Q1 2025 LivePerson Inc Earnings Call

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Michael, Ryan MacDonald, John Perachio, LivePerson Inc. John Perachio, LivePerson Inc

Speaker Change: Good afternoon, ladies and gentlemen. Thank you for standing up. Welcome to Lat this first quarter, 2025 earnings conference call.

Jamie: My name is Jamie and I will be your Comfort Operator today.

Jamie: At this time, all participants are in a listen-only mode after the pre-prepared remarks. The management team from LivePerson will conduct a question and answer session, and the conference participants will be given instructions at that time.

Jamie: To give everyone the opportunity to participate, please limit yourselves to one question and one follow-up.

As a reminder, today's conference call is being recorded.

Speaker Change: At this time, I'd like to turn the floor over to Mr. John Perachio, Vice President

Speaker Change: Thank you, Jamie. Joining me in today's call is John Sabino, CEO and John Collins, CFO and COL.

Speaker Change: Please note that during today's call, we'll make four looking statements which are predictions, projections and other statements about future results. These statements are based on our current expectations and assumptions as of today, May 7, 2025, and are subject to risk and uncertainties.

Speaker Change: Actual results may differ materially due to various factors, including those described in today's earnings press release in the comments made during the comments call, as well as in any 10Ks and Qs and other reports we follow the SEC. We assume no obligation to update any four-looking statements.

Speaker Change: Also, during this call, we'll discuss certain non-GAAP financial measures, a reconciliation of gap to non-GAAP is included in today's earnings press release.

Speaker Change: Both the press release and the supplemental slides which include highlights for the quarter are available on the Invest relations section of LivePerson's website, ir.liveperson.com. With that, I'll turn the call over to LivePerson and CEO , John Sabino.

Thank you so much, Jon.

Jon Sabino: Thank you all for joining us today. Let me begin by highlighting what sits live person apart and today's rapidly evolving market.

Jon Sabino: LivePerson has a proven track record of partnering with enterprise brands across both regulated industries, such as financial services, healthcare, telecommunications, and non-regulated industries, including retail, travel, and hospitality.

Jon Sabino: As organizations accelerate their digital and AI transformations, they rely on LivePerson as a trusted partner to help guide them through their journey forward.

Jon Sabino: Our strength lies in combining deep first-party expertise with a broad ecosystem of trusted partners to deliver a unified AI-powered platform for voice and digital engagement.

Jon Sabino: The LivePerson platform brings together live agents, intelligent automation, and advanced analytics seamlessly orchestrated across all channels and third-party systems.

Jon Sabino: The result is consistent contextual customer experiences that drive real business outcomes.

Jon Sabino: Our values clear to enterprises weighed down by legacy CX infrastructure, like outdated chat systems, on-prem technology, and early-generation CX platforms.

Jon Sabino: LivePerson provides a flexibility to adopt AI and digital capabilities within a single platform without the need for a costly rip and replace. We call this innovation without disruption.

Jon Sabino: This strategy positions LivePerson as the partner of choice for enterprises addressing today's customer and workforce experience challenges.

Jon Sabino: Whether they're out front with AI looking to scale their advantage or stuck behind legacy tech and internal blockers, we meet them where they are and help them move forward.

Jon Sabino: by addressing the full spectrum of enterprise needs with speed, flexibility, and focus on outcomes.

Jon Sabino: We're a well-positioned to lead in the rapidly evolving market.

Jon Sabino: Before we dive deeper into our product and go to market updates, let me briefly discuss our high level results for the first quarter.

Jon Sabino: Revenue in the first quarter of 64.7 million was above the midpoint of our guidance range.

Jon Sabino: and adjusted EBITDA, a point two million, was above the high end of our guidance range.

Speaker Change: John Collins will provide more detail about our financials, but I want to underscore that we are continuing to deliver on our financial commitments and executing on our turnaround.

Now let me move to our product update.

Speaker Change: We structure our product strategy around three core dimensions, each essential to delivering greater value for our customers and reinforcing LivePerson's position as a market leader in enterprise digital engagement and conversational AI.

These dimensions are differentiation, high value innovation, and foundational capabilities.

Speaker Change: Our differentiation comes from a focus on agentic orchestration with leadership in Advanced AI Touring and Unified Analytics and Generative Insets.

Speaker Change: A great example of this is a health insurance provider that wanted to improve the accuracy of their inquiry routing while reducing maintenance labor.

Speaker Change: By implementing our AI agent capabilities, the boost in the intent match rates from 70% to 90%, in just two weeks, and cut human agent conversation times by 30%.

Speaker Change: The results were more efficient operations, enhanced customer experiences, and substantial cost savings.

Speaker Change: Our platform integrates generative AI with customer data, business logic, and third-party agentic bots and tools to power personalized, context-aware interactions at scale.

Speaker Change: This keeps LivePerson at the center of the customer experience. Work is sharing engagements even as the ecosystem around us continues to ship.

Speaker Change: is a core driver of differentiation and competitive advantage, establishing LivePerson as a system of action and intelligence for enterprises.

Speaker Change: This is not just about automation, it's about delivering real-time, gold-driven experiences that span digital channels, voice and backend systems.

Speaker Change: Much of this is what we're doing now, and our roadmap is designed to accelerate it, keeping pace with new technologies and evolution of foundational models.

Speaker Change: Second, we're delivering on our high value ad capabilities that extend our leadership and gender to the eye.

Speaker Change: This includes our AI builder and AI blueprints, next-gen tools for building and managing and analyzing AI driven conversations, along with core gendered AI agents for key use cases like FAQ's data collection and routing.

Speaker Change: We'll also continue to expand our industry-leading offerings with unified analytics for real-time AI power insights, an AI assistance and agent co-pilots that significantly improve agent productivity.

Speaker Change: These are capabilities that are already driving measurable impact. In Q1, we saw 14% increase in the number of customers using our generative AI tools, and a 25% sequential increase in conversations powered by generative AI.

Speaker Change: These are not abstract metrics, they represent real values delivered to real customers. For example, a UK-based telecom company and a leading solar company are now using generative AI in 80% and 90% respectively their customer conversations.

Speaker Change: In addition, the global luxury fashion company and one of the world's largest banks renewed and expanded their partnership with us, citing our leadership and gender of AI and enterprise grade guardrails.

Speaker Change: The final dimension of our product strategy is about maintaining our foundations with evolving consumer expectations.

Speaker Change: We continue to deliver the essential contact center and communication capabilities our customers depend on.

Speaker Change: This foundation is critical to running day-to-day operations and delivering a consistent, reliable customer experience.

Speaker Change: It includes a broad range of connectivity across digital, social, voice, and email channels.

Speaker Change: We also offer standardized APIs and SDKs that make integration easier for enterprises, partners, and developers.

Speaker Change: For example, our previously discussed integration with a via allows brands to unify digital and voice experiences without disrupting existing IT environments.

Speaker Change: This quarter, we're launching the same integration with Amazon Connect, and building new connectors that make it easy to bring virtually any voice system into our AI environment.

Speaker Change: We're also preparing for launch an innovative and email solution, recognizing the continued importance of this channel and positioning ourselves ahead of the eye revolution within it.

Speaker Change: In addition, we've partnered with a leading global bank to reimagine in-app mobile experiences using RSDK, and it's already powering millions of customer and repactions every day.

Speaker Change: These are just a few examples of how our foundational innovations continue to drive strategic value for our enterprise customers.

Speaker Change: Executing on our product strategy and evolving it over time, we'll ensure that we continue to support enterprises at scale with AI-powered orchestration across all touch points.

Speaker Change: It will help accelerate adoption of our product and strengthen our partnerships with our enterprise customers.

Speaker Change: I am confident that this strategy closely aligned with our customers' priorities will position LivePerson as a partner of choice for brands seeking to innovate and lead in an AI-driven customer engagement, driving meaningful growth and both new business and retention for LivePerson.

Next, let's discuss our go-to-market.

Speaker Change: Partnerships continue to be part of our go-to-market strategy, we're seeing growing momentum driven by our flexible architecture, LLN agnostic approach, and strong track record of successful

Speaker Change: As previously discussed, we are excited to launch our Amazon Connect integration in the second quarter, and we are already seeing early customer interest.

Speaker Change: We're also on track to hit our goal of 35% partner attached to the year, which reflects the growing strength of our partner ecosystem.

Speaker Change: Ultimately, these partnerships will allow us to reach more customers, accelerate innovation and deliver greater value at scale.

Speaker Change: Regarding pricing, we continue to see momentum in our simplified customer-centric bronze silver involved packaging and pricing strategy.

Speaker Change: IBM recognized the value in our gold package, which gives them access to our full-generative AI suite and the flexibility to bring IBM Watson X technology into our platform.

The combination led to successful renewal and an expanded partnership.

Speaker Change: We're continuing to actively explore refinements to our pricing and packaging to deliver greater value to our enterprise customers. A key area of focus is creating incentives for brands and partners to bring their third-party bots to our platform.

Speaker Change: Today, this represents approximately 20% of tonal bot usage and by aligning pricing closer to the investment customers are already making in their own tech stacks, we can help them unlock the full potential of our analytics and agentic orchestration capabilities while also driving meaningful cost savings.

Finally, let me touch on bookings to the corner.

Speaker Change: While retention continues to improve and exceed our expectations in the quarter, several large deals that initially expected the closing Q1 are now expected the closing Q2.

Speaker Change: The shift was primarily driven by extended enterprise buying cycles. However, we're already seeing positive momentum on these deals in the second quarter, along with a strong growing pipeline, bringing confidence in our expectation for positive net new AAR in the second half of this year.

Speaker Change: In closing, we delivered on our P1 financial guidance and remained on track to achieve our full-year targets. As expected, we faced headwinds in Q1 related to the prior trial cycle, but we're now seeing more favorable renewable trends and expect that to continue.

Speaker Change: In addition, we're seeing new pipeline momentum building through a partner ecosystem and our direct sales efforts.

Speaker Change: Our priorities remain unchanged and consistent with what we outlined in our Q4 call.

Speaker Change: First, driving commercial performance through growth in bookings and improved retention. Second, maintaining discipline cost control while strengthening our capital structure. And third, accelerating innovation across our product.

Speaker Change: I remain confident in our trajectory, and I firmly believe in the future performance of the company. Now, let me hand the call over to Jon Collins, our COO and CFO , Jon.

Thanks, Jon.

Jon Collins: I'll begin with a brief update on customer wins followed by discussion of our financial

Jon Collins: In terms of deals and significant customer wins, we signed a total of 50 deals in the first quarter.

Jon Collins: including five new logos and 45 expansions and renewals, translating to a quarter quarter-quarter increase of 25%.

Jon Collins: As Jon alluded to, we observed an extended enterprise buying cycles in the first quarter that caused several large yields to shift into the second quarter.

Jon Collins: While macroeconomic factors likely play a role, the extent of which is unclear to us at this time, we also observe that increasing demand for AI added new approval rates for risk and compliance.

Jon Collins: We do the latter as a positive development for LivePerson, considering our focus on AI about doorbells and track record in highly regulated industries.

Jon Collins: More importantly, we believe this increasing demand reflects the demonstrable return on investment from our platform, which is driving expansion and deal sizes as we progress through the sales cycle.

Broadly the first quarter

We observed a continuation of commercial themes from recent borders.

Jon Collins: Again, increasing demand for AI agents and AI orchestration, continuing traction within highly regulated industries, including health care financial services and telecommunications.

which collectively represented 70% of bookings in the first quarter.

Jon Collins: and Building Momentum with Partners, who leveraged us as a trusted AI agnostic orchestration platform for the enterprise.

Jon Collins: Consistent with these teams, significant renewals and expansions included one of the world's largest banks, a global financial technology platform, two of the largest telecommunications companies in Asia-Pacific.

Jon Collins: One of the world's largest health insurance providers, and as Jon said, IBM Yeah.

Jon Collins: I emphasize that all of these deals leverage our suite of generative AI capabilities.

Jon Collins: to get new logo wins, including one of Canada's largest retailers and a digital entertainment company focused on commerce use cases.

Jon Collins: As for our first quarter financial results, total revenue was $64.7 million, or just above the midpoint of our guidance range.

Jon Collins: The improvement above the midpoint was primarily driven by slightly better than expected, retention in the quarter.

Jon Collins: Despite the sequential revenue step down, adjusted EBITDA for the first quarter was just positive at .29 and above the high end of our guidance range, driven primarily by continued optimization of our cost structure.

Jon Collins: Revenue from Hosted Services was 55.1 million, down 23% near a year. Recurring Revenue was 60.49, or 93% of total revenue, and down 22% year-over-year.

Jon Collins: Further segmenting revenue, professional services revenue was 9.6 million, down 30% in your view. From a geographic perspective, U.S. revenue was 40 million, and international revenue was 24.7 million, or 62% and 38% of total revenue, respectively.

Jon Collins: Avid revenue for a customer was $640,000, up 2% year-of-year, driven in part by expansions with our largest customers and in part by customer retention.

Jon Collins: RPO declined to 221 million, consistent with the same factors driving declines and revenues.

Jon Collins: Net revenue retention was 80% in the first quarter, down from 82% in the fourth quarter. As a reminder, net revenue retention is a function of in-period revenue, so this metric will generally continue to decline until revenue begins to grow again, which we expect by the end of the year.

Jon Collins: A contrast, we expect renewal rates measured in terms of ARR to improve in the second quarter and beyond.

Jon Collins: Finally, in terms of cash, we ended the first quarter with 176 million of cash on the balance sheet, inclusive of the proceeds from the transaction with Linnrock Lake last year.

Jon Collins: Turning to full-year revenue guides. We are reaffirming our guidance range of 249-255 approximately 93% of which we expect to be referring

Jon Collins: As previously discussed, we continue to expect sequential declines in revenue through most of the year before reaching an inflection point by the end of the year. In terms of net new ARR, we continue to expect this leading indicator of future growth to turn positive in the second half of the year.

Jon Collins: For the second quarter, we expect revenue to range from $57 million to $60 million, representing the sequential decline of approximately $6.9 at the midpoint.

Jon Collins: Consistent with expectations we previously set on our fourth quarter call, the quarter of a quarter decline is primarily driven by first quarter attrition events that were anticipated and tied to the prior renewal cycle.

Jon Collins: Finally, a consistent with the full year revenue mix, we expect the current revenue to make up approximately 93% of total revenue in the second quarter.

Jon Collins: In terms of adjusted EBITDA, we are reaffirming our school year's Got Interange of a loss of 14 million to break even.

Jon Collins: As previously discussed on our fourth quarter call, we do not expect positive free cash flow in 2025, though we continue to improve the cost structure while preserving the investments necessary for a return to growth.

Jon Collins: Finally, we expect to just leave it out in the second quarter to range from a loss of 4 million to a loss of 2 million [inaudible]

Jon Collins: Before moving to questions, I'll briefly summarize a few key points.

Jon Collins: We continue to see increasing demand for AI agents in orchestration, including expanding deal sizes as we progress through the sales cycle, which we believe reflects the demonstrable return on investment from our platform.

Jon Collins: While this AI demand has added new approval gates for risk and compliance, which shifted some deals into the second quarter, we believe this development is positive for LivePerson considering our track record as a trusted partner in regulated industries and our focus on AI carburels for the enterprise.

Jon Collins: Despite the shift in timing, we continue to expect positive net new ARR in the second half of the year, driven by sequentially increasing renewal rates, expansions and new logos.

And with that operator, we can move to Q&A.

John Collins, Jeffrey Rhee, John Sabino, Jon Perachio, LivePerson Inc.

Speaker Change: Ladies and gentlemen, at this time we'll begin the question and answer session to ask a question you may press star and then one using a touch-to-ring telephone to withdraw all your questions you may press star and two.

Speaker Change: If you are using a speaker phone, we do ask the police pick up the handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: Once again, that is Star, and then one, to join the question queue.

We'll pause momentarily to assemble the roster.

Speaker Change: Our first question today comes from Ryan McDonald from Needhamick Company. Please go ahead with your question

I'd like to take my questions and maybe first on the M.

Ryan McDonald: Sales cycle and elongation, you know, from some of the deals slipping from Q1 to Q2. Obviously, it sounds like

Ryan McDonald: Just adding AI in is adding more complexity, more approvals, completely understandable there, but I guess keep talking about the progress you're seeing maybe on those slipped Q1 deals in Q2 thus far and any signs of let's call it the uncertain macro environment starting to play a role that could lead to potentially additional deal slippage into the back half of the year. Thanks.

Oh, I'll start here, Jon.

Ryan McDonald: Sure, broadly, we think that the macro environment certainly is playing a role generally.

and the elongation of cell cycles.

Ryan McDonald: However, the extent to which that's impacting us in the first quarter is not clear at this time.

Ryan McDonald: As for progress on these deals in the second quarter, we are on track broadly to close them within the quarter. They did not shift out ambiguously into the future, but we have specific closed plans tied to the second quarter for these deals. And as we...

Ryan McDonald: shared in the spread remarks, these deals have actually also expanded in size in the second quarter relative to the first.

Ryan McDonald: Right, just to build on that and highlight that, that's the key, the key point here that's

Ryan McDonald: The macro situation is uncertain for many companies and I'm sure it's playing to some degree in the decision cycle with customers, but what we're not seeing right now

Speaker Change: is deals shrinking or customers backing away. It's as John is...

John Collins: explained their looking for more enhanced capabilities around AI, bringing additional approval gates.

Speaker Change: which we do not necessarily see as a challenge. We're very used to operating in that environment. And most of these deals have actually gotten larger in size.

Speaker Change: That's great to hear. Maybe the follow-up, I wanted to ask about the impending launch here of the integration with Amazon Connect in the second quarter. Obviously, Amazon's had some really impressive market share games. I think there might be number two worldwide now in C-CAST. Can you just talk about sort of level of enthusiasm you have for the launch of that?

Speaker Change: You know, maybe dive a little deeper on some of the early interests you're seeing and how material do you an instrumental do you think this new partnership can be for your go to market motion and sort of the return to growth strategy here thanks.

Speaker Change: John , I'll start with this one. So we do see early interest in this integration. I think it lines up primarily with what we outlined as a point of differentiation for us.

It allows customers to

Engage in their tech stack and not have to do

Speaker Change: Significant Rip and Replay and still get all the capabilities that we bring. So we see this as a net net positive and we do believe it can have a larger positive impact with both our partner network and customer base.

Speaker Change: as we start to show the advantages of working with us in conjunction with Amazon Connect. So with the gains that they've had in the market, it is not...

Speaker Change: It has not been a point of contention or competition per se with us. It's actually increasing the number of customers and size that we can work with in the future as potential customers.

Speaker Change: It's very similar to the VIA strategy that we have and lastly, the strategy of the company when it comes to voice and other capabilities.

Speaker Change: Again, it is to work with as many platforms as possible so that customers can't move forward without lengthy large technical projects that have a lot of risk and that's what we're finding.

Customer C-Valuein

Speaker Change: So we do have some pretty decent size customers that are interested. We have partners that are excited about it because I think it's going to give them an opportunity to talk to customers about new projects and digital transformation. And we see this as a neck positive that aligns very tightly with our current strategy.

Thanks for the call. I'll have back in the queue. Thank you.

Speaker Change: Once again, if you would like to ask a question, please press star and then one, to withdraw your questions you may press star and two.

Speaker Change: Our next question comes from Mike Latimore from Northland Capital Markets. Please go ahead with your question.

Mike Watermore: All right, great. Thanks. I think you said you expected the renewal rate to improve in the second quarter. Can you just talk a little bit about the trend in the renewal rate over the last few quarters? And, you know, will this be a...

Mike Watermore: sort of material change relative to the trend that you've had previously.

I'll start here, John . Yes, from a numbers perspective.

Mike Watermore: In terms of trends, Mike, the second quarter reflects a significant improvement relative to the past several quarters. We're approaching, once again, in our forecast.

Mike Watermore: industry norms for renewal rates and Q2 and beyond. Not best in class yet, but industry norms. So that's a significant improvement from, again, the last three to four quarters on an average basis.

Thank you.

Speaker Change: and then J.C. Alla adds to that. You've heard me reference renewal cycles. In other words, contracts and average deal length.

Speaker Change: We are now just moving through that, so Q1 is what we believe

the last real remaining quarter of what we saw.

Speaker Change: from over a year and a half ago, 18 months ago. We're now starting to move through that, and we feel confident that the renewal rates that we're seeing moving forward from now...

Speaker Change: Our result of the changes that we've made in our customer success motion, the effort by Kevin Meeks to really help focus the customer on adoption and ultimately driving more value use cases and consumption with our customers. So Q2 should start to reflect those efforts that we've been working on over the past three or four quarters.

Speaker Change: Great, great, super. And then as you just think about the, you know, the pipeline, I can see when bookings activity, there are noticeable difference in kind of U.S. versus international patterns here.

Jon Sabino: John , sure. Mike at this time, I would say not a noticeable difference that we're observing, but that's also, you know,

A function of the...

Jon Sabino: Significant changes we've made to our commercial motion, including changes overseas.

Jon Sabino: and so while our APAC region has continued strongly throughout 2024 and the forecast is similar for 25, in Amia, we've been in a bit of a rebuild and the positive changes that we've made should take effect going forward so that the observations we have.

Jon Sabino: to say that there are significant differences, are not really in the system yet, so I would say, again, not significant differences at this moment in time.

Jon Sabino: Very specifically, it's not regionally based improvement, it's improvement across the board. And again, I think this is some of the focus that we've put.

Jon Sabino: in terms of how we deploy our sales teams, our comp structure, how we've aligned our pricing and packaging to make it easier for customers to actually assess and look at our product and see value.

Jon Sabino: So, the improvement in the pipeline is decent, you know, significant over last year I should say, and it does position us for success in meeting our commitments for this year.

Speaker Change: I guess just to follow up on that comment you just made so any quantification of the improvement in the pipeline?

Speaker Change: I don't think we do not typically report on the pipeline. I'll just let you know that it's improved over last year and we're happy with where it's at.

Speaker Change: It might what I would say is just quarterly we've been

Speaker Change: and improving total pipe that we're entering the quarter with and that we're generally building throughout the quarter. So if we look at this on a trended basis, it would be safe for you to assume that we're broadly building more pipe each quarter of 25 than we did in 24.

Speaker Change: Yeah, healthy and improving. That's probably the best way to think about it.

All right, great. Thanks very much.

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Speaker Change: And ladies and gentlemen, with that we'll be concluding today's question and answer session as well as today's conference call. We do thank you for joining us. You may now disconnect your lines.

Speaker Change: which are all now fully damaged, but some help will be needed. Please stand by to hear a conversation with the same speaker. This is the third time we have had commercial issues that asked the Broadcaster Corporation tocomfort the opening of the Program. The Broadcaster Corporation has been aware that the Broadcaster Corporation attempted to open the program.

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Speaker Change: it's still early enough today to have wasted but the time is now to make貢ケ or not on the than

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