LivePerson's (LPSN) CEO Robert LoCascio on Q1 2014 Results - Earnings Call Transcript

May. 7.14 | About: LivePerson, Inc. (LPSN)

LivePerson, Inc. (NASDAQ:LPSN)

Q1 2014 Earnings Conference Call

May 7, 2014 17:00 ET

Executives

Robert LoCascio - Chief Executive Officer

Dan Murphy - Chief Financial Officer

Analysts

Richard Fetyko - ABR Investments

Koji Ikeda - Oppenheimer

Shyam Patil - Wedbush

Richard Baldry - ROTH Capital Partners

Brad Sills - Maxim Group

Mike Anderson - Credit Suisse

Mike Latimore - Heartland Capital Markets

Craig Nankervis - First Analyst

Jon Hickman - Ladenburg

Operator

Good afternoon. My name is Doughton and I’ll be your conference cooperator today. At this time I would like to welcome everyone to the LivePerson First Quarter 2014 Earnings Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Joining us today for the conference are Mr. Robert LoCascio, CEO and Mr. Dan Murphy, CFO.

I’ll now turn the call over to Mr. Murphy. Sir, you may begin.

Dan Murphy

Thanks very much. Before we begin, I’d like to remind listeners that during this conference call comments that we make regarding LivePerson that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

The internal projections and beliefs upon which we base our expectations today may change over time, and we undertake no obligation to inform you if they do. Results that we report today should not be considered as an indication of future performance. Changes in economic business, competitive, technological and regulatory and other factors could cause LivePerson’s actual results to differ materially from those expressed or implied by the projections or forward-looking statements made today.

For a more detailed information about these factors and other risks that may impact our business, please review the reports and documents filed from time-to-time by LivePerson with the Securities and Exchange Commission.

Also, please note that on the call today we will discuss some non-GAAP financial measures when talking about the company’s financial performance. We report our GAAP results, as well as provide a reconciliation of these non-GAAP measures to GAAP financial measures in our earnings release. You can obtain a copy of our earnings release by visiting the Investor Relations section of our website.

Now, I’d like to take a few minutes to review the results for the quarter before turning the call over to Robert. We’ll start the call with a review of financial and operational highlights and then Rob will discuss the go-forward vision for LivePerson. For the first quarter revenue and diluted GAAP EPS exceeded our guidance range. In addition our diluted adjusted EBITDA and diluted adjusted net income were within our guidance range. Our sales team delivered another solid quarter of bookings, we posed several large deals during the first quarter that continue to validate the value proposition we’re bringing to market with our LiveEngage platform.

And our first quarter revenue was $47.8 million, EBITDA revenue was $43.9 million and revenue from our Consumer segment was $3.9 million. Our B2B revenue excluding this small business segment grew 17% over the first quarter of 2013 as Midmarket and Enterprise segments revenue grew at faster pace than our small Business and Consumer segments.

As previously reported first quarter bookings came in at $9 million, a 20% increase over the same period last year. In the first quarter approximately 60% of our bookings came from existing customers and 40% came from new customers. During Q1 we signed our biggest enterprise deal to-date, a three year deal with one of the largest cable telecommunications companies in the U.S. We also signed expansions with two of the largest financial services firms in the U.S.

As a reminder LivePerson defined bookings as a new contractual commitment from new or existing customers and excludes non-recurring revenue. This metric generally represents contracts with committed to current subscription fees and does not capture usage, one-time or performance-based contracts. As in the past few quarters during Q1 we continue to deepen and expand relationships with existing customers. In 2013 we started the year with 39 customers spending more than $500,000 on an annualized basis. And we ended 2013 with 48 customers spending more than $500,000 on an annualized basis.

In the first quarter of 2014 we add an additional three customers for a total of 51 customers spending more than $500,000 on an annualized basis. In addition we still have 26 customers spending more than $1 million annually. We signed 109 deals during the quarter and added 26 new customers during the first quarter. The average deal size for all deals was $82,000, the average deal size for new customers was $139,000, while the average for existing customers signing up for an up-sell or expanded business was $65,000.

In each case the average deal metrics for the quarter were helped by the signing of few larger deals in our Enterprise and Midmarket segments. Similar to our booking metric, this metric generally represents contracts with committed to current subscription fees and did not capture usage, one-time or performance-based contracts. Customer attrition for enterprise and midmarket accounts average 1.2% per month during the first quarter, down from Q4’s 1.7% than Q1 of 2013’s 2.9%.

Small business attrition rate averaged 2.3% per month which was also down from Q4’s 2.6% than Q1 of 2013’s 2.6%. Pay for Performance generated approximately 14% of total enterprise revenue and 8% of total revenue. The revenue breakdown by industry verticals was consistent with prior quarters. Telecommunications made up approximately 31%, financial services approximately 25%, retail approximately 15%, technology 14% and other approximately 15% for the quarter.

Revenue coming from outside of the U.S. was approximately 35% of total revenue with UK representing the largest revenue concentration outside of the U.S. During the quarter we signed our first partner deals in Hungary and Mexico and filing a successful pilot signed a deal in the Netherlands with a major telecommunications company. We are responsive to (hide) this customer and partner conference in Munich during the quarter with over 1,200 partners from 40 different countries.

First quarter gross margin came in at 75%. We ended the quarter with a cash balance of approximately $79 million which compares to $92 million at the end of the fourth quarter. In addition we had approximately $1.5 million in capital expenditures for the quarter related to servers, computers, and the build-out of office space, in addition we spend approximately $7.8 million repurchasing stock in the first quarter.

First quarter accounts receivable came in at $28.9 million and our DSO metric for the first quarter was 54 days which is a normalized level for LivePerson. The first quarter tax rate was 23%. From a financial perspective our first quarter diluted adjusted net income per share was $0.05, diluted GAAP loss per share was $0.01 and diluted adjusted EBITDA per share was $0.09.

That covers the highlights from the quarter. Now I’d like to discuss the financial expectations for the second quarter and full year 2014. As we discussed on our last earnings call during 2014 we’ll continue to invest in the business and the rollout of the LiveEngage platform. Our current expectations for Q2, 2014 are as follows. Revenue of $49 million to $50 million, diluted adjusted EBITDA of $0.07 to $0.09 per share, diluted adjusted net income of $0.04 to $0.06 per share and diluted GAAP EPS loss of $0.04 to $0.02, with a fully diluted share count of approximately 56 million shares.

Current expectations for the full year 2014 are revenue of $199 million to $204 million, diluted adjusted EBITDA of $0.37 to $0.41 per share, diluted adjusted net income of $0.21 to $0.25 per share and a diluted GAAP EPS loss of $0.11 to $0.07 with a fully diluted share count of approximately $56.5 million. Of the full year 2014 assumptions include amortization of purchase intangibles of approximately $4 million, stock compensation expense of approximately $14 million, depreciation of approximately $10 million and effective tax rate of approximately 23%, a cash tax rate of approximately 23%, and capital expenditures of approximately $11 million.

We expect gross margin on a GAAP basis to be approximately 76% and as a reminder our cost of goods sold continue to be sensitive to foreign currency fluctuations. Furthermore as a percent of revenue for the year we anticipate sales and marketing to be approximately 38% of sales of revenue, G&A approximately 21% and R&D to be approximately 20%. That covers all the operational and revenue highlights.

Now I’d like to turn the call over to Rob who will provide insights around the market and LivePerson’s strategic direction. Rob?

Robert LoCascio

Thanks, Dan. As Dan mentioned we delivered really strong results during the quarter. This is our also 47th consecutive quarter of revenue growth and I think it’s a testament to the focus of our team on execution and also on our strategy of delivering on our platform. As I mentioned on the last call the digital experience online has really not changed from a shopping perspective, it’s the same as it was in the 90s.

And as a matter of fact I was recently on a panel at DLD which is a technology conference here in New York City last week and I was there with four or five other CEOs of ad companies, mobile ad companies and data companies and everyone is talking about all of the things they’re doing prediction and data, we’re talking about Google and Facebook and yet the results are still less than 1% of the people who come from one of these places will convert to a buyer on a website.

And as much of all the focus is on there. I think there is a disruption that I’m starting to see in the industry and I think it plays into where we’re going as business. Customers know this. They see the statistic. And what they’re looking for is how do they get closer to the customer, their consumers, how do they create a relationship with those consumers. And I really think there is going to be a shift now from content and the focus on delivering content and advertising to and focus on engagement and connection and that’s really what’s the heart of the LiveEngage platform.

When you look at LiveEngage it’s about driving conversions, it’s about driving a deeper connection with the consumer. And some of those statistics that we know is that 25% of the people who chat will turn into a sale. So the conversion rate is 25%. And when you look at that obviously we deliver that in two ways, one is we can target that chat with intelligence and data, we can invite the right people on the website, but the second part is really the relationship that the consumer has with the person who is answering that chat at the business. And we see these great conversations and then we’ve been reading them and we actually are doing workshops now around the country with the operators. And we listen to their stories and their fantastic stories and we see the deep relationship that they’re building with their consumers.

And this is important to understand a couple of months ago Facebook bought WhatsApp for $19 billion and the company doesn’t have any revenues and we can all say why did they do that? But really when you look at the importance of that it’s that the connection in real-time that few consumers even have with each other to share information, share ideas, I think Facebook is saying that’s very important. We see it in our business, nobody want to pickup the phone anymore and dial an 800 number, whether you are 72 years old or 50 or 20 or 15 years old, the shoppers of today they do message, they do things differently, they don’t pickup the phone and they want to be engaged online.

More importantly they’ve got their mobile devices, they’ve got their tablets, they’re on the web and they want a unified experience and that’s really the vision of LiveEngage, where WhatsApp really is about the consumer, the consumer connection we’re about hiring the consumer to company connection. Mobile is very important to us and we made an acquisition two years ago of a company and we’ve been focused on really investing in there and we’re seeing obviously more and more growth with the use of mobile with the platform.

For instance about 2.3% of our overall chat volume is coming through mobile, about 17.5% of the traffic that we’re monitoring right now and we monitor 100s of millions of people a month is coming through mobile. Out of our top 25 customers who deployed mobile they see 50% higher propensity to engage when presented a chat invitation versus on the web. And recently one of our telcos in Europe, one of the largest telcos in the last three months 20% of their interactions were used to be mobile, now it’s gone to 45% of their total interactions on the platform.

So mobile is not just a channel of communication, it’s fundamental to our strategy and how we’re stitching the online or offline journey together in the digital space. What we see today is really in our business internally is really two parts, one is our strategic enterprise customers and these are largest banks, telcos and we have the biggest brands in the world who work with us maybe work with us for many years, but asking for more from us. As we put out two days ago we have a new leader of – who is running now Global Sales and he is very focused on that area of the business, Alan Banks ran our EMEA operation. He has taken over the job. He did a great job in the last year. He has really expanded the business in Europe.

It’s got to a highest growth rates and the company was coming out of that area and previously before being here at LivePerson he was at Adobe and he ran their European operations especially in the digital marketing and digital media products that they sell and he is very focused, it’s about $500 million business. So we’re excited to have Alan take it over and drive it. In that area we closed in the quarter a one of the largest cable companies in the United States and we continue to close companies in this segment, but I think it’s a real testament to the platform and to the company’s strategy. I’d say there was a bakeoff with competitors. We tend to win these deals because we have the best product, we’re the most innovative and we have a vision on really how to shape the future with them when it comes to how do you engage the company.

As we said for many years it’s not about the chat, the chat is just a channel of communication. It’s really about the intelligence and the data that we’re using to power that. And so when you look at this – when you look at the platform why they chose us, it’s really that we can intelligently deliver that, we can create higher conversions and higher customer satisfaction. Also when you look at the business internally outside of the enterprise strategics we also have what we call are small business which is really shaping up to be a little different now.

As of the couple of weeks ago now you can get LiveEngage on the web, you don’t have to call us, you can put your credit card in, you pay by usage and we just launched that and that’s the first time we’ve had a self-service product. We have a new Head of that who has started couple of months ago and Tom Byun, who is the GM of Yahoo Small Business Division, before he came here ran their entire small business group, it’s about 2 million customers, about $150 million business and he is doing great things with that. but that’s going to become something I think transformative. We just don’t see this small business anymore, I think midmarket and even enterprise customers could potentially just self-service and that’s what we’re really focused on growing that.

He has had some good results. Average order value under him so far has grown by about 25%. So Tom is doing a great job. A little bit of a case study there. There is a company called INKKAS which is a new LiveEngage customer and they make shoes from Peru. It’s like server, (cool hip) company and they are out there and there are some interesting statistics we see from this to LiveEngage. First one is 44% of the chat turning into sales. They had a 100% higher average order value when somebody chatted over when they just self-service, 23% of their purchases actually were outside of chat and was just content targeting. So once again the platform has video voice chat and content 23% of the overall sales on the platform was from things outside of the chat and 29% of – they had a 29% higher average order value.

So when they’re able to chat with somebody they were cross-selling and up-selling and that’s the power of the platform. And the power of that platform and why we’re delivering those results once again is the data and intelligence. We continue to invest in that area. The insights that we get in the platform, the data that we provide, the predictive capabilities of the platform are obviously very, very important. We monitor about 1.5 billion sessions about 600 million uniques a month and we do about 22 million chat. So we’re at a very large scale. During the holiday season will be one of the most trafficked domains in the world because of all of the data and all the behavioral data that we’re capturing.

As you know in 2012 we bought a company called Amadesa in Israel and that gave us a bunch of data scientists and some technology around machine-learning predictive technology. And then recently we just acquired a company NexGraph. NexGraph is a series of data scientists who have been focused in the area of social and advertising targeting. They are led by gentlemen Key Compton; I’ve known Key for years. He is a great entrepreneur. He has done many things in this space. He recently sold his company which is called XGraph to an ad targeting company. So we’re going to have some good capabilities in there to even look at products outside of our – the current core taking our data maybe doing some targeting integration with social. So we’re excited to have him on board.

This is our 14th year actually as of April of being a public company. And I think it’s actually one of the most exciting times in the company’s history. Three years ago we started to reshape where we wanted to go, we want to build the platform that was called LiveEngage. A couple of weeks the 2.0 version came out which is really the thing we’ve been working on for the last two and a half years and it’s a great product, it’s self-service it’s got a great data reporting capabilities in it and it’s got a very integrated approach to engaging consumers.

We wanted to make it as easy as setting up a campaign on Google, as you can setup a campaign to engage consumers on the website. So we’ve got a great group of people here, obviously the promotion of Alan, the hiring of Tom, Key all the things we’re doing around shaping with our customers, the future of digital engagement I think we’re in a really great position and we’re thinking big. Obviously when think big you take some risks and obviously we want to change how people are shopping online I mean we fundamentally believe that the way commerce is being today which is an advertisement is there you click on it, you land on some page on a website, you scramble around and 99% of the people just leave and that’s the digital experience.

We have a greater vision and we really believe that when a brand truly connects in real time with the consumer and they maintain that connection even if the consumer leaves website and goes into a store, we can maintain that connection with them through mobile, in other ways we think that will be a better way to deliver the vision in and what I think is the power of digital commerce and that’s what we’re after. So I look forward to giving updates on that. If you haven’t tried LiveEngage go on to the website and put your credit card and try.

And I will now turn the call over to the operator and we will take questions from our analysts. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Richard Fetyko with ABR Investments.

Richard Fetyko - ABR Investments

Hey good evening, guys. Congrats on the numbers. And first I’m just curious on the small business side. What things are you doing working on to revive the growth in that segment as well? And then with respect to LiveEngage rollout just give us an update on the rollout to the enterprise clients and on the new enterprise clients that you are adding being added on the LiveEngage platform?

Dan Murphy

So on the small business side we had the 2.0 Version just came out a couple of weeks ago. So now we had our basic way in which you can put your credit card in and you get live within minutes and that allows us to really I think scale that business at a different cliff than we’re doing previously which was just we had a direct salesforce against with. So we’re going to be very focused on increasing marketing spend there and really driving that business I think to a greater place than where it’s been. So it’s all about self-service as it get marketing campaigns and we’re also looking at doing some integrations with partners, maybe web hosting companies and things like that. So Tom is focused in those two areas right now.

On the enterprise side we continue to rollout the 1.3 Version of LiveEngage that the recent win with the cable company is going on there. So everything is going as planned with moving our customers onto LiveEngage and also the LiveEngage pricing was paying by the – by usage. So we just converted one of our largest banks into that model recently. So everything so far is going well. The 2.0 Version that we have out that’s just online is very focused on the small business, the 1.3 Version is focused on the enterprise. In the next couple of months we’ll have everyone up to the 2.0 Version. So.

Richard Fetyko - ABR Investments

Alright. Thank you.

Operator

Our next question comes from the line of Brian Schwartz with Oppenheimer.

Koji Ikeda - Oppenheimer

Thanks guys for taking my question. This is Koji Ikeda for Brian Schwartz. Looks like total enterprise mid-market deal count came in a little bit lower than what we were expecting. I was wondering if you could talk a bit about the environment from where these deals are coming from? Are there specific industries that were underperforming more than under – others or is a certain size of the customer that were performing less than expected or maybe it was a combination of both? Thanks.

Dan Murphy

No, I mean I think it’s not – we don’t look at it as underperformance, we look at it as a seasonal issue, usually we have a drop from Q4 to Q1 in the number of deals in primary bookings perspective. So we’re excited. We signed a large deal with the cable company, several expansions with financial service companies and from an enterprise and midmarket perspective, I give the stat that, that portion of the business has actually grown quite well quarter-over-quarter about 17%. So nothing unusual from a bookings perspective and nothing to point out.

Koji Ikeda - Oppenheimer

Alright. Thanks guys. Thanks for the color.

Dan Murphy

Thank you.

Operator

Our next question comes from the line of Shyam Patil with Wedbush.

Shyam Patil - Wedbush

Good job on the quarter. Rob, thanks for your prepared remarks. In terms of driving kind of broader adoption of your newer technology, what do you think the hurdle is? When do you think you’ll start to see more of a pickup in kind of sales of your newer technology, especially around division that you talked about on the call earlier?

Robert LoCascio

It’s happening I mean that’s what we’re selling, we’re all selling the new platform so it’s actually, it’s going. The interesting thing is our largest customer now I think could really double or triple not that specific customer but as a overall – our largest customers could be $30 million, $40 million I think in the future because we’re seeing much more deeper thinking about it, a global approach to digital engagement. So and our platform allows us to do that. So that’s on the high-end strategic and their action is to help and shape how they’re going to do that online and offline where they have stores or branches the way they’re asking us to do that. So that’s how it delivers to LiveEngage.

And then more on the self-service model as you go on the website and get the product with a credit card that’s all marketing effort, that’s really front-end marketing, making sure the funnel that someone can come through, get on it and put it on their website and go. And so far we’ve seen some good results there. So the platform is powering on this for us and that’s what’s happening.

Shyam Patil - Wedbush

Great. And then Dan I may have missed this, but what was the small business growth this quarter?

Dan Murphy

We have talked about it, but it was relatively flat quarter-over-quarter, year-over-year.

Shyam Patil - Wedbush

Okay, great. And then on attrition I believe I heard you mention that the trend there was downward year-over-year and quarter-over-quarter. Can you talk about what’s driving that and is that kind of the right way to think about it going forward I know you don’t got that specific metric but just from a high level?

Dan Murphy

Yes, sure. From an attrition perspective that we got hit in Q1 last year and we’ve been focusing on the attrition and it’s been dropping over 2013 and into the early part of 2014. So it’s been a focus of our business and a focus of the sales organization. So the 1.2% attrition in the Enterprise and Midmarket segment we’re very happy about. So it’s going in the right direction, I think we’re doing some of the right things in the organization.

Shyam Patil - Wedbush

Great. Thank you.

Operator

Our next question comes from the line of Richard Baldry with ROTH Capital Partners.

Richard Baldry - ROTH Capital Partners

Could you talk a little bit about the ASPs you’d see or would expect for the LiveEngage platform in the enterprise? And maybe a little deeper on the levers or the drivers of that? I know it’s not necessarily a (per seat) transaction-driven model just so we can sort of understand what will push and pull those ASPs?

Dan Murphy

Yes. So we haven’t disclosed anything on the ASPs around LiveEngage. But everything that was signed from a small business and starting with retail customer is on the LiveEngage platform. So we had high ASPs for the quarter. It was helped by the large deal that we talked about with the cable company, but as far as the pricing model we’re excited about the pricing model and we think there is a good opportunity from a customer perspective and it aligns our pricing model aligns with the value that we’re generating for those end customers. So we’ve had the pricing model in place for a little over four months through the end of the first quarter and we’re seeing positive results in acceptance from a client perspective. So we can grow and align the business that we have LivePerson is aligned with our customer’s interest in driving value.

Robert LoCascio

And when you look at the drivers of the platform it’s really about using – people come in because we are the leader in real-time engagement like chat and video and voice and things like that, but there is the content, there is the data. So everyone of our customers now get back to us 100% of the platform. We’re not bifurcating by size or anything so it simplifies our business model and what we’re driving is like that example I gave at the shoe company 22% of the engagements they’re doing are coming through content targeting. So we’re really looking for them to use more than chat but then obviously we’re the leader in it. There is more adoption on it right now even on the enterprise side is just an adoption that we want to move voice into chat. And so that is definitely our focus and we want to keep expanding in that area. So.

Richard Baldry - ROTH Capital Partners

Great. And could you talk about your comfort level on the sales transition? In particular, you’ve been doing strongly in Europe. So with him coming out of production into the management side, can you talk a little bit about the team underneath him whether you think that will be able to continue the strength you’ve seen in Europe through that transition?

Robert LoCascio

Yes. I think we’ve got a very good team, really engaged group of leader there and we have Alan who I think has done a very good job and he has done global roles before. He has run bigger groups and even than our previous Head of Sales then we have a bunch of people who are working with him who have some have been here for a while, some have been new in the next two years. But they’re really I think excited about the opportunity. We have the leading product, we got a platform out that’s working, we got big customers are referenced. So it’s sort of a dream for ourselves. And he is excited and he knows the business. So we don’t need any sort of like trying to find somewhat externally, we can make it a very seamless and I don’t want to even use the word transition because he has been in the business long enough to just know the business and he knows everyone in the business. So he has just taken it over.

Richard Baldry - ROTH Capital Partners

And lastly it looks like the buyback was maybe a little bit more aggressive in the quarter. Could you talk a bit about your comfort with your cash level, whether you think you could be more aggressive given the general market pullback? You really seem to be more of an execution stage on the sales side rather than an investment stage on the product side. So do you think you continue to be aggressive on the buyback or do you think cash preservation or some strategic acquisitions might take priority over the balance of the year? Thanks.

Dan Murphy

So we’re comfortable with where the cash position is. We saw an opportunity to buyback some stock in the first quarter so we took advantage of it. We still have about $5 million authorized in our buyback program and we’ve been relatively aggressive in 2013 and the first quarter of 2014 is buying back that stock. But you’re right, we’re on execution mode and is focused on the rollout of LiveEngage and the adoption of LiveEngage. So we’re comfortable with where the cash balance is and we’ll continue to use it in strategic manners where we’re looking at acquisitions or if the opportunity presents itself to buyback stock.

Richard Baldry - ROTH Capital Partners

Thanks.

Robert LoCascio

Thanks, Richard.

Operator

Our next question comes from the line of Brad Sills with Maxim Group.

Brad Sills - Maxim Group

Hi, thanks for taking my question. Just one on the coming LiveEngage cycle within larger accounts, now that things are more bundled, do you see an opportunity to expand the offering to a wider user base within the marketing department now that marketing is included in the pricing analytics I know was still priced separately, but even on analytics being better integrated now with the platform. How do you view those two marketing analytics in terms of potential expansion within the marketing department to more users and use cases?

Robert LoCascio

Yes I mean we definitely – the platform was built in and actually the platform, the 2.0 Version in the platform is very – it’s a very beautiful platform I mean with the user interface is really quite I think nice and we spent 2.5 years designing this one. And it’s made for marketers. It’s campaign focused so you actually set up a campaign and in that campaign you could say I want to target my VIP customers and you can define who those are and we can define it. And then you could say I’m going to give them a piece of content maybe a chat.

So it’s really marketing centric is the way the platform was designed and then all the analytics now, the analytics are really broken into three pieces one was the analytics of the operators, you got someone chatting or doing voice or video, the analytics of the campaign. So we can see how our campaign is running at content and then you could see the analytics of the program, how is the actual entire program of all the campaign is running. And so it’s quite even very graphical because we want to attract more of that those users in the group and the pricing model is everyone can have it. So there is no seat so we can give it to everyone and then they’re going to pay as they draw those interactions down.

Brad Sills - Maxim Group

Got it. Thanks Rob. Very helpful.

Operator

Our next question comes from the line of Michael Nemeroff with Credit Suisse.

Mike Anderson - Credit Suisse

Mike Anderson on behalf of Michael. First of all, with respect to the large cable customer order that you signed, can you give us some insight into how long that sales process took and compare it to what your normal sales process might look like?

Robert LoCascio

So it’s interesting. It was a normal sales process about six to eight months for the whole thing. It’s a three year deal so it’s a multi-year deal. So it – have to fit into the normal sales process of a large enterprise and then it’s a three year deal which we’re trying to push more and more of our customers into that and to align to the new pricing model too, so they can obviously use all the platform and so those are the three parts to it.

Mike Anderson - Credit Suisse

And with respect to the billing on that, is there going to be an annual billing charge because I think I noticed your long-term deferred revenue went to zero. So will that be – how will that get recognized on the financial statements?

Dan Murphy

It will get recognized pro rata. We bill it on a monthly basis but again we recognized pro rata seat, we wouldn’t see a large increase in deferred revenue.

Mike Anderson - Credit Suisse

Okay. And then just as a follow-up, would you expect – how long would you expect it to take to implement that customers since it sounds like it’s – it has a pretty sizable base?

Dan Murphy

So we expect it to be around the normal implementation cycle, it should take somewhere between two and four months but most likely around three or less.

Mike Anderson - Credit Suisse

Okay. And general on the other implementations which had crept up, have you started to see any improvement on that metric as well?

Dan Murphy

Sure. It’s been a focus for us. We talked about it, about a year ago and we’ve seen the go live timeframe shortly between when we sign a contract and when we actually go live. So we’re getting – we are back in our normalized levels that we were experienced back in 2012. So anywhere between two and three months and we’re actively trying to drive that timeframe down. And as Rob spoke about with the LiveEngage platform our goal with the LiveEngage platform is to make that go live even easier from a customer perspective and even internally to LivePerson.

Mike Anderson - Credit Suisse

That’s very helpful. Thanks a lot guys.

Dan Murphy

Thanks.

Robert LoCascio

Thank you.

Operator

Our next question comes from the line of Mike Latimore with Heartland Capital Markets.

Mike Latimore - Heartland Capital Markets

The large cable customer, are they going to be using sort of all of the applications or will they start with chat or how are they going to be using it?

Robert LoCascio

Yes, they will start with the obviously our core chat because they have a lot of voice calls that they want to shift over into the chat side and then obviously we’ll expand from there and that’s how it’s working today. But we will start them because they have an immediate need which is how do we get closer to our customers, keep them online to do an interaction and decrease the voice calls that we’re getting.

Mike Latimore - Heartland Capital Markets

And how are you feeling about the sales force productivity? What kind of additional productivity could they get and are you planning to hire more people this year?

Robert LoCascio

I think we have still a lot of capacity in the sales force. So we will be hiring probably some more people, but we do have a lot of people right now. We hired a lot in the last 24 months and I just think we can get a lot more and I think when you look at Alan and the leadership team as a whole over there I think they have some really good ideas on how to trying to get a lot out of the people we have and change the game with some of our large enterprise customers. And we just got a support and I didn’t get out there and that’s what they’re doing.

Mike Latimore - Heartland Capital Markets

And do you sort of imply in your guidance, are you assuming some improvement in the small business growth rate?

Dan Murphy

We’re expecting some improvement in this small business growth rate is relatively flat year-over-year, quarter-over-quarter, but we’re expecting some modest growth in this small business sector.

Mike Latimore - Heartland Capital Markets

Okay, thanks. Nice quarter.

Robert LoCascio

Thank you.

Dan Murphy

Thanks, Mike.

Operator

Our next question comes from the line of Craig Nankervis with First Analyst.

Craig Nankervis - First Analyst

Just – Rob, how are you guys measuring your success with LiveEngage at this point? What metrics do you look at? And what data points that you see today give you – how do you look at your success with where you are at this point on the rollout?

Robert LoCascio

It’s really – there is a couple of different – one is we want to see if the customer can get online and I’m talking about business, small business and some midmarkets which is that go online, put your credit card in, get yourself tags and go live and start taking a chat or doing a something with content. So we’re measuring how fast that happens and then we want to measure the usage on the platform and adoption on the platform. So that’s one thing. We want to see things like mobile being used in content, so like these things are that usually – people using the entire platform.

On the enterprise side it’s more like average order, if we looked at a metric like average order value how big of deals we’re doing because those deals are dictating the usage of the platform in the same way. So the things were – the programs were presenting to our customers they are about using all the pieces of the platform and that’s why average order values can go up a little bit and we’re looking at much bigger deals in the future and we’re starting that the third how we’re measuring between the self-service and the large enterprises.

Craig Nankervis - First Analyst

I see. That is very helpful. Are you willing to share any color on any of those things or is it premature to do that?

Robert LoCascio

It’s premature. I’d love to share stuff with you guys but then when I do I have 26 quarters worth of why do you go up and down and up and down in sideways is up and down. I want to just focus on the goal of getting LiveEngage out the door, we’re measuring that stuff, we will give that to you guys in the future, but I want to get a really good set of metrics that we feel and we’re focused on the execution of that now.

Craig Nankervis - First Analyst

Okay. That’s all I have. Thank you very much.

Dan Murphy

Thanks, Craig.

Robert LoCascio

Thanks, Craig.

Operator

Our next question comes from the line of Jon Hickman with Ladenburg.

Jon Hickman - Ladenburg

Hello?

Robert LoCascio

Hello.

Dan Murphy

Hi, Jon.

Jon Hickman - Ladenburg

Hi. Could you repeat the Pay for Performance statistics there. It was 8% of total revenue and 13% of..

Dan Murphy

No, it was 14% of enterprise and.

Jon Hickman - Ladenburg

Okay.

Dan Murphy

And 8% total.

Jon Hickman - Ladenburg

Okay, 14% of enterprise, okay. And then my – almost all my other questions were answered, but could you just talk a little bit about the competitive landscape? Is there anything changed, anybody new?

Robert LoCascio

No, I mean it’s basically the same as it was. We’ve got Oracle out there with the acquisition they did a couple of years ago right now. So and they’re kind of the main guys out there, but we are not seeing any big shifts or changes in that competitive set today. And I think where we’re going – I think where we’re going is a really different place than where we’ve been and we really been is been pioneering but we’re going to go now I think is going to be like what we do with proactive chat back in 2006 which is game-change, what it means to engage your consumer. And we see small companies like eGain out there but they’ve got old stories with all technology.

And we took the risk of really replatforming and it took about – it’s about $40 million of our cash and the changes we’ve made in the company but it’s going to payoff and it’s paying off. And we got a platform out the door in 2.5 years and it’s working and our customers like it. And what’s great with the strategic where we have these great conversations with them because we have the product to back it up. And that was something that we plan 2.5, 3 years ago. So we’re in a great position I think we’re about to game change this industry again. We’re changing how pricing is happening and we’re changing the different how you’re going to deliver the platform for digital engagement.

Jon Hickman - Ladenburg

Okay. Thank you. Nice quarter.

Dan Murphy

Thanks, Jon. Thank you.

Robert LoCascio

Thanks, Jon.

Operator

Our next question comes from the line of Richard Fetyko with ABR Investments.

Richard Fetyko - ABR Investments

Hey guys, just a follow-up. On the largest deal, was that for a sales or a service type of engagement that the client is going to use your platform for? And then secondly, since mobile is becoming such a growing portion of traffic and focus for your clients. Is there anything else do you feel like you need to do or could do to help facilitate the mobile engagement with their clients? And are you perhaps working or seeing any need for in-app since fair amount of the traffic or usage actually happens in mobile apps. I was just wondering how you’re positioned for facilitating engagements within mobile apps as well?

Robert LoCascio

Yes. So on the first question it was the service, it’s starting out of service and with the large cable company. And then we do, do both today on the mobile side, so we do in-app so we’re implemented in-app and we’re also implemented on m-dot site on the mobile sites. So we do our both the technologies. We’ve got a great group that we acquired two years ago. We continue to invest in that group in Southern California and they’re doing a great job in shaping it. I think there’s a lot of not a lot but there’s a couple of cold things are coming up with on the mobile side for the operator consoles and for some interesting things on the consumer side.

So there is definitely opportunity. The interesting thing I think about mobile is there is really no owner of mobile today when it comes to commerce, I wouldn’t say Amazon or Google or anyone owns the mobile space, they’re definitely on the web space. So mobile is a Greenfield, if we can make (indiscernible) where we can create that connection between the consumer and the business and it’s an always on connection, right. Someone walks in a store and we know who they are through the monitoring tag we know how to engage them in the store and then they are online and we know how to engage them online. We are – that’s the vision we’re painting and that’s the execution that we’ll do on the product side around that. So we – I think mobile is very integral for our strategy and I think is this Greenfield for who can win there on the commerce side.

Richard Fetyko - ABR Investments

Is it fair Rob to say that consumer behavior changes oftentimes a lot faster than the enterprise and clients can keep up with? That a fair amount of the in-app activity I think is on the gaming side. But are you seeing much on the commerce side in terms of in-app activity or just even customers having an app to take advantage of and to facilitate that or is that sort of still really early stages?

Robert LoCascio

Yes. I mean we’re seeing in-app actually it’s more popular than the m-dot site in many cases, we look at those especially the big brand. So we’re seeing a lot of activity there and that’s why we’re actually integrating into it. So I answered you that. I think the challenge though is with in-app is that everyone – think about it you’ve made – how many apps can you have on your mobile device. So how many branded apps do you want, if you got a mobile – you got someone from your telco, from your retailer. So I really got to believe – I actually believe there is the integrated approach to bringing those – these customers together and that’s some of the stuff we’re exploring. But I think consumers are using them, we’re seeing users – we’re seeing uses our chat in-app. So I think they’re gaining traction definitely. So.

Richard Fetyko - ABR Investments

Okay. Thanks.

Dan Murphy

Thanks, Richard.

Operator

There seem to be no further questions. I’ll now hand the call back over to management for closing remarks.

Robert LoCascio

Thanks everyone for being on the call and we will speak to you on the next quarter. Have a good day.

Dan Murphy

Thank you.

Robert LoCascio

Thanks.

Operator

And ladies and gentlemen this concludes today’s conference call. We thank you for your participation. You may all disconnect.

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