LIVEPERSON INC Q3 FY2024 earnings

LivePerson's third quarter of 2024 revenue fell 26.7% to $74.2 million. The company attributed the decline to customer cancellations and downsells. Year-to-date revenue was $239.3 million, down 21.9% from the same nine-month period a year earlier. The top line remains under pressure, but the company signed 44 deals in the quarter, made up of 35 expansion renewals and 9 new logos, including 2 seven-figure deals. Trailing-twelve-months average revenue per enterprise and mid-market customer rose 5.9% to $630,000. Revenue retention was approximately 79%, below the company's target range of 105% to 115%, and below the 83% recorded in the second quarter of 2024 and the 98% recorded in the third quarter of 2023. That retention gap is the central operational risk, and it explains why bookings growth has not yet shown up in reported revenue.

Profitability improved in the quarter. Operating loss narrowed 63.3% to $16.0 million. Net loss narrowed 46.9% to $28.3 million. Diluted loss per share narrowed 52.9% to $0.32. Operating margin was negative 21.6%, up 21.5 percentage points from the prior-year quarter. The company also reported adjusted EBITDA of $7.3 million, down from $10.6 million a year earlier, and adjusted operating income of less than $0.1 million, down from $2.8 million. The year-to-date picture is mixed. Operating loss widened 16.3% to $82.2 million. Net loss narrowed 63.0% to $22.1 million. Diluted loss per share narrowed 67.9% to $0.25. Year-to-date operating margin was negative 34.4%, down 11.3 percentage points from the prior-year period. The year-to-date net loss benefited from non-operating items, including a gain on debt extinguishment, while the operating loss reflects the revenue decline. Cost cuts are doing real work here. Sales and marketing, general and administrative, and product development spending all came down, and restructuring costs fell 31% in the quarter.

Cash generation remains uneven. Operating cash flow was $4.8 million in the quarter, down 22.9% from the prior-year quarter. Year-to-date operating cash flow was negative $12.0 million, an improvement of 50.6%. Capital expenditures were $5.0 million in the quarter, down 7.2%, and $21.5 million year to date, down 4.2%. Free cash flow, a non-GAAP measure, was negative $0.2 million in the quarter against positive $0.8 million a year earlier, and negative $33.5 million year to date against negative $46.7 million in the prior-year period. Deferred revenue was $75.6 million, down 21.9% from the prior-year quarter. Remaining performance obligations were $312.9 million, flat versus the prior-year quarter. The stable backlog suggests part of the book is holding even as near-term revenue declines.

Guidance points to continued near-term pressure. For the fourth quarter of 2024, the company guides to $65.7 million to $70.7 million in revenue, with B2B Core recurring revenue at 93% of the total. Fourth-quarter adjusted EBITDA is guided to $2.1 million to $7.1 million, a margin of 3.2% to 10.0%. For the full year 2024, guidance is $305 million to $310 million in revenue, with B2B Core recurring revenue at 92% of the total. Full-year adjusted EBITDA is guided to $18 million to $23 million, a margin of 5.9% to 7.4%. Management said short-term attrition should continue into the first half of 2025, with revenue declining sequentially, and expects a transition toward positive net new annual recurring revenue in the second half of 2025. The main risks are customer retention, the pace of the turnaround, and the need to refinance remaining debt. The company carries substantial indebtedness, including the 2026 Notes, and plans to refinance that balance on or prior to maturity. Execution on the new sales motion and the cost reductions will decide whether the revenue decline stabilizes.