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LIVEPERSON INC 10-K Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

LIVEPERSON INC

Filing date:

03/14/2025

TLDR:

ELI5:

LivePerson, a company that helps businesses talk to customers online, had a tough year with sales going down and losing money. They’re trying to fix things by using more AI and cutting costs, but they still have a lot of debt to pay off.

Accession #:

0001102993-25-000018

Published on

Analyst Summary

  • Revenue decreased by 22% year-over-year, from $402.0 million in 2023 to $312.5 million in 2024, attributed to customer cancellations and reduced professional services revenue.
  • Net loss increased to $134.3 million in 2024, compared to $100.4 million in 2023.
  • Gross margin improved from 64% to 70% due to cost reduction efforts, but revenue retention decreased significantly from 95% to 82%.
  • A goodwill impairment charge of $60.6 million was recorded, indicating a potential overvaluation of acquired assets.
  • Cash and cash equivalents decreased by $29.7 million to $183.2 million as of December 31, 2024.
  • The company’s debt-to-equity ratio changed from 16.36 in 2023 to -10.03 in 2024 due to negative equity, indicating a high level of financial risk.
  • The interest coverage ratio decreased from 18.86 in 2023 to 8.89 in 2024, indicating a reduced ability to cover interest expenses with earnings.
  • Director Vanessa Pegueros adopted a Rule 10b5-1 trading plan on November 20, 2024, to sell 30,000 shares of common stock by November 14, 2025.

Opportunities and Risks

  • Opportunity: Focus on AI and automation to drive future growth and improve customer engagement.
  • Risk: Customer retention is critical, and the company faces challenges in retaining existing customers and attracting new ones.
  • Risk: Substantial indebtedness raises concerns about the company’s ability to refinance or generate sufficient cash flow.
  • Risk: The market is highly competitive, with pressure from established players and emerging technologies.
  • Risk: Evolving regulations regarding AI could impact the company’s ability to develop and deploy AI-driven solutions.

Potential Implications

Company Performance

  • Continued revenue decline and net losses may impact the company’s ability to invest in growth initiatives.
  • Failure to improve customer retention could further erode revenue and market share.
  • Inability to manage debt obligations could lead to financial distress.
  • The company’s success depends on the successful execution of its AI and automation strategy.

Stock Price

  • Negative financial performance and high debt levels could negatively impact the company’s stock price.
  • Uncertainty about the company’s future prospects may lead to investor caution.
  • Positive developments in customer retention, AI adoption, and debt management could improve investor sentiment.

LivePerson Inc. (LPSN) – SEC Filing Report (10-K) – FY 2024

Executive Summary

This report analyzes LivePerson Inc.’s 10-K filing for the fiscal year ended December 31, 2024. The company, a leader in digital customer conversation, experienced a significant revenue decline and net loss. Key areas of concern include customer retention, substantial indebtedness, and goodwill impairment. While the company is focusing on AI and automation, and has taken steps to improve liquidity, the overall outlook is uncertain. A “Hold” rating is recommended, pending further evidence of successful execution of their strategic initiatives and improved financial performance.

Company Overview

LivePerson, Inc. provides digital customer conversation solutions, connecting businesses and consumers through messaging and AI. The company’s platform is used by major brands to improve customer service, increase sales, and reduce costs. LivePerson operates in a competitive market, facing challenges from both established technology providers and emerging AI-driven solutions.

Detailed Analysis

Revenue and Financial Performance

Revenue decreased by 22% year-over-year, from $402.0 million in 2023 to $312.5 million in 2024. This decline was attributed to customer cancellations, downsells, and reduced professional services revenue. The company reported a net loss of $134.3 million for 2024, compared to a net loss of $100.4 million in 2023. The accumulated deficit as of December 31, 2024, was $991.3 million.

Key Ratios and Trends

  • Gross Margin: Improved from 64% in 2023 to 70% in 2024 due to cost reduction efforts.
  • Revenue Retention: Decreased from 95% in 2023 to 82% in 2024, indicating challenges in retaining existing customers.
  • ARPC: Increased slightly from $610,000 to $625,000, suggesting some success in upselling to existing customers.

Management’s Discussion and Analysis (MD&A)

Management acknowledges the revenue decline and emphasizes the company’s focus on AI, automation, and cost reduction. They express optimism about future growth driven by these initiatives. However, the narrative is tempered by concerns about short-term attrition and the need to improve customer retention.

Risk Factors

The 10-K highlights several key risk factors, including:

  • Customer Retention: The success of the business depends on retaining existing customers and attracting new ones.
  • Substantial Indebtedness: The company has significant debt obligations, raising concerns about its ability to refinance or generate sufficient cash flow.
  • Competition: The market is highly competitive, with pressure from established players and emerging technologies.
  • Cybersecurity: Failures or security breaches could harm the business and reputation.
  • AI Regulation: Evolving regulations regarding AI could impact the company’s ability to develop and deploy AI-driven solutions.

Uncommon Metrics & Red Flags

  • Contingent Pricing: The company’s contingent pricing arrangement program could result in operating losses if customer objectives are not achieved.
  • Goodwill Impairment: A significant goodwill impairment charge of $60.6 million was recorded, indicating a potential overvaluation of acquired assets.
  • Restructuring Costs: Continued restructuring initiatives suggest ongoing efforts to streamline operations and reduce costs.

Liquidity and Capital Resources

The company’s cash and cash equivalents decreased by $29.7 million to $183.2 million as of December 31, 2024. Management believes that current cash resources will be sufficient to meet working capital and capital expenditure requirements for the next 12 months. However, the company may need to seek additional financing in the future.

Conclusion and Actionable Insights

LivePerson faces significant challenges, including declining revenue, customer attrition, and substantial debt. While the company is pursuing strategic initiatives focused on AI and automation, the near-term outlook is uncertain. The high level of debt and the goodwill impairment charge are causes for concern.

Overall Assessment: Hold. A “Hold” rating is recommended. Investors should monitor the company’s progress in improving customer retention, reducing costs, and successfully executing its AI-driven growth strategy. Further evidence of improved financial performance and successful execution of strategic initiatives is needed before considering a more positive outlook.

Recommendations:

  • Monitor Customer Retention: Closely track customer retention rates and identify the drivers of attrition.
  • Assess AI Strategy: Evaluate the effectiveness of the company’s AI and automation initiatives in driving revenue growth and improving customer engagement.
  • Debt Management: Monitor the company’s ability to manage its debt obligations and refinance existing debt on favorable terms.
  • Regulatory Landscape: Stay informed about evolving regulations related to AI and data privacy, and assess their potential impact on the company’s business.

Financial Analysis of LivePerson, Inc. (LPSN)

LivePerson’s financial performance in 2024 reflects a challenging year with a significant decline in revenue and substantial net losses. While the company managed to reduce its cost of revenue and operating expenses, these reductions were insufficient to offset the revenue decrease. Impairment charges on goodwill and intangibles significantly impacted profitability. The company’s liquidity position remains weak, and solvency is a concern due to high debt levels.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Metric: (Revenue – Cost of Revenue) / Revenue
      • 2024: ($312,474 – $93,404) / $312,474 = 70.17%
      • 2023: ($401,983 – $142,823) / $401,983 = 64.47%
      • % Change: (70.17% – 64.47%) / 64.47% = 8.84%
    • Trend: The gross profit margin increased from 64.47% in 2023 to 70.17% in 2024, indicating improved efficiency in managing production costs relative to revenue.
    • Industry: The software industry generally has high gross profit margins, often exceeding 70%. LivePerson’s 2024 margin is within this range, suggesting it is performing adequately in terms of direct cost management.
  • Operating Profit Margin

    • Metric: Operating Income / Revenue
      • 2024: (-$183,195) / $312,474 = -58.63%
      • 2023: (-$111,375) / $401,983 = -27.71%
      • % Change: (-58.63% + 27.71%) / 27.71% = -111.58%
    • Trend: The operating profit margin worsened significantly from -27.71% in 2023 to -58.63% in 2024, primarily due to impairment charges.
    • Industry: A negative operating margin is unfavorable, especially compared to the software industry, where established companies typically have positive operating margins ranging from 15% to 30%.
  • Net Profit Margin

    • Metric: Net Income / Revenue
      • 2024: (-$134,273) / $312,474 = -42.97%
      • 2023: (-$100,435) / $401,983 = -25.0%
      • % Change: (-42.97% + 25.0%) / 25.0% = -71.88%
    • Trend: The net profit margin decreased from -25.0% in 2023 to -42.97% in 2024, indicating a decline in overall profitability.
    • Industry: A negative net profit margin is a significant concern. Software companies generally aim for a net profit margin of 10% or higher.
  • Return on Assets (ROA)

    • Metric: Net Income / Total Assets
      • 2024: (-$134,273) / $607,778 = -22.09%
      • 2023: (-$100,435) / $835,513 = -12.02%
      • % Change: (-22.09% + 12.02%) / 12.02% = -83.78%
    • Trend: ROA deteriorated from -12.02% in 2023 to -22.09% in 2024, indicating the company is less efficient in generating profit from its assets.
    • Industry: The software industry typically sees ROA values between 5% and 15% for profitable companies.
  • Return on Equity (ROE)

    • Metric: Net Income / Total Stockholders’ Equity
      • 2024: (-$134,273) / (-$67,316) = 199.47%
      • 2023: (-$100,435) / $48,138 = -208.64%
      • % Change: (199.47% + 208.64%) / 208.64% = 195.60%
    • Trend: The ROE improved drastically from -208.64% to 199.47%. However, this is due to the negative equity in 2024, making the ratio misleading.
    • Industry: A healthy ROE for software companies is generally between 15% and 25%.
  • Earnings Per Share (EPS)

    • Metric: Net Income / Weighted Average Shares Outstanding
      • Basic EPS 2024: -$134,273 / 88,715,161 = -$1.51
      • Diluted EPS 2024: -$134,273 / 88,715,161 = -$1.51
      • Basic EPS 2023: -$100,435 / 78,593,274 = -$1.28
      • Diluted EPS 2023: -$100,435 / 78,593,274 = -$1.28
      • % Change: (-$1.51 + $1.28) / $1.28 = -17.97%
    • Trend: EPS decreased from -$1.28 in 2023 to -$1.51 in 2024, reflecting lower profitability on a per-share basis.
    • Industry: Positive EPS is expected in the software industry.

Liquidity

  • Current Ratio

    • Metric: Current Assets / Current Liabilities
      • 2024: $231,224 / $139,940 = 1.65
      • 2023: $321,708 / $267,549 = 1.20
      • % Change: (1.65 – 1.20) / 1.20 = 37.5%
    • Trend: The current ratio increased from 1.20 in 2023 to 1.65 in 2024, indicating improved short-term liquidity.
    • Industry: A current ratio between 1.5 and 2.0 is generally considered healthy.
  • Quick Ratio (Acid-Test Ratio)

    • Metric: (Current Assets – Inventory) / Current Liabilities. Assuming inventory is negligible.
      • 2024: $231,224 / $139,940 = 1.65
      • 2023: $321,708 / $267,549 = 1.20
      • % Change: (1.65 – 1.20) / 1.20 = 37.5%
    • Trend: The quick ratio increased from 1.20 in 2023 to 1.65 in 2024, suggesting improved immediate liquidity.
    • Industry: A quick ratio of 1 or higher is generally considered acceptable.
  • Cash Ratio

    • Metric: (Cash and Cash Equivalents) / Current Liabilities
      • 2024: $183,237 / $139,940 = 1.31
      • 2023: $210,782 / $267,549 = 0.79
      • % Change: (1.31 – 0.79) / 0.79 = 65.82%
    • Trend: The cash ratio increased from 0.79 in 2023 to 1.31 in 2024, indicating a stronger ability to cover short-term liabilities with available cash.
    • Industry: A cash ratio of 0.5 to 1.0 is often considered adequate.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Metric: Total Liabilities / Total Stockholders’ Equity
      • 2024: $675,094 / (-$67,316) = -10.03
      • 2023: $787,375 / $48,138 = 16.36
      • % Change: (-10.03 – 16.36) / 16.36 = -162.53%
    • Trend: The debt-to-equity ratio changed from 16.36 in 2023 to -10.03 in 2024. The negative value is due to negative equity, indicating a high level of financial risk.
    • Industry: A debt-to-equity ratio of 1.0 or lower is generally preferred.
  • Debt-to-Assets Ratio

    • Metric: Total Liabilities / Total Assets
      • 2024: $675,094 / $607,778 = 1.11
      • 2023: $787,375 / $835,513 = 0.94
      • % Change: (1.11 – 0.94) / 0.94 = 18.09%
    • Trend: The debt-to-assets ratio increased from 0.94 in 2023 to 1.11 in 2024, indicating a higher proportion of assets are financed by debt.
    • Industry: A debt-to-assets ratio below 0.5 is generally considered healthy.
  • Interest Coverage Ratio (Times Interest Earned)

    • Metric: EBIT / Interest Expense
      • EBIT 2024: -$131,538 + $2,735 = -$128,803
      • EBIT 2023: -$96,272 + $4,163 = -$92,109
      • 2024: (-$128,803) / (-$14,486) = 8.89
      • 2023: (-$92,109) / (-$4,882) = 18.86
      • % Change: (8.89 – 18.86) / 18.86 = -52.86%
    • Trend: The interest coverage ratio decreased from 18.86 in 2023 to 8.89 in 2024, indicating a reduced ability to cover interest expenses with earnings.
    • Industry: An interest coverage ratio above 1.5 is generally considered safe.

Activity/Efficiency

  • Asset Turnover

    • Metric: Revenue / Total Assets
      • 2024: $312,474 / $607,778 = 0.51
      • 2023: $401,983 / $835,513 = 0.48
      • % Change: (0.51 – 0.48) / 0.48 = 6.25%
    • Trend: The asset turnover ratio increased from 0.48 in 2023 to 0.51 in 2024, indicating a slight improvement in the efficiency of asset utilization to generate revenue.
    • Industry: Software companies typically have asset turnover ratios between 0.5 and 1.0.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Metric: Stock Price / EPS
      • EPS 2024: -$1.51
      • Stock Price: $0.98
      • P/E Ratio: $0.98 / (-$1.51) = -0.65
    • Trend: The P/E ratio is negative due to the negative EPS, making it difficult to interpret.
    • Industry: A positive P/E ratio is generally expected.
  • Price-to-Book Ratio (P/B)

    • Metric: Market Capitalization / Book Value of Equity
      • Shares Outstanding 2024: 91,190,665
      • Stock Price: $0.98
      • Market Cap: 91,190,665 * $0.98 = $89,366,852
      • Book Value of Equity: -$67,316,000
      • P/B Ratio: $89,366,852 / (-$67,316,000) = -1.33
    • Trend: The P/B ratio is negative due to the negative book value of equity, making it difficult to interpret.
    • Industry: A P/B ratio is typically positive.
  • Price-to-Sales Ratio (P/S)

    • Metric: Market Capitalization / Revenue
      • Market Cap: $89,366,852
      • Revenue 2024: $312,474,000
      • P/S Ratio: $89,366,852 / $312,474,000 = 0.29
    • Trend: N/A
    • Industry: Software companies often have P/S ratios between 2 and 10. LivePerson’s P/S ratio is significantly lower, reflecting investor concerns about future growth and profitability.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Metric: (Market Cap + Total Debt – Cash) / EBITDA
      • Market Cap: $89,366,852
      • Total Debt: $527,070,000
      • Cash: $183,237,000
      • EBITDA: Net Income + Interest + Taxes + Depreciation and Amortization = -$134,273 + $14,486 + $2,735 + $30,310 + $11,962 = -$74,780
      • EV: $89,366,852 + $527,070,000 – $183,237,000 = $433,199,852
      • EV/EBITDA: $433,199,852 / (-$74,780,000) = -5.79
    • Trend: The EV/EBITDA ratio is negative due to the negative EBITDA, making it difficult to interpret.
    • Industry: A positive EV/EBITDA ratio is generally expected.

Growth Rates

  • Revenue Growth

    • Metric: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue
      • 2024: ($312,474 – $401,983) / $401,983 = -22.27%
    • Trend: Revenue decreased by 22.27% from 2023 to 2024.
    • Industry: The software industry generally experiences positive revenue growth.
  • Net Income Growth

    • Metric: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income
      • 2024: (-$134,273 + $100,435) / (-$100,435) = 33.69%
    • Trend: Net loss increased by 33.69% from 2023 to 2024.
    • Industry: The software industry generally experiences positive net income growth.
  • EPS Growth

    • Metric: (Current Year EPS – Previous Year EPS) / Previous Year EPS
      • 2024: (-$1.51 + $1.28) / (-$1.28) = 17.97%
    • Trend: EPS decreased by 17.97% from 2023 to 2024.
    • Industry: The software industry generally experiences positive EPS growth.

Other Relevant Metrics

  • Stock Option Activity
    • The weighted average exercise price of outstanding options is $22.93.
    • The weighted average remaining contractual term is 3.95 years.
  • Restricted Stock Units (RSUs)
    • 12,522 RSUs outstanding as of December 31, 2024, with a weighted average grant date fair value of $2.03.
  • Rule 10b5-1 Trading Plan
    • Director Vanessa Pegueros adopted a Rule 10b5-1 trading plan on November 20, 2024, to sell 30,000 shares of common stock by November 14, 2025.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️