2018, 31, December of As
n2020. in
xie n22;adapoiaey3,0 qaefe nSate o eerhaddvlpetta expires that development and research for Seattle, in feet square 38,000 approximately and 2024; in expires
08 fapoiaey4,0 qaefe nApaet,Goga o ae n upr ne es that lease a under support and sales for Georgia, Alpharetta, in feet square 40,000 approximately of 2018,
qaefe nR’nn,Ire,frrsac n eeomn,slsadspotudrlae htepr in expire that leases under support and sales development, and research for Israel, Ra’anana, in feet square
eto fiesaeudralaeta xie n22.W lolaeofc pc fapoiaey68,000 approximately of space office lease also We 2020. in expires that lease a under space office of feet
u oprt eduresaelctdi e okCt,weew es prxmtl 700square 37,000 approximately lease we where City, York New in located are headquarters corporate Our
tm2 Properties 2. Item
None. tm1.Ursle tf Comments Staff Unresolved 1B. Item
159263 TOPPAN live person AR_Text_Insert Sig 5 ] Sig 5 person AR_Text_Insert TOPPAN live 159263
aktpieo u omnstock. common our of price market
sdsrdb rbnfca oorsokodr,wihi uncudhv aeilavreefc nthe on effect adverse material a have could turn in which stockholders, our to beneficial or by desired is
rvso eesscuddsorg,dlyo rvn hnei oto forcmay hte rntit not or whether company, our of control in change a prevent or delay discourage, could defenses provision
tchle eaea neetdsokodr nescrancniin r e.Ti anti-takeover This met. are conditions certain unless stockholder, interested an became stockholder
obntoswt nitrse tchle o eido he er olwn h aeo hc the which on date the following years three of period a for stockholder interested an with combinations
a,wihgnrlypoiisaDlwr oprto rmeggn nayo ra ag fbusiness of range broad a of any in engaging from corporation Delaware a prohibits generally which Law,
saDlwr oprto,w r losbett eto 0 fteDlwr eea Corporation General Delaware the of 203 Section to subject also are we corporation, Delaware a As
oaedoraeddadrsae bylaws. restated and amended our amend to
u mne n ettdblw xrsl uhrz ue-aoiyo h or fdirectors of board the of super-majority a authorize expressly bylaws restated and amended Our •
n ettdcriiaeo noprto n oaedoraeddadrsae bylaws. restated and amended our amend to and incorporation of certificate restated and erqiesprmjrt oigb tchlest mn eti rvsosi u amended our in provisions certain amend to stockholders by voting super-majority require We •
159263 TOPPAN live person AR_Text_Insert Signature 5 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] tm4 ieSft Disclosures and Safety Mine defense of because us on 4. Item impact adverse and factors. an investigations other lawsuits, have and of resources can threats management periodic litigation of to diversion outcome, costs, addition, if subject settlement also the In exposure, a flows. are have and cash we of not business, damages or Regardless will our condition matters claims. of financial of existing operations, the amount course all ordinary of the of of the results disposition certain nor business, in final our claims, be the on any cannot that effect believe we adverse of currently material Although we disposition business. incur, the could of we or course that any, litigation ordinary any the be in of cannot arising outcome estimate matters other an and that issues disclose estimated, or or, reasonably loss whole be a additional as cannot the statements applicable, adjustment financial of our as estimate such to an respect will, of made. with disclose we immaterial amount made, is accrued, the is estimate already the determination a if that amounts the is indicate there loss, period the extent of the exceed the range To in matter. could accrual particular losses analysis, a the foregoing to the adviceadjust pertaining rulings, the that settlements, events from negotiations, and possibility resulting of information any, impact reasonable other appropriate the if and as reflect estimates, counsel matter to legal such or adjusted to of accruals and to related quarterly believe The disclosure least we 450. at include what determine reviewed ASC develop will we are to we with event possible then compliance the becomes loss, in in it possible addition, and and of possible, In reasonably range estimable. reasonable is reasonably a but probable, is be not loss is a loss whether a to that as determination the and o Applicable. Not privacy rights, property intellectual regarding us against claims assert parties third time, to time From 48 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Black
5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] ] 32 Page o a ...... —— $— — Total 12/31/2018 ...... – 12/1/2018 11/30/2018 – 11/1/2018 10/31/2018 – 10/1/2018 follows: Securities Equity paying of anticipate Purchases Issuer not do and business our future. of foreseeable expansion the and in operation dividends the cash finance any to any, if earnings, retain Dividends Stock Aviv Tel the Holders on traded also are stock common TA. LPSN of symbol shares the Our under LPSN. Exchange symbol the under Market Select of Purchases Issuer and Stock Common Matters of Stockholder Range Related Price Equity, Common Registrant’s for Market 5. Item Period 1 rnato esrltdt h hr ucae r eutdfo h oa eann allowable remaining total the from deducted are purchases share the to related fees Transaction (1) 159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Black umr fteCmaysrprhs ciiyfrtetremnh ne eebr3,21 sas is 2018 31, December ended months three the for activity repurchase Company’s the of summary A to intend We inception. our since stock capital our on dividends cash any paid or declared not have We stock. common our of record of holders 165 approximately were there 2019, 12, February of As Global NASDAQ The is traded is stock common our which on market States United principal The xedtr amount. expenditure qiySecurities Equity .....——— — — — — $— — — — ...... hrsPurchased Shares oa ubrof Number Total ATII PART 49 adprShare per Paid vrg Price Average sPr fPublicly of Part as hrsPurchased Shares none Plans Announced oa ubrof Number Total rPrograms or a e ePurchased Be Yet May au fSae that Shares of Value prxmt Dollar Approximate ne h ln or Plans the Under $17,050,059 $17,050,059 17,050,059 17,050,059 17,050,059 Programs
555
50
06 05ad21 n h eae ttmnso prtosfrteyaseddDcme 1 05and 2015 31, December ended years the for operations of statements related the and 2014 and 2015 2016,
hc r nlddhri.Teslce iaca aawt epc oorblneset so eebr31, December of as sheets balance our to respect with data financial selected The herein. included are which
eebr3,21,21 n 06hv endrvdfo u uie osldtdfnnilstatements financial consolidated audited our from derived been have 2016 and 2017 2018, 31, December
eebr3,21 n 07adterltdcnoiae ttmnso prtosfrteyasended years the for operations of statements consolidated related the and 2017 and 2018 31, December
h eetdcnoiae iaca aawt epc oorcnoiae aac hesa of as sheets balance consolidated our to respect with data financial consolidated selected The
tm6 eetdCnoiae iaca Data Financial Consolidated Selected 6. Item
uhifrainb rae sslctn aeil nec aeudrtoestatutes. those under case each in material, soliciting as treated be information such
pcfclyicroaesc nomto yrfrneit rvoso uuefln,o pcfclyrqetthat request specifically or filing, future or previous a into reference by information such incorporate specifically
hs ro iig rit n uueflnsmd yu ne hs ttts xett h xetta we that extent the to except statutes, those under us by made filings future any into or filings prior those
omsin sntdee oiiigmtra n hl o edee noprtdb eeec noayof any into reference by incorporated deemed be not shall and material soliciting deemed not is Commission,
ttts h tc efrac rp bv sntdee ie ihteScrte n Exchange and Securities the with filed deemed not is above Graph Performance Stock the statutes,
noprt yrfrneti nulRpr nFr 0Ko uueflnsmd yteCmayudrthose under Company the by made filings future or 10-K Form on Report Annual this reference by incorporate
euiisAto 93 saedd rteScrte xhneAto 94 saedd htmight that amended, as 1934, of Act Exchange Securities the or amended, as 1933, of Act Securities
owtsadn ntigt h otaystfrhi n forpeiu rftr iig ne the under filings future or previous our of any in forth set contrary the to anything Notwithstanding
tchle returns. stockholder
3 tchle eun vrteidctdpro hudntb osdrdidctv ffuture of indicative considered be not should period indicated the over returns Stockholder (3)
elrdo ieesnsCmo Stock. Common LivePerson’s on declared
nomto ehooyIdx n htaldvdnswr enetd ocs iied aebeen have dividends cash No reinvested. were dividends all that and Index, Technology Information
omnSok nteSadr orsSala 0 ne n nteSadr Poor’s & Standard the in and Index 600 SmallCap Poor’s & Standard the in Stock, Common
2 h rp sue ht$0 a netda h aktcoeo eebr3,21 nLivePerson’s in 2013 31, December on close market the at invested was $100 that assumes graph The (2)
1 h rp oestepro rmDcme 1 03t eebr3,2018. 31, December to 2013 31, December from period the covers graph The (1)
S&P Information Technology Information S&P
LivePerson, Inc. S&P Smallcap 600 Smallcap S&P Inc. LivePerson,
Period Ending Period
23/31/11 23/51/11 23/712/31/18 12/31/17 12/31/16 12/31/15 12/31/14 12/31/13
0
50 100 Index Value
159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5 150
200
250
tnad&Po’ nomto ehooyIndex. Technology Information Poor’s & Standard
tchle eunwt h uuaiettlrtr fteSadr orsSala 0 ne n the and Index 600 SmallCap Poor’s & Standard the of return total cumulative the with return stockholder
h rp eitdblwcmae h nulpretg hne nteLvPro’ uuaietotal cumulative LivePerson’s the in changes percentage annual the compares below depicted graph The tc efrac Graph Performance Stock
159263 TOPPAN live person AR_Text_Insert Signature 5 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Black dutdEBITDA Adjusted Operational and Financial Other to used shares Weighted-average dutdoeaigincome operating Adjusted ot n expenses: and Costs Revenue...... $ of Statement Consolidated Operations.” of Results and and Condition contained Financial Synchronite information in of the of read Analysis and those CAO!, be and thereto with should Discussion notes “Management’s or data and the 7, other, financial and Item each consolidated statements in 2018 selected financial with following consolidated results our in the The operating to with meaningful. our conjunction Central Due be of not herein. comparisons Bot may included periods, that not believe prior and are we Conversable, 2014, which in statements AdvantageTec, NexGraph financial audited of our from acquisitions derived been have 2014 2 edfn dutdoeaigicm sicm ls)bfr rvso o noetxsexcluding taxes income for provision before (loss) income as income operating adjusted define We (2) other taxes, income from) (benefit for provision before loss net as EBITDA adjusted define We (1) common of share per loss Net income (expense) Other operations from Loss e loss Net taxes income for Provision income for provision before Loss Data: Basic share: per loss net compute Diluted Diluted costs Restructuring ae n marketing and Sales eea n diitaie...4,7 3144,4 71140,192 37,171 43,046 43,124 45,873 . development Product . . administrative and General revenue of Cost Data: Operations mriaino purchased of Amortization Basic stock: taxes ...... intangibles o oeifrainadfrarcniito fajse prtn noet noe(os before (loss) income in GAAP. to presented or and income principles calculated accounting operating measure accepted financial generally adjusted comparable U.S. directly with of accordance most reconciliation the taxes, a income below for for Income” provision Operating earn-out and “Adjusted see information contingent Please more income. costs, (expense) for other acquisition and costs, charges other restructuring adjustments, compensation, stock-based amortization, financial or comparable principles, directly accounting most accepted generally the U.S. income, with and (loss) accordance information (“GAAP”). in net more presented to for and EBITDA below calculated EBITDA” adjusted measure “Adjusted of see reconciliation costs, Please a charges. restructuring for compensation, other stock-based and amortization, costs and acquisition depreciation net, income, (expense) 215,098 249,440 242,188 236,702 273,541 . . . expenses and costs Total ...... $ ...... $ ...... $ ...... (1) ...... $ ...... (2) .. 5 501 858 ..... ,0 ,4 ,0 ,3 13,601 $ 9,130 $ 7,503 $ 6,042 $ 4,902 $ . . . 923405,5,1 603775,5,0 54,478,754 54,478,754 56,452,408 56,452,408 56,063,777 56,063,777 56,358,017 56,358,017 59,203,400 59,203,400 0821 0621 2014 2015 2016 2017 2018 4,3 1,7 2,7 3,1 209,931 $ 239,012 $ 222,779 $ 218,876 $ 249,838 0,4 0958,2 47883,253 94,728 89,529 90,905 103,344 2,0)(786 1,0)(048 (5,167) (10,428) (19,409) (17,826) (23,703) 2,3)$(811 2,7)$(644 (7,348) $ (26,444) $ (25,873) $ (18,191) $ (25,032) 2,7)(760 1,3)(060 (5,489) (10,630) (19,939) (17,690) (24,174) 900$1,0 918$2,4 22,672 $ 21,244 $ 19,198 $ 18,400 $ 19,090 5774,3 0183,7 37,329 38,974 40,198 40,034 55,707 2495,0 3117,1 52,703 70,310 63,161 58,205 62,479 ,6 ,9 ,6 ,8 — 3,384 2,369 2,594 4,468 ,7 ,4 ,8 ,7 1,621 4,873 3,885 1,840 1,670 04)$(.2 04)$(.7 (0.13) $ (0.47) $ (0.46) $ (0.32) $ (0.42) 04)$(.2 04)$(.7 (0.13) $ (0.47) $ (0.46) $ (0.32) $ (0.42) 41 3 50 22 (322) (202) (530) 136 (471) 51 I huad,Ecp hr n e hr Data) Share per and Share Except Thousands, (In erEddDcme 31, December Ended Year ,3 5841,859 15,814 5,934
5
52
dutdEID osntcnie h mato custo costs; acquisition of impact the consider not does EBITDA adjusted •
needs;
dutdEID osntrfetcagsi,o ahrqieet o,orwrigcapital working our for, requirements cash or in, changes reflect not does EBITDA adjusted •
requirements;
aia xedtr eurmnsfrsc elcmnso o e aia expenditure capital new for or replacements such for requirements expenditure capital
mrie a aet erpae nteftr,adajse BTAde o elc cash reflect not does EBITDA adjusted and future, the in replaced be to have may amortized
lhuhdpeito n mriainaenncs hre,teast en ercae and depreciated being assets the charges, non-cash are amortization and depreciation although •
are:
slto ra usiuefraayi forrslsa eotdudrGA.Sm fteelimitations these of Some GAAP. under reported as results our of analysis for substitute a as or isolation
u s fajse BTAhslmttosa naayia ol n o hudntcnie tin it consider not should you and tool, analytical an as limitations has EBITDA adjusted of use Our
aemne sormngmn n or fdirectors. of board and management our as manner same
sflifraint netr n tesi nesadn n vlaigoroeaigrslsi the in results operating our evaluating and understanding in others and investors to information useful
xctv fies codnl,w eiv htajse BTAadajse prtn noeprovide income operating adjusted and EBITDA adjusted that believe we Accordingly, officers. executive
opnaincmiteo u or fdrcosi oncinwt h amn fbnsst our to bonuses of payment the with connection in directors of board our of committee compensation
oprsn forcr uies diinly dutdEID sakyfnnilmaueue ythe by used measure financial key a is EBITDA adjusted Additionally, business. core our of comparisons
dutdEID n dutdoeaigicm a rvd sflmauefrperiod-to-period for measure useful a provide can income operating adjusted and EBITDA adjusted
eeo hr n ogtr prtoa ln.I atclr h xlso fcranepne ncalculating in expenses certain of exclusion the particular, In plans. operational long-term and short develop
n vlaeorcr prtn efrac n rns opeaeadapoeorana ugtadto and budget annual our approve and prepare to trends, and performance operating core our evaluate and
om1- eas hs r e esrsue yormngmn n or fdrcost understand to directors of board and management our by used measures key are these because 10-K Form
ehv nlddajse BTAadajse prtn noei hsAna eoton Report Annual this in income operating adjusted and EBITDA adjusted included have We
otdrcl oprbeGA iaca measures. financial GAAP comparable directly most
eo rsn eoclaino dutdEID n dutdoeaigicm ont(os noe the income, (loss) net to income operating adjusted and EBITDA adjusted of reconciliation a present below
dutdEID n dutdoeaigicm hc r o-APfnnilmaue.Tetables The measures. financial non-GAAP are which income operating adjusted and EBITDA adjusted
opoieivsoswt diinlifrainrgrigorfnnilrsls ehv disclosed have we results, financial our regarding information additional with investors provide To
dutdEID n dutdOeaigIncome Operating Adjusted and EBITDA Adjusted
7,2 4,6 3,7 6,0 180,337 165,305 138,476 140,063 170,729 ...... equity stockholders’ Total
9,0 3,9 1,3 2,9 239,817 226,194 219,638 232,799 290,103 ...... assets Total
1241,8 7583,2 34,954 39,122 17,548 13,789 21,234 ...... capital Working
649$5,1 089$4,0 49,372 $ 48,803 $ 50,889 $ 56,115 $ 66,449 $ ...... equivalents cash and Cash
osldtdBlneSetData: Sheet Balance Consolidated
I Thousands) (In 0821 0621 2014 2015 2016 2017 2018
159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
so eebr31, December of As
oa tc-ae compensation stock-based Total 1,4 894$,3 1,1 $12,306 $11,814 $9,736 $8,944 $14,841 ......
...... development Product ,5 ,0 ,8 ,3 3,606 3,638 3,488 2,305 3,550
eea n administrative and General ,2 ,9 ,0 ,9 3,809 3,692 3,304 3,691 4,921 ......
...... marketing and Sales ,7 ,0 ,1 ,8 3,399 3,088 2,515 2,500 5,374
oto revenue of Cost ...... 9 4 2 $ 429 $ 448 $ 996 $ ...... ,9 1,492 $ 1,396
0821 0621 2014 2015 2016 2017 2018
erEddDcme 31, December Ended Year
thousands): tc-ae opnainicue ntesaeet foeain bv a sflos(mut in (amounts follows as was above operations of statements the in included compensation Stock-based
159263 TOPPAN live person AR_Text_Insert Signature 5 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT • adjusted EBITDA does not consider the impact of restructuring costs;
• adjusted EBITDA does not consider the impact of other costs;
• adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and
• other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including various pre-tax GAAP loss and our other GAAP results. The following table presents a reconciliation of adjusted EBITDA for each of the periods indicated (amounts in thousands): Year Ended December 31, 2018 2017 2016 2015 2014 Reconciliation of Adjusted EBITDA: Net loss ...... $(25,032) $(18,191) $(25,873) $(26,444) $ (7,348) Amortization of purchased intangibles ...... 2,813 4,682 6,673 8,040 5,090 Stock-based compensation ...... 14,841 8,944 9,736 11,814 12,306 Contingent earn-out adjustments ...... — — — (3,680) — Restructuring costs ...... 4,468(1) 2,594(2) 2,369(3) 3,384(4) — Depreciation ...... 14,188 12,358 12,011 12,114 9,071 Other litigation and consulting costs ...... 5,928(5) 7,648(6) 7,818(7) —— Provision for income taxes ...... 858 501 5,934 15,814 1,859 Acquisition costs ...... 555———1,372 Other (income) expense, net ...... 471 (136) 530 202 322 Adjusted EBITDA ...... $19,090 $ 18,400 $ 19,198 $ 21,244 $22,672
Our use of adjusted operating income has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these 5 limitations are:
• although amortization is a non-cash charge, the assets being amortized may have to be replaced in the future, and adjusted operating income does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
• adjusted operating income does not consider the impact of acquisition costs;
• adjusted operating income does not consider the impact of restructuring costs;
• adjusted operating income does not consider the impact of other non-recurring costs;
• other companies, including companies in our industry, may calculate adjusted operating income differently, which reduces its usefulness as a comparative measure.
53 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
159263 TOPPAN live person AR_Text_Insert Signature 5 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Black — 1,372 (4) —— 3,384 (3,680) — (3) (8) 2,369 8,134 (2) (6) Year Ended December 31, (136) 530 202 322 2,594 7,648 (1) (5) 5——— 4,468 2,813 4,682 6,673 8,040 5,090 5,928 4,902 $ 6,042 $ 7,503 $ 9,130 $13,601 2018 2017 2016 2015 2014 14,841 8,944 9,736 11,814 12,306 $(24,174) $(17,690) $(19,939) $(10,630) $ (5,489) 54 ...... — — — ...... 471 ...... $ ...... 55 2018. As detailed inrestructuring Note costs relate 13 to of resourcewind reallocation the for down the Notes costs Company’s to platform to transformation thecontract. focus as Consolidated on well as Financial areas Statements, of the high Company’s growth potential, and the termination ofyear ended a December large 31, customer 2017.the Please nature of refer to these restructuring footnote costs. (1) above for additional information related to benefit of $0.4December 31, million 2016. Please ofof refer to cash these restructuring footnote costs. collected (1) above on for additional previously information related written to the off nature ended bad in debtDecember for 2015 31, the 2015. and Please yearof refer $1.7 ended to these restructuring footnote million costs. (1) above for of additional information severance related to the and nature $0.3 other million, and associated executive relocationdetailed costs costs in of for Note $0.2litigation million 12 costs the for relate to the of the year year Company’s the intellectual ended property ended December suit Notes 31, against [24]7 to 2018. Customer, As Inc. the consolidatedexecutive Financial separation Statements, costfootnote the of (5) above Company’s for $0.5 additional other information related million to the for nature of the these other year litigation costs. costs ended of December $0.5 31,additional million information 2017. related for to the Please the nature of year refer these ended to other December litigation costs. 31, 2016.costs Please of refer $0.5 to million,December footnote 31, and (5) 2016. write Please above offof refer for to of these other footnote office litigation (5) costs. facility above for depreciation additional of information related $0.3 to million the for nature the year ended Because of these limitations, you should consider adjusted operating income alongside other financial Stock-based compensation Restructuring costs Amortization of purchased intangibles Other litigation and consulting costs Contingent earn-out adjustments Acquisition costs Other (income) expense, net (1) These costs include severance and associated costs of $4.5 million for the year ended December 31, (2) Includes wind down costs of legacy platform of $1.9 million and severance costs of(3) $0.7 million for Includes the severance costs of $1.6 million, wind down costs of legacy platform of(4) $1.2 million Includes approximately and $1.7 million a of termination costs associated with a large customer contract that (5) Includes litigation costs of $4.1 million, consulting costs of $1.3 million, executive recruitment costs of (6) Includes litigation costs of $6.2 million, executive one-time compensation payment of $1.0 million, and (7) Includes litigation costs of $4.7 million, write off of technology licenses of(8) $2.6 million, and Includes severance litigation costs of $4.7 million, write off of technology licenses of $2.6 million, severance Reconciliation of Adjusted Operating Income (Loss) Loss before provision for income taxes performance measures, including varioustable pre-tax presents GAAP a loss reconciliation and ofthousands): our adjusted other operating GAAP income for results. each The of following the periods indicated (amounts in Adjusted operating income Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General You should read the following discussion of our financial condition and results of operations in conjunction with the 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.”
Overview LivePerson, Inc. (“LivePerson”, the “Company”, “we” or “our”) makes life easier by transforming how people communicate with brands. During the past decade, the consumer has made the mobile device the center of their digital lives, and they have made mobile messaging the center of communication with friends, family and peers. Our technology enables consumers to connect with businesses through these same preferred conversational interfaces, including Facebook Messenger, WhatsApp, Apple Business Chat, Google Rich Business Messenger and Alexa. These messaging conversations harness human agents, bots and Artificial Intelligence (AI) to power convenient, personalized and content-rich journeys across the entire consumer lifecycle, from discovery and research, to sales, service and support, and even marketing and brick and mortar engagements. For example, consumers can look up product info like ratings, images and pricing, search for stores, see products in the store, schedule appointments, apply for credit, approve repairs, make purchases or payments – all without ever leaving the messaging channel. We call these AI and human-assisted conversational experiences over messaging Conversational Commerce.
LiveEngage, our enterprise-class, cloud-based platform, was designed for Conversational Commerce, enabling businesses to securely deploy messaging, coupled with bots and AI, at scale for brands with tens of millions of customers and many thousands of customer care agents. LiveEngage powers conversations across each of a brand’s primary digital channels, including mobile apps, mobile and desktop web browsers, short message service (SMS), social media and third-party consumer messaging platforms. Brands can also use LiveEngage to message consumers when they dial a 1-800 number instead of having them navigate interactive voice response systems (IVRs) and wait on hold.
Our robust, cloud-based suite of rich mobile messaging and real-time chat offerings features intelligent routing and capacity mapping, queue prioritization, customer sentiment, real-time analytics and reporting, 5 content delivery, Payment Card Industry (PCI) compliance, cobrowsing and a sophisticated proactive targeting engine. With LiveEngage, agents can manage all conversations with consumers through a single console interface, regardless of which disparate messaging endpoints the consumers originate from: i.e., WhatsApp, Line, Apple Business Chat, IVR, or Google Home. An extensible application programming interface (API) stack facilitates a lower cost of ownership by facilitating robust integration into back-end systems, as well as enabling developers to build their own programs and services on top of the platform. More than three dozen APIs are available on LiveEngage.
LiveEngage also features Maven, a robust AI engine that was custom designed for Conversational Commerce. Maven, announced in December 2018, puts the power of bot development, training and management into the hands of the contact center and its agents, the teams most familiar with how to structure sales and service conversations to drive successful outcomes. The platform enables what the we call “the tango” of humans, AI and bots, whereby human agents act as bot managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed. Through Maven Assist, agents become ultra-efficient, leveraging the AI engine to serve up relevant content, define next-best actions and take over repetitive transactional work, so that the agent can focus on relationship building. By seamlessly integrating LiveEngage with Maven, as well as third-party bots, the platform provides businesses with a comprehensive view of all AI-based and human-based conversations from a single console.
55 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
159263 TOPPAN live person AR_Text_Insert Signature 5 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Black LivePerson brought its first 56 Our strategy is to drive higher volumes on LiveEngage by going both wide across messaging As a “cloud computing” or software-as-a-service (SaaS) provider, LivePerson provides solutions on a More than 18,000 businesses, including Citibank, HSBC, Orange, and TheOur Home solutions benefit Depot organizations of use all our sizes conducting business or communicating with consumers We are organized into two operating segments: Business and Consumer. The Business segment enables In order to sustain growth in these segments, our strategy is toThe expand key elements our of position LivePerson’s business solutions as strategy include: theBuild leading awareness and drive adoption of Conversational Commerce. A key component of our industry awareness marketing strategy has been to hold multiple global Increase volumes on LiveEngage by deploying a broad messaging ecosystem and expanding customer use In order to go wide across messaging endpoints, it is imperative that LiveEngage integrates to all of the hosted basis. This modelcosts, offers faster significant implementation, benefits lowerupgrades. over total premise-based Organizations cost software, including of thatLivePerson lower ownership, eliminate up-front adopt scalability, the cost predictability, majority aimplement, and maintain, of and simplified fully-hosted, support the traditional on-premise multi-tenant time, software. server architecture infrastructure that costs, and isConversational Commerce IT solutions maintained resources to orchestrate required humanspersonal by and to relationship. AI, at scale, and create a convenient, deeply through mobile andconsumer/retail, online telecommunications, messaging and financialwithin the chat. United services, States We and travel/hospitality, plan Canada, technology Latin to America, Europe and continue and the to Asia-Pacific automotive, region. focusbrands on to key leverage LiveEngage’s targetintegrated sophisticated suite markets: intelligence of engine mobileonline to and transactions connect between online independent with business serviceseeking consumers messaging providers information and (“Experts”) through technologies. knowledge and The an for individual a Consumer consumers fee segment (“Users”) via mobile facilitates and online messaging. provider of online andTo accomplish mobile this, messaging we are solutions focused that on the transform following how current people initiatives: communicate with brands. customer live on messagingConversational in June Commerce 2016. Since andoperational that time, driving transformation we adoption. have that beenenvironment, We where focused occurs on the have building consumer when awareness educateddays, controls from for the a a businesses synchronous pace call contact of or onand chat the end. center center, the where conversation, conversations which shifts occur financial can in real-time last to and and minutes, have hours an a distinct or start asynchronouscustomer messaging summits each yearkey that target theme executives fromMessenger, within enterprise IVR customers deflection Conversational and or prospects, Commerce,why and AI. they feature such LivePerson a chose customers as LivePerson areROI they for the have Apple Conversational centerpoint realized. Commerce, Each of BusinessWe attendee how these then have they Chat, receives summits, found achieved a presenting this blueprint Google success,conversion for strategy rate and how Rich to on they what opportunities can drive type Business end that achieve strong of similar 2018, were results outcomes. created we for or hadenterprise advanced brought LivePerson, as more as customers part than we to of 200automation have customers more the attached. seen live customer We than on a summits. will messaging 40%. By greaterdriving continue and adoption year than to In of increased focus 40% adoption messaging addition, on and within AI more building our across awareness our than for customer Conversational 50% base. Commerce of and cases. messaging conversations had endpoints and deep acrosscustomers consumer are offered use access cases. toa LivePerson our pre-negotiated offers entire suite cost a of per platformLivePerson by messaging usage interaction. reducing technologies pricing barriers across We to their model, believe adoption entire where that of agent new over pool messaging for time endpoints and this use model cases. messaging will apps drive that higher consumersWhatsApp revenue user, prefer and for to a brand use only for offers SMS communication. as For a example, messaging if option, that a consumer may consumer be is reluctant to an try avid
5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] We believe 57 contact center agents. By putting the power of conversational design and bot management We believe that over the past few years many first generation AI and bots have created and Bring to market best-in-class AI and machine learning technologies designed for Conversational Unlike alternative solutions designed solely for IT departments, Maven was built to be used by Each channel added opens the door to hundreds of millions of new consumers, providing brands a In order to go deep across customer use cases, we are focused on extending LiveEngage beyond just We believe that this strategy has influenced LivePerson’s enterprise and mid-market revenue retention Globalize R&D to attract the industry’s best AI, machine learning and conversational talent. in the hands ofthe contact customer, those center who agents, Maven arecraft gives successful most outcomes brands versed for the in customer service ability the and to voice sales leverage of journeys. the the employees brand, closest and to with the most expertise in how to that AI andorder machine to learning develop the are industry’sTo critical leading spearhead technology, to we that successfully need globalization toAlexa scaling effort, open Operating Conversational offices System in Commerce, where at 2018, and the Amazon.com,an best LivePerson that as Advanced talent our recruited in is Technology Global located. Alexdevelopment CTO. Center center, Spinelli, Under and in Mr. added key Spinelli’s key Seattle, architect leadership, developmentView, talent we Washington, of California through opened in the and the acquisitions 2018, of ConversableConversational Commerce in BotCentral expanded developers in Austin, in Mountain our 2018, Texas. Mannheim,Microsoft recruiting We and top Germany added Target. talent We from more expect firmsoffices to than such in continue 2019. as 70 adding Nike, industry Amazon.com, machine leading learning, development talent AI across our and global Commerce. frustrating experiences for consumersMany and of businesses alike, these whichimplementations solutions in turn have that proven has difficult erodedCommerce lacked trust to platforms in build the such automation. andpending as measurement, scale, AI LiveEngage. and engine In reporting havemarket that been December conversational and AI limited is 2018, that by designed LivePerson can humanand stand conversion scale to announced rates. alone to oversight overcome Maven, millions a these of of patent shortcomings interactions, while and Conversational increasing help customerdevelopers satisfaction brands rapidly bring to messaging the brand. Therefore,ecosystems a of key strategy messagingintroduced of Facebook endpoints. Messenger, SMS, our In Web messaging hasApple June and Business been IVR Chat, 2016, to deflection Google Rich integrations. we buildLingo In Business and 2018, one Messenger, launched Twitter. Line, we of WhatsApp, added with Alexa, Google the Home, In-App Google industry’s Ad messaging. broadest In 2017,greater we opportunity toLivePerson makes the shift management of shareintelligent routing, all queuing away these and disparate fromof prioritization channels software seamless their which orchestrates to these messaging the legacy conversationscustomers brand. endpoint at through The just contact scale, they one LiveEngage regardless console. originated center from, channels so that into humantaking messaging. and share of bot the agents 270and billion can calls brick made engage and to with customer mortarthat service all conversations. 1-800 autonomously For numbers each example, sells year, in intoservice millions sales, that 2018, marketing lets of a patrons in home dollarstelecommunications a company improvement of sports used retailer arena LiveEngage grills; order to launched drive beverages a a to pre-sales for their bot an leading seats iPhone through global series Apple launch. Business concessions Chat;rate, manager and (the a trailing-twelve-month launched change in a attrition) total which revenue was from greater existing than customers 110%per after in user upsells, 2018. downsells (ARPU) The and for benefit ourapproximately can $285,000 enterprise also from be and approximately seen $225,000 mid-market in customers, inonly LivePerson’s which average 2017. revenue increased the For this more subset same than customerWhen 25% that examining set, in customers have when 2018 that examining adopted to have adoptedlow messaging, at seven least figures. the three We believe endpoints, ARPU these themessaging ARPU in APRU in trends 2018 are 2018 adoption a increased increased clear intocommunication indication the has to channels. of We approximately will how successfully LivePerson’s $500,000. continue strategy to toadoption drive focus of influenced on each adding of our new these messaging channels endpoints within revenue and our driving customer growth higher base. by taking share from legacy ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Black Some of the key innovations behind Maven include: • bot building software that is based on dialogue instead of workflow or code, so non-technical employees like contact center agents can design automations • the ability to bootstrap conversations with existing transcripts, reducing design effort and speeding time to market • the establishing of contact center agents as bot managers, ensuring that every conversation is safeguarded by a human and that agents are continuously training the AI to be smarter and drive more successful outcomes • powerful Assist technology that multiplies the efficiency of agents by analyzing intents in real time and then suggesting next best actions, predefined content, and bots that can take over transactional work • pre-built templates for target verticals that provide out of the box support for the top intents and back-end integrations • third-party AI NLU integration, so customers aren’t boxed into one vendor • AI analytics and reporting tailored to Conversational Commerce Our strategy is to continue to enhance the Maven AI engine and related products, leveraging our global R&D footprint and substantial library of mobile and online conversational data, with the aim of increasing agent efficiency, decreasing customer care costs, improving the customer experience and increasing customer lifetime value. Sustain our leadership position by aligning brands to a vision that transforms how they communicate with consumers and delivers a superior return on investment. We believe that most online retailers view messaging and Conversational Commerce as a feature. They are content with building integrations to a messaging endpoint and offering messaging as just another product in their suite. LivePerson holds the perspective that Conversational Commerce requires an operational transformation that changes how brands engage with consumers across service, sales, marketing and brick and mortar. Brands must adapt their contact centers to an asynchronous messaging environment and leverage a combination of human agents, bots and AI to achieve scale and efficiencies. When done right, the entire consumer lifecycle with a brand will be maintained within the Conversational Commerce relationship, and traffic will steadily shift away from lower returning voice calls, websites and apps to higher returning messaging endpoints. 5 We believe that LivePerson is uniquely positioned to deliver this transformation due to its technology and expertise: • The LiveEngage enterprise-class, automation-first, cloud-based platform, was designed for AI-assisted and human-powered messaging in mobile and online channels. The platform offers best-in-class security and scalability, offers the broadest ecosystem of messaging endpoints, is designed for ease of use, and features an AI engine custom built for Conversational Commerce, robust real-time reporting, role-based real-time analytics, predictive intelligence, and innovations in customer satisfaction and connection measurement. Additionally, LiveEngage is an open platform with pre-built, enterprise-grade integrations into back-end systems as well as the ability to work across natural language understanding (NLU) providers. • LivePerson has deep domain expertise across verticals and messaging endpoints, a global footprint, referenceable enterprise brands and a team of technical, solutions and consulting professionals to assist customers along their transformational journeys. We are positioned as an authority in Conversational Commerce, publishing a proprietary Conversational Quotient™ Index that measures each customer across multiple key indicators to ascertain their level of conversational maturity. Each business is then benchmarked against industry peers to determine their relative progression. We have developed a Transformation Model that is introduced to existing and prospective customers to help guide them on their journeys from legacy and oftentimes inefficient legacy voice, email and chat solutions to modern conversational ones powered by messaging and AI.
58 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
159263 TOPPAN live person AR_Text_Insert Signature 5 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] We are focused on As described above, we are In addition to developing our own We are focused on expanding our We plan to continue to develop its market 59 Maintain Market Leadership in Technology and Security Expertise. In addition, we have opened up access to our platform and our products with more than three dozen Expand sales partnerships to broaden our presence and accelerate sales cycles. Continue to build our international international presence. Leverage our open architecture to support partners and developers. We believe that LivePerson’s differentiated approach to the Conversational Commerce industry, Strengthen our position in both existing and new industries. broadening its market reach and acceleratingproviders, sales business cycles by process partnering outsourcers, withrelationship with systems value IBM integrators, added technology Global Business resellers Servicespartners in and focused 2017 on other and SMBs Accenture sales byyear. in more 2018. These partners. We than efforts We increased 300% the are formalized in numbervalue increasingly a of 2018, signed yielding to in positive over 2018 results 150channels was in at for directly 2019. year us, influenced end as from by nearly 40 partners. one-third at We of the expect start to annual of increase contract the investmentdevoting in significant our partner resources toinnovation. creating We new products evaluatetechnology and emerging in enabling order technologies technologiestechnological designed to developments and to in retain accelerate industry the ourand area procedures leadership standards of meet position or information andbelieve exceed in security the continually and each that demands confidentiality update of market torequirements these in the we ensure our our world’s serve. our rapidly efforts largest evolving policies and We industry. will most monitor demanding legal allow corporations. We and us to effectively anticipate changing customer and consumer applications, we continue to cultivateservices a to partner our customers. eco-system We integrate capableFacebook into of nearly Messenger, offering a Apple dozen additional third-party applications BusinessGoogle messaging and Home, endpoints Chat, including Google Google SMS, Adoffering Rich is Lingo AI Business and vendor Messenger, agnostic, Twitter,and empowering Line, multiple our customers WhatsApp, IVR technologies to Alexa, vendors manage fromproprietary a and and mix third-party one dozens of AI/bots different of enable control bots,customers. brands human branded to agents panel, partially apps. or Our fully thereby automate communications optimizing with their contact centerAPIs efficiency. that allow LivePerson’s customers and thirdutilize parties these to APIs develop to on build toptheir our of services. capabilities In our into 2019, platform. their Customers we ownthey and expect applications can partners and to build can to programs increase and enhance our services our marketing on applications efforts top with to of developers, our raising platform. awareness for how position by increasing ourfocus customer primarily base, on andhospitality, technology expanding key and within target automotive oursmall within markets: business installed both (SMB) base. consumer/retail, our sector. We Healthcare, enterpriseand insurance, telecommunications, will real and natural extensions financial estate continue mid-market of and to sectors, services, our energyto as primary utilities emphasize travel/ target well are our markets. new We as domain are target expertise the increasingly industries and structuring strengthen our customer field relationships. organization international revenue contribution, which increased34% to in 41% 2016. of We total generatedin revenue positive in the results 2018, United from from Kingdom previous 37% andAsia investments in Pacific Western in 2017 Europe. region, direct We and leveraging also sales our continued and relationships to with services partners. focus personnel on expanding our presence in the combined with our unique technologydeliver and superior expertise has returns established on usconversations as at investment. a a LivePerson market time, leader, customers as withchat compared typically an to agent. ability manage one Adding to as at AI a many andcustomers time as often bots for see provides a 40 labor even voice messaging efficiency greater agentcosts gains scale and by of to two at to at the four least least numberconversations at two 50%. of often a times Furthermore, drives time conversations that increases managed. our for of a in Our abilitysales voice good customer conversions to agents, of satisfaction effectively deliver cutting of up more labor to up 20%, convenient, to while personalized 20 enhancing and average percentage order points content-rich value, customer and retention increases and in loyalty. ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Black Evaluate Strategic Alliances and Acquisitions When Appropriate. We have successfully integrated several acquisitions over the past decade. While we have in the past, and may from time to time in the future, engage in discussions regarding acquisitions or strategic transactions or to acquire other companies that can accelerate our growth or broaden our product offerings, we currently have no binding commitments with respect to any future acquisitions or strategic transactions.
Key Metrics Financial overview of the three and twelve months ended December 31, 2018 compared to the comparable periods in 2017 are as follows: • Revenue increased 15% and 14% to $65.7 million and $249.8 million in the three and twelve months ended December 31, 2018, respectively, from $57.4 million and $218.9 million in the comparable periods in 2017. • Revenue from our Business segment increased 15% and 14% to $60.7 million and $230.3 million in the three and twelve months ended December 31, 2018, respectively, from $52.9 million and $201.4 million in the comparable periods in 2017. • Gross profit margin remained consistent at 74% in the three months ended December 31, 2018 and 2017. Gross profit margin increased to 75% in the twelve months ended December 31, 2018 from 73% in the comparable period in 2017. • Cost and expenses increased 15% and 16% to $73.0 million and $273.5 million in the three and twelve months ended December 31, 2018, respectively, from $63.3 million and $236.7 million in the comparable periods in 2017. • Net loss increased to $6.5 million and $25.0 million in the three and twelve months ended December 31, 2018, respectively, from net loss of $3.7 million and $18.2 million for the three and twelve months ended December 31, 2017, respectively. • Trailing-twelve-month average revenue per enterprise and mid-market customer was greater than $285,000 in 2018, as compared to approximately $220,000 in 2017. • Revenue retention rate for enterprise and mid-market customers on LiveEngage was greater than 110% for the twelve months ended December 31, 2018 and 2017.
Revenue 5 The majority of our revenue is generated from monthly service revenues and related professional services from the sale of the LivePerson services. We charge a monthly fee, which varies by service and customer usage. The majority of our larger customers also pay a professional services fee related to implementation and ongoing optimization services. A large proportion of our revenue from new customers comes from large corporations. These companies typically have more significant implementation requirements and more stringent data security standards. Such customers also have more sophisticated data analysis and performance reporting requirements, and are likely to engage our professional services organization to provide such analysis and reporting on a recurring basis. We determine revenue recognition through the following steps: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, the Company satisfies a performance obligation. Total revenue of $249.8 million recognized during the year ended December 31, 2018 under ASU No. 2014-09, “Revenue from Contracts with Customers” (“Topic 606”), was not materially different from what would have been recognized under Topic 605.
60 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
159263 TOPPAN live person AR_Text_Insert Signature 5 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT For more information about our revenue recognition policies, please see “— Critical Accounting Policies and Estimates — Revenue Recognition.”
Hosted Services — Business Revenue Revenue attributable to our monthly hosted Business services accounted for 79% of total revenue for the year ended December 31, 2018 and 82% of total revenue for the years ended December 31, 2017 and 2016.
Professional Services Revenues Revenue attributable to professional services accounted for 13% of total revenue for the year ended December 31, 2018 and 10% of total revenue for the years ended December 31, 2017 and 2016.
Contracts with Multiple Performance Obligations Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the cloud applications sold, and the number and types of users within our contracts.
Hosted Services — Consumer Revenue Revenue from our Consumer segment accounted for approximately 8% of total revenue for the years ended December 31, 2018 and 2017 and 7% of total revenue for the year ended December 31, 2016, respectively.
Deferred Revenues We record deferred revenues when cash payments are received or due in advance of our performance. The increase of $19.7 million in the deferred revenue balance for the year ended December 31, 2018 is primarily driven by cash payments received or due in advance of satisfying our performance obligations, partially offset by $32.7 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2017.
5 We also have entered into contractual arrangements that complement our direct sales force and online sales efforts. These are primarily with call center service companies, pursuant to which LivePerson is paid a commission based on revenue generated by these service companies from our referrals. To date, revenue from such commissions has not been material.
Costs and Expenses Our cost of revenue consists of: • compensation costs relating to employees who provide customer support and implementation services to our customers; • outside labor provider costs; • compensation costs relating to our network support staff; • depreciation of certain hardware and software; • allocated occupancy costs and related overhead; • the cost of supporting our infrastructure, including expenses related to server leases, infrastructure support costs and Internet connectivity; • the credit card fees and related payment processing costs associated with the consumer and SMB services; and
61 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
159263 TOPPAN live person AR_Text_Insert Signature 5 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 2018 2017 2016 $14,841 $8,944 $9,736 62 ...... We are organized into two operating segments for purposes of making operating decisions and • amortization ofOur certain sales intangibles. and marketing expenses consist of compensation and related expenses for sales personnel and Our general and administrative expenses consist primarily of compensation and related expenses for Our product development expenses consist primarily of compensation and related expenses for product During 2018, we increased our allowance for doubtful accounts from $1.3 million to approximately The net non-cash compensation amounts for the years ended December 31, 2018, 2017 and 2016 Results of Operations assessing performance. Theintelligence engine Business to connect segmentmessaging with technologies. enables The consumers Consumer through brandsseeking segment an information facilitates and to integrated online knowledge suite for transactions leverage a of between fee via LiveEngage’s Experts mobile mobile and and sophisticated and Users online online messaging. business Stock-based compensation expense marketing personnel, online marketing,commissions, allocated public occupancy relations, costs promotional andshow materials, related exhibit travel expenses. overhead, expenses, advertising, global sales customer summits and trade executive, accounting, legal, information technologycosts and and human related overhead, resourcescorporate litigation, personnel, expenses. professional allocated fees, occupancy provision for doubtful accounts and other general development personnel, allocated occupancy coststesting and new related versions overhead, of outsourced labor our and software. Product expenses development for expenses are charged to operations as incurred. $2.3 million. During 2017, weto decreased our approximately allowance $1.3 for doubtfulreceivable. million. accounts In by estimating We approximately the $0.4 perform allowance million the for a aging doubtful of detailed accounts, management the assessment accounts considers,proportion among receivable, of of historical other write-offs receivables and are factors, the due the from creditworthiness collectability larger of corporate of each customers customer. that our A typically large have longer accounts Non-Cash payment Compensation cycles. Expense consist of (amounts in thousands): ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Black 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. Year Ended December 31, 2018 2017 2016 (as a percentage of revenue) Consolidated Statements of Operations Data:(1) Revenue...... 100% 100% 100% Costs and expenses: Cost of revenue ...... 25% 27% 28% Sales and marketing ...... 41% 42% 40% General and administrative ...... 18% 20% 19% Product development ...... 22% 18% 18% Restructuring costs ...... 2% 1% 1% Amortization of purchased intangibles ...... 1% 1% 2% Total costs and expenses ...... 109% 108% 109% Loss from operations ...... (9)% (8)% (9)% Other (expense) income, net ...... —% —% —% Loss before provision for income taxes ...... (10)% (8)% (9)% Provision for income taxes ...... —% —% 3% Net loss ...... (10)% (8)% (12)%
(1) Certain items may not total due to rounding.
Revenue Year Ended December 31, Year Ended December 31, 2018 2017 % Change 2017 2016 % Change (in thousands) (in thousands)
5 Revenue by Segment: Business ...... $230,285 $201,426 14% $201,426 $206,521 (2)% Consumer ...... 19,553 17,450 12% 17,450 16,258 7% Total...... $249,838 $218,876 14% $218,876 $222,779 (2)%
Our business revenue growth has traditionally been driven by a mix of revenue from new customers as well as expansion from existing customers. Business revenue increased by 14% to $230.3 million for the year ended December 31, 2018, from $201.4 million for the year ended December 31, 2017. This increase is primarily attributable to revenue from existing customers of approximately $11.8 million, net of cancellations, revenue from professional services provided to clients in the amount of $10.3 million, revenue from new customers of approximately $5.9 million, and revenue that is variable based on interactions and usage of approximately $0.8 million. Business revenue decreased by 2% to $201.4 million for the year ended December 31, 2017, from $206.5 million for the year ended December 31, 2016. The decrease is primarily attributable to revenue from existing customers of approximately $14.9 million, net of cancellations, and revenue that is variable based on interactions and usage in the amount of $1.0 million. This is partially offset by increases in revenue from new customers of approximately $10.1 million and revenue from professional services of approximately $0.7 million. The overall increase in business revenue in 2018 is primarily attributable to the Company’s renewed selling focus after completing the migration to LiveEngage in 2017. LivePerson has also developed a large
63 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
159263 TOPPAN live person AR_Text_Insert Signature 5 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] (13)% (11)% 18 16 13% 64 ($ in thousands) ($ in thousands) ($ in thousands) ($ in thousands) 2018 2017 % Change 2017 2016 % Change 2018 2017 % Change 2017 2016 % Change $4,059 $3,605 13% $3,605 $2,809 28% $58,420 $54,600 7% $54,600 $60,352 (10)% Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, ...... 2% 2% 2% 1% ...... 23% 25% 25% 27% ...... 16 18 ...... 228 205 11% 205 236 Cost of revenue increased by 7% to $58.4 million for the year ended December 31, 2018, from Cost of revenue decreased by 10% to $54.6 million for the year ended December 31, 2017,Gross profit from margin increased by 2% to 75% and 73% for the year ended December 31, 2018 andCost 2017, of Revenue — Consumer Cost of revenue consists of compensation costs relating to employees who provide customer service to Consumer revenue increased by 12% to $19.6 million for the year ended December 31, 2018, from Cost of Revenue — Business Cost of revenue consists of compensation costs relating to employees who provide customer service to $54.6 million for the yearincrease ended in December 31, business 2017. servicesand This and related increase employee in outsourced expenses expense subcontracted of is$0.4 labor approximately primarily $2.6 million. of attributable million, to This and approximately an in $2.8 wasprimary depreciation partially million, expense and offset of in backup by approximately salary server aand facilities decrease network and infrastructure in of allocated amortization approximately overhead $0.3 of cost million. related approximately $1.7 to costs million of and in supporting$60.4 our million server for the yeardecrease ended in December salary 31, and 2016. relatedbackup employee This server expenses decrease facilities of in and expense approximatelyinfrastructure allocated $3.1 is of overhead million, primarily approximately cost $1.5 a attributable million, related to decrease and to a in a costs primary decrease of in and depreciation supporting of our approximately $1.3 server million. andrespectively. The network increase in grossbrands off margin of was our tied legacy to platform and our realigning ability our to go-to-market strategy operationalize around cost LiveEngage. savings by moving Experts and Users, compensationserver costs and relating to network ourallocated occupancy infrastructure, network costs and support credit related staff, overhead. card the cost and of transaction supporting processing our fees and related costs, and Percentage of total revenue Headcount (at period end) Cost of revenue – Consumer Percentage of total revenue Headcount (at period end) Cost of revenue – Business ecosystem of conversational messaging endpointsthese that integrates endpoints to our along platformcarry-over with and effect is bots driving from adoption and the of offering in 2016 AI. the migration The second to quarter businessa of the material revenue impact 2017. LiveEngage on Acquisitions decrease revenue. platform during in the and year 2017, the ended end December primarily 31, of reflects 2018 did life the not$17.5 of have million for the the legacy yearchat ended minutes December and 31, price 2017. per ThisDecember increase minute. 31, Consumer is 2017, primarily revenue attributable increased from toattributable by to $16.3 an an 7% increase million increase to in in for $17.5 price the million per year minute. for the ended year December ended 31, 2016. This increase is primarily our customers, compensation costs relatingand to network our infrastructure, and network allocated support occupancy staff, costs the and related cost overhead. of supporting our server ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Black
5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] (6)% ] 32 Page 65 ($ in thousands) ($ in thousands) ($ in thousands) ($ in thousands) 2018 2017 % Change 2017 2016 % Change 2018 2017 % Change 2017 2016 % Change $9,005 $8,485 6% $8,485 $7,466 14% $94,339 $82,420 14% $82,420 $82,063 —% Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, ...... 4% 4% 4% 3% ...... 38% 38% 38% 37% ...... 13 12 8% 12 11 9% ...... 352 291 21% 291 310 Sales and marketing expenses increased by 6% to $9.0 million for the year ended December 31, 2018, Sales and marketing expenses increased by 14% to $94.3 million for the year ended December 31, 2018 Sales and marketing expenses remained relatively flat for the year ended December 31, 2017 as We have realigned our go-to-market strategy around LiveEngage. Our outreach efforts are primarily Sales and Marketing — Consumer Our sales and marketing expenses consist of compensation and related expenses for marketing Cost of revenue increased by 13% to $4.1 million for the year ended DecemberCost 31, of 2018, revenue from increased by 28% to $3.6 million for theSales year and Marketing ended — Business December 31,Our 2017, sales from and marketing expenses consist of compensation and related expenses for sales and Percentage of total revenue from $8.5 millionincrease for in the advertising and year onlineand ended expenses related costs of December for additional approximately $0.3 and 31, existing million 2017. sales and and an This marketing personnel increase of increase in approximately compensation is $0.2 million. primarily attributable to an Sales and Marketing – Consumer Headcount (at period end) Headcount (at period end) Sales and Marketing – Business Percentage of total revenue from $82.4 million for therecruitment, year ended and December 31, relatedoutsourced 2017. labor This of employee is approximately $3.8 expenses primarily million,show related in to of marketing an exhibit events, increase advertising, approximately public in$0.4 expenses relations, million. salary, $5.5 and trade of million, in approximately $2.2 business services million,compared and and the year in endedadvertising, public December facilities relations, 31, and trade 2016. andbusiness show This exhibit services allocated primarily expenses and of related overheadexpense to outsourced approximately $3.1 by an of labor million, increase approximately an ofexpenses increase in $0.3 of in approximately marketing approximately million. $4.7 $1.7 events, million. This million, was and offset an by increasefocused a in on decrease depreciation fostering a inworld’s community largest of salary brands through thought and conference calls and and related industry global customer leadership employee events. by targeting several hundred of the personnel, as well as onlinerelated overhead. promotion and trade show exhibit expenses and allocated occupancy costs and $3.6 million for the yearexpense of ended approximately December $0.2 31, million,outsourced credit 2017. card This labor, processing and is fees primarily related ofoffset related employee approximately by $0.2 to expenses a million, an decrease and of increase in salary, expenses in approximately for $0.1 depreciation backup million. server facilities This of increase approximately $0.1 is$2.8 million. partially million for therelated year employee ended expenses December ofexpenses 31, approximately for 2016. $1.1 backup server This million. facilities This is of increase primarily approximately $0.5 is related million. to partially offset an by increase a in decrease salary in and marketing personnel, asoccupancy well costs as and related advertising, overhead. public relations, trade show exhibit expenses and allocated 159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Black Sales and marketing expenses increased by 14% to $8.5 million for the year ended December 31, 2017, from $7.5 million for the year ended December 31, 2016. This increase is primarily attributable to an increase in advertising and online expenses of approximately $0.9 million and an increase in compensation and related costs for additional and existing sales and marketing personnel of approximately $0.1 million. General and Administrative Our general and administrative expenses consist primarily of compensation and related expenses for executive, accounting, legal, information technology, human resources and administrative personnel, professional fees and other general corporate expenses. Year Ended December 31, Year Ended December 31, 2018 2017 % Change 2017 2016 % Change ($ in thousands) ($ in thousands) General and administrative ...... $45,873 $43,124 6% $43,124 $43,046 —% Percentage of total revenue ...... 18% 20% 20% 19% Headcount (at period end) ...... 128 113 13% 113 112 1%
General and administrative expenses increased by 6% to $45.9 million for the year ended December 31, 2018 from $43.1 million for the year ended December 31, 2017. This is primarily related to an increase in salaries and employee related expenses of approximately $4.5 million and in business services and outsourced labor of approximately $0.8 million. This was partially offset by a decrease in allocated occupancy costs, related overhead, information technology, and other general corporate expenses of approximately $1.2 million, a net decrease in other costs of approximately $1.1 million, and a decrease of amortization and depreciation expense of approximately $0.2 million. Other costs consisted of a decrease in litigation of approximately $2.0 million and one-time executive compensation paid in 2017 of approximately $1.0 million. This was partially offset by consulting fees relating to cost efficiency analysis of $1.2 million and acquisition costs of approximately $0.6 million. General and administrative expenses remained relatively flat for the year ended December 31, 2017 as compared to the year ended December 31, 2016. This is primarily related to an increase in salaries and employee related expenses of approximately $0.3 million and a net increase in other costs of approximately $0.2 million. Other costs consisted of an increase in litigation of approximately $1.3 million, executive one-time compensation of approximately $1.0 million, and executive separation costs of approximately $0.5 million, offset partially by the write off of technology licenses in 2016 of approximately $2.6 million.
5 The overall general and administrative expense variance was offset by a decrease in business services and outsourced labor of approximately $0.2 million and a decrease in allocated occupancy costs, related overhead, information technology and other general corporate expenses of approximately $0.2 million. Product Development Our product development expenses consist primarily of compensation and related expenses for product development personnel as well as allocated occupancy costs and related overhead and outsourced labor and expenses for testing new versions of our software. Year Ended December 31, Year Ended December 31, 2018 2017 % Change 2017 2016 % Change ($ in thousands) ($ in thousands) Product development ...... $55,707 $40,034 39% $40,034 $40,198 —% Percentage of total revenue ...... 22% 18% 18% 18% Headcount (at period end) ...... 369 342 8% 342 300 14%
Product development costs increased by 39% to $55.7 million for the year ended December 31, 2018 from $40.0 million for the year ended December 31, 2017. This is primarily related to an increase in compensation, recruitment, and related costs of approximately $10.2 million, an increase in facility, allocated occupancy costs and overhead related to costs of supporting our server and network infrastructure of approximately $3.4 million, in depreciation expenses of approximately $1.4 million, and in business services and outsourced labor of approximately $0.7 million.
66 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
159263 TOPPAN live person AR_Text_Insert Signature 5 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] ] 32 Page 67 ($ in thousands) ($ in thousands) ($ in thousands) ($ in thousands) 2018 2017 % Change 2017 2016 % Change 2018 2017 % Change 2017 2016 % Change $1,670 $1,840 (9)% $1,840 $3,885 (53)% $4,468 $2,594 72% $2,594 $2,369 9% Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, ...... 2% 1% 1% 1% ...... 1% 1% 1% 2% ......
Restructuring costs increased by 72% to $4.5 million for the year ended December 31, 2018, from Restructuring costs increased by 9% to $2.6 million for the year ended December 31, 2017, from Amortization of Purchased Intangibles Amortization expense for purchased intangibles decreased by 9% to $1.7 million for the year ended Additional amortization expense in the amount of $1.1 million was included in cost of revenue for the Product development costs remained relatively flat for the year ended December 31, 2017 as compared We continue to invest in new product development efforts to expand the capability of LiveEngage. Restructuring Costs intangibles Percentage of total revenue Percentage of total revenue $2.6 million for the yearand ended other December associated 31, costs 2017.approximately This of $1.9 variance approximately is million $3.8 attributable related to million.related an to This primarily increase was shutting to in offset the severance down partiallyour reorganization the by technology of wind legacy operations, the down drive platformnew GPT costs improvements in add-on group of in features 2017. to in quality LiveEngage. In order assurance to 2018, of promote restructuring existing continued products globalization of and creation$2.4 of million for the yearcosts ended December 31, of 2016. Thisapproximately approximately increase $0.4 is $0.8 million attributable to taken an million inlarge increase 2016 customer in related contract wind related that down to to ended. cashcosts This shutting of collected was offset on $1.0 partially down million. previously by a written the decrease off in legacy bad severance and debt other platform of associated a and a benefit of Amortization of purchased December 31, 2018,$1.8 from $1.8 million million for the for2016. year the The ended year year December endedagreements 31, related December over to 2017, 31, year the from 2017relationships past variance related $3.9 and acquisitions to million the of is decreased past for Synchronite acquisition by primarily the of and 53% CAO! Engage attributable year to in in ended to 2016. 2017 December and the 31, of fullyear capitalized ended customer December amortization 31, 2018 of and $2.8 non-compete million for the years ended December 31, and 2017 and 2016. Restructuring Costs the year ended December 31,of 2016. This approximately $1.6 is million primarily and relatedThis to in a was business decrease services offset in and by compensationallocated outsourced occupancy and an labor costs related of costs and increase related approximately in overhead $0.3 of million. depreciation approximately $0.3 expense million. of approximately $1.3During million and July an 2018,continued increase we globalization in of opened our anproducts technology and operations, office creation drive of in improvements in newemploys Seattle, an quality add-on individualized for assurance features and to of research complex LiveEngage.“Internal existing approach We and — to recognize Use managing that development their every Software”, users. in brandplatform, In is as the accordance order unique associated with new development and to ASC and 350-40, projectscosts promote employee will costs are be will depreciated initiated be overand capitalized. that five $8.3 Upon years. million provide completion, During was the the capitalized, functionality project year respectively. to ended December the 31, 2018 LiveEngage and 2017, $11.7 million 159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Black Other (Expense) Income, net Other income, net primarily consists of interest income on cash and cash equivalents, investment income and financial (expense) income which is a result of currency rate fluctuations associated with exchange rate movement of the U.S. dollar against the New Israeli Shekel, Pound Sterling, Japanese Yen, AUS dollar and the Euro. Year Ended December 31, Year Ended December 31, 2018 2017 % Change 2017 2016 % Change ($ in thousands) ($ in thousands) Other (expense) income, net ...... $(471) $136 (446)% $136 $(530) (126)% Other (expense) income increased by $0.3 million to an expense of $0.5 million for the year ended December 31, 2018 from an income of $0.1 million for the year ended December 31, 2017. This was primarily attributable to a decrease in other financial income and finance hedging income. Other (expense) income decreased by $0.7 million to an income of $0.1 million for the year ended December 31, 2017 from an expense of $0.5 million for the year ended December 31, 2016. This was primarily attributable to an increase in realized and unrealized gain due to foreign exchange of approximately $0.5 million and a decrease in finance hedging and other financial income of approximately $0.2 million Provision for Income Taxes Year Ended December 31, Year Ended December 31, 2018 2017 % Change 2017 2016 % Change ($ in thousands) ($ in thousands) Provision for income taxes ...... $858 $501 71% $501 $5,934 (92)% Income tax expense increased by 71% to $0.9 million for the year ended December 31, 2018, from $0.5 million for the year ended December 31, 2017. Our consolidated effective tax rate was impacted by the statutory income tax rates applicable to each of the jurisdictions in which we operate. As a result of the Tax Cuts and Jobs Act the federal corporate income tax rate decreased from a maximum of 35% to a flat rate of 21%. In addition, federal NOLs incurred after December 31, 2017 will have an indefinite carryforward period and will be available to offset 80% of federal taxable income in future years. During the first quarter of 2018 we recognized a benefit of $2.0 million related to a settlement with the Israeli Tax Authority. As a result of the settlement we recognized a benefit as the recorded liability was less than the final settlement. A 5 benefit was also recorded for U.S. federal tax refunds that were recognized due to increased foreign tax credits and increased federal NOLs from foreign tax deductions. The increase in tax expense was primarily due to these factors. Income tax expense decreased by 92% to $0.5 million for the year ended December 31, 2017, from $5.9 million for the year ended December 31, 2016. This decrease was primarily attributable to a benefit of $2.4 million recorded in the fourth quarter of 2017 as a result of the Tax Cuts and Jobs Act, which was passed on December 22, 2017. Prior to the passage of the tax law, we had an indefinite lived intangible that was not available to be netted against existing deferred tax assets for purposes of determining the valuation allowance. Net Loss We had a net loss of $25.0 million for the year ended December 31, 2018 compared to a net loss of $18.2 million for the year ended December 31, 2017. Revenue increased approximately $31.0 million, operating expenses increased by approximately $36.8 million, the provision for income taxes increased approximately $0.4 million, and other (expense) income net increased by $0.6 million, contributing to a net increase in net loss of approximately $6.8 million. We had a net loss of $18.2 million for the year ended December 31, 2017 compared to a net loss of $25.9 million for the year ended December 31, 2016. Revenue decreased approximately $3.9 million, operating expenses decreased by approximately $5.5 million, the provision for (benefit from) income taxes decreased approximately $5.4 million, and other (expense) income, net decreased by approximately $0.7 million, contributing to a net decrease in net loss of approximately $7.7 million.
68 159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
159263 TOPPAN live person AR_Text_Insert Signature 5 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
5
69
ffrinecag aecagso ahadcs qiaet fapoiaey$. million. $0.6 approximately of equivalents cash and cash on changes rate exchange foreign of
prxmtl 2. ilo,terprhs fcmo tc fapoiaey$. ilo,adteeffect the and million, $1.3 approximately of stock common of repurchase the million, $27.8 approximately
tc fapoiaey$53mlin hswsprilyofe ycs sdi netn ciiisof activities investing in used cash by offset partially was This million. $35.3 approximately of stock
ahpoie yoeaigatvte fapoiaey$. ilo n rcesfo suneo common of issuance from proceeds and million $4.8 approximately of activities operating by provided cash
nraeo prxmtl 1. ilo rmDcme 1 07 hsices spiaiyatiual to attributable primarily is increase This 2017. 31, December from million $10.3 approximately of increase
so eebr3,21,w a prxmtl 6. ilo ncs n aheuvlns an equivalents, cash and cash in million $66.4 approximately had we 2018, 31, December of As
396729(7,068) 7,209 33,926 ...... activities financing by provided flows Cash
2,7)(530 (11,452) (15,320) (27,773) ...... activities investing in used flows Cash
,7 020$24,560 $ 10,290 $ 4,779 $ ...... activities operating by provided flows Cash
osldtdSaeet fCs lw Data: Flows Cash of Statements Consolidated
i thousands) (in
0821 2016 2017 2018
eebr31, December
iudt n aia Resources Capital and Liquidity
004265,4,9 739775,6,1 654905,5,5 55,975,093 55,954,158 56,524,990 56,965,111 57,309,707 58,648,195 60,014,246 60,794,252 ...... Diluted
004265,4,9 739775,6,1 654905,5,5 55,975,093 55,954,158 56,524,990 56,965,111 57,309,707 58,648,195 60,014,246 60,794,252 ...... Basic
e share per
sdt opt e loss net compute to used
egtdaeaeshares Weighted-average
01)(.2 01)(.6 00)(.2 01)(0.10) (0.13) (0.02) (0.06) (0.06) (0.14) (0.12) (0.11) ...... Diluted
01)(.2 01)(.6 00)(.2 01)(0.10) (0.13) (0.02) (0.06) (0.06) (0.14) (0.12) (0.11) ...... Basic
omnstock: common
e osprsaeof share per loss Net
645 703 831 323 362 130 753 (5,676) $ (7,533) $ (1,310) $ (3,672) $ (3,203) $ (8,321) $ (7,043) $ (6,465) $ Netloss......
113 ,0 3 49 249 ,5 7 1,072 673 1,256 (2,499) (489) 536 2,004 (1,193) .... forincometaxes
Bnftfo)provision from) (Benefit
768 509 775 362 611 5)(,6)(4,604) (6,860) (54) (6,171) (3,692) (7,785) (5,039) (7,658) taxes......
rvso o income for provision
osbfr bnftfrom) (benefit before Loss
te epne noe..(1)(1)3 2 26 9 9)320 (99) 191 (276) 129 31 (213) (418) . . income (expense) Other
osfo prtos...(,4)(,2)(,1)(,2)(,9)(4)(,6)(4,924) (6,761) (245) (5,895) (3,821) (7,816) (4,826) (7,240) . . . operations from Loss
9096,7 2026,8 6786,3 55,843 60,835 56,738 63,285 62,062 69,476 69,039 72,964 ..... expenses
oa ot and costs Total
nagbe... 9 2 2 2 2 7 7 472 470 470 428 424 424 424 398 intangibles......
purchased
mriainof Amortization
etutrn ot ,6 2 ,0 7 7 ,7 — 2,076 — 279 178 1,906 722 1,662 . . . costs Restructuring
rdc eeomn 4721,8 4291,5 1039769369,958 9,326 9,726 11,023 13,252 14,219 13,484 14,752 . . development Product
1921,9 0131,9 0381,3 9,692 10,437 10,398 12,596 10,123 11,499 11,972 12,279 .... administrative
eea and General
ae n aktn 7032,4 5322,3 4202,0 33221,700 23,392 21,603 24,210 24,131 25,392 26,748 27,073 . . marketing and Sales
otfeeu...16,800 Costofrevenue..... 5691,3 3941,4 4511,3 13,781 15,134 14,541 14,749 13,954 16,036 15,689 ot n Expenses: and Costs
159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
eeu...... $6,2 $ 65,724 $ Revenue...... 423$6,6 821$5,9 643$5,7 50,919 $ 54,074 $ 56,493 $ 57,390 $ 58,241 $ 61,660 $ 64,213
prtosData: Operations
osldtdSaeet of Statements Consolidated
i huad,ecp hr n e hr data) share per and share except thousands, (in
2017 2017 2017 2017 2018 2018 2018 2018
ac 31, March 30, June 30, Sept. 31, Dec. 31, March 30, June 30, Sept. 31, Dec.
ihtecnoiae iaca ttmns nldn h eae oe,icue herein. included notes, related the including statements, financial consolidated the with
fteuadtdifrainfrteprospeetd hsifrainsol era nconjunction in read be should information This presented. periods the for information unaudited the of
nldsalajsmns ossigol fnra eurn dutet,ncsayfrafi presentation fair a for necessary adjustments, recurring normal of only consisting adjustments, all includes
nomto a enpeae nabsscnitn ihteana osldtdfnnilsaeet and statements financial consolidated annual the with consistent basis a on prepared been has information
ih otrcn ureseddDcme 1 08 nteCmaysoiin hsunaudited this opinion, Company’s the In 2018. 31, December ended quarters recent most eight
h olwn al esfrh o h eid niae,teCmaysfnnilifrainfrthe for information financial Company’s the indicated, periods the for forth, sets table following The urel eut fOeain Data Operations of Results Quarterly
159263 TOPPAN live person AR_Text_Insert Signature 5 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] ] 32 Page omtet o h eredn eebr3,21 ilntece prxmtl 1. ilo nthe in million $10.0 approximately exceed not will principal our 2019 that 31, expect currently December We ending 2019. aggregate. in year due the is for million $8.5 commitments approximately which of leases, million, operating $10.9 approximately was 2016, and for 2017 expense 2018, respectively. Rental insurance. 31, million, $10.0 and December and maintenance ended million as years $9.9 such the costs for executory all leases pay operating to us require generally leases Commitments and Obligations Contractual arrangements. financing sheet off-balance in engage not do we below complementary acquire or in Arrangements invest Sheet Balance to Off or rapid products, more fund or to services order products. and in enhanced or sales funds or services additional technologies, planned new businesses, require our may financial develop business, we of to our debt addition, scope affect expansion, In or the adversely results. materially any reduce operating equity obtain could further that and to additional which unable condition to you efforts, are sell development required assure we product be to cannot If and all. may We seek marketing at we financing. if then not financing, needed, of will when would additional terms, we sources favorable necessary we on alternative that available you be and seek will assure the time, or funding cannot additional financings, such by we However, public to partially months. through 12 prior securities offset next funds the options additional the least stock at require from for proceeds requirements of capital the exercise and of the primarily with consisted connection This 2017. in stock. common 31, stock our December of common repurchase ended year of the issuance in fixed in million on decrease of $7.2 a purchase details by the offset investing further partially to in was primarily for This used due intangibles. cash 2017 Statements of of Net 31, collateral. purchases Financial collateral. purchases December as and as held ended Consolidated and facilities cash held year co-location acquisitions cash to our the in for facilities, in Notes decrease assets million co-location a $15.3 the our by was offset for activities of partially assets was 7 This fixed acquisitions. Note of See purchase intangibles. the to in and cash stock-based primarily increases payable to by accounts to in offset moving decreases partially related customers and was our assets expenses This current of expenses. other non-cash liability. more accrued and tax expenses and by deferred to prepaid billings due and impacted annual receivable revenue on accounts accounts. was deferred advance doubtful in for loss in loss provision increases payments net and net were Our depreciation, 2017. there intangibles, that 31, in Furthermore, purchased December increases ended but of year by amortization the million, stock-based Net offset compensation, liability. in tax partially million to deferred $18.2 $10.3 was in was related decrease This was on activities and advance receivable expenses. operating expenses in accounts by payments accrued and provided cash non-cash assets cash and to current payable moving other of customers and accounts our expenses effect in prepaid of more and the to as billings due accounts revenue includes annual doubtful deferred for in provision which increases and as depreciation, million, well intangibles, purchased $25.0 of amortization was compensation, loss net so eebr3,21,orpicplcmimnswr prxmtl 2. ilo ne various under million $23.7 approximately were commitments principal our 2018, 31, December of As These leases. operating as for accounted agreements under equipment certain and facilities lease We described are which leases, operating than other and entities, purposes special any have not do We capital working our satisfy to sufficient be will equivalents cash and cash current our that anticipate We and 2018 31, December ended year the in million $33.9 was activities financing by provided cash Net due 2018 31, December ended year the in million $27.8 was activities investing in used cash Net Our 2018. 31, December ended year the in million $4.8 was activities operating by provided cash Net 70 159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Black
555
71
hs services. those
oorcsoes na mutta elcstecnieainw xett eette oi xhnefor exchange in to entitled be to expect we consideration the reflects that amount an in customers, our to
evcsfo h aeo u evcs eeusaercgie hncnrlo hs evcsi transferred is services these of control when recognized are Revenues services. our of sale the from services
h aoiyo u eeu sgnrtdfo otl evc eeusadrltdprofessional related and revenues service monthly from generated is revenue our of majority The
eeu Recognition Revenue
nulRpr nFr 10-K. Form on Report Annual
conigplce,seNt fteNtst osldtdFnnilSaeet ne tm8o this of 8 Item under Statements Financial Consolidated to Notes the of 1 Note see policies, accounting
rcniin,adaydfeecscudb aeil o ute nomto nalo u significant our of all on information further For material. be could differences any and conditions, or
siae na non ai.Ata eut ol ifrfo hs siae ne ifrn assumptions different under estimates those from differ could results Actual basis. ongoing an on estimates
otnece aetegets oeta mato u osldtdfnnilsaeet.W vlaethese evaluate We statements. financial consolidated our on impact potential greatest the have contingencies
opnain consrcial,tevlaino odiladitnil ses noetxsadlegal and taxes income assets, intangible and goodwill of valuation the receivable, accounts compensation,
ebleeta h supin n siae soitdwt eeu eonto,stock-based recognition, revenue with associated estimates and assumptions the that believe We
periods.
osldtdfnnilsaeet n h eotdaonso eeu n xessdrn h reporting the during expenses and revenue of amounts reported the and statements financial consolidated
mut fast n iblte n h icoueo otnetast n iblte ttedtso the of dates the at liabilities and assets contingent of disclosure the and liabilities and assets of amounts
a o eraiyaprn rmohrsucs hs siae n supin fettereported the affect assumptions and estimates These sources. other from apparent readily be not may
eiv ob esnbeudrtecrusacs h eut fwihfr h ai o u uget that judgments our for basis the form which of results the circumstances, the under reasonable be to believe
hs siae norhsoia xeine uueepcain n aiu te supin htwe that assumptions other various and expectations future experience, historical our on estimates these
n supin htmngmn eivsaeraoal ae pnteifrainaalbe ebase We available. information the upon based reasonable are believes management that assumptions and
cetdi h ntdSae fAeia ssc,w r eurdt aecranetmts judgments estimates, certain make to required are we such, As America. of States United the in accepted
u osldtdfnnilsaeet r rprdi ofriywt conigpicpe generally principles accounting with conformity in prepared are statements financial consolidated Our
rtclAcutn oiisadEstimates and Policies Accounting Critical
urnl,w aen iblte eoddfrteeareet so eebr3,2018. 31, December of as agreements these for recorded liabilities no have we Currently,
oiycvrg,w eiv h siae arvleo hs nenfcto gemnsi minimal. is agreements indemnification these of value fair estimated the believe we coverage, policy
xoueadealsu orcvraprino n uueaonspi.A euto u insurance our of result a As paid. amounts future any of portion a recover to us enables and exposure
gemnsi niie;hwvr ehv ietr n fiesisrneplc htrdcsour reduces that policy insurance officers and directors a have we however, unlimited; is agreements
aiu oeta muto uuepyet ecudb eurdt aeudrteeindemnification these under make to required be could we payments future of amount potential maximum
vnso curne hl h fie rdrco s rwssrig torrqeti uhcpct.The capacity. such in request our at serving, was or is, director or officer the while occurrences or events
eas aeareet hrb u xctv fiesaddrcosaeidmiidfrcertain for indemnified are directors and officers executive our whereby agreements have also We
osssfee ricre yte sarsl fuigorproducts. our using of result a as them by incurred or suffered losses
hs gemns earet nenf eti utmr rmadaantcrantpso lisand claims of types certain against and from customers certain indemnify to agree we agreements, these
eetrit evc n ies gemnsi h riaycus fbsns.Prun osm of some to Pursuant business. of course ordinary the in agreements license and service into enter We
Indemnifications
ilb ufcett udteecptlexpenditures. capital these fund to sufficient be will
159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5 operations from cash and equivalents cash and cash current our that anticipate We 2019. in million $27.0
xaso forc-oainfclte.Orttlcptlepniue r o urnl xetdt exceed to expected currently not are expenditures capital total Our facilities. co-location our of expansion
oa aia xedtrsi 08wr prxmtl 2. ilo,piaiyrltdt h continued the to related primarily million, $21.9 approximately were 2018 in expenditures capital Total
aia Expenditures Capital
oa ...... Total 2,9 848$166$,3 $61 $3,532 $11,616 $8,488 $23,697
prtn leases Operating ...... 2,9 848$166$,3 $61 $3,532 $11,616 $8,488 $23,697
otata biain Total Obligations Contractual er1–3Yas3–5Years 5 – 3 Years 3 – 1 Year 1 Years 5
esThan Less oeThan More
amnsDeb Period by Due Payments u otata biain tDcme 1 08aesmaie sflos(mut nthousands): in (amounts follows as summarized are 2018 31, December at obligations contractual Our
159263 TOPPAN live person AR_Text_Insert Signature 5 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] odtosadohrfcos nldn h au forcnrcs h lu plctossl,adthe and sold, applications market cloud consideration the into contracts, taking our contracts. objectives, of our within pricing value users overall the of types including our and factors, determine number on is We other basis. price based price and transaction selling prices The conditions standalone relative selling distinct. a are standalone on they obligations the performance if separate separately the obligations to performance allocated individual for no account we is There advance. in annually or Obligations Performance Multiple quarterly with monthly, Contracts billed, length, are arrangements. contracts these in to service related measure longer fixed Professional consideration the variable a obligation. or as significant on performance inputs year billed the performance using services performed one of For distinct proportion satisfaction term. generally the of contract complete platform, a on the transfer toward LiveEngage based over progress the represent the time the basis to over of straight-line to access of recognized over for a is depiction fee revenue on deemed ratably basis, faithful the recognized price as not be recognized most manner will the are same such is the be as which in and and to recognized services, deemed be customer will our is deployment the revenue the obligation, time of certain reflects majority stand-ready to of For the that passage distinct time for control. the amount Control a over services. as represent the such period, passes to for contracted at exchange contracts deemed in reported Services is receive are to Professional which expect Revenues basis we Services consideration on-demand ultimate Professional an on obligation. delivered performance training as well the control we if transaction Revenues Services a customer.Professional placed the in order to principal transferred each accordance a are for in they as fee before arrangements fixed act services (“PFP”) a or we provider Performance goods of Considerations”, labor for specified form the Agent Pay the with “Principal these in incur For ASC-606, customers we solutions. our with fee engagement to the through online more pass services or our for we hosted one via Additionally, customers, the with for these arrangement arrangements. fee an of through these its most labor and For to center vendors. in call annually related qualified provide several may or consideration we quarterly of customers, monthly, variable of larger billed, control our significant length, of of no in certain transfer longer performance. the is our or of by to There year provided depiction available advance. one benefit faithful made the generally most is consumes are the platform and contracts receives be LiveEngage simultaneously Subscription to the customer deemed to the is as access basis time services ratable that the a of stand-ready date on passage the this time The on over customer. of revenue beginning our the this satisfaction term, LiveEngage, recognize and We service contract time. to control over stand-ready the access occur such, over a to customers As deemed represents provide is term. access obligation that contract performance such fees the determined throughout of continually have consist provided We primarily platform. and cloud-based received enterprise-class, be to expected Revenue Business — Services 605. Hosted Topic under recognized been have would what from different materially not was oeo u otat ihcsoescnanmlil efrac biain.Frteecontracts, these For obligations. performance multiple contain customers with contracts our of Some as services, optimization and deployment for fees of consists primarily revenue services Professional consideration ultimate the reflects that amount the at reported is revenue Business Services Hosted 606, Topic under 2018, 31, December ended obligation. year performance the a during satisfy recognized we million as, $249.8 or and when, of contract; revenue revenue Total the of in Recognition obligations performance the to price transaction • the of Allocation price; transaction the • of Determination contract; the in obligations performance the • of Identification customer; a with contracts, or contract, the • of Identification • steps: following the through recognition revenue determine We ] 32 Page 72 159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Black
5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] epromd novn oprsnbtenteetmtdfi auso u eotn ntwt our with unit an reporting is initial there our value, fair this of estimated values exceeds If value fair will carrying available. analysis the estimated second If if the a goodwill. exists, including between companies, impairment amount comparison that carrying similar respective not a than involving similar of likely involving performed, more acquisitions metrics is be valuation it future and (iv) to that projected and indicates publicly-traded and necessary assessment conditions; qualitative current market are is past, includes, and it that (ii) trends assessment capitalization, whether recent qualitative companies market (iii) initial determine our below equity; This (i) units to and of: reporting test. earnings made consideration our impairment things, first of goodwill other is value quantitative among fair assessment two-step the qualitative the reduce A perform not amounts. than likely carrying more their would that indicate change circumstances circumstances in changes is value. or instead fair events but its whenever exceed amortized, may and not goodwill annually is of value Goodwill impairment carrying acquired. for the that assets tested intangible be identified to the required and assets tangible net for allowance our are receivables increased of we proportion Goodwill 2018, large cycles. payment During A longer have million. 2017. typically that $2.3 or approximately customers in corporate for to receivable larger accounted from million financial 2016. customer accounts due $1.3 or single consolidated total from 2017 No our 2018, 2018. accounts our on in in doubtful receivable revenue impact of total accounts adverse total our write-off 10% material our of significant exceeded or a 10% a 10% exceeded have experience exceeded or could we customer for One it accounted if customers, customer risk, our single large credit Although No our statements. of historical affected. concentration our adversely of than our be If one higher limits future. could from are receivables customers the write-offs these in of actual an for change number or historical recoverability established may worthiness large customers, have they of credit customer’s although of estimates and reasonable, a our risk be download) experience, of credit to deterioration Internet believe the a we is surrounding via that there factors information card upon other credit and based trends by accounts services doubtful for LivePerson allowance the purchase who be to expected is cost Receivable average Accounts That weighted years. units. a 2.8 total approximately stock over of of restricted period million recognized average nonvested $37.9 weighted approximately be a was to over to there recognized related 2018, expected 31, cost is December compensation of cost unrecognized As That years. 2.7 options. approximately stock of period nonvested to instruments related equity cost costs recognized. of compensation be Incremental award must exceptions). date an grant limited for the (with requires after award exchange awards 718-10 the of in modifications ASC of received subsequent value transactions. from services fair arising payment employee grant-date share-based the of transactions in on on cost based services focus the primary employee a of obtains with services, measurement entity or goods an for which instruments equity in its exchanges entity an which or Expert the then the and selecting when fee, time Compensation in the Stock-Based in involved point of remain. the not portion obligations at performance are a recognized significant is retain we no transactions and and these and consumer complete from Revenue is collection, the Expert. transaction from for the fee to loss balance perform a the we collect of Additionally, remit We obligor. risk fee. primary Agent Expert’s any “Principal the the 606, is without establishing ASC Expert agent with the accordance an that in fact fees as Expert the to of net primarily amount due Considerations,” an at recognized is revenue Users, Revenue Consumer — Services Hosted epromtsigfripimn fgowl nortidqatr ra vnsocror occur events as or quarter, third our in goodwill of impairment for testing perform We the of value fair the exceeds combination business a in paid consideration the when goodwill record We customers for (except condition financial customers’ our of evaluations credit ongoing perform We compensation unrecognized total of million $14.4 approximately was there 2018, 31, December of As in transactions for accounting the addresses which Compensation,” “Stock 718-10, ASC follow We and Experts between transactions online from generated segment Consumer our from revenue For 73 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side D Black
555
74
conigstandards. accounting
e oe1o h oe oCnoiae iaca ttmnsfrafl ecito frcnl issued recently of description full a for Statements Financial Consolidated to Notes the of 1 Note See
eetyIse conigStandards Accounting Issued Recently
litigation.
tm8o hsAna eoto om1- o diinlifraino u ea rceig and proceedings legal our on information additional for 10-K Form on Report Annual this of 8 Item
prtos e oe1,LglMtes fteNtst h osldtdFnnilSaeet under Statements Financial Consolidated the to Notes the of Matters, Legal 13, Note See operations.
rltgto,admyrvs u siae.Ayrvsoscudhv aeilefc norrslsof results our on effect material a have could revisions Any estimates. our revise may and litigation, or
diinlifrainbcmsaalbe erass h oeta iblt eae otelglproceeding legal the to related liability potential the reassess we available, becomes information additional
iblt n h muto crasrcre r ae nyo h nomto vial ttetm.As time. the at available information the on only based are recorded accruals of amount the and liability
ucm faypoedn sntdtrial navne sarsl,teassmn fapotential a of assessment the result, a As advance. in determinable not is proceeding any of outcome
eemn h rbblt fals n hte h muto h osi esnbyetmbe The estimable. reasonably is loss the of amount the whether and loss a of probability the determine
esnbyetmtd eacu iblt o h siae os infcn ugeti eurdto required is judgment Significant loss. estimated the for liability a accrue we estimated, reasonably
oeta osfo n ea rceigo iiaini osdrdpoal n h mutcnbe can amount the and probable considered is litigation or proceeding legal any from loss potential
eidcly eeaut h ttso ahlglmte n sesorptnilfnnilepsr.I the If exposure. financial potential our assess and matter legal each of status the evaluate we Periodically,
eaesbett ea rceig n iiainaiigi h riaycus fbusiness. of course ordinary the in arising litigation and proceedings legal to subject are We
ea Contingencies Legal
hr a euto ntevlainalwneo 69million. $6.9 of allowance valuation the in reduction a was there
osi eetyasa infcn ic fngtv vdne uigteya ne eebr3,2018, 31, December ended year the During evidence. negative of piece significant a as years recent in loss
ngnrladamnsrtv xess ercre auto loac sw osdrdorcumulative our considered we as allowance valuation a recorded We expenses. administrative and general in
nepyeto noetxsi neetepneadpnlis fay eae ourcgie a benefits tax unrecognized to related any, if penalties, and expense interest in taxes income of underpayment
aal noe a-lnigsrtge,adrslso eetoeain.W nld neetacudo the on accrued interest include We operations. recent of results and strategies, tax-planning income, taxable
oiieadngtv vdne nldn ceue eesl fdfre a iblte,poetdfuture projected liabilities, tax deferred of reversals scheduled including evidence, negative and positive
blt orcvrordfre a sesi h uidcinfo hc hyaie ecnie l available all consider we arise, they which from jurisdiction the in assets tax deferred our recover to ability
h eid nwihtoetmoaydfeecsaeepce obcm eutbe neautn our evaluating In deductible. become to expected are differences temporary those which in periods the
liaeraiaino eerdtxast sdpnetuo h eeaino uuetxbeicm during income taxable future of generation the upon dependent is assets tax deferred of realization ultimate
hte ti oelkl hnntta oeprino l ftedfre a seswl eraie.The realized. be will assets tax deferred the of all or portion some that not than likely more is it whether
ob eoee rstld nassigteraiaiiyo eerdtxast,mngmn considers management assets, tax deferred of realizability the assessing In settled. or recovered be to
a ae xetdt pl otxbeicm nteyasi hc hs eprr ifrne r expected are differences temporary those which in years the in income taxable to apply to expected rates tax
prtn osadtxcei arfrad.Dfre a sesadlaiiisaemaue sn enacted using measured are liabilities and assets tax Deferred carryforwards. credit tax and loss operating
iaca ttmn arigaonso xsigast n iblte n hi epcietxbssand bases tax respective their and liabilities and assets existing of amounts carrying statement financial
sesadlaiiisaercgie o h uuetxcneune trbtbet ifrne ewe the between differences to attributable consequences tax future the for recognized are liabilities and assets
noetxsaeacutdfrudrteastadlaiiymto.Udrti ehd eerdtax deferred method, this Under method. liability and asset the under for accounted are taxes Income
noeTaxes Income
26mlin a nlddi etutrn ot n eea n diitaieepne,respectively. expenses, administrative and general and costs restructuring in included was million, $2.6
iesst eipie.Tewieofo e okvleo hs ses fapoiaey$. ilo and million $0.2 approximately of assets, these of value book net of write-off The impaired. be to licenses
eemndcranln-ie sesrltdt h eaypafr n ucae nagbe ftechnology of intangibles purchased and platform legacy the to related assets long-lived certain determined
arigvleadtefi au fteipie se.Drn h ereddDcme 1 06 we 2016, 31, December ended year the During asset. impaired the of value fair the and value carrying
nastmyntb eoeal.Teaon fayipimn smaue stedfeec ewe the between difference the as measured is impairment any of amount The recoverable. be not may asset an
r eiwdfripimn hnvreet rcagsi icmtne niaeta h arigvleof value carrying the that indicate circumstances in changes or events whenever impairment for reviewed are
159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5 amortization to subject intangibles purchased and equipment and plant property, as such assets, long-lived
nacrac ihAC301,“conigfrteIpimn rDsoa fLn-ie Assets,” Long-Lived of Disposal or Impairment the for “Accounting 360-10, ASC with accordance In
mareto ogLvdAssets Long-Lived of Impairment
marettest. impairment
eotn nt a esta u arigaon.Acrigy eddntpromtetose goodwill two-step the perform not did we Accordingly, amount. carrying our than less was units reporting
ure f21 n 07w eemndta twsntmr ieyta o httefi au fthe of value fair the that not than likely more not was it that determined we 2017 and 2018 of quarter
eeaut o odilipimn nulya h n ftetidqatr tteedo h third the of end the At quarter. third the of end the at annually impairment goodwill for evaluate We
nipimn hrei eoddfrteexcess. the for recorded is charge impairment an
niiulast eslaiiis ftecryn au fgowl xed h mle arvleo goodwill, of value fair implied the exceeds goodwill of value carrying the If liabilities. less assets individual
xeso h siae arvleo h eotn ntoe h grgt siae arvle fthe of values fair estimated aggregate the over unit reporting the of value fair estimated the of excess
maret h hr nlssivle acltn nipidfi au fgowl ymauigthe measuring by goodwill of value fair implied an calculating involves analysis third The impairment. niaino oeta maret n hr nlssi efre omaueteaon of amount the measure to performed is analysis third a and impairment, potential of indication
159263 TOPPAN live person AR_Text_Insert Signature 5 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 5 159263 TOPPAN live person AR_Text_Insert Sig 5 ] eal oflyofe uhhge ot hog rc nrae.Oriaiiyo alr od ocudharm could so do to not failure may or we inability operations. pressures, Our of inflationary increases. results price significant and through to condition costs financial subject higher business, become such our to offset fully were to costs able our be If operations. of results us. by Risk recorded Rate as Inflation investments the of value the respect material any in affect not do Risk Rate Interest reserved by previously accounts when accounts we accounts that doubtful information doubtful for other doubtful allowance collected. and for our been for trends allowance have adjust historical We from our reasonable. customers, allowance due base be of We to are risks cycles. believe receivables our credit payment to identified of longer specifically decreased million proportion have on large typically $1.3 accounts we that A from customers million. accounts corporate 2017, $1.3 doubtful approximately larger for to effects During allowance adverse million our the $0.4 million. approximately against increased protect we to $2.3 2018, practices approximately business During and risks. policies collection established have of and risks these assess Yen. Japanese the is Risk Japan Collection the Australia in operations in in our our operations operations our of our of currency of functional currency of currency the currency functional functional and functional the Dollar; the Australian Euro; the the dollar; the Sterling; is U.S. is Pound Italy to LivePerson the the and in subsidiaries, France is is Germany, Israeli enter Kingdom Netherlands, Ltd., wholly-owned United future Kasamba the our the and in in of operations Ltd.) exposure may currency HumanClick we of functional (formerly instruments, risk The our financial investments. Ltd. that derivative to of determine limited of types we not cost these but If potential including risk. instruments, the such financial exceeds mitigate materially of could use income which the instruments, before considered financial income have derivative and our Yen decrease Japanese and or dollar increase would NIS 2018, the 31, December of of value as the dollar million. in a $0.7 approximately against decrease by operations fluctuation taxes to Israeli or rate relating exchange our increase exposure NIS by risk 1% to currency generated exposure a foreign our expenses to our on compared 2018, hedged Based as we 31, NIS. 1% 2018, the ended December of During average year ended an million. the year by $65.4 For approximately NIS the (“NIS”). totaled the For Shekel to Israeli 2017. compared New as 31, appreciated the December dollar against U.S dollar the U.S. 2018, the 31, December of movement rate exchange the Fluctuations Rate Risk Currency Market About Disclosures Qualitative and Quantitative 7A. Item pronouncements. accounting adopted Pronouncements Accounting Adopted Recently ed o eiv htifainhshdamtra feto u uies iaca odtosor conditions financial business, our on effect material a had has inflation that believe not do We rates interest market’s the in changes Therefore, equivalents. cash and cash of consist investments Our regularly We risks. collection to business, of course normal the in subject, are receivable accounts Our AUS Euro, Sterling, Pound NIS, the against dollar U.S. the of movement the monitor actively We with associated risk fluctuation rate currency is there operations, Israeli our of scope the of result a As recently of description full a for Statements Financial Consolidated to Notes the of 1 Note See 75 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 5 Side B Black
5
76
oe oCnoiae iaca Statements Financial Consolidated to Notes ...... 83 ......
...... 82 ...... 2016 and
osldtdSaeet fCs lw o aho h er ne eebr3,21,2017 2018, 31, December ended years the of each for Flows Cash of Statements Consolidated
...... 81 ...... 2016 and 2017
159263 TOPPAN live person AR_Text_Insert Sig 5 ] 159263 TOPPAN live person AR_Text_Insert Sig 5
osldtdSaeet fSokodr’Eut o aho h er ne eebr3,2018, 31, December ended years the of each for Equity Stockholders’ of Statements Consolidated
...... 80 ...... 2016 and 2017
osldtdSaeet fCmrhnieLs o aho h er ne eebr3,2018, 31, December ended years the of each for Loss Comprehensive of Statements Consolidated
06...... 79 2016......
osldtdSaeet fOeain o aho h er ne eebr3,21,21 and 2017 2018, 31, December ended years the of each for Operations of Statements Consolidated
osldtdBlneSet so eebr3,21 n 07.. . 2017 and 2018 31, December of as Sheets Balance Consolidated ...... 78 ......
eoto D S,LP needn eitrdPbi conigFr ...... Firm Accounting Public Registered Independent LLP, USA, BDO of Report ...77 ......
Page
INDEX tm8 osldtdFnnilSaeet n upeetr Data Supplementary and Statements Financial Consolidated 8. Item
159263 TOPPAN live person AR_Text_Insert Signature 5 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders LivePerson, Inc. New York, New York
Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of LivePerson, Inc. and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 25, 2019 expressed an unqualified opinion thereon.
Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis
4 for our opinion.
/s/ BDO USA, LLP
We have served as the Company’s auditor since 2005.
New York, New York February 25, 2019
77 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
159263 TOPPAN live person AR_Text_Insert Signature 4 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 1,451 December 31, 1,707 1,600 8,174 $ 5,481 4,205 2,766 1,096 915 (4,431) (2,535) 46,023 37,926 22,613 7,352 43,73513,832 34,705 95,031 12,366 80,531 66,449 $ 56,115 50,66255,015 48,011 35,563 2018 2017 135,085 102,844 290,103 $ 232,799 113,851 89,055 119,374 92,736 362,590 305,676 170,729290,103 140,063 $ 232,799 (187,491) (163,135) 78 ...... $ ...... (IN THOUSANDS) LIVEPERSON, INC...... CONSOLIDATED BALANCE SHEETS ...... See notes to consolidated financial statements...... $ ...... — ...... 713 753 ...... $ ...... 64 60 ...... 222 — ...... (3) (3) ...... $ ...... $1,318, in 2018 and 2017, respectively . . Total current assets Total assets Total current liabilities Total liabilities Total stockholders’ equity Total liabilities and stockholders’ equity Cash held as collateral Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $2,276 and Prepaid expenses and other current assets Accounts payable Deferred revenue Accrued expenses and other current liabilities Common stock Additional paid-in capital Accumulated deficit Treasury stock Accumulated other comprehensive loss ASSETS CURRENT ASSETS: Intangibles, net Goodwill Deferred tax assets, net Other assets Property and equipment, net LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Deferred revenue Other liabilities Deferred tax liability Commitments and contingencies (See Note 9) STOCKHOLDERS’ EQUITY: ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Black LIVEPERSON, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Year Ended December 31, 2018 2017 2016 Revenue ...... $ 249,838 $ 218,876 $ 222,779 Costs and expenses:(1)(2)(3) Cost of revenue ...... 62,479 58,205 63,161 Sales and marketing ...... 103,344 90,905 89,529 General and administrative ...... 45,873 43,124 43,046 Product development ...... 55,707 40,034 40,198 Restructuring costs ...... 4,468 2,594 2,369 Amortization of purchased intangibles ...... 1,670 1,840 3,885 Total costs and expenses ...... 273,541 236,702 242,188 Loss from operations ...... (23,703) (17,826) (19,409) Other (expense) income, net ...... (471) 136 (530) Loss before provision for income taxes ...... (24,174) (17,690) (19,939) Provision for income taxes ...... 858 501 5,934 Net loss ...... $ (25,032) $ (18,191) $ (25,873)
Net loss per share of common stock: Basic ...... $ (0.42) $ (0.32) $ (0.46) Diluted ...... $ (0.42) $ (0.32) $ (0.46)
Weighted-average shares used to compute net loss income per share: Basic ...... 59,203,400 56,358,017 56,063,777 Diluted ...... 59,203,400 56,358,017 56,063,777
(1) Amounts include stock compensation expense, as follows: Cost of revenue ...... $ 996 $ 448 $ 429 Sales and marketing ...... 5,374 2,500 2,515
4 General and administrative ...... 4,921 3,691 3,304 Product development ...... 3,550 2,305 3,488
(2) Amounts include depreciation expense, as follows: Cost of revenue ...... $7,831 $7,150 $8,234 Sales and marketing ...... 1,520 1,625 1,315 General and administrative ...... 1,083 1,226 1,418 Product development ...... 3,754 2,357 1,044
(3) Amounts include amortization of purchased intangibles, as follows: Cost of revenue ...... $1,143 $2,842 $2,788
See notes to consolidated financial statements. 79 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
159263 TOPPAN live person AR_Text_Insert Signature 4 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] Year Ended December 31, 2018 2017 2016 (1,896) 3,625 (3,624) $(25,032) $(18,191) $(25,873) $(26,928) $(14,566) $(29,497) 80 (IN THOUSANDS) LIVEPERSON, INC...... See notes to consolidated financial statements...... CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS ...... Net loss Foreign currency translation adjustment Comprehensive loss ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Black
4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 3,625 3,625 Loss Total (3,624) (3,624) Other ] 32 Page Accumulated Comprehensive (25,032) — (25,032) (18,191) — (18,191) (25,873) — (25,873) Deficit Accumulated 8,944 — — 8,944 9,736 — — 9,736 14,841 — — 14,841 Paid-in Capital Additional (93,750) — (1,345) — — (1,345) (247,430) (1) (1,741) — — (1,742) (1,518,349) (1) (9,966) — — (9,967) 81 (1,896) (1,896) 379,328 — — — 8,150 — — 8,150 361,539 1 — — — — — 1 170,208 — — — 1,459150,989 — — — — 1,459 — 2,480 — — 2,480 183,534 — — —363,429 1,092 1 — — — — 1,092 — — — 1 393,504 1 — — — — — 1 Common Stock Treasury Stock Shares Amount Shares Amount 63,676,229 $ 64 (2,681,285) $ (3) $362,590 $(187,491) $(4,431) $170,729 59,663,969 60 (2,587,535) (3) 305,676 (163,135) (2,535) 140,063 58,276,447 58 (2,340,105) (2) 289,524 (144,944) (6,160) 138,476 57,374,907 $ 57 (821,756) $ (1) 286,856 $(119,071) $(2,536) $165,305 LIVEPERSON, INC...... — — — — — 676 — 676 See notes to consolidated financial statements. (IN THOUSANDS, EXCEPT SHARE DATA) ...... — — — — — — CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ...... — — — — — — ...... — —...... — — ...... —...... — — — — — ...... — — ...... — — ...... — — — — ...... — — — — — ...... — — — — — ...... — — — — — ...... Plan Plan acquisitions (see note 7) stock units Plan stock units stock units Net loss Other comprehensive income Stock-based compensation Common stock issued under Employee Stock Purchase Common stock issued under Employee Stock Purchase ASC 606 prior period adjustment (see noteIssuance 1) of common stock in connection with Common stock repurchase Common stock repurchase Net loss Other comprehensive income Common stock issued upon exercise of stockCommon options stock issued . upon vesting . of . restricted 3,120,404 3 32,788 — — 32,791 Common stock repurchase Stock-based compensation Common stock issued under Employee Stock Purchase Net loss Other comprehensive loss Common stock issued upon exercise of stockCommon options stock issued . upon vesting . of . restricted 853,885 1 — — 7,490 — — 7,491 Stock-based compensation Common stock issued upon exercise of stockCommon options stock issued . upon vesting . of . restricted 324,502 — — — 1,806 — — 1,806 Balance at December 31, 2018 Balance at December 31, 2017 Balance at December 31, 2016 Balance at December 31, 2015 159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Black LIVEPERSON, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS, EXCEPT SHARE DATA) Year Ended December 31, 2018 2017 2016 OPERATING ACTIVITIES: Net loss ...... $(25,032) $(18,191) $(25,873) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation expense ...... 14,841 8,944 9,736 Depreciation ...... 14,188 12,358 12,011 Impairment on investments ...... — — 2,600 Amortization of tenant allowance ...... (326) (166) (180) Amortization of purchased intangibles ...... 2,813 4,682 6,673 Provision for doubtful accounts, net ...... 1,788 1,895 1,831 Deferred income taxes ...... (309) (2,397) 1,852 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable ...... (9,662) (7,998) (3,265) Prepaid expenses and other current assets ...... (14,628) (1,867) 3,845 Other assets ...... (107) (38) 196 Accounts payable ...... 2,199 (2,743) 185 Accrued expenses and other current liabilities ...... (205) 7,838 2,982 Deferred revenue ...... 19,005 8,418 13,283 Other liabilities ...... 214 (445) (1,316) Net cash provided by operating activities ...... 4,779 10,290 24,560 INVESTING ACTIVITIES: Purchases of property and equipment, including capitalized software ..... (21,938) (17,390) (12,344) Payments for acquisitions and intangible assets, net of cash acquired ..... (7,286) (441) (555) Cash held as collateral ...... 1,451 2,511 1,447 Net cash used in investing activities ...... (27,773) (15,320) (11,452) FINANCING ACTIVITIES: Repurchase of common stock ...... (1,345) (1,742) (9,967) Proceeds from issuance of common stock in connection with the exercise of options ...... 35,271 8,951 2,899 Net cash provided by (used in) financing activities ...... 33,926 7,209 (7,068) EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ...... (598) 3,047 (3,954) CHANGE IN CASH AND CASH EQUIVALENTS ...... 10,334 5,226 2,086 CASH AND CASH EQUIVALENTS – Beginning of the year ...... 56,115 50,889 48,803 CASH AND CASH EQUIVALENTS – End of the year ...... $66,449 $ 56,115 $ 50,889 SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW INFORMATION: Cash paid for income taxes ...... $ 5,144 $ 1,551 $ 424
4 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Purchase of property and equipment recorded in accounts payable ...... $ 190 $ 936 $ 2,497 Leasehold improvements funded by landlord ...... $ 1,551 $ — $ 1,440 Issuance of 85,861 shares of common stock in connection with the BotCentral transaction on January 24, 2018 ...... $ 1,000 $ — $ — Issuance of 115,385 shares of common stock in connection with the Conversable transaction on September 27, 2018 ...... $ 2,850 $ — $ — Issuance of 178,082 shares of common stock in connection with the AdvantageTec transaction on October 11, 2018 ...... $ 4,300 $ — $ — Fair value of contingent earn-out in connection with the acquisition of Conversable recorded in accrued expenses ...... $ 1,496 $ — $ — Fair value of contingent earn-out in connection with the acquisition of AdvantageTec recorded in accrued expenses ...... $ 876 $ — $ —
See notes to consolidated financial statements. 82 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
159263 TOPPAN live person AR_Text_Insert Signature 4 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] ] 32 Page 83 LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LivePerson, Inc. (the “Company” or “LivePerson”) was incorporated in the State of Delaware in LivePerson makes life easier by transforming how people communicate with brands. During the past LiveEngage, the Company’s enterprise-class, cloud-based platform, was designed for Conversational The robust, cloud-based suite of rich mobile messaging and real-time chat offerings features intelligent LiveEngage also features Maven, a robust AI engine that was custom designed for Conversational Complementing LiveEngage are teams of technical, solutions and consulting professionals that have 1. Description of Business and Summary of SignificantNovember Accounting 1995 Policies and the LivePersoncompleted service an was initial introduced public in offering NovemberTel and 1998. Aviv is In Stock currently April Exchange. traded 2000, LivePerson(Georgia), on the Austin is the company (Texas), San headquartered NASDAQ Global Francisco in Select (California)Amsterdam Market and New and Seattle York (Washington), the City (Netherlands), and with internationalMelbourne offices U.S. Berlin (Australia), in offices Milan in (Germany), (Italy), Alpharetta Aviv (Israel), Paris and London Tokyo (France), (Japan). Ra’anana (United (Israel), Reading Kingdom), (United Kingdom), Mannheimdecade, Tel the (Germany), consumermobile has messaging made the the centerenables of mobile communication consumers device with the to friends,including family center connect and Facebook of peers. Messenger, with The their WhatsApp,Alexa. Company’s businesses Apple technology digital These Business messaging through lives, conversations Chat, and harness theseconvenient, human Google they personalized same agents, and Rich have bots content-rich preferred and Business made journeysresearch, Artificial across Messenger conversational Intelligence the to (AI) interfaces, and entire to consumer sales, power lifecycle,example, from service discovery consumers and and canproducts support, look in and up the evenpayments product — marketing all store, info without and like schedule everconversational experiences leaving brick ratings, over the appointments, messaging images messaging and Conversational Commerce. apply channel. and mortar LivePerson for calls pricing, engagements. these credit, AI search For and approve for human-assisted Commerce, enabling repairs, stores, businesses to see make securely deploywith purchases messaging, tens coupled or with of botsconversations and across millions AI, each at of of scale a forweb customers brand’s brands primary browsers, and digital short channels, message including manyBrands mobile service thousands can apps, (SMS), mobile also of and social use desktop mediathem customer LiveEngage navigate and interactive to care voice third-party message response agents. consumer systems consumers (IVRs) LiveEngage messaging when and platforms. powers wait they on dial hold. arouting 1-800 and number capacity instead mapping, of queuecontent prioritization, having delivery, customer sentiment, Payment real-timetargeting Card analytics engine. and With Industry reporting, LiveEngage, (PCI) agentsconsole can interface, compliance, manage regardless cobrowsing all ofWhatsApp, conversations and Line, with which a Apple consumers disparate Business through sophisticatedinterface messaging a Chat, (API) proactive endpoints single stack IVR, the facilitates orsystems, consumers a as Google lower originate well Home. cost from: as An ofMore i.e., enabling than extensible ownership developers three by application dozen to facilitating APIs programming build are robust their available on integration LiveEngage. own into programs back-end and servicesCommerce. on Maven, top announced ofmanagement in the into platform. December the 2018,structure hands of sales puts and the theCompany service contact calls power “the center tango” conversations of of and toAI-powered humans, bot AI conversations its drive and and agents, seamlessly development, bots, successful whereby stepping the human trainingMaven into outcomes. agents Assist, teams the act and The flow agents as most when bot become platform a familiar managers,next-best ultra-efficient, overseeing personal enables with actions leveraging touch the what is and how needed. AI take the to building. Through engine over By repetitive to transactional serve seamlessly work, upprovides integrating so relevant businesses content, that LiveEngage with define the with asingle agent console. comprehensive Maven, can view as focus of on well relationship all as AI-based third-party and bots,developed human-based deep the conversations domain platform from expertise in a Conversational Commerce across industries and messaging endpoints. 159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Black LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies – (continued)
The Company is positioned as an authority in Conversational Commerce, publishing a proprietary Conversational Quotient™ Index that measures each customer across multiple key indicators to ascertain their level of conversational maturity. Each business is then benchmarked against industry peers to determine their relative progression. The Company has developed a Transformation Model that is introduced to existing and prospective customers to help guide them on their journeys from legacy and oftentimes inefficient legacy voice, email and chat solutions to modern conversational ones powered by messaging and AI. LivePerson’s products, coupled with our domain knowledge, industry expertise and professional services, have been proven to maximize the effectiveness of Conversational Commerce and deliver measurable return on investment. As a “cloud computing” or software-as-a-service (SaaS) provider, LivePerson provides solutions on a hosted basis. This model offers significant benefits over premise-based software, including lower up-front costs, faster implementation, lower total cost of ownership, scalability, cost predictability, and simplified upgrades. Organizations that adopt a fully-hosted, multi-tenant architecture that is maintained by LivePerson eliminate the majority of the time, server infrastructure costs, and IT resources required to implement, maintain, and support traditional on-premise software. Our consumer services offering is an online marketplace that connects independent service providers (Experts) who provide information and knowledge for a fee via mobile and online messaging with individual consumers (Users). Users seek assistance and advice in various categories including personal counseling and coaching, computers and programming, education and tutoring, spirituality and religion, and other topics.
Principles of Consolidation The consolidated financial statements reflect the operations of LivePerson and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Reclassification For comparability, certain 2016 and 2017 amounts have been reclassified where appropriate, to conform to the financial presentation in 2018.
Use of Estimates The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the 4 disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the period. Significant items subject to such estimates and assumptions include revenue recognition, stock-based compensation, accounts receivable, the valuation of goodwill and intangible assets, income taxes and legal contingencies. Actual results could differ from those estimates.
Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable which approximate fair value at December 31, 2018 because of the short-term nature of these instruments. The Company invests its cash and cash equivalents with financial institutions that it believes are of high quality, and the Company performs periodic evaluations of these instruments and the relative credit standings of the institutions with which it invests. At certain times, the Company’s cash balances with any one financial institution may exceed Federal Deposit Insurance Corporation insurance limits. The Company believes it mitigates its risk by depositing its cash balances with high credit, quality financial institutions.
84 159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
159263 TOPPAN live person AR_Text_Insert Signature 4 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
4
85
ieyasfreupetadsfwr.Laeodipoeet r ercae sn h straight-line the using depreciated are improvements Leasehold software. and equipment for years five
sn h tagtln ehdoe h siae sfllvso h eae ses eeal he to three generally assets, related the of lives useful estimated the over method straight-line the using
rpryadeupetaesae tcs,nto cuuae ercain ercaini calculated is Depreciation depreciation. accumulated of net cost, at stated are equipment and Property
rpryadEquipment and Property
138$,1 86 $2,276 (856) $ $1,814 $1,318 ...... 2018
172$,9 (,0)$1,318 $(2,309) $1,895 $1,732 ...... 2017
114$,3 (,8)$1,732 $(1,283) $1,831 $1,184 ...... 2016
erEddDcme 31, December Ended Year Balance Balance Write-Offs Expenses
Beginning Ending Deductions/ and Costs
hre to Charged
Additions
obflacut sa olw aonsi thousands): in (amounts follows as is accounts doubtful
aeayofblnesetcei xouerltdt t utmr.Teatvt ntealwnefor allowance the in activity The customers. its to related exposure credit sheet off-balance any have
olcinhv enehutdadteptnilfrrcvr scniee eoe h opn osnot does Company The remote. considered is recovery for potential the and exhausted been have collection
eiwdo oldbss con aacsaecagdofaanttealwneatralmasof means all after allowance the against off charged are balances Account basis. pooled a on reviewed
0dy n vraseiidaon r eiwdidvdal o olcaiiy l te aacsare balances other All collectability. for individually reviewed are amount specified a over and days 90
xeine h opn eiw t loac o obflacut otl.Ps u aacsover balances due Past monthly. accounts doubtful for allowance its reviews Company The experience.
xsigacut eevbe h opn eemnstealwnebsdo itrclwrite-off historical on based allowance the determines Company The receivable. accounts existing
obflacut steCmaysbs siaeo h muto rbbecei ossi h Company’s the in losses credit probable of amount the of estimate best Company’s the is accounts doubtful
consrcial r eodda h nocdaon n ontba neet h loac for allowance The interest. bear not do and amount invoiced the at recorded are receivable Accounts
consReceivable Accounts
eodda ot hc prxmtsfi value. fair approximates which cost, at recorded
hnaqie ob aheuvlns aheuvlns hc rmrl oss fmnymre ud,are funds, market money of consist primarily which equivalents, Cash equivalents. cash be to acquired when
h opn osdr l ihylqi euiiswt rgnlmtrte ftremnh rless or months three of maturities original with securities liquid highly all considers Company The
ahadCs Equivalents Cash and Cash
osldtdsaeet foperations. of statements consolidated
oeg xhnetascingi rlse r nlddi te noe e nteaccompanying the in net Income, Other in included are losses or gain transaction exchange Foreign
nldda opnn facmltdohrcmrhnieicm ls)i tchles equity. stockholders’ in (loss) income comprehensive other accumulated of component a as included
sesadlaiiisaetasae tfsa eidedecag ae.Rsligtasainajsmnsare adjustments translation Resulting rates. exchange period-end fiscal at translated are liabilities and assets
n ahfosaetasae twihe vrg xhnertspealn uigtefsa eid and period, fiscal the during prevailing rates exchange average weighted at translated are flows cash and
terprigcrec)fricuini h opn’ osldtdfnnilsaeet.Icm,expenses Income, statements. financial consolidated Company’s the in inclusion for currency) reporting (the
urnis.Fnnilifraini rnltdfo h plcbefntoa urnyt h ..dollar U.S. the to currency functional applicable the from translated is information Financial currencies).
ttmnso t oeg usdaisaerpre nteapial oeg urnis(functional currencies foreign applicable the in reported are subsidiaries foreign its of statements
h opn’ prtosaecnutdi aiu onre rudtewrdadtefinancial the and world the around countries various in conducted are operations Company’s The
oeg urnyTranslation Currency Foreign
159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4 2017. in receivable accounts
prxmtl 1. ilo.N igecsoe cone o recee 0 fteCmaystotal Company’s the of 10% exceeded or for accounted customer single No million. $10.0 approximately
utmrecee 0 fteCmaysttlacut eevbei 08wt aac fapproximately of balance a with 2018 in receivable accounts total Company’s the of 10% exceeded customer
utmr.N igecsoe cone o recee 0 frvnei 08 07o 06 One 2016. or 2017 2018, in revenue of 10% exceeded or for accounted customer single No customers.
rnsadohrifrain ocnrto fcei iki iie u oteCmayslrenme of number large Company’s the to due limited is risk credit of Concentration information. other and trends
nalwnefrdutu consbsduo atr urudn h rdtrs fcsoes historical customers, of risk credit the surrounding factors upon based accounts doubtful for allowance an
utmr h ucaeteLvPro evcsb rdtcr i nentdwla)adhsestablished has and download) Internet via card credit by services LivePerson the purchase who customers
h opn efrsogigcei vlain fiscsoes iaca odto ecp for (except condition financial customers’ its of evaluations credit ongoing performs Company The
.Dsrpino uiesadSmayo infcn conigPlce (continued) – Policies Accounting Significant of Summary and Business of Description 1.
OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 4 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] ] 32 Page ela h osdrto fpstv n iiaigeet n icmtne htwudafc the its than affect less is would unit that reporting a circumstances of value and fair events the and that mitigating not circumstances than and likely and more positive as amount. was value events carrying fair it The of unit’s whether of reporting segments. consideration the of totality affect Consumer determination the could and circumstances the or as Business events summarizing adverse Company’s well fair which perform while the the to not extent that did facts both the more-likely Company considered qualitative not on the Accordingly, was test amount. assessed it carrying impairment that Company their goodwill than determined less Company two-step is the the units 2016, reporting and the 2017, of value 2018, of quarter third hi siae eiulvle,adrvee o mareti codnewt S 360-10-35, ASC with accordance in impairment for reviewed Assets.” Long-Lived and of Disposal values, or Impairment for residual “Accounting goodwill estimated of excess. value the their for carrying recorded over the is unit charge If an reporting impairment liabilities. the calculating an less goodwill, third involves of assets value of analysis a individual value fair fair the estimated third and implied the the of the The impairment, of exceeds values If excess impairment. potential fair the estimated goodwill. of of measuring aggregate by including amount indication the goodwill amount the an of value measure carrying is fair implied to respective there that value, performed not its fair fair is than estimated with likely analysis estimated the unit between more similar exceeds comparison reporting is value of a Company’s it carrying involving acquisitions the performed, that be indicates and and of will assessment conditions; publicly-traded qualitative analysis values Company’s Company, qualitative market second are initial initial and the a the exists, that trends this This impairment of recent companies If of available. (iii) capitalization test. similar equity; if market value involving and companies, impairment (i) earnings metrics fair goodwill future of: valuation projected quantitative the consideration (iv) and things, current two-step reduce past, other it the (ii) whether not among determine perform to includes, than made to first assessment likely is assessment necessary qualitative more A amounts. is carrying would their below units that reporting change circumstances in circumstances changes value. or fair events its whenever but exceed may and amortized, goodwill annually not of is impairment value Goodwill for carrying acquired. the tested assets that be intangible indicate identified to the required and is assets instead tangible net the of value Assets Intangible and respectively.Goodwill 2016, and 2017 2018, 31, December ended years the with for together the criteria, of incurred. these Company’s life as meeting the expensed useful to are estimated in maintenance, prior the the and equipment incurred over training and and for Costs basis incurred property years. completed straight-line costs three in be a approximates included will on which are project amortized asset, costs related are the These and that sheets probable intended. has balance as is management consolidated its used it completed, develop be and successfully to will funding, are software project costs efforts committed its development and capitalizes preliminary authorized Company when software the use Software”, internal “Internal-Use 350-40, (“ASC”) Codification expense, Depreciation Costs asset. million Development the Software $12.0 respectively.Internal-Use and of 2016, million, and life $12.4 2017 useful 2018, million, estimated 31, $14.2 December totaled the ended software or years use the term internal for lease of the depreciation includes (continued) of which – shorter Policies the Accounting Significant over of method Summary and Business of Description 1. h opn vlae o odilipimn nulya etme 30 September at annually impairment goodwill for evaluates Company The to lives useful estimated respective their over amortized are lives useful estimable with assets Intangible or occur events as or quarter, third its in goodwill of impairment for testing performs Company The fair the exceeds combination business a in paid consideration the when goodwill records Company The million $3.7 and million, $8.3 million, $11.7 of costs software internal-use capitalized Company The Standards Accounting (“FASB”) Board Standards Accounting Financial the with accordance In OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON, 86 th n tteedo the of end the at and 159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Black
444
87
a o aeilydfeetfo htwudhv enrcgie ne oi 605. Topic under recognized been have would what from different materially not was
oa eeu f$4. ilo eonzddrn h ereddDcme 1 08 ne oi 606, Topic under 2018, 31, December ended year the during recognized million $249.8 of revenue Total
eonto frvnewe,o s h opn aife efrac obligation. performance a satisfies Company the as, or when, revenue of Recognition •
loaino h rnato rc otepromneolgtosi h otat and contract; the in obligations performance the to price transaction the of Allocation •
eemnto ftetascinprice; transaction the of Determination •
dniiaino h efrac biain ntecontract; the in obligations performance the of Identification •
dniiaino h otat rcnrcs ihacustomer; a with contracts, or contract, the of Identification •
h opn eemnsrvnercgiintruhtefloigsteps: following the through recognition revenue determines Company The
opn xet ob nildt necag o hs services. those for exchange in to entitled be to expects Company
hs evcsi rnfre oteCmayscsoes na mutta elcstecnieainthe consideration the reflects that amount an in customers, Company’s the to transferred is services these
rfsinlsrie rmtesl fteLvPro evcs eeusaercgie hncnrlof control when recognized are Revenues services. LivePerson the of sale the from services professional
h aoiyo h opn’ eeu sgnrtdfo otl evc eeusadrelated and revenues service monthly from generated is revenue Company’s the of majority The
eeu Recognition Revenue
arigvleadtefi au fteipie asset. impaired the of value fair the and value carrying
nastmyntb eoeal.Teaon fayipimn smaue stedfeec ewe the between difference the as measured is impairment any of amount The recoverable. be not may asset an
r eiwdfripimn hnvreet rcagsi icmtne niaeta h arigvleof value carrying the that indicate circumstances in changes or events whenever impairment for reviewed are
oglvdast,sc spoet,patadeupetadprhsditnilssbett amortization to subject intangibles purchased and equipment and plant property, as such assets, long-lived
nacrac ihAC301,“conigfrteIpimn rDsoa fLn-ie Assets,” Long-lived of Disposal or Impairment the for “Accounting 360-10, ASC with accordance In
mareto ogLvdAssets Long-Lived of Impairment
hrdars utpeaece n regions. and agencies multiple across shared
xadteeitn letrltosis h xetdbnft fteCmaysaqiiin r typically are acquisitions Company’s the of benefits expected The relationships. client existing the expand
rmr rvr nietfigadeeuigaseii rnato steeitneo,o h blt to, ability the or of, existence the is transaction specific a executing and identifying in drivers primary
otat,a ela rd ae.I xctn h opn’ vrl custo taey n fthe of one strategy, acquisition overall Company’s the executing In names. trade as well as contracts,
dniibeitnil sesaqie sdrvdfo utmrrltosis nldn h eae customer related the including relationships, customer from derived is acquired assets intangible identifiable
rae spr fgowl n sntrqie ob audsprtl.Temjrt ftevleo the of value the of majority The separately. valued be to required not is and goodwill of part as treated
nagbeastvleta h opn cursi h pcaie nwhwo h okoc,wihis which workforce, the of know-how specialized the is acquires Company the that value asset intangible
rnatos swl suiiigdsone xetdcs lwmtooois usata oto fthe of portion substantial A methodologies. flow cash expected discounted utilizing as well as transactions,
esrmnst eemn siae au.Ti prahicue osdrto fsmlradrecent and similar of consideration includes approach This value. estimated determine to measurements
auto spromdfralsc dniidast.TeCmayue eea aktparticipant market several uses Company The assets. identified such all for performed is valuation a
o ahaqiiin h opn netksadtie eiwt dniyohritnil sesand assets intangible other identify to review detailed a undertakes Company the acquisition, each For
06mlino custo eae ot eecagdt operations. to charged were costs related acquisition of million $0.6
oe oteCnoiae iaca ttmnsicue een o h er ne eebr3,2018, 31, December ended years the For herein. included Statements Financial Consolidated the to Notes uhetmtdvle r eoddi h eut foeain.Frfrhrifrain e oe7o the of 7 Note see information, further For operations. of results the in recorded are values estimated such
159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
aac he tteaqiiindt arvleadaermaue tec eotn eid hne in Changes period. reporting each at remeasured are and value fair date acquisition the at sheet balance
biain.Cnign ucaepieolgtosaercre sdfre custo osdrto nthe on consideration acquisition deferred as recorded are obligations price purchase Contingent obligations.
yial rvdsfra nta amn tcoigadfrftr diinlcnign ucaeprice purchase contingent additional future for and closing at payment initial an for provides typically
h curdbsns r eodda hi custo aefi aus h opn’ custo model acquisition Company’s The values. fair date acquisition their at recorded are business acquired the
curd(nldn dniiditnil ses,telaiiisasmdadaynnotoln neetin interest noncontrolling any and assumed liabilities the assets), intangible identified (including acquired
uiescmiain r cone o sn h custo ehdadacrigy h assets the accordingly, and method acquisition the using for accounted are combinations Business
uiesCombinations Business
.Dsrpino uiesadSmayo infcn conigPlce (continued) – Policies Accounting Significant of Summary and Business of Description 1.
OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 4 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] xet n sr,rvnei eonzda naon e fEpr esi codnewt S 606, ASC with accordance in fees Expert of net amount an at recognized is revenue Users, and cloud Experts the contracts, its Revenue of Consumer — value contracts. Services its the Hosted within users including taking of objectives, factors, types and pricing other number overall the its price and and on selling sold, conditions applications based standalone relative market prices a selling consideration on standalone obligations into the performance The determines separate distinct. Company are the The they basis. to allocated if separately is obligations price performance individual transaction for accounts Company the or contracts, quarterly monthly, obligation. billed, performance length, Obligations the Performance in Multiple arrangements. of with longer these Contracts to satisfaction performed or related consideration proportion complete variable year the significant toward no one on For is progress generally based There term. advance. time in are contract of annually over the contracts measure recognized over service is the basis the revenue Professional straight-line to as basis, access a faithful price for inputs on is most fixed fee a recognized using the a represent the and be as to on be will manner deemed customer billed to same such not services the the deemed are as in which is and to recognized services, the platform, time deployment be LiveEngage for time will certain of revenue For Control over passage obligation, control. the services. performance the of passes distinct transfer such as reflects stand-ready contracts the period, for that distinct of Services contracted exchange depiction amount a the Professional in over represent the Company’s receive ratably to at recognized the to deemed reported expects of is Company are which majority the Revenues basis consideration Services on-demand ultimate Professional an on obligation. delivered performance training a as in well principal in a customer. arrangements as the to acts transferred (“PFP”) are the Revenues Company they Services via Performance Professional before placed services the order or for goods each Considerations”, specified for Pay the fee Agent controls fixed it these “Principal a its if transaction and For of ASC-606, provider form labor solutions. the with the in with accordance engagement customers qualified incurs several its it to online of fee through more the Company’s services or passes hosted Company one the the with for customers, customers, arrangement fee variable larger these an Company’s significant through of the no labor most For is center and of vendors. call There receives certain one advance. provide most the for simultaneously may in generally Additionally, the annually Company to customer are arrangements. or the be the these access contracts quarterly to monthly, to as Subscription that billed, related deemed performance. services date length, consideration Company’s is the in the the time longer of on by or this of control provided year beginning recognizes passage of benefit term, The Company transfer the contract customer. the The consumes the the of time. to over depiction available over basis faithful made occur ratable is to a platform the on deemed LiveEngage LiveEngage, of time is satisfaction to and over obligation access control revenue such, a customers performance As represents provide term. stand-ready access that contract such this the fees throughout determined continually has provided of Company service consist stand-ready The primarily platform. cloud-based and enterprise-class, received Company’s be to expected The 606. Topic Revenue applying Business — in monthly Services billed FASB, Hosted are the streams the upon those revenue for by revenue of recognition as streams, permitted the revenue to certain as regard of with invoicing streams, expedient practical revenue right-to-invoice the certain utilizes Company to specific (continued) expedient – Policies Accounting Significant of Summary and Business of Description 1. o eeu rmteCmaysCnue emn eeae rmoln rnatosbetween transactions online from generated segment Consumer Company’s the from revenue For these For obligations. performance multiple contain customers with contracts Company’s the of Some as services, optimization and deployment for fees of consists primarily revenue services Professional consideration ultimate the reflects that amount the at reported is revenue Business Services Hosted practical a use to elected and election policy accounting following the made has Company The ] 32 Page OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON, 88 159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Black
4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] efrac.Teices ntedfre eeu aac o h ereddDcme 1 08is 2018 obligations, 31, performance as balance its December revenue deferred satisfying ended the of in year included advance were 2017. the that in 31, recognized December revenues for due of of or balance million received $32.7 revenue by payments offset deferred partially cash the by driven in primarily increase The performance. is Revenues transactions Deferred obligations these performance from significant Revenue no Expert. and obligor. the complete and is to primary consumer transaction balance the the the the from when remits time fee remain. then is in a involved point and collects not the Expert fee, Company is at the The recognized and the fee. of collection, Expert’s for portion that the loss a establishing of fact retains or risk Expert any the the without selecting agent to in an as primarily performs Company due (continued) the Additionally, – Considerations,” Policies Accounting Agent Significant of “Principal Summary and Business of Description 1. thousands): Revenue Disaggregated Business – services Professional Business – services Hosted rfsinlsrie Business – services Professional Revenue: Business – services Hosted oa eerdrvne–ln term long – revenue deferred Total oa eerdrvne–sotterm short – revenue deferred Total otdsrie Business – services Hosted rfsinlservices Professional Consumer – services Hosted h olwn al rsnsdfre eeu yrvnesuc aonsi thousands): in (amounts source revenue by revenue deferred presents table following The its of advance in due or received are payments cash when revenues deferred records Company The h olwn al rsnsteCmaysrvne iageae yrvnesuc aonsin (amounts source revenue by disaggregated revenues Company’s the presents table following The Totalrevenue ...... OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES ...... $1 — $ 19 $ ...... 0 — 203 ...... 2 — $ 222 $ ...... IEESN INC. LIVEPERSON, 89 1744$7,8 $183,551 $178,686 $197,474 2988$1,7 $222,779 $218,876 $249,838 2812,4 22,970 22,740 32,811 9531,5 16,258 17,450 19,553 0821 2016 2017 2018 eebr31, December 5,1 $35,563 $55,015 5,3 $27,011 $52,232 082017 2018 ,8 8,552 2,783 eebr31, December ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side D Black
444
90
respectively.
1. ilo,$58mlin n 1. ilo o h er ne eebr3,21,21 n 2016, and 2017 2018, 31, December ended years the for million $10.9 and million, $15.8 million, $17.4
aktn xes ntecnoiae ttmn foeain.Sc ot oae approximately totaled costs Such operations. of statement consolidated the on expense marketing
h opn xesstecs favriigadpooigissrie sicre nteslsand sales the in incurred as services its promoting and advertising of cost the expenses Company The
detsn Costs Advertising
2020.
so eebr3,21,teCmayepcst eonz h ogtr efrac biain in obligations performance term long the recognize to expects Company the 2018, 31, December of As
3,1 1,1 1,6 5,1 $222 $55,015 $13,361 $11,812 $34,211 ...... 2018 31, December of as Balance Ending
,6 ,2 1181,5 222 19,452 11,138 4,228 3,869 ...... net (decrease), Increase
3,4 ,8 ,2 3,6 — $ $35,563 2,223 $ 7,584 $ $30,342 ..... 2017 31, December of as Balance Opening
Commissions Receivable Receivable (current) ln term) (long
Prepaid Unbilled Accounts Revenue Revenue
Deferred Deferred
eeusaea olw aonsi thousands): in (amounts follows as are revenues
h pnn n lsn aacso h opn’ consrcial,uble eevbe,addeferred and receivables, unbilled receivable, accounts Company’s the of balances closing and opening The
eivie ntenx wlemnh,aeicue nacut eevbeo h osldtdblnesheet. balance consolidated the on receivable accounts in included are months, twelve next the in invoiced be
eeu necs faonsble r eodda nildrcials nildrcials niiae to anticipated receivables, Unbilled receivables. unbilled as recorded are billed amounts of excess in revenue
ftesfwr ies.TeCmayrfr oteea usrpintascin.Aonsrcgie as recognized Amounts transactions. subscription as these to refers Company The license. software the of
nsm ragmns h opn loscsoest a o cest ienaeoe h term the over LiveEngage to access for pay to customers allows Company the arrangements, some In
l fteCmaysdfre eeu aac srltdto related is balance revenue deferred Company’s the of all otdSrie-uiesRevenue. Services-Business Hosted
mut olce navneo evcsbigpoie r cone o sdfre eeu.Nearly revenue. deferred as for accounted are provided being services of advance in collected Amounts
nomto bu otatBalances Contract about Information
20mlin n 21mlinfrteya ne eebr3,21,21,ad21,respectively. 2016, and 2017, 2018, 31, December ended year the for million $2.1 and million, $2.0
ereddDcme 1 08 07 n 06 epciey n rmteNtelnso 87million, $8.7 of Netherlands the from and respectively. 2016, and 2017, 2018, 31, December ended year
4 nldsrvnefo h ntdKndmo 4. ilo,$89mlin n 3. ilo o the for million $35.3 and million, $38.9 million, $46.5 of Kingdom United the from revenue Includes (4)
3 saPcfc(“APAC”) Asia-Pacific (3)
2 uoe h ideEs n fia(“EMEA”) Africa and East Middle the Europe, (2)
1 aaa ai mrc n ot America South and America Latin Canada, (1)
Totalrevenue...... 2988$1,7 $222,779 $218,876 $249,838
APAC ...... 4531,4 18,717 18,146 24,503
(3)
EMEA ...... 1385,1 50,511 56,310 71,318
(2)(4)
...... Americas Total 5,1 4,2 153,551 144,420 154,017
te Americas Other ...... ,1 ,8 6,818 6,987 7,315
(1)
...... States United 1672$3,3 $146,733 $137,433 $146,702
159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4 0821 2016 2017 2018
eebr31, December
h er ne aonsi thousands): in (amounts ended years the
olwn al rsnsteCmaysrvne trbtbet oetcadfrinoeain for operations foreign and domestic to attributable revenues Company’s the presents table following
igo,Ai-aii,LtnAeiaadWsenErp,priual rneadGray The Germany. and France particularly Europe, Western and America Latin Asia-Pacific, Kingdom,
h opn sdmcldi h ntdSae n a nentoa prtosi h United the in operations international has and States United the in domiciled is Company The
eeu yGorpi Location Geographic by Revenue
.Dsrpino uiesadSmayo infcn conigPlce (continued) – Policies Accounting Significant of Summary and Business of Description 1.
OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 4 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 4 159263 TOPPAN live person AR_Text_Insert Sig 4 ] conigfripeetto ot nurdi otn ragmn hti evc otatwt the with contract service a is that the arrangement aligns hosting standard for a in Incurred This Cloud incurred Costs 2018-15”). a costs (“ASU Implementation in implementation Arrangements” for for Computing Incurred Disclosures accounting Cloud Contract; Costs and Service Implementation Software a for Internal-Use Is Accounting That “Customer’s Arrangement Computing 2018-15 No. (“ASU”) Update Standards translation. which Accounting currency foreign Issued (loss), comprehensive Company’s Recently of income The effect (loss). the comprehensive to income other related net is accumulated from presented Comprehensive excluded sources. periods and are all non-owner for that (loss), from loss equity period income in the changes during net assets certain of net includes its consists in (loss) change the income total, single a as and reduce to the necessary, Loss on Comprehensive when realized be accrued established, to expected benefits are interest amount tax allowances the unrecognized include Valuation to to assets taxable related We expenses. any, tax is administrative future operations. deferred if penalties, rates and projected recent and tax expense general liabilities, positive to interest available of in in ability tax in all taxes our change results deferred consider income evaluating we a and of of In arise, underpayment occurs. strategies, reversals of they change which liabilities scheduled tax-planning from tax and including income, jurisdiction the evidence, assets the that negative in tax period assets and deferred the tax in on deferred expected operations are our effect differences recover of temporary The those enacted and results which settled. using in bases in measured or years recognized tax the are recovered respective in liabilities income be their and taxable assets to to and apply tax liabilities to the Deferred expected and between carryforwards. rates differences credit assets tax to tax existing attributable and consequences of loss tax operating amounts future carrying the statement for recognized financial are liabilities and other assets in included liability rent deferred as Taxes Income recognized payments actual is the agreement sheets. and lease balance purposes consolidated Company’s the reporting the on with financial liabilities for accordance recognized in expense made rent the between difference related the consequently, and Rent compensation Deferred stock-based the operations. materially of of of statement can period value forfeited consolidated assumptions service the be fair and requisite in estimates will the the recognized these over that amount in of basis options Changes line determination years. straight of four the a to number affect on three the other generally recognized and is then among which exercising is price award, before value including, the stock options fair common stock assumptions The vested vesting. its and retain to of will prior estimates volatility employee make an estimated time the to of them, Company length the the regarding estimates requires things, model This its model. to made awards payment share-based all options. for stock employee expense including compensation directors, recognizes and employees and value fair at awards (continued) – Policies Accounting Significant Compensation of Stock-based Summary and Business of Description 1. nAgs 08 h iaca conigSadrsBad(FS” sudAcutn Standards Accounting issued (“FASB”) Board Standards Accounting Financial the 2018, August In components major by reports Company the Income”, “Comprehensive 220, ASC with accordance In tax deferred method, this Under method. liability and asset the under for accounted are taxes Income The lease. related the of term the over basis straight-line a on expense rent records Company The valuation Black-Scholes the using granted options stock of value fair the estimates Company The based stock measures Company the Compensation”, “Stock 718-10, Topic ASC with accordance In OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON, 91 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 4 Side B Black
4
92
eodse ftets.A niywl pl n-tpqatttv etadrcr h muto goodwill of amount the record and test quantitative one-step a apply will entity An test. the of step second
otadcmlxt ftetose odilipimn et h mnmnsi hsudt eoethe remove update this in amendments The test. impairment goodwill two-step the of complexity and cost
ipiyn h etfrGowl maret “S 070”.Ti paeadesscnen vrthe over concerns addresses update This 2017-04”). (“ASU Impairment” Goodwill for Test the Simplifying
nJnay21,FS sudAUN.21-4 Itnils—Gowl n te Tpc350): (Topic Other and Goodwill — “Intangibles 2017-04, No. ASU issued FASB 2017, January In
prtoso ahflows. cash or operations
o xetteaoto fAU21-2t aeamtra feto t iaca oiin eut of results position, financial its on effect material a have to 2017-12 ASU of adoption the expect not
emte nayitrmpro rfsa er eoeteefciedt ftesadr.TeCmaydoes Company The standard. the of date effective the before years fiscal or period interim any in permitted
ihntoefsa er,bgnigatrDcme 5 08 o ulccmais al dpinis adoption Early companies. public for 2018, 15, December after beginning years, fiscal those within
n ntefonts o netr n nlss S 071 sefciefrfsa er,aditrmperiods interim and years, fiscal for effective is 2017-12 ASU analysts. and investors for footnotes, the in and
oetasaec rudhweooi eut r rsne,bt ntefc ftefnnilstatements financial the of face the on both presented, are results economic how around transparency more
xad eg conigfrbt iaca eg,itrs ae n omdt ik.Ispoiin create provisions Its risks. commodity and rate) interest (e.g., financial both for accounting hedge expands
mrvmnst conigfrHdigAtvte”(AU21-2) hsnwsadr eie and refines standard new This 2017-12”). (“ASU Activities” Hedging for Accounting to Improvements
nAgs 07 h ABise S o 071 DrvtvsadHdig(oi 1) Targeted 815): (Topic Hedging and “Derivatives 2017-12 No. ASU issued FASB the 2017, August In
prtoso ahflows. cash or operations
osntepc h dpino S 080 ohv aeilefc nisfnnilpsto,rslsof results position, financial its on effect material a have to 2018-02 ASU of adoption the expect not does
spritdi n nei eido iclyasbfr h fetv aeo h tnad h Company The standard. the of date effective the before years fiscal or period interim any in permitted is
eid ihntoefsa er,bgnigatrDcme 5 08 o ulccmais al adoption Early companies. public for 2018, 15, December after beginning years, fiscal those within periods
te opeesv noea eurdb AP S 080 sefciefrfsa er,adinterim and years, fiscal for effective is 2018-02 ASU GAAP. by required as income comprehensive other
oi 2 n a tm fohrcmrhnieicm o hc h eae a fet r rsne in presented are effects tax related the which for income comprehensive other of items has and 220 Topic
osAt h mnmnsi S 080 fet n niyta srqie oapytepoiin of provisions the apply to required is that entity any affects 2018-02 ASU in amendments The Act. Jobs
te opeesv noet eanderig o taddtxefcsrsligfo h a usand Cuts Tax the from resulting effects tax stranded for earnings retained to income comprehensive other
opeesv noe “S 080”.Ti e tnadalw elsiiainfo accumulated from reclassification a allows standard new This 2018-02”). (“ASU Income” Comprehensive
opeesv noe(oi 2) elsiiaino eti a fet rmAcmltdOther Accumulated from Effects Tax Certain of Reclassification 220): (Topic Income Comprehensive
nFbur 08 h ABise S o 080 Icm ttmn Reporting — Statement “Income 2018-02 No. ASU issued FASB the 2018, February In
n profits. and
eemndta h a nurmte annsi eodet h vrl cuuae eii nearnings in deficit accumulated overall the to due zero is earnings unremitted on tax the that determined
nlso nteFS oiiain h opn vlae h mato hsudtdsadr and standard updated this of impact the evaluated Company The Codification. FASB the in inclusion
07 h aeo hc h a usadJb c a indit a.AU21-5i fetv upon effective is 2018-05 ASU law. into signed was Act Jobs and Cuts Tax the which on date the 2017,
tf eadn plcto fTpc70 noeTxs nterprigpro hticue eebr22, December includes that period reporting the in Taxes, Income 740, Topic of application regarding staff
E aarpsprun oteSCSafAcutn ultnN.18 hc xrse h iwo the of view the expresses which 118, No. Bulletin Accounting Staff SEC the to pursuant paragraphs SEC
aarpsPrun oSCSafAcutn ultnN.18 “S 080”.Ti e tnadadds standard new This 2018-05”). (“ASU 118” No. Bulletin Accounting Staff SEC to Pursuant Paragraphs
nMrh21,teFS sudAUN.21-5“noeTxs(oi 4) mnmnst SEC to Amendments 740): (Topic Taxes “Income 2018-05 No. ASU issued FASB the 2018, March In
aeasgiiatipc niscnoiae iaca statements. financial consolidated its on impact significant a have
opn scretyeautn h mato hsudtdsadr,btde o eiv hsudt will update this believe not does but standard, updated this of impact the evaluating currently is Company
o iclyasbgnigatrDcme 5 08 nldn nei eid ihnta iclya.The year. fiscal that within periods interim including 2018, 15, December after beginning years fiscal for
o-mlye n mlye ilb usatal lge.AU21-7i fetv o ulccompanies public for effective is 2018-07 ASU aligned. substantially be will employees and non-employees
o-mlye o od rsrie.Cneunl,teacutn o hr-ae amnsto payments share-based for accounting the Consequently, services. or goods for non-employees
nyicue hr-ae amnst mlye)t nld hr-ae amnsise to issued payments share-based include to employees) to payments share-based includes only
e tnadepnstesoeo oi 1,Cmesto tc opnain(hc currently (which Compensation Stock — Compensation 718, Topic of scope the expands standard new Tpc78 mrvmnst oepoe hr-ae amn conig “S 080”.This 2018-07”). (“ASU Accounting” Payment Share-Based Nonemployee to Improvements — 718) (Topic
159263 TOPPAN live person AR_Text_Insert Sig 4 ] 159263 TOPPAN live person AR_Text_Insert Sig 4
nJn 08 h ABise S o 080 Cmesto tc Compensation Stock — “Compensation 2018-07 No. ASU issued FASB the 2018, June In
rcs feautn h mato h dpino S 0820o t osldtdfnnilstatements. financial consolidated its on 2018-230 ASU of adoption the of impact the evaluating of process
nurdatrtedt faoto rrtopcieyt l ragmns h opn scretyi the in currently is Company The arrangements. all to retrospectively or adoption of date the after incurred
einn fe eebr1,21,adcnb ple ihrpopcieyt mlmnaincosts implementation to prospectively either applied be can and 2019, 15, December after beginning
se.AU21-5i fetv o nulrprigpros n nei eid ihntoeyears, those within periods interim and periods, reporting annual for effective is 2018-15 ASU asset.
tnad oiiain(AC)304,i re odtriewihcsst aiaieadrcgiea an as recognize and capitalize to costs which determine to order in 350-40, (“ASC”) Codification Standards
conigfripeetto ot nurdt eeo roti nenluesfwr ne Accounting under software internal-use obtain or develop to incurred costs implementation for accounting
.Dsrpino uiesadSmayo infcn conigPlce (continued) – Policies Accounting Significant of Summary and Business of Description 1.
OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 4 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies – (continued)
impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. ASU 2017-04 is effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods. The Company does not expect the adoption of ASU 2017-04 to have a material effect on its financial position, results of operations or cash flows. In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The new lease guidance also simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) may apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company plans on adopting the standard using the modified transition approach or the transition option available where the Company would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018. The Company continues to implement changes to its systems, processes and controls, in conjunction with its review of existing lease agreements. The Company expects its leases designated as operating leases in Note 9, “Contractual Obligations,” will be reported on the consolidated balance sheets upon adoption, which will materially increase its total assets and liabilities. The adoption of this ASU will result in the recognition of operating lease assets and liabilities of approximately $10.0 million. The Company does not expect the adoption of ASU 2016-02 to have a material impact to its consolidated statements of operations or to have any impact on its total cash flows from operating, investing or financing activities.
Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“Topic 606”). Topic 606 supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition” (“Topic 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, “Other Assets and Deferred Costs — Contracts with Customers”, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, the Company refers to Topic 606 and Subtopic 340-40 as the “new standard.” 3 The Company adopted the requirements of the new standard as of January 1, 2018, utilizing the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for the reporting periods beginning after January 1, 2018 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported in accordance with its historic accounting under Topic 605. The impact of adopting the new standard as of January 1, 2018 on revenues was not material. The primary impact of adopting the new standard relates to the deferral of incremental commission costs of obtaining subscription contracts. The Company recorded an addition to opening retained earnings of
93 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
159263 TOPPAN live person AR_Text_Insert Signature 3 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] Year Ended December 31, 2018 2017 2016 59,203,400 56,358,017 56,063,777 59,203,400 56,358,017 56,063,777 94 LIVEPERSON, INC...... — — — NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...... The Company accounts for its segment information in accordance with the provisions of ASC 280-10, The Company calculates earnings per share (“EPS”) in accordance with the provisions of ASC 260-10 Diluted net loss per common share for the year ended December 31, 2018 does not include the effect of A reconciliation of shares used in calculating basic and diluted earnings per share follows: Effect of assumed exercised options Diluted Basic 3. Segment Information “Segment Reporting.” ASCsegments of 280-10 a establishes company. ASCabout annual 280-10 products, requires and disclosures major ofmethods. interim customers, selected The reporting segment-related and financial Company geographic information decisions standards is areas and for organized based operating assessingsophisticated into on intelligence performance. two the engine The operatingonline to Company’s Business segments business internal connect for segment messaging accounting withindependent purposes technologies. enables consumers service The of through brands providers Consumer anknowledge making (“Experts”) to integrated segment for and operating leverage suite facilitates a individual LiveEngage’s ofprimarily online consumers fee in mobile (“Users”) transactions via the and seeking between mobileevaluates performance, United information and makes operating and States. decisions, online and The allocates messaging. resources chief based Both on operating segments the operating decision currently income maker, of generate who their is revenue the chief executive officer, 1. Description of Business and Summary$0.7 of million Significant as Accounting of Policies –to January (continued) 1, the 2018 deferral due of toincremental the incremental commission impact commission costs of costs. to adopting Underthe obtain the Topic term a new 605, standard, contract of the with and the CompanyCompany the amortized deferred defers related impact those all only subscription related incremental costs direct contract, commission onas and which costs a of was to straight-line generally obtain December basis one the 31,benefit over year. contract. 2018 using Under The is prepaid the the $13.4 commission new customerconsistent balance million. standard, with expected the The the life transfer Company to that amortizes the the customer these of Company costs the determined over services2. to to the which be related the period three asset Net relates. of to Loss per five Share years which is and the guidanceexcludes of dilution for common SEC stockto equivalents Staff and common is Accounting shareholders computed by by BulletinAll dividing the options, net (“SAB”) warrants weighted income or or No. average other loss numberto potentially 98. attributable dilutive of be instruments Under issued common included for ASC shares nominalDiluted in consideration outstanding 260-10, EPS are the for required basic is calculation the of calculated EPS occur period. if using basic securities the or and other treasuryand diluted contracts resulted stock to net in issue method the income common issuance and stock of attributable were reflects common to exercised stock. or the common converted potential into stockholders. common dilution stock thatoptions could toanti-dilutive. purchase Diluted net 8,957,672 income perthe shares common effect share of for of the options year toanti-dilutive. common ended purchase Diluted 8,831,798 December net shares 31, income stock of 2017 per doesthe common common awards effect not stock share of awards include for as as the options the year to effectanti-dilutive. the ended purchase of 8,956,932 December their shares 31, effect inclusion of 2016 is does common of not stock awards include as their the effect inclusion of their is inclusion is ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Black LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Segment Information – (continued)
each segment. The reporting segments follow the same accounting polices used in the preparation of the Company’s consolidated financial statements which are described in the summary of significant accounting policies. The Company allocates cost of revenue, sales and marketing and amortization of purchased intangibles to the segments, but it does not allocate product development expenses, general and administrative expenses, restructuring costs and income tax expense because management does not use this information to measure performance of the operating segments. There are currently no inter-segment sales.
Summarized financial information by segment for the year ended December 31, 2018, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision maker, follows (amounts in thousands): Business Consumer Corporate Consolidated Revenue: Hosted services – Business ...... $197,474 $ — $ — $197,474 Hosted services – Consumer ...... — 19,553 — 19,553 Professional services ...... 32,811 — — 32,811 Totalrevenue...... 230,285 19,553 — 249,838 Cost of revenue ...... 58,420 4,059 — 62,479 Sales and marketing ...... 94,339 9,005 — 103,344 Amortization of purchased intangibles ...... 1,670 — — 1,670 Unallocated corporate expenses ...... — — 106,048 106,048 Operating income (loss) ...... $ 75,856 $ 6,489 $(106,048) $ (23,703)
Summarized financial information by segment for the year ended December 31, 2017, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision maker, follows (amounts in thousands): Business Consumer Corporate Consolidated Revenue: Hosted services – Business ...... $178,686 $ — $ — $178,686 Hosted services – Consumer ...... — 17,450 — 17,450 Professional services ...... 22,740 — — 22,740 Totalrevenue...... 201,426 17,450 — 218,876 Cost of revenue ...... 54,600 3,605 — 58,205 Sales and marketing ...... 82,420 8,485 — 90,905 Amortization of purchased intangibles ...... 1,840 — — 1,840 Unallocated corporate expenses ...... — — 85,752 85,752 3 Operating income (loss) ...... $ 62,566 $ 5,360 $(85,752) $ (17,826)
95 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
159263 TOPPAN live person AR_Text_Insert Signature 3 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] December 31, 7,426 7,495 3,130 2,711 8,970 9,496 2018 2017 85,613 85,613 13,598 13,940 $155,143 $127,487 $122,019 $ 93,845 16,258 — 16,258 3,885 — — 3,885 22,970 — — 22,970 60,352 2,809 — 63,161 82,063 7,466 — 89,529 60,221 $ 5,983 $(85,613) $ (19,409) 206,521 16,258 — 222,779 Business Consumer Corporate Consolidated $183,551 $ — $ — $183,551 96 LIVEPERSON, INC...... — — ...... — ...... $ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...... (1) Totalrevenue...... Summarized financial information by segment for the year ended December 31, 2016, based on the The Company is domiciled in the United States and has international operations in the United Total long-lived assets Hosted services – Business Hosted services – Consumer Professional services Other (1) United Kingdom, Germany, Japan, France, and Italy United States Revenue: Israel...... Australia Netherlands Cost of revenue Sales and marketing Company’s internal financial reportingfollows system (amounts in utilized thousands): by the Company’s chief operating decision maker, 3. Segment Information – (continued) Amortization of purchased intangibles Unallocated corporate expenses Operating income (loss) Geographic Information Kingdom, Asia-Pacific, Latinfollowing table America presents and the(amounts in Company’s Western thousands): long-lived Europe, assets particularly by geographic France region and for the Germany. periods The presented ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Black
3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] ] 32 Page December 31, 2018 2017 19,240 8,736 79,161 $14,132 92,079 15,355 43,735 $ 34,705 (68,798) (81,465) 112,533 116,170 (106) — (106) 14,606 — 14,606 Business Consumer Total Business Consumer Total $72,221 $8,024 $80,245 $72,507 $8,024 $80,531 $72,507 $8,024 $80,531 $87,007 $8,024 $95,031 97 ...... LIVEPERSON, INC...... $ ...... 286 — 286 ...... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...... In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an The changes in the carrying amount of goodwill for the year ended December 31, 2018 are as follows Foreign exchange adjustments Acquisitions Foreign exchange adjustments The following table presents the detail of property and equipment for the periods presented (amounts The total accumulated goodwill impairment charges are $23.5 million through December 31, 2018. No The changes in the carrying amount of goodwill for the year ended December 31, 2017 are as follows Adjustments to goodwill: Adjustments to goodwill: Less: accumulated depreciation Balance as of December 31, 2016 Balance as of December 31, 2017 Furniture, equipment and building improvements Internal-use software development costs ...... $ Total ongoing basis. As ofdevelopment December costs 31, relatedamortization. 2018, to Aggregate there depreciation expense projects was forand approximately currently property $12.0 $7.8 and million still equipment million for the was in of years $14.2 ended million, development, internal-use December $12.4 31, software therefore, million 2018,5. 2017, are and 2016, not respectively. Goodwill yet and Intangible subject Assets to Goodwill (amounts in thousands): Computer equipment and software Balance as of December 31, 2017 in thousands): 4. Property and Equipment impairment was recognized for the years ended December 31, 2018, 2017, and 2016. Balance as of December 31, 2018 (amounts in thousands): 159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Black LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Goodwill and Intangible Assets – (continued)
Intangible Assets Intangible assets are summarized as follows (see Note 8) (amounts in thousands): December 31, 2018 Weighted Gross Average Carrying Accumulated Net Carrying Amortization Amount Amortization Amount Period Amortizing intangible assets: Technology ...... $30,447 $(23,615) $ 6,832 5.3 years Customer relationships ...... 17,219 (11,786) 5,433 8.4 years Trade names ...... 1,286 (1,286) — 2.1 years Non-compete agreements ...... 1,436 (1,436) — 2.3 years Patents ...... 2,074 (534) 1,540 12.4 years Other ...... 262 (235) 27 2.7 years Total...... $52,724 $(38,892) $13,832
December 31, 2017 Weighted Gross Average Carrying Accumulated Net Carrying Amortization Amount Amortization Amount Period Amortizing intangible assets: Technology ...... $27,882 $(22,197) $ 5,685 5.3 years Customer relationships ...... 15,978 (10,457) 5,521 8.0 years Trade names ...... 1,289 (1,283) 6 2.1 years Non-compete agreements ...... 1,439 (1,439) — 2.3 years Patents ...... 1,620 (493) 1,127 13.1 years Other ...... 262 (235) 27 2.7 years Total...... $48,470 $(36,104) $12,366
Amortization expense is calculated over the estimated useful life of the asset. Aggregate amortization expense for intangible assets was $2.8 million, $4.7 million and $6.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. For the years ended December 31, 2018, 2017 and 2016, a portion of this amortization is included in cost of revenue. Estimated amortization expense for the next five years are as follows (amounts in thousands): Estimated Amortization Expense 2019 ...... $ 2,901 2020 ...... 2,708 2021 ...... 2,498 3 2022 ...... 2,143 2023 ...... 902 Thereafter ...... 2,680 Total...... $13,832
98 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
159263 TOPPAN live person AR_Text_Insert Signature 3 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] ] 32 Page 2,338 December 31, 2,372 — 6,239 5,259 2,686 3,385 1,913 4,924 2018 2017 17,461 15,674 $50,662 $48,011 $19,014 $16,431 ...... 99 ...... LIVEPERSON, INC...... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...... 977
......
In October 2018, the Company entered into a stock purchase agreement to acquire the outstanding The purchase price allocation resulted in approximately $9.1 million of goodwill and approximately AdvtangeTec, Inc. enhances the Company’s messaging platform available for the automotive industry In September 2018, the Company acquired the employees and technology assets of Conversable, Inc. a The purchase price allocation resulted in approximately $5.5 million of goodwill and approximately The following table presents the detail of accrued liabilities and other current liabilities for the periods oa ...... Total Restructuring Contingent earn-out (Note 8) Unrecognized tax benefits Sales commissions Other 7. Acquisitions AdvantageTec Inc. equity interest of AdvantageTec, Inc.departments (“AdvantageTec”), a of leading provider automotivedealership, of including texting dealerships solutions both that for frontoperations service end/variable helps (parts operations enable (new and$11.2 Conversational and services). million, used Commerce The which vehicle across includes purchasecommon sales) approximately the stock, and agreement $6.0 and back million entire was approximately end/fixed incommon $0.9 for cash, million stock. total approximately of $4.3 consideration Theintegration potential million objectives of earn-out and in earn-out consideration milestones shares approximately and in is is of cash included as and contingent part shares of upon of the purchase$2.2 achieving price. million of certain intangible assets.are targeted The goodwill being financial, will not amortizedintangibles strategic be has deductible over been for and recorded. their tax There purposes.in The was expected intangible approximately general $0.6 period assets million and of ofdeferred acquisition tax administrative costs, benefit. liability which expenses of is Aliability $0.5 included $0.1 in million. million. deferred The the tax net Company’s book liability value consolidated of for statements acquired the assets ofand and identified will liabilities be operations resulted included in in and to a the the Company’s net results business of segment. operations The for results the of year this ended December acquisitionConversable, 31, were Inc. 2018. not significant SaaS based Artificial Intelligenceaggregated powered estimated conversational platform, purchase headquartered price of inin Austin, $5.7 cash, Texas, million. for approximately The an $2.9 estimated millionconsideration purchase price of in consisted shares $1.5 of of million $1.3integration in common million objectives. cash, stock This which of transaction iswas the was based based Company, accounted on upon and achieving the for a estimated certain under potentialas fair targeted of the earn-out value financial, of the purchase strategic, date Conversable, method and Inc.’s of net of acquisition. tangible and accounting identifiable and intangible assets $0.5 million of intangiblebeing assets. The amortized goodwill will over be their deductible expected for tax period purposes. of The intangible benefit. assets The are allocation of the purchase price to net book Professional services, consulting and other vendor fees . . . Payroll and other employee related costs . presented (amounts in thousands): 6. Accrued Liabilities and Other Current Liabilities 159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Black LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Acquisitions – (continued)
value of acquired assets and liabilities resulted in a net liability $0.3 million, which includes accounts receivable, property and equipment, accrued expenses, and deferred revenue.
Conversable Inc.’s capabilities will accelerate the ongoing expansion of the Company’s Conversational Commerce solutions and enhance the Company’s ability to deliver proactive and personalized content and services when and where the customer needs it, helping consumers find immediate service through messaging. Conversable, Inc will be included in the Company’s business segment. The results of this acquisition were not significant to the results of operations for the year ended December 31, 2018.
BotCentral, Inc. In January 2018, the Company acquired the employees and technology assets of BotCentral, Inc., a Silicon Valley based startup, for an approximate purchase price of $1.0 million in common stock of the Company. The Company incurred an additional $0.2 million related to acquisition costs. This transaction was accounted for as an asset purchase. The aggregate amount of approximately $1.2 million is included in intangibles on the Company’s consolidated balance sheet. With the team’s expertise and knowledge of the LiveEngage platform, the team is bringing valuable insight for the Company’s customers and partners, and enabling the company to more rapidly optimize its bot deployment capabilities, and grow the ecosystem. BotCentral, Inc will be included in the Company’s business segment. The results of this acquisition were not significant to the results of operations for the year ended December 31, 2018.
8. 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.
• 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 3 market participant assumptions that are reasonably available.
100 159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
159263 TOPPAN live person AR_Text_Insert Signature 3 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
3
101
eti agtdfnnil taei n nerto betvsadmlsoe relating. milestones and objectives integration and strategic financial, targeted certain
custoso ovral,IcadAvnaee,Ic h anot r otnetuo achieving upon contingent are earn-outs The Inc. AdvantageTec, and Inc Conversable, of acquisitions
ereddDcme 1 08 h otneterot oaig$. ilo eeadda euto the of result a as added were million $2.4 totaling earnouts contingent the 2018, 31, December ended year
opeepoutitgainadamnmmnme f“oBos”itrcin e ot.Drn the During month. per interactions “Co-Browse” of number minimum a and integration product complete
ihcnign anu eodda euto h custo fSnhoiebsdo h uflmn fa of fulfillment the on based Synchronite of acquisition the of result a as recorded earnout contingent with
uigteya ne eebr3,21,tefnlpyeto 02mlinwsmd nconnection in made was million $0.2 of payment final the 2017, 31, December ended year the During
opromtetose odilipimn et hsmaueeti lsiidbsdo ee input. 3 level on based classified is measurement This test. impairment goodwill two-step the perform to
au farprigui sls hniscryn muta ai o eemnn hte ti necessary is it whether determining for basis a as amount carrying its than less is unit reporting a of value
atr nacrac ihAUN.21-8t eemn hte ti mr ieyta o”ta h fair the that not” than likely “more is it whether determine to 2011-08 No. ASU with accordance in factors
h opn vlae odilfripimn tterprigui ee.TeCmayue qualitative uses Company The level. unit reporting the at impairment for goodwill evaluates Company the
opn ssa noeapoc n nusta osiuelvl3 uigtetidqatro ahyear, each of quarter third the During 3. level constitute that inputs and approach income an uses Company
vrtermiigaotzto eid,tercryn ausaerdcdt siae arvle The value. fair estimated to reduced are values carrying their periods, amortization remaining the over
eiwidctsta h seswl o eflyrcvrbe ae nudsone siae ahflows cash estimated undiscounted on based recoverable, fully be not will assets the that indicates review
arigaon fa se a o ercvrbe fi sdtrie uhidctr r rsn n the and present are indicators such determined is it If recoverable. be not may asset an of amount carrying
agbeast r eiwdfripimn hnvreet rcagsi icmtne niaeta the that indicate circumstances in changes or events whenever impairment for reviewed are assets tangible
orcrigbss h opn ssfi au esrswe nlzn se maret Long-lived impairment. asset analyzing when measures value fair uses Company the basis, nonrecurring
eurn ai n r lsiida ee n ee ,rsetvl,wti h arvleheacy na On hierarchy. value fair the within respectively, 2, level and 3 level as classified are and basis recurring
otneter-u iblt n oeg urnydrvtv otat r esrda arvleo a on value fair at measured are contracts derivative currency foreign and liability earn-out contingent
aktpie natv akt n r lsiida ee ihntefi au irrh.TeCompany’s The hierarchy. value fair the within 1 level as classified are and markets active in prices market
h opn’ oe aktfnsaemaue tfi au narcrigbssbsdo quoted on based basis recurring a on value fair at measured are funds market money Company’s The
h etifrainavailable. information best the
bandfo needn ore,wieuosral nusrfetteCmaysasmtosbsdon based assumptions Company’s the reflect inputs unobservable while sources, independent from obtained
oneprycei iki t seseto arvle bevbeo aktipt elc aktdata market reflect inputs market or Observable value. fair of assessment its in risk credit counterparty
bevbeipt n iiieteueo nbevbeipt oteetn osbea ela considers as well as possible extent the to inputs unobservable of use the minimize and inputs observable
ndtriigfi au,teCmayuiie auto ehiusta aiieteueof use the maximize that techniques valuation utilizes Company the value, fair determining In
232$,7 —$2 $ $— 2 $ — $ $2,372 $2,372 $— — $ ...... liabilities Total
...... 2 — 2 — — — — — ...... contracts
oeg urnyderivative currency Foreign
232$,7 —$ — $ $— $— — $ $2,372 $2,372 $— — $ ...... earn-out Contingent
Liabilities:
288$ 288$,0 6 —$2,871 $— $65 $2,806 $2,828 — $ $— $2,828 ...... assets Total
...... 5—65 — 65 — — — — — ...... contracts
oeg urnyderivative currency Foreign
288$ 288$,0 —$ $2,806 $— $— $2,806 $2,828 — $ $— $2,828 ...... funds market Money
ahequivalents: Cash
Assets:
ee ee ee oa ee ee ee Total 3 Level 2 Level 1 Level Total 3 Level 2 Level 1 Level eebr3,21 eebr3,2017 31, December 2018 31, December
159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
o edi oe aktacutadi o nlddi h olwn table. following the in included not is and account market money a in held not
so eebr3,21.TeCmaysrsrce ahblneo 15mlina eebr3,21 is 2017 31, December at million $1.5 of balance cash restricted Company’s The 2018. 31, December of as
r umrzda olw aonsi huad) h opn i o aeayrsrce ahbalance cash restricted any have not did Company The thousands). in (amounts follows as summarized are
eurn ai,b ee,wti h arvleheacya fDcme 1 08adDcme 1 2017, 31, December and 2018 31, December of as hierarchy value fair the within level, by basis, recurring
u otersottr aue h opn’ sesadlaiiista r esrda arvleo a on value fair at measured are that liabilities and assets Company’s The nature. short-term their to due
h arigaon fcs,acut eevbe n conspybeapoiaeterfi value fair their approximate payable accounts and receivable, accounts cash, of amount carrying The
iaca sesadLiabilities and Assets Financial
.Fi au esrmns–(continued) – Measurements Value Fair 8.
OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 3 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] ] 32 Page .Fi au esrmns–(continued) – Measurements Value Fair 8. arvleo oeg urnydrvtvscontracts derivatives . currency foreign . of . value Fair contracts derivative currency foreign of amount Notional year of Beginning Balance, eiaiecnrcsrltdpiaiyt necmayrcialsadpybe o h eid rsne (in presented periods the for payables and receivables thousands): intercompany to primarily as related held contracts derivative cash as recorded was which 2017, 31, satisfy December to at order cash million assets. in available $1.5 had current approximately an Company in be collateral at of the to Accordingly, bank maintained bank, contracts. Israeli be the forward an currency to hedge of currency at foreign control security foreign the collateral in the to under remain as with obligations would cash accordance outstanding related security pledge in collateral to The 2017, derivatives required bank. 31, Israeli was December Company of At balance. the contracts, cash portion forward restricted any not have the derivatives not does and to related accounting losses and hedge Gains earnings. flow of current earnings. cash in recognized impact same as requirements are the ineffectiveness transactions effective in earnings the and hedged to reclassified designated the and atmeeting Derivatives income at which recorded comprehensive inputs. risks other are and in 2 Derivatives of purposes hedges. to Level component periods value a trading upon related as fair reported for based as are contracts derivatives designated values hedges are use forward fair that not derivatives estimated currency no does their has foreign Company 2018 into The 31, operations. December enters foreign Company with associated The instruments. financial Instruments Financial Derivative year of End Balance, ahpayment Cash 7) Note (see addition Inc. AdvantageTec, 7) Note (see addition Inc. Conversable, h hne nfi au fteLvl3laiiisaea olw aonsi thousands): in (amounts follows as are liabilities 3 Level the of value fair in changes The h olwn umrzscranifrainrgrigteCmaysottnigfrincurrency foreign outstanding Company’s the regarding information certain summarizes following The and contracts forward currency foreign any to party not is Company the 2018, 31, December of As derivative using by part in managed are that risks exchange foreign to exposed is Company The ...... — ...... OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES ...... $—$210 — $ ...... IEESN INC. LIVEPERSON, ...... 86— 876 ...... 102 ...... 63 — ...... $— ...... eebr31, December 2018 232$— $ $2,372 ,9 — 1,496 otnetEarn-Out Contingent 082017 2018 eebr31, December eebr31, December $2,866 2017 (210) 159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Black
333
103
hs a iblte;teeoe uhaonsaenticue nteaoecnrculolgto table. obligation contractual above the in included not are amounts such therefore, liabilities; tax these
omk esnbyrlal siaeo h iigo amnsi niiulyasi oncinwith connection in years individual in payments of timing the of estimate reliable reasonably a make to
fDcme 1 08 ehdgosurcgie a eeiso 19mlin tti ie eaeunable are we time, this At million. $1.9 of benefits tax unrecognized gross had we 2018, 31, December of
u te ocretlaiiisi h osldtdblneseticueurcgie a eeis As benefits. tax unrecognized include sheet balance consolidated the in liabilities noncurrent other Our
$23,697 ...... payments lease minimum Total
...... 61 ...... Thereafter
03...... 883 2023......
2,649 2022......
5,477 2021......
6,139 2020......
8,488 $ 2019......
erEdn eebr31, December Ending Year Leases
Operating
es em necs foeya)aea olw aonsi thousands): in (amounts follows as are year) one of excess in terms lease
uuemnmmlaepyet ne o-aclal prtn ess(iha nta rremaining or initial an (with leases operating non-cancellable under payments lease minimum Future
prxmtl 1. ilo,$. ilo n 1. ilo,respectively. million, $10.0 and million $9.9 million, $10.9 approximately
nuac.Rna xes o prtn essfrteyaseddDcme 1 08 07 n 06was 2016 and 2017, 2018, 31, December ended years the for leases operating for expense Rental insurance.
ess hs essgnrlyrqieteCmayt a l xctr ot uha aneac and maintenance as such costs executory all pay to Company the require generally leases These leases.
h opn essfclte n eti qimn ne gemnsacutdfra operating as for accounted agreements under equipment certain and facilities leases Company The
otata Obligations Contractual
.CmimnsadContingencies and Commitments 9.
oeg urnydrvtvscnrcs...Ohr(xes)Icm,nt$5)$236 $(50) net Income, (Expense) Other . . . contracts derivatives currency Foreign
2017 2018 Location Statement Income
eebr31, December 31, December
an(oss nDrvtv ntuet eonzdi noeStatement Income in Recognized Instruments Derivative on (losses) Gain
eintdo r o fetv shde i thousands): (in hedges as effective not are or designated
h olwn umrzscranifrainrgrigteCmaysdrvtvsta r not are that derivatives Company’s the regarding information certain summarizes following The
cre xessadohrlaiiis$ 2 $ $— liabilities other and expenses Accrued ...... contracts
oeg urnyderivatives currency Foreign
instruments:
eiaie o eintda hedging as designated not Derivatives
eiaieLiabilities Derivative
...... Pr ...... contracts pi xessadohrcretast —$65 $— assets current other and expenses epaid oeg urnyderivatives currency Foreign
159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3 instruments:
eiaie o eintda hedging as designated not Derivatives
eiaieAssets Derivative
aac he Location Sheet Balance 2017 2018
eebr31, December 31, December
arVleo eiaieInstruments Derivative of Value Fair
h arvleo h opn’ eiaieisrmnsi umrzdblw(nthousands): (in below summarized is instruments derivative Company’s the of value fair The
.Fi au esrmns–(continued) – Measurements Value Fair 8.
OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 3 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] n f21.TeCmaymyo a o ne noanwsokrprhs rga ntefuture. the in program price, repurchase stock windows, new trading a the into open enter at not discontinued of may was timing or program may the Company The The conditions. of including 2018. market number factors other of actual end and of and depending privately requirements variety timing Directors regulatory or a The and market of considerations. corporate on open Board corporate depend the the other repurchased in by and appropriate stock, shares conditions considered common market prices its prevailing and of upon times shares at repurchase transactions, to negotiated authorized was Company the Program $0.001. Repurchase is Stock shares preferred for value par The outstanding. and issued shares zero stock $0.001. common is shares of common Stock shares for Preferred 100,000,000 value par were The there outstanding. 2017, and 31, issued shares December ended 59,663,969 of and As authorized, year outstanding. and the issued shares during credit of letters Stock Common totaling these credit against Equity of Stockholders’ draws of letter conditions a and 10. no terms has the were Company of Company the There the addition, by 2018. performance 31, contract. In December due space. the supply for office deposit security a for a landlord as million certain $0.1 a of favor Credit these of future for Letters any recorded liabilities of of value no fair portion 2018. has estimated 31, a Company the December believes recover the Company of Currently, to the as minimal. coverage, agreements officers Company policy is insurance and the agreements its indemnification directors enables of these a and result in a has exposure request As Company Company’s its paid. make the the amounts reduces however, to at that required unlimited; serving, be policy is could was Company insurance agreements or the indemnification payments is, future director these of or under amount officer potential maximum the The capacity. while such products. occurrences Company’s certain the or using against events of and certain result from a as customers them certain by incurred indemnify or suffered to losses agrees and Company claims the of agreements, types these of some 2016, and 2017 2018, 31, December ended year Indemnifications the for ended 401(k) million, years employees $1.6 the were the contributions for matching into million Company respectively. Total deposited $1.3 of vesting. are and lesser graded year the contributions million, 5 to $1.4 Matching to up $6,000. subject contributions, are or employee and compensation account of eligible 50% to of equal 5% contributions matching employer for provides Plans Benefit Employee (continued) – Contingencies and Commitments 9. rm21 hog 08 h opn a tc eucaepormi lc usatt which to pursuant place in program repurchase stock a had Company the 2018, through and 2012 From authorized, stock preferred of shares 5,000,000 were there 2017, and 2018 31, December of As 63,676,229 and authorized, stock common of shares 100,000,000 were there 2018, 31, December At in substantially outstanding credit of letter million $1.8 a has Company the 2018, 31, December of As for indemnified are directors and officers executive its whereby agreements has also Company The to Pursuant business. of course ordinary its in agreements license and service into enters Company The Company The employees. eligible all covering plan contribution defined 401(k) a has Company The ] 32 Page OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON, 104 159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Black
3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] rn setmtdo h aeo rn sn h lc-coe pinpiigmdlwt h following the with model option-pricing 2016: Black-Scholes option and 2017 each the 2018, of using 31, value December grant fair ended years The of respectively. the date $3.10, for assumptions and the average $4.25, weighted on $6.60, estimated was is 2016 and grant 2017 2018, 31, transactions. December of payment award recognized. arising an be share-based costs for must compensation date exchange Incremental in grant award. in the the received after services awards of services value of employee employee modifications fair subsequent grant-date of from obtains the cost on focus the entity based primary instruments a of equity an with measurement services, requires which or 718-10 goods for in ASC instruments equity transactions its exchanges on entity an which in transactions Compensation Stock-Based (continued) – Equity Stockholders’ 10. suneudrtepa y60000 h opn mne h 09SokIcniePa (the Plan shares Incentive of Stock number the 2009 increased the Plan amended 2009 4,250,000. additional Amended an Company by The for plan available The 2012. the shares under 7, 6,000,000. issuance of for June number 2000 authorized by effective the the under increased Plan”) plan outstanding Company 2009 been the “Amended the had and which Plan options under 2009 the Plan, the issuance 2009 into the incorporated Under were Plan. Plan been 2000 shares the had to of successor which number a options the increasing the or 10,000,000 Plan Plan, issuance options for 2000 aggregate. 2000 reserving the stock the thereby in the stock 4,150,000, in incentive approximately common Under by incorporated of issue plan shares Plan. were the could under Incentive 1998 Plan issuance Stock Directors 1998 for the 2000 available The the succeeded of stock. under common Plan”) Board of outstanding “2000 shares the 5,850,000 (the to Plan, up Plan purchase 1998 to options the stock nonqualified Under Plan”). “1998 Plans Option Stock years. in options stock of life expected current the representing maturity, constant with term. near the in dividends issuing follows: awards compensation stock-based-based volatility Historical years) (in life Expected rate interest Risk-free yield Dividend h e hr egtdaeaefi au fsokotosgatddrn h er ended years the during granted options stock of value fair average weighted share per The for accounting the addresses which Compensation,” “Stock 718-10, ASC FASB follows Company The h opn salse h 09SokIcniePa a mne n ettd h 20 ln)as Plan”) “2009 the restated, and amended (as Plan Incentive Stock 2009 the established Company The (the Plan Purchase Stock Restricted and Option Stock the established Company the 1998, During volatility Historical life Expected rate interest Risk-free yield Dividend ecito ftemtosue ntesgiiatasmtosue oetmt h arvleof value fair the estimate to used assumptions significant the in used methods the of description A ...... — %—% —% —% ...... h opn sshsoia aat siaeteepce ieo tc option. stock a of life expected the estimate to data historical uses Company The — h opn ss0 si a ee suddvdnsadde o anticipate not does and dividends issued never has it as 0% uses Company The — ...... OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES ...... h opn ssataln ieya rmgatdt odtrievolatility. determine to date grant from year five trailing a uses Company The — ...... 50505.0 5.0 5.0 ...... h opn sstemre il nUS rauyscrte tfv years five at securities Treasury U.S. on yield market the uses Company The — IEESN INC. LIVEPERSON, 105 35 84 66 81 68 48.2% – 46.8% 48.1% – 46.6% 48.4% – 43.5% .%–31 .%–21 .%–1.8% – 1.0% 2.1% – 1.7% 3.1% – 2.5% 0821 2016 2017 2018 eebr31, December ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side D Black
333
106
eebr3,2018). 31, December
mne 08Pa tkn noacutaloto rnsadohreut wr eteet through settlements award equity other and grants option all account into (taking Plan 2018 Amended
eebr3,21,apoiaey01mlinsae fcmo tc eersre o suneudrthe under issuance for reserved were stock common of shares million 0.1 approximately 2018, 31, December
0,0 hrs hrb eevn o sune20000sae fcmo tc nteageae sof As aggregate. the in stock common of shares 2,000,000 issuance for reserving thereby shares, 500,000
mne 08Pa nrae h ubro hrsatoie o suneudrtepa ya additional an by plan the under issuance for authorized shares of number the increased Plan 2018 Amended
opn’ or fDrcosaeddadrsae h 08Pa te“mne 08Pa”.The Plan”). 2018 “Amended (the Plan 2018 the restated and amended Directors of Board Company’s
qiybsdaad nrseto pt ,0,0 hrso omnsok nArl2,21,the 2018, 25, April On stock. common of shares 1,500,000 to up of respect in awards equity-based
08Pa,teBado ietr a su netv tc pin rnnulfe tc pin rother or options stock nonqualified or options stock incentive issue can Directors of Board the Plan, 2018
uigJnay21,teCmayetbihdteIdcmn ln(h 21 ln) ne the Under Plan”). “2018 (the Plan Inducement the established Company the 2018, January During
nueetPlan Inducement
con l hr ucae hog eebr3,2018). 31, December through purchases share all account
hrso omnsokwr eevdfrisac ne h mlyeSokPrhs ln(aiginto (taking Plan Purchase Stock Employee the under issuance for reserved were stock common of shares
,0,0 hrso omnsoki h grgt.A fDcme 1 08 prxmtl . million 0.9 approximately 2018, 31, December of As aggregate. the in stock common of shares 2,000,000
hrsatoie o suneudrtepa ya diinl10000 hrb eevn o issuance for reserving thereby 1,000,000, additional an by plan the under issuance for authorized shares
tc ucaePa fetv pi 0 07 h mne n ettdpa nrae h ubrof number the increased plan restated and amended The 2017. 30, April effective Plan Purchase Stock
a bando ue2 07 h opn’ or fDrcosaeddadrsae h 00Employee 2010 the restated and amended Directors of Board Company’s the 2017, 2, June on obtained was
,0,0 hrso omnsokiiilyrsre o sune ujc osokodrapoa,which approval, stockholder to Subject issuance. for reserved initially stock common of shares 1,000,000
nJn 00 h opn’ tchlesapoe h 00Epoe tc ucaePa with Plan Purchase Stock Employee 2010 the approved stockholders Company’s the 2010, June In
159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3 Plan Purchase Stock Employee
o suneudrte20 ln(aigit con l pineecsstruhDcme 1 2018). 31, December through exercises option all account into (taking Plan 2009 the under issuance for
so eebr3,21,apoiaey27mlinsae fcmo tc eermiigauthorized remaining were stock common of shares million 2.7 approximately 2018, 31, December of As
omnsoki h grgt.Otost cur omnsokgatdteene ae1-erterms. 10-year have thereunder granted stock common acquire to Options aggregate. the in stock common
suneudrtepa ya diinl40000 hrb eevn o sune2,1,4 hrsof shares 23,817,744 issuance for reserving thereby 4,000,000, additional an by plan the under issuance
fetv pi 0 07 h mne n ettdpa nrae h ubro hrsatoie for authorized shares of number the increased plan restated and amended The 2017. 30, April effective
nJn ,21,teCmaysBado ietr mne n ettdteAedd20 Plan 2009 Amended the restated and amended Directors of Board Company’s the 2017, 2, June On
0 tchles qiy–(continued) – Equity Stockholders’ 10.
OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 3 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 3 159263 TOPPAN live person AR_Text_Insert Sig 3 ] prxmtl 1. ilo n 37mlin epciey so eebr3,21,teewas of there period average 2018, weighted a 31, over share-based December recognized nonvested be to of to related expected As cost is years. respectively. compensation 2.7 cost approximately unrecognized million, That total arrangements. $3.7 of compensation million and $14.4 million approximately $16.1 approximately . 2018 31, December at exercisable Options vest to expected and vested Options 2018 31, December at outstanding Balance tc pinActivity Option Stock (continued) – Equity Stockholders’ 10. aac usadn tDcme 1 2017 31, December at outstanding Balance . 2017 31, December at exercisable Options vest to expected and vested Options 2017 31, December at outstanding Balance aac usadn tDcme 1 2016 31, December at outstanding Balance . 2016 31, December at exercisable Options vest to expected and vested Options 2016 31, December at outstanding Balance aac usadn tDcme 1 2015 31, December at outstanding Balance acle rexpired or Cancelled Exercised Granted acle rexpired or Cancelled Exercised Granted acle rexpired or Cancelled Exercised Granted h oa arvleo tc pin xrie uigteyaseddDcme 1 08ad21 was 2017 and 2018 31, December ended years the during exercised options stock of value fair total The umr fteCmayssokoto ciiyadwihe vrg xriepie follows: prices exercise average weighted and activity option stock Company’s the of summary A ...... 635 ...... OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES ...... IEESN INC. LIVEPERSON, ...... 107 i thousands) (in tc pinActivity Option Stock Options 310 10.70 (3,120) 165 11.49 (1,685) ,7 1.246 $25,367 $39,521 $43,348 4.64 6.28 $11.12 6.55 $11.89 3,278 $12.13 5,550 6,266 ,3 15.00 2,033 ,6 1.745 8,648 $ $13,197 $14,881 4.50 $10.71 5.49 $11.17 7,959 5.85 $10.75 5,163 $10.71 7,163 7,959 ,4 9.87 2,042 ,8 1.152 2,347 $ 2,529 $ 2,641 $ 5.27 $10.88 5.90 $11.31 7,769 6.05 $11.00 5,580 $10.88 7,348 7,769 ,4 $11.05 9,144 66 10.03 (606) 98 11.98 8.80 (998) (854) 35 5.66 (325) Weighted Exercise Average Price 7.32 em(nyears) (in Term Contractual Remaining Weighted Average i thousands) (in Aggregate Intrinsic Value ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 3 Side B Black
3
108
,7 1.3$35,357 $14.83 1,875 ...... vest to Expected
o-etdadottniga eebr3,21 ,9 1.1$50,756 $15.81 2,690 . . 2018 31, December at outstanding and Non-vested
30 .9— 9.49 (390) ...... Forfeited
31 .9— 9.49 (361) ...... Released
,6 70 — 17.02 2,568 Awarded......
.9$10,053 8.29 $ 873 ...... 2017 31, December at outstanding Balance
o-etdadottniga eebr3,21 7 .9$10,053 8.29 $ 873 2017 31, December at outstanding and Non-vested
24 .6— 8.46 (284) ...... Forfeited
33 .8— 8.48 (363) ...... Released
.6— 8.16 332 Awarded......
,8 .4$8,968 $ 8.44 $ 1,188 ...... 2016 31, December at outstanding Balance
o-etdadottniga eebr3,21 ,8 .4$8,968 $ 8.44 $ 1,188 2016 31, December at outstanding and Non-vested
11 00 — 10.01 (191) ...... Forfeited
34 03 — 10.31 (394) ...... Released
wre...... 571 Awarded...... 2— 6.32
,0 1.1$6,220 $ $10.31 1,202 ...... 2015 31, December at outstanding Balance
au PrShare) (Per Value i thousands) (in i thousands) (in
rn aeFair Date Grant ubro Shares of Number grgt arValue Fair Aggregate
egtdAverage Weighted
etitdSokUi Activity Unit Stock Restricted
rcsfollows: prices
umr fteCmaysrsrce tc nt “Ss)atvt n egtdaeaeexercise average weighted and activity (“RSUs”) units stock restricted Company’s the of summary A
etitdSokUi Activity Unit Stock Restricted
,6 .5$21 ,7 $11.12 3,278 $12.13 6.55 6,266
.62.1—— — 22.91 9.56 149 ...... $23.50 – $22.04
.51.03717.45 327 18.30 6.85 770 ...... $21.75 – $16.05
.21.31614.97 146 14.73 7.22 678 ...... $15.96 – $14.30
.21.16413.31 684 13.31 3.42 684 ...... $13.59 – $12.46
.31.5—— — 12.45 9.13 930 ...... $12.45 – $12.45
.11.93 12.29 39 12.29 2.31 39 ...... $12.32 – $12.09
...... 660 ...... $11.96 – $10.31 .71.63811.00 388 11.26 6.77
...... 640 ...... $10.13 – $9.90 .31.96610.09 636 10.09 5.33
...... 635 ...... $9.55 – $7.95 .092 8 9.18 488 9.20 5.90
...... $7.60 – $1.79 ,8 .7$70 7 6.70 $ 570 7.03 $ 6.37 1,081
159263 TOPPAN live person AR_Text_Insert Sig 3 ] 159263 TOPPAN live person AR_Text_Insert Sig 3
ag fEecs Prices Exercise of Range i thousands) (in ie(Years) Life i thousands) (in Price Price
Outstanding Contractual Shares Exercise Exercise
Shares Remaining ubrof Number Average Average
ubrof Number Average Weighted- Weighted-
Weighted-
pin usadn pin Exercisable Options Outstanding Options
eebr3,2018: 31, December
h olwn al umrzsifrainaotottnigadvse tc pin sof as options stock vested and outstanding about information summarizes table following The
0 tchles qiy–(continued) – Equity Stockholders’ 10.
OE OCNOIAE IACA STATEMENTS FINANCIAL CONSOLIDATED TO NOTES IEESN INC. LIVEPERSON,
159263 TOPPAN live person AR_Text_Insert Signature 3 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Stockholders’ Equity – (continued)
RSUs granted to employees generally vest over a three to four-year period, or upon achievement of certain performance conditions. As of December 31, 2018, total unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested RSUs was approximately $37.9 million and the weighted-average remaining vesting period was 2.8 years.
11. 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 in interest expense and penalties, if any, related to unrecognized tax benefits in general and administrative expenses. The Company recorded a valuation allowance against its U.S. and Australia deferred tax asset as it considered its cumulative loss in recent years as a significant piece of negative evidence. Since valuation allowances are evaluated on a jurisdiction by jurisdiction basis, we believe that the deferred tax assets related to LivePerson UK, Kasamba Israel, 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 onetime items. During the year ended December 31, 2018, there was an increase in the valuation recorded of $6.9 million.
Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company’s use of its federal net operating loss (“NOL”) carryforwards may be limited if the Company experiences an ownership change, as defined in Section 382 of the Code. Such an annual limitation could result in the expiration of the NOL carryforwards before utilization. Corresponding provisions of state law may limit the Company’s ability to utilize NOL carryforwards for state tax purposes. As of December 31, 2018, the Company had approximately $73.0 million of federal NOL carryforwards available to offset future taxable income. Included in this amount is $5.1 million of federal NOL carryovers from the Company’s acquisition of Proficient. Approximately $32.8 million of these federal NOL carryforwards were generated in taxable years ending on or before December 31, 2017 and will expire in various years through 2027. Federal NOL carryforwards generated in taxable years ending after December 31, 2017, do not expire, but generally may only offset up to 80% of federal taxable income earned in a taxable year. 2
109 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] $5,934 (1,979) (2,774) Year Ended December 31, Year Ended December 31, (28) (1,144) 99 (295) (1,289) 841 (309) (2,398) 1,852 3,163 3,458 15,622 3,690 2,087 2,345 2,900 2,424 2,085 3,235 1,568 3,104 3,0321,167 2,852 2,899 2,226 4,082 2018 2017 2016 2018 2017 2016 $(1,932) $ — $1,829 $(38,078) $(25,585) $(40,774) $(24,174) $(17,690) $(19,939) 110 LIVEPERSON, INC...... $ 858 $ 501 ...... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...... 67 47 27 ...... 686 ...... 14 35 912 ...... 230 337 453 (1) The provision for income taxes consists of the following (amounts in thousands): No additional provision has been made for U.S. income taxes on the undistributed earnings of its The domestic and foreign components of (loss) before provision for income taxes consist of the Total current income taxes Total provision for income taxes Total deferred income taxes Israel...... United Kingdom State and local Foreign Deferred income taxes: U.S. Federal State and local Current income taxes: U.S. Federal Israeli subsidiary, LivePerson Ltd.U.S. (formerly and HumanClick Ltd.), accumulatedDecember as 31, earnings such 2018. earnings of have been the taxed Company’s in the other foreign subsidiaries are immaterial through (1) Includes Japan, Italy, Singapore, Canada, and France Netherlands United States Germany...... Other Australia Foreign following (amounts in thousands): 11. Income Taxes – (continued) ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Black LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Income Taxes – (continued)
The difference between the total income taxes computed at the federal statutory rate and the provision for income taxes consists of the following: Year Ended December 31, 2018 2017 2016 Federal statutory rate ...... 21.00% 34.00% 34.00% State taxes, net of federal benefit ...... 3.30% 4.09% 3.24% Non-deductible expenses – ISO ...... 4.73% (0.78)% (1.85)% Global intangible low tax income inclusion ...... (7.99)% —% —% Non-deductible expenses – Other ...... (2.58)% (1.19)% (0.88)% Foreign tax rate differential ...... (1.34)% (1.97)% 0.89% Change in valuation allowance ...... (28.91)% 26.12% (53.55)% Stock based compensation ...... 6.10% —% —% Return to provision true-up adjustment ...... —% —% (9.22)% Effect of new tax legislation ...... —% (56.84)% —% Other ...... 2.09% (6.26)% (2.42)% Total provision for income taxes ...... (3.60)% (2.83)% (29.79)%
The effects of temporary differences and federal NOL carryforwards that give rise to significant portions of federal deferred tax assets and deferred tax liabilities at December 31, 2018 and 2017 are presented below (amounts in thousands): Year Ended December 31, 2018 2017 Deferred tax assets: Net operating loss carryforwards ...... $18,083 $ 8,093 Accounts payable and accrued expenses ...... 4,024 4,429 Non-cash compensation ...... 9,597 9,510 Intangibles amortization ...... 5,691 5,513 Allowance for doubtful accounts ...... 315 232 Total deferred tax assets ...... 37,710 27,777 Less valuation allowance ...... (30,185) (23,260) Deferred tax assets, net of valuation allowance ...... 7,525 4,517
Deferred tax liabilities: Property and equipment ...... (3,736) (2,010) Goodwill amortization and contingent earn-out adjustments ...... (4,172) (2,669) Total deferred tax liabilities ...... (7,908) (4,679) Net deferred tax liabilities ...... $ (383) $ (162)
We have income tax NOL carryforwards related to federal and Australian income tax carryforwards of
2 $74.2 million and $5.3 million respectively. The Australian NOLs can be carried forward indefinitely. $39.2 million of the federal NOL can be carried forward indefinitely. $6.0 million will expire between 2023 and 2026, and $28.9 million will expire between 2036 and 2037.
111 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] (445) — 4,924 $4,240 1,921 $4,924 2018 2017 (2,963) — Year Ended December 31, ...... 405 684 ...... — — 112 ...... $ ...... $ LIVEPERSON, INC...... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The tax years subject to examination by major tax jurisdictions include the years 2014 and forward for The Tax Cuts and Jobs Act makes broad and complex changes to the U.S. federal tax laws that affect The legislation reduced the U.S. corporate tax rate from the current rate of 35% to 21% for tax years ASC Topic 740-10 clarifies the accounting for uncertainty in income taxes recognized in the financial We believe that it is reasonably possible that approximately $0.5 million of currentA other reconciliation of remaining the beginning and ending amount of unrecognized tax benefits is as follows (in Gross increase for tax positions of prior years . . . Decrease due to settlement Gross increase for tax positions of current years . . . Decrease due to expiration of statue Unrecognized tax benefits balance at January 1 Gross unrecognized tax benefits at December 31 U.S states and New York City,for the certain years 2015 foreign jurisdictions. and The forwardthe for decrease Israeli U.S. of Federal, Tax and Authority $3.0 the for the million years years 2014 was 2013, and related 2014 to forward and the 2015 Tax settlement Reform of an audit with fiscal 2017, including,earnings but of not foreign subsidiaries limited thatJobs to is Act payable requiring also over eight establishes a years newreduction (the one-time tax of “Repatriation laws Tax”). repatriation the that The tax will U.S. Taxgeneral Cuts federal affect on elimination and corporate 2018 of certain income and U.S. tax unrepatriated laterprovision federal designed rate years, income to including, from taxes tax a but global on not intangible maximum certain low-taxed limited of income dividends to, (“GILTI”). 34% from a to foreign subsidiaries a and flatbeginning a rate after of new December 21%, a federal 31, NOL 2017. carryforwards Under generated20 the years as Tax following Cuts of their incurrence andfuture December and tax Jobs are 31, years. Act, expected 2017 Federal to the netgenerally be will Company’s operating available may to continue $32.8 losses fully only generated to million offsetDecember after be in taxable offset 2017 income 31, carried up will earned 2017, in forward be toincluding for carried the (a) 80% forward Company revaluing indefinitely, the of but revalued21% Company’s its federal taxable tax net deferred income rate, deferred tax resulting tax earned assets assets in in before and a valuation a allowance decreased liabilities using tax federal due the deferred year. to tax In these provision changes, the of quarter $10.1 ending million; (b) revaluing the statements in accordancerecognition with other threshold provisionsmeasurement contained and of within tax this arecognized, positions guidance. a measurement taken tax This or position topicauthorities. attribute must The expected prescribes amount be to a recognized more forlikely be is likely of measured than taken the as not in being the to$1.9 realized a financial largest million be upon amount and tax sustained $4.9 of ultimate statement return. million upon auditincluded benefit as For examination of in that settlement. recognition by those December is the The 31, the greater benefits Company’s 2018 and 2018 Company liability than taxing and and to had related 50% 2017, 2017. to respectively. be unrecognized Accrued unrecognized interest tax and tax penalties benefits benefits of were immaterial at Decemberunrecognized 31, tax benefits, each2019 as of a result which of are a individually lapse insignificant, of the may statute be of recognized limitations. thousands): by the end of 11. Income Taxes – (continued) ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Black
2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] ] 32 Page 113 LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Tax Cuts and Jobs Act creates a new requirement that certain income earned by a foreign The Company’s consolidated financial statements do not provide for any related tax liability on The Company previously filed an intellectual property suit against [24]7 Customer, Inc. in the Southern The Company routinely assesses all of its litigation and threatened litigation as toFrom the time probability of to time, the Company is involved in or subject to legal, administrative and regulatory 11. Income Taxes – (continued) Company’s federal valuationstrategies, allowance using resulting the(c) in 21% recognizing tax a aliabilities, rate, which federal federal are including deferred anticipated the to deferred taxassets be impact that benefit available tax as would of a of also sourceunaffected have benefit tax of by indefinite $2.0 the taxable lives; planning million to changes income and in uponfederal for (d) the reversal continuing income recognizing of 80% Tax a Cuts deferred tax operations of $1.2 and tax Pursuant on Jobs million to indefinite Act. of state the The SAB deferred lived new unremitted 118,accumulated tax $12.6 legislation deferred deficit provision the requires earnings tax in the Company million; of earnings Company estimatedthe to and preparation the its pay and profits. analysis tax As foreign of of on the subsidiaries required unremitted the information though fourth and earnings has quarter December is not of changed zero 31, from 2018, due the 2017. subsidiary the estimate. to must Company an has be overall finalized Global included Intangible in Low-Taxed Income, the orover federal GILTI) a is taxable nominal defined return income on asUnder of fixed the U.S. GAAP, assets. excess the the The of Company U.S. Companythe is a expects shareholder. effects to allowed foreign This of to subsidiaries be income make subject income theinto an to (called GILTI the accounting inclusion this Company’s policy measurement inclusion as choice of in aprovision of future its current as deferred years. either period taxes. a accounting expense, The for periodliabilities when Company at has incurred, cost, December elected or 31, and to 2018. factoring treat therefore, such the has effects amounts of not this considered the impactsamounts that of may be GILTI repatriatedindefinitely on from reinvested its in foreign operations operations deferred as outsidethe tax the the basis U.S. Company difference Accordingly, in intends no the for deferred foreign these taxes subsidiaries. earnings have been to provided be for 12. Legal Matters District of New York onmisappropriated March the 6, Company’s 2014 technology seekingbusiness damages to on information. develop the On competing groundsNorthern that products June District [24]7 and reverse of 22, engineered misusedfiled California and 2015, the a alleging second Company’s [24]7 patent patent infringement. infringement Customer,March suit On against 16, Inc. December the 2017, Company, filed 7, also the incases 2015, New the suit in Northern [24]7 York the District case against Customer Northern of was District Inc. the the California. voluntarily of On United transferred Company California States and for Patent all in consolidatedwere Office pre-trial with purposes. asserted in the Recent the the in rulings two Company’s by theagainst favor California both have patent [24]7 the invalidated cases. the Court in Trial and majority the forclaims of original filed the by [24]7 litigation Company’s [24]7 patents is intellectual are that property not entirely without and scheduled merit other and to intends claims allow to for asserted defend mediation. them vigorously. ultimately The incurring Company believes a the liability,Company assesses and the records likelihood of its loss best as probable. estimate of the ultimateproceedings, claims, loss demands in and investigations situationsclaims arising brought where in by the the or ordinary against courseother the of matters, Company with as business, including respect well direct tocontractual as indemnification intellectual property, claims obligation. contracts, The employment brought Company and againstliability accrues has the for been a Company’s incurred liability customers and whenrequired for it the in whom is amount both both the of the probable Company the determination that has loss a of can a probability be and reasonably the estimated. determination Significant as judgment to is whether a loss is reasonably 159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Black LIVEPERSON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Legal Matters – (continued)
estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosure related to such matter as appropriate and in compliance with ASC 450. 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. To the extent there is a reasonable possibility that the losses could exceed the amounts already accrued, the Company will, as applicable, adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made.
From time to time, third parties assert claims against the Company regarding intellectual property rights, privacy issues and other matters arising in the ordinary course of business. Although the Company cannot be certain of the outcome of any litigation or the disposition of any claims, nor the amount of damages and exposure, if any, that the Company could incur, the Company currently believes that the final disposition of all existing matters will not have a material adverse effect on our business, results of operations, financial condition or cash flows. In addition, in the ordinary course of business, the Company is also subject to periodic threats of lawsuits, investigations and claims. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.
13. Restructuring Costs The Company’s restructuring costs relate to wind-down and severance costs associated with re-prioritizing and reallocating resources to focus on areas showing high growth potential, as well as the termination of a large customer contract. In 2018, we undertook a restructuring related primarily to a reorganization in order to promote continued globalization of our technology operations, drive improvements in quality assurance of existing products and creation of new add-on features to LiveEngage. The expense associated with this restructuring was approximately $4.5 million, $2.6 million, and $2.4 million during the years ended December 31, 2018, 2017, and 2016, respectively, and is classified in the consolidated statements of operations as restructuring costs. The restructuring liability was approximately $1.0 million and $2.3 million as of December 31, 2018 and 2017, respectively, and is classified as accrued expenses and other current liabilities on the consolidated balance sheets. The Company expects to incur additional restructuring costs of approximately $0.3 million through December 31, 2019.
The following table presents the detail of the liability for the Company’s restructuring charges for the periods presented (amounts in thousands): December 31, December 31, 2018 2017 Balance, Beginning of the year ...... $2,338 $ 2,551 Severance and other associated costs ...... 4,468 648 Cash payments ...... (5,829) (2,807) Wind down costs of legacy platform ...... — 1,946 Balance, End of year ...... $ 977 $2,338 2
114 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] ] 32 Page (384) 2016 December 31, 2017 1,946 1,168 December 31, 2018 4,468 648 1,585 $4,468 $2,594 $2,369 December 31, 115 LIVEPERSON, INC...... — ...... $ — $ — $ ...... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the detail of expenses for the Company’s restructuring charges for the Total restructuring costs Severance and other associated costs Wind down costs of legacy platform Contract termination benefit 13. Restructuring Costs – (continued) periods presented (amounts in thousands): 159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Black Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not Applicable.
Item 9A. Controls and Procedures
Management’s Annual Report on Internal Control Over Financial Reporting Our management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) promulgated under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. Our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2018 based on the framework established in “Internal Control — Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that as of December 31, 2018, our internal control over financial reporting was effective based on those criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by BDO USA, LLP, an independent registered public accounting firm. Their attestation is included herein.
Limitations of the Effectiveness of Internal Control A control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, have been detected.
Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended December 31, 2018 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and Chief Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures Our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) promulgated under the Exchange Act, as of December 31, 2018. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2018 to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. 2
116 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
2
117
eray2,2019 25, February
e ok e York New York, New
s D S,LLP USA, BDO /s/
ihteplce rpoeue a deteriorate. may procedures or policies the with
htcnrl a eoeiaeut eas fcagsi odtos rta h ereo compliance of degree the that or conditions, in changes of because inadequate become may controls that
isaeet.As,poetoso n vlaino fetvns oftr eid r ujc oterisk the to subject are periods future to effectiveness of evaluation any of projections Also, misstatements.
eas fisihrn iiain,itra oto vrfnnilrprigmyntpeeto detect or prevent not may reporting financial over control internal limitations, inherent its of Because
aeilefc ntefnnilstatements. financial the on effect material
ieydtcino nuhrzdaqiiin s,o ipsto ftecmaysast htcudhv a have could that assets company’s the of disposition or use, acquisition, unauthorized of detection timely
aaeetaddrcoso h opn;ad()poieraoal suac eadn rvninor prevention regarding assurance reasonable provide (3) and company; the of directors and management
eepsadepniue ftecmayaebigmd nyi codnewt uhrztosof authorizations with accordance in only made being are company the of expenditures and receipts
rprto ffnnilsaeet nacrac ihgnrlyacpe conigpicpe,adthat and principles, accounting accepted generally with accordance in statements financial of preparation
opn;()poieraoal suac httascin r eodda eesr opermit to necessary as recorded are transactions that assurance reasonable provide (2) company;
ht nraoal eal cuaeyadfil elc h rnatosaddsoiin fteast fthe of assets the of dispositions and transactions the reflect fairly and accurately detail, reasonable in that,
iaca eotn nldstoeplce n rcdrsta 1 eti otemitnneo records of maintenance the to pertain (1) that procedures and policies those includes reporting financial
upssi codnewt eeal cetdacutn rnils opn’ nenlcnrlover control internal company’s A principles. accounting accepted generally with accordance in purposes
eadn h eiblt ffnnilrprigadtepeaaino iaca ttmnsfrexternal for statements financial of preparation the and reporting financial of reliability the regarding
opn’ nenlcnrloe iaca eotn sapoesdsge opoieraoal assurance reasonable provide to designed process a is reporting financial over control internal company’s A
eiiinadLmttoso nenlCnrloe iaca Reporting Financial over Control Internal of Limitations and Definition
eesr ntecrusacs ebleeta u ui rvdsaraoal ai o u opinion. our for basis reasonable a provides audit our that believe We circumstances. the in necessary
ae nteasse ik u ui loicue efrigsc te rcdrsa econsidered we as procedures other such performing included also audit Our risk. assessed the on based
aeilwans xss n etn n vlaigtedsg n prtn fetvns fitra control internal of effectiveness operating and design the evaluating and testing and exists, weakness material
nlddotiiga nesadn fitra oto vrfnnilrprig sesn h ikta a that risk the assessing reporting, financial over control internal of understanding an obtaining included
hte fetv nenlcnrloe iaca eotn a anandi l aeilrset.Oraudit Our respects. material all in maintained was reporting financial over control internal effective whether
CO.Toesadrsrqieta epa n efr h ui ooti esnbeasrneabout assurance reasonable obtain to audit the perform and plan we that require standards Those PCAOB.
ecnutdoradto nenlcnrloe iaca eotn nacrac ihtesadrso the of standards the with accordance in reporting financial over control internal of audit our conducted We
euain fteScrte n xhneCmiso n h PCAOB. the and Commission Exchange and Securities the of regulations
ihrsett h opn nacrac ihUS eea euiislw n h plcberlsand rules applicable the and laws securities federal U.S. with accordance in Company the to respect with
u ui.W r ulcacutn imrgsee ihtePABadaerqie ob independent be to required are and PCAOB the with registered firm accounting public a are We audit. our
epniiiyi oepesa pno nteCmaysitra oto vrfnnilrprigbsdon based reporting financial over control internal Company’s the on opinion an express to is responsibility
h copnigIe A aaeetsRpr nItra oto vrFnnilRprig Our Reporting. Financial over Control Internal on Report Management’s 9A, Item accompanying the
eotn n o t seseto h fetvns fitra oto vrfnnilrprig nlddin included reporting, financial over control internal of effectiveness the of assessment its for and reporting
h opn’ aaeeti epnil o anann fetv nenlcnrloe financial over control internal effective maintaining for responsible is management Company’s The
ai o Opinion for Basis
h eae oe n u eotdtdFbur 5 09epesda nulfe pno thereon. opinion unqualified an expressed 2019 25, February dated report our and notes related the
tchles qiy n ahfosfrec ftetreyasi h eideddDcme 1 08 and 2018, 31, December ended period the in years three the of each for flows cash and equity, stockholders’
eebr3,21 n 07 h eae osldtdsaeet ficm n opeesv income, comprehensive and income of statements consolidated related the 2017, and 2018 31, December
or Uie tts “CO”,tecnoiae aac heso h opn n usdaisa of as subsidiaries and Company the of sheets balance consolidated the (“PCAOB”), States) (United Board
159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2 Oversight Accounting Company Public the of standards the with accordance in audited, have also We
so eebr3,21,bsdo h OOcriteria COSO the on based 2018, 31, December of as .
pno,teCmaymitie,i l aeilrset,efcieitra oto vrfnnilreporting financial over control internal effective respects, material all in maintained, Company the opinion,
yteCmiteo pnoigOgnztoso h rawyCmiso te“OOciei”.I our In criteria”). “COSO (the Commission Treadway the of Organizations Sponsoring of Committee the by
eebr3,21,bsdo rtraetbihdin established criteria on based 2018, 31, December issued nenlCnrl—Itgae rmwr (2013) Framework Integrated — Control Internal
ehv uie ieesn n.s(h Cmays)itra oto vrfnnilrpriga of as reporting financial over control internal “Company’s”) (the Inc.’s LivePerson, audited have We
pno nItra oto vrFnnilReporting Financial over Control Internal on Opinion
e ok e York New York, New
ieesn Inc. LivePerson,
oteBado ietr n Stockholders and Directors of Board the To EOTO NEEDN EITRDPBI CONIGFIRM ACCOUNTING PUBLIC REGISTERED INDEPENDENT OF REPORT
159263 TOPPAN live person AR_Text_Insert Signature 2 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] ] 32 Page IdpnetRgsee ulcAcutn imFe n r-prvlPlce n rcdrs nthe in Stockholders. Procedures” of and Meeting Policies Annual Pre-Approval 2019 our and for Fees statement proxy Firm definitive Accounting Public Registered “Independent Services and Fees Accountant Principal proxy 14. definitive Item the in Stockholders. Independence” of “Director Meeting Annual and 2019 our Transactions” for Related statement and Relationships “Certain Independence Director and Transactions, Related and Relationships Certain 13. Item 2019 our for statement proxy definitive the Stockholders. in of Plans” “Securities Meeting Compensation and Annual Equity Change-in-Control” Stockholder Under or Related Issuance Termination for Upon and Authorized Payments “Potential Management Securities,” of and “Ownership Owners Beneficial Certain of Ownership Security 12. and Item Compensation” our for Director statement and proxy definitive “Executive Stockholders. the 10-K), of in Form Participation” Meeting Annual Insider on 2019 and Report Interlocks Annual Committee this “Compensation be in shall information furnished (which Report” deemed Committee “Compensation Analysis,” and herein. Discussion reference “Compensation by incorporated Compensation not Executive be is not and should Ethics. 11. and 10-K Item of not Form Code is our site to on amendments web any Report Company’s website this the Annual on on post this information will Company the of and hyperlink, part a considered at: as available is function Ethics to of intended Governance.” Code Relations/Corporate Our officers. “Investor proxy financial under definitive senior other the and in officer, executive appeared which procedures, such Stockholders. of of disclosure Meeting Annual last 2018 our our for Governance since statement proxy Directors Corporate definitive of Board the and in Conduct Compliance” Reporting “Board Stockholders. of Officers,” of Ownership Meeting “Executive Annual “Codes Beneficial Directors,” 2019 our Committee,” 16(a) for of statement “Section Election Audit — — and Meeting Meetings Documents” Annual and at Considered Committees be to “Matters Governance Corporate and Officers Executive Directors, 10. Item Information Other 9B. Item h nomto eurdb hsIe 4i noprtdb eeec otescincaptioned section the to reference by incorporated is 14 Item this by required information The captioned sections the to reference by incorporated is 13 Item this by required information The captioned sections the to reference by incorporated is 12 Item this by required information The captioned sections the to reference by incorporated is 11 Item this by required information The principal our is who Officer, Executive Chief our to applies that Ethics of Code a adopted have We our to nominees recommend may stockholders which by procedures the to changes no been have There captioned sections the to reference by incorporated is 10 Item this by required information The None. Matters ATIII PART 118 h opn’ e ieadespoie bv snot is above provided address site web Company’s The www.liveperson.com The 159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Black
222
119
None.
tm1.Fr 0KSummary 10-K Form 16. Item
nulRpr nFr 10-K. Form on Report Annual
noprtdb eeec oteEhbtIdximdaeypeeigteehbt tahdt this to attached exhibits the preceding immediately Index Exhibit the to reference by Incorporated .Exhibits. 3.
159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2 None.
.FnnilSaeet Schedules. Statements Financial 2.
nulRpr nFr 10-K. Form on Report Annual
noprtdb eeec oteidxo osldtdfnnilsaeet nlddi tm8o this of 8 Item in included statements financial consolidated of index the to reference by Incorporated
.FnnilStatements. Financial 1.
h olwn ouet r ie spr fti nulRpr nFr 10-K: Form on Report Annual this of part as filed are documents following The
tm1.Ehbt n iaca ttmn Schedules Statement Financial and Exhibits 15. Item ATIV PART
159263 TOPPAN live person AR_Text_Insert Signature 2 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT
2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] indblwb h olwn esn nbhl fteRgsrn n ntecpcte niae on indicated capacities the in and Registrant the of behalf on persons following 2019. 25, the February by below signed mne,teRgsrn a uycue hsrpr ob indo t eafb h undersigned, the by behalf its on signed be to report this 2019. caused 25, February duly on authorized, has duly thereunto Registrant the amended, ila .Wesemann G. William Wesemann G. William /s/ Mossler Fred Mossler Fred /s/ Layfield Jill Layfield Jill /s/ Lavan C. Kevin Lavan C. Kevin /s/ Block Peter Block Peter /s/ Carlough J. Daryl Carlough J. Daryl /s/ Greiner E. Christopher Greiner E. Christopher /s/ LoCascio P. Robert LoCascio P. Robert /s/ usatt h eurmnso h euiisEcag c f13,a mne,ti eothsbeen has report this amended, as 1934, of Act Exchange Securities the of requirements the to Pursuant usatt h eurmnso eto 3o 5d fteScrte xhneAto 94 as 1934, of Act Exchange Securities the of 15(d) or 13 Section of requirements the to Pursuant ] 32 Page intr Title(s) Signature Director Director Director Director Director Officer) Accounting Controller (Principal Corporate and Global President, Vice Senior Officer) Financial (Principal Officer Financial Chief Directors of Board the Officer) Executive of (Principal Chairman and Officer Executive Chief SIGNATURES y s oetP LoCascio P. Robert /s/ By: INC. LIVEPERSON, 120 il:CifEeuieOfficer Executive Chief Title: LoCascio P. Robert Name: 159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Black
2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] 01b*20 tc netv ln(mne n ettda fJn ,21)(noprtdby (incorporated 2012) 7, June of as restated and (amended Plan Incentive Stock 2009 10.1(b)* 01a*20 tc netv ln(noprtdb eeec oEhbt9. oLivePerson’s to 99.1 Exhibit to reference by (incorporated Plan Incentive Stock 2009 10.1(a)* 08 mlyetAreetbtenLvPro n rnVnuo,dtda fFbur 22, February of as dated Vanounou, Eran and LivePerson between Agreement Employment on Report Current LivePerson’s to 10.1 Exhibit to reference by 2006 (incorporated Plan 25, Incentive October 10.8* of as dated Greenberg, L. Monica and LivePerson 10.7* 2011 between Agreement 27, of Directors March and Officers Executive of with into entered as Agreement 10.6* Indemnification dated of Form Murphy, of Dan as dated and LoCascio, LivePerson P. between 10.5* Robert Agreement and to LivePerson reference between by Agreement (incorporated Employment Plan 10.4* Purchase Stock Employee 2010 10.3* Inc. LivePerson, 10.2* ubrDescription Number . eodAeddadRsae eitainRgt gemn,dtda fJnay27, January of as dated Agreement, Rights Registration Restated and Amended Second identically-numbered the the to to reference reference by (incorporated by certificate stock (incorporated common 4.2 amended Specimen as Bylaws, Restated and Amended Second to reference 4.1 by (incorporated Incorporation of Certificate Restated Inc. and LivePerson, Amended 3.2 Fourth among 2014, 5, November of as dated Merger, 3.1 Plan and Agreement Soho Inc., LivePerson, among 2006, 22, June of as dated Merger, 2.2 of Plan and Agreement 2.1 ae hrt sIvsos n oetLCsi icroae yrfrnet the to reference by (incorporated LoCascio signature the Robert on and named 333-96689) entities No. Investors, Registration and to exhibit persons as identically-numbered several the thereto LivePerson, pages among and by 2000, No. (Registration amended as S-1, 333-96689”)) No. Form (“Registration on 333-96689) Statement Registration LivePerson’s to exhibit 10-K) Form 2000 the 10-K”)) to Form exhibit identically-numbered “2000 (the 2001 30, March fiscal filed the and for 2000 10-K 31, Form December on ended Report year Annual LivePerson’s to exhibit identically-numbered the 8-K Form on LLC Report 000-30141) QP, No. Current LivePerson’s (File II 2014 the Fund 12, to Growth November 2.1 on Fulcrum filed Exhibit and to LLC Shareholders’ reference Once!, by At (incorporated as Contact LLC, Freishtat Lightning Catalyst Gregg 2006) 22, and Current June on the filed in Inc. 8-K exhibit Form numbered identically on Report the Systems, to reference by Proficient (incorporated Representative Corp., Acquisition 04icroae yrfrnet xii 02t ieesnsQatryRpr on Report Quarterly LivePerson’s to 10.2 2014) Exhibit 9, May on to filed 10-Q Form reference by 2014(incorporated 2011) 28, April on filed 8-K Form 2012) 13, March for filed 10-K and Form 2011 on 31, Report December Annual LivePerson’s ended to year 10.8 the Exhibit to reference 2012) by 13, (incorporated on March Report filed and Annual 2011 LivePerson’s 31, to December ended 10.6 year Exhibit the for to 10-K Form reference by (incorporated LivePerson 2012) 13, March for filed 10-K and Form 2011 on 31, Report December Annual LivePerson’s ended to year 10.5 the Exhibit to reference by (incorporated 333-96689) No. Registration to 10.1 Exhibit to reference by (incorporated 19, 1999 August 1, January on filed S-8 Form on Statement 000-30141)) Registration No. LivePerson’s (File 2010 the to 99.1 Exhibit 2012 to 8, June on 10.1 filed 8-K Exhibit Form on Report 000-30141)) to No. Current LivePerson’s (File to reference 99.1 Exhibit by to 000-30141)) reference No. (incorporated (File 2011 Plan 6, May on Incentive filed Agreements 10-Q Grant Form Stock on of Report Forms Quarterly 2009 and LivePerson’s 2009) 9, the June on under filed S-8 Form on Statement Registration XII INDEX EXHIBIT 121 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side D Black
222
122
0.E†XR aooyEtninDfnto ikaeDocument Linkbase Definition Extension Taxonomy XBRL 101.DEF†
0.A†XR aooyEtninCluainLnbs Document Linkbase Calculation Extension Taxonomy XBRL 101.CAL†
0.C†XR aooyEtninShm Document Schema Extension Taxonomy XBRL 101.SCH†
0.N†XR ntneDocument Instance XBRL 101.INS†
usatt eto 0 fteSrae-xe c f2002 of Act Sarbanes-Oxley the of 906 Section to pursuant
22*Criiainb rnia iaca fie usatt 8USC eto 30 sadopted as 1350, Section U.S.C. 18 to pursuant officer financial principal by Certification 32.2**
usatt eto 0 fteSrae-xe c f2002 of Act Sarbanes-Oxley the of 906 Section to pursuant
21*Criiainb he xctv fie usatt 8USC eto 30 sadopted as 1350, Section U.S.C. 18 to pursuant Officer Executive Chief by Certification 32.1**
dpe usatt eto 0 fteSrae-xe c f2002 of Act Sarbanes-Oxley the of 302 Section to pursuant adopted
12Criiainb rnia iaca fie usatt xhneAtRl 3-4a,as 13a-14(a), Rule Act Exchange to pursuant officer financial principal by Certification 31.2
dpe usatt eto 0 fteSrae-xe c f2002 of Act Sarbanes-Oxley the of 302 Section to pursuant adopted
11Criiainb he xctv fie usatt xhneAtRl 3-4a,as 13a-14(a), Rule Act Exchange to pursuant Officer Executive Chief by Certification 31.1
31Cneto D S,LLP USA, BDO of Consent 23.1
11Subsidiaries 21.1
o 000-30141)) No.
eoto om1- o h ure ne ue3,21,fldo uut6 08((File 2018 6, August on filed 2018, 30, June ended quarter the for 10-Q Form on Report
fArl3,21 icroae yrfrnet xii 02t ieesnsQuarterly LivePerson’s to 10.2 Exhibit to reference by (incorporated 2018 30, April of
01*Sprto gemn eea ees ewe ieesnadEa aonu ae as dated Vanounou, Eran and LivePerson between Release General Agreement Separation 10.18*
uut6 08(Fl o 000-30141)) No. ((File 2018 6, August
ieesnsQatryRpr nFr 0QfrteqatreddJn 0 08fldon filed 2018 30, June ended quarter the for 10-Q Form on Report Quarterly LivePerson’s
01*Ln emIcniePa ae uy3,21 icroae yrfrnet xii 01to 10.1 Exhibit to reference by (incorporated 2018 31, July dated Plan Incentive Term Long 10.17*
o h ure ne ac 1 08 ie a ,21 Fl o 000-30141)) No. (File 2018 8, May filed 2018, 31, March ended quarter the for
(noprtdb eeec oEhbt1. oLvPro’ urel eoto om10-Q Form on Report Quarterly LivePerson’s to 10.2 Exhibit to reference by ((incorporated
01*AreetbtenLvPro n hi rie,dtda fFbur 9 2018 19, February of as dated Greiner, Chris and LivePerson between Agreement 10.16*
o h ure ne ac 1 08 ie a ,21 Fl o 000-30141)) No. (File 2018 8, May filed 2018, 31, March ended quarter the for
icroae yrfrnet xii 01t ieesnsQatryRpr nFr 10-Q Form on Report Quarterly LivePerson’s to 10.1 Exhibit to reference by (incorporated
01*AreetbtenLvPro n lxSiel,dtda fJnay1,2018 12, January of as dated Spinelli, Alex and LivePerson between Agreement 10.15*
o 000-30141)) No.
eoto om1- o h ereddDcme 1 07 ie nMrh1,21 (File 2018 15, March on filed 2017, 31, December ended year the for 10-K Form on Report
eebr2,21 icroae yrfrnet xii 01 oLvPro’ Annual LivePerson’s to 10.15 Exhibit to reference by (incorporated 2017 27, December
01*AeddEpomn gemn ewe ieesnadRbr oaco ae sof as dated LoCascio, Robert and LivePerson between Agreement Employment Amended 10.14*
ac 5 08(ieN.000-30141)) No. (File 2018 15, March
ieesnsAna eoto om1- o h ereddDcme 1 07 ie on filed 2017, 31, December ended year the for 10-K Form on Report Annual LivePerson’s
01*Idcmn lndtdJnay1,21 icroae yrfrnet xii 01 to 10.14 Exhibit to reference by (incorporated 2018 19, January dated Plan Inducement 10.13*
eebr3,21,fldo ac 5 08(ieN.000-30141)) No. (File 2018 15, March on filed 2017, 31, December
eeec oEhbt1.3t ieesnsAna eoto om1- o h erended year the for 10-K Form on Report Annual LivePerson’s to 10.13 Exhibit to reference
159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2 by (incorporated Locascio Robert for Agreement Award Unit Stock Restricted of Form 10.12*
eebr3,21,fldo ac 5 08(ieN.000-30141)) No. (File 2018 15, March on filed 2017, 31, December
xii 01 oLvPro’ nulRpr nFr 0Kfrteya ended year the for 10-K Form on Report Annual LivePerson’s to 10.12 Exhibit
01*Fr fRsrce tc ntAadAreet(noprtdb eeec to reference by (incorporated Agreement Award Unit Stock Restricted of Form 10.11*
ac 5 08(ieN.000-30141)) No. (File 2018 15, March
ieesnsAna eoto om1- o h ereddDcme 1 07 ie on filed 2017, 31, December ended year the for 10-K Form on Report Annual LivePerson’s
upy ae so eray9 08(noprtdb eeec oEhbt1.1to 10.11 Exhibit to reference by (incorporated 2018 9, February of as dated Murphy,
01*Aedett eaainAreetGnrlRlaebtenLvPro n Daniel and LivePerson between Release General Agreement Separation to Amendment 10.10*
eoto om1- ie nNvme ,2017) 9, November on filed 10-Q Form on Report
oebr9 07(noprtdb eeec oEhbt1. B oLvPro’ Quarterly LivePerson’s to (B) 10.5 Exhibit to reference by (incorporated 2017 9, November
09 eaainAreetGnrlRlaebtenLvPro n ailMrh,dtda of as dated Murphy, Daniel and LivePerson between Release General Agreement Separation 10.9* ubrDescription Number
159263 TOPPAN live person AR_Text_Insert Signature 2 Side C YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT 2 159263 TOPPAN live person AR_Text_Insert Sig 2 ] usatt plcbescrte asadrgltos h eitati emdt aecmle with complied have to deemed is Registrant the regulations, and laws securities applicable to Pursuant Form on Report Annual † the accompany 32.2 Exhibit and 32.1 Exhibit as attached certifications The arrangement or plan compensatory ** or contract Management * 0.A†XR aooyEtninLblLnbs Document Linkbase Label Extension Taxonomy XBRL 101.LAB† 0.R†XR aooyEtninPeetto ikaeDocument Linkbase Presentation Extension Taxonomy XBRL 101.PRE† ubrDescription Number r emdntfldfrproe fscin1 fteScrte xhneAto 94 samended, as 1934, of amended, Act as Exchange 1933, Securities of sections. the these Act of under Securities liability 18 the to section subject of registration not the of 12 are a purposes otherwise or as of for and 11 part filed long sections or not filed with of deemed as comply not purposes are to deemed laws for promptly fail are prospectus files and securities files or data requirements data interactive statement federal interactive submission the These that the the aware requirements. with becoming not submission comply after of the is files to and data provisions attempt exhibits interactive faith the such anti-fraud good amends in a any files made data under has interactive Registrant liability of submission to the subject to by relating “filed” obligation amended. deemed reporting as be 1934, the not of shall Act Exchange and Securities 2002 the of of 18 Act Section Sarbanes-Oxley of the purposes for of Company 906 the Section to pursuant 10-K 123 ] 32 Page 159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Yellow159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Magenta159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Cyan159263 TOPPAN live person AR_Text_Insert Signature 2 Side B Black
2
[This page intentionally left blank.] blank.] left intentionally page [This
159263 TOPPAN live person AR_Text_Insert Sig 2 ] 159263 TOPPAN live person AR_Text_Insert Sig 2
159263 TOPPAN live person AR_Text_Insert Signature 2 Side A YellowMagentaCyanBlack ] 32 Page DTP SB Hcho 8.25 x 10.75 (35) .25 HT C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75% C+M K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% M+Y K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% C+Y K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75% C+M K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% M+Y K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% C+Y K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75
159263 TOPPAN live person AR_Text_Insert Signature 1 Side B 6th5thBlackYellowMagentaCyan ] 4 Page In C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75% C+M K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% M+Y K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% C+Y K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75% C+M K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% M+Y K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% C+Y K C M Y 5th 6th 25% 50% K C M Y S1 S2 75% BAL K C M Y 5th 6th 25% 50% K C M Y 5th 6th 75% 0 K C M Y 5th 6thh 25% 50% K C M Y 5th 6th 75% 0 K C M Y S1 S2 25% 50% K C M Y 5th 6th 75
Select LivePerson Customers
Aramark, one of the world's largest hospitality “The integration of Apple Business Chat with the ordering process is not companies, works with LivePerson to only fan-friendly and easily accessible, it’s reflective of fans’ changing deliver innovative and exceptional customer expectations and behaviors," said Kevin Kearney, District Manager, experiences in the stadium, via the messaging Aramark’s Sports & Entertainment division." channels consumers know and love.
Fifth Third Bank, one of the leading North "At Fifth Third we believe our customers should be able to bank with us American banks, partners with LivePerson when they want and how they want," says Doug Smith, who heads digital to provide exceptional and engaging banking initiatives for Fifth Third’s Consumer Bank. “Today's consumers expect experiences for their customers across digital us to meet them where they are. LivePerson allows us to deliver banking and messaging channels — making it easy for services across messaging and digital channels while also providing the their consumers to bank and save time. personalization and exceptional service our customers have come to expect from Fifth Third."
KDDI, a leading Japanese telecommunications “Our focus is on providing an exceptional customer experience. We are provider, uses LivePerson to transform customer thrilled to support Apple Business Chat through LivePerson's LiveEngage connections by giving customers the ability to platform, which gives us a powerful and engaging connection with our connect with KDDI through messaging—just as customers," said Yasuhisa Yamada, Associate Executive Director of they would their friends and family. Product & Customer Service Sector of KDDI. "Apple Business Chat makes communicating with 'KDDI au' as easy as messaging a friend, so we expect it will quickly become everyone's preferred customer service channel.”
T-Mobile’s Team of Experts use LivePerson’s “The frustration of endless robotic phone menus and transfers from rep to LiveEngage platform to connect with customers rep can ruin a customer's experience – so we ended it. Now with T-Mobile on the messaging platforms that they prefer Team of Experts, our customers can get assistance when and how and use most. they want to – including via messaging," said Nick Drake, executive vice president of marketing and digital experience at T-Mobile. "We were one of the first companies to launch asynchronous messaging in 2016, and we've continued to build out this capability across a variety of digital channels. Our customers love the convenience of messaging us like they do with their friends – it's the primary way most of us communicate every single day.”
159263 TOPPAN live person AR_Text_Insert Signature 1 Side A 6th5thBlackYellowMagentaCyan ] 4 Page Out DTP SB To Match Hant 8.25x10.75 (25 X38) .25 HT About LivePerson Board of Directors Executive Officers
LivePerson, Inc. (NASDAQ: LPSN) makes life easier by transforming how people communicate with brands. LiveEngage, the Robert P. LoCascio Robert P. LoCascio Company’s enterprise-class, cloud-based platform was designed for Conversational Commerce, enabling businesses and Chairman of the Board, Chairman of the Board, consumers to connect through conversational interfaces, such as in-app and mobile messaging, while leveraging bots and Chief Executive Officer Chief Executive Officer Artificial Intelligence (AI) to increase efficiency. LivePerson, Inc. More than 18,000 businesses, including Adobe, EE, HSBC, IBM, L'Oreal, Orange, PNC, and The Home Depot use our Christopher Greiner Conversational Commerce solution to orchestrate humans and AI, at scale, and create a convenient and deeply Peter Block Executive Vice President, personal relationship. Independent Consultant and Chief Financial Officer Partner in Designed Learning Inc. LivePerson is headquartered in New York City, with U.S. offices in Alpharetta (GA), Austin (TX), Mountain View (CA), San Rafael Alexander Spinelli (CA), Seattle (WA), and international offices in Amsterdam, Berlin, London, Mannheim, Melbourne, Milan, Paris, Ra'anana (Israel), Kevin C. Lavan Reading (UK), Sydney, Tel Aviv, and Tokyo. Executive Vice President, CFO, Autoclear LLC Global Chief Technology Officer
Jill Layfield Monica L. Greenberg Co-founder & CEO, Tamara Mellon Brand Executive Vice President, Business Affairs and General Counsel Total revenue (in millions) Annual revenue per user (in thousands) Fred Mossler Independent Consultant Daryl J. Carlough Senior Vice President, $65.7 $285 $61.7 $64.2 $270 William G. Wesemann Global and Corporate Controller $58.2 $255 $240 Independent Consultant
Shareholders Information
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Corporate Headquarters Counsel LivePerson, Inc. Fried, Frank, Harris, Shriver & Jacobson LLP ENTERPRISE ADOPTION OF MESSAGING 475 Tenth Avenue One New York Plaza New York, NY 10004 40% New York, NY 10018
20% Investor Relations Independent Registered 50% 200+ 1,100 Public Accounting Firm OF MESSAGING BRANDS POWERING EMPLOYEES Copies of our Annual Report on Form 10-K for the 0 CONVERSATIONS CONVERSATIONAL GLOBALLY 2016 2017 2018 year ended December 31, 2018 are available free BDO USA, LLP USE AUTOMATION COMMERCE ON LIVEENGAGE of charge, upon request to: 100 Park Avenue *ARPU is for enterprise and midmarket customers New York, NY 10017 Investor Relations LivePerson, Inc. Transfer Agent 475 Tenth Avenue American Stock Transfer & Trust Company New York, NY 10018 6201 15th Avenue Safe Harbor Statement Brooklyn, NY 11219 Statements in this report regarding LivePerson that are not historical facts are forward-looking statements and are subject to risks and uncertainties that Stock Listing could cause actual future events or results to differ materially from such statements. Any such forward-looking statements, including but not limited to financial Our common stock is listed on the Nasdaq Global Company Information on the Web guidance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. It is routine for our internal projections and Select Market and Tel Aviv Stock Exchange under expectations to change as the quarter and year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which Current information about LivePerson, press releases the symbol “LPSN” we base our expectations may change. Although these expectations may change, we are under no obligation to inform you if they do. Actual events or results and investor information are available on our website may differ materially from those contained in the projections or forward-looking statements. Readers are referred to the reports and documents filed by us from at www.liveperson.com time to time with the U.S. Securities and Exchange Commission, including the Annual Report on Form 10-K enclosed herein, for a discussion of risks and other important factors that could cause actual results to differ from those discussed in the projections or the forward-looking statements. Annual Report 2018
OUR MISSION IS TO MAKE LIFE EASIER BY TRANSFORMING HOW PEOPLE COMMUNICATE WITH BRANDS.
LivePerson 475 10th Ave, 5th Floor, New York, NY 10018 ©2019 LivePerson, Inc. All rights reserved. BRINGING MESSAGING TO THE MAINSTREAM