LIVEPERSON INC Q3 FY2023 earnings

LivePerson reported third quarter 2023 revenue of $101.33 million, down 21.8% from the prior-year quarter. Year-to-date revenue was $306.52 million, down 21.9%. The decline reflects the company's plan to exit lower-margin and non-core lines of business, the sale of Kasamba, and lower hosted services and professional services revenue. Operating loss narrowed to $43.68 million for the quarter, up 10.0% from the prior-year quarter. Year-to-date operating loss narrowed to $70.71 million, up 61.4%. Net loss moved the other way. The quarter's net loss widened to $53.31 million, down 23.3%, and diluted EPS was -$0.68, down 21.4%. For the nine months, net loss narrowed to $59.91 million, up 67.4%, and diluted EPS was -$0.78, up 67.4%. Operating margin was -43.1% for the quarter, down 5.7 percentage points, while year-to-date operating margin improved to -23.1%, up 23.6 percentage points.

Non-GAAP results showed similar cost progress. Adjusted EBITDA was $10.6 million for the quarter, compared with $9.1 million in the prior-year quarter. Adjusted operating income was $2.8 million, compared with $2.0 million. Operating cash flow was $6.25 million for the quarter, up 141.4%. Year-to-date operating cash flow was -$24.30 million, up 69.4%. Capital expenditures were $5.44 million for the quarter, down 45.7%, and $22.44 million year to date, down 36.3%. Current deferred revenue was $96.78 million, down 6.2%. Remaining performance obligations were $312.90 million, down 27.3%. The company ended the quarter with a lower deferred revenue balance and a much smaller RPO backlog, which points to pressure on future revenue visibility.

Operationally, LivePerson signed 50 deals in the third quarter, including 19 new logos and 31 expansion renewals. 4 of those deals were seven-figure contracts. Trailing-twelve-months average revenue per enterprise and mid-market customer increased 13% to $595,000, up from approximately $525,000 in the comparable prior-year period. Revenue retention for enterprise and mid-market customers on the Conversational Cloud remained below the target range of 105% to 115% for the third quarter of 2023 and the comparable period in 2022. The company continued to shrink its cost base across sales and marketing, product development, and general and administrative functions. The quarter also included a non-cash goodwill impairment charge tied to the WildHealth reporting unit, and the company recorded restructuring costs as it works to realign resources.

Guidance points to a still difficult near term. For the fourth quarter of 2023, LivePerson expects total revenue to decline year over year and adjusted EBITDA of $0 million to $7 million. Fourth quarter adjusted EBITDA margin is guided to 0.0% to 7.0%, and B2B Core recurring revenue is expected to represent 89% of total revenue. For the full year 2023, the company reiterated its revenue guidance midpoint and narrowed the range. Full year adjusted EBITDA guidance has a midpoint of $25.5 million, with a narrowed range of $22 million to $29 million from $19 million to $32 million. Full year adjusted EBITDA margin is guided to 5.7% to 7.3%. B2B Core recurring revenue is expected to represent 86% of total revenue for the full year.

Risks remain substantial. Revenue retention is below the company's target, and the RPO decline suggests customers are committing to less future work. The company faces lengthy sales cycles, a competitive market for conversational AI, and the execution risk of its restructuring. Management also cited a material weakness in internal controls and the need to secure additional financing if current cash is not sufficient. The sale of Kasamba eliminated the Consumer segment and reduced revenue, but it also simplified the business. The main question for investors is whether cost cuts and the focus on B2B Core can stabilize revenue before the shrinking backlog and retention challenges weigh further on results.