LIVEPERSON INC Q2 FY2022 earnings

LivePerson's second quarter revenue rose 11% year over year to $132.6 million. The Business segment grew 12% to $123.4 million, while Consumer slipped 7% to $9.1 million. For the six months ended June 30, 2022, total revenue was $262.8 million, up from $227.5 million a year earlier. Monthly hosted Business services accounted for 72% of total revenue in the quarter, down from 80% a year earlier, while professional services rose to 22% of total revenue from 12%. The company signed 104 deals in the quarter, including 45 new logos and five seven-figure contracts. Trailing-twelve-month average revenue per enterprise and mid-market customer reached $660,000, up 23% from roughly $535,000 a year earlier. Management said new logo signings rose 55% year over year and 73% sequentially.

Profitability moved sharply the other way. Total costs and expenses increased 52% to $202.8 million from $133.2 million. The operating loss widened to $70.2 million from $13.6 million in the prior-year quarter, and the operating margin fell to -53.0% from -11.4%. Net loss was $75.4 million, or $0.98 per diluted share, compared with a net loss of $21.1 million, or $0.31 per share, a year earlier. Restructuring costs of $10.9 million and stock-based compensation of $36.5 million both weighed on the quarter. Adjusted EBITDA, a non-GAAP measure, was negative $5.5 million versus positive $13.4 million a year ago, and adjusted operating loss was $12.6 million against adjusted operating income of $6.4 million.

Cash generation reversed. Operating cash flow was negative $41.5 million for the quarter, down from positive $5.4 million a year earlier, and negative $64.4 million for the six months versus positive $30.6 million. Capital expenditures were $12.1 million in the quarter, down 3.8% year over year. Free cash flow, a non-GAAP measure, was negative $53.6 million for the quarter compared with negative $7.2 million a year ago. Cash and cash equivalents stood at $425.9 million at June 30, 2022, down from $521.8 million at December 31, 2021. Deferred revenue was $110.6 million, up 2.7% year over year, and remaining performance obligations were $408.8 million, up 18.2%. The company carried an accumulated deficit of about $607.4 million.

Guidance came down on revenue and held on adjusted EBITDA. For the third quarter, LivePerson guides revenue of $120.5 million to $123.6 million, or 1.8% to 4.5% growth year over year, and adjusted EBITDA of $0 to $4.3 million, a 0% to 3.5% margin. For the full year 2022, revenue guidance was cut to $507.1 million to $518.3 million, or 8% to 10% growth, from a prior range of $544.8 million to $563.3 million. Full-year adjusted EBITDA guidance was maintained at $1.0 million to $10.0 million, a 0.0% to 2.0% margin. The company raised non-GAAP gross margin guidance to 72% to 74% for the full year 2022 and the third quarter.

Management tied the revenue cut to deliberate moves: eliminating low-quality revenue and reducing costs. The company said the expense reductions and the elimination of low-quality revenue will weigh on near-term growth but should support better gross and operating margins over time. It also reaffirmed an expectation of positive cash flow in the fourth quarter. The quarter included a restructuring initiative that reoriented the global product and engineering organization and shifted spending toward customer success and go-to-market. Risks remain. Revenue retention for enterprise and mid-market customers was just below the 105% to 115% target range. The company flagged potential elongation of sales cycles tied to macro conditions. It also cited risks around personnel retention and attrition, integration of acquisitions, and operations in Israel and Ukraine. Sales and marketing headcount grew 121% to 724 at period end, and product development headcount rose 15% to 604.