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Executives

Robert LoCascio – CEO

Daniel Murphy – CFO

Analysts

Nathan Schneiderman – Roth Capital

Brad Whitt – Gleacher & Company

Mike Latimore – Northland Securities

Craig Nankervis – First Analysis

Jon Hickman – MDB Capital Group

Jeff Van Rhee – Craig-Hallum Capital

LivePerson, Inc. (LPSN) Q2 2011 Earnings Call August 3, 2011 5:00 PM ET

Operator

Welcome to the second quarter 2011 LivePerson conference call. With us today, we have Robert LoCascio, CEO of LivePerson and Daniel Murphy, Chief Financial Officer of LivePerson. Now, I like to turn call over to Mr. Murphy.

Daniel Murphy

Thanks very much. Before we begin, I would 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 or 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. The results that we report today should not be considered as an indication of future performance.

Changes in economic business, competitive, technological, 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 more detailed information about these factors and other risks that may impact our business, please review 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 in 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 relation section of our website.

And now, I’d like to turn the call over to LivePerson’s Chief Executive Officer, Robert LoCascio.

Robert LoCascio

Thanks, Dan. Good afternoon, everyone and thanks for joining us. I'm happy to report that we had a very strong second quarter. We generated $31.9 million in revenue, which is a 5% increase from the prior quarter and a 21% increase from the prior year. Revenue exceeded our guidance and we achieved an EBITDA of $0.13 per share, which is a 30% increase from the second quarter of the prior year, and adjusted net income of $0.08 per share.

Beyond our core chat business, we continue to lay the foundation for a new product and platform strategy. Before diving into those details, I would like to briefly take you through the exciting developments in LivePerson’s vision and strategy. Success of our intelligent web franchise is largely being driven by the sophisticated behavioral targeting platform that supports this core application.

Our platform process data on nearly 100% of the traffic on our customers’ website totaling about $450 million unique visitors per month. Though we process data all this traffic our platform currently targets some proactive users [ph] and most likely to convert, which is only about 2% of all visitors. So, we continue to work towards unleashing the full value of our data and behavioral intelligence. Last year, we architected an open platform that can support a broader set of online engagement applications and services developed by our team for customers and third party partners.

By supporting and delivering more engagement applications and services we can maximize the value that we hold in our data monitoring and intelligence, and in turn enable the business to meaningfully connect with a greater percentage of their consumers on and off their websites. On the last call, I introduced the strategic priorities that are guiding our company’s operations that will help us to the next level. To remind you these priorities are to increase the value of each unique monthly visitor that we monitor, deliver a platform that supports intelligent real-time applications and services, deliver products in a frictionless way [ph] and provide meaningful connections between our clients and their customers.

These priorities keep our company focused on our strength and differentiators, as well as our mission and while we do what we do which is provide meaningful connections overall [ph]. As we execute on a strategic plan, we have also been expanding our leadership team to align to where our business is headed over the next several years. In the past quarter, we hired a new head of global professional services, who will largely be focusing on creating a set of expanded service offerings to support the platform and our new application.

Additionally, we brought on a head a platform, who co-founded a company that had created one of the main advertising trading platforms, and we also added a head of data strategy with a senior executive from one of the main advertising networks. As we continue to execute on our strategic plan we are bringing a new set of leaders to help guide our teams effectively, in alignment with our tactical [ph] and strategic priorities.

Now I’d like to talk about activity in new areas before discussing the performance of our core products. I am personally very excited by the advancements we made in the past quarter as we are starting to see opportunities and delivering new intelligent engagement products. With re-architecting our platform late last year, we developed a set of APIs to enable customers and third party partners to leverage our data intelligence to expand their engagement capabilities to other channels and communications such as mobile devices and social media.

Today we have 15 partners developing on our platform and over 100 customers using our various APIs and other applications. In fact more than 10 enterprise customers are using our APIs and partner apps for use cases that include mobile live chat, visitor intelligence and customer onboarding. To cite a recent success story, (inaudible) an early user of our third party apps had recently reported that they saw a significant lift in conversion rates after implementing LivePerson and Demandbase integrated solution. The Demandbase app delivers the actual company data for specific visitor so that the operator can better tell their message or offering to them.

The other aspect of our platform strategy is to build our own application driven by internal innovation, and today these applications include a product called ADE, LP Marketer and LP Insights. We have been seeing a lot of value in working with third parties (inaudible) to improve the effectiveness of our chat application, so we recently launched a tool called Analytics Driven Engagement or ADE, which creates an update to the business tools, dynamically using the customer data to drive proactive chat invitation.

ADE has helped dozen or so new customers in different segment (inaudible). The data phase [ph] market is on schedule with nine major customers signing the program and four customers are already live, including one enterprise, one mid market and two small business. LP Marketer, it’s an application that delivers personalized content like a coupon to online business, leveraging current code and rules on their site with no agent logo required. One mid market customer who sells electronics products online reporting 18%

(inaudible).

We are scheduled to close the beta program at the end of September, and we’re still on track for (inaudible) at the end of the year. I first introduced LP Insights on the last call and we continue to make steady progress in its development, LP Insights is a transcript analysis tool that will deliver actionable insight to the aging business owner and we hope to report some exiting initial results in the upcoming quarters.

Now I would like to review the performance of our core chat products, our core business performed very well last quarter as we generated 28.1 million in revenue. All segments of the business contributed to top line growth with revenue from business operations increasing by 22% as compared to the second quarter of 2010. Overall revenue for our enterprise business increased 6% over the last quarter, and grew 21% as compared to the prior quarter. We had strong bookings this quarter totaling $5.8 million.

We added 23 new enterprise and mid market customers to our customer base, including a top five software company, a top five interactive entertainment company, and a leading industrial supply company.

In Europe, we had the second highest sales bookings quarter ever. We signed a leading regional insurance company, expanded business with a leading Telco company in the U.K. Our mid market segment completed a strong quarter with several new name signings and significant customer expansions, revenue grew 4% over the last quarter and nearly 100% as compared to the prior year.

We are also seeing some wins in new verticals. For example, we have signed one of the largest University Medical Center in the U.S. and a leading online university. We also had two new regional banks with several expansions in this sector. There has been expansion in the government sector as well particularly in the use case for online recruitment. Through an existing reseller [ph] partnership, we now have a total of four branches of U.S. Armed Forces using LivePerson solution.

We also experienced lot of momentum in the energy vertical with our proactive services as we signed a leading provider in the Southeast and expanded our services with TXU, another leading energy company which makes up two of the largest leading energy providers in the Southwest. Finally I like to mention that we did extremely well in retail adding 7 new names, expanding with 12 clients including Patagonia, a leading outdoor clothing equipment retailer (inaudible) a leading merchant and retail department store and a top cosmetics company.

Our small business group’s revenue grew 5% year-over-year from Q2 2010 and 3% from Q1. Average monthly attrition in Q2 ended at 2.2% of revenue which is a 15% improvement over the 2010 average of 2.6%. Our small business is continuing to drive our platform business leading all segments in the number of API deals sold. Also our new application (inaudible) is a major advantage in that product line.

We are making strong and steady progress in the Asia Pacific market, which we just entered last year. In addition, to establishing our presence in Australia we developed a strong resell partnership to serve the Asia Pac region, had several new name signings including a large insurance provider, one of the largest banks in Singapore and SingTel, the largest Telco in Singapore.

There are significant expansions with a leading Telco in Australia, Optus. Also one of our financial services clients in the region has implemented social media integration provided by our partner track through our APIs enabling them to expand their reach and strengthen their relationship with customers by engaging with them beyond the website in the sphere of social networks.

We also will be holding our first large customer summit at the end of October here in New York City bringing together all of our B2B customers from diverse industries to share best practices and give an insight on our new platform vision, and exiting new capabilities and we’ll obviously invite our shareholders to come to this event.

Our consumer business had a solid quarter and delivered 3.7 million in revenue. We expect the consumer group to contribute close to 4 million in overall cash flow for the company this year, which is up significantly from 2.5 million in 2010. Building meaningful connections in the communities in which we live is important to employees and resonates with our core value of helping others. Our London office successfully completed a 100 mile charity challenge raising over 30,000 to donate directly to the Naomi House hospice for terminally ill children, and Fairmire [ph] Institute for undernourished families.

We are already planning our 11th annual FeedingNYC event here in New York City. If you remember last year we fed 8000 families, and we believe this event obviously creates employment opportunity for people from different walks of life to come together during Thanksgiving and help each other. On the last call I mentioned a special initiative we are supporting in our Israeli office. This is an Israeli Arab diversity at workplace initiative led by the Israeli President, Shimon Peres. It is supported by other major U.S. tech companies including ourselves, who have offices in Israel, companies like Google, Microsoft and IBM. The (inaudible) developers that since joined our team have really become a part of our family, and are doing some great work around the new product offerings.

Before turning the call over to Dan, I just want to say that he has been doing a really great job since he came onboard this quarter. He came in and really hit the ground running, and I have always been out to several meetings with him. He has been a great partner. Dan’s experience working for a multibillion dollar company, Thomson Reuters, as well as a few startups gives him the right balance to expand the finance team’s function infrastructure and implement the next level and implement the next level of operational frame work to support our rapidly growing company.

It is really exciting time here at LivePerson. We built a team of extremely talented leaders, some new leaders and then we have obviously a great set of leaders who have been here for several years, and I’m eager to work with them as we drive our business forward and continue to lay the ground work for our new product strategy. And now I’ll turn the call over to Dan. Dan?

Daniel Murphy

Thanks Rob, and thanks for the kind words. I appreciate that. We are very pleased with the strong performance we delivered in the first half of 2011 for the second quarter. We exceeded our stated revenue guidance provided last quarter, while EBITDA, EPS and adjusted net income EPS were in line with our guidance. I will provide further details on these metrics in a minute.

As Rob mentioned, we made good progress in the quarter against our new product offerings, we expanded the number of data clients for LP Marketer, and continue to receive positive feedback. LP Insights continues to gain traction and we launched Analytics Driven Engagement, which helps our clients’ complete conversion.

Revenue in the quarter was $31.9 million, an increase of 21% as compared to the prior year and 5% sequentially quarter-over-quarter. Year-to-date our revenue grew by 21% over the same period last year.

Revenue from business operations for the second quarter was $28.1 million, and 22% increase as compared to the second quarter of 2010 and a 5% sequential increase as compared to the first quarter of 2011.

Revenue from consumer operations for the second quarter was $3.7 million, a 9% increase from $3.4 million in the second quarter of 2010. In addition, EBITDA margins expanded by 300 basis points in the first half of 2011 compared to the first half of 2010 and by 160 basis points in the current quarter compared to Q2 of 2010. EBITDA per share for the second quarter was $0.13, an increase of 30% as compared to the $0.10 per share in the second quarter of 2010.

Second quarter EPS was $0.04 per share, up $0.01 per share from the second quarter of 2010 and adjusted net income per share was $0.08, also up $0.02 per share from a year ago. Bookings were solid in the quarter of 5.8 million, which represents a 55% increase from the first quarter of 2011 and a 32% increase against the second quarter of 2010.

As Rob mentioned, we signed 23 new clients in the second quarter and we signed a total of 96 deals in the quarter. Customer attrition for the enterprise accounts was 1.6% in Q2, which is in line with Q1 of 2011, and uptime exceeded 99.99%, while some of [ph] business attrition rates held study at the quarter at 2.2%. Pay per performance continued to be a solid contributor to revenue in the quarter generating 83% of total enterprise revenue.

As for the average deal size in the quarter for all deals signed we have an average deal size of $60,000. For new customers the average deal size is $54,000, existing customers was $62,000, proactive sales was $69,000 and customer service was $36,000.

The breakdown in enterprise bookings in revenue terms were 24% with our new customers, 76% with existing customers and then 74% sales deployments versus 26% for customer service deployments.

Our SMB business delivered 3% sequential growth as compared to the first quarter, our stated [ph] revenue coming from outside the U.S. primarily in U.K. and remained steady at 24% of revenue with the U.K. portion making up approximately 14%. Revenue breakdown by industry verticals was consistent with Q1, financial services was 21%, telco was 33%, retail 14%, tech 13% and all other approximately 19%.

As for the customer revenue break down 20 customers were over 1 million in annualized revenues, which is no change from Q1. We had 30 plus customers above 500,000 per year and one customer over $10 million per year. The consumer group continued to improve cash flow this quarter, revenue for the second quarter was 3.7 million, a 9% increase as compared to the second quarter of 2010, and our margins continued to be strong at 30% – at approximately 30%.

Gross margin for the quarter on the entire business was about 73%, which is inline as compared to most of 2010 in Q1, total head – company head count increased from 472 at the end of the December 31, 2010 to 525 as of June 30, 2011. As we discussed we’re behind our hiring trend in Q1 in April, but we made up some of that shortfall in Q2.

Also as discussed on the Q1 call, we expected to offset the Q1 favorable variances with increased spending in quarters two through four. In Q2, we increased headcount by approximately 30 employees. In addition we expensed one time accretive fees [ph] associated with high end several senior executives that Rob mentioned, as well as the associated stock compensation expense.

Also in Q2 of 2011, we had an impact from currency and a relatively higher tax rate compared to Q1 2011. Sales rep headcount increased by 6 heads compared to the prior quarter with a number of mid market reps being added in the middle to late part of the quarter. Since forming the mid market group a little more than a year ago, the group has doubled in size based on revenues. As we continue to build the business overall, revenue outside the United States represents approximately 24% of our total revenue. We ended the quarter with a cash balance of 74.4 million as compared to 52.8 million as of June 30th 2010.

In the quarter we had strong cash flow from operations and also had significant cash flows related to options exercises and a decrease in receivable. Accounts receivable decreased as compared to the first quarter from $19.6 million to $17.7 million for a DSO metric of 51 days compared to 58 days in Q1 of 2011. 51 days is within our target range given the higher proportion of business will larger accounts and the level of pay per performance revenue impact they had [ph] disproportionally to revenue. We continue to focus resources on maintaining DSOs in our target range of 45 to 55 days, which is better than nearly all the comparable public thought [ph] leaders that we track.

Following is our updated guidance. We are giving our view of the third quarter for the first time, and reaffirming our prior full year guidance, which remains unchanged from the guidance given during the Q1 call. In the third quarter, we expect to see revenue between 34 million and 34.5 million. We expect EBITDA between $0.14 and $0.16 per share, adjusted net income between $0.07 and $0.09 per share and GAAP EPS between $0.04 and $0.06 per share, and a fully diluted share count of approximately 56.5 million for the quarter.

Our full-year guidance is unchanged from the prior quarter with revenue of 133 million to 136 million, and EBITDA of $0.62 to $0.63 per share, adjusted net income of $0.33 to $0.36 per share, GAAP EPS of between $0.20 and $0.22 per share and a fully diluted share count of approximately 57 million.

For the full year the effective tax rate is expected to be approximately 38% with a cash tax rate the same. Capital expenditures remain unchanged from our prior guidance at $8 million level for the year, and we expect GAAP gross margin of about 17% which corresponds to cash gross margin about 4 points better or about 77%.

We expect sales and marketing as a percentage of revenue about 30% for the full year, G&A about 14% for the full year, R&D to remain consistent. We expect it to be about 15% of revenue for the full year. Full year depreciation we expect to be 8 million, roughly with full year amortization of intangibles just above 1 million, and full year stock compensation expense we expect to be approximately 7 million. That covers the operational and revenue highlights. And we’d now be happy to take any questions that you may have. Operator?

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from Nathan Schneiderman [ph].

Nathan Schneiderman – Roth Capital

Hi, Rob and Dan. Thanks very much for taking my questions, hey that was a really great rebound in bookings and a nice strong number there. Rob, in the past you’ve described a changing dynamic with the enterprise bookings that there is a lot of – there is a lot of business that you’ve sign that’s not part of this number, so I was hoping you could go over that again what actually is not included in this enterprise bookings number, and then if you look at that portion of the business signed how did that fair relative to last quarter in year-over-year maybe on a percentage basis, just give us some sense of what’s outside this enterprise bookings number? Thanks.

Robert LoCascio

Okay, so I will start with the enterprise bookings number. When we talk about bookings we don’t include the consumer group. It is primarily transaction based. We also exclude the small business team while it’s quite steady and attrition is fairly low, we don’t sign long term contracts with these customers and we don't include the pay per performance portion in our bookings metric. So really those three primary things that don’t include from a bookings perspective. I think there was another part of the question to that.

Nathan Schneiderman – Roth Capital

Relate to that if you look at that combination, how did that fare from a business signed basis, what – was that meaningfully on a sequential and year-over-year basis, anything you can say about that.

Robert LoCascio

Nothing specifically to be concerned about that. It is fairly consistent with the way we took the business in the past.

Nathan Schneiderman – Roth Capital

Okay and you gave us a number of 23 for the new enterprise deals, the combination of enterprise and mid market, and just to clarify I think correct me if I am wrong, but in the past I believe we were just looking at a pure enterprise number. So if you were to mid market in the historicals, what would last quarter have been and the year ago. I mean if you have the last four quarters that would help, they maybe at a minimum last quarter in the year-over-year?

Robert LoCascio

I don’t have last quarter but maybe I should clarify something, maybe as far as the new customer account, it included mid market and enterprise deals.

Nathan Schneiderman – Roth Capital

So that hasn’t changed. Okay, and then a final question area for you and then I’ll drop I understand that you absorbed some onetime expenses related to the exact hires and we had a surge in G&A about 1.3 million sequential by my calculations, but how much of the spike in G&A was related to this? How much of it was one-time in nature that should effectively kind of bleed off next quarter. Thanks very much.

Robert LoCascio

It was 1.4 sequential growth quarter-over-quarter in G&A, and roughly 600,000 to 700,000 of that was one time that we don’t expect to recur. As Rob mentioned, we hired several senior executives and we hold that – including costs in G&A we don't push it out to the other areas. So it is not that all those heads were hired in G&A. It is that where we hold a good portion of that cost in your stock compensation costs associated with those employees as well. So, those are the biggest drivers.

Nathan Schneiderman – Roth Capital

Thanks.

Operator

Your next question comes from Brad Whitt.

Brad Whitt – Gleacher & Company

Hi guys, thanks for taking my questions, Robert – I was wondering if you could maybe help us understand, what gives you confidence in the sequential ramps that we are looking for in the second half of the year. I know you seasonally get pay per performance, but can you just talk about last year versus this year, and whether you have more pay per performance, and just kind of give us an idea what gives you confidence there?

Robert LoCascio

Yeah, I mean you know the business seems to be trending like we normally see, and we had a very strong obviously bookings quarter and the rest of the businesses like pay per performance look healthy and so far you know we feel really confident with it. So, what we are seeing right now we feel good about even though the ramp up obviously there was a step up in Q3 and Q4 that we feel good about that right now.

Brad Whitt – Gleacher & Company

Okay, in the bookings [ph] this quarter were there any unusually large up sales or anything in that that skewed that higher?

Robert LoCascio

No unlike Q4 if you remember we had one – we have one big up sell with the Telco, this one was just made up of a series of new deals and up sell. So there actually was only one specific deal that carried it where it did, unlike Q4 where we had that $6.1 million, and so it’s a mix of just the business accelerating.

Brad Whitt – Gleacher & Company

Okay good, that’s very helpful and I guess finally how – what’s an update on the New York headquarters, are you guys settled, and how should we think about CapEx in the next couple of quarters?

Robert LoCascio

While we are settled, we are getting settled in this space. We have been here for about 2.5 months, and all the employees love to be in this place and really represents our culture in a good way. As far as capital expenditures are concerned, we think that we are going to spend about $8 million this year, and we spent some roughly $4 million year-to-date, but that's not all on fitting that [ph] space, we are still investing in our data centers in Europe as well. So, out of that revenue is total capital expense in 2011.

Brad Whitt – Gleacher & Company

Okay, great. Thanks for taking my questions guys.

Robert LoCascio

Okay Brad.

Operator

Your next question comes from Mike Latimore.

Mike Latimore – Northland Securities

Hi thanks. In terms of the – I know you have been testing at least with one large customer pay per performance options, how is that testing going, are you testing at this point?

Robert LoCascio

Yeah, we continue, we have a dozen pay per performance customers and we’re continuing to do our tests and expand with some of them, so nothing specific to report.

Mike Latimore – Northland Securities

And how about pay per performance if it goes strong to end of this quarter, did you think that will grow with the overall business through the rest of the year or faster or slower?

Robert LoCascio

Yes, usually it starts to pick up. Obviously Q3 we start to get a pick up towards the end and then obviously at the beginning of Q4 into the holiday season, and so we expect to get the same sort of trends happening this year so – so far, so good. There has been some expansion opportunities in some of the current pay per performance accounts and they are – they feel overall like we’ll get to our targets this year.

Mike Latimore – Northland Securities

Okay and just you mentioned the nutrition numbers – they’ve been relatively consistent this quarter so far with the second quarter?

Robert LoCascio

Yeah they have been consistent, and I – we – I mean it’s a little early but the delivery of the APIs and some of the new products around the platform and obviously we are not giving any tremendous amount of detail on it yet until it is meaningful on their own with revenue, but they have started to contribute to deals being up sold to wining deals, and so and making our customer sticky.

And so it is interesting, I guess where we thought maybe there is a segment of just APIs and themselves as a revenue stream, when we look at the revenue it is actually being used also just a combination of up selling customers or expanding them, using them as a driver to expand, let us say, de novo or social or an integration into their own applications. So there is some interesting stuff – we didn't really anticipate with the APIs and I think that's helping them to drive that attrition number.

Mike Latimore – Northland Securities

Great, thanks a lot. Nice quarter.

Robert LoCascio

Thank you.

Operator

Your next question comes from Craig Nankervis.

Craig Nankervis – First Analysis

Yes, thanks very much, and congratulations on the nice quarter, I wonder Rob maybe could you review what new life person products are currently generating revenue or generated revenue in Q2, can you just quickly go over what's actually available and what is still in beta?

Robert LoCascio

Sure, once again there is very little revenue impacts right now from actual new products because they just started. So the things that are generating revenue as we have a product called ADE, which has the ability to take our customers’ third-party data, let’s say their CRM data and inject it into our system, and then you’ve got to drive more interaction because we can understand more information – we have a better set of data.

So that’s been generating revenue. It is a small amount, but it’s growing nicely, but it’s just started. We have LP Insights, which is the transcript analysis tool, which has gone live and being rolled out, but once again the revenue was minimal or zero in the quarter, but it is going to start to generate some revenue. And then the (inaudible) as well as LP Marketer out there and then we got the APIs that are third-party APIs, or third-party product. We have about 15 right now, companies that have developed partner applications, and that are being used by our customers today primarily around mobile and social space.

And then we saw about overall the 10 customers that have moved the APIs to develop applications within their own development groups, and they pay us for those APIs. So in order to get access to the APIs they’re paying anywhere between 50 bucks if they’re a small customer to $1000 a month for the access to the API, and then we do a revenue share but once again everything is fairly minimal because we just started. We just launched this stuff in Q1.

So, what the goal is really is towards year end is to get the pipelines built on the sales side, so we can start to potentially break out the revenues and do some forecasting for you guys to say here is the chat, here is LP Marketer or here is APIs and here is two or three other products, but right now the thing that we think is important is that the customers are actually buying them, they’re paying for them and we just got started which is a good sign.

Craig Nankervis – First Analysis

All right. Thank you for that. I’m also wondered if you could just maybe comment a little more on your expanding leadership team, you talked about potentially expanding your services offerings maybe if you could give an example or two of what you might have in mind there on the head of platform can you maybe contrast what that person is doing versus what I thought Mark [ph] was doing and stuff like that.

Robert LoCascio

Sure. So Mark on the actual developers network, so he goes out and he has built his team, finds new developers and we actually did two separate conferences back in Q1, one is Israel, and one in California, where we had like a 100 to 200 developers show up, and he is you know giving them access to the APIs and supporting them in developing the application. He has got about 1400 developers to sign up in the developer platform and 15 developers have actually developed applications. That is one side.

The other side of his team supporting the sales team as they go out, and so when they are out there selling and a customer wants a mobile app, his team also supports bringing the partner in the developer with the sales guy and then goes to the pitch. So he is working really customer facing, developer facing. The person who we hired on the head of platform, she was the co-founder of a trading actually company, and her expertise is really around products, and what she is doing is taking all the products that we’re developing, all the intelligence and data layers, and stitching them together now.

And so (inaudible) with a unified platform, where our customers can log in and get access to all these different applications on a single platform, and that is really what she is focused on, the data intelligence, how the applications plug in to the data intelligence, and then all the reporting infrastructure behind that flows into her [ph] now, so it’s a fairly large role.

Craig Nankervis – First Analysis

And I guess lastly on your hiring versus plan, it sounds like you caught up some in Q2, do you think it is likely you reach your full year headcount goal as you sit here today or do you think it is more likely you fall a little bit short, how do you see things playing out in the second half?

Robert LoCascio

Yeah I mean I think we are trying to get to our target headcount goal. It is always hard to hire good people and we take our time. But we really want to execute on the strategy, and get these new products to market, and I guess we get more confidence as an organization as we start to see, we start seeing customers buying them, it gives us a little more confidence to continue on with the headcount plan that we have in place today.

Craig Nankervis – First Analysis

Thanks very much.

Robert LoCascio

Thank you.

Daniel Murphy

Thank you.

Operator

Your next question comes from Jon Hickman.

Jon Hickman - MDB Capital Group

Hello. Hi Rob.

Robert LoCascio

Hi, Jon.

Jon Hickman - MDB Capital Group

Two questions real quick, I understand how are you getting paid on the APIs but could you explain how you get paid on the LP Marketer side of things?

Robert LoCascio

Yes, we haven't put out the publicly yet, because it is on beta, how we are going to charge for LP Marketer, it most likely will be on a per usage basis, every time a customer want to serve a piece of content that we can get a certain dollar amount for that on per 1,000 basis like an advertising model.

But as we go through the data, as we’re really working through also the pricing model with our customers.

Jon Hickman - MDB Capital Group

Okay, and then one more question, as you kind of prepare these new products and work through these new intelligence set of product, are you – what are you doing on the or do you have in place all the analytics that you need to really make these things (inaudible)?

Robert LoCascio

Yeah, it’s a place especially if we look on just compare platform size, it’s a place in which we continue to invest and we need to expand it. So especially as we get different applications needed different set of analytics, the good thing is we understand [ph] the platform that’s driving for chat, the real-time analytics and that’s the place that we need to make continued investments in.

By adding the data structure because it’s a lot of data and we need to be able to manage that data in a certain way, so these other applications can handle it and use that data in real time, and I think that’s really the strength of the company, there are data analytics companies that do website analysis, and it is just they take the data in and they provide reporting but it is not in real time, and what we’ve been able to do which makes us very unique in the world is in real time process consumer behavior on a website do a decision and then view the real time analytics to drive an action like a chat and now a coupon, a mobile app, a social networking integration and that’s kind of a real cool stuff that we are doing that it is needed for real time.

Jon Hickman - MDB Capital Group

Okay, I’m sorry if I could ask one more. Are you using LP Marketer yourself on your expert site [ph]?

Robert LoCascio

Yeah it is there. You can get you’ll get a coupon for chatting with an experts, and it is starting in the alpha in Q4, and they continue to use it over there and we continue to get feedback there obviously, they became part of the beta program. What is interesting about the beta program is we just – the most important thing is to expand it to enough customers in enough different use cases for us to get the feedback to really hone in the products so we can get out in the market in the latter half of the year.

Jon Hickman - MDB Capital Group

Could you share is it working, I mean is there anything left there?

Robert LoCascio

Yeah I mean so far what we’ve seen – we have seen positive results, we saw positive results of our site, we saw positive results on our some of the data sights. And I think the interesting thing is these cases are not only we have done what we call the coupon app, but internally the product owner as a content app. So in some cases we are not delivering an actionable coupon, we just deliver content, and so really need the way for a marketer to create content and generate it, and put it on the website without having to go to IT or what are all the things that they need to do to get content changed on the website.

Jon Hickman - MDB Capital Group

Okay, thanks, nice quarter.

Robert LoCascio

Thank you.

Daniel Murphy

Thank you.

Operator

Your next question comes from Jeff Van Rhee.

Jeff Van Rhee – Craig-Hallum Capital

Great, thanks. Several questions for you guys, first just along the lines of LP Marketer and the transcript analysis products, particularly LP Marketer as you have gone through the beta process, based on what you have learnt, what are the adjustments that has driven in terms of your strategy for the product, and also along those lines, can you talk about the go to market differences primarily for LP but also for transcript around your point of contact, sales pitch, competition, just a little more color on what you have learnt so far and how you are going to go to market with those?

Robert LoCascio

Yes, the first step is really the sales force starting on a new way to strategically sell that was developed by one of the sales leaders, the gentleman who runs enterprise sales. And that is really the thing that we needed to really make the change on, the sales guys going down not just look at the chat opportunities, but look at better opportunities and we call where the customer can act, the customer life cycle and they need to map, where you are touching your customers, and where can we apply mobile here and a coupon there, or a content there and a chat there. And that changed the conversation.

And that is really where the sales guys are, and that is really the first line to making these products successful and we are going out and doing that. And then right now, we’re just getting the feedback from things like LP Marketer and the Insights product from our customers and making adjustments where we need to. Remember also, these products were really generated from our customers saying, we would like these things from you guys, can you give something similar.

And so a lot of this has been driven over that. The ADE product actually came forward in our professional services personnel in the company, who obviously worked very closely with customers realized there is a great input there with third party and their data, we can maybe enhance the delivery of conversions. So that is how it is happening here now.

Jeff Van Rhee – Craig-Hallum Capital

And Dan, you mentioned currency impacts in the quarter; can you quantify that for me?

Robert LoCascio

We don’t give that number out Jeff. It was an impact of the translation of the shekel to UK pounds.

Jeff Van Rhee – Craig-Hallum Capital

Shekel to the pound.

Daniel Murphy

That was shekel to the dollar, and we get pound to dollar.

Jeff Van Rhee – Craig-Hallum Capital

Okay, all right, and then lastly, just maybe you guys contrast the pipeline and the composition now versus the start of Q2?

Robert LoCascio

Yes, it is you mean Q1 as well, or in Q2?

Jeff Van Rhee – Craig-Hallum Capital

No, no, Q2.

Robert LoCascio

Yeah, looking at the pipeline now we look once again it looks like a normal business as usual year, where we see our pipeline is trying to expand and so far it is business as usual.

Jeff Van Rhee – Craig-Hallum Capital

Okay, great, nice quarter. Thanks.

Robert LoCascio

Thank you.

Daniel Murphy

Thank you.

Operator

(Operator instructions)

Robert LoCascio

Okay. No further questions, thank you and we will see you on the Q3 call.

Daniel Murphy

Thanks everybody. I appreciate it.

Robert LoCascio

Thank you. Bye.

Operator

This concludes today’s conference call. You may now disconnect.

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