LivePerson Annual Report 2021

FY2021 Annual Report · LivePerson
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We create 
Curiously Human™ 
digital experiences

ANNUAL REPORT 2021

About LivePerson

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Total revenue (in millions)

Annual revenue per user (in thousands)

$107.9

$119.6

$118.3

$123.8

$535

$570

$610

$490

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Q1 2021

Q2 2021

Q3 2021

Q4 2021

80%

70%

60%

50%

40%

75%

2018

2019

2020

2021

(cid:1628)(cid:1681)(cid:775)(cid:645)(cid:1681)(cid:752)(cid:612)(cid:867)(cid:867)(cid:504)(cid:650)(cid:679)(cid:759)(cid:650)(cid:1681)(cid:582)(cid:775)(cid:759)(cid:932)(cid:612)(cid:837)(cid:867)(cid:504)(cid:884)(cid:679)(cid:775)(cid:759)(cid:867)(cid:1681)
(cid:899)(cid:867)(cid:679)(cid:759)(cid:650)(cid:1681)(cid:504)(cid:899)(cid:884)(cid:775)(cid:752)(cid:504)(cid:884)(cid:679)(cid:775)(cid:759)

1,540

(cid:612)(cid:752)(cid:827)(cid:723)(cid:775)(cid:950)(cid:612)(cid:612)(cid:867) 
(cid:650)(cid:723)(cid:775)(cid:575)(cid:504)(cid:723)(cid:723)(cid:950)

>115%

(cid:299)(cid:382)(cid:382)(cid:1681)(cid:612)(cid:945)(cid:582)(cid:612)(cid:612)(cid:594)(cid:612)(cid:594)(cid:1681)(cid:884)(cid:504)(cid:837)(cid:650)(cid:612)(cid:884) 
(cid:837)(cid:504)(cid:759)(cid:650)(cid:612)(cid:1681)(cid:775)(cid:645)(cid:1681)(cid:1295)(cid:1294)(cid:1300)(cid:1374)(cid:1295)(cid:1295)(cid:1300)(cid:1628)

1.5B

(cid:884)(cid:775)(cid:884)(cid:504)(cid:723)(cid:1681)(cid:582)(cid:775)(cid:759)(cid:932)(cid:612)(cid:837)(cid:867)(cid:504)(cid:884)(cid:679)(cid:775)(cid:759)(cid:867) 
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Safe Harbor Statement

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Dear Fellow Stockholders,

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we believe

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(cid:65)(cid:612)(cid:867)(cid:884)(cid:1681)(cid:837)(cid:612)(cid:650)(cid:504)(cid:837)(cid:594)(cid:867)(cid:1403)

Rob LoCascio 
(cid:280)(cid:679)(cid:932)(cid:612)(cid:374)(cid:612)(cid:837)(cid:867)(cid:775)(cid:759)(cid:1681)(cid:137)(cid:775)(cid:899)(cid:759)(cid:594)(cid:612)(cid:837)(cid:1681)(cid:1328)(cid:1681)(cid:73)(cid:95)(cid:320) 
rob@liveperson.com

Select LivePerson Customers

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(cid:280)(cid:679)(cid:932)(cid:612)(cid:374)(cid:612)(cid:837)(cid:867)(cid:775)(cid:759)(cid:1386)(cid:867)(cid:1681)(cid:73)(cid:775)(cid:759)(cid:932)(cid:612)(cid:837)(cid:867)(cid:504)(cid:884)(cid:679)(cid:775)(cid:759)(cid:504)(cid:723)(cid:1681)(cid:73)(cid:723)(cid:775)(cid:899)(cid:594)(cid:1404) 

“AI-powered messaging creates an 
easy, secure connection to our service 
center, where clients dip in and out of the 
conversation at their own pace and avoid 
call wait times. Whether accessing our relief 
programs or managing a wide range of day-
to-day banking, our skilled conversational 
banking team is ready to help,” 

(cid:84)(cid:504)(cid:932)(cid:679)(cid:594)(cid:1386)(cid:867)(cid:1681)(cid:65)(cid:837)(cid:679)(cid:594)(cid:504)(cid:723)(cid:1386)(cid:867)(cid:1681)(cid:2)(cid:197)(cid:1361)(cid:827)(cid:775)(cid:936)(cid:612)(cid:837)(cid:612)(cid:594)(cid:1681)(cid:752)(cid:612)(cid:867)(cid:867)(cid:504)(cid:650)(cid:679)(cid:759)(cid:650)(cid:1681)
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(cid:827)(cid:723)(cid:504)(cid:759)(cid:1681)(cid:884)(cid:660)(cid:612)(cid:1681)(cid:612)(cid:932)(cid:612)(cid:759)(cid:884)(cid:867)(cid:1681)(cid:775)(cid:645)(cid:1681)(cid:884)(cid:660)(cid:612)(cid:679)(cid:837)(cid:1681)(cid:594)(cid:837)(cid:612)(cid:504)(cid:752)(cid:867)(cid:1404)(cid:1681)

“From our Zoey bot concierge to video chats 
with our expert stylists, we can’t overstate 
how critical conversational commerce has 
become to the immersive shopping 
experiences our brides expect,”  

Katie Jenkins 
Head of Direct Banking • HSBC

Kassandra Palo 
Director, Customer Service • David’s Bridal

(cid:73)(cid:775)(cid:759)(cid:867)(cid:612)(cid:759)(cid:395)(cid:950)(cid:867)(cid:1681)(cid:827)(cid:504)(cid:837)(cid:884)(cid:759)(cid:612)(cid:837)(cid:867)(cid:1681)(cid:936)(cid:679)(cid:884)(cid:660)(cid:1681)(cid:280)(cid:679)(cid:932)(cid:612)(cid:374)(cid:612)(cid:837)(cid:867)(cid:775)(cid:759)(cid:1681)(cid:884)(cid:775)(cid:1681)
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(cid:582)(cid:775)(cid:752)(cid:752)(cid:899)(cid:759)(cid:679)(cid:884)(cid:679)(cid:612)(cid:867)(cid:1403)(cid:1681)(cid:867)(cid:884)(cid:504)(cid:837)(cid:884)(cid:679)(cid:759)(cid:650)(cid:1681)(cid:936)(cid:679)(cid:884)(cid:660)(cid:1681)(cid:899)(cid:867)(cid:612)(cid:837)(cid:867)(cid:1681)(cid:775)(cid:645)(cid:1681)(cid:723)(cid:612)(cid:504)(cid:594)(cid:679)(cid:759)(cid:650)(cid:1681)
(cid:582)(cid:837)(cid:950)(cid:827)(cid:884)(cid:775)(cid:1681)(cid:936)(cid:504)(cid:723)(cid:723)(cid:612)(cid:884)(cid:1681)(cid:291)(cid:612)(cid:884)(cid:504)(cid:291)(cid:504)(cid:867)(cid:715)(cid:1404)(cid:1681)

“Working with LivePerson helps match 
cutting-edge technology with the best-
in-class customer experiences that our 
communities expect. We are on a constant 
quest to hone our support services for 
Web3 users, and LivePerson’s expertise and 
platform help us provide trusted, efficient 
experiences,” 

(cid:409)(cid:660)(cid:612)(cid:1681)(cid:382)(cid:612)(cid:504)(cid:723)(cid:382)(cid:612)(cid:504)(cid:723)(cid:1681)(cid:899)(cid:867)(cid:612)(cid:867)(cid:1681)(cid:280)(cid:679)(cid:932)(cid:612)(cid:374)(cid:612)(cid:837)(cid:867)(cid:775)(cid:759)(cid:1386)(cid:867)(cid:1681)(cid:73)(cid:775)(cid:759)(cid:932)(cid:612)(cid:837)(cid:867)(cid:504)(cid:884)(cid:679)(cid:775)(cid:759)(cid:504)(cid:723)(cid:1681)
(cid:73)(cid:723)(cid:775)(cid:899)(cid:594)(cid:1681)(cid:504)(cid:759)(cid:594)(cid:1681)(cid:2)(cid:197)(cid:1681)(cid:884)(cid:775)(cid:1681)(cid:582)(cid:837)(cid:612)(cid:504)(cid:884)(cid:612)(cid:1681)(cid:582)(cid:899)(cid:867)(cid:884)(cid:775)(cid:752)(cid:612)(cid:837)(cid:1681)(cid:612)(cid:945)(cid:827)(cid:612)(cid:837)(cid:679)(cid:612)(cid:759)(cid:582)(cid:612)(cid:867)(cid:1681)
(cid:645)(cid:679)(cid:884)(cid:1681)(cid:645)(cid:775)(cid:837)(cid:1681)(cid:723)(cid:899)(cid:945)(cid:899)(cid:837)(cid:950)(cid:1681)(cid:582)(cid:775)(cid:759)(cid:867)(cid:679)(cid:650)(cid:759)(cid:752)(cid:612)(cid:759)(cid:884)(cid:1404)(cid:1681)

“Our clients are looking for sophisticated, 
intuitive, and frictionless experiences that 
help them contribute to a more sustainable 
future and become part of our community 
building the circular economy. With 
LivePerson’s managed services team, we’ve 
built a hands-on partnership to design, 
(cid:723)(cid:504)(cid:899)(cid:759)(cid:582)(cid:660)(cid:1403)(cid:1681)(cid:504)(cid:759)(cid:594)(cid:1681)(cid:582)(cid:775)(cid:759)(cid:884)(cid:679)(cid:759)(cid:899)(cid:504)(cid:723)(cid:723)(cid:950)(cid:1681)(cid:775)(cid:827)(cid:884)(cid:679)(cid:752)(cid:679)(cid:973)(cid:612)(cid:1681)(cid:775)(cid:899)(cid:837)(cid:1681)(cid:2)(cid:197)(cid:1374)
supported customer experience organization,” 

Dror Avieli 
Vice President, Customer Success • ConsenSys

Holly Carroll
Vice President, Client Services • The RealReal

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

☒

☐

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2021 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _____ to _____

Commission File Number 000-30141 
LIVEPERSON, INC. 
(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

530 7th Ave, Floor M1

New York, New York

(Address of Principal Executive Offices)

13-3861628

(IRS Employer Identification No.)

10018

(Zip Code)

(212) 609-4200 

(Registrant’s telephone Number, including area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

LPSN

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☒  No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐  No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been 
subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to 
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  
Yes ☒  No ☐

Indicate  by  check  mark  whether  the  registrant  is  a  large  accelerated  filer,  an  accelerated  filer,  a  non-accelerated  filer,  smaller  reporting 
company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and 
“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer
Non-accelerated Filer

☒
☐

Accelerated Filer
Smaller Reporting Company
Emerging Growth Company

☐
☐
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying 
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its 
internal  control  over  financial  reporting  under  Section  404(b)  of  the  Sarbanes-Oxley  Act  (15  U.S.C.  7262(b))  by  the  registered  public 
accounting firm that prepared or issued its audit report.                                                                                              ☒   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 30, 2021 (the last business day of 
the registrant’s most recently completed second fiscal quarter) was approximately $4,035,402,834 (computed by reference to the last reported 
sale price on The Nasdaq Global Select Market on that date). The registrant does not have any non-voting common stock outstanding.

On February 10, 2022, 72,570,760 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for the 2022 Annual Meeting of Stockholders, which we plan to file subsequent to the 
date hereof, are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K. 

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LIVEPERSON, INC.
2021 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

PART I

Page

Item 1.  Business   ..................................................................................................................................................................................

Item 1A.  Risk Factors   ............................................................................................................................................................................

Item 1B.  Unresolved Staff Comments     ..................................................................................................................................................

Item 2. 

Properties   ................................................................................................................................................................................

Item 3.  Legal Proceedings    ..................................................................................................................................................................

Item 4.  Mine Safety Disclosures   .........................................................................................................................................................

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     ............

Item 6. 

Selected Consolidated Financial Data     ....................................................................................................................................

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations   ................................................

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk    ...............................................................................................

Item 8.  Consolidated Financial Statements and Supplementary Data  ................................................................................................

1

17

52

52

53

53

54

55

55

77

79

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure     ...............................................

123

Item 9A.  Controls and Procedures  .........................................................................................................................................................

123

Item 9B.  Other Information     ...................................................................................................................................................................

126

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections     ...................................................................................

126

PART III

Item 10.  Directors, Executive Officers and Corporate Governance    .....................................................................................................

126

Item 11.  Executive Compensation     ........................................................................................................................................................

126

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   ..............................

126

Item 13.  Certain Relationships and Related Transactions, and Director Independence   .......................................................................

126

Item 14.  Principal Accountant Fees and Services     ................................................................................................................................

126

Item 15.  Exhibits and Financial Statement Schedules   ..........................................................................................................................

127

Item 16.  Form 10-K Summary    .............................................................................................................................................................

127

PART IV

i

 
The following are explanations of some of the industry and general terms we use in this report:

2024 Notes – The Company’s $230.0 million 0.750% Convertible Senior Notes due 2024 issued in 2019.

2026 Notes – The Company’s $517.5 million 0% Convertible Senior Notes due 2026 issued in 2020.

ASC – FASB Accounting Standards Codification.

AI – Artificial Intelligence.

APAC – Asia-Pacific.

API – Application programming interface.

ARPU – Average revenue per user.

COVID-19 – Global novel coronavirus disease.

DEI – Diversity, equity, and inclusion.

EMEA – Europe, the Middle East, and Africa.

ESPP – Employee Stock Purchase Plan.

E.U. – European Union.

Experts – Independent service providers.

FaaS – Function as a Service.

FASB – Financial Accounting Standards Board.

GAAP – Accounting principles generally accepted in the United States.

IT – Information technology.

IVRs – Interactive voice response systems.

Nasdaq – Nasdaq Global Select Market.

NIS – New Israeli Shekel.

NLU – Natural language understanding.

PCI – Payment Card Industry.

R&D – Research and development.

ROI – Return on investment.

SaaS – Software-as-a service.

SEC – Securities and Exchange Commission.

SMB – Small business sector.

SMS – Short messaging service.

TASE – Tel Aviv Stock Exchange.

The Notes – Collectively, the 2024 Notes and the 2026 Notes.

U.K. – United Kingdom.

U.S. – United States of America.

Users – Individual consumers.

ii

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Statements in this Annual Report on Form 10-K about LivePerson, Inc. (“LivePerson”) that are not historical facts are 
forward-looking  statements.  These  forward-looking  statements  are  based  on  our  current  expectations,  assumptions,  estimates 
and projections about LivePerson and our industry. Our expectations, assumptions, estimates and projections are expressed in 
good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations, assumptions, 
estimates and projections will be realized. Examples of forward-looking statements include, but are not limited to, statements 
regarding  future  business,  future  results  of  operations  or  financial  condition  (including  based  on  examinations  of  historical 
operating trends), management strategies and the COVID-19 pandemic. Many of these statements are found in the “Business” 
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Annual Report 
on Form 10-K. When used in this Annual Report on Form 10-K, the words “estimates,” “expects,” “anticipates,” “projects,” 
“plans,”  “intends,”  “believes”  and  variations  of  such  words  or  similar  expressions  are  intended  to  identify  forward-looking 
statements. However, not all forward-looking statements contain these words. Forward-looking statements are subject to risks 
and  uncertainties  that  could  cause  actual  future  events  or  results  to  differ  materially  from  those  expressed  or  implied  in  the 
forward-looking statements. Important factors that could cause our actual results to differ materially from the forward-looking 
statements  we  make  in  this  Annual  Report  on  Form  10-K  include  those  set  forth  in  the  section  entitled  “Risk  Factors.”  It  is 
routine for our internal projections and expectations to change as the year or each quarter in the year progress, and therefore it 
should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to 
the end of each quarter or the year. Although these expectations may change, we are under no obligation to inform you if they 
do. Our policy is generally to provide our expectations only once per quarter, and not to update that information until the next 
quarter. We do not undertake any obligation to revise forward-looking statements to reflect future events or circumstances. All 
forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 
1995.

iii

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Item 1. Business

PART I

Overview

LivePerson, Inc. (“LivePerson”, the “Company”, “we” or “our”) is a leading Conversational AI company creating digital 
experiences  that  are  Curiously  Human.  Conversational  AI  allows  humans  and  machines  to  interact  using  natural  language, 
including speech or text. During the past decade, consumers have made mobile devices the center of their digital lives, and they 
have  made  mobile  messaging  the  center  of  communication  with  friends,  family  and  peers.  This  trend  has  been  significantly 
accelerated  by  the  COVID-19  pandemic  and  we  believe  can  now  be  viewed  as  a  permanent,  structural  shift  in  consumer 
behavior. Our technology enables consumers to connect with businesses through these same preferred conversational interfaces, 
including  Facebook  Messenger,  SMS,  WhatsApp,  Apple  Business  Chat,  Google  Rich  Business  Messenger  and  Alexa.  These 
messaging  conversations  harness  human  agents,  bots  and  AI  to  power  convenient,  personalized  and  content-rich  journeys 
across  the  entire  consumer  lifecycle,  from  discovery  and  research,  to  sales,  service  and  support,  and  increasingly  marketing, 
social, and brick and mortar engagements. For example, consumers can look up product info like ratings, images and pricing, 
search  for  stores,  see  product  inventory,  schedule  appointments,  apply  for  credit,  approve  repairs,  and  make  purchases  or 
payments - all without ever leaving the messaging channel. These AI and human-assisted conversational experiences constitute 
the  Conversational  Space,  within  which  LivePerson  has  strategically  developed  one  of  the  industry’s  largest  ecosystems  of 
messaging endpoints and use cases. 

The  Conversational  Cloud,  our  enterprise-class  cloud-based  platform,  enables  businesses  to  become  conversational  by 
securely deploying AI-powered messaging at scale for brands with tens of millions of customers and many thousands of agents. 
The  Conversational  Cloud  powers  conversations  across  each  of  a  brand’s  primary  digital  channels,  including  mobile  apps, 
mobile and desktop web browsers, SMS, social media, and third-party consumer messaging platforms. Brands can also use the 
Conversational Cloud to message consumers when they dial a 1-800 number instead of forcing them to navigate IVRs and wait 
on hold. Similarly, the Conversational Cloud can ingest traditional emails and convert them into messaging conversations, or 
embed  messaging  conversations  directly  into  web  advertisements,  rather  than  redirect  consumers  to  static  website  landing 
pages.  Agents  can  manage  all  conversations  with  consumers  through  a  single  console  interface,  regardless  of  where  the 
conversations originated.

LivePerson’s robust, cloud-based suite of rich messaging, real-time chat, AI and automation offerings features consumer 
and  agent  facing  bots,  intelligent  routing  and  capacity  mapping,  real-time  intent  detection  and  analysis,  queue  prioritization, 
customer  sentiment,  analytics  and  reporting,  content  delivery,  PCI  compliance,  co-browsing,  and  a  sophisticated  proactive 
targeting engine. An extensible API stack facilitates a lower cost of ownership by facilitating robust integration into back-end 
systems, as well as enabling developers to build their own programs and services on top of the platform. More than 40 APIs and 
software development kits are available on the Conversational Cloud.

For your reference:

•

•

•

Conversational  AI:  Conversational  AI  allows  humans  and  machines  to  interact  using  natural  language, 
including speech or text.

Conversational  Space:  In  the  Conversational  Space,  consumers  message  with  brands  on  their  own  schedule, 
using natural language, to resolve their intents - all on their preferred messaging service. The core capabilities of 
the  Conversational  Space  are  voice  and  text-based  interfaces,  powered  by  AI  and  humans  working  together. 
Conversational Space is the simplest, most intuitive interface of all. 

Conversational  Cloud:  LivePerson’s  enterprise-class,  AI-powered  Conversational  Cloud  platform  empowers 
consumers to message their favorite brands, just as they do with friends and family.

LivePerson’s Conversational AI offerings put the power of bot development, training, management and analysis into the 
hands of the contact center and its agents, the teams most familiar with how to structure sales and service conversations to drive 
successful outcomes. The platform enables what we call “the tango” of humans, AI and bots, whereby human agents act as bot 
managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed. Agents 
become ultra-efficient, leveraging the AI engine to serve up relevant content, define next-best actions and take over repetitive 
transactional  work,  so  that  the  agent  can  focus  on  relationship  building.  By  seamlessly  integrating  messaging  with  our 

1

proprietary Conversational AI, as well as third-party bots, the Conversational Cloud offers brands a comprehensive approach to 
scaling automations across their millions of customer conversations.

Complementing  our  proprietary  messaging  and  Conversational  AI  offerings  are  teams  of  technical,  solutions  and 
consulting professionals that have developed deep domain expertise in the implementation and optimization of conversational 
services  across  industries  and  messaging  endpoints.  We  are  a  leading  authority  in  the  Conversational  Space.  LivePerson’s 
products, coupled with our domain knowledge, industry expertise and professional services, have been proven to maximize the 
effectiveness  of  the  Conversational  Space  and  deliver  measurable  return  on  investment  for  our  customers.  Certain  of  our 
customers have achieved the following advantages from our offerings:

•

•

•

the ability for each agent to manage as many as 40 messaging conversations at a time, as compared to one at a 
time for a voice agent and two to four at a time for a good chat agent. Adding AI and bots provides even greater 
scale to the number of conversations managed;  

labor efficiency gains of at least two times that of voice agents, effectively cutting labor costs by at least 50%;

improving  the  overall  customer  experience,  thereby  fueling  customer  satisfaction  score  increases  of  up  to  20 
percentage points, and enhancing retention and loyalty;

• more  convenient,  personalized  and  content-rich  conversations  that  increase  sales  conversion  by  up  to  20%, 

increase average order value and reduce abandonment; 

• more satisfied contact center agents, thereby reducing agent churn by up to 50%;

•

•

•

•

a  valued  connection  with  consumers  via  mobile  devices,  either  through  native  applications,  websites,  text 
messages, or third-party messaging platforms;

leveraged spending that drives visitor traffic by increasing visitor conversions;

refining and improving performance by understanding which initiatives deliver the highest rate of return; and

increased  lead  generation  by  providing  a  single  platform  that  engages  consumers  through  advertisements  and 
listings on branded and third-party websites.

As a “cloud computing” or SaaS provider, LivePerson provides solutions on a hosted basis. This model offers significant 
benefits  over  premise-based  software,  including  lower  up-front  costs,  faster  implementation,  lower  total  cost  of  ownership, 
scalability, cost predictability, and simplified upgrades. Organizations that adopt a fully-hosted, multi-tenant architecture that is 
maintained  by  LivePerson  eliminate  the  majority  of  the  time,  server  infrastructure  costs,  and  IT  resources  required  to 
implement, maintain, and support traditional on-premise software.

To  further  enhance  our  platform,  in  September  2020  we  signed  a  partnership  with  a  digital  services  and  consulting 
company. We are working with this company to transform our technology infrastructure on the public cloud, to build integrated 
solutions and a global practice around our Conversational Cloud to sell into their channels and global enterprise customer base, 
and to redefine how the world’s top brands communicate.

More than 18,000 businesses, including HSBC, Orange, and GM Financial use our conversational solutions to orchestrate 

humans and AI, at scale, and create a convenient, deeply personal relationship with their customers.

LivePerson’s  consumer  services  offering  is  an  online  marketplace  that  connects  Experts  who  provide  information  and 
knowledge  for  a  fee  via  mobile  and  online  messaging  with  Users.  Users  seek  assistance  and  advice  in  various  categories 
including personal counseling and coaching, computers and programming, education and tutoring, spirituality and religion, and 
other topics.

LivePerson was incorporated in the State of Delaware in November 1995 and the LivePerson service was introduced in 
November 1998. The Company completed an initial public offering in April 2000 and is currently traded on the Nasdaq and the 
TASE.  LivePerson  is  headquartered  in  New  York  City.  In  light  of  the  COVID-19  pandemic  and  the  company’s  strong 
performance  working  remotely,  LivePerson  has  adopted  an  “employee-centric”  workforce  model  that  does  not  rely  on 
traditional offices. During the second quarter of 2021, the Company decided to reoccupy some of its leased space to provide its 
employees with the option of working in an office space environment if they choose to do so.

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Market Opportunity

LivePerson’s proprietary messaging and Conversational AI enable consumers and businesses to use natural language over 
conversational  interfaces  such  as  SMS,  Messenger,  Apple  Business  Chat,  Google’s  Rich  Business  Messenger,  and  in-home 
personal assistants like Alexa, in order to get answers to questions, make purchases and resolve customer care inquiries. These 
conversational messaging capabilities target lower costs and increased customer satisfaction, retention and revenue by utilizing 
human  agents,  AI  and  bots  to  provide  convenient,  personalized  and  content-rich  communication  as  alternatives  to  calling  a 
1-800 number, navigating a website or downloading an app.

Our view is that once a consumer has established their favorite brands as contacts in their preferred messaging app, they 
will be less likely to contact that brand by other means. Instead, they will simply select the contact, open up the thread with 
their  entire  history  with  the  brand,  and  then  renew  the  conversation.  As  a  result,  we  anticipate  that  the  billions  of  dollars 
previously  invested  by  brands  across  these  legacy  channels  will  be  increasingly  allocated  to  experiences  powered  by  our 
platform.

Historically,  brands  have  predominantly  promoted  calling  their  1-800  number  or  using  email  as  the  primary  means  of 
contact with consumers. According to a 2018 IBM report, approximately 270 billion customer service calls are made to contact 
centers  each  year.  With  a  median  cost  per  call  of  approximately  $5.60,  according  to  US  Contact  Center  Decision-Makers’ 
Guide, we estimate that businesses spend approximately $1.5 trillion annually to support their 1-800 number call centers. We 
believe that moving these calls to messaging represents the largest portion of what we estimate is a $60 billion go-to-market 
opportunity. We estimate that nearly half of this market opportunity is tied to service, and the other half tied to sales, marketing, 
social and brick and mortar use cases.

LivePerson is already capitalizing on this Conversational Space transformation. We cite the following considerations:

•

•

•

Consumer preference has already shifted away from calling to messaging in our personal lives. WhatsApp and 
Facebook users combined send more than 65 billion messages a day, and, according to Portio Research, people 
worldwide  were  estimated  to  send  an  estimated  23  billion  text  messages  a  day  in  2015.  The  International 
Smartphone  Mobility  Report  by  mobile  data  tracking  firm  Infomate  found  that  Americans  spend  about  26 
minutes a day texting, as compared to six minutes a day on voice calls. A survey by transportation booking app, 
Hailo,  found  that  making  phone  calls  has  dropped  to  the  sixth  most  popular  use  of  a  mobile  device,  behind 
sending  messages,  receiving  messages,  checking  email,  surfing  the  Web,  and  using  the  alarm  clock.  The 
adoption  of  messaging  has  not  been  constrained  to  younger  generations.  According  to  Experian  Marketing 
Services, adults 55 and older send and receive an average of nearly 500 text messages a month. 

Calling a 1-800 number typically leads to a poor customer experience. Roughly 50% of calls to 1-800 numbers 
go unresolved, according to IBM, and a 2014 Harris Interactive survey found that “81% of all consumers agree 
that it is frustrating to be tied to a phone or computer to wait for customer service help.” Research by enterprise 
analytics  firm  Mattersight,  reinforces  this  view,  with  74%  of  consumers  feeling  that  call  centers  are  getting 
worse or at best staying the same. The risk of poor customer service is material, according to Harris Interactive, 
which found that 89% of consumers will leave and go to a competitor due to bad customer experiences. 

LivePerson holds the perspective that AI and automation are the foundation for transforming the conversational 
experience, disrupting how agents operate and how brands engage with consumers. With AI at the center of the 
solution and by harnessing data from all primary channels, including voice, messaging, chat, and human  agents, 
LivePerson  is  in  a  unique  position  to  provide  the  best  conversational  experiences  for  consumers.  Deep  voice 
integrations with CRM, service, and IT systems allows us to deliver a unified agent experience through a single 
pane of glass. 

• We  believe  the  combination  of  strong  alignment  to  consumer  communication  preferences,  high  returns  on 
investment and a growing list of proven referenceable customers have positioned the Conversational Space at an 
inflection point. Nearly 75% of messaging conversations on our platform had automation attached at the end of 
2021, up from nearly 70% at the end of 2020, nearly 60% at the end of 2019, and approximately 25% at the end 
of 2017. In the first year of its launch, our Conversation Bot Builder was deployed by nearly 300 brands.  

We also believe that consumer traffic and digital spending will increasingly shift away from websites and mobile apps to 
conversational engagements. We think that websites and e-commerce have not lived up to the expectations of businesses and 
that  consumers  are  likewise  frustrated  with  the  navigational  experience  and  the  challenges  of  getting  questions  answered  on 

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websites. In fact, after more than 20 years and a global pandemic, e-commerce still only accounts for approximately 18% of 
total retail sales and, in the U.S., Amazon.com accounts for approximately 40% of this share.

The low penetration rates of online and mobile e-commerce reflect disappointing website conversion rates, which average 
less  than  5%.  Low  conversion  rates  are  likely  a  factor  of  the  trend  for  websites  to  be  designed  for  content,  as  opposed  to 
commerce, so that they can be indexed to show up in web searches. According to a 2015 Forrester consumer survey, 53% of 
customers  are  likely  to  abandon  their  online  purchases  if  they  cannot  find  quick  answers  to  their  questions.  This  conflict 
between content and commerce not only impacts revenue, but also drives higher costs, as we estimate that 60%-80% of all calls 
to 1-800 numbers originate from consumers first visiting a website and then getting confused or not obtaining the answers they 
seek.

We  believe  that  LivePerson’s  proprietary  messaging  and  Conversational  AI  offerings  provide  a  superior  alternative. 
Certain  LivePerson  customers  have  demonstrated  increases  in  website  sales  of  up  to  20%,  while  lowering  the  cost  of 
engagement relative to voice or email. No longer are consumers navigating through clicks and searches to find answers across 
multiple static web pages. Instead they use natural language to engage conversationally with a brand. These conversations can 
be personalized to each brand’s unique identity and to each consumer’s unique history and preferences. The engagements are 
content  rich,  featuring  images,  reviews,  ratings,  and  videos,  and  they  are  convenient,  letting  the  consumer  drive  the 
conversation when it meets their needs, and offering the ability to integrate to credit cards, pay wallets and calendars.

We  also  believe  that  the  Conversational  Space  will  steadily  eliminate  the  need  for  investment  in  branded  apps.  We 
conclude  that  consumers  will  increasingly  opt  to  connect  with  brands  through  their  preferred  messaging  channels,  such  as 
Apple  Business  Chat,  WhatsApp,  SMS,  Messenger,  or  Twitter,  rather  than  clutter  their  mobile  devices,  waste  storage,  and 
potentially impact performance by downloading a multitude of individual apps.

Another emerging market opportunity for LivePerson is the leveraging of brick and mortar operations as an extension of 
the contact center. Retailers, telecommunications companies, and financial services companies, among others, all operate brick 
and mortar storefronts, where thousands of employees often sit idle during off peak hours. The Conversational Cloud enables 
our customers to set up campaigns where these employees can connect through messaging to customers in their community, 
with check-ins, follow ups, and special offers, reinforcing relationships at the local level. For example, a telecommunications 
company  targeted  consumers  that  were  local  to  its  storefronts  with  a  trade-in  offer.  Additionally,  our  platform  can  arm 
employees in the field with the ability to rapidly obtain answers to questions as they engage with customers in the stores. For 
example, a consumer may have a specific question about a new appliance in a home improvement store, and the employee can 
engage  through  our  platform  with  a  specialist  bot  or  human  agent  to  obtain  detailed  information  on  that  appliance.  The 
COVID-19 pandemic has only accelerated adoption of these experiences. In 2021 we hit a new milestone of 1.5 billion total 
conversations on our platform, demonstrating the breadth and depth of our data assets and further strengthening our data moat 
for delivering high quality Conversational AI.

The key elements of LivePerson’s business solutions strategy include:

Strategy

Build  awareness  and  drive  adoption  of  the  Conversational  Space.  LivePerson  brought  our  first  customer  live  on 
messaging  in  June  2016.  Since  that  time,  we  have  been  focused  on  building  awareness  for  conversational  experiences  and 
driving  adoption.  We  have  educated  businesses  on  the  financial  and  operational  transformation  that  occurs  when  a  contact 
center shifts to an asynchronous messaging environment, where the consumer controls the pace of the conversation, which can 
last minutes, hours or days, from a synchronous call or chat center, where conversations occur in real-time and have a distinct 
start and end.

A key component of our industry awareness marketing strategy has been to hold multiple global customer summits each 
year (events in 2020 and 2021 were held virtually in light of the COVID-19 pandemic) that target executives from enterprise 
customers and prospects, and feature a key theme within the Conversational Space, such as Apple Business Chat, Google Rich 
Business Messenger, IVR deflection, or AI. LivePerson customers are the center point of these summits, presenting why they 
chose LivePerson for conversational experiences, how they achieved success, and what type of ROI they have realized. Each 
attendee then receives a blueprint for how they can pursue similar outcomes. We have found this strategy to drive strong results 
for LivePerson, as we have seen a greater than 40% conversion rate on opportunities that were created or advanced as part of 

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the customer summits. By year-end 2021, nearly 75% of messaging conversations had automation attached. We will continue to 
focus on building awareness for the Conversational Space and driving adoption of messaging and AI across our customer base.

Increase messaging volumes by developing a broad ecosystem, expanding customer use cases, and focusing on AI and 
automation. Our strategy is to drive higher messaging volumes by going both wide across messaging endpoints, deep across 
consumer use cases, and focusing on AI and automation as the means to deliver powerful scale. LivePerson offers a platform 
usage pricing model, where customers are offered access to our entire suite of messaging technologies across their entire agent 
pool for a pre-negotiated cost per interaction. We believe that over time this model will drive higher revenue for LivePerson by 
reducing barriers to adoption of new messaging endpoints and use cases.

In  order  to  drive  broad  messaging  adoption,  it  is  imperative  that  the  Conversational  Cloud  integrates  to  all  of  the 
messaging apps that consumers prefer to use for communication and addresses all key use cases. For example, if a consumer is 
an avid WhatsApp user, and a brand only offers SMS as a messaging option, that consumer may be reluctant to try messaging 
the brand. Therefore, a key strategy of ours has been to build one of the industry’s broadest ecosystems of messaging endpoints 
and use cases. In June 2016, we launched with In-App messaging. In 2017, we introduced Facebook Messenger, SMS, Web 
messaging and IVR deflection integrations. In 2018, we added Apple Business Chat, Google Rich Business Messenger, Line, 
WhatsApp, Alexa, Google Home, Google Ad Lingo, and Twitter. In 2019, we added email, allowing brands to manage emails 
through the same console they use for messaging, and to convert legacy emails into messaging conversations. We also added 
social monitoring and conversational tools for Twitter and Facebook, and introduced proactive messaging, allowing brands to 
transform  traditional  one-way  notifications  such  as  flight  cancellations  or  phone  plan  overage  alerts  into  two-way 
conversations.  Further,  we  connected  to  Facebook  and  WhatsApp  digital  advertisements,  enabling  consumers  to  initiate 
messaging conversations for marketing and customer care directly within the advertisement. In 2020, we added Instagram and 
Google’s Business Messages, allowing brands to bring customer-initiated conversations into the Conversational Cloud directly 
from Instagram, Google Search, and Google Maps.

Each channel and use case added opens the door to new consumers, providing brands a greater opportunity to shift share 
away from their legacy contact center channels into messaging. For example, in 2019, leading airlines launched on WhatsApp 
and Apple Business Chat with the ability to make secure payments; a baseball stadium launched an automated conversational 
concierge  providing  answers  to  a  wide  range  of  questions  from  restroom  locations  to  player  stats;  and  a  multinational 
telecommunications company used proactive two-way messaging for outbound campaigns. In 2020, one of the largest Telcos in 
Australia fully virtualized their contact centers, a leading U.S. quick-serve restaurant launched on Facebook Messenger to help 
customers order meals, one of the biggest banks in the world launched an Apple Business Chat channel to provide a secure way 
to perform day-to-day banking, and one of the world’s largest jewelry retailers used the Conversational Cloud and QR codes to 
sell millions of dollars of product.

LivePerson  makes  the  management  of  all  these  disparate  channels  seamless  to  the  brand.  AI-based  intelligent  routing, 
queuing  and  prioritization  software  orchestrates  these  conversations  at  scale,  regardless  of  which  messaging  endpoint  they 
originated from, so that human and bot agents can engage with all customers through just one console.

We  believe  LivePerson  is  leading  the  structural  shift  to  Conversational  AI.  In  the  wake  of  the  COVID-19  pandemic, 
leading brands are turning to LivePerson’s AI-powered messaging to overcome a capacity gap created by voice call agent work-
from-home  measures  and  increased  demand  for  digital  engagement  as  consumers  practice  social  distancing.  LivePerson  is 
powering Conversational AI, automation and messaging strategies across a growing number of use cases from care and sales, to 
marketing,  social,  conversational  advertising  and  brick  and  mortar.  Our  Conversational  AI  leadership  and  the  increase  in 
adoption have influenced LivePerson’s enterprise and mid-market revenue retention rate, (the trailing-twelve-month change in 
total revenue from existing customers after upsells, downsells and attrition) which was within our target range of 105% to 115% 
for 2021. The benefit can also be seen in LivePerson’s ARPU for our enterprise and mid-market customers, which increased 
approximately 31% in 2021 to $610,000 from approximately $465,000 in 2020.

Attract the industry’s best AI, machine learning and conversational talent. We believe that AI and machine learning are 
critical to successfully scaling in the Conversational Space, and that in order to develop the industry’s leading technology, we 
need to attract the industry’s best talent. Since 2018, LivePerson hired more than 437 of the industry’s brightest data scientists, 
machine learning engineers and automation engineers, many from firms such as Nike, Amazon.com, Microsoft and Target, who 
are working exclusively on applying AI to the Conversational Space. LivePerson also expanded its development talent base in 
Germany,  and  added  key  development  talent  through  the  acquisitions  of  BotCentral  in  Mountain  View,  California;  Callinize 

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Inc.,  dba  Tenfold  (“Tenfold”)  in  Austin,  Texas;  e-bot7  in  Munich,  Germany;  and  VoiceBase,  Inc.  (“VoiceBase”)  in  San 
Francisco, California.

Bring  to  market  best-in-class  AI  and  machine  learning  technologies  designed  for  the  Conversational  Space.  We 
believe that in the last decade many vendors introduced AI and bot offerings that created frustrating experiences for consumers 
and businesses alike, which in turn has eroded trust in automation. Many of these solutions have proven difficult to build and 
scale, and have been limited by stand-alone implementations that lacked the measurement, reporting and human oversight of 
conversational  platforms  such  as  the  Conversational  Cloud.  In  December  2018,  LivePerson  announced  its  patent-pending  AI 
engine  that  is  designed  to  overcome  these  shortcomings  and  help  brands  rapidly  bring  to  market  conversational  AI  that  can 
scale to millions of interactions, while increasing customer satisfaction and conversion rates.

Unlike alternative solutions designed solely for IT departments, LivePerson’s Conversational AI was built to be used by 
developers  and  contact  center  agents.  By  putting  the  power  of  conversational  design  and  bot  management  in  the  hands  of 
contact  center  agents,  LivePerson’s  Conversational  AI  gives  brands  the  ability  to  leverage  the  employees  closest  to  the 
customer, those who are most versed in the voice of the brand, and with the most expertise in how to craft successful outcomes 
for customer service and sales journeys.

Some of the key innovations behind LivePerson’s Conversational AI include:

•

•

•

•

•

•

•

•

•

a holistic approach to scaling AI by combining consumer facing bots, agent facing bots, intelligent routing and 
real-time  intent  understanding,  with  an  analytics  dashboard  that  helps  users  focus  on  the  intents  that  are 
impacting their business and prioritize which intents to automate next;

bot building software that is based on dialogue instead of workflow or code, so non-technical employees like 
contact center agents can design automations;

leveraging a data moat from hundreds of millions of conversations to feed the machine learning that rapidly and 
accurately  detects  consumer  sentiment  and  intents  in  real-time.  Customers  of  LivePerson  can  use  intent 
understanding for advanced routing, next-best actions, and to fully contain conversations with automation; 

the establishing of contact center agents as bot managers, ensuring that every conversation is safeguarded by a 
human and that agents are continuously training the AI to be smarter and drive more successful outcomes;

powerful  Assist  technology  that  multiplies  the  efficiency  of  agents  by  analyzing  intents  in  real  time  and  then 
suggesting next best actions, predefined content, and bots that can take over transactional work;

pre-built  templates  for  target  verticals  that  provide  out  of  the  box  support  for  the  top  intents  and  back-end 
integrations;

the  ability  to  bootstrap  conversations  with  existing  transcripts,  reducing  design  effort  and  speeding  time  to 
market;

third-party AI NLU integration, so customers are not boxed into one vendor; and

AI  analytics  and  reporting  tailored  to  the  Conversational  Space,  providing  brands  with  immediate,  actionable 
insights about their businesses and contact center operations.

Our strategy is to continue to enhance the Conversational AI engine and related products, by leveraging our global R&D 
footprint  and  substantial  library  of  mobile  and  online  conversational  data,  with  the  aim  of  increasing  agent  efficiency, 
decreasing customer care costs, improving the customer experience and increasing customer lifetime value.

Sustain our leadership position by aligning brands to a vision that transforms how they communicate with consumers 
and delivers a superior return on brands’ investment. Over the past four years we have made good progress in developing our 
conversational AI platform and within the next 12 months, we expect to have a solution in place for our automations to self-
heal, which is the ultimate goal of any AI platform. Our acquisitions of VoiceBase and Tenfold provide us with a mechanism 
for data capture in the voice channel. This additional data and the associated analytics and system integration give us an even 
greater ability to scale the usage of our platforms, by building on our strength in messaging. Brands must adapt their contact 
centers to an asynchronous messaging environment and leverage a combination of human agents, bots, and AI to achieve scale 
and efficiencies. When done correctly, the entire consumer lifecycle with a brand will be maintained within the Conversational 
Space,  and  traffic  will  steadily  shift  away  from  lower  returning  traditional  voice  calls,  websites,  emails,  and  apps  to  higher 
returning messaging endpoints.

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We believe that LivePerson is uniquely positioned to deliver this transformation due to our technology and expertise:

•

•

•

•

The Conversational Cloud, LivePerson’s enterprise-class, automation-first, cloud-based platform, was designed 
for AI-assisted and human-powered messaging in mobile and online channels. The platform offers best-in-class 
security and scalability, offers the broadest ecosystem of messaging endpoints, is designed for ease of use, and 
features an AI engine custom built for the Conversational Space, intent recognition, robust real-time reporting, 
role-based real-time analytics, predictive intelligence, and innovations in customer satisfaction and connection 
measurement.  Additionally,  the  Conversational  Cloud  is  an  open  platform  with  pre-built,  enterprise-grade 
integrations into back-end systems as well as the ability to work across NLU providers. 

The  Company  believes  it  has  a  data  moat  built  on  hundreds  of  millions  of  conversations  across  industries, 
geographies and use cases that is feeding the machine learning engines that power intent understanding. 

The  platform  has  expanded  to  power  conversations  across  a  broad  spectrum  of  channels  and  use  cases,  from 
traditional sales and customer service, to marketing, social, email, advertising, and brick and mortar.

LivePerson  has  deep  domain  expertise  across  verticals  and  messaging  endpoints,  a  global  footprint, 
referenceable  enterprise  brands  and  a  team  of  technical,  solutions  and  consulting  professionals  to  assist 
customers along their transformational journeys. We are positioned as an authority in the Conversational Space. 
We  have  developed  a  Transformation  Model  that  is  introduced  to  existing  and  prospective  customers  to  help 
guide them on their journeys from legacy and oftentimes inefficient legacy voice, email, and chat solutions to 
modern conversational ones powered by messaging and AI.

We believe that LivePerson’s differentiated approach to the Conversational Space, combined with our unique technology 
and  expertise  has  established  us  as  a  market  leader,  with  an  ability  to  deliver  superior  returns  on  investment.  LivePerson 
customers manage as many as 40 messaging conversations at a time, as compared to one at a time for a voice agent and two to 
four at a time for a good chat agent. Adding AI and bots provides even greater scale to the number of conversations managed. 
Our customers often see labor efficiency gains of at least two times that of voice agents, effectively cutting labor costs by at 
least  50%.  Furthermore,  our  ability  to  deliver  more  convenient,  personalized  and  content-rich  conversations  often  drives 
increases  in  customer  satisfaction  of  up  to  20  percentage  points  and  increases  in  sales  conversions  of  up  to  20%,  while 
enhancing average order value, customer retention and loyalty.

Strengthen  our  position  in  both  existing  and  new  industries.  We  plan  to  continue  to  develop  our  market  position  by 
increasing our customer base, and expanding within our installed base. We plan to continue to focus primarily on key target 
markets: consumer/retail, telecommunications, financial services, travel/hospitality, technology and automotive within both our 
enterprise and mid-market sectors, as well as the SMB sector. In 2019, we made strong inroads into new verticals with key wins 
in the airline, food service and healthcare industries. In 2020, we strengthened our presence in key markets including travel/
hospitality and retail, and opened new verticals like healthcare and government. In 2021, we continued to grow in verticals such 
as  healthcare  and  financial  services,  and  expanded  into  new  industries  including  cryptocurrency.  We  are  experimenting  with 
new  conversational  businesses,  including  some  that  are  in  regulated  industries,  like  online  banking  and  healthcare.  We  are 
increasingly structuring our field organization to emphasize our domain expertise and strengthen customer relationships across 
target industries.

Continue to build our international presence. We are focused on building our international presence and expanding our 
international revenue contribution, which accounted for 35% and 38% of total revenue in 2021 and 2020, respectively. We are 
generating positive results from our recent investments in the Asia Pacific, Europe, and Latin America regions. Expanding go-
to-market  capacity  in  international  theaters  is  one  of  our  key  strategic  focuses  and  also  part  of  our  motivation  for  our  recent 
acquisition of e-bot7.

Leverage our open architecture to support partners and developers. In addition to developing our own applications, we 
continue  to  cultivate  a  partner  eco-system  capable  of  offering  additional  applications  and  services  to  our  customers.  We 
integrate  into  third-party  messaging  endpoints  including  SMS,  Facebook  Messenger,  Apple  Business  Chat,  Google  Rich 
Business  Messenger,  Line,  WhatsApp,  Alexa,  Google  Home,  WeChat,  Google  Ad  Lingo,  Google  Search,  Google  Maps, 
Instagram and Twitter, multiple IVR vendors, and dozens of branded apps. The Conversational Cloud integrates our proprietary 
messaging and Conversational AI with third-party bot offerings, empowering our customers to manage a mix of different bots, 
human agents and technologies from one control panel, thereby optimizing contact center efficiency. LivePerson’s proprietary 
and third-party AI/bots enable brands to partially or fully automate communications with their customers.

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In  addition,  we  have  opened  up  access  to  our  platform  and  our  products  with  more  than  40  APIs  and  software 
development kits that allow customers and third parties to develop on top of our platform. Customers and partners can utilize 
these APIs to build our capabilities into their own applications and to enhance our applications with their services. In 2019, we 
launched  LivePerson  Functions,  a  serverless  FaaS  integration  which  enables  brands  to  develop  custom  behaviors  within 
LivePerson’s conversational platform to easily and rapidly tailor conversation flows to their specific needs. 

Expand  sales  partnerships  to  broaden  our  presence  and  accelerate  sales  cycles.  We  are  focused  on  broadening  our 
market  reach  and  accelerating  sales  cycles  by  partnering  with  systems  integrators,  technology  providers,  business  process 
outsourcers, value added resellers and other sales partners. We formalized a relationship with IBM Global Business Services in 
2017 and Accenture in 2018. In 2019, we announced strategic partnerships with TTEC, a leading BPO focused on customer 
experience,  and  DMI,  a  digital  transformation  company,  to  redefine  the  customer  experience  with  digital  engagement, 
messaging, and AI-driven automation. In 2020, a digital services and consulting company joined LivePerson’s network with a 
first-of-its-kind 360 degree partnership focusing not only on capturing the global rising demand for conversational commerce 
and building a personalized experience for customers, but also driving the transformation for internal corporate messaging and 
the  employee  experience  through  Conversational  AI.  In  2021,  we  announced  strategic  integration  partnerships  with  Google 
Cloud, Adobe and Medallia to help brands make contact center agents more efficient and effective, and empower and enrich the 
management  of  customer  and  employee  experience  through  the  power  of  AI.  Our  network  also  expanded  with  the  Tech 
Mahindra partnership to help brands deliver personalized conversational experiences to consumers at scale.

Maintain  market  leadership  in  technology  and  security  expertise.  As  described  above,  we  are  devoting  significant 
resources  to  creating  new  products  and  enabling  technologies  designed  to  accelerate  innovation.  We  evaluate  emerging 
technologies  and  industry  standards  and  continually  update  our  technology  in  order  to  retain  our  leadership  position  in  each 
market we serve. We monitor legal and technological developments in the area of information security and confidentiality to 
ensure our policies and procedures meet or exceed the demands of the world’s largest and most demanding corporations. We 
believe that these efforts will allow us to effectively anticipate changing customer and consumer requirements in our rapidly 
evolving industry.

Evaluate strategic alliances and acquisitions when appropriate. In July 2021, we acquired German conversational AI 
company e-bot7, which we expect to propel our self-service capabilities and continued growth in Europe. In October 2021, we 
acquired VoiceBase, a leader in real-time speech recognition and conversational analytics; and Tenfold, an advanced customer 
engagement platform for integrating communication systems with leading CRM and support services. Once fully integrated, we 
expect these acquisitions to allow LivePerson to deliver our AI and automation capabilities, insights, and integration as a single 
integrated product offering across all channels including voice and messaging.

Business solutions offerings

Products and Services

LivePerson’s hosted platforms harness human, AI and bot-powered messaging on mobile apps, mobile and desktop web 
browsers, SMS, social media and third-party consumer messaging platforms. Our business-to-business services are all managed 
from  a  single  user  interface.  By  supplying  a  complete,  unified  consumer  view,  our  solutions  enable  businesses  to  deliver  a 
relevant,  timely,  personalized,  and  seamless  consumer  experience  for  heads  of  digital  and  customer  care,  as  well  as  e-
commerce,  marketing,  and  contact  center  executives.  In  addition  to  product  offerings,  LivePerson  provides  professional 
services  and  value-added  business  consulting  to  support  complete  deployment  and  optimization  of  our  enterprise  solutions. 
Revenue  attributable  to  our  monthly  hosted  Business  services  accounted  for  78%  of  total  revenue  for  the  year  ended 
December 31, 2021, 79% of total revenue for the year ended December 31, 2020, and 77% of total revenue for the year ended 
December  31,  2019.  Our  strategy  is  to  increase  the  percentage  of  our  total  revenue  attributable  to  Business  services  by 
leveraging the partner network for a portion of professional services work and the adoption of our self-service tools.

The  Conversational  Cloud.  The  Conversational  Cloud,  LivePerson’s  enterprise-class,  cloud-based  platform,  enables 
businesses and consumers to connect through conversational interfaces, such as in-app and mobile messaging, while leveraging 
bots and AI to increase efficiency. The platform, which is marketed primarily to managers of digital and customer care, as well 
as  e-commerce,  marketing,  and  contact  center  executives,  combines  sophisticated  mobile  and  online  engagement  technology 
with robust business intelligence and big data to produce compelling, measurable results by intelligently engaging consumers 
based on a real-time understanding of consumer needs. Rich, contextually aware targeting, actionable insights and personalized 
experiences, empower businesses to get the most out of their existing online, mobile and social platforms. Potential benefits of 

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the Conversational Cloud include increased agent efficiency, decreased customer care costs, improved customer experiences, 
higher conversion rates and increased customer lifetime value.

The  Conversational  Cloud  was  designed  for  conversational  experiences,  enabling  businesses  to  securely  deploy 
messaging, coupled with bots and AI, at scale for brands with tens of millions of customers and many thousands of customer 
care  agents.  The  platform  powers  conversations  across  each  of  a  brand’s  primary  digital  channels,  including  mobile  apps, 
mobile and desktop web browsers, SMS, social media, and third-party consumer messaging platforms. Brands can also use the 
Conversational Cloud to message consumers when they dial a 1-800 number instead of forcing them to navigate IVRs and wait 
on hold. Similarly, the Conversational Cloud can ingest traditional emails and convert them into messaging conversations, or 
embed  messaging  conversations  directly  into  web  advertisements,  rather  than  redirect  consumers  to  static  website  landing 
pages. The platform seamlessly integrates LivePerson’s Conversational AI engine as well as third-party bots, enabling brands to 
manage both AI-based agents and human agents from a single console.

Our robust, cloud-based suite of rich messaging, real-time chat, AI and automation offerings features consumer and agent 
facing  bots,  intelligent  routing  and  capacity  mapping,  real-time  intent  detection  and  analysis,  queue  prioritization,  customer 
sentiment,  analytics  and  reporting,  content  delivery,  PCI  compliance,  co-browsing,  and  a  sophisticated  proactive  targeting 
engine. With the Conversational Cloud, agents can manage all conversations with consumers through a single console interface, 
regardless of which disparate messaging endpoints consumers originate from; i.e., WhatsApp, Line, Apple Business Chat, IVR, 
social, email, Amazon Alexa, or WeChat. An extensible API stack facilitates a lower cost of ownership by facilitating robust 
integration  into  back-end  systems,  as  well  as  enabling  developers  to  build  their  own  programs  and  services  on  top  of  the 
platform. More than 40 APIs and software development kits are available on the Conversational Cloud.

The Conversational Cloud enables the combination of real time on-site data and off-site behavioral data, with a broad set 
of historical and operational data. Proprietary analytics utilize this data to target end users with compelling engagement options 
at any step in the conversion funnel and throughout the customer lifecycle. The platform enables customers to maximize online 
revenue  opportunities,  improve  conversion  rates  and  reduce  shopping  cart  abandonment  by  proactively  engaging  the  right 
visitor,  using  the  right  channel,  at  the  right  time.  Our  solution  identifies  segments  of  website  visitors  who  demonstrate  the 
highest propensity to convert, and engages them in real-time with relevant content and offers, helping to generate incremental 
sales. The platform also reduces costs in the contact center relative to voice, by identifying consumers who may be struggling 
with  their  self-serve  experience,  and  proactively  connecting  them  to  a  live  consumer  care  specialist  via  messaging,  who  can 
manage several conversations at once. This comprehensive solution blends a proven value-based methodology with an active 
rules-based engagement engine and deep domain expertise to increase first contact resolution, improve consumer satisfaction, 
and reduce attrition rates.

LivePerson’s Conversational AI. LivePerson’s Conversational AI, announced in December 2018, operates as the brains 
behind  new  LivePerson  AI-based  products,  and  was  developed  using  our  conversational  data  set  of  millions  of  brand-to-
consumer interactions. LivePerson’s Conversational AI was custom designed for the Conversational Space, putting the power 
of bot development, training and management into the hands of the contact center and its agents, the teams most familiar with 
how to structure sales and service conversations to drive successful outcomes. The platform enables what we call “the tango” of 
humans,  AI  and  bots,  whereby  human  agents  act  as  bot  managers,  overseeing  AI-powered  conversations  and  seamlessly 
stepping  into  the  flow  when  a  personal  touch  is  needed.  Through  the  Conversational  Cloud,  agents  become  ultra-efficient, 
leveraging the AI engine to serve up relevant content, define next-best actions and take over repetitive transactional work, so 
that the agent can focus on relationship building. By seamlessly integrating the Conversational Cloud with our proprietary AI, 
as  well  as  third-party  bots,  the  platform  provides  businesses  with  a  comprehensive  view  of  all  AI-based  and  human-based 
conversations from a single console. Some of the first products developed on LivePerson’s Conversational AI engine include:

•

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Conversation  Builder,  which  non-technical  staff  such  as  contact  center  agents  use  to  design  high-quality 
automated conversations. The conversations are not built from scratch. Conversation Builder creates the initial 
versions  by  mining  a  brand’s  existing  conversation  transcripts.  Prebuilt  industry  templates  are  also  available, 
providing the dialogue and integrations necessary for common use cases such as billing.

Conversation  Manager,  a  console  that  suggests  automated  responses  and  next  best  actions  to  contact  center 
agents, who edit and select from them. Edits and selections dynamically improve the responses and next best 
actions. When the content reaches a brand-set accuracy threshold, it can be offered to consumers without human 
intervention.  Conversation  Manager  also  includes  sentiment  monitoring  to  alert  contact  center  agents  to 
conversations  that  require  their  attention.  Designed  for  use  in  large  contact  centers,  Conversation  Manager 
sends these requests to agents who have the capacity and appropriate skills to respond. A major retail brand that 
adopted this approach in its sales operation increased agent productivity up to 220% within 12 weeks of launch.

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•

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Conversation  Analytics,  dashboards  and  reporting  which  take  the  true  voice  of  the  customer  -  their  direct 
discussions  with  a  brand,  spoken  in  their  natural  language  -  and  turn  it  into  actionable  sales  and  service 
intelligence.  A  major  wireless  provider  using  early  versions  of  Conversation  Analytics  reported  the  product 
identifies the root cause of service issues faster than monitoring software, enabling the provider to accelerate the 
fix and reduce inbound customer inquiries. A leading hospitality firm used Conversation Analytics to identify 
and add new, top-selling items to its menu selection.

Intent  Manager,  a  real-time  intent  recognition  and  classification  engine  that  analyzes  consumer  intentions  at 
every  turn  of  the  conversation.  Intent  Manager  is  powered  by  LivePerson’s  proprietary  natural  language 
understanding capabilities and machine learning algorithms, which are grounded in 20+ years of conversational 
data and more than one billion messaging transcripts across a variety of industries. Intent Manager is currently 
being used by top brands to gain real-time insights and take action to improve customer service, marketing, and 
sales automation

Performance  Optimizer,  a  measurement  tool  to  help  brands  to  measure  and  manage  the  health  of  their 
conversational  operations  in  a  single  self-service  dashboard.  Performance  Optimizer  measures  critical  metrics 
for  conversational  experiences  and  uses  AI  to  automatically  assess  performance,  provide  actionable  insights, 
and deliver executive reporting.

Professional Services

The mission of our Professional Services team is to help customers optimize the performance of our products in order to 
drive incremental value through their mobile and online sales and/or service channel(s). This talented group utilizes their deep 
domain  expertise  and  years  of  hands-on  experience  to  provide  customers  with  detailed  analyses  and  measurements  of  their 
LivePerson deployment that drive strategies and decisions on how to optimize mobile and online messaging, real-time chat, and 
bot and AI integration. Deliverables of the team include scorecards that measure and chart performance trends, analyses and 
recommendations for conversational design, web design and process improvement, transcript reviews to discover both voice of 
the consumer insight and agent improvement opportunities, custom training of call center agents and management, and ongoing 
management  of  messaging  programs  to  ensure  alignment  with  current  business  practices  and  objectives.  The  team’s  value-
added methodology and approach to guiding customers towards messaging channels and human/bot agent optimization is an 
important  component  of  the  LivePerson  offering,  and  gives  our  customers  a  competitive  advantage  in  the  digital  world. 
Revenue  attributable  to  Professional  Services  accounted  for  14%,  13%,  and  14%  of  total  revenue  for  the  years  ended 
December 31, 2021, 2020, and 2019, respectively. 

e-Bot7

In the third quarter of 2021, we acquired German conversational AI company e-bot7. We expect the acquisition to propel 
LivePerson’s self-service capabilities — empowering brands of all sizes to quickly launch AI-powered messaging experiences 
—  as  well  as  its  continued  growth  in  Europe.  We  believe  that  combining  e-bot7’s  simple,  easy-to-use  technology  with 
LivePerson’s  world-class  NLU,  global  organization,  and  vast  customer  base  will  accelerate  the  speed  at  which  brands  can 
deploy and train AI-powered conversations.

Tenfold

In the fourth quarter of 2021, we acquired Tenfold, a customer experience integration platform that enables enterprises to 
modernize  customer  experience  tools  without  having  to  replace  legacy  systems.  Tenfold  helps  transform  voice  networks  and 
contact center providers without impacting day-to-day operations. Its customers include brands such as Wayfair, TransAmerica, 
and Sixt. We intend to maintain Tenfold’s business operations while integrating and leveraging Tenfold’s technology platform 
with  our  proprietary  messaging  and  Conversational  AI  offerings.  With  Tenfold,  LivePerson  messaging  becomes  available  to 
agents  anywhere  —  embedded  in  a  CRM,  on  the  agent’s  desktop,  or  in  the  brand’s  own  integrated  systems.  Once  fully 
integrated, as a voice platform-agnostic, blended system, we expect the offering also to provide enhanced flexibility for brands 
to work with any voice vendor and complement LivePerson messaging without impacting agent experience and productivity.

VoiceBase 

In  the  fourth  quarter  of  2021,  we  acquired  VoiceBase,  a  voice  analytics  platform  for  the  enterprise,  built  on  advanced 
speech recognition technology, that transforms voice and messaging conversations into easily interpreted data and actionable 
insights. It works with leading brands such as GrubHub, Twilio, Delta Dental, UserTesting, and Slice, and has out-of-the-box 

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integrations with leading telephony and contact-center systems including RingCentral, Genesys, NICE CXone, Avaya, Twilio, 
and  now  LivePerson.  We  intend  to  maintain  VoiceBase’s  business  operations  while  integrating  and  leveraging  VoiceBase’s 
technology  with  our  proprietary  messaging  and  Conversational  AI  offerings.  Once  fully  integrated,  we  anticipate  that 
VoiceBase’s  capabilities  with  LivePerson’s  Conversational  AI  will  give  brands  enhanced  visibility  into  customer  intents, 
sentiments, frustrations, and successes from 100% of conversations across messaging and voice, as well as third-party voice, 
telephony, or contact center systems. These insights make it easier to improve customer experience, uncover sales opportunities 
and increase revenue, and understand agent productivity and utilization.

Consumer services offering

Our consumer services offering is an online marketplace that connects Experts who provide information and knowledge 
for a fee via mobile and online messaging with Users. Users seek assistance and advice in various categories including personal 
counseling  and  coaching,  computers  and  programming,  education  and  tutoring,  spirituality  and  religion,  and  other  topics. 
Revenue  from  our  Consumer  segment  accounted  for  approximately  8%  of  total  revenue  for  each  of  the  years  ended 
December 31, 2021, 2020, and 2019, respectively.

Customers

More than 18,000 customers have deployed our business solutions, including Fortune 500 companies, dedicated Internet 
businesses,  a  broad  range  of  online  merchants,  as  well  as  numerous  SMBs,  automotive  dealers,  universities,  libraries, 
government  agencies  and  not-for-profit  organizations.  Our  solutions  benefit  organizations  of  all  sizes  conducting  business  or 
communicating  with  consumers  through  mobile  and  online  messaging  and  chat.  We  plan  to  continue  to  focus  on  key  target 
markets:  consumer/retail,  telecommunications,  financial  services,  travel/hospitality,  technology,  healthcare,  and  automotive, 
within the U.S. and Canada, Latin America, Europe, and the Asia-Pacific region.

No single customer accounted for or exceeded 10% of our total revenue in 2021, 2020, or 2019.

Sales and Marketing

Sales. We sell our business products and services by leveraging a common methodology through both direct and indirect 

sales channels.

Our  sales  process  focuses  on  the  perspective  that  the  Conversational  Space  requires  an  operational  transformation  that 
changes how brands engage with consumers across service, sales, marketing, social and brick and mortar. Brands must adapt 
their contact centers to an asynchronous messaging environment and leverage a combination of human agents, bots and AI to 
achieve scale and efficiencies. When done correctly, the entire consumer lifecycle with a brand will be maintained within the 
Conversational Space, and traffic will steadily shift away from lower returning voice calls, websites, emails and apps to higher 
returning messaging endpoints.

Our  mobile  and  online  messaging  solutions  are  targeted  at  business  executives  whose  primary  responsibility  is 
optimization of customer care, sales and marketing, or optimizing a consumer’s journey across the brand’s digital properties. 
Our solutions enable organizations to provide effective customer service, sales and marketing by deflecting costly phone calls 
and emails to the more cost efficient mobile and online messaging channel. We focus on the value that our solutions deliver in 
the  form  of  increased  agent  efficiency,  reduced  contact  center  costs,  increased  customer  satisfaction,  improved  customer 
lifetime  value,  maximized  digital  consumer  acquisition,  and  optimized  website  and  mobile  business  outcomes.  LivePerson 
supports  any  organization  with  a  company-wide  strategic  initiative  to  improve  the  overall  mobile  and  online  consumer 
experience.

Within the business solutions segment we have aligned our field organization to address the different sales strategies of 

our target markets:

Enterprise and large mid-market. We target large mid-market and enterprise businesses with a combination of direct sales 
and customer success teams, and partners. Across the globe, we are targeting a select group of brands, many of them already 
customers, that hold the power to transform customer care. These enterprises have thousands of agents in their contact centers 
and collectively connect with billions of consumers each year. We leverage thought leadership and related events to showcase 
our  strength  in  messaging  and  AI,  and  highlight  existing  reference  customers  who  share  their  successes  on  our  platform  and 

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how they achieved positive ROIs. Increasingly, we are working with large third-party system integrators, technology providers 
and business process outsourcers to supplement our direct sales effort.

For  our  large  and  more  complex  customers,  our  sales  methodology  often  begins  with  research  and  discovery  meetings 
that enable us to develop a deep understanding of the value drivers and key performance metrics of a prospective customer. We 
then present an analytical review detailing how our solutions and industry expertise can affect these value drivers and metrics. 
Once we validate solution capabilities and prove financial return on investment, we transition to a program management model 
wherein we work hand-in-hand with the customer, providing detailed analysis, measurements and recommendations that help 
optimize their performance and ensure ongoing program success.

In 2018, we introduced a pilot accelerator program, where we offer customers the option to test our entire platform, across 
all messaging endpoints and customer use cases, at an entry level price point for a period of three to nine months. This pilot 
program is intended to accelerate sales cycles and enable customers to rapidly assess the potential ROI and differentiation of 
our solutions before committing to a more substantial and extended deployment.

Small  business  and  small  mid-market.  We  target  small  business  and  small  mid-market  customers  with  a  mix  of  direct, 
online self-service, and third-party partner channels. Our customer acquisition strategy centers on leveraging customer word-of-
mouth, our leading brand name, online marketing and partnerships. We also leverage marketing programs and partner resources 
to promote increased usage and product adoption within these customers.

Indirect Sales. Resources within our organization are focused on developing partnerships to generate revenues via referral 
partnerships  and  indirect  sales  through  channel  partners.  By  maximizing  market  coverage  via  partners  who  provide  lead 
referrals and complementary products and services, we believe this channel supports revenue opportunities without incurring 
the costs associated with traditional direct sales.

Customer  Support.  Our  Professional  Services  group  provides  deployment  support  and  ongoing  business  consulting  to 
enterprise  and  mid-market  customers  and  maintains  involvement  throughout  the  engagement  lifecycle.  All  LivePerson 
customers have access to 24/7 help desk services through messaging, chat, and technical support ticketing.

Marketing.  Our  marketing  efforts  in  support  of  our  business  operations  are  organized  around  the  needs,  trends  and 
characteristics of our existing and prospective customer base. Our deep relationship with existing customers fosters continuous 
feedback and critical data analysis, thereby allowing us to develop and refine marketing programs that drive adoption across 
multiple  customer  segments.  We  have  a  global  team,  spread  across  key  geographies  that  is  focused  on  marketing  our  brand, 
products  and  services  to  executives  responsible  for  the  digital  channel,  the  consumer  experience,  marketing,  sales,  IT,  and 
consumer service operations of their organization.

Our  main  focus  is  on  the  consumer/retail,  telecommunications,  financial  services,  travel/hospitality,  technology, 
healthcare, and automotive industries. Our integrated marketing strategy is focused on driving demand, building customer and 
consumer advocacy, driving adoption of our platform, and supporting key areas of business, especially large enterprise, but also 
including  mid-sized  and  small  business  partners  and  international  entities.  We  aim  to  achieve  this  by  delivering  high-touch, 
small  group  events  for  senior  executives,  to  educate  them  on  messaging  and  the  transformational  ways  that  digital 
communication  can  help  their  business.  We  also  market  our  software  via  high-level  thought  leadership  campaigns,  industry 
event participation, personalized lead generation campaigns to reach potential and existing customers using mediums such as 
paid and organic search, direct email and mail, industry- and category-specific trade shows and events, and telemarketing.

Our  marketing  strategy  also  encompasses  a  strategic  communications  approach  that  integrates  public  relations,  social 
media, and analyst/influencer relations. We are focused on using those channels to communicate our brand value, to those key 
stakeholders,  to  increase  overall  brand  and  technology  awareness.  Communications  seek  to  highlight  key  customer  success 
stories, and promote executive thought leadership via contributed content, speaking opportunities and press interviews, to raise 
LivePerson’s profile and reinforce our position as an industry leader.

Competition

The  markets  for  mobile  and  online  business  messaging,  and  digital  engagement  technology  are  intensely  competitive, 
rapidly  changing  and  characterized  by  aggressive  marketing,  pricing  pressure,  evolving  industry  standards,  rapid  technology 
developments,  and  frequent  new  product  introductions.  We  believe  that  competition  will  continue  to  increase  as  our  current 
competitors increase the sophistication of their offerings and as new participants enter the market, which may cause additional 

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pricing pressure. If we are unable to accurately anticipate technology developments and continue to innovate in the markets in 
which we compete, or our competitors are more successful than us at developing compelling new products and services or at 
attracting and retaining customers, we may lose revenue and market share and our operating results could be adversely affected.

We believe that most contact center technology vendors incorrectly view messaging as a feature. They are content with 
building integrations to a messaging endpoint and offering messaging as just another product in their suite. LivePerson holds 
the perspective that messaging and AI are the foundation for conversational experiences, which transform how agents operate 
and how brands engage with consumers across service, sales, marketing, and brick and mortar. Brands must adapt their contact 
centers to an asynchronous messaging environment and leverage a combination of human agents, bots and AI to achieve scale 
and efficiencies. 

We  believe  that  our  differentiated  approach  to  the  Conversational  Space,  combined  with  our  unique  technology  and 

expertise, has established the Company as a market leader, with an ability to deliver superior returns on investment:

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The Conversational Cloud, LivePerson’s enterprise-class, automation-first, cloud-based platform, was designed 
for AI-assisted and human-powered messaging in mobile and online channels. The platform offers best-in-class 
security and scalability, offers the broadest ecosystem of messaging endpoints, is designed for ease of use, and 
features an AI engine custom built for the Conversational Space, intent recognition, robust real-time reporting, 
role-based real-time analytics, predictive intelligence, and innovations in customer satisfaction and connection 
measurement.  Additionally,  the  Conversational  Cloud  is  an  open  platform  with  pre-built,  enterprise-grade 
integrations into back-end systems as well as the ability to work across NLU providers. 

The  platform  has  expanded  to  power  conversations  across  a  broad  spectrum  of  channels  and  use  cases,  from 
traditional sales and customer service, to marketing, social, email, advertising and brick and mortar. 

The  Company  believes  it  has  a  data  moat  built  on  hundreds  of  millions  of  conversations  across  industries, 
geographies and use cases that is feeding the machine learning engines that power intent understanding. 

LivePerson  has  deep  domain  expertise  across  verticals  and  messaging  endpoints,  a  global  footprint, 
referenceable  enterprise  brands  and  a  team  of  technical,  solutions  and  consulting  professionals  to  assist 
customers along their transformational journeys. We are positioned as an authority in the Conversational Space,. 
We  have  developed  a  Transformation  Model  that  is  introduced  to  existing  and  prospective  customers  to  help 
guide them on their journeys from legacy and oftentimes inefficient legacy voice, email and chat solutions to 
modern conversational ones powered by messaging and AI.

We believe this focus on technological innovation, expertise and enterprise-class capabilities is positioning LivePerson as 

a leader in the Conversational Space. 

We  have  current  and  potential  competition  from  providers  of  messaging  and  digital  engagement  solutions  that  enable 
companies  to  engage  and  connect  with  their  consumer  customers,  as  well  as  technology  providers  that  offer  customer 
relationship management and contact center solutions. We have current and potential competitors in many different industries, 
including:

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•

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technology  or  service  providers  offering  or  powering  competing  digital  engagement,  contact  center, 
communications,  or  customer  relationship  management  solutions  such  as,  eGain,  Genesys,  Nuance,  Oracle, 
Salesforce.com, and Twilio;

service providers that offer basic messaging products or services with limited functionality free of charge or at 
significantly reduced entry level prices;

social  media,  social  listening,  messaging,  artificial  intelligence,  bots,  e-commerce,  and/or  data  and  data 
analytics  companies,  such  as  Facebook,  Google,  and  WeChat,  which  may  leverage  their  existing  or  future 
capabilities and consumer relationships to offer competing business-to-business solutions; and

customers that develop and manage their messaging solutions in-house.

In addition, many of our current and potential competitors have substantial competitive advantages, such as greater brand 
recognition, significantly larger financial, marketing, and resource and development budgets, access to larger customer and/or 
consumer bases, larger and more established marketing and distribution relationships, and/or more diverse product and service 
offerings. As a result, these competitors may be able to respond more quickly and effectively than we can to any change in the 
general  market  acceptance  of  messaging  services  or  any  new  or  changing  opportunities,  technologies,  standards,  pricing 

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strategies or customer requirements. Also, because of these advantages, potential customers may select a competitor’s products 
and  services,  even  if  our  services  are  more  effective.  For  all  of  these  reasons,  we  may  not  be  able  to  compete  successfully 
against our current and future competitors.

Four key technological features distinguish the LivePerson services:

Technology

• We  support  our  customers  through  a  secure,  scalable  server  infrastructure.  In  September  2020,  we  signed  a 
partnership  with  a  digital  services  and  consulting  company  to  transform  our  technology  infrastructure  on  the 
public cloud and to build integrated solutions. Currently, in North America, our primary servers are hosted in a 
fully-secured, top-tier, third-party server center located in the Mid-Atlantic United States, and are supported by 
a top-tier backup server facility located in the Western United States. In Europe, our primary servers are hosted 
in a fully-secured, top-tier, third-party server center located in the United Kingdom and are supported by a top-
tier  backup  server  facility  located  in  The  Netherlands.  In  the  Asia  Pacific  region,  our  primary  and  backup 
servers  are  hosted  in  fully-secured,  top-tier,  third-party  server  centers  located  in  Australia.  Nearly  all  of  our 
larger  customers  outside  of  the  United  States  are  hosted  within  our  U.K.-  and  Australia-based  facilities.  By 
managing  our  servers  directly,  we  maintain  greater  flexibility  and  control  over  the  production  environment 
allowing us to be responsive to customer needs and to continue to provide a superior level of service. Utilizing 
advanced  network  infrastructure  and  protocols,  our  network,  hardware  and  software  are  designed  to 
accommodate our customers’ demand for secure, high-quality 24/7 service, including during peak times such as 
the holiday shopping season.

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•

As a hosted service, we are able to add additional capacity and new features quickly and efficiently. This has 
enabled  us  to  provide  these  benefits  simultaneously  to  our  entire  customer  base.  In  addition,  it  allows  us  to 
maintain a relatively short development and implementation cycle.

As  a  SaaS  provider,  we  focus  on  the  development  of  tightly  integrated  software  design  and  network 
architecture. We dedicate significant resources to designing our software and network architecture based on the 
fundamental principles of security, reliability and scalability.

LivePerson’s  powerful  Conversational  AI  is  powered  by  over  20  years  of  proprietary,  verbatim  conversation 
data  that  the  company  has  accumulated  helping  thousands  of  clients,  including  the  world’s  largest  brands, 
message with consumers at scale. The strength of the company’s Conversational AI can also be attributed to the 
company’s laser focus on brand-consumer conversations. Unlike other AIs, which are applied to wide-ranging 
and unrelated use cases, LivePerson’s AI has been built specifically to power conversations between brands and 
consumers, giving it the edge in understanding consumer intents and the resolutions that best satisfy them.

Software  Design.  Our  software  design  is  based  on  client-server  architecture.  Since  we  are  a  SaaS  provider, 
Conversational Cloud customers and visitors to our customers’ websites require only a standard Web browser and do not need 
to download software from LivePerson in order to interact with our customers’ operators or to use the LivePerson services. We 
also  provide  APIs  that  enable  our  customers  and  third-parties  to  integrate  the  Conversational  Cloud  with  custom  designed 
applications.

Network Architecture. The software underlying our services is integrated with scalable and reliable network architecture. 
Our  network  is  scalable;  we  do  not  need  to  add  new  hardware  or  network  capacity  for  each  new  LivePerson  customer.  This 
network  architecture  is  hosted  in  co-location  facilities  with  redundant  network  connections,  servers  and  other  infrastructure, 
enabling  superior  availability.  Our  backup  server  infrastructure  housed  at  separate  locations  provides  our  primary  hosting 
facilities with effective disaster recovery capability. We comply with security standards such as SOC2 and PCI. For increased 
security,  through  a  multi-layered  approach,  we  use  advanced  firewall  architecture  and  industry-leading  encryption  standards 
and employ third-party experts to further validate our systems’ security. We also enable our customers to further encrypt their 
sensitive data using more advanced encryption algorithms.

Government Regulation

We and our customers are subject to a number of laws and regulations in the United States and abroad, including laws 
related  to  conducting  business  on  the  Internet  and  on  mobile  devices,  such  as  laws  regarding  data  privacy,  data  protection, 
information security, cybersecurity, restrictions, or technological requirements regarding the collection, use, storage, protection, 
disposal transfer, or other processing of consumer data, content, consumer protection, internet (or net) neutrality, advertising, 

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electronic contracts, taxation, provision of online payment services (including credit card processing), and intellectual property 
rights, which are continuously evolving and developing.

U.S.  and  international  privacy  laws  and  regulations  are  evolving  and  changing,  are  subject  to  differing  interpretations, 
may be costly to comply with, and may be inconsistent among countries and jurisdictions or conflict with other rules. As we 
expand  our  operations  in  these  countries,  our  liability  exposure  and  the  complexity  and  cost  of  compliance  with  data  and 
privacy requirements will likely increase. Any failure by us to comply with our posted privacy policies, applicable federal, state 
or international laws and regulations relating to data privacy and data protection, or the privacy commitments contained in our 
contracts, could result in proceedings against us by governmental entities, customers, consumers, watchdog groups or others, 
which  could  have  a  material  adverse  effect  on  our  business,  financial  condition  and  results  of  operations.  In  addition,  the 
increased attention focused upon liability as a result of lawsuits, investigations, and legislative proposals and enactments could 
harm our reputation or otherwise impact the growth of our business.

Intellectual Property and Proprietary Rights

We rely on a combination of patent, copyright, trade secret, trademark and other common law protections in the United 
States  and  other  jurisdictions,  as  well  as  confidentiality  requirements  and  contractual  provisions,  to  protect  our  proprietary 
technology, processes and other intellectual property. We own a portfolio of patents and patent applications in the United States 
and  internationally  and  regularly  file  patent  applications  to  protect  intellectual  property  that  we  believe  is  important  to  our 
business, including intellectual property related to digital engagement technology and web and mobile based consumer-facing 
services.  We  believe  the  duration  of  our  patents  is  adequate  relative  to  the  expected  lives  of  our  products  and  services.  We 
pursue the registration of our domain names, trademarks and trade names in the United States and in certain locations outside 
the United States. We also own copyrights, including in our software, publications and other documents authored by us. These 
intellectual  property  rights  are  important  to  our  business  and  marketing  efforts.  We  seek  to  protect  our  intellectual  property 
rights by relying on federal, state, and common law rights, including registration, or otherwise in the United States and certain 
foreign jurisdictions, as well as contractual restrictions. However, we believe that factors such as the technological and creative 
skills  of  our  personnel,  new  service  developments,  frequent  enhancements  and  reliable  maintenance  are  more  essential  to 
establishing  and  maintaining  a  competitive  advantage.  Others  may  develop  technologies  that  are  similar  or  superior  to  our 
technology. We enter into confidentiality and other written agreements (including invention assignment agreements) with our 
employees, consultants, customers, potential customers, strategic partners, and other third parties, and through these and other 
written  agreements,  we  attempt  to  control  access  to  and  distribution  of  our  software,  documentation  and  other  proprietary 
information. Despite our efforts to protect our proprietary rights, third parties may, in an unauthorized manner, attempt to use, 
copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop a service 
with the same functionality as our services. Policing unauthorized use of our services and intellectual property rights is difficult, 
and we cannot be certain that the steps we have taken will prevent misappropriation of our technology or intellectual property 
rights,  particularly  in  foreign  countries  where  we  do  business,  where  our  services  are  sold  or  used,  where  the  laws  may  not 
protect proprietary rights as fully as do the laws of the United States or where enforcement of laws protecting proprietary rights 
is not common or effective.

Substantial litigation regarding intellectual property rights exists in the software industry. In the ordinary course of our 
business,  our  services  and/or  our  customers’  use  of  our  services  have  been  and  may  be  increasingly  subject  to  third-party 
infringement  claims  as  claims  by  non-practicing  entities  become  more  prevalent  and  as  the  number  of  competitors  in  our 
industry segment grows and the functionality of services in different industry segments overlaps. Some of our competitors in 
the market for digital engagement technology and/or web and mobile based consumer-facing services or other third parties may 
have filed or may intend to file patent applications covering aspects of their technology and have asserted or may assert claims 
against  us.  Any  claims  alleging  infringement  of  third-party  intellectual  property  rights  could  require  us  to  spend  significant 
amounts  in  litigation  (even  if  the  claim  is  invalid),  distract  management  from  other  tasks  of  operating  our  business,  pay 
substantial  damage  awards,  prevent  us  from  selling  our  products,  delay  delivery  of  our  services,  develop  non-infringing 
software, technology, business processes, systems or other intellectual property (none of which might be successful), or limit 
our ability to use the intellectual property that is the subject of any of these claims, unless we enter into license agreements with 
the third parties (which may be costly, unavailable on commercially reasonable terms, or not available at all). Therefore, any 
such claims could have a material adverse effect on our business, results of operations, cash flows and financial condition.

The duration of the protection afforded to our intellectual property depends on the type of property in question, the laws 
and regulations of the relevant jurisdiction and the terms of its license agreements with others. With respect to our trademarks 
and trade names, trademark laws and rights are generally territorial in scope and limited to those countries where a mark has 
been registered or protected. While trademark registrations may generally be maintained in effect for as long as the mark is in 

15

use in the respective jurisdictions, there may be occasions where a mark or title is not registrable or protectable or cannot be 
used in a particular country. In addition, a trademark registration may be canceled or invalidated if challenged by others based 
on certain use requirements or other limited grounds. The duration of property rights in trademarks, service marks and trade 
names in the United States, whether registered or not, is predicated on our continued use.

Human Capital Management

As a leading provider of conversational solutions, we are at the forefront of a consumer-led shift to Conversational AI, 
and our Conversational Cloud is setting the industry standard for this future. As a result of these efforts, LivePerson was named 
to Fast Company’s annual list of the World’s Ten Most Innovative Artificial Intelligence Companies of 2020. Our employees 
understand  that  they  are  critical  to  our  mission  of  making  life  easier  for  people  and  brands  everywhere  through  trusted 
Conversational  AI.  We  intend  to  continue  to  invest  in  the  diversity,  inclusiveness,  health  and  happiness  of  our  employees  in 
order to foster creativity, productivity and growth.

As of December 31, 2021, we had 1,540 full-time employees worldwide, located in more than 12 countries. Of these, 876 
were  located  in  the  Americas,  548  in  EMEA,  and  116  in  APAC.  Although  we  have  statutory  employee  representation 
obligations in certain countries, our U.S. employees are not covered by collective bargaining arrangements. We believe we have 
good relations with our employees. For 2021, our key human capital management efforts focused on the following: 

Talent Acquisition and Development. We place a high priority on attracting, recruiting, developing and retaining diverse 
global talent. As a company, we are focused on benefits and programs that support our employees across the entire employee 
lifecycle, from recruitment and onboarding, to well-being, learning and development.  Our recruiting processes are designed to 
ensure that we bring on employees who are aligned to our values and culture, and we follow a comprehensive process in order 
to solicit multiple perspectives and eliminate bias. In 2020, we scaled and expanded an internal program to train employees to 
become  objective  “hiring  experts”  and  to  reduce  unconscious  bias  in  the  hiring  process.  We  also  launched  a  new  virtual 
onboarding and orientation program for new hires globally, which includes a multi-day immersion into our principles and team 
building exercises. 

In  2020,  we  also  launched  a  four  week  seminar  style  cohort  program  to  ensure  LivePerson  employees  understand  the 
foundation of AI and how AI is transforming industries and society. The program also features monthly external AI speakers 
and a monthly podcast series showcasing internal product leaders and AI specialists. Approximately 25% of employees earned 
certificates of completion during 2020, and we expanded the program during 2021 due to continuing employee demand. 

Diversity,  Equity  and  Inclusion.  DEI  is  core  to  our  global  strategy.  We  believe  that  diverse  and  inclusive  teams  foster 
innovation,  creativity  and  productivity.  We  have  invested  resources  in  this  area  for  some  time,  and  intend  to  continue  to 
enhance and improve our efforts. In 2021, we hired a dedicated leader to focus on our global diversity recruiting practices. We 
also began working with two diversity recruiting platforms, intentionally diversified our interview panels, and recalibrated our 
job description templates to focus more heavily on inclusivity. We also invested in a series of recruiting events in the U.S. and 
EMEA to help us connect underrepresented talent to open positions.

We  are  committed  to  fostering  a  diverse  and  inclusive  workplace  that  celebrates  different  perspectives,  cultures,  and 
experiences.  We regularly measure the representation of women and minority groups in the company, including in leadership 
and  technical  positions,  and  will  continue  our  ongoing  efforts  to  increase  hiring  of  employees  from  these  groups.  We  are 
committed to equal pay for equal work. As part of that commitment, we run a pay equity analysis when we conduct our annual 
compensation assessments and when we grant equity. 

During  2020,  we  launched  an  employee-led  diversity  council  empowered  to  drive  global  programs  focused  on  DEI  as 
well  as  to  support  independent  employee  resource  groups  and  help  ensure  the  diversity  of  teams  and  projects  within  our 
company.  We  have  launched  several  employee-led  DEI  programs  under  this  umbrella  in  2020,  including  a  Women  in 
Technology, Live in Color program and in 2021, we added a LGBTQ+ employee resource group.

Employee  Wellness  and  COVID-19  Response.  We  remain  focused  on  programs  that  promote  the  total  wellness  of  our 
employees,  including  resources  and  services  to  support  physical,  mental  and  financial  wellness.  We  offer  industry-leading 
benefits packages based on the diverse needs of our employees and their families, including comprehensive healthcare, accident 
insurance,  a  401(k)  plan,  an  employee  stock  purchase  program,  and  time  off  programs.  We  work  hard  to  ensure  that  our 

16

employees are aware of and take advantage of these opportunities, and we review our programs annually to ensure they remain 
competitive.

This was particularly important during the COVID-19 pandemic, where we proactively prioritized the safety and health of 
our  employees.  Before  local  health  experts  suggested  shelter  in  place  initiatives,  we  began  to  limit  business  travel  and 
encourage all employees to work remotely. We went on to adopt a company policy for all employees to work from home and 
closed virtually all of our offices (including our corporate headquarters). Since transitioning to a remote work environment, we 
established multiple employee-led committees to design future of work programs and launched two surveys to gather employee 
feedback.  Based  on  survey  results  from  over  75%  of  our  global  workforce,  we  identified  key  themes  and  opportunities  for 
enhancement, and we have already implemented several employee recommendations.

We also provided opportunities for virtual peer connection, virtual learning, and enhanced emotional well-being benefits 
and  programs,  along  with  flexible  work  arrangements  to  ensure  our  employees  have  the  resources  they  need  to  care  for 
themselves and their families. We plan to continue to offer time away, wellness and caregiving leave and financial support and 
reimbursement  for  work  from  home  equipment  to  foster  a  healthy  and  happy  workforce  and  community  with  support  for 
productive remote workspaces.

Website Access to Reports

We  make  available,  free  of  charge,  on  our  website  (  www.liveperson.com  ),  our  annual  reports  on  Form  10-K,  our 
quarterly  reports  on  Form  10-Q,  and  our  current  reports  on  Form  8-K  and  amendments  to  those  reports  filed  or  furnished 
pursuant  to  Sections  13(a)  or  15(d)  of  the  Securities  Exchange  Act  of  1934  as  soon  as  reasonably  practicable  after  we  have 
electronically  filed  such  material  with,  or  furnished  it  to,  the  SEC.  The  Company’s  web  site  address  provided  above  is  not 
intended to function as a hyperlink, and the information on the Company’s web site is not and should not be considered part of 
this Annual Report on Form 10-K and is not incorporated by reference herein. The SEC maintains an Internet site that contains 
reports,  proxy  and  information  statements,  and  other  information  regarding  issuers  that  file  electronically  with  the  SEC  at 
www.sec.gov.

Item 1A. Risk Factors

The  following  are  certain  of  the  important  risk  factors  that  could  cause,  or  contribute  to  causing,  our  actual  operating 
results  to  differ  materially  from  those  indicated,  expected,  or  suggested  by  forward-looking  statements  made  in  this  Annual 
Report on Form 10-K or presented elsewhere by management from time to time. The risks described below are not the only 
ones we face. Additional risks not presently known to us, or that we currently deem to be immaterial, could also materially and 
adversely  affect  our  business,  results  of  operations,  financial  condition,  cash  flows,  prospects,  and/or  the  price  of  our 
outstanding securities.

Summary of Risk Factors

The following is a summary of the principal risks and uncertainties that could materially adversely affect our business, 
results  of  operations,  financial  condition,  cash  flows,  prospects,  and/or  the  price  of  our  outstanding  securities,  and  make  an 
investment in our securities speculative or risky. You should read this summary together with the more detailed description of 
each risk factor contained below.

Risks Related to Operating our Business

•

•

•

Our business depends significantly on our ability to retain our key personnel, attract new personnel, and manage 
attrition.
Supporting our existing and growing customer base could strain our personnel resources and infrastructure, and 
if we are unable to scale our operations and increase productivity, we may not be able to successfully implement 
our business plan.
The  success  of  our  business  depends  on  retention  of  existing  customers  and  their  purchase  of  additional 
services, and attracting new customers and new consumer users of our consumer services.
Our expansion into new products, services, and technologies could subject us to additional risks.

•
• Major  public  health  issues,  and  specifically  the  pandemic  caused  by  the  spread  of  COVID-19,  could  have  a 
material adverse impact on our business, results of operations, financial condition, cash flows, prospects, and/or 
the price of our outstanding securities.

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•

•

•

•

If  we  do  not  successfully  integrate  past  or  potential  future  acquisitions,  we  may  not  realize  the  expected 
business or financial benefits and our business could be adversely impacted.

Capital needs necessary to execute our business strategy could increase substantially and we may not be able to 
secure additional financing to execute this strategy.
Our  sales  cycles  can  be  lengthy,  and  the  timing  of  sales  can  be  difficult  to  predict,  which  may  cause  our 
operating results to vary significantly.
Delays in our implementation cycles could have an adverse effect on our results of operations.

Risks Related to our Financial Condition and Operating Results

•

•

•

•

Our quarterly revenue and operating results may fluctuate significantly, which may cause a substantial decline 
in the trading price of our securities.
In the past we have experienced losses, we had an accumulated deficit of $516.9 million as of December 31, 
2021 and we may incur losses in the future.

The non-payment or late payment of amounts due to us from a significant number of customers may negatively 
impact our financial condition or make it difficult to forecast our revenues accurately.

Because we recognize revenue from subscriptions for our service over the term of the subscription, declines in 
business may not be immediately reflected in our operating results.

Risks Related to Industry Dynamics and Competition

•

•

•

•

If we are unable to develop and maintain successful relationships with partners, service partners, social media, 
and  other  third-party  consumer  messaging  platforms  and  endpoints,  our  business,  results  of  operations,  and 
financial condition could be adversely affected.
If we are unable to effectively operate on mobile devices, our business could be adversely affected.

The markets in which we participate are highly competitive, and we may lose customers and revenue if we are 
not able to innovate or effectively compete.
Downturns in the global economic environment or in particular industries in which our sales are concentrated 
may adversely affect our business and results of operations.

Risks Related to Security Vulnerabilities and Service Reliability

•

Failures  or  security  breaches  in  our  services  or  systems,  those  of  our  third  party  service  providers,  or  in  the 
websites  of  our  customers,  including  those  resulting  from  cyber-attacks,  security  vulnerabilities,  defects,  or 
errors, could harm our business.

• We  may  be  liable  if  third  parties  access  or  misappropriate  confidential  or  personal  data  from  our  systems  or 

services.

• We provide service level commitments to certain customers. If we do not meet these contractual commitments, 
we could be obligated to provide credits or refunds or face contract terminations, which could adversely affect 
our revenue and harm our reputation.
Failure to license necessary third party software for use in our products and services, or failure to successfully 
integrate third party software, could cause delays or reductions in our sales, or errors or failures of our service.

•

Risks Related to Regulatory and Data Privacy Issues

•

Our business is subject to a variety of U.S. and international laws and regulations regarding privacy and data 
protection,  and  increased  public  scrutiny  of  privacy  and  security  issues  could  result  in  increased  government 
regulation, industry standards, and other legal obligations that could adversely affect our business.

• We may be subject to governmental export controls and economic sanctions regulations that could impair our 
ability to compete in international markets due to licensing requirements and could subject us to liability if we 
are not in compliance with applicable laws.
Industry-specific  regulation  is  evolving  and  unfavorable  industry-specific  laws,  regulations,  or  interpretive 
positions could harm our business.

•

•

Future regulation of the Internet or mobile devices may slow our growth, resulting in decreased demand for our 
services and increased costs of doing business.

Risks Related to our Intellectual Property  

•

Our products and services may infringe upon intellectual property rights of third parties and any infringement 
could require us to incur substantial costs and may distract our management.

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•

•

Our business and prospects would suffer if we are unable to protect and enforce our intellectual property rights.

Issues in the use of AI in our product offerings may result in reputational harm or liability.

Risks Related to our International Operations and Tax Issues 

•

Our  results  of  operations  may  be  adversely  impacted  due  to  our  exposure  to  foreign  currency  exchange  rate 
fluctuations.

• We  may  be  unsuccessful  in  expanding  our  operations  internationally  and/or  into  direct-to-consumer  services 
due  to  additional  regulatory  requirements,  tax  liabilities,  currency  exchange  rate  fluctuations,  and  other  risks, 
which could adversely affect our results of operations.
Our operations may expose us to greater than anticipated income, non-income, and transactional tax liabilities, 
which could harm our financial condition and results of operations.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

•

•

•

Political, economic, and military conditions in Israel could negatively impact our Israeli operations.

Risks Related to our Outstanding Convertible Notes  

•

Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our 
business to pay our indebtedness.

• We  may  not  have  the  ability  to  raise  the  funds  necessary  to  settle  conversions  of  the  Notes  in  cash  or  to 
repurchase the Notes upon a fundamental change, and any future debt may contain limitations on our ability to 
pay cash upon conversion or repurchase of the Notes.

•

•

•

•

Provisions in the indentures for the Notes may deter or prevent a business combination that may be favorable to 
you.
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and 
operating results.
The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have 
a material effect on our reported financial results.

The capped call transactions may affect the value of the Notes and our common stock.

Risks Related to our Common Stock  

•

•
•

•
•

Our  stock  price  has  been,  and  may  continue  to  be,  highly  volatile,  which  could  reduce  the  value  of  your 
investment and subject us to litigation.

Our common stock is traded on more than one market and this may result in price variations.
If  our  officers,  directors  and  largest  stockholders  choose  to  act  together,  they  may  be  able  to  significantly 
influence  our  management  and  operations,  acting  in  their  own  best  interest  and  not  necessarily  those  of  our 
other stockholders.

Future sales of substantial amounts of our common stock may negatively affect our stock price.
Provisions  in  our  charter  documents  and  Delaware  law  could  discourage,  delay  or  prevent  a  takeover  that 
stockholders may consider favorable.

Risks Related to Operating our Business

Our business depends significantly on our ability to retain our key personnel, attract new personnel, and manage attrition. 

Our success depends largely on the continued services of our senior management team. The loss of one or more members 
of senior management could have a material adverse effect on our business, results of operations, and financial condition. We 
are also substantially dependent on the continued service of other key personnel, including key sales executives responsible for 
revenue generation and key development personnel accountable for product and service innovation and timely development and 
delivery  of  upgrades  and  enhancements  to  our  existing  products  and  services.  Changes  to  senior  management  and  key 
employees could also lead to additional unplanned losses of key employees. The loss of key employees could seriously harm 
our ability to release new products and services and upgrade existing products and services on a timely basis, and put us at a 
competitive disadvantage. 

In the technology industry, there is substantial competition for key personnel, including skilled engineers, sales executives 
and  operations  personnel.  We  may  not  be  able  to  successfully  recruit,  integrate  and  retain  qualified  personnel  in  the  future, 
which  could  impact  our  ability  to  innovate  and  deliver  new  or  updated  products  to  our  customers,  which  could  harm  our 

19

business. Among other things, our decision to close virtually all of our offices following the onset of the COVID-19 pandemic 
may make it harder for us to recruit and retain our personnel. If our retention and recruitment efforts are ineffective, employee 
turnover  could  increase  and  our  ability  to  provide  services  to  our  customers  would  be  materially  and  adversely  affected. 
Furthermore, the requirement to expense stock options may discourage us from granting the size or type of stock option awards 
that job candidates may require in order to join our company. 

In addition, we may not be able to outsource certain functions. We expect to evaluate our needs and the performance of 
our staff on a periodic basis, and may choose to make adjustments in the future. If the size of our staff is significantly reduced, 
either by our choice or otherwise, it may become more difficult for us to manage existing, or establish new, relationships with 
customers and other counter-parties, or to expand and improve our service offerings. It may also become more difficult for us to 
implement  changes  to  our  business  plan  or  to  respond  promptly  to  opportunities  in  the  marketplace.  Further,  it  may  become 
more difficult for us to devote personnel resources necessary to maintain or improve existing systems, including our financial 
and managerial controls, billing systems, reporting systems and procedures. Thus, any significant amount of staff attrition could 
cause our business and financial results to suffer. 

Supporting our existing and growing customer base could strain our personnel resources and infrastructure, and if we are 
unable to scale our operations and increase productivity, we may not be able to successfully implement our business plan. 

We  continue  to  experience  significant  growth  in  our  customer  base  and  personnel,  which  has  placed  a  strain  on  our 
management, administrative, operational and financial infrastructure. We anticipate that additional investments in our internal 
infrastructure, data center capacity, research, customer support and development, and real estate spending will be required to 
scale  our  operations  and  increase  productivity,  to  address  the  needs  of  our  customers,  to  further  develop  and  enhance  our 
services,  to  expand  into  new  geographic  areas,  and  to  scale  with  our  overall  growth.  We  may  also  need  to  make  additional 
investments  with  third  party  outsourcing  providers,  such  our  announced  plans  to  work  with  a  digital  services  and  consulting 
company to move our technology infrastructure to the public cloud. The additional investments we are making will increase our 
cost base, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term, 
and there is no guarantee that they will be successful or meet our customers’ needs. 

We  regularly  upgrade  or  replace  our  various  software  systems.  If  the  implementations  of  these  new  applications  are 
delayed, or if we encounter unforeseen problems with our new systems or in migrating away from our existing applications and 
systems, our operations and our ability to manage our business could be negatively impacted. 

Our success will depend in part upon the ability of our senior management to manage our projected growth effectively. 
To do so, we must continue to increase the productivity of our existing employees and to hire, train and manage new employees 
as  needed.  To  manage  the  expected  domestic  and  international  growth  of  our  operations  and  personnel,  we  will  need  to 
continue  to  improve  our  operational,  financial  and  management  controls,  our  reporting  systems  and  procedures,  and  our 
utilization of real estate. If we fail to successfully scale our operations and increase productivity, we may be unable to execute 
our business plan and the market price of our securities could decline. 

The  success  of  our  business  depends  on  retention  of  existing  customers  and  their  purchase  of  additional  services,  and 
attracting new customers and new consumer users of our consumer services. 

Our customers typically subscribe for our services for a twelve month term and may have no obligation to renew their 
subscription after expiration of the twelve month term. In some cases, our agreements are terminable or may terminate upon 30 
to  90  days’  notice  without  penalty.  If  a  significant  number  of  our  customers,  or  any  one  customer  to  whom  we  provide  a 
significant  amount  of  services,  were  to  terminate  services,  reduce  the  amount  of  services  purchased,  or  fail  to  purchase 
additional  services,  our  results  of  operations  may  be  negatively  and  materially  affected.  Dissatisfaction  with  the  nature  or 
quality of our services could also lead customers to terminate our service. 

We depend on monthly fees and interaction-based fees from our services for substantially all of our revenue. As part of 
our strategy, we are increasingly offering customers subscriptions with interaction-based fees. While this interaction-based fee 
model  has  demonstrated  success  in  our  business  to  date,  it  could  potentially  produce  greater  variability  in  our  revenue  as 
revenue  in  this  model  is  impacted  by  the  number  of  interactions  that  our  customers  generate  through  use  of  our  products. 
Because  of  the  historically  small  amount  of  services  sold  in  initial  orders,  we  depend  significantly  on  the  growth  of  our 
customer  base  and  sales  to  new  customers  and  sales  of  additional  services  to  our  existing  customers.  The  success  of  our 

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consumer offerings similarly depends on our ability to attract and retain new customers.  Our revenue could decline unless we 
are able to obtain additional customers or alternate revenue sources. 

Our Gainshare program offers contingent pricing and if we are unsuccessful at achieving customer objectives, the program 
could result in operating losses. 

The  Company  has  developed  Gainshare,  a  fully  managed  solution  where  LivePerson  provides  messaging  and  AI 
automation technology as well as the labor, automation, and end-to-end program management. Gainshare pricing is contingent 
on the degree to which a customer achieves its financial objectives, such as increased revenue or reduced operating costs. If we 
are  unsuccessful  in  achieving  these  objectives  for  our  customers  (including  as  a  result  of  broader  market  events,  such  as 
normalization of pandemic-specific shopping trends and returns to physical, in-store shopping experiences), it will reduce the 
revenue that we recognize from Gainshare and could result in our operating the program at a financial loss, which could have a 
materially adverse impact on our financial results.

Our expansion into new products, services, and technologies could subject us to additional risks. 

We have invested and expect to continue to expand in new products, services, and technologies. We may have limited or 
no experience in new market segments that we enter or new services that we decide to offer, and customers may not choose to 
buy or use our service offerings. These offerings, which can present new and difficult technology challenges, may subject us to 
claims if customers of these offerings experience service disruptions or failures or other quality issues. Our newer activities may 
involve significant risks and uncertainties, including diversion of resources and management attention from current operations, 
as  well  as,  in  certain  circumstances,  the  use  of  alternative  investment,  governance,  or  revenue  strategies  that  may  fail  to 
adequately align incentives across our business or otherwise accomplish our objectives. In addition, new and evolving products, 
services, and technologies, including those that use AI, machine learning, and blockchain, can raise ethical, technological, legal, 
regulatory,  and  other  challenges,  which  may  negatively  affect  our  business  and  demand  for  our  products  and  services.  In 
addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in 
these  newer  activities  to  recoup  our  investments  in  them.  Failure  to  realize  the  benefits  of  amounts  we  invest  in  new 
technologies, products, or services could result in the value of those investments being written down or written off. 

Major public health issues, and specifically the pandemic caused by the spread of COVID-19, could have a material adverse 
impact on our business, results of operations, financial condition, cash flows, prospects, and/or the price of our outstanding 
securities. 

Our results of operations could in the future be materially adversely impacted by the COVID-19 pandemic. We closely 
monitor  developments  related  to  the  COVID-19  pandemic  to  assess  its  impact  on  our  business.  While  still  evolving,  the 
COVID-19  pandemic  (including  the  emergence  and  spread  of  more  transmissible  variants)  has  created  significant  economic 
disruption,  and  financial  volatility  and  uncertainty  both  in  the  U.S.  and  around  the  world.  Although  vaccines  believed  to  be 
highly  effective  at  preventing  hospitalization  from  COVID-19  continue  to  be  produced  and  distributed,  it  is  not  possible  to 
predict  the  longer  term-effects  that  the  COVID-19  pandemic  could  have  on  our  business,  including  after  the  COVID-19 
pandemic  has  subsided.  The  extent  to  which  the  COVID-19  pandemic  impacts  our  business,  results  of  operations,  financial 
condition, cash flows or prospects will depend on future developments, which are highly uncertain and that we may not be able 
to accurately predict, including the duration and severity of the pandemic; governmental, business and individual actions that 
have  been  and  continue  to  be  taken  in  response  to  the  pandemic;  the  rate  of  vaccine  adoption,  the  effectiveness  of  global 
vaccine  distribution  efforts  and  vaccine  efficacy;  the  impact  of  the  pandemic  on  economic  activity  and  actions  taken  in 
response; the effect on our clients and client demand for our services and solutions, including the potential lengthening of the 
sales cycle; our ability to sell and provide our services and solutions, including through global customer summits (which were 
held virtually in 2020 and 2021); the ability of our clients to pay for our services and solutions; travel restrictions and working 
from home; and any closures of our and our clients’ offices and facilities. Clients may also slow down decision making, delay 
planned work, seek to terminate existing agreements and/or delay payment terms.

While  we  have  implemented  risk  management  and  contingency  plans  and  taken  preventive  measures  and  other 
precautions,  the  ultimate  impact  of  the  COVID-19  pandemic  on  our  business  is  uncertain.  In  2020,  due  to  health  concerns 
related  to  the  COVID-19  pandemic,  we  vacated  our  physical  offices  around  the  world,  and  transitioned  to  a  work-from-
anywhere  model.  While  we  have  been  able  to  operate  effectively  from  remote  locations,  the  long-term  impact  of  such  work 
arrangements remains unknown. For example, such remote work arrangements may increase the risk of cyber incidents or data 

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breaches  and  may  present  workplace  culture  challenges.  Furthermore,  we  have  incurred  expenses  associated  with  the  early 
termination of various leases at our office locations around the world.

We also outsource certain critical business activities to third parties and plan to continue to increasingly do so. As a result, 
we rely upon the successful implementation and execution of the business continuity and repopulation planning of such entities 
in  the  current  environment.  While  we  closely  monitor  the  business  continuity  activities  of  these  third  parties,  successful 
implementation and execution of their business continuity and repopulation strategies are largely outside our control. If one or 
more of the third parties to whom we outsource certain critical business activities experience operational failures as a result of 
the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure, it may have a material 
adverse effect on our business, financial condition, results of operations, liquidity and cash flows.

While governmental and non-governmental organizations are engaging in efforts to combat the spread and severity of the 
COVID-19 pandemic and related public health issues, these measures may not be effective. We also cannot predict how legal 
and regulatory responses to concerns about the COVID-19 pandemic and related public health issues will impact our business. 
Such events or conditions could result in additional regulation or restrictions affecting the conduct of our business in the future.

Any  of  these  events  or  other  currently  unforeseen  consequences  of  the  coronavirus  pandemic,  or  of  other  pandemics, 
epidemics or similar widespread public health concerns, could cause or contribute to the risks and uncertainties enumerated in 
this Annual Report on Form 10-K, and could materially adversely affect our business, results of operations, financial condition, 
cash flows, prospects and/or the price of our outstanding securities.

If we do not successfully integrate past or potential future acquisitions, we may not realize the expected business or financial 
benefits and our business could be adversely impacted. 

As part of our business strategy, we have made and will continue to make acquisitions to add complementary businesses, 
products, technologies, revenue and intellectual property rights. In October 2018, we acquired AdvantageTec, Inc., a leading 
provider of texting solutions for service departments of automotive dealerships that helps enable the conversational experience 
across  the  entire  dealership,  including  variable  and  fixed  operations.  In  September  2018,  we  acquired  the  employees  and 
technology  assets  of  Conversable,  Inc.  a  SaaS  based  AI  powered  conversational  platform.  In  January  2018,  we  acquired  the 
employees and technology assets of BotCentral, Inc., a Silicon Valley based startup which has created a number of bot solutions 
for major brands in banking, insurance, and travel, running on LivePerson’s conversational platform. In July 2021, we acquired 
German  conversational  AI  company  e-bot7.  In  October  2021,  we  acquired  VoiceBase,  Inc.,  a  leader  in  real-time  speech 
recognition  and  conversational  analytics;  and  Callinize  Inc.,  dba  Tenfold,  an  advanced  customer  engagement  platform  for 
integrating communication systems with leading CRM and support services.

Acquisitions and investments involve numerous risks to us, including: 

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potential failure to achieve the expected benefits of the combination or acquisition; 

inability to generate sufficient revenue to offset acquisition or investment cost; 

difficulties in integrating operations, technologies, products, and personnel; 

diversion of financial and management resources from efforts related to existing operations; 

risks of entering new markets in which we have little or no experience or where competitors may have stronger 
market positions; 

potential loss of our existing key employees or key employees of the company we acquire; 

inability to maintain relationships with customers and partners of the acquired business; 

potential unknown liabilities associated with the acquired businesses; and 

the tax effects of any such acquisitions. 

These  difficulties  could  disrupt  our  ongoing  business,  expose  us  to  unexpected  costs,  distract  our  management  and 
employees,  increase  our  expenses,  and  adversely  affect  our  results  of  operations.  Furthermore,  we  may  incur  debt  or  issue 
equity  securities  to  pay  for  any  future  acquisitions.  The  issuance  of  equity  securities  could  be  dilutive  to  our  existing 
stockholders. 

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If  we  do  not  effectively  implement  our  plans  to  migrate  our  technology  infrastructure  to  the  public  cloud,  our  operations 
could be significantly disrupted.

We  have  announced  plans  to  migrate  our  technology  infrastructure  to  the  public  cloud.  This  initiative  is  a  major 
undertaking as we migrate and reconfigure our current system processes, transactions, data and controls to a new cloud-based 
platform.  It  could  have  a  significant  impact  on  our  business  processes,  financial  reporting,  information  systems  and  internal 
controls.

As  we  implement  the  transition  of  our  technology  infrastructure  to  the  public  cloud,  we  may  need  to  divert  resources 
away  from  other  important  business  operations,  including  management  attention.  While  we  plan  to  implement  business 
contingency and other plans to facilitate continuous internet access, sustained or concurrent service denials or similar failures 
could limit our ability to provide our customers access to cloud-based services or otherwise operate our business. Additionally, 
we may experience issues with customer migration, as many of our customers may not migrate to cloud-based technologies on 
a  timely  basis  or  at  all  or  may  choose  not  to  utilize  our  products  and  services  during  and  after  our  transition  to  cloud-based 
technologies,  which  could  negatively  impact  our  revenue.  Additionally,  we  may  experience  difficulties  as  we  manage  these 
changes and transition our technology infrastructure to the public cloud, including loss or corruption of data, interruptions in 
service  and  downtime,  increased  cyber  threats  and  activity,  delayed  financial  reporting,  unanticipated  expenses  including 
increased  costs  of  implementation  and  of  conducting  business,  and  lost  revenue.  Although  we  plan  to  conduct  design 
validations  and  user  testing,  these  may  cause  delays  in  transacting  our  business  due  to  system  challenges,  limitations  in 
functionality,  inadequate  management  or  process  deficiencies  in  the  development  and  use  of  our  systems.  Difficulties  in 
implementing or an inability to effectively implement our migration plans could disrupt our operations and harm our business.

As we increase our reliance on public cloud infrastructure, our products and services will become increasingly reliant on 
continued access to, and the continued stability, reliability, and flexibility of third-party public cloud services. We have limited 
control over the public cloud operations and facilities on which we plan to host our technology infrastructure. Any changes in 
third-party  service  levels  or  any  disruptions  or  delays  from  errors,  defects,  hacking  incidents,  security  breaches,  computer 
viruses, DDoS attacks, bad acts or performance problems could harm our reputation, damage our customers’ businesses, and 
harm  our  business.  Our  public  cloud  providers  are  also  vulnerable  to  damage  or  interruption  from  earthquakes,  hurricanes, 
floods, fires, war, public health crises, such as COVID-19, terrorist attacks, power losses, hardware failures, systems failures, 
telecommunications failures and similar events. Although our transition and migration to the public cloud may increase our risk 
of liability and cause us to incur significant technical, legal or other costs, we may have limited remedies against third-party 
providers in connection with such liabilities.

Additionally, our public cloud providers may not be able to effectively manage existing traffic levels or increased demand 
in  capacity  requirements,  especially  to  cover  peak  levels  or  spikes  in  traffic,  and  as  a  result,  our  customers  may  experience 
delays  in  accessing  our  solutions  or  encounter  slower  performance  in  our  solutions,  which  could  significantly  harm  the 
operations  of  our  customers.  Interruptions  in  our  services  might  reduce  our  revenue,  cause  us  to  issue  credits  to  customers, 
subject us to potential liability, and cause customers to terminate their subscriptions or harm our renewal rates. Finally, we may 
in  the  future  be  unable  to  secure  additional  cloud  hosting  capacity  on  commercially  reasonable  terms  or  at  all.  If  any  of  our 
public  cloud  providers  increases  pricing  terms,  terminates  or  seeks  to  terminate  our  contractual  relationship  or  changes  or 
interprets their terms of service or policies in a manner that is unfavorable, we may be required to transfer to another provider 
and may incur significant costs and experience service interruptions.

Capital  needs  necessary  to  execute  our  business  strategy  could  increase  substantially  and  we  may  not  be  able  to  secure 
additional financing to execute this strategy. 

To the extent that we require additional funds to support our operations or the expansion of our business, or to pay for 
acquisitions,  we  may  need  to  sell  additional  equity,  issue  debt  or  convertible  securities,  or  obtain  credit  facilities  through 
financial  institutions.  In  the  past,  we  have  obtained  financing  principally  through  the  sale  of  preferred  stock,  common  stock, 
warrants, and convertible notes. If additional funds are raised through the issuance of debt or preferred equity securities, these 
securities could have rights, preferences, and privileges senior to holders of common stock, and could have terms that impose 
restrictions on our operations. If additional funds are raised through the issuance of additional equity or convertible securities, 
our  stockholders  could  suffer  dilution.  We  cannot  assure  you  that  additional  funding,  if  required,  will  be  available  to  us  in 
amounts or on terms acceptable to us. If sufficient funds are not available or are not available on acceptable terms, our ability to 
fund  any  potential  expansion,  take  advantage  of  acquisition  opportunities,  develop  or  enhance  our  services  or  products,  or 

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otherwise  respond  to  competitive  pressures  would  be  significantly  limited.  Those  limitations  would  materially  and  adversely 
affect our business, results of operations, cash flows, and financial condition. 

Our sales cycles can be lengthy, and the timing of sales can be difficult to predict, which may cause our operating results to 
vary significantly. 

The  sales  cycle  for  our  products  can  be  several  months  or  more  and  varies  substantially  from  customer  to  customer, 
particularly for sales to enterprise customers. Because we sell complex, integrated solutions, it can take many months to close 
sales  as  customers  evaluate  our  product  offering  against  available  alternatives  and  define  their  requirements.  We  are  often 
required to expend substantial time, effort, and money educating potential customers them about the value of our offerings. The 
increasingly complex needs of our customers can contribute to a longer sales cycle. 

Additionally, our quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a 
quarter’s  total  sales  occur  in  the  last  month,  weeks  and  days  of  each  quarter.  These  patterns  make  prediction  of  revenue 
especially difficult and uncertain and increase the risk of unanticipated variations in our results of operations. As a result, we 
are not always able to precisely predict the quarter in which expected sales will occur. In addition, historically a large portion of 
our revenue has derived from large orders from large clients. Consequently, delays in the closing of sales, especially from large 
clients, could have a material impact on the timing of revenue and results of operations. 

Delays in our implementation cycles could have an adverse effect on our results of operations. 

Certain of our products require some implementation services, including but not limited to, training our customers. As an 
open  platform,  we  also  work  with  other  third  parties  on  implementing  a  variety  of  integrations  into  our  platform.  We  have 
historically experienced a lag between signing a customer contract and recognizing revenue from that customer. Although this 
lag has typically ranged from 30 to 90 days, it may take more time between contract signing and recognizing revenue in certain 
situations.  If  we  experience  delays  in  implementation  or  do  not  meet  project  milestones  in  a  timely  manner,  we  could  be 
obligated to devote more customer support, engineering and other resources to a particular project. If new or existing customers 
cancel  or  have  difficulty  deploying  our  products  or  require  significant  amounts  of  our  professional  services,  support,  or 
customized  features,  revenue  recognition  could  be  canceled  or  delayed  and  our  costs  could  increase,  which  could  negatively 
impact our operating results.

Our services are subject to payment-related risks. 

For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase 
over time and raise our operating costs and lower our profit margins. We rely on third parties to provide payment processing 
services, including the processing of credit cards and debit cards and it could disrupt our business if these companies become 
unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, certification 
requirements and rules governing electronic funds transfers, which could change or be reinterpreted in such a way as to make 
compliance infeasible. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction 
fees  and  lose  our  ability  to  accept  credit  and  debit  card  payments  from  our  customers  or  facilitate  other  types  of  online 
payments, and our business and operating results could be adversely affected. 

Through  our  consumer-facing  platform,  we  facilitate  online  transactions  between  individual  service  providers  who 
provide online advice and information to consumers. In connection with these services, we accept payments using a variety of 
methods,  such  as  credit  card,  debit  card  and  PayPal.  These  payments  are  subject  to  “chargebacks”  when  consumers  dispute 
payments  they  have  made  to  us.  Chargebacks  can  occur  whether  or  not  services  were  properly  provided.  Susceptibility  to 
chargebacks puts a portion of our revenue at risk. We take measures to manage our risk relative to chargebacks and to recoup 
properly charged fees, however, if we are unable to successfully manage this risk our business and operating results could be 
adversely  affected.  As  we  offer  new  payment  options  to  our  users,  we  may  be  subject  to  additional  regulations,  compliance 
requirements, and fraud. 

We  are  also  subject  to  a  number  of  other  laws  and  regulations  relating  to  money  laundering,  international  money 
transfers, privacy and information security, and electronic fund transfers. If we were found to be in violation of applicable laws 
or regulations, we could be subject to civil and criminal penalties or forced to cease our payments services business. 

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We  may  experience  difficulties  integrating  e-bot7,  VoiceBase  and  Tenfold,  and  may  not  realize  expected  business  or 
financial benefits and our business could be adversely impacted.  

In the third quarter of 2021, we acquired e-bot7, a Conversational AI company. In the fourth quarter of 2021, we acquired 
VoiceBase,  a  leader  in  real  time  speech  recognition  and  conversational  analytics  and  Tenfold,  an  advanced  customer 
engagement platform for integrating communication systems with leading CRM and support systems. We intend to maintain 
the business operations of each of these companies while integrating and leveraging e-bot7’s self-service capabilities, Tenfold’s 
technology platform, and VoiceBase’s technology with our proprietary messaging and Conversational AI offerings. However, 
acquiring  and  integrating  a  technology  company  presents  unique  risks  including  difficulties  in  adapting  and  developing  new 
software  technologies  and  systems  protocols,  increased  software  integration  expenses,  and  incompatibility  of  acquired 
technologies in addition to the risks discussed under “If we do not successfully integrate past or potential future acquisitions, 
we may not realize the expected business or financial benefits and our business could be adversely impacted.”

Our business of facilitating at-home rapid-testing solutions poses substantial risks.

In the first quarter of 2021, our subsidiary Bella Health began to offer its corporate customers access to a digital mobile 
application that provides our customers’ employees with FDA-approved rapid-antigen COVID-19 tests (provided by a qualified 
third-party), guided self-administration, and access to experts through messaging and Conversational AI.

The business of Bella Health poses certain risks, including our lack of experience operating in the healthcare industry and 
elevated risks related to compliance with federal, state, and local laws, rules and regulations pertaining to the healthcare and 
diagnostic testing industry. 

These risks include among other things, potential fines and other penalties for failure to protect the security of, and the 
unauthorized sharing of, health information, or our failure to comply with health care laws and regulations, for each of which 
we may not have sufficient insurance or indemnification rights. In addition, the revenue we generate from Bella Health may 
decrease due to reduced demand for COVID-19 testing if the number of COVID-19 infections continues to decrease, unless we 
are able to develop other product offerings that offset this decrease.

Our expansion into digital healthcare poses substantial new risks to which we have not previously been exposed.  

These risks include our lack of experience operating in the healthcare industry and elevated risks relating to compliance 
with  certain  U.S.  federal,  state,  and  local  healthcare  laws,  regulations,  and  rules  in  the  heavily-regulated  healthcare  industry, 
including:  state  laws  relating  to  the  licensure  of  medical  professionals;  state  laws  regulating  telehealth  and  online  healthcare 
services;  state  laws  that  prohibit  general  business  corporations  from  practicing  medicine,  controlling  physicians’  medical 
decisions, or engaging in certain practices, such as splitting fees with physicians; state law provisions relating to anti-kickback, 
self-referral, and false claims; provisions of, and regulations relating to the Health Insurance Portability and Accountability Act 
of  1996,  as  amended,  and  its  accompanying  regulations  (“HIPAA”),  including  provisions  relating  to  the  confidentiality  and 
security of individually identifiable health information; and federal and state laws relating to the provision of services by non-
physician clinical providers (such as physician assistants or nurses); and exposure to liability, which may include liabilities for 
failure  to  comply  with  healthcare  laws,  regulations,  and  rules  for  which  we  may  not  have  sufficient  insurance  or 
indemnification rights.

In addition, if we were to start accepting payments from third party payors, including, among others, private insurance 
companies or government payors (such as Medicaid or Medicaid), it would create additional compliance obligations, including: 
federal laws that prohibit entities from submitting false claims to Medicare, Medicaid, or other government programs; federal 
laws that prohibit the receipt of any form of remuneration in return for the referral of patients for items and services covered, in 
whole  or  in  part,  by  federal  healthcare  programs;  federal  laws  prohibiting  physicians  from  referring  Medicare  or  Medicaid 
patients to an entity for the provision of certain “designated health services” if the physician (or a member of the physician’s 
immediate family) has a direct or indirect financial relationship with the entity; federal laws relating to failure to disclose or 
refund overpayments by a government payor; federal and state laws the prohibit healthcare providers from billing and receiving 
payment  from  Medicare  or  Medicaid  for  services,  unless  the  services  are  medically  necessary;  and  federal  laws  that  impose 
civil  administrative  sanctions  for,  among  other  violations,  inappropriate  billing  of  services  to  federally  funded  healthcare 
programs, or employing individuals who are excluded from participation in federally funded healthcare programs.

Accordingly, to the extent they are or become applicable as and if we continue to grow in the digital healthcare space, we 
must monitor our compliance with applicable healthcare laws, regulations, and rules in every jurisdiction in which we operate, 

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on an ongoing basis, and we cannot provide assurance that our activities and arrangements, if challenged, will be found to be in 
compliance. Even if our activities and arrangements are found to be in compliance, investigations can be time- and resource-
consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our 
costs  or  otherwise  have  an  adverse  effect  on  our  business.  Achieving  and  sustaining  compliance  with  these  laws  may  prove 
costly. Compliance may require obtaining appropriate licenses or certificates, increasing our security measures and expending 
additional  resources  to  monitor  developments  in  applicable  rules  and  ensure  compliance.  Additionally,  it  is  possible  that  the 
laws, regulations and rules governing the provision of healthcare services may change significantly in the future. Any new or 
changed  healthcare  laws,  regulations  or  rules  or  any  review  of  our  business  by  judicial,  law  enforcement,  regulatory  or 
accreditation authorities could adversely affect our business, financial condition and results of operations.

Our reputation depends, in part, on factors which are partially or entirely outside of our control. 

Our services typically appear under the LivePerson brand or as a LivePerson-branded icon on our customers’ websites. 
The customer service operators and Experts who respond to the inquiries of our customers’ users are employees or agents of our 
customers or independent consultants rather than employees of LivePerson. As a result, we are not able to control the actions of 
these operators or Experts and the impression that such operator or Expert leaves the user with whom they interact. A user may 
not  know  that  the  operator  or  Expert  is  not  a  LivePerson  employee.  If  a  user  were  to  have  a  negative  experience  in  a 
LivePerson-powered real-time dialogue, it is possible that this experience could be attributed to us, which could diminish our 
brand and harm our business. Additionally, we believe the success of our business services is aided by the prominent placement 
of the chat icon on a customer’s website, over which we also have no control. 

We are subject to risks related to corporate and social responsibility and reputation. 

Many  factors  influence  our  reputation  including  the  perception  held  by  our  customers,  business  partners  and  other  key 
stakeholders. Businesses face increasing scrutiny related to environmental, social and governance activities. We risk damage to 
our  reputation  if  we  fail  to  act  responsibly  in  a  number  of  areas,  such  as  diversity  and  inclusion,  sustainability  and  social 
responsibility.  Any  harm  to  our  reputation  could  impact  employee  engagement  and  retention,  our  corporate  culture  and  the 
willingness of customers and our partners to do business with us, which could have a material adverse effect on our business, 
results of operations and cash flows. 

Risks Related to our Financial Condition and Operating Results

Our  quarterly  revenue  and  operating  results  may  fluctuate  significantly,  which  may  cause  a  substantial  decline  in  the 
trading price of our securities. 

We have in the past incurred, and may in the future incur, losses and experience negative cash flows, either or both of 
which  may  be  significant  and  may  cause  our  quarterly  revenue  and  operating  results  to  fluctuate  significantly.  These 
fluctuations may result from a variety of factors, many of which are outside of our control. Some of the important factors that 
may cause our revenue and operating results to fluctuate include: 

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our ability to attract and retain new customers; 

our ability to retain and increase sales to existing customers; 

demand from customers and consumers for our services; 

our ability to innovate and provide new services to current and future customers; 

our ability to continue to add artificial intelligence, machine learning, and automation into our services; 

the introduction of new services by us or our competitors; 

our ability to avoid and/or manage service interruptions, disruptions, or security incidents; 

changes in our pricing models or policies or in those of our competitors; 

our ability to maintain and add integrations with third-party consumer messaging platforms and endpoints; 

continued adoption by companies of mobile and cloud-based messaging solutions; 

investments in growing our sales and marketing programs; 

continued adoption by Experts and Users of web-based advice services; 

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•

•

exposure to foreign currency exchange rate fluctuations; and 

the  amount  and  timing  of  capital  expenditures  and  other  costs  related  to  operation  and  expansion  of  our 
business, including those related to acquisitions. 

Our  revenue  and  operating  results  may  also  fluctuate  significantly  in  the  future  due  to  the  following  factors  that  are 

entirely outside of our control: 

•

•

•

new laws, regulations, or regulatory or law enforcement initiatives; 

economic  conditions  specific  to  the  web,  mobile  technology,  electronic  commerce,  and  cloud  computing; 
consequences  of  unexpected  geopolitical  events,  natural  disasters,  acts  of  war  or  terrorism,  outbreaks  of 
contagious disease (e.g., COVID-19), or climate change; and 

general, regional, and/or global economic and political conditions. 

As a result, comparing our operating results on a period-to-period basis may not be meaningful. You should not rely upon 
these comparisons or our past results as indicators of our future performance. Due to the foregoing factors, it is possible that our 
operating results in one or more future quarters may fall below the expectations of securities analysts and investors or below 
any guidance we may provide to the market. If this occurs, the trading price of our securities could decline significantly. 

In the past we have experienced losses, we had an accumulated deficit of $516.9 million as of December 31, 2021 and we 
may incur losses in the future. 

We have in the past incurred, and we may in the future incur, losses and experience negative cash flow, either or both of 
which may be significant. We recorded net losses from inception through the year ended December 31, 2003. We recorded net 
income  for  the  years  ended  December  31,  2004  through  2007  and  2009  through  2012,  while  we  recorded  net  losses  for  the 
years  ended  December  31,  2008,  and  2013  through  2021.  We  recorded  a  net  loss  of  $125.0  million  for  the  year  ended 
December 31, 2021. As of December 31, 2021, our accumulated deficit was approximately $516.9 million. We cannot assure 
you that we can sustain or increase profitability on a quarterly or annual basis in the future. Failure to maintain profitability may 
materially and adversely affect the market price of our securities. 

The non-payment or late payment of amounts due to us from a significant number of customers may negatively impact our 
financial condition or make it difficult to forecast our revenues accurately. 

During 2021, we increased our allowance for doubtful accounts from $5.3 million to approximately $6.3 million. During 
2020,  we  increased  our  allowance  for  doubtful  accounts  from  $3.1  million  to  approximately  $5.3  million.  We  base  our 
allowance for doubtful accounts on specifically identified credit risks of customers, historical trends, and other information that 
we  believe  to  be  reasonable.  A  large  proportion  of  receivables  are  due  from  larger  corporate  customers  that  typically  have 
longer payment cycles. We adjust our allowance for doubtful accounts when accounts previously reserved have been collected. 
As a result of increasingly long payment cycles, we have faced increased difficulty in predicting our operating results for any 
given period, and have experienced significant unanticipated fluctuations in our revenues from period to period. Any failure to 
achieve anticipated revenues in a period could cause the market price of our securities to decline.

There are inherent limitations on the effectiveness of our controls. 

We  do  not  expect  that  our  disclosure  controls  or  our  internal  control  over  financial  reporting  will  prevent  or  detect  all 
errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, 
assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that resource 
constraints  exist,  and  the  benefits  of  controls  must  be  considered  relative  to  their  costs.  Further,  because  of  the  inherent 
limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or 
fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of 
controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any 
design  will  succeed  in  achieving  its  stated  goals  under  all  potential  future  conditions.  Projections  of  any  evaluation  of  the 
effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate due to changes in 
conditions  or  deterioration  in  the  degree  of  compliance  with  policies  or  procedures.  If  our  controls  become  inadequate,  we 
could  fail  to  meet  our  financial  reporting  obligations,  our  reputation  may  be  adversely  affected,  our  business  and  operating 
results could be harmed, and the market price of our securities could decline. 

27

With the recent volatility in the capital markets, there is a risk that we could suffer a loss of principal in our cash and cash 
equivalents and short term investments and suffer a reduction in our interest income or in our return on investments. 

As of December 31, 2021, we had $521.8 million in cash and cash equivalents. We regularly invest excess funds from our 
cash and cash equivalents in short-term money market funds. We currently hold no mortgaged-backed or auction rate securities. 
However,  some  of  our  investments  are  subject  to  general  credit,  liquidity,  market,  and  interest  rate  risks,  which  may  be 
exacerbated  by  any  ongoing  uncertainty  in  the  United  States  and  global  credit  markets.  In  the  future,  these  market  risks 
associated with our investment portfolio may harm the results of our operations, liquidity and financial condition. Although we 
believe we have chosen a portfolio reasonably designed to preserve our existing cash position, it may not adequately protect the 
value  of  our  investments.  Furthermore,  this  more  cautious  portfolio  is  unlikely  to  provide  us  with  any  significant  interest 
income in the near term. 

Because we recognize revenue from subscriptions for our service over the term of the subscription, declines in business may 
not be immediately reflected in our operating results. 

We  generally  recognize  revenue  from  customers  ratably  over  the  terms  of  their  subscription  agreements,  which  are 
typically 12 or more months. As a result, much of the revenue we report in each quarter is the result of subscription agreements 
entered  into  during  previous  quarters.  Consequently,  a  decline  in  new  or  renewed  subscriptions  or  cancellations  of  existing 
subscriptions in any one quarter may not be reflected in our revenue results for that quarter. Any such decline, however, could 
negatively affect our revenue in future quarters. Our subscription model also makes it difficult for us to rapidly increase our 
revenue  through  additional  sales  in  any  period,  because  revenue  from  new  customers  and  additional  revenue  from  existing 
customers is generally recognized over the applicable subscription term, rather than immediately. 

If  our  goodwill  or  amortizable  intangible  assets  become  impaired,  we  may  be  required  to  record  a  significant  charge  to 
earnings. 

Under  GAAP,  we  review  our  amortizable  intangible  assets  for  impairment  when  events  or  changes  in  circumstances 
indicated that the carrying value may not be recoverable. We review our goodwill for impairment at least annually and when 
events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that may be considered a 
change  in  circumstances  indicating  that  the  carrying  value  of  our  goodwill  or  amortizable  intangible  assets  may  not  be 
recoverable include a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth 
rates in our industry. Based on our annual review for 2021, we determined that it is not more likely than not that the fair value 
of  the  reporting  units  is  less  than  their  carrying  amount.  However,  future  assessments  may  yield  a  different  result,  and  from 
time to time, we may be required to record a significant charge to earnings in our consolidated financial statements during the 
period in which any impairment of our goodwill or amortizable intangible assets is determined, resulting in a negative impact 
on our results of operations.

Risks Related to Industry Dynamics and Competition

If we are unable to develop and maintain successful relationships with partners, service partners, social media, and other 
third-party consumer messaging platforms and endpoints, our business, results of operations, and financial condition could 
be adversely affected. 

We  believe  that  continued  growth  for  companies  in  our  industry  depends,  in  part,  on  enabling  brands  to  connect  with 
consumers across consumers’ preferred conversational interfaces and messaging endpoints, such as SMS, Facebook Messenger, 
WhatsApp, Apple Business Chat, Google Rich Business Messenger, Line, and Alexa. In order to grow our business, we have 
identified  and  developed,  and  maintain,  strategic  relationships  with  many  key  technology  partners.  As  part  of  our  growth 
strategy, we plan to further develop partnerships and specific solution areas with additional technology partners. We typically 
rely on our strategic partners and third-party service providers to supplement our own subject matter expertise and to leverage 
industry best practice, provide enhanced products and services, and reduce costs. If we fail to establish these relationships in a 
timely and cost-effective manner or at all, if these strategic partners or third-party service providers fail to provide the services 
expected, or if we lose any or all of our current relationships, then our business, results of operations, and financial condition 
could  be  adversely  affected.  Replacing  a  strategic  relationship  could  also  take  a  long  period  of  time  and  result  in  increased 
expenses. Additionally, even if we are successful at developing these relationships, but there are problems or issues with the 
integrations,  or  our  ability  to  scale  and  onboard  our  customers  onto  new  endpoints,  our  reputation,  and  ability  to  grow  our 
business may be adversely affected. 

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We have announced plans to migrate our technology infrastructure to the public cloud, and may in the future be unable to 
secure  additional  cloud  hosting  capacity  on  commercially  reasonable  terms  or  at  all.  If  any  of  our  public  cloud  providers 
increases pricing terms, terminates or seeks to terminate our contractual relationship, establishes more favorable relationships 
with our competitors, or changes or interprets their terms of service or policies in a manner that is unfavorable with respect to 
us, we may be required to transfer to another provider and may incur significant costs and experience service interruptions.

If we are unable to effectively operate on mobile devices, our business could be adversely affected. 

The  number  of  people  who  access  the  Internet  and  complete  transactions  over  the  Internet  through  devices  other  than 
desktop  computers,  including  smartphones,  handheld  tablets,  and  mobile  phones,  has  increased  dramatically  in  the  past  few 
years and is projected to continue to increase. To address these developments, we continue to extend our products and services 
to  support  messaging  on  mobile  phone  and  tablet  applications  belonging  to  our  company  and  our  customers.  If  the  mobile 
solutions we have developed do not meet our customers’ needs or the needs of their website visitors, or are not widely adopted 
by our customers and consumers, we may fail to retain existing customers and we may have difficulty attracting new customers. 
Such solutions may also create new risks related to privacy and security, which could subject us to investigations, litigation, or 
reputational  harm.  If  we  are  unable  to  rapidly  innovate  and  grow  mobile  revenue,  or  if  we  incur  excessive  expenses  in  this 
effort, our financial performance and ability to continue to grow overall revenue may be negatively affected. 

Additionally, our mobile phone and tablet applications and those of our customers depend on their interoperability with 
popular mobile operating systems, networks, and standards that we and they do not control, such as Android and iOS operating 
systems,  and  any  changes  in  such  systems  and  terms  of  service  that  degrade  the  functionality  of  our  solutions  or  give 
preferential  treatment  to  competitive  products  could  adversely  affect  our  revenue.  We  may  not  be  successful  in  developing 
products that operate effectively with these technologies, systems, networks, or standards. As new devices and platforms are 
continually being released, it is difficult to predict the challenges we may encounter in developing versions of our solutions for 
use on these alternative devices. 

The markets in which we participate are highly competitive, and we may lose customers and revenue if we are not able to 
innovate or effectively compete. 

The  markets  for  mobile  and  online  business  messaging  and  digital  engagement  and  AI  technology  are  intensely 
competitive, rapidly changing, and characterized by aggressive marketing, pricing pressure, evolving industry standards, rapid 
technology developments, and frequent new product introductions. We believe that competition will continue to increase as our 
current  competitors  increase  the  sophistication  of  their  offerings  and  as  new  participants  enter  the  market,  which  may  cause 
additional pressure. If we are unable to accurately anticipate technology developments and continue to innovate in the markets 
in  which  we  compete  and  develop  successful  integrations  with  third-party  consumer  messaging  platforms,  AI  providers,  and 
endpoints, or our competitors are more successful than us at developing compelling new products, services, and integrations, or 
at  attracting  and  retaining  customers,  we  may  lose  revenue  and  market  share  and  our  operating  results  could  be  adversely 
affected. 

We  have  current  and  potential  competition  from  providers  of  messaging  and  digital  engagement  solutions  that  enable 
companies  to  engage  and  connect  with  their  consumer  customers,  as  well  as  technology  providers  that  offer  customer 
relationship management and contact center solutions. We have current and potential competitors in many different industries, 
including: 

•

•

•

•

technology  or  service  providers  offering  or  powering  competing  digital  engagement,  contact  center, 
communications,  or  customer  relationship  management  solutions,  such  as  eGain,  Genesys,  Nuance,  Oracle, 
Salesforce.com, and Twilio; 

service providers that offer basic messaging products or services with limited functionality free of charge or at 
significantly reduced entry level prices; 

social  media,  social  listening,  messaging,  artificial  intelligence,  bots,  e-commerce,  and/or  data  and  data 
analytics  companies,  such  as  Facebook,  Google,  and  WeChat,  which  may  leverage  their  existing  or  future 
capabilities and consumer relationships to offer competing B2B solutions; and 

customers that develop and manage their messaging solutions in-house. 

In addition, many of our current and potential competitors have substantial competitive advantages, such as greater brand 
recognition, significantly larger financial, marketing, and resource and development budgets, access to larger customer and/or 

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consumer bases, larger and more established marketing and distribution relationships, and/or more diverse product and service 
offerings. As a result, these competitors may be able to respond more quickly and effectively than we can to any change in the 
general  market  acceptance  of  messaging  services  or  any  new  or  changing  opportunities,  technologies,  standards,  pricing 
strategies, or customer requirements. Also, because of these advantages, potential customers may select a competitor’s products 
and  services,  even  if  our  services  are  more  effective.  For  all  of  these  reasons,  we  may  not  be  able  to  compete  successfully 
against our current and future competitors. 

We  may  be  unable  to  respond  to  the  rapid  technological  change  and  changing  customer  preferences  in  the  online  sales, 
marketing, customer service, and/or online consumer services industries and this may harm our business. 

If  we  are  unable,  for  technological,  legal,  financial,  or  other  reasons,  to  adapt  in  a  timely  manner  to  changing  market 
conditions  in  the  online  sales,  marketing,  customer  service,  and/or  e-commerce  industry  or  our  customers’  or  consumers’ 
requirements  or  preferences,  our  business,  results  of  operations,  and  financial  condition  would  be  materially  and  adversely 
affected.  Online  business  is  characterized  by  rapid  technological  change.  In  addition,  the  market  for  online  sales,  marketing, 
customer service, and expert advice solutions is relatively new. Sudden changes in customer and consumer requirements and 
preferences, frequent new product and service introductions embodying new technologies, and the emergence of new industry 
and  regulatory  standards  and  practices  such  as  but  not  limited  to  data  privacy  and  security  standards,  could  render  the 
LivePerson services and our proprietary technology and systems obsolete. The rapid evolution of these products and services 
will require that we continually improve the performance, features and reliability of our services. Our success will depend, in 
part, on our ability to: 

•

•

•

enhance the features and performance of our services;

develop and offer new services that are valuable to companies doing business online as well as consumers; and 

respond  to  technological  advances  and  emerging  industry  and  regulatory  standards  and  practices  in  a  cost-
effective and timely manner. 

If  any  of  our  new  services,  including  upgrades  to  our  current  services,  do  not  meet  our  customers’  or  consumers’ 
expectations,  we  could  lose  customers  and  our  business  may  be  harmed.  Updating  our  technology  may  require  significant 
additional  capital  expenditures  and  could  materially  and  adversely  affect  our  business,  results  of  operations,  and  financial 
condition. 

If new services require us to grow rapidly, this could place a significant strain on our managerial, operational, technical 
and  financial  resources.  In  order  to  manage  our  growth,  we  could  be  required  to  implement  new  or  upgraded  operating  and 
financial  systems,  procedures  and  controls.  Our  failure  to  expand  our  operations  in  an  efficient  manner  could  cause  our 
expenses to grow, our revenue to decline or grow more slowly than expected and could otherwise have a material adverse effect 
on our business, results of operations, and financial condition. 

Downturns  in  the  global  economic  environment  or  in  particular  industries  in  which  our  sales  are  concentrated  may 
adversely affect our business and results of operations. 

The U.S. and other global economies have experienced in the past and could in the future experience economic downturn 
that  affects  all  sectors  of  the  economy,  particularly  in  the  financial  services  and  retail  industries,  resulting  in  declines  in 
economic growth and consumer confidence, increases in unemployment rates and uncertainty about economic stability. Further, 
there  is  increased  uncertainty  regarding  social,  political,  immigration  and  trade  policies  in  the  U.S.,  which  could  impact  our 
global  operations  and  our  business.  Global  credit  and  financial  markets  have  in  the  past  experienced  extreme  disruptions, 
including diminished liquidity and credit availability and rapid fluctuations in market valuations. Our business has been affected 
by these conditions in the past and could be similarly impacted in the future by any downturn in global economic conditions. 

Our business is, and will continue to be, dependent on sales to customers in the telecommunications, financial services, 
retail, automotive, real estate and technology industries. A downturn in one or more of these industries could have a material 
adverse  effect  on  our  business,  liquidity,  results  of  operations,  financial  condition  and  cash  flows.  In  the  event  that  industry 
conditions deteriorate in one or more of these industries, we could experience, among other things, cancellation or non-renewal 
of existing contracts, reduced demand for our products and reduced sales. It could be difficult to predict the timing, strength or 
duration of any economic slowdown or subsequent economic recovery, either relating to the global economic environment or to 
the particular industries in which our sales are concentrated, which, in turn, could make it more challenging for us to forecast 

30

our  operating  results,  make  business  decisions  and  identify  risks  that  may  adversely  affect  our  business,  sources  and  uses  of 
cash, financial condition and results of operations.

Weak economic conditions may also cause our customers to experience difficulty in supporting their current operations 
and implementing their business plans. Our customers may reduce their spending on our services, may not be able to discharge 
their  payment  and  other  obligations  to  us,  may  experience  difficulty  raising  capital,  or  may  elect  to  scale  back  the  resources 
they devote to customer service and/or sales and marketing technology, including services such as ours. Economic conditions 
may  also  lead  consumers  and  businesses  to  postpone  spending,  which  may  cause  our  customers  to  decrease  or  delay  their 
purchases  of  our  products  and  services.  If  economic  conditions  deteriorate  for  us  or  our  customers,  we  could  be  required  to 
record  charges  relating  to  restructuring  costs  or  the  impairment  of  assets,  may  not  be  able  to  collect  receivables  on  a  timely 
basis, and our business, financial condition, and results of operations could be materially adversely affected. 

Risks Related to Security Vulnerabilities and Service Reliability

Failures or security breaches in our services or systems, those of our third party service providers, or in the websites of our 
customers, including those resulting from cyber-attacks, security vulnerabilities, defects, or errors, could harm our business. 

Our products and services involve the storage and transmission of proprietary information and personal data related to our 
customers and their users, as well as experts and consumers, and theft and security breaches expose us to a risk of loss of such 
information  and  data,  improper  use  and  disclosure  thereof,  litigation,  regulatory  investigation,  and  potential  liability.  We 
experience cyber-attacks of varying degrees on a regular basis. Our security measures may also be breached due to employee or 
other error, intentional malfeasance and other third party acts, and system errors or vulnerabilities, including vulnerabilities of 
our third party service providers, or customers, or otherwise. We have announced plans to move our technology infrastructure 
to  the  public  cloud,  which  will  require  us  to  rely  on  third-party  cloud  providers  to  maintain  appropriate  safeguards. 
Additionally, in response to the COVID-19 pandemic, a majority of our office employees are working remotely. We currently 
expect  this  to  continue  for  the  foreseeable  future,  which  may  potentially  further  increase  the  risk  of  cyber  incidents  or  data 
breaches.  Any  such  breach  or  unauthorized  access,  or  attempts  by  outside  parties  to  fraudulently  induce  employees,  users, 
vendors,  or  customers  to  disclose  sensitive  information  in  order  to  gain  access  to  our  data  or  data  of  our  customers,  users, 
experts, or consumers, including, but not limited to, individual personal information and financial credit or debit card data that 
is protected by law or contract, could result in significant legal and financial exposure, damage to our reputation, and a loss of 
confidence in the security of our products and services that could potentially have an adverse effect on our business. 

While we continue to expand our focus on this issue and are taking measures to safeguard our products and services from 
cybersecurity  threats  and  vulnerabilities  in  desktop  computers,  mobile  phones,  smartphones  and  handheld  devices,  cyber-
attacks, and other security incidents continue to evolve in sophistication and frequency. Because the techniques used to obtain 
unauthorized  access,  disable  or  degrade  service,  or  sabotage  systems,  are  constantly  evolving  in  sophisticated  ways  to  avoid 
detection and often are not recognized until launched against a target, it may be difficult or impossible for us to anticipate or 
identify these techniques or to implement adequate preventative measures. And while technological advancements enable more 
data  and  processes,  such  as  mobile  computing  and  mobile  payments,  they  also  increase  the  risk  that  cyber-attacks  and  other 
security incidents will occur. We engage third parties to review and assist in safeguarding our products and services from such 
threats. Those parties may identify vulnerabilities, some of which may not be immediately remedied. A significant cyber-attack, 
or a security incident of any magnitude that is profiled in the media, involving our, our third party service providers’ or our 
customers’  systems,  could  result  in  material  harm  to  our  brand  and  reputation,  our  ability  to  deliver  our  services  or  retain 
customers, and expose us to lawsuits, regulatory investigations, and significant damages, fines or penalties.

In  addition,  our  customers  may  authorize  third  party  access  to  their  customer  data  located  in  our  cloud  environment. 
Because we do not control the transmissions to customer-authorized third parties, or the processing of such data by customer 
authorized third parties, we cannot ensure the integrity or security of such transmissions or processing. Because our services are 
responsible  for  critical  communication  between  our  customers  and  consumers,  any  security  failures,  defects  or  errors  in  our 
components, materials or software or those used by our customers could have an adverse impact on us, on our customers and on 
the  end  users  of  their  websites.  Such  adverse  impact  could  include  a  decrease  in  demand  for  our  services,  damage  to  our 
reputation and to our customer relationships, legal exposure, and other financial liability or harm to our business.

We may be liable if third parties access or misappropriate confidential or personal data from our systems or services. 

The dialogue transcripts of the text-based chats, email interactions and other interactions between our customers and their 
users may include information, such as personal contact and demographic information. Although we employ and continually 

31

 
test and update our security measures to protect this information from unauthorized access, it is still possible that our security 
measures could be breached and such a breach could result in unauthorized access to our customers’ data or our data, including 
our  intellectual  property  and  other  confidential  business  information.  Because  the  techniques  employed  by  hackers  to  obtain 
unauthorized access or to sabotage systems change frequently and are becoming more sophisticated in circumventing security 
measures  and  avoiding  detection,  we  may  be  unable  to  anticipate  all  techniques  or  to  implement  adequate  preventative 
measures. Any security breach could result in disclosure of our trade secrets or disclosure of confidential customer, supplier or 
employee data. If third parties were able to penetrate our network security or otherwise misappropriate personal data relating to 
our customers’ users or the text of customer service inquiries, our competitive position may be harmed and we could be subject 
to liability. In the event of a security incident, we could be required to comply with a myriad of breach notification laws at the 
state, federal and international level, which may cause business disruption and extensive notification costs, and could lead to 
penalties, government investigations and lawsuits for compliance failures. We may as a result of a security incident be deemed 
out of compliance with U.S. federal and state laws, international laws, or contractual commitments, and we may be subject to 
government  investigations,  lawsuits,  fines,  criminal  penalties,  statutory  damages,  and  other  costs  to  respond  to  breach  or 
security incidents, which could have a material adverse effect on our business, results of operations, and financial condition. We 
may  incur  significant  costs  to  protect  against  the  threat  of  security  breaches  or  to  mitigate  the  harm  and  alleviate  problems 
caused  by  such  breaches.  While  we  currently  maintain  insurance  coverage  that  may  cover  certain  cyber  security  risks,  such 
insurance coverage is subject to certain exclusions and exceptions and may be insufficient to cover all losses. 

Furthermore, certain software and services that we use to operate our business are hosted and/or operated by third parties 
or integrated with our systems. For example, as we expand our use of cloud-based services, we will increasingly rely on third-
party cloud providers to maintain appropriate safeguards to protect confidential or personal data we receive. While we intend to 
conduct  due  diligence  on  these  cloud  providers  with  respect  to  their  security  and  business  controls,  we  may  not  have  the 
visibility to effectively monitor the implementation and efficacy of these controls. If third-party services were to be interrupted 
or their security breached, our business operations could be similarly disrupted and we could be exposed to liability and costly 
investigations  or  litigation.  The  need  to  properly  secure,  and  securely  transmit  and  store,  confidential  information  online  has 
historically been a significant barrier to e-commerce and online communications, and will become increasingly highlighted as a 
consumer  and  regulatory  focus  and  concern.  Any  publicized  compromise  of  security  could  deter  people  from  using  online 
services  such  as  the  ones  we  offer  or  from  using  them  to  conduct  transactions,  which  involve  transmitting  confidential 
information. Because our success depends on the general acceptance and reputation of our services and electronic commerce, 
we  may  incur  significant  costs  to  protect  against  the  threat  of  security  breaches  or  to  alleviate  problems  caused  by  these 
breaches. 

We provide service level commitments to certain customers. If we do not meet these contractual commitments, we could be 
obligated to provide credits or refunds or face contract terminations, which could adversely affect our revenue and harm our 
reputation. 

As is common for many cloud service providers, we offer service level commitments in certain of our customer contracts, 
primarily related to uptime of our service.  If we are unable to meet the stated service level commitments or suffer periods of 
downtime that exceed the periods allowed under our customer contracts, whether due to downtime caused by us or our third-
party  service  providers,  which  has  occurred  on  several  occasions  in  the  past  and  could  occur  in  the  future  (including  in 
connection  with  the  migration  of  our  technology  infrastructure  to  the  public  cloud),  we  may  be  contractually  obligated  to 
provide these customers with service credits and/or pay financial penalties, which could significantly impact our revenue.  In 
addition, even if our contracts provide otherwise, these customers may attempt to terminate or reduce their contracts, which has 
occurred from time to time, and/or pursue other legal remedies. Recurring or extended service outages could also cause damage 
to our reputation and result in substantial customer dissatisfaction or loss, which could adversely affect our current and future 
revenue and operating results.

We are dependent on technology systems and third-party content that are beyond our control. 

The  success  of  our  services  depends  in  part  on  our  customers’  online  services  as  well  as  the  Internet  and  mobile 
connectivity of consumers, both of which are outside of our control. As a result, it may be difficult to identify the source of 
problems if they occur. In the past, we have experienced problems related to connectivity, which has resulted in slower than 
normal response times to user messaging requests and interruptions in service. Our services rely both on the Internet and on our 
connectivity  vendors  for  data  transmission.  Therefore,  even  when  connectivity  problems  are  not  caused  by  our  services,  our 
customers or their consumers may attribute the problem to us. This could diminish our brand and harm our business, divert the 
attention of our technical personnel from our product development efforts or cause significant customer relations problems.

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In addition, we rely in part on third party service providers and other third parties for various services, including, but not 
limited to, Internet connectivity, network infrastructure hosting, security and maintenance, and software and hardware from a 
variety  of  vendors.  These  providers  may  experience  problems  that  result  in  slower  than  normal  response  times  and/or 
interruptions  in  service.  If  we  are  unable  to  continue  utilizing  the  third  party  services  that  support  our  web  hosting  and 
infrastructure or if our services experience interruptions or delays due to existing third party service providers or transition to 
new  third  party  service  providers,  our  reputation  and  business  could  be  harmed,  and  we  may  be  exposed  to  legal  and 
reputational risk, and significant remediation costs.

We also rely on the security of our third party service providers to protect our proprietary information and information of 
our  customers.  Information  technology  system  failures,  including  a  breach  of  our  or  our  third  party  service  providers’  data 
security, could disrupt our ability to function in the normal course of business by potentially causing, among other things, an 
unintentional disclosure of customer information or loss of information. Additionally, despite our security procedures or those 
of our third party service providers, information systems may be vulnerable to threats such as computer hacking, ransomware, 
cyber-terrorism or other unauthorized attempts by third parties to access, obtain, modify or delete our or our customers’ data. 
Any  such  breach  could  have  a  material  adverse  effect  on  our  operating  results  and  our  reputation  as  a  provider  of  business 
collaboration  and  communications  solutions  and  could  subject  us  to  significant  penalties  and  negative  publicity,  as  well  as 
government  investigations  and  claims  for  damages  or  injunctive  relief  under  state,  federal  and  foreign  laws  or  contractual 
agreements.

We also depend on third parties for hardware and software, and our consumer services depend on third parties for content. 
Such products and content could contain defects or inaccurate information. Problems arising from our use of such hardware or 
software  or  third  party  content  could  require  us  to  incur  significant  costs  or  divert  the  attention  of  our  technical  or  other 
personnel from our product development efforts or to manage issues related to content. To the extent any such problems require 
us to replace such hardware or software we may not be able to do so on acceptable terms, if at all. 

We depend on the continued viability of the infrastructure of the Internet. 

To the extent that the Internet continues to experience growth in the number of users and frequency of use by consumers 
resulting in increased bandwidth demands, we cannot assure you that the infrastructure for the Internet will be able to support 
the  demands  placed  upon  it.  The  Internet  has  experienced  outages  and  delays  as  a  result  of  damage  to  portions  of  its 
infrastructure. Outages or delays could adversely affect online sites, email and the level of traffic on the Internet. The Internet is 
also subject to continued and ongoing cyber-attacks and related conduct, which affect all online businesses. We also depend on 
Internet  service  providers  that  provide  our  customers  and  Internet  users  with  access  to  the  LivePerson  services.  In  the  past, 
users  have  experienced  difficulties  due  to  system  failures  unrelated  to  our  service.  In  addition,  the  Internet  could  lose  its 
viability due to delays in the adoption of new standards and protocols required to handle increased levels of Internet activity. 
Insufficient availability of telecommunications services to support the Internet also could result in slower response times and 
negatively impact use of the Internet generally, and our customers’ sites (including their use of the Conversational Cloud) in 
particular.  If  the  infrastructure  of  the  Internet  does  not  effectively  support  the  growth  of  the  Internet,  we  may  not  maintain 
profitability and our business, results of operations, and financial condition will suffer. 

Technological  or  other  defects  could  disrupt  or  negatively  impact  our  services,  which  could  harm  our  business  and 
reputation. 

We face risks related to the technological capabilities of our services. We expect the number of interactions between our 
customers’ operators and consumers over our system to increase significantly as we expand our customer base. Our network 
hardware and software may not be able to accommodate this additional volume. Additionally, we must continually upgrade our 
software to improve the features and functionality of our services in order to be competitive in our markets. If future versions of 
our software contain undetected errors, our business could be harmed. If third-party content is flawed, our business could be 
harmed. As a result of software upgrades at LivePerson, our customer sites have, from time to time, experienced slower than 
normal response times and interruptions in service. If we experience system failures or degraded response times, our reputation 
and  brand  could  be  harmed.  We  may  also  experience  technical  problems  in  the  process  of  installing  and  initiating  the 
LivePerson  services  on  new  web  hosting  services,  including  in  connection  with  our  plans  to  migrate  our  technology 
infrastructure to the public cloud. These problems, if not remedied, could harm our business. 

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Our services also depend on complex software which may contain defects, particularly when we introduce new versions 
onto our servers. We may not discover software defects that affect our new or current services or enhancements until after they 
are deployed. It is possible that, despite testing by us, defects may occur in the software. These defects could result in: 

•

•

•

•

•

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damage to our reputation; 

lost sales; 

contract terminations; 

loss of market share; 

delays in or loss of market acceptance of our products; and 

unexpected expenses and diversion of resources to remedy errors. 

Our products are complex, and errors, failures, or “bugs” may be difficult to correct. 

Our products are complex, integrating hardware, software and elements of a customers’ existing infrastructure. Despite 
quality assurance testing conducted prior to the release of our products our software may contain “bugs” that are difficult to 
detect  and  fix.  Any  such  issues  could  interfere  with  the  expected  operation  of  a  solution,  which  might  negatively  impact 
customer satisfaction, reduce sales opportunities or affect gross margins. Depending upon the size and scope of any such issue, 
remediation  may  have  a  negative  impact  on  our  business.  Our  inability  to  cure  an  application  or  product  defect,  should  one 
occur,  could  result  in  the  failure  of  an  application  or  product  line,  damage  to  our  reputation,  litigation,  and/or  product 
reengineering expenses. Our insurance may not cover or may be insufficient to cover expenses associated with such events. 

Failure  to  license  necessary  third  party  software  for  use  in  our  products  and  services,  or  failure  to  successfully  integrate 
third party software, could cause delays or reductions in our sales, or errors or failures of our service. 

We license third party software that we plan to incorporate into our products and services. In the future, we might need to 
license other software to enhance our products and meet evolving customer requirements. These licenses may not continue to be 
available on commercially reasonable terms or at all. Some of this technology could be difficult to replace once integrated. The 
loss of, or inability to obtain, these licenses could result in delays or reductions of our products and services until we identify, 
license and integrate or develop equivalent software, and new licenses could require us to pay higher royalties. If we are unable 
to successfully license and integrate third party technology, we could experience a reduction in functionality and/or errors or 
failures of our products, which may reduce demand for our products and services. 

Third-party licenses may expose us to increased risks, including risks associated with the integration of new technology, 
the  impact  of  new  technology  integration  on  our  existing  technology,  open  source  software  disclosure  requirements,  the 
diversion of resources from the development of our own proprietary technology, and our inability to generate revenue from new 
technology sufficient to offset associated acquisition and maintenance costs. 

Our business is subject to the risks of earthquakes, fires, floods, and other natural catastrophic events and to interruption by 
man-made problems such as terrorism or cyber-attacks. 

Although we intend to migrate our technology infrastructure to the public cloud, a substantial majority of our computer 
and communications infrastructure is running in our private cloud on hardware that is located at a limited number of facilities in 
the  United  States,  Europe,  and  Australia.  Our  systems  and  operations  are  vulnerable  to  damage  or  interruption  from 
earthquakes, fires, floods, hurricanes, other acts of nature, power losses, telecommunications failures, terrorist attacks, acts of 
war, human errors, break-ins, cyber-attacks or failures, pandemics or other public health crises, or similar events. For example, 
a  significant  natural  disaster,  such  as  an  earthquake,  fire  or  flood,  could  have  a  material  adverse  impact  on  our  business, 
operating results and financial condition, and our insurance coverage may be insufficient to compensate us for losses that may 
occur. In addition, acts of terrorism could cause disruptions in our business or the economy as a whole. Our headquarters are 
located in New York City and we have a significant employee presence located in Israel, each of which regions has experienced 
acts  of  terrorism  in  the  past.  Our  servers  may  also  be  vulnerable  to  computer  viruses,  break-ins,  cyber-attacks,  such  as 
coordinated  denial-of-service  attacks  or  ransomware,  or  other  failures,  and  similar  disruptions  from  unauthorized  tampering 
with  our  computer  systems,  which  could  lead  to  interruptions,  delays,  loss  of  critical  data  or  the  unauthorized  disclosure  of 
confidential customer data. Although we have implemented security measures and disaster recovery capabilities, there can be 
no assurance that we will not suffer from business interruption, or unavailability or loss of data, as a result of any such events. 
As we rely heavily on our servers, computer and communications systems and the internet to conduct our business and provide 

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high quality service to our customers, such disruptions could negatively impact our ability to run our business, result in loss of 
existing or potential customers and increased expenses, and/or have an adverse effect on our reputation and the reputation of 
our products and services, any of which would adversely affect our operating results and financial condition. 

Risks Related to Regulatory and Data Privacy Issues

Our business is subject to a variety of U.S. and international laws and regulations regarding privacy and data protection, 
and  increased  public  scrutiny  of  privacy  and  security  issues  could  result  in  increased  government  regulation,  industry 
standards, and other legal obligations that could adversely affect our business. 

We  collect,  process,  store,  and  use  personal  data  and  other  information  generated  during  mobile  and  online  messaging 
between brands and consumers and between experts and consumers. We post our privacy policies and practices on our websites 
and  we  also  often  include  privacy  commitments  in  our  contracts.  Our  business  is  subject  to  numerous  federal,  state  and 
international  laws  and  regulations  regarding  privacy,  data  protection,  personal  information,  security,  data  collection,  storage, 
use and transfer, and the use of cookies and similar tracking technologies. To the extent that additional legislation regarding 
user privacy is enacted, such as legislation governing the collection and use of information regarding Internet or mobile users 
through the use of cookies or similar technologies, the effectiveness of our services could be impaired by restricting us from 
collecting  or  using  information  that  may  be  valuable  to  our  customers  and/or  exposing  us  to  lawsuits  or  regulatory 
investigations. The foregoing could have a material adverse effect our business, results of operations, and financial condition.

U.S. and international privacy laws and regulations are evolving and changing, subject to differing interpretations, may be 
costly to comply with, and may be inconsistent among countries and jurisdictions or conflict with other rules.  As we expand 
our  operations  in  these  countries,  our  liability  exposure  and  the  complexity  and  cost  of  compliance  with  data  and  privacy 
requirements  will  likely  increase.  Any  failure  by  us  to  comply  with  our  posted  privacy  policies,  applicable  federal,  state  or 
international  laws  and  regulations  relating  to  data  privacy  and  data  protection,  or  the  privacy  commitments  contained  in  our 
contracts, could result in proceedings against us by governmental entities, customers, consumers, watchdog groups or others, 
which  could  have  a  material  adverse  effect  on  our  business,  financial  condition  and  results  of  operations.  In  addition,  the 
increased  attention  focused  upon  liability  as  a  result  of  lawsuits  and  legislative  proposals  and  enactments  could  harm  our 
reputation or otherwise impact the growth of our business.

Laws  and  practices  regarding  handling  and  use  of  personal  and  other  information  by  companies  have  come  under 
increased public scrutiny, and governmental entities, consumer agencies and consumer advocacy groups have called for, and in 
many instances, enacted increased regulation and changes in industry practices. For example, the E.U. General Data Protection 
Regulation  (“GDPR”),  which  became  effective  in  May  2018,  replacing  the  E.U.  Data  Protection  Directive,  imposes 
significantly greater compliance burdens on companies that control or process personal data of users primarily located in the 
E.U.  and,  for  noncompliance,  provides  for  considerable  fines  up  to  the  higher  of  20  million  Euros  or  4%  of  global  annual 
revenue. European regulators have issued numerous fines pursuant to the GDPR. One material change is that data processors 
(as that term is defined by applicable E.U. data protection law) have direct obligations, including implementing technical and 
organizational  measures,  and  are  subject  to  enhanced  notification  rules.  The  GDPR  also  imposes  certain  technological 
requirements that may, from time to time, require us to make changes to our services to enable LivePerson and/or our customers 
to meet legal requirements and may impact how data protection is addressed in our customer and vendor agreements. Ensuring 
compliance with the GDPR is an ongoing commitment that involves substantial costs, and it is possible that despite our efforts, 
governmental authorities or third parties will assert that our services or business practices fail to comply. We also must require 
vendors that process personal data to take on additional privacy and security obligations, and some may refuse, causing us to 
incur potential disruption and expense related to our business processes. If our policies and practices, or those of our vendors, 
are,  or  are  perceived  to  be,  insufficient,  we  could  be  subject  to  enforcement  actions  or  investigations  by  Data  Protection 
Authorities (including in the E.U.) or lawsuits by private parties, and our business could be negatively impacted.

The E.U. has also released a proposed Regulation on Privacy and Electronic Communications (“e-Privacy Regulation”) to 
replace  the  E.U.’s  Privacy  and  Electronic  Communications  Directive  (“e-Privacy  Directive”)  to,  among  other  things,  better 
align with the GDPR, to amend the current e-Privacy Directive’s rules on the use of cookies and other tracking technologies, 
and  to  harmonize  across  current  E.U.  member  state  e-privacy  data  protection  laws.    Compliance  with  changes  in  laws  and 
regulations  related  to  privacy  may  require  significant  cost,  limit  the  use  and  adoption  of  our  services,  and  require  material 
changes in our business practices that result in reduced revenue.  Noncompliance could result in material fines and penalties, 
litigation, regulatory investigation and/or governmental orders requiring us to change our data practices, which could damage 
our reputation and harm our business.

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Additionally, as web and mobile commerce continues to evolve, regulation by federal, state and foreign governments or 
agencies in the areas of data privacy and data security is likely to increase. For instance, recent legal developments in Europe 
have  created  complexity  and  regulatory  compliance  uncertainty  regarding  certain  transfers  of  personal  information  from  the 
European Economic Area (the “EEA”) to the United States and certain other third countries. For example, on July 16, 2020, the 
Court of Justice of the European Union (“CJEU”) invalidated the E.U.-U.S. Privacy Shield Framework (the “E.U.-U.S. Privacy 
Shield”) under which personal information could be transferred from the EEA to U.S. entities who had self-certified under the 
Privacy  Shield  program.  Similarly,  on  September  8,  2020,  the  Swiss  Data  Protection  Authority  announced  in  a  position 
statement that it no longer considers the Swiss-U.S. Privacy Shield adequate for the purpose of transferring personal data from 
Switzerland to the United States. While the CJEU upheld the adequacy of E.U.-specified standard contractual clauses (“SCCs”) 
as  an  adequate  personal  information  transfer  mechanism,  it  made  clear  that  reliance  on  them  alone  may  not  necessarily  be 
sufficient in all circumstances and that their use must be assessed on a case-by-case basis taking into account the surveillance 
laws  in  and  the  right  of  individuals  afforded  by,  the  destination  country.  The  CJEU  went  on  to  state  that,  if  the  competent 
supervisory  authority  believes  that  the  SCCs  cannot  be  complied  with  in  the  destination  country  and  the  required  level  of 
protection  cannot  be  secured  by  other  means,  such  supervisory  authority  is  under  an  obligation  to  suspend  or  prohibit  that 
transfer unless the data exporter has already done so itself. Ongoing legal challenges in the E.U. to the mechanisms allowing 
companies  to  transfer  personal  data  from  the  EEA  to  certain  other  jurisdictions,  including  the  U.S.,  following  the  CJEU’s 
decision may result in further limitations on the ability to transfer data across borders, particularly if governments are unable or 
unwilling to reach new or maintain existing agreements that permit cross-border data transfers.

On January 31, 2020, the U.K. withdrew its membership from the E.U., which is commonly referred to as “Brexit.” As a 
result, we became subject to the GDPR as incorporated into UK law through the Data Protection Act of 2018 (“U.K. GDPR”). 
The relationship  between the U.K. and the E.U. in relation to certain aspects of data protection law remains unclear, however, 
and it is unclear how U.K. data protection laws and regulations will develop in the medium to longer term, including how data 
transfers to and from the U.K. will be regulated in the long term. Any changes to these laws may require us to modify our data 
processing practices and policies and to incur substantial costs and expenses to comply. The updated SCCs apply only to the 
transfer of data outside of the EEA and not the U.K. Although the European Commission adopted an adequacy decision for the 
U.K. on June 28, 2021, allowing the continued flow of personal data from the EEA to the United Kingdom, this decision will 
automatically expire four years after its entry into force, will be regularly reviewed going forward and may be revoked if the 
U.K. diverges from its current adequate data protection laws following its exit from the E.U.

We rely on a mixture of mechanisms to govern the transfer of personal data from our E.U. and U.K. business to the U.S. 
and  are  continuing  to  evaluate  what  additional  mechanisms  may  be  required  to  establish  adequate  safeguards  for  the  cross-
border  transfer  of  personal  data.  The  European  Commission  updated  the  SCCs  on  June  4,  2021,  and  additional  regulatory 
guidance  has  been  released  that  seeks  to  impose  additional  obligations  on  companies  choosing  to  rely  on  the  SCCs.  Parties 
transferring personal data from the EEA to third countries with “inadequate data protection” such as the U.S. will have until 
December 27, 2022 to update any existing agreements, or any new agreements executed before September 27, 2021, that rely 
on SCCs. The new SCCs apply only to the transfer of data outside of the EEA and not the U.K., though on January 31, 2022, 
the U.K.’s Information Commissioner’s Officer announced that proposals for the U.K.’s own form of agreement and addendum 
to  the  E.U.  SCCs  (the  “U.K.  SCCs”),  which  could  be  used  for  transfers  for  data  from  the  U.K.,  have  been  laid  before 
Parliament. If no objections are raised in Parliament and the proposals are approved, the U.K. SCCs will come into force on 
March 21, 2022 (subject to a grace period for implementation). The outcome of the consultation has yet to be published.  As 
such, any transfers by us or our vendors of personal data from the E.U./U.K. may not comply with E.U./U.K. data protection 
laws,  may  increase  our  exposure  to  the  GDPR’s/U.K.  GDPR’s  heightened  sanctions  for  violations  of  their  cross-border  data 
transfer restrictions and may reduce demand for our products from companies subject to E.U./U.K. data protection laws. If we 
are unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in 
which we provide our services and could adversely affect our financial results, and, until the legal uncertainties regarding how 
to legally continue transfers pursuant to the SCCs and other mechanisms are settled, we will continue to face uncertainty as to 
whether our efforts to comply with our obligations under the GDPR will be sufficient. Failure to comply with existing or new 
rules may result in significant penalties or orders to stop the alleged noncompliant activity.

In addition to the changing regulatory landscape in the E.U. and the U.K., in June 2018, the State of California legislature 
passed the California Consumer Privacy Act of 2018 (“CCPA”), which came into effect in January of 2020.  The CCPA gives 
California residents new data privacy rights, allows consumers to opt out of certain data sharing with third parties, and provides 
a new private cause of action for data breaches. Moreover, a new privacy law, the California Privacy Rights Act (“CPRA”), 
which is scheduled to take effect on January 1, 2023 (with a lookback to January 1, 2022), will significantly modify the CCPA, 
and  will  impose  additional  data  protection  obligations  on  companies  doing  business  in  California,  potentially  resulting  in 
further complexity and requiring us to incur additional costs and expenses in an effort to comply. Similarly, other states, such as 

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Virginia and Colorado, have instituted privacy and data security laws, rules, and regulations, and many similar laws have been 
proposed  at  the  federal  and  state  level;  accordingly,  we  also  may  be  subject  to  additional  compliance  obligations  as  such 
legislation  is  considered  and  adopted,  which  may  require  us  to  modify  our  data  processing  practices  and  policies  and  incur 
substantial costs and expenses to comply. 

In  addition  to  government  activity,  privacy  advocacy  and  other  industry  groups  have  established  and  may  continue  to 
establish  new  self-regulatory  standards  that  may  place  additional  burdens  on  us.    If  our  privacy  practices  are  deemed 
unacceptable  by  watchdog  groups  or  privacy  advocates,  such  groups  may  take  measures  that  harm  our  business  by,  for 
example, disparaging our reputation and our business, which may have a material adverse effect on our results of operations, 
and financial condition.  In addition, privacy concerns may cause consumers to avoid online sites that collect various forms of 
data or to resist providing the data necessary to allow our customers to use our services effectively. Even the perception of data 
security and data privacy concerns, whether or not valid, could inhibit sales and market acceptance of our products and services.

Our  business  is  subject  to  a  variety  of  U.S.  and  foreign  laws,  and  existing,  new  and  developing  regulatory  or  other  legal 
requirements could subject us to claims or materially impact our business. 

We and our customers are subject to a number of laws and regulations in the United States and abroad, including laws 
related  to  conducting  business  on  the  Internet  or  mobile  devices,  such  as  laws  regarding  data  privacy,  data  protection, 
information security, cybersecurity, restrictions or technological requirements regarding the collection, use, storage, protection, 
transfer or other processing of consumer data, content, consumer protection, internet (or net) neutrality, advertising, electronic 
contracts,  taxation,  provision  of  online  payment  services  (including  credit  card  processing),  and  intellectual  property  rights, 
which are continuously evolving and developing. Because our services are accessible worldwide, certain foreign jurisdictions 
may claim that we are required to comply with their laws, even if we do not have a local entity, employees or infrastructure. 
Foreign data protection, privacy, and other laws and regulations may often be more restrictive than those in the United States. 
The scope and interpretation of the laws and other obligations that apply to us, including those related to user privacy and data 
security, are often uncertain and may be conflicting, particularly laws and obligations outside the U.S. There is a risk that these 
laws  may  be  interpreted  and  applied  differently  in  any  given  jurisdiction  in  a  manner  that  is  not  consistent  with  our  current 
practices, which could cause us to incur substantial cost and could negatively impact our brand, reputation and business. 

Businesses  using  our  products  and  services  may  collect  data  from  their  users.  Various  federal,  state  and  foreign 
government bodies and agencies impose laws regarding collection, use, storage, retention, disposal, transfer or other processing 
of data from website visitors. We offer our customers a variety of data security procedures and practices, such as encryption for 
data  at  rest  and  masking  algorithms  for  sensitive  data  prior  to  transfer  to  our  database,  in  an  effort  to  protect  information. 
Changes to applicable laws and how they are interpreted relating to privacy and data security could significantly increase the 
cost to us and our customers of regulatory compliance and could negatively impact our business. 

For  instance,  some  states  in  the  U.S.  have  enacted  legislation  designed  to  protect  consumer  privacy  by  prohibiting  the 
distribution of “spyware” over the Internet. Such legislation typically focuses on restricting the proliferation of software that, 
when installed on an end user’s computer, is used to intentionally and deceptively take control of the end user’s machine. We 
do  not  believe  that  the  data  monitoring  methods  that  we  employ  constitute  “spyware”  or  are  prohibited  by  applicable  laws. 
However,  federal,  state  and  foreign  laws  and  regulations,  many  of  which  can  be  enforced  by  government  entities  or  private 
parties, are constantly evolving and can be subject to significant changes in application and interpretation. If, for example, the 
scope of the previously mentioned “spyware” legislation were changed to include web analytics, such legislation could apply to 
the technology we use and potentially restrict our ability to conduct our business. 

Further,  various  federal,  state  and  foreign  government  bodies  and  agencies  are  highly  focused  on  consumer  protection 
initiatives,  particularly  in  light  of  the  increase  in  new  technologies  and  services  that  incorporate  or  use  bots,  artificial 
intelligence and/or machine learning. For example, the California B.O.T. Act came into effect in July 2019 and requires that 
companies using bots on platforms with more than 10 million unique monthly visitors from the U.S. use clear and conspicuous 
disclosure to inform consumers that they are not speaking to a human. Similar bills have been introduced from time to time at 
the state and federal level in recent years. Further, use of artificial intelligence and machine learning may be subject to laws and 
evolving  regulations  regarding  the  use  of  artificial  intelligence,  controlling  for,  among  other  things,  data  bias,  and 
antidiscrimination. For example, the Federal Trade Commission (“FTC”) enforces consumer protection laws such as Section 5 
of  the  FTC  Act,  which  prohibits  unfair  and  deceptive  practices,  including  use  of  biased  algorithms  in  AI.  The  European 
Commission also recently published its proposal for a regulation implementing harmonized rules on AI and amending certain 
union legislative acts. The proposed regulation would impose additional restrictions and obligations on providers of AI systems, 
including increasing transparency so consumers know they are interacting with an AI system, requiring human oversight in AI, 

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and prohibiting certain practices of AI that could lead to physical or psychological harm. Given the increased focus by the FTC 
and  other  regulators  on  the  use  of  AI,  it  is  possible  that  additional  laws,  regulations,  and  standards  related  to  AI  may  be 
introduced  in  the  future.  Regulation  in  this  area  could  impact  how  businesses  use  our  products  and  services  to  interact  with 
consumers  and  how  we  provide  our  services  to  our  customers.  AI  tools  can  also  present  unique  technological  and  legal 
challenges, such as the possibility of insufficient data sets, or (as stated above) data sets that contain biased information, which 
can  negatively  impact  the  decisions,  predictions  or  analyses  that  AI  applications  produce.  Deficiencies  such  as  these  could 
cause  us  reputational  harm  and  subject  us  to  legal  liability,  including  claims  of  product  liability,  breach  of  warranty,  or 
negligence.

In  addition,  regulatory  authorities  and  governments  around  the  world  are  considering  a  number  of  legislative  and 
regulatory proposals concerning privacy, collection and use of website visitor data, data storage, data protection, the “right to be 
forgotten,”  content  regulation,  cybersecurity,  government  access  to  personal  information,  online  advertising,  email  and  other 
categories  of  electronic  spam,  and  other  matters  that  may  be  applicable  to  our  business.  Compliance  with  these  laws  may 
require substantial investment or may be technologically challenging for us. For example, some jurisdictions, including in the 
United States, are considering whether the collection of anonymous data may invade the privacy of website visitors. If laws or 
regulations are enacted that limit data collection or use practices related to anonymous data, we and/or our customers may be 
required to obtain the express consent of web visitors in order for our technology to perform certain basic functions that are 
based on the collection and use of technical data. Requirements that a website must first obtain consent from its web visitors 
before using our technology could reduce the amount and value of the services we provide to customers, which might impede 
sales and/or cause some existing customers to discontinue using our services. 

It is also likely that, as our business grows and evolves, an increasing portion of our business shifts to mobile, and our 
solutions are offered and used in a greater number of countries, we will become subject to laws and regulations in additional 
jurisdictions. We may need to expend considerable effort and resources to develop new product features and/or procedures to 
comply with any such legal requirements. It is difficult to predict how existing laws will apply to our business and what new 
laws and legal obligations we may become subject to. If we are not able to comply with these laws or other legal obligations, or 
if we become liable under them, we may be forced to implement material changes to our business practices, delay release of 
new and enhanced services and expend substantial resources, which would negatively affect our business, financial condition 
and  results  of  operations.  In  addition,  any  increased  attention  focused  on  liability  issues,  or  as  a  result  of  regulatory  fines  or 
lawsuits,  could  harm  our  reputation  or  otherwise  impact  the  growth  of  our  business.  Any  costs  incurred  as  a  result  of  this 
potential liability could harm our business and operating results. 

We  monitor  pending  legislation  and  regulatory  initiatives  to  ascertain  relevance,  analyze  impact  and  develop  strategic 
direction  surrounding  regulatory  trends  and  developments.  Due  to  shifting  economic  and  political  conditions,  tax  policies  or 
rates  in  various  jurisdictions  may  be  subject  to  significant  change.  A  range  of  other  proposed  or  existing  laws  and  new 
interpretations of existing laws could have an impact on our business. For example: 

Government agencies and regulators have reviewed, are reviewing and will continue to review, the personal data handling 
practices of companies doing business online, including privacy and security policies and practices. This review may result in 
new laws or the promulgation of new regulations or guidelines that may apply to our products and services. For example, the 
State of California and other states have passed laws relating to disclosure of companies’ practices with regard to Do-Not-Track 
signals  from  Internet  browsers,  the  ability  to  delete  information  of  minors,  and  new  data  breach  notification  requirements. 
Outside the E.U. and the U.S., a number of countries have adopted or are considering privacy laws and regulations that may 
result  in  significant  greater  compliance  burdens.  Existing  and  proposed  laws  and  regulations  regarding  cybersecurity  and 
monitoring  of  online  behavioral  data,  such  as  proposed  “Do  Not  Track”  regulations,  regulations  aimed  at  restricting  certain 
targeted advertising practices and collection and use of data from mobile devices, new and existing tools that allow consumers 
to block online advertising and other content, and other proposed online privacy legislation could potentially apply to some of 
our current or planned products and services. Existing and proposed laws and regulations related to email and other categories 
of electronic spam could impact the delivery of commercial email and other electronic communications by us or on behalf of 
customers using our services.

The  Federal  Trade  Commission  (“FTC”)  in  particular  has  aggressively  investigated  and  brought  enforcement  actions 
against  companies  that  fail  to  comply  with  their  privacy  or  data  security  commitments  to  consumers,  or  fail  to  comply  with 
regulations or statutes such as the Children’s Online Privacy Protection Act. Any investigation or review of our practices may 
require us to make changes to our products and policies, which could harm our business. Currently there are many proposals by 
lawmakers and industry groups in this area, both in the United States and overseas, which address the collection, maintenance 
and  use  of  personal  information,  web  browsing  and  geolocation  data,  and  establish  data  security  and  breach  notification 

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requirements.  Further,  regulators  and  industry  groups  have  also  released  self-regulatory  principles  and  guidelines  for  various 
data privacy and security practices. Given that this is an evolving and unsettled area of regulation, the imposition of any new 
significant restrictions or technological requirements could have a negative impact on our business.

Various governmental bodies and many customers and businesses are increasingly focused on environmental, social and 
governance  issues,  which  has  in  the  past  resulted,  and  may  in  the  future  continue  to  result,  in  the  adoption  of  new  laws  and 
regulations  and  changing  buying  practices.  If  we  fail  to  keep  pace  with  these  developments,  our  reputation  and  results  of 
operations could be adversely impacted.

We might unintentionally violate such laws now or in the future; such laws or their interpretation or application may be 
modified; and new laws may be enacted in the future. Any such developments could subject us to legal liability exposure, and 
harm our business, operating results and financial condition. 

We  may  be  subject  to  governmental  export  controls  and  economic  sanctions  regulations  that  could  impair  our  ability  to 
compete in international markets due to licensing requirements and could subject us to liability if we are not in compliance 
with applicable laws. 

Certain of our products and services may be subject to export control and economic sanctions regulations, including the 
U.S.  Export  Administration  Regulations,  U.S.  Customs  regulations  and  various  economic  and  trade  sanctions  regulations 
administered by the U.S. Treasury Department’s Office of Foreign Assets Control. Exports of our products and the provision of 
our services must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, 
we and certain of our employees could be subject to substantial civil or criminal penalties, including: the possible loss of export 
privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration 
of responsible employees or managers. Obtaining the necessary authorizations, including any required license, for a particular 
deployment may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. In addition, 
changes in our products or services, or changes in applicable export or economic sanctions regulations may create delays in the 
introduction and deployment of our products and services in international markets, or, in some cases, prevent the export of our 
products or provision of our services to certain countries or end users. Any change in export or economic sanctions regulations, 
shift  in  the  enforcement  or  scope  of  existing  regulations,  or  change  in  the  countries,  governments,  persons  or  technologies 
targeted  by  such  regulations,  could  also  result  in  decreased  use  of  our  products  and  services,  or  in  our  decreased  ability  to 
export our products or provide our services to existing or prospective customers with international operations. Any decreased 
use of our products and services or limitation on our ability to export our products and provide our services could adversely 
affect our business, results of operations, and financial condition. Further, we incorporate encryption technology into certain of 
our products. Various countries regulate the import of certain encryption technology, including through import permitting and 
licensing  requirements,  and  have  enacted  laws  that  could  limit  our  customers’  ability  to  import  our  products  into  those 
countries. Encryption products and the underlying technology may also be subject to export control restrictions. Governmental 
regulation of encryption technology and regulation of exports of encryption products, or our failure to obtain required approval 
for  our  products,  when  applicable,  could  harm  our  international  sales  and  adversely  affect  our  revenue.  Compliance  with 
applicable regulatory requirements regarding the export of our products and provision of our services, including with respect to 
new releases of our products and services, may create delays in the introduction of our products and services in international 
markets, prevent our customers with international operations from deploying our products and using our services throughout 
their  globally-distributed  systems  or,  in  some  cases,  prevent  the  export  of  our  products  or  provision  of  our  services  to  some 
countries altogether. 

Industry-specific regulation is evolving and unfavorable industry-specific laws, regulations, or interpretive positions could 
harm our business. 

Our  customers  and  potential  customers  do  business  in  a  variety  of  industries,  including  financial  services,  the  public 
sector,  healthcare  and  telecommunications.  Regulators  of  various  industries  have  adopted  and  may  in  the  future  adopt 
regulations  or  interpretive  positions  regarding  the  use  of  cloud  computing  and  other  outsourced  services.  The  costs  of 
compliance  with,  and  other  burdens  imposed  by,  industry-specific  laws,  regulations  and  interpretive  positions  may  limit  our 
customers’ use and adoption of our services and reduce overall demand. For example, some financial services regulators have 
imposed  guidelines  for  use  of  cloud  computing  services  that  mandate  specific  controls  or  that  require  financial  services 
providers to obtain regulatory approval prior to outsourcing certain functions. If we are unable to comply with these guidelines 
or controls, or if our customers are unable to obtain regulatory approval to use our service where required, our business may be 
harmed  and  we  may  be  unable  to  conduct  business  with  customers  in  such  industries.  In  addition,  an  inability  to  satisfy  the 
standards  of  certain  third-party  certification  bodies  that  our  customers  may  expect,  such  as  the  PCI  Data  Security  Standards, 

39

may  have  an  adverse  impact  on  our  business.  If  we  are  unable  in  the  future  to  achieve  or  maintain  these  industry-specific 
certifications or comply with other similar requirements or standards that are relevant to our customers, our business and our 
revenue may be adversely impacted. 

In  some  cases,  industry-specific  laws,  regulations  or  interpretive  positions  may  also  apply  directly  to  us  as  a  service 
provider. Any failure or perceived failure by us to comply with such requirements could have a material adverse impact on our 
business and results of operations. 

In addition, we may become subject to additional regulatory and compliance burdens as we expand our product offerings 
into new conversational businesses. For example, we recently launched a new conversational banking initiative. While we are 
relying on the banking license of a third party and certain of their compliance programs for this initiative, if we or our partner 
fail to comply with applicable laws, rules and regulations, fail to successfully manage our regulatory or compliance obligations, 
or  fail  to  obtain  and  maintain  required  licenses,  we  could  be  subject  to  fines  and/or  proceedings  by  governmental  agencies, 
regulatory bodies, and/or private litigation, which could materially and adversely affect our business, financial condition and 
results of operations. 

Future regulation of the Internet or mobile devices may slow our growth, resulting in decreased demand for our services 
and increased costs of doing business. 

State, federal and foreign regulators could adopt laws and regulations that impose additional burdens on companies that 
conduct business online or that adversely affect the growth or use of the Internet or mobile commerce. For example, these laws 
and regulations could discourage communication by e-mail or other web-based communications, particularly targeted e-mail of 
the type facilitated by our services, which could reduce demand for our services. Laws or regulations that affect the use of the 
Internet or mobile devices, including but not limited to laws affecting net neutrality could also decrease demand for our services 
and  increase  our  costs.  Some  jurisdictions  have  adopted  regulations  prohibiting  certain  forms  of  discrimination  by  Internet 
access  providers;  however,  substantial  uncertainty  exists  in  the  U.S.  and  elsewhere.  For  example,  in  the  U.S.,  the  Federal 
Communications Commission repealed net neutrality rules effective June 11, 2018, which could lead internet access providers 
to restrict, block, degrade or charge for access to our products and services, while California, among other states, have passed 
legislation  that  seeks  to  reestablish  net  neutrality.  Further,  regulatory  focus  on  data  privacy,  data  security  and  consumer 
protection  continues  to  expand  on  a  worldwide  basis  and  is  becoming  more  complex,  which  will  increase  the  risks  to  our 
business on reputational, operational, and compliance bases. 

The continued growth and development of the market for online services may prompt calls for more stringent consumer 
protection laws or laws that will inhibit the use of Internet-based or mobile-based communications or the information contained 
in  these  communications  or  the  ways  in  which  information  may  be  collected,  stored,  used  and  transferred  in  the  course  of 
providing  services.  For  example,  in  the  United  States,  the  CAN-SPAM  Act  regulates  the  transmission  and  content  of 
commercial emails, and, among other things, obligates the sending of such emails to provide recipients with the ability to opt-
out  or  unsubscribe  and  other  requirements;  and  the  Children’s  Online  Privacy  Protection  Act  regulates  the  ability  of  certain 
online  services  to  collect  or  use  certain  categories  of  information  from  children  under  age  13  absent  parental  consent.  The 
adoption of any additional laws or regulations, or changes to existing laws or regulations, may decrease the expansion of the 
Internet or smartphone usage. A decline in the growth of the Internet or smartphone usage, particularly as it relates to online 
communication,  could  decrease  demand  for  our  services  and  increase  our  costs  of  doing  business,  or  otherwise  harm  our 
business. Any new legislation or regulations, application of laws and regulations from jurisdictions whose laws do not currently 
apply  to  our  business,  or  application  of  existing  laws  and  regulations  to  the  Internet,  mobile  and  other  online  services  could 
increase our costs and harm our growth. 

We  anticipate  making  investments  in,  and  potentially  holding,  creating  or  managing  blockchain-based  assets,  including 
cryptocurrency  or  other  digital  tokens  and  development  of  blockchain-based  decentralized  applications  (“DApps”),  which 
may subject us to exchange risk and additional tax and regulatory requirements.

In the fourth quarter of 2021, we updated our investment policy to provide us with more flexibility to further diversify 
and maximize returns on our cash that is not required to maintain adequate operating liquidity. Under this policy, which was 
duly  approved  by  our  board  of  directors,  we  may  invest  a  portion  of  such  cash  in  investment  instruments  related  to 
cryptocurrencies  and  other  blockchain-based  assets  through  a  newly  established  subsidiary.  Our  subsidiary  is  expected  to 
contract with providers to invest in funds and/or directly hold blockchain-based, assets including cryptocurrencies such as USD 

40

Coin, in order to engage in investment strategies such as yield farming, which involves lending or staking cryptocurrencies to 
generate returns in the form of transaction fees or interest.  

The laws surrounding cryptocurrency and blockchain-based assets are uncertain and evolving. Cryptocurrencies are not 
considered legal tender or backed by any government, and any cryptocurrencies we may hold or related investments we may 
experience  price  volatility,  technological  glitches  and  various  law  enforcement  and  regulatory  interventions.  The  use  of 
cryptocurrency  is  currently  limited  both  in  the  U.S.  and  around  the  world,  and  the  widespread  acceptance  and  adoption  of 
cryptocurrencies as a store of value or means of payment for goods and services is uncertain. The application of securities laws 
and other regulations to cryptocurrency and blockchain-based assets is unclear, and it is possible that regulators in the U.S. or 
other jurisdictions may create new regulations or interpret laws in a manner that adversely affect the price of blockchain-based 
assets,  restrict  our  future  ability  to  invest  in  or  hold  blockchain-based  assets  and  subject  us  to  additional  regulatory 
requirements,  including  laws  governing  payments,  financial  services,  virtual  currency,  anti-money  laundering,  counter-
terrorism  financing,  trade  sanctions,  privacy  and  data  protection,  tax,  consumer  protection,  environmental  protection  and 
competition.  Further,  the  use  and  development  of  cryptocurrency  has  been  prohibited  or  effectively  prohibited  in  some 
countries. If we fail to comply with regulations or prohibitions applicable to us, we could face regulatory or other enforcement 
actions  and  potential  fines  and  other  consequences.  If  any  regulatory  authority  asserts  that  we  require  a  license  or  other 
regulatory approval to conduct business involving cryptocurrencies or other blockchain-based assets, it could have a material 
adverse effect on our business, results of operations, cash flows and financial condition. 

If we accept and hold cryptocurrency in the future, we may have exchange rate risk on the cryptocurrencies we hold as 
well as the risks that regulatory or other developments may adversely affect their value. We may choose not to hedge, or may 
be  unable  to  fully  hedge,  our  exposure  to  cryptocurrencies  and  other  blockchain-based  assets  and  may  at  times  be  unable  to 
convert them to U.S. dollars. If we hold cryptocurrency and its value decreases relative to our acquisition price, our financial 
condition may be harmed. 

Moreover,  cryptocurrency  and  blockchain-based  assets  are  currently  considered  indefinite-lived  intangible  assets  under 
applicable accounting rules, meaning that any decrease in the asset’s fair value below our carrying value for such asset at any 
time subsequent to its acquisition will require us to recognize impairment charges, whereas we may make no upward revisions 
for  any  market  price  increases  until  a  sale,  which  may  adversely  affect  our  operating  results  in  any  period  in  which  such 
impairment  occurs.  Moreover,  there  is  no  guarantee  that  future  changes  in  GAAP  will  not  require  us  to  change  the  way  we 
account for cryptocurrency held by us.

As intangible assets that may lack centralized issuers or governing bodies, cryptocurrencies’ and blockchain-based assets’ 
lack  of  a  physical  form,  their  reliance  on  technology  for  their  creation,  existence  and  transactional  validation  and  their 
decentralization may subject their integrity to the threat of security breaches, cyberattacks or other malicious activities, as well 
as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets. 
As cryptocurrencies and blockchain-based assets have no physical existence beyond the record of transactions on a blockchain, 
a variety of technical factors related to blockchain technologies could also impact the price of cryptocurrencies and the stability 
of our investments. For example, malicious attacks by cryptocurrency miners, inadequate mining fees to incentivize validation 
of transactions, hard “forks” of individual blockchains into multiple blockchains, and advances in digital computing, algebraic 
geometry, and quantum computing could undercut the integrity of blockchain technologies and negatively affect the price of 
cryptocurrencies  and  the  stability  of  our  investments.  While  we  intend  to  take  all  reasonable  measures  to  secure  any  digital 
assets, if such threats are realized or the measures or controls we or our counterparties create or implement to secure our digital 
assets  fail,  it  could  result  in  a  partial  or  total  misappropriation  or  loss  of  our  digital  assets,  and  our  financial  condition  and 
operating results may be harmed.

Finally, blockchain is an emerging technology that offers new capabilities which are not fully proven through sustained 
widespread use in the marketplace. Furthermore, the creation and use of blockchain technology and DApps in new industries 
will  be  subject  to  potential  technical,  legal  and  regulatory  constraints.  There  is  no  warranty  that  blockchain-based  assets  and 
DApps will be uninterrupted or error-free and there is an inherent risk that the software, network, blockchain-based assets and 
related  technologies  and  theories  could  contain  undiscovered  technical  flaws  or  weaknesses,  the  cryptographic  security 
measures  that  authenticate  transactions  and  the  distributed  ledger  could  be  compromised,  and  breakdowns  could  cause  the 
partial or complete inability to use or loss of blockchain-based assets or DApps.

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Global or local climate change and natural resource conservation regulations or requirements could adversely impact our 
business.

The  long-term  effects  of  climate  change  on  the  global  economy  and  the  cloud  and  SaaS  industry  remain  unknown. 
Changes in weather where we operate may increase the costs of powering and cooling computer hardware we use to develop 
software and provide cloud-based services. In response to concerns about global climate change, governments may adopt new 
regulations affecting the use of fossil fuels or requiring the use of alternative fuel sources. Our server infrastructure consumes 
significant energy resources, including those generated by the burning of fossil fuels. 

Our  customers,  investors  and  other  stakeholders  may  require  us  to  take  steps  to  demonstrate  that  we  are  taking 
ecologically responsible measures in operating our business. The costs and any expenses we may incur to make our network 
more energy-efficient and comply with any new regulations could negatively impact our operating results. Failure to comply 
with applicable laws and regulations or other requirements imposed on us could result in material fines and penalties, litigation, 
regulatory  investigation  and/or  governmental  orders  requiring  us  to  change  our  data  practices,  which  could  damage  our 
reputation and harm our business.

Risks Related to our Intellectual Property

Our products and services may infringe upon intellectual property rights of third parties and any infringement could require 
us to incur substantial costs and may distract our management. 

We have had patent and other infringement lawsuits filed against us claiming that certain of our products and services 
infringe  third  party  intellectual  property  rights,  and  we  are  subject  to  the  future  risk  of  additional  third  party  claims  alleging 
infringement  against  us  or  against  our  customers  for  use  of  our  products  and  services.  Many  of  our  customer  and  partner 
contracts, including certain suppliers, contain indemnification obligations requiring us to indemnify our customers from certain 
claims against them or arising from the use of our services. Substantial litigation regarding intellectual property rights exists in 
the  software  industry.  In  the  ordinary  course  of  our  business,  our  services  and/or  our  customers’  use  of  our  services  may  be 
increasingly  subject  to  third-party  infringement  claims  as  claims  by  non-practicing  entities  become  more  prevalent  and  the 
number of competitors in our industry segment grows and the functionality of services in different industry segments overlaps. 
Some  of  our  competitors  in  the  market  for  digital  engagement  technology,  and/or  web  and  mobile  based  consumer-facing 
services or other third parties may have filed or may intend to file patent applications covering aspects of their technology and 
have  asserted  and  may  in  the  future  assert  claims  against  us.  Any  claims  alleging  infringement  of  third-party  intellectual 
property rights could require us to spend significant amounts in litigation (even if the claim is invalid), distract management 
from other tasks of operating our business, pay substantial damage awards, prevent us from selling our products, delay delivery 
of  our  services,  require  the  development  of  non-infringing  software,  technology,  business  processes,  systems  or  other 
intellectual property (none of which might be successful), or limit our ability to use the intellectual property that is the subject 
of  any  of  these  claims,  unless  we  enter  into  license  agreements  with  the  third  parties  (which  may  be  costly,  unavailable  on 
commercially reasonable terms, or not available at all). Therefore, any such claims could have a material adverse effect on our 
business, results of operations, cash flows and financial condition. 

Our business and prospects would suffer if we are unable to protect and enforce our intellectual property rights. 

Our success and ability to compete depend, in part, upon the protection of our intellectual property rights relating to the 
technology underlying our services. We rely on a combination of patent, copyright, trade secret, trademark and other common 
law protections in the United States and other jurisdictions, as well as confidentiality requirements and contractual provisions, 
to  protect  our  proprietary  technology,  processes  and  other  intellectual  property.  We  own  a  portfolio  of  patents  and  patent 
applications in the U.S. and internationally and regularly file patent applications to protect intellectual property that we believe 
is important to our business, including intellectual property related to digital engagement technology, and/or web and mobile 
based consumer-facing services. We believe the duration of our patents is adequate relative to the expected lives of our products 
and services. We pursue the registration of our domain names, trademarks and trade names in the U.S. and in certain locations 
outside the U.S. We also own copyrights, including in our software, publications and other documents authored by us. These 
intellectual  property  rights  are  important  to  our  business  and  marketing  efforts.  We  seek  to  protect  our  intellectual  property 
rights by relying on federal, state, and common law rights, including registration, or otherwise in the U.S. and certain foreign 
jurisdictions, as well as contractual restrictions. However, we believe that factors such as the technological and creative skills of 
our personnel, new service developments, frequent enhancements and reliable maintenance are more essential to establishing 
and maintaining a competitive advantage. Others may develop technologies that are similar or superior to our technology. We 
enter  into  confidentiality  and  other  written  agreements  (including  invention  assignment  agreements)  with  our  employees, 

42

consultants,  customers,  potential  customers,  strategic  partners,  and  other  third  parties,  and  through  these  and  other  written 
agreements, we attempt to control access to and distribution of our software, documentation and other proprietary information. 
Despite  our  efforts  to  protect  our  proprietary  rights,  third  parties  may,  in  an  unauthorized  manner,  attempt  to  use,  copy  or 
otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop a service with the 
same functionality as our services. Policing unauthorized use of our services and intellectual property rights is difficult, and we 
cannot be certain that the steps we have taken will prevent misappropriation of our technology or intellectual property rights, 
particularly  in  foreign  countries  where  we  do  business,  where  our  services  are  sold  or  used,  where  the  laws  may  not  protect 
proprietary rights as fully as do the laws of the U.S. or where enforcement of laws protecting proprietary rights is not common 
or effective. 

The duration of the protection afforded to our intellectual property depends on the type of property in question, the laws 
and regulations of the relevant jurisdiction and the terms of its license agreements with others. With respect to our trademarks 
and trade names, trademark laws and rights are generally territorial in scope and limited to those countries where a mark has 
been registered or protected. While trademark registrations may generally be maintained in effect for as long as the mark is in 
use in the respective jurisdictions, there may be occasions where a mark or title is not registrable or protectable or cannot be 
used in a particular country. In addition, a trademark registration may be canceled or invalidated if challenged by others based 
on certain use requirements or other limited grounds. The duration of property rights in trademarks, service marks and trade 
names in the U.S., whether registered or not, is predicated on our continued use. 

It is possible that: 

•

•

•

•

any issued patent or patents issued in the future may not be broad enough to protect our intellectual property 
rights; 

any  issued  patent  or  any  patents  issued  in  the  future  could  be  successfully  challenged  by  one  or  more  third 
parties, which could result in our loss of the right to prevent others from exploiting the inventions claimed in the 
patents; 

current and future competitors may independently develop similar technologies, duplicate our services or design 
around any patents we may have; and 

effective intellectual property protection may not be available in every country in which we do business, where 
our services are sold or used, where the laws may not protect proprietary rights as fully as do the laws of the 
United States or where enforcement of laws protecting proprietary rights is not common or effective. 

Further,  to  the  extent  that  the  invention  described  in  any  U.S.  patent  was  made  public  prior  to  the  filing  of  the  patent 
application,  we  may  not  be  able  to  obtain  patent  protection  in  certain  countries.  We  also  rely  upon  copyright,  trade  secret, 
trademark  and  other  common  law  in  the  U.S.  and  other  jurisdictions,  as  well  as  confidentiality  procedures  and  contractual 
provisions, to protect our proprietary technology, processes and other intellectual property. Any steps we might take may not be 
adequate  to  protect  against  infringement  and  misappropriation  of  our  intellectual  property  by  third  parties.  Similarly,  third 
parties  may  be  able  to  independently  develop  similar  or  superior  technology,  processes  or  other  intellectual  property.  Third 
parties may register marks that are confusingly similar to the trademarks or services marks that we have used in the U.S. and 
our  failure  to  monitor  foreign  registrations  or  mark  usage  may  impact  out  rights  in  certain  trademarks  or  services  marks. 
Policing unauthorized use of our services and intellectual property rights is difficult, and we cannot be certain that the steps we 
have  taken  will  prevent  misappropriation  of  our  technology  or  intellectual  property  rights,  particularly  in  foreign  countries 
where we do business, where our services are sold or used, where the laws may not protect proprietary rights as fully as do the 
laws  of  the  U.S.  or  where  enforcement  of  laws  protecting  proprietary  rights  is  not  common  or  effective.  The  unauthorized 
reproduction  or  other  misappropriation  of  our  intellectual  property  rights  could  enable  third  parties  to  benefit  from  our 
technology  without  paying  us  for  it.  If  this  occurs,  our  business,  results  of  operations,  and  financial  condition  could  be 
materially and adversely affected. In addition, disputes concerning the ownership or rights to use intellectual property could be 
costly  and  time-consuming  to  litigate,  may  distract  management  from  operating  our  business  and  may  result  in  our  loss  of 
significant rights. 

Issues in the use of AI in our product offerings may result in reputational harm or liability. 

We have built, and expect to continue to build, AI into many of our product offerings and we expect this element of our 
business to grow. We envision a future in which AI operating in our devices, applications and the cloud helps our customers be 
more productive in their business activities and interactions with consumers. As with many disruptive innovations, AI presents 
risks and challenges that could affect its adoption, and therefore our business. AI algorithms may be flawed. Datasets may be 

43

insufficient  or  contain  biased  information.  Inappropriate  or  controversial  data  practices  by  us  or  others  could  impair  the 
acceptance of AI solutions. These deficiencies could undermine the decisions, predictions, or analysis AI applications produce, 
subjecting us to competitive harm, legal liability, and brand or reputational harm. Some AI scenarios present ethical issues. If 
we enable or offer AI solutions that are controversial because of their impact on human rights, privacy, employment, or other 
social issues, we may experience a material adverse effect on our business, results of operations and cash flows.  

We  may  be  subject  to  legal  liability  and/or  negative  publicity  for  the  services  provided  to  consumers  via  our  technology 
platforms. 

Our technology platforms enable representatives of our customers as well as individual service providers to communicate 
with  consumers  and  other  persons  seeking  information  or  advice  on  the  web  or  via  mobile  devices.  The  law  relating  to  the 
liability of online platform providers such as us for the activities of users of their online platforms is often challenged in the 
U.S. and internationally. We may be unable to prevent users of our technology platforms from providing negligent, unlawful or 
inappropriate  advice,  information  or  content  via  our  technology  platforms,  or  from  behaving  in  an  unlawful  manner,  and  we 
may be subject to allegations of civil or criminal liability for negligent, fraudulent, unlawful or inappropriate activities carried 
out by users of our technology platforms. 

Claims  could  be  made  against  online  services  companies  under  both  U.S.  and  foreign  law,  such  as  fraud,  defamation, 
libel, invasion of privacy, negligence, data breach, copyright or trademark infringement, or other theories based on the nature 
and content of the materials disseminated by users of our technology platforms. In addition, domestic and foreign legislation 
has been proposed that could prohibit or impose liability for the transmission over the Internet of certain types of information. 
Our  defense  of  any  of  these  actions  could  be  costly  and  involve  significant  time  and  attention  of  our  management  and  other 
resources. 

The  Digital  Millennium  Copyright  Act  (“DMCA”)  is  intended,  among  other  things,  to  reduce  the  liability  of  online 
service providers for transmitting or storing materials that infringe copyrights of others or referring, listing or linking to third 
party web properties that include materials that infringe copyrights of others. Additionally, Section 230 of the Communications 
Decency Act (“CDA”), is intended to provide statutory protections to online service providers who host or distribute third party 
content.  A  safe  harbor  for  copyright  infringement  is  also  available  under  the  DMCA  to  certain  online  service  providers  that 
provide  specific  services,  if  the  providers  take  certain  affirmative  steps  as  set  forth  in  the  DMCA.  There  are  various 
Congressional  efforts  to  restrict  the  scope  of  the  protections  from  liability  for  service  providers  in  certain  circumstances. 
Important questions regarding the safe harbor under the DMCA and the CDA have yet to be litigated, and we cannot guarantee 
that we will meet the safe harbor requirements of the DMCA or of the CDA. If we are not covered by a safe harbor, for any 
reason, we could be exposed to claims, which could be costly and time-consuming to defend.

Our consumer service allows consumers to provide feedback regarding service providers. Although all such feedback is 
generated  by  users  and  not  by  us,  claims  of  defamation  or  other  injury  could  be  made  against  us  for  content  posted  on  our 
websites. Our liability for such claims may be higher in jurisdictions outside the United States where laws governing Internet or 
mobile transactions are unsettled. 

If  we  become  liable  for  information  provided  by  our  users  and  carried  via  our  service  in  any  jurisdiction  in  which  we 
operate, we could be directly harmed and we may be forced to implement new measures to reduce our exposure to this liability. 
In  addition,  the  increased  attention  focused  upon  liability  issues  as  a  result  of  these  lawsuits  and  legislative  proposals  could 
harm  our  reputation  or  otherwise  impact  the  growth  of  our  business.  Any  costs  incurred  as  a  result  of  this  potential  liability 
could harm our business. 

In addition, negative publicity and user sentiment generated as a result of fraudulent or deceptive conduct by users of our 
technology  platforms  could  damage  our  reputation,  reduce  our  ability  to  attract  new  users  or  retain  our  current  users,  and 
diminish the value of our brand. 

In  the  future,  we  may  be  required  to  spend  substantial  resources  to  take  additional  protective  measures  or  discontinue 
certain service offerings, either of which could harm our business. Any costs incurred as a result of potential liability relating to 
the sale of unlawful services or the unlawful sale of services could harm our business. In addition to legislation and regulations 
relating  to  privacy  and  data  security  and  collection,  we  may  be  subject  to  consumer  protection  laws  that  are  enforced  by 
regulators  such  as  the  FTC  and  private  parties,  and  include  statutes  that  regulate  the  collection  and  use  of  information  for 
marketing purposes. Any new legislation or regulations regarding the Internet, mobile devices, software sales or export and/or 
the cloud or SaaS industry, and/or the application of existing laws and regulations to the Internet, mobile devices, software sales 

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or  export  and/or  the  cloud  or  SaaS  industry,  could  create  new  legal  or  regulatory  burdens  on  our  business  that  could  have  a 
material adverse effect on our business, results of operations, and financial condition. Additionally, as we operate outside the 
U.S., the international regulatory environment relating to the Internet, mobile devices, software sales or export, and/or the SaaS 
industry could have a material adverse effect on our business, results of operations, and financial condition. 

Risks Related to our International Operations and Tax Issues

Our results of operations may be adversely impacted due to our exposure to foreign currency exchange rate fluctuations. 

We conduct business in currencies other than the U.S. dollar in Europe, Australia, Japan and Israel. As we continue to 
expand  our  international  operations  we  become  more  exposed  to  the  effects  of  fluctuations  in  currency  exchange  rates.  As  a 
result  of  the  expanding  size  and  scope  of  our  international  operations,  our  currency  rate  fluctuation  risk  associated  with  the 
exchange rate movement of the U.S. dollar has increased. 

Since  we  conduct  business  in  currencies  other  than  the  U.S.  dollar  but  report  our  financial  results  in  U.S.  dollars, 
fluctuations  in  currency  exchange  rates  could  adversely  affect  our  results  of  operations.  For  example,  during  the  year  ended 
December 31, 2021, we experienced a foreign currency exchange impact of approximately 1.8% percent, or approximately $8.3 
million  if  held  in  constant  currency,  to  our  revenue.  Fluctuations  in  the  value  of  the  U.S.  dollar  relative  to  other  foreign 
currencies  could  materially  affect  our  revenue,  cost  of  revenue  and  operating  expenses,  and  result  in  foreign  currency 
transaction gains and losses. We may seek to enter into hedging transactions in the future or to use financial instruments, such 
as derivative financial instruments, to mitigate risk, but we may be unable to enter into them successfully, on acceptable terms 
or  at  all.  Additionally,  these  programs  rely  on  our  ability  to  forecast  accurately  and  could  expose  us  to  additional  risks  that 
could adversely affect our financial condition and results of operations. We cannot predict whether or not we will incur foreign 
exchange losses in the future. To the extent the international component of our revenues grows, our results of operations will 
become more sensitive to foreign exchange rate fluctuations. 

Economic  conditions  and  regulatory  changes  caused  by  the  United  Kingdom’s  exit  from  the  European  Union  could 
negatively impact our business. 

On  January  31,  2020,  the  U.K.  withdrew  its  membership  from  the  E.U.,  which  is  commonly  referred  to  as  “Brexit.”  
Pursuant to the withdrawal arrangements entered into between the U.K. and the E.U. in connection with Brexit, the U.K. was no 
longer a part of the E.U. at the end of the transition period on December 31, 2020. While the U.K. has for the most part chosen 
to retain existing E.U. law and on December 24, 2020 the U.K. and E.U. agreed to a trade and cooperation agreement which 
took provisional effect from January 1, 2020, the longer term economic, legal, political and social implications for the U.K. and 
the  E.U.  remain  unclear  and  may  lead  to  ongoing  political,  regulatory  and  economic  uncertainty  and  periods  of  exacerbated 
volatility in both the U.K. and in wider European markets for some time. Such uncertainty may have a material adverse effect 
on our ability to operate in the U.K. and the E.U.

Brexit has resulted in significant volatility in global stock market and currency exchange rate fluctuations that resulted in 
strengthening  of  the  U.S.  dollar  relative  to  other  foreign  currencies  in  which  we  conduct  business  and  global  economic 
uncertainty.  The  continuing  uncertainty  may  cause  our  customers  to  closely  monitor  their  costs  and  reduce  their  spending 
budgets.  This  could  negatively  impact  our  business,  including  affecting  our  relationships  with  our  existing  and  future 
customers, suppliers and employees.

Further volatility in exchange rates resulting from Brexit is expected to continue in the short term as a result of Brexit. We 
translate sales and other results denominated in foreign currency into U.S. dollars for our financial statements.  During periods 
of  a  strengthening  dollar,  our  reported  international  sales  and  earnings  could  be  reduced  because  foreign  currencies  may 
translate into fewer U.S. dollars.

The longer term economic, legal, political and social implications of Brexit could potentially disrupt the markets we serve 
and  the  tax  jurisdictions  in  which  we  operate  and  adversely  change  tax  benefits  or  liabilities  in  these  or  other  jurisdictions.  
They may also impact how we deliver our products and services to customers in the U.K. and in the E.U., which may cause us 
to lose customers, suppliers and/or employees and could result in increased operating expenses. In addition, Brexit could lead to 
further legal uncertainty and potentially divergent laws and regulations, as well as other adverse effects that we are unable to 
anticipate. Any of these effects of Brexit, among others, could negatively impact our business, results of operations, financial 
condition, cash flows and prospects. 

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We  may  be  unsuccessful  in  expanding  our  operations  internationally  and/or  into  direct-to-consumer  services  due  to 
additional  regulatory  requirements,  tax  liabilities,  currency  exchange  rate  fluctuations,  and  other  risks,  which  could 
adversely affect our results of operations. 

In  addition  to  our  operations  in  the  U.S.,  we  have  operations  in  Australia,  Bulgaria,  Canada,  France,  Germany,  Israel, 
Italy, Japan, Latin America, Netherlands, Singapore, Spain, and the U.K. We have also continued to invest in global messaging 
initiatives and in acquisitions. Our ability to continue to expand into international markets and in the online consumer market 
involves various risks, including the possibility that returns on such investments will not be achieved in the near future, or ever, 
and the difficulty of competing in markets with which we are unfamiliar. 

Our international operations and direct-to-consumer services may also fail due to other risks inherent in foreign and/or 

online consumer operations, including: 

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varied,  unfamiliar,  unclear  and  changing  legal  and  regulatory  restrictions,  including  different  legal  and 
regulatory standards applicable to Internet or mobile services, communications, privacy, and data protection; 

difficulties in staffing and managing foreign operations; 

differing intellectual property laws that may not provide sufficient protection for our intellectual property; 

adverse tax consequences or additional tax liabilities; 

difficulty in addressing country-specific business requirements and regulations, for instance, data privacy laws; 

fluctuations in currency exchange rates; 

strains on financial and other systems to properly administer value-added tax (“VAT”) and other taxes; 

different consumer preferences and requirements in specific international markets; 

international legal, compliance, political, regulatory or systemic restrictions, or other international governmental 
scrutiny, applicable to United States companies with sales and operations in foreign countries, including, but not 
limited to, possible compliance issues involving the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, 
and similar laws in other jurisdictions; and 

local instability and shifting political, economic, and military conditions including armed conflict and terrorist 
activity.

In addition, we rely in part on third-party service providers with international operations. For example, we rely on a third-
party service provider that utilizes approximately 100 engineers based in Ukraine for a portion of our engineering and software 
development  initiatives.  If  this  third  party’s  operations  were  disrupted  or  discontinued  due  to  local  instability  or  political, 
economic or military conditions, then our ability to provide services to some of our current customers and the development of 
new products or enhancement of existing products could be delayed, and our results of operations could be adversely affected.  

Our  current  and  any  future  international  expansion  plans  will  require  management  attention  and  resources  and  may  be 
unsuccessful.  We  may  find  it  impossible  or  prohibitively  expensive  to  continue  expand  internationally  or  we  may  be 
unsuccessful in our attempt to do so, and our results of operations could be adversely impacted. In addition, violations of any 
foreign laws or regulations could result in fines, criminal sanctions against us, our officers or our employees, prohibitions on the 
conduct of our business and damage to our reputation. 

Our operations may expose us to greater than anticipated income, non-income, and transactional tax liabilities, which could 
harm our financial condition and results of operations. 

There  is  heightened  scrutiny  by  fiscal  authorities  in  many  jurisdictions  on  the  potential  taxation  of  e-commerce 
businesses. The Organization for Economic Co-operation and Development (“OECD”) has issued guidelines, referred to as the 
Base  Erosion  and  Profit  Shifting  project,  to  its  member-nations  aimed  at  encouraging  broad-based  legislative  initiatives 
intended to prevent perceived base erosion transactions and income shifting in a tax-advantaged manner. Further, for the past 
several years, the OECD has had a specific focus on the taxation implications of e-commerce business, generally referred by the 
OECD  as  the  “digital  economy.”  In  the  fourth  quarter  of  2019,  the  OECD  released  details  on  its  proposed  approach  which 
would, among other changes, create a new right to tax certain “digital economy” income not necessarily based on traditional 
nexus  concepts  nor  on  the  “arm’s  length  principle.”  At  this  point,  there  is  a  lack  of  consensus  among  the  key  members, 
particularly the United States, with the latest OECD proposal. The United States has expressed that it would generally support a 

46

solution along the lines proposed by the OECD only if the solution was in the form of a “safe-harbor” rather than a mandatory 
requirement.  A  failure  to  reach  full  consensus  on  an  executable  plan  within  the  tight  time  frame  under  which  the  OECD  is 
operating  could  result  in  individual  jurisdictions  legislating  digital  tax  provisions  in  an  uncoordinated  and  unilateral  manner, 
and further result in greater or even double taxation that companies may not have sufficient means to remedy. For example, a 
number of jurisdictions, including the U.K., France and Italy, have already adopted or have formally proposed legislation that 
would  affect  the  taxation  of  certain  e-commerce  businesses  based  on  differing  criteria  and  metrics.  Efforts  to  alleviate  this 
increased tax burden will increase the cost of structuring and compliance as well as the cost of doing business internationally. 
Any changes to the taxation of our international activities may increase our worldwide effective tax rate and adversely impact 
our financial position and results of operations. 

Further,  the  prospective  taxation  by  multiple  jurisdictions  of  e-commerce  businesses  could  subject  us  to  exposure  to 
withholding,  sales,  VAT  and/or  other  transaction  taxes  on  our  past  and  future  transactions  in  such  jurisdictions  where  we 
currently or in the future may be required to report taxable transactions. A successful assertion by any jurisdiction that we failed 
to  pay  such  withholding,  sales,  VAT  or  other  transaction  taxes,  or  the  imposition  of  new  laws  requiring  the  registration  for, 
collection of, and payment of such taxes, could result in substantial tax liabilities related to past, current and future sales, create 
increased administrative burdens and costs, discourage customers from purchasing content from us, or otherwise substantially 
harm  our  business  and  results  of  operations.  We  are  currently  subject  to  and  in  the  future  may  become  subject  to  additional 
compliance  requirements  for  certain  of  these  taxes.  Changes  in  our  exposure  to  withholding,  sales,  VAT  and/or  other 
transaction taxes could have an adverse impact on our financial condition in the future. 

In  addition,  an  increasing  number  of  states  have  considered  or  adopted  laws  that  attempt  to  impose  tax  collection 
obligations on out-of-state companies. In June 2018, the Supreme Court of the United States issued its decision in the matter of 
South  Dakota  v.  Wayfair,  Inc.  This  decision  effectively  reversed  the  25-year-old  “physical  presence  doctrine”  previously 
established by the Supreme Court in Quill Corp. v. North Dakota, which required a minimum level of physical presence within 
a  state  before  the  state  could  impose  an  obligation  to  register  and  remit  sales  tax  on  revenue  derived  within  that  state.  This 
decision  may  significantly  increase  the  effort,  resources  and  costs  associated  with  the  sales  tax  collection  and  compliance 
burden.  Since  the  decision,  a  number  of  states  have  enacted  sales  tax  enabling  legislation  which  has  had  the  effect  of 
significantly expanding the liability of e-commerce companies to register, collect and remit state sales taxes from customers. A 
successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect more taxes 
in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past 
sales,  as  well  as  penalties  and  interest.  The  imposition  by  state  governments  or  local  governments  of  sales  tax  collection 
obligations  on  out-of-state  sellers  could  also  create  additional  administrative  burdens  for  us,  put  us  at  a  competitive 
disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could have a 
material adverse effect on our business and results of operations. 

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations. 

As of December 31, 2021, we had federal net operating loss carryforwards (“NOLs”) of approximately $553.4 million 
which are available to offset future federal taxable income. In general, under Section 382 of the Internal Revenue Code of 1986, 
as  amended  (the  “Code”),  a  corporation  that  undergoes  an  “ownership  change”  (generally  defined  as  a  greater  than  50-
percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period) 
is subject to limitations on its ability to utilize its pre-change NOLs to offset post-change taxable income. Under Section 382 of 
the  Code,  our  existing  NOLs  may  be  subject  to  limitations  arising  from  previous  ownership  changes,  and  if  we  undergo  an 
ownership change in the future, our ability to utilize NOLs could be further limited by Section 382 of the Code, or as a result of 
a corresponding provision of state law. Future changes in our stock ownership, some of which may be outside of our control, 
could  result  in  an  ownership  change  under  Section  382  of  the  Code.  Federal  NOLs  generated  in  taxable  years  ending  on  or 
before  December  31,  2017,  are  eligible  to  be  carried  forward  for  up  to  20  tax  years  (and  carried  back  up  to  two  tax  years) 
following their incurrence. Federal NOLs generated in taxable years ending after December 31, 2017, are eligible to be carried 
forward  indefinitely,  but  generally  may  only  offset  up  to  80%  of  federal  taxable  income  earned  in  a  taxable  year.  As  of 
December  31,  2021,  approximately  $78.2  million  of  our  approximately  $553.4  million  of  federal  NOLs  were  generated  in 
taxable years ending on or before December 31, 2017. If our ability to utilize federal NOLs were limited by Section 382 of the 
Code, it could result in NOLs generated on or before December 31, 2017, expiring unused. Our ability to utilize our NOLs is 
conditioned upon our maintaining profitability in the future and generating U.S. federal taxable income. Since we do not know 
whether  or  when  we  will  generate  the  U.S.  federal  taxable  income  necessary  to  utilize  our  remaining  NOLs,  our  NOLs 
generated on or prior to December 31, 2017 could expire unused.

47

Political, economic, and military conditions in Israel could negatively impact our Israeli operations. 

A substantial portion of our product development staff, help desk and online sales support operations are located in Israel. 
As of December 31, 2021, we had 204 full-time employees in Israel. Although substantially all of our sales to date have been 
made to customers outside Israel, we are directly influenced by the political, economic and military conditions affecting Israel. 
Since  the  establishment  of  the  State  of  Israel  in  1948,  a  number  of  armed  conflicts  have  taken  place  between  Israel  and  its 
neighboring  countries,  Hamas  (an  Islamist  militia  and  political  group  that  controls  the  Gaza  Strip),  Hezbollah  (an  Islamist 
militia and political group based in Lebanon) and other armed groups. Furthermore, Iran has threatened to attack Israel and may 
be developing nuclear weapons. 

In  addition,  the  State  of  Israel  and  Israeli  companies  have  been  subject  to  economic  boycotts.  Several  countries  still 
restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse 
impact on our results of operations, financial condition or the expansion of our business. A campaign of boycotts, divestment, 
and sanctions has been undertaken against Israel, which could also adversely affect our business. Actual or perceived political 
instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect 
the Israeli economy and, in turn, our business, financial condition and results of operations.

Parties  with  whom  we  do  business  may  sometimes  decline  to  travel  to  Israel  during  periods  of  heightened  unrest  or 
tension,  forcing  us  to  make  alternative  arrangements  when  necessary  in  order  to  meet  our  business  partners  face  to  face.  In 
addition,  the  political  and  security  situation  in  Israel  may  result  in  parties  with  whom  we  have  agreements  involving 
performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to 
force majeure provisions in such agreements. 

Further, shifting economic and political conditions in the U.S. and in other countries may result in changes in how the 
U.S.  and  other  countries  conduct  business  and  other  relations  with  Israel,  which  may  have  an  adverse  impact  on  our  Israeli 
operations and a material adverse impact on our business. 

Our  commercial  insurance  may  not  cover  losses  that  could  occur  as  a  result  of  events  associated  with  the  security 
situation in the Middle East. Any losses or damages incurred by us could have a material adverse effect on our business. Armed 
conflicts or political instability in the region could negatively affect our business and could harm our results of operations. 

Continued  hostilities  between  Israel  and  its  neighbors  and  any  future  armed  conflict,  terrorist  activity  or  political 
instability in the region could adversely affect our operations in Israel and adversely affect the market price of our securities. In 
addition,  escalation  of  tensions  or  violence  might  require  more  widespread  military  reserve  service  by  some  of  our  Israeli 
employees  and  might  result  in  a  significant  downturn  in  the  economic  or  financial  condition  of  Israel,  either  of  which  could 
have a material adverse effect on our operations in Israel and our business. 

Risks Related to our Outstanding Convertible Notes

Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to 
pay our indebtedness. 

In March 2019, we issued $230.0 million in aggregate principal amount of 0.75% Convertible Senior Notes due 2024 in a 
private placement. The interest rate on the 2024 Notes is fixed at 0.75% per annum and is payable semi-annually in arrears on 
March  1  and  September  1  of  each  year.  In  December  2020,  we  issued  $517.5  million  in  aggregate  principal  amount  of  0% 
Convertible Senior Notes due 2026 in a private placement. The 2026 Notes do not bear any regular interest payments. 

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our Notes or any additional 
future indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors 
beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and 
make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more 
alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may 
be onerous or highly dilutive. Our ability to refinance our current or any future indebtedness will depend on the capital markets 
and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on 
desirable  terms,  which  could  result  in  a  default  on  our  debt  obligations.  In  addition,  any  of  our  future  debt  agreements  may 

48

contain  restrictive  covenants  that  may  prohibit  us  from  adopting  any  of  these  alternatives.  Our  failure  to  comply  with  these 
covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.

We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes 
upon  a  fundamental  change,  and  any  future  debt  may  contain  limitations  on  our  ability  to  pay  cash  upon  conversion  or 
repurchase of the Notes. 

Holders of the Notes have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a 
fundamental change before the maturity date at a fundamental change repurchase price equal to 100% of the principal amount 
of the Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the Notes, unless we 
elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any 
fractional share), we are required to make cash payments in respect of the Notes being converted. However, we may not have 
enough  available  cash  or  be  able  to  obtain  financing  at  the  time  we  are  required  to  make  repurchases  of  Notes  surrendered 
therefor  or  pay  cash  with  respect  to  Notes  being  converted.  In  addition,  our  ability  to  repurchase  Notes  or  to  pay  cash  upon 
conversions of Notes may be limited by law, regulatory authority, or any agreements governing our future indebtedness. Our 
failure to repurchase Notes at a time when the repurchase is required by the indenture or to pay any cash upon conversions of 
Notes  as  required  by  the  indenture  would  constitute  a  default  under  the  indenture.  A  default  under  the  indenture  or  the 
fundamental change itself could also lead to a default under agreements governing any future indebtedness. If the payment of 
the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to 
repay the indebtedness and repurchase the Notes or to pay cash upon conversions of Notes.

Provisions in the indentures for the Notes may deter or prevent a business combination that may be favorable to you. 

If a fundamental change occurs prior to the maturity date of the Notes, the holders of the Notes will have the right, at their 
option, to require us to repurchase all or a portion of their Notes. In addition, if a make-whole fundamental change occurs prior 
the  maturity  date  of  the  Notes,  we  will  in  some  cases  be  required  to  increase  the  conversion  rate  for  a  holder  that  elects  to 
convert its Notes in connection with such make-whole fundamental change. Furthermore, the indentures for the Notes prohibit 
us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations 
under  the  Notes.  These  and  other  provisions  in  the  indentures  governing  the  Notes  could  deter  or  prevent  a  third  party  from 
acquiring us even when the acquisition may be favorable to you.

The  conditional  conversion  feature  of  the  Notes,  if  triggered,  may  adversely  affect  our  financial  condition  and  operating 
results. 

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert 
their Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we 
elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of 
delivering  any  fractional  share),  we  would  be  required  to  settle  a  portion  or  all  of  our  conversion  obligation  through  the 
payment of cash, which could adversely affect our liquidity. In addition, even if holders of Notes do not elect to convert their 
Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 
Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material 
effect on our reported financial results. 

Under  ASC  470-20,  Debt  with  Conversion  and  Other  Options,  an  entity  must  separately  account  for  the  liability  and 
equity components of the convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon 
conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the 
Notes is that the equity component, net of issuance costs, is required to be included in the additional paid-in capital section of 
stockholders’ equity on our consolidated balance sheet at the issuance date and the value of the equity component is treated as 
original  issue  discount  for  purposes  of  accounting  for  the  liability  component  of  the  Notes.  As  a  result,  we  are  required  to 
record  a  greater  amount  of  non-cash  interest  expense  in  current  periods  presented  as  a  result  of  the  amortization  of  the 
discounted  carrying  value  of  the  Notes  to  their  face  amount  over  the  term  of  the  Notes.  We  will  report  larger  net  losses  (or 
lower  net  income)  in  our  financial  results  because  ASC  470-20  requires  interest  to  include  both  the  current  period’s 
amortization of the debt discount and the instrument’s non-convertible coupon interest rate, which could adversely affect our 
reported or future financial results, the trading price of our common stock and the trading price of the Notes.

49

In  August  2020,  the  FASB  issued  ASU  2020-06,  ASC  Subtopic  470-20  “Debt  -  Debt  with  Conversion  and  Other 
Options”  and  ASC  Subtopic  815-40  “Hedging  -  Contracts  in  Entity’s  Own  Equity”  that  changes  the  accounting  for  the 
convertible  debt  instruments  described  above.  Under  the  new  standard,  an  entity  may  no  longer  separately  account  for  the 
liability  and  equity  components  of  convertible  debt  instruments.  Additionally,  the  treasury  stock  method  for  calculating 
earnings  per  share  will  no  longer  be  allowed  for  convertible  debt  instruments  the  principal  amount  of  which  may  be  settled 
using  shares.  Rather,  the  “if-converted”  method  may  be  required.  Application  of  the  “if  converted”  method  may  reduce  our 
reported  diluted  earnings  per  share.  The  standard  is  effective  for  fiscal  years  beginning  after  December  15,  2021,  including 
interim  periods  within  those  fiscal  years  and  early  adoption  is  permitted.  We  cannot  be  sure  whether  other  changes  may  be 
made to the accounting standards related to the 2024 Notes and 2026 Notes, or otherwise, that could have an adverse impact on 
our financial statements.

The capped call transactions may affect the value of the Notes and our common stock. 

In  connection  with  the  transaction  in  which  we  issued  the  Notes,  we  entered  into  capped  call  transactions  with  certain 
option counterparties. The capped call transactions are expected generally to reduce the potential dilution to our common stock 
upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of the 
converted Notes, as the case may be, upon any conversion of Notes, with such reduction and/or offset subject to a cap.

The  option  counterparties  or  their  respective  affiliates  are  expected  to  modify  their  hedge  positions  by  entering  into  or 
unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock, the Notes or 
other of our securities or instruments (if any), in secondary market transactions prior to the maturity of the Notes (and are likely 
to do so during any observation period related to a conversion of Notes or following any earlier conversion or any repurchase of 
Notes by us on any fundamental change repurchase date or otherwise). This activity could also cause or avoid an increase or a 
decrease in the market price of our common stock or the Notes, which could affect a holder’s ability to convert the Notes and, 
to the extent the activity occurs during any observation period related to a conversion of Notes, it could affect the amount and 
value of the consideration that a holder will receive upon conversion of such Notes.

The potential effect, if any, of these transactions and activities on the market price of our common stock or the Notes will 
depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the 
value of our common stock and the value of the Notes (and as a result, the amount and value of the consideration that a holder 
would  receive  upon  the  conversion  of  any  Notes)  and,  under  certain  circumstances,  a  holder’s  ability  to  convert  his  or  her 
Notes.

We  do  not  make  any  representation  or  prediction  as  to  the  direction  or  magnitude  of  any  potential  effect  that  the 
transactions  described  above  may  have  on  the  price  of  our  common  stock  or  the  Notes.  In  addition,  we  do  not  make  any 
representation  that  the  option  counterparties  or  their  respective  affiliates  will  engage  in  these  transactions  or  that  these 
transactions, once commenced, will not be discontinued without notice.

We are subject to counterparty risk with respect to the capped call transactions. 

The option counterparties to the capped call transactions are financial institutions, and we are subject to the risk that any 
or all of them may default under the capped calls. Our exposure to the credit risk of the option counterparties is not secured by 
any collateral. Global economic conditions have in the recent past resulted in, and may again result in, the actual or perceived 
failure  or  financial  difficulties  of  many  financial  institutions.  If  an  option  counterparty  becomes  subject  to  insolvency 
proceedings, we will become an unsecured creditor in those proceedings, with a claim equal to our exposure at that time under 
our  transactions  with  that  option  counterparty.  Our  exposure  depends  on  many  factors  but,  generally,  an  increase  in  our 
exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a 
default by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock. 
We can provide no assurances as to the financial stability or viability of the option counterparties.

50

Risks Related to our Common Stock

Our  stock  price  has  been,  and  may  continue  to  be,  highly  volatile,  which  could  reduce  the  value  of  your  investment  and 
subject us to litigation. 

The  price  of  our  common  stock  has  fluctuated  significantly  in  the  past  and  may  continue  to  be  highly  volatile,  with 
extreme price and volume fluctuations. Our trading price could fluctuate substantially in the future, including in response to the 
following factors, some of which are beyond our control: 

•

•

•

•

•

•

•

•

•

•

•

quarterly variations in our operating results or those of our competitors; 

earnings announcements that are not in line with analyst expectations; 

changes in recommendations or financial estimates by securities analysts; 

announcements or rumors about mergers or strategic acquisitions by us or by our competitors; 

announcements about customer additions and cancellations or failure to complete significant sales; 

changes in market valuations of companies that investors believe are comparable to us; 

additions or departures of key personnel; 

our exposure, or perceptions or misperceptions of our exposure to cryptocurrencies;

consequences of unexpected geopolitical events, natural disasters, acts of war or climate change;

pandemics, epidemics or similar widespread public health concerns; and 

general economic, political and market conditions, such as recessions, political unrest or terrorist attacks, or in 
the specific locations where we operate, such as the United States, Israel and the United Kingdom. 

In  addition,  extreme  price  and  volume  fluctuations  in  the  stock  markets  generally,  and  in  the  markets  for  technology 
companies  in  particular,  could  cause  the  market  price  for  our  common  stock  to  decline.  In  the  past,  companies  that  have 
experienced volatility in the market price of their stock have been the subject of securities class action litigation. We may in the 
future  be  the  target  of  similar  litigation,  which  could  result  in  substantial  costs  and  distract  management’s  attention  and 
resources. 

Our common stock is traded on more than one market and this may result in price variations. 

Our common stock is currently traded on the Nasdaq and the TASE. Trading in our common stock on these markets takes 
place in different currencies (U.S. dollars on the Nasdaq and New Israeli Shekels on the TASE) and at different times (due to 
different time zones, trading days and public holidays in the United States and Israel). The trading prices of our common stock 
on these two markets may differ due to these and other factors. Any decrease in the trading price of our common stock on one 
of these markets could cause a decrease in the trading price of our common stock on the other market. Differences in trading 
prices on the two markets could negatively impact our trading price. 

If  our  officers,  directors,  and  largest  stockholders  choose  to  act  together,  they  may  be  able  to  significantly  influence  our 
management and operations, acting in their own best interest and not necessarily those of our other stockholders. 

As of December 31, 2021, our executive officers, directors and holders of 5% or more of our outstanding common stock 
and  their  affiliates  in  the  aggregate  beneficially  owned  approximately  40.8%  of  our  outstanding  common  stock.  As  a  result, 
these stockholders, acting together, have the ability to significantly influence all matters requiring approval by our stockholders, 
including  the  election  of  directors  and  approval  of  significant  corporate  transactions.  Our  executive  officers,  directors  and 
principal  stockholders  could  also  delay  or  prevent  a  change  in  control.  The  interests  of  this  group  of  stockholders  may  not 
always coincide with LivePerson’s interests or the interests of other stockholders, and they may act in a manner that advances 
their best interests and not necessarily those of our other stockholders. 

Future sales of substantial amounts of our common stock may negatively affect our stock price. 

If we or our stockholders sell substantial amounts of our common stock, including shares issuable upon the exercise of 
outstanding  options  and  warrants,  or  upon  the  conversion  of  the  Notes,  in  the  public  market,  or  if  the  market  perceives  that 
these sales might occur, the market price of our common stock could fall. These sales also might make it more difficult for us to 

51

sell equity securities in the future at a time and price that we deem appropriate. No prediction can be made as to the effect, if 
any, that market sales of our common stock will have on the market price of our common stock. 

Provisions in our charter documents and Delaware law could discourage, delay, or prevent a takeover that stockholders may 
consider favorable. 

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect 
of  discouraging,  delaying  or  preventing  a  change  in  control  or  changes  in  our  management  that  stockholders  may  deem 
advantageous. These provisions include the following: 

•

•

•

•

•

Our board of directors is divided into three classes, with each class serving three-year staggered terms, which 
prevents stockholders from electing an entirely new board of directors at any annual meeting; 

Vacancies on our board of directors may only be filled by a vote of a majority of directors then in office, even if 
less than a quorum;

Our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors or 
any other matters. This limits the ability of minority stockholders to elect director candidates;

Our stockholders may only act at a duly called annual or special meeting and may not act by written consent;

Stockholders must provide advance notice to nominate individuals for election to our board of directors or to 
propose other matters that can be acted upon at a stockholders’ meeting;

• We  require  supermajority  voting  by  stockholders  to  amend  certain  provisions  in  our  amended  and  restated 

certificate of incorporation and to amend our amended and restated bylaws; and 

•

Our amended and restated bylaws expressly authorize a supermajority of the board of directors to amend our 
amended and restated bylaws. 

As a Delaware corporation, we are also subject to Section 203 of the Delaware General Corporation Law, which generally 
prohibits  a  Delaware  corporation  from  engaging  in  any  of  a  broad  range  of  business  combinations  with  an  interested 
stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless 
certain conditions are met. This anti-takeover provision defenses could discourage, delay or prevent a change in control of our 
company, whether or not it is desired by or beneficial to our stockholders, which in turn could have a material adverse effect on 
the market price of our common stock. 

We  cannot  assure  our  stockholders  that  any  stock  repurchase  programs  will  be  fully  consummated  or  will  enhance  long-
term  stockholder  value,  and  stock  repurchases  could  increase  the  volatility  of  the  price  of  our  common  stock  and  will 
diminish our cash reserves. 

Repurchases  pursuant  to  any  stock  repurchase  program  that  we  may  enter  could  affect  our  stock  price  and  increase  its 
volatility. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the 
absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, repurchases under a 
stock repurchase program would diminish our cash reserves, which could impact our ability to pursue possible future strategic 
opportunities and acquisitions and could result in lower overall returns on our cash balances. There can be no assurance that any 
stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels 
at which we repurchased shares of stock. 

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

LivePerson is headquartered in New York City, and we maintain a globally distributed, remote workforce. In 2020, due to 
health  concerns  related  to  the  COVID-19  pandemic,  the  Company  vacated  its  physical  offices  around  the  world,  and  began 
transitioning  to  an  “employee-centric”  workforce  model,  leveraging  its  expertise  in  AI  and  asynchronous  communication  to 
support operations, culture and productivity in this new environment. During the second quarter of 2021, the Company decided 
to reoccupy some of its leased space to provide its employees with the option of working in an office space environment if they 
choose to do so. 

52

As  of  December  31,  2021,  we  have  data  centers  in  the  United  States,  Europe,  and  Australia  pursuant  to  various  lease 
agreements.  We believe that our current facilities properties are in good condition and are adequate to meet our current needs.  
If required, we believe that we will be able to obtain suitable additional space on commercially reasonable terms.  

Item 3. Legal Proceedings

The Company filed an intellectual property suit against [24]7 Customer, Inc. (“[24]7”) in the Southern District of New 
York  on  March  6,  2014  seeking  damages  on  the  grounds  that  [24]7  reverse  engineered  and  misappropriated  the  Company’s 
technology to develop competing products and misused the Company’s business information. On June 22, 2015, [24]7 filed suit 
against the Company in the Northern District of California alleging patent infringement. On December 7, 2015, [24]7 filed a 
second patent infringement suit against the Company, also in the Northern District of California. On March 16, 2017, the New 
York case was voluntarily transferred and consolidated with the two California cases in the Northern District of California for 
all pre-trial purposes. Rulings by both the Court and the United States Patent and Trademark Office in the Company’s favor 
have  invalidated  the  majority  of  [24]7  patents  that  were  asserted  in  the  patent  cases.  The  Company  believes  the  remaining 
claims  filed  by  [24]7  are  entirely  without  merit  and  intends  to  defend  them  vigorously.  Trial  for  the  Company’s  intellectual 
property and other claims asserted against [24]7 related to three of the customers at issue occurred on May 24, 2021 and the 
jury  awarded  approximately  $30.3  million  in  favor  of  the  Company,  including  approximately  $6.7  million  in  compensatory 
damages  and  approximately  $23.6  million  in  punitive  damages.  The  Company  currently  anticipates  that  [24]7  may  elect  to 
pursue challenges to this award on procedural grounds. Accordingly, no amounts for the settlement have been reflected in the 
Company’s financial statements. Trial for [24]7’s patent infringement claims has been vacated, to be reset by the Court.

From  time  to  time,  the  Company  is  involved  in  or  subject  to  legal,  administrative  and  regulatory  proceedings,  claims, 
demands,  and  investigations  arising  in  the  ordinary  course  of  business,  including  direct  claims  brought  by  or  against  the 
Company with respect to intellectual property, contracts, employment and other matters, as well as claims brought against the 
Company’s  customers  for  whom  the  Company  has  a  contractual  indemnification  obligation.  The  Company  accrues  for  a 
liability  when  it  is  both  probable  that  a  liability  has  been  incurred  and  the  amount  of  the  loss  can  be  reasonably  estimated. 
Significant  judgment  is  required  in  both  the  determination  of  probability  and  the  determination  as  to  whether  a  loss  is 
reasonably estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, 
and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will 
include  disclosure  related  to  such  matter  as  appropriate  and  in  compliance  with  ASC  450.  The  accruals  or  estimates,  if  any, 
resulting  from  the  foregoing  analysis,  are  reviewed  at  least  quarterly  and  adjusted  to  reflect  the  impact  of  negotiations, 
settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. To the extent 
there  is  a  reasonable  possibility  that  the  losses  could  exceed  the  amounts  already  accrued,  the  Company  will,  as  applicable, 
adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate 
that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be 
reasonably  estimated,  disclose  that  an  estimate  cannot  be  made.  From  time  to  time,  third  parties  assert  claims  against  the 
Company regarding intellectual property rights, privacy issues, and other matters arising in the ordinary course of business. 

Although the Company cannot be certain of the outcome of any litigation or the disposition of any claims, nor the amount 
of damages and exposure, if any, that the Company could incur, the Company currently believes that the final disposition of all 
existing matters will not have a material adverse effect on results of operations, financial condition, or cash flows. 

In addition, in the ordinary course of business, the Company is also subject to periodic threats of lawsuits, investigations 
and  claims.  Regardless  of  the  outcome,  litigation  can  have  an  adverse  impact  on  the  Company  because  of  defense  and 
settlement costs, diversion of management resources and other factors.

Item 4. Mine Safety Disclosures

Not Applicable.

53

 
PART II

Item  5.  Market  for  Registrant’s  Common  Equity,  Related  Stockholder  Matters  and  Issuer  Purchases  of  Equity 
Securities

Price Range of Common Stock. The principal United States market on which our common stock is traded is the Nasdaq 

under the symbol LPSN. Our shares of common stock are also traded on the TASE under the symbol LPSN TA.

Holders. As of February 10, 2022, there were approximately 197 holders of record of our common stock.

Dividends. We have not declared or paid any cash dividends on our capital stock since our inception. We intend to retain 
earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the 
foreseeable future.

Unregistered Sales of Securities.  On October 18, 2021, the Company sold a total of 698,987 shares of its common stock 
as  partial  consideration  of  the  Company’s  acquisition  of  Tenfold  in  a  transaction  exempted  from  registration  under  Section 
4(a)(2) of the Securities Act of 1933. On October 25, 2021, the Company sold a total of 1,078,610 shares of its common stock 
as partial consideration of the Company’s acquisition of VoiceBase in a transaction exempted from registration under Section 
4(a)(2) of the Securities Act of 1933.

Issuer  Purchases  of  Equity  Securities.  A  summary  of  the  Company’s  repurchase  activity  for  the  three  months  ended  

December 31, 2021 is as follows:

Period

Total Number of Shares 
Purchased (1)

Average Price Paid per 
Share

Oct 1, 2021 - Oct 31, 2021     ......

Nov 1, 2021 - Nov 30, 2021       ....

Dec 1, 2021 - Dec 31, 2021    .....

Total    .........................................

—  $ 

30,344 

— 

30,344  $ 

— 

23.37 

— 

23.37 

Total Number of Shares 
Purchased as Part of 
Publicly Announced Plans 
or Programs

Approximate Dollar 
Value of Shares that May 
Yet Be Purchased Under 
the Plans or Programs

—  $ 

— 

— 

— 

— 

— 

— 

——————————————
(1)

In November 2021, the Company repurchased 30,344 options to buy an aggregate of 30,344 shares from John Collins.

54

 
 
 
 
 
 
 
 
 
 
 
 
Stock  Performance  Graph.  The  graph  depicted  below  compares  the  annual  percentage  changes  in  LivePerson’s 
cumulative  total  stockholder  return  with  the  cumulative  total  return  of  the  Standard  &  Poor’s  SmallCap  600  Index  and  the 
Standard & Poor’s Information Technology Index.

——————————————

(1) The graph covers the period from December 31, 2016 to December 31, 2021.

(2) The graph assumes that $100 was invested at the market close on December 31, 2016 in LivePerson’s Common Stock, in the Standard & Poor’s SmallCap 
600 Index and in the Standard & Poor’s Information Technology Index, and that all dividends were reinvested. No cash dividends have been declared on 
LivePerson’s Common Stock.

(3) Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

Notwithstanding  anything  to  the  contrary  set  forth  in  any  of  our  previous  or  future  filings  under  the  Securities  Act  of 
1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate by reference this Annual Report 
on Form 10-K or future filings made by the Company under those statutes, the Stock Performance Graph above is not deemed 
filed with the SEC, is not deemed soliciting material and shall not be deemed incorporated by reference into any of those prior 
filings  or  into  any  future  filings  made  by  us  under  those  statutes,  except  to  the  extent  that  we  specifically  incorporate  such 
information by reference into a previous or future filing, or specifically request that such information be treated as soliciting 
material, in each case under those statutes.

Item 6. [Reserved]

55

Period EndingIndex ValueLivePerson, Inc.S&P Smallcap 600S&P Information Technology12/31/1612/31/1712/31/1812/31/1912/31/2012/31/2102004006008001,000 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

You  should  read  the  following  discussion  of  our  financial  condition  and  results  of  operations  in  conjunction  with  the 
financial statements and the notes thereto included elsewhere in this report. The following discussion contains forward-looking 
statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the 
forward-looking  statements.  Factors  that  could  cause  or  contribute  to  these  differences  include  those  discussed  below  and 
elsewhere in this report, particularly in “Risk Factors.”

Overview

LivePerson  is  a  leading  Conversational  AI  company  creating  digital  experiences  that  are  Curiously  Human. 
Conversational  AI  allows  humans  and  machines  to  interact  using  natural  language,  including  speech  or  text.  During  the  past 
decade, consumers have made mobile devices the center of their digital lives, and they have made mobile messaging the center 
of communication with friends, family and peers. This trend has been significantly accelerated by the COVID-19 pandemic and 
we  believe  can  now  be  viewed  as  a  permanent,  structural  shift  in  consumer  behavior.  Our  technology  enables  consumers  to 
connect  with  businesses  through  these  same  preferred  conversational  interfaces,  including  Facebook  Messenger,  SMS, 
WhatsApp, Apple Business Chat, Google Rich Business Messenger and Alexa. These messaging conversations harness human 
agents,  bots  and  AI  to  power  convenient,  personalized  and  content-rich  journeys  across  the  entire  consumer  lifecycle,  from 
discovery  and  research,  to  sales,  service  and  support,  and  increasingly  marketing,  social,  and  brick  and  mortar  engagements. 
For  example,  consumers  can  look  up  product  info  like  ratings,  images  and  pricing,  search  for  stores,  see  product  inventory, 
schedule  appointments,  apply  for  credit,  approve  repairs,  and  make  purchases  or  payments  -  all  without  ever  leaving  the 
messaging channel. These AI and human-assisted conversational experiences constitute the Conversational Space, within which 
LivePerson has strategically developed one of the industry’s largest ecosystems of messaging endpoints and use cases. 

The  Conversational  Cloud,  our  enterprise-class  cloud-based  platform,  enables  businesses  to  become  conversational  by 
securely deploying AI-powered messaging at scale for brands with tens of millions of customers and many thousands of agents. 
The  Conversational  Cloud  powers  conversations  across  each  of  a  brand’s  primary  digital  channels,  including  mobile  apps, 
mobile and desktop web browsers, SMS, social media and third-party consumer messaging platforms. Brands can also use the 
Conversational Cloud to message consumers when they dial a 1-800 number instead of forcing them to navigate IVRs and wait 
on hold. Similarly, the Conversational Cloud can ingest traditional emails and convert them into messaging conversations, or 
embed  messaging  conversations  directly  into  web  advertisements,  rather  than  redirect  consumers  to  static  website  landing 
pages.  Agents  can  manage  all  conversations  with  consumers  through  a  single  console  interface,  regardless  of  where  the 
conversations originated.

LivePerson’s robust, cloud-based suite of rich messaging, real-time chat, AI and automation offerings features consumer 
and  agent  facing  bots,  intelligent  routing  and  capacity  mapping,  real-time  intent  detection  and  analysis,  queue  prioritization, 
customer  sentiment,  analytics  and  reporting,  content  delivery,  PCI  compliance,  co-browsing  and  a  sophisticated  proactive 
targeting engine. An extensible API stack facilitates a lower cost of ownership by facilitating robust integration into back-end 
systems, as well as enabling developers to build their own programs and services on top of the platform. More than 40 APIs and 
software development kits are available on the Conversational Cloud.

For your reference:

•

•

•

Conversational  AI:  Conversational  AI  allows  humans  and  machines  to  interact  using  natural  language, 
including speech or text.

Conversational  Space:  In  the  Conversational  Space,  consumers  message  with  brands  on  their  own  schedule, 
using natural language, to resolve their intents - all on their preferred messaging service. The core capabilities of 
the  Conversational  Space  are  voice  and  text-based  interfaces,  powered  by  AI  and  humans  working  together. 
Conversational Space is the simplest, most intuitive interface of all.

Conversational  Cloud:  LivePerson’s  enterprise-class,  AI-powered  Conversational  Cloud  platform  empowers 
consumers to message their favorite brands, just as they do with friends and family.

LivePerson’s Conversational AI offerings put the power of bot development, training, management and analysis into the 
hands of the contact center and its agents, the teams most familiar with how to structure sales and service conversations to drive 
successful outcomes. The platform enables what we call “the tango” of humans, AI and bots, whereby human agents act as bot 

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managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed. Agents 
become ultra-efficient, leveraging the AI engine to serve up relevant content, define next-best actions and take over repetitive 
transactional  work,  so  that  the  agent  can  focus  on  relationship  building.  By  seamlessly  integrating  messaging  with  our 
proprietary Conversational AI, as well as third-party bots, the Conversational Cloud offers brands a comprehensive approach to 
scaling automations across their millions of customer conversations.

Complementing  our  proprietary  messaging  and  Conversational  AI  offerings  are  teams  of  technical,  solutions  and 
consulting professionals that have developed deep domain expertise in the implementation and optimization of conversational 
services  across  industries  and  messaging  endpoints.  We  are  a  leading  authority  in  the  Conversational  Space.  LivePerson’s 
products, coupled with our domain knowledge, industry expertise and professional services, have been proven to maximize the 
effectiveness  of  the  Conversational  Space  and  deliver  measurable  return  on  investment  for  our  customers.  Certain  of  our 
customers have achieved the following advantages from our offerings:

•

•

•

the ability for each agent to manage as many as 40 messaging conversations at a time, as compared to one at a 
time for a voice agent and two to four at a time for a good chat agent. Adding AI and bots provides even greater 
scale to the number of conversations managed;   

labor efficiency gains of at least two times that of voice agents, effectively cutting labor costs by at least 50%;

improving  the  overall  customer  experience,  thereby  fueling  customer  satisfaction  score  increases  of  up  to  20 
percentage points, and enhancing retention and loyalty;

• more  convenient,  personalized  and  content-rich  conversations  that  increase  sales  conversion  by  up  to  20%, 

increase average order value and reduce abandonment; 

• more satisfied contact center agents, thereby reducing agent churn by up to 50%;

•

•

•

•

a  valued  connection  with  consumers  via  mobile  devices,  either  through  native  applications,  websites,  text 
messages, or third-party messaging platforms;

leveraged spending that drives visitor traffic by increasing visitor conversions;

refining and improving performance by understanding which initiatives deliver the highest rate of return; and

increased  lead  generation  by  providing  a  single  platform  that  engages  consumers  through  advertisements  and 
listings on branded and third-party websites.

As a “cloud computing” or SaaS provider, LivePerson provides solutions on a hosted basis. This model offers significant 
benefits  over  premise-based  software,  including  lower  up-front  costs,  faster  implementation,  lower  total  cost  of  ownership, 
scalability, cost predictability, and simplified upgrades. Organizations that adopt a fully-hosted, multi-tenant architecture that is 
maintained  by  LivePerson  eliminate  the  majority  of  the  time,  server  infrastructure  costs,  and  IT  resources  required  to 
implement, maintain, and support traditional on-premise software.

To  further  enhance  our  platform,  in  September  2020  we  signed  a  partnership  with  a  digital  services  and  consulting 
company  to  transform  our  technology  infrastructure  on  the  public  cloud,  to  build  integrated  solutions  and  a  global  practice 
around our Conversational Cloud to sell into this company’s channels and global enterprise customer base, and to redefine how 
the world’s top brands communicate.

More than 18,000 businesses, including HSBC, Orange, and GM Financial use our conversational solutions to orchestrate 

humans and AI, at scale, and create a convenient, deeply personal relationship with their customers.

LivePerson’s  consumer  services  offering  is  an  online  marketplace  that  connects  Experts  who  provide  information  and 
knowledge  for  a  fee  via  mobile  and  online  messaging  with  Users.  Users  seek  assistance  and  advice  in  various  categories 
including personal counseling and coaching, computers and programming, education and tutoring, spirituality and religion, and 
other topics.

The key elements of LivePerson’s business solutions strategy include:

Build  awareness  and  drive  adoption  of  the  Conversational  Space.  LivePerson  brought  our  first  customer  live  on 
messaging  in  June  2016.  Since  that  time,  we  have  been  focused  on  building  awareness  for  conversational  experiences  and 
driving  adoption.  We  have  educated  businesses  on  the  financial  and  operational  transformation  that  occurs  when  a  contact 
center shifts to an asynchronous messaging environment, where the consumer controls the pace of the conversation, which can 

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last minutes, hours or days, from a synchronous call or chat center, where conversations occur in real-time and have a distinct 
start and end.

A key component of our industry awareness marketing strategy has been to hold multiple global customer summits each 
year (events in 2020 were held virtually in light of the COVID-19 pandemic) that target executives from enterprise customers 
and prospects, and feature a key theme within the Conversational Space, such as Apple Business Chat, Google Rich Business 
Messenger,  IVR  deflection  or  AI.  LivePerson  customers  are  the  center  point  of  these  summits,  presenting  why  they  chose 
LivePerson for conversational experiences, how they achieved success, and what type of ROI they have realized. Each attendee 
then  receives  a  blueprint  for  how  they  can  pursue  similar  outcomes.  We  have  found  this  strategy  to  drive  strong  results  for 
LivePerson, as we have seen a greater than 40% conversion rate on opportunities that were created or advanced as part of the 
customer summits. By year-end 2021, nearly 75% of messaging conversations had automation attached. We will continue to 
focus on building awareness for the Conversational Space and driving adoption of messaging and AI across our customer base.

Increase messaging volumes by developing a broad ecosystem, expanding customer use cases, and focusing on AI and 
automation. Our strategy is to drive higher messaging volumes by going both wide across messaging endpoints, deep across 
consumer use cases, and focusing on AI and automation as the means to deliver powerful scale. LivePerson offers a platform 
usage pricing model, where customers are offered access to our entire suite of messaging technologies across their entire agent 
pool for a pre-negotiated cost per interaction. We believe that over time this model will drive higher revenue for LivePerson by 
reducing barriers to adoption of new messaging endpoints and use cases.

In  order  to  drive  broad  messaging  adoption,  it  is  imperative  that  the  Conversational  Cloud  integrates  to  all  of  the 
messaging apps that consumers prefer to use for communication and addresses all key use cases. For example, if a consumer is 
an avid WhatsApp user, and a brand only offers SMS as a messaging option, that consumer may be reluctant to try messaging 
the brand. Therefore, a key strategy of ours has been to build one of the industry’s broadest ecosystems of messaging endpoints 
and use cases. In June 2016, we launched with In-App messaging. In 2017, we introduced Facebook Messenger, SMS, Web 
messaging and IVR deflection integrations. In 2018, we added Apple Business Chat, Google Rich Business Messenger, Line, 
WhatsApp, Alexa, Google Home, Google Ad Lingo and Twitter. In 2019, we added email, allowing brands to manage emails 
through the same console they use for messaging, and to convert legacy emails into messaging conversations. We also added 
social monitoring and conversational tools for Twitter and Facebook, and introduced proactive messaging, allowing brands to 
transform  traditional  one-way  notifications  such  as  flight  cancellations  or  phone  plan  overage  alerts  into  two-way 
conversations.  Finally,  we  connected  to  Facebook  and  WhatsApp  digital  advertisements,  enabling  consumers  to  initiate 
messaging conversations for marketing and customer care directly within the advertisement. In 2020, we added Instagram and 
Google’s Business Messages, allowing brands to bring customer-initiated conversations into the Conversational Cloud directly 
from Instagram, Google Search, and Google Maps.

Each channel and use case added opens the door to new consumers, providing brands a greater opportunity to shift share 
away from their legacy contact center channels into messaging. For example, in 2019, leading airlines launched on WhatsApp 
and Apple Business Chat with the ability to make secure payments; a baseball stadium launched an automated conversational 
concierge  providing  answers  to  a  wide  range  of  questions  from  restroom  locations  to  player  stats;  and  a  multinational 
telecommunications company used proactive two-way messaging for outbound campaigns. In 2020, one of the largest Telcos in 
Australia fully virtualized their contact centers, a leading U.S. quick-serve restaurant launched on Facebook Messenger to help 
customers order meals, one of the biggest banks in the world launched an Apple Business Chat channel to provide a secure way 
to perform day-to-day banking, and one of the world’s largest jewelry retailers used the Conversational Cloud and QR codes to 
sell millions of dollars of product.

LivePerson  makes  the  management  of  all  these  disparate  channels  seamless  to  the  brand.  AI-based  intelligent  routing, 
queuing  and  prioritization  software  orchestrates  these  conversations  at  scale,  regardless  of  which  messaging  endpoint  they 
originated from, so that human and bot agents can engage with all customers through just one console.

We  believe  LivePerson  is  leading  the  structural  shift  to  Conversational  AI.  In  the  wake  of  the  COVID-19  pandemic, 
leading brands are turning to LivePerson’s AI-powered messaging to overcome a capacity gap created by voice call agent work-
from-home  measures  and  increased  demand  for  digital  engagement  as  consumers  practice  social  distancing.  LivePerson  is 
powering Conversational AI, automation and messaging strategies across a growing number of use cases from care and sales, to 
marketing,  social,  conversational  advertising  and  brick  and  mortar.  Our  Conversational  AI  leadership  and  the  increase  in 
adoption have influenced LivePerson’s enterprise and mid-market revenue retention rate, (the trailing-twelve-month change in 
total revenue from existing customers after upsells, downsells and attrition) which exceeded the high end of our target range of 
105%  to  115%  for  2021.  The  benefit  can  also  be  seen  in  LivePerson’s  ARPU  for  our  enterprise  and  mid-market  customers, 

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which increased approximately 31% in 2021 to $610,000 from approximately $465,000 in 2020. We believe these ARPU trends 
are a clear indication of how LivePerson’s strategy to drive messaging adoption has successfully influenced our revenue growth 
by taking share from legacy communication channels. 

Attract the industry’s best AI, machine learning and conversational talent. We believe that AI and machine learning are 
critical to successfully scaling in the Conversational Space, and that in order to develop the industry’s leading technology, we 
need to attract the industry’s best talent. Since 2018, LivePerson hired more than 437 of the industry’s brightest data scientists, 
machine learning engineers and automation engineers, many from firms such as Nike, Amazon.com, Microsoft and Target, who 
are working exclusively on applying AI to the Conversational Space. LivePerson also expanded its development talent base in 
Germany, and added key development talent through the acquisitions of BotCentral in Mountain View, California; Tenfold in 
Austin, Texas; e-bot7 in Munich, Germany; and VoiceBase in San Francisco, California.

Bring  to  market  best-in-class  AI  and  machine  learning  technologies  designed  for  the  Conversational  Space.  We 
believe that in the last decade many vendors introduced AI and bot offerings that created frustrating experiences for consumers 
and businesses alike, which in turn has eroded trust in automation. Many of these solutions have proven difficult to build and 
scale, and have been limited by stand-alone implementations that lacked the measurement, reporting and human oversight of 
conversational  platforms  such  as  the  Conversational  Cloud.  In  December  2018,  LivePerson  announced  its  patent-pending  AI 
engine  that  is  designed  to  overcome  these  shortcomings  and  help  brands  rapidly  bring  to  market  conversational  AI  that  can 
scale to millions of interactions, while increasing customer satisfaction and conversion rates.

Unlike alternative solutions designed solely for IT departments, LivePerson’s Conversational AI was built to be used by 
developers  and  contact  center  agents.  By  putting  the  power  of  conversational  design  and  bot  management  in  the  hands  of 
contact  center  agents,  LivePerson’s  Conversational  AI  gives  brands  the  ability  to  leverage  the  employees  closest  to  the 
customer, those who are most versed in the voice of the brand, and with the most expertise in how to craft successful outcomes 
for customer service and sales journeys.

Some of the key innovations behind LivePerson’s Conversational AI include:

•

•

•

•

•

•

•

•

•

a holistic approach to scaling AI by combining consumer facing bots, agent facing bots, intelligent routing and 
real-time  intent  understanding,  with  an  analytics  dashboard  that  helps  users  focus  on  the  intents  that  are 
impacting their business and prioritize which intents to automate next;

bot building software that is based on dialogue instead of workflow or code, so non-technical employees like 
contact center agents can design automations;

leveraging a data moat from hundreds of millions of conversations to feed the machine learning that rapidly and 
accurately  detects  consumer  sentiment  and  intents  in  real-time.  Customers  of  LivePerson  can  use  intent 
understanding for advanced routing, next-best actions, and to fully contain conversations with automation; 

the establishing of contact center agents as bot managers, ensuring that every conversation is safeguarded by a 
human and that agents are continuously training the AI to be smarter and drive more successful outcomes;

powerful  Assist  technology  that  multiplies  the  efficiency  of  agents  by  analyzing  intents  in  real  time  and  then 
suggesting next best actions, predefined content, and bots that can take over transactional work;

pre-built  templates  for  target  verticals  that  provide  out  of  the  box  support  for  the  top  intents  and  back-end 
integrations;

the  ability  to  bootstrap  conversations  with  existing  transcripts,  reducing  design  effort  and  speeding  time  to 
market;

third-party AI NLU integration, so customers are not boxed into one vendor; and

AI  analytics  and  reporting  tailored  to  the  Conversational  Space,  providing  brands  with  immediate,  actionable 
insights about their businesses and contact center operations.

Our strategy is to continue to enhance the Conversational AI engine and related products, by leveraging our global R&D 
footprint  and  substantial  library  of  mobile  and  online  conversational  data,  with  the  aim  of  increasing  agent  efficiency, 
decreasing customer care costs, improving the customer experience and increasing customer lifetime value.

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Sustain our leadership position by aligning brands to a vision that transforms how they communicate with consumers 
and delivers a superior return on brands’ investment. Over the past four years we have made good progress in developing our 
conversational AI platform and within the next 12 months, we expect to have a solution in place for our automations to self-
heal, which is the ultimate goal of any AI platform. Our acquisitions of VoiceBase and Tenfold provide us with a mechanism 
for data capture in the voice channel. This additional data and the associated analytics and system integration give us an even 
greater ability to scale the usage of our platforms, by building on our strength in messaging. Brands must adapt their contact 
centers to an asynchronous messaging environment and leverage a combination of human agents, bots, and AI to achieve scale 
and efficiencies. When done correctly, the entire consumer lifecycle with a brand will be maintained within the Conversational 
Space,  and  traffic  will  steadily  shift  away  from  lower  returning  traditional  voice  calls,  websites,  emails,  and  apps  to  higher 
returning messaging endpoints.

We believe that LivePerson is uniquely positioned to deliver this transformation due to our technology and expertise:

•

•

•

•

•

The Conversational Cloud, LivePerson’s enterprise-class, automation-first, cloud-based platform, was designed 
for AI-assisted and human-powered messaging in mobile and online channels. The platform offers best-in-class 
security and scalability, offers the broadest ecosystem of messaging endpoints, is designed for ease of use, and 
features an AI engine custom built for the Conversational Space, intent recognition, robust real-time reporting, 
role-based real-time analytics, predictive intelligence, and innovations in customer satisfaction and connection 
measurement.  Additionally,  the  Conversational  Cloud  is  an  open  platform  with  pre-built,  enterprise-grade 
integrations into back-end systems as well as the ability to work across NLU providers. 

The  Company  believes  it  has  a  data  moat  built  on  hundreds  of  millions  of  conversations  across  industries, 
geographies and use cases that is feeding the machine learning engines that power intent understanding. 

The  platform  has  expanded  to  power  conversations  across  a  broad  spectrum  of  channels  and  use  cases,  from 
traditional sales and customer service, to marketing, social, email, advertising and brick and mortar.

LivePerson  has  deep  domain  expertise  across  verticals  and  messaging  endpoints,  a  global  footprint, 
referenceable  enterprise  brands  and  a  team  of  technical,  solutions  and  consulting  professionals  to  assist 
customers along their transformational journeys. We are positioned as an authority in the Conversational Space. 
We  have  developed  a  Transformation  Model  that  is  introduced  to  existing  and  prospective  customers  to  help 
guide them on their journeys from legacy and oftentimes inefficient legacy voice, email and chat solutions to 
modern conversational ones powered by messaging and AI.

The Company has developed Gainshare - a Transformation Model that is introduced to existing and prospective 
customers to help guide them on their journeys from legacy and oftentimes inefficient legacy voice, email, and 
chat  solutions  to  modern  conversational  ones  powered  by  messaging  and  AI.  Gainshare  is  a  fully  managed 
solution where LivePerson not only provides the messaging and AI automation technology, but also the labor, 
automation, and end-to-end program management, leveraging the Company’s expertise with Conversational AI 
and  messaging  operations.  Gainshare  is  an  option  for  brands  that  want  to  accelerate  a  transformation  to 
Conversational AI, or that want a worry-free solution where LivePerson manages the entire operation, from
staffing to automation building and optimization, to conversation design and consumer experience. Gainshare 
pricing  is  bespoke,  and  is  typically  structured  around  a  brand’s  desired  goals,  whether  driving  incremental 
revenue or reducing operational costs.

We believe that LivePerson’s differentiated approach to the Conversational Space, combined with our unique technology 
and  expertise  has  established  us  as  a  market  leader,  with  an  ability  to  deliver  superior  returns  on  investment.  LivePerson 
customers manage as many as 40 messaging conversations at a time, as compared to one at a time for a voice agent and two to 
four at a time for a good chat agent. Adding AI and bots provides even greater scale to the number of conversations managed. 
Our customers often see labor efficiency gains of at least two times that of voice agents, effectively cutting labor costs by at 
least  50%.  Furthermore,  our  ability  to  deliver  more  convenient,  personalized  and  content-rich  conversations  often  drives 
increases  in  customer  satisfaction  of  up  to  20  percentage  points  and  increases  in  sales  conversions  of  up  to  20%,  while 
enhancing average order value, customer retention and loyalty.

 Strengthen our position in both existing and new industries. We plan to continue to develop our market position by 
increasing our customer base, and expanding within our installed base. We plan to continue to focus primarily on key target 
markets: consumer/retail, telecommunications, financial services, travel/hospitality, technology and automotive within both our 
enterprise and mid-market sectors, as well as the SMB sector. In 2019, we made strong inroads into new verticals with key wins 
in the airline, food service and healthcare industries. In 2020, we strengthened our presence in key markets including travel/
hospitality and retail, and opened new verticals like healthcare and government. In 2021, we continued to grow in verticals such 

60

as  healthcare  and  financial  services,  and  expanded  into  new  industries.  We  are  experimenting  with  new  conversational 
businesses, including some that are in regulated industries, like online banking and healthcare. We are increasingly structuring 
our field organization to emphasize our domain expertise and strengthen customer relationships across target industries.

Continue to build our international presence.  We are focused on building our international presence and expanding our 
international revenue contribution, which accounted for 35% and 38% of total revenue in 2021 and 2020, respectively. We are 
generating positive results from our recent investments in the Asia Pacific, Europe, and Latin America regions. Expanding go-
to-market  capacity  in  international  theaters  is  one  of  our  key  strategic  focuses  and  also  part  of  our  motivation  for  our  recent 
acquisition of e-bot7.

Leverage our open architecture to support partners and developers. In addition to developing our own applications, we 
continue  to  cultivate  a  partner  eco-system  capable  of  offering  additional  applications  and  services  to  our  customers.  We 
integrate  into  third-party  messaging  endpoints  including  SMS,  Facebook  Messenger,  Apple  Business  Chat,  Google  Rich 
Business  Messenger,  Line,  WhatsApp,  Alexa,  Google  Home,  WeChat,  Google  Ad  Lingo,  Google  Search,  Google  Maps, 
Instagram and Twitter, multiple IVR vendors, and dozens of branded apps. The Conversational Cloud integrates our proprietary 
messaging and Conversational AI with third-party bot offerings, empowering our customers to manage a mix of different bots, 
human agents and technologies from one control panel, thereby optimizing contact center efficiency. LivePerson’s proprietary 
and third-party AI/bots enable brands to partially or fully automate communications with their customers.

In  addition,  we  have  opened  up  access  to  our  platform  and  our  products  with  more  than  40  APIs  and  software 
development kits that allow customers and third parties to develop on top of our platform. Customers and partners can utilize 
these APIs to build our capabilities into their own applications and to enhance our applications with their services. In 2019, we 
launched  LivePerson  Functions,  a  serverless  FaaS  integration  which  enables  brands  to  develop  custom  behaviors  within 
LivePerson’s conversational platform to easily and rapidly tailor conversation flows to their specific needs.

Expand  sales  partnerships  to  broaden  our  presence  and  accelerate  sales  cycles.  We  are  focused  on  broadening  our 
market  reach  and  accelerating  sales  cycles  by  partnering  with  systems  integrators,  technology  providers,  business  process 
outsourcers, value added resellers and other sales partners. We formalized a relationship with IBM Global Business Services in 
2017 and Accenture in 2018. In 2019, we announced strategic partnerships with TTEC, a leading BPO focused on customer 
experience,  and  DMI,  a  digital  transformation  company,  to  redefine  the  customer  experience  with  digital  engagement, 
messaging, and AI-driven automation. In 2020, a digital services and consulting company joined LivePerson’s network with a 
first-of-its-kind 360 degree partnership focusing not only on capturing the global rising demand for conversational commerce 
and building a personalized experience for customers, but also driving the transformation for internal corporate messaging and 
the  employee  experience  through  Conversational  AI.  In  2021,  we  announced  strategic  integration  partnerships  with  Google 
Cloud, Adobe and Medallia to help brands make contact center agents more efficient and effective, and empower and enrich the 
management  of  customer  and  employee  experience  through  the  power  of  AI.  Our  network  also  expanded  with  the  Tech 
Mahindra partnership to help brands deliver personalized conversational experiences to consumers at scale.

Maintain  market  leadership  in  technology  and  security  expertise.  As  described  above,  we  are  devoting  significant 
resources  to  creating  new  products  and  enabling  technologies  designed  to  accelerate  innovation.  We  evaluate  emerging 
technologies  and  industry  standards  and  continually  update  our  technology  in  order  to  retain  our  leadership  position  in  each 
market we serve. We monitor legal and technological developments in the area of information security and confidentiality to 
ensure our policies and procedures meet or exceed the demands of the world’s largest and most demanding corporations. We 
believe that these efforts will allow us to effectively anticipate changing customer and consumer requirements in our rapidly 
evolving industry.

Evaluate strategic alliances and acquisitions when appropriate. In July 2021, we acquired German conversational AI 
company e-bot7, which propels our self-service capabilities and continued growth across Europe. In October 2021, we acquired 
VoiceBase,  a  leader  in  real-time  speech  recognition  and  conversational  analytics;  and  Tenfold,  an  advanced  customer 
engagement platform for integrating communication systems with leading CRM and support services. Once fully integrated, we 
expect these acquisitions to allow LivePerson to deliver our AI and automation capabilities, insights, and integration as a single 
integrated product offering across all channels including voice and messaging.

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Financial  overview  of  the  three  and  twelve  months  ended  December  31,  2021  compared  to  the  comparable  periods  in 

2020 is as follows:

Key Metrics

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•

•

•

•

•

•

Revenue increased 21% and 28% to $123.8 million and $469.6 million in the three and twelve months ended 
December 31, 2021, respectively, from $102.1 million and $366.6 million in the comparable periods in 2020.

Revenue from our Business segment increased 21% and 28% to $114.1 million and $431.9 million in the three 
and  twelve  months  ended  December  31,  2021,  respectively,  from  $94.1  million  and  $336.9  million  in  the 
comparable periods in 2020.

Gross  profit  margin  decreased  to  64%  in  the  three  months  ended  December  31,  2021  from  73%  in  the 
comparable period in 2020. Gross profit margin decreased to 67% in the twelve months ended December 31, 
2021 from 71% in the comparable period in 2020.

Cost and expenses increased 55% and 23% to $169.1 million and $562.9 million in the three and twelve months 
ended December 31, 2021, respectively, from $108.8 million and $456.1 million in the comparable periods in 
2020. 

Net loss increased to $49.9 million and to $125.0 million in the three and twelve months ended December 31, 
2021,  respectively,  from  net  loss  of  $13.3  million  and  $107.6  million  for  the  three  and  twelve  months  ended 
December 31, 2020, respectively. 

Trailing-twelve-month average revenue per enterprise and mid-market customer was approximately $610,000 in 
2021, as compared to approximately $465,000 in 2020. 

Revenue retention rate for enterprise and mid-market customers on Conversational Cloud exceeded the high end 
of our target range of 105% to 115% in 2021 and 2020.

Adjusted EBITDA and Adjusted Operating Income (Loss)

To provide investors with additional information regarding our financial results, we have disclosed adjusted EBITDA and 
adjusted operating income (loss) which are non-GAAP financial measures. The tables below present a reconciliation of adjusted 
EBITDA and adjusted operating income (loss) to net loss, the most directly comparable GAAP financial measures. 

We have included adjusted EBITDA and adjusted operating income (loss) in this Annual Report on Form 10-K because 
these  are  key  measures  used  by  our  management  and  board  of  directors  to  understand  and  evaluate  our  core  operating 
performance  and  trends,  to  prepare  and  approve  our  annual  budget  and  to  develop  short  and  long-term  operational  plans.  In 
particular, the exclusion of certain expenses in calculating adjusted EBITDA and adjusted operating income (loss) can provide a 
useful  measure  for  period-to-period  comparisons  of  our  core  business.  Additionally,  adjusted  EBITDA  is  a  key  financial 
measure  used  by  the  compensation  committee  of  our  board  of  directors  in  connection  with  the  payment  of  bonuses  to  our 
executive  officers.  Accordingly,  we  believe  that  adjusted  EBITDA  and  adjusted  operating  income  (loss)  provide  useful 
information  to  investors  and  others  in  understanding  and  evaluating  our  operating  results  in  the  same  manner  as  our 
management and board of directors. 

Our  use  of  adjusted  EBITDA  has  limitations  as  an  analytical  tool,  and  you  should  not  consider  it  in  isolation  or  as  a 

substitute for analysis of our results as reported under GAAP. Some of these limitations are: 

•

•

•

•

•

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may 
have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements 
for such replacements or for new capital expenditure requirements; 

adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

adjusted EBITDA does not consider the impact of acquisition related costs;

adjusted EBITDA does not consider the impact of restructuring costs;

adjusted EBITDA does not consider the impact of other costs;

adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and

62

•

other  companies,  including  companies  in  our  industry,  may  calculate  adjusted  EBITDA  differently,  which 
reduces its usefulness as a comparative measure.

Because  of  these  limitations,  you  should  consider  adjusted  EBITDA  alongside  other  financial  performance  measures, 
including  various  pre-tax  GAAP  loss  and  our  other  GAAP  results.  The  following  table  presents  a  reconciliation  of  adjusted 
EBITDA for each of the periods indicated: 

Year Ended December 31,

2021

2020

2019

2018

2017

(In thousands)

Reconciliation of Adjusted EBITDA:

GAAP net loss  ............................................................ $ 

(124,974)  $ 

(107,594)  $ 

(96,071)  $ 

(25,032)  $ 

(18,191) 

Amortization of purchased intangibles and 
finance leases  ........................................................

Stock-based compensation     ...................................

     ...........................................

Contingent earn-out adjustments  ..........................
Restructuring costs (1)
Depreciation   .........................................................
Other litigation and consulting costs (2)
    ................
(Benefit from) provision for income taxes    ...........

Acquisition costs  ..................................................
Interest expense (income), net   ..............................
Other (income) expense, net (3)

  .............................

Adjusted EBITDA (loss)   ............................................ $ 

9,327 

69,656 

132 

3,397 

27,423 

6,665 
(2,404) 

5,808 
37,406 

3,552 

65,946 

263 

29,420 

22,826 

5,375 
2,466 

— 
14,334 

2,932 

44,105 

— 

2,043 

16,366 

7,974 
2,845 

— 
7,407 

2,813 

14,841 

— 

4,468 

14,188 

5,928 
858 

555 
(22) 

(3,294) 
29,142  $ 

1,343 
37,931  $ 

(1,213) 
(13,612)  $ 

493 
19,090  $ 

4,682 

8,944 

— 

2,594 

12,358 

7,648 
501 

— 
(26) 

(110) 
18,400 

——————————————
(1)

Includes  severance  costs  and  other  compensation  related  costs  of  $2.7  million  and  lease  restructuring  costs  of  $0.7  million  for  the  year  ended 
December 31, 2021. Includes lease restructuring costs of $24.3 million and severance and other compensation related costs of $5.1 million for the year 
ended December 31, 2020. Includes severance and associated costs of $2.0 million for the year ended December 31, 2019. Includes severance costs of 
$4.5 million for the year ended December 31, 2018. Includes wind down costs of legacy platform of $1.9 million and severance costs of $0.7 million for 
the year ended December 31, 2017. The restructuring costs relate to resource reallocation for the Company’s platform transformation.  

(2)

Includes litigation costs of $4.1 million, employee benefit costs of $0.5 million, consulting costs of $2.4 million, and a reversal of reserve for sales and 
use tax liability of $0.3 million for the year ended December 31, 2021. Includes other litigation costs of $5.4 million for the year ended December 31, 
2020. Includes other litigation costs of $4.4 million relating to the Company’s intellectual property lawsuit against [24]7 Customer, Inc., consulting costs 
of  $3.2  million,  and  fair  value  earn-out  adjustment  of  $0.3  million  for  the  year  ended  December  31,  2019.  Includes  litigation  costs  of  $4.1  million, 
consulting costs of $1.3 million, executive recruitment costs of $0.3 million, and executive relocation costs of $0.2 million for the year ended December 
31,  2018.    Includes  litigation  costs  of  $6.2  million,  executive  one-time  compensation  payment  of  $1.0  million,  and  executive  separation  cost  of  $0.5 
million for the year ended December 31, 2017. Other litigation costs relate to lease restructuring costs, along with other general legal matters. 

(3)

Includes $3.5 million of other income related to the settlement of leases for the year ended December 31, 2021. The remaining amount of other (income) 
expense is attributable to currency rate fluctuations.

Our  use  of  adjusted  operating  income  (loss)  has  limitations  as  an  analytical  tool,  and  you  should  not  consider  it  in 

isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: 

•

•

•

•

•

although amortization is a non-cash charge, the assets being amortized may have to be replaced in the future, 
and  adjusted  operating  income  (loss)  does  not  reflect  cash  capital  expenditure  requirements  for  such 
replacements or for new capital expenditure requirements; 

adjusted operating income (loss) does not consider the impact of acquisition related costs;

adjusted operating income (loss) does not consider the impact of restructuring costs;

adjusted operating income (loss) does not consider the impact of other costs; and

other  companies,  including  companies  in  our  industry,  may  calculate  adjusted  operating  income  (loss) 
differently, which reduces its usefulness as a comparative measure.

63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Because of these limitations, you should consider adjusted operating income (loss) alongside other financial performance 
measures, including various pre-tax GAAP loss and our other GAAP results. The following table presents a reconciliation of 
adjusted operating income (loss) for each of the periods indicated:

Year Ended December 31,

2021

2020

2019

2018

2017

(In thousands)

Reconciliation of Adjusted Operating Income 
(Loss) 

Loss before provision for income taxes   ..................... $ 

(127,378)  $ 

(105,128)  $ 

(93,226)  $ 

(24,174)  $ 

(17,690) 

Amortization of purchased intangibles and 
finance leases  ........................................................

Stock-based compensation     ...................................
Restructuring costs (1)
Other litigation and consulting costs (2)
Contingent earn-out adjustments  ..........................

     ...........................................

    ................

Acquisition costs  ..................................................

Interest expense (income), net   ..............................
Other expense (income), net (3)

  .............................

Adjusted operating income (loss)   .............................. $ 

9,327 

69,656 

3,397 

6,665 

132 

5,808 

37,406 

(3,294) 
1,719  $ 

3,552 

65,946 

29,420 

5,375 

263 

— 

14,334 

1,343 

15,105  $ 

2,932 

44,105 

2,043 

7,974 

— 

— 

7,407 

2,813 

14,841 

4,468 

5,928 

— 

555 

(22) 

(1,213) 
(29,978)  $ 

493 
4,902  $ 

4,682 

8,944 

2,594 

7,648 

— 

— 

(26) 

(110) 
6,042 

——————————————
(1)

Includes  severance  costs  and  other  compensation  related  costs  of  $2.7  million  and  lease  restructuring  costs  of  $0.7  million  for  the  year  ended 
December 31, 2021. Includes lease restructuring costs of $24.3 million and severance and other compensation related costs of $5.1 million for the year 
ended December 31, 2020. Includes severance and associated costs of $2.0 million for the year ended December 31, 2019. Includes severance costs of 
$4.5 million for the year ended December 31, 2018. Includes wind down costs of legacy platform of $1.9 million and severance costs of $0.7 million for 
the year ended December 31, 2017. The restructuring costs relate to resource reallocation for the Company’s platform transformation.  

(2)

Includes litigation costs of $4.1 million, employee benefit costs of $0.5 million, consulting costs of $2.4 million, and a reversal of reserve for sales and 
use tax liability of $0.3 million for the year ended December 31, 2021. Includes other litigation costs of $5.4 million for the year ended December 31, 
2020. Includes other litigation costs of $4.4 million relating to the Company’s intellectual property lawsuit against [24]7 Customer, Inc., consulting costs 
of  $3.2  million,  and  fair  value  earn-out  adjustment  of  $0.3  million  for  the  year  ended  December  31,  2019.  Includes  litigation  costs  of  $4.1  million, 
consulting costs of $1.3 million, executive recruitment costs of $0.3 million, and executive relocation costs of $0.2 million for the year ended December 
31,  2018.    Includes  litigation  costs  of  $6.2  million,  executive  one-time  compensation  payment  of  $1.0  million,  and  executive  separation  cost  of  $0.5 
million for the year ended December 31, 2017. Other litigation costs relate to lease restructuring costs, along with other general legal matters. 

(3)

Includes $3.5 million of other income related to the settlement of leases for the year ended December 31, 2021. The remaining amount of other (income) 
expense is attributable to currency rate fluctuations.

 .

           Critical Accounting Policies and Estimates

Our  consolidated  financial  statements  are  prepared  in  conformity  with  accounting  principles  generally  accepted  in  the 
United  States  of  America.  As  such,  we  are  required  to  make  certain  estimates,  judgments  and  assumptions  that  management 
believes  are  reasonable  based  upon  the  information  available.  We  base  these  estimates  on  our  historical  experience,  future 
expectations and various other assumptions that we believe to be reasonable under the circumstances, the results of which form 
the basis for our judgments that may not be readily apparent from other sources. These estimates and assumptions affect the 
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated 
financial statements and the reported amounts of revenue and expenses during the reporting periods. 

We  believe  that  the  assumptions  and  estimates  associated  with  revenue  recognition,  depreciation,  stock-based 
compensation, accounts receivable, the valuation of goodwill and intangible assets, income taxes and legal contingencies have 
the greatest potential impact on our consolidated financial statements. We evaluate these estimates on an ongoing basis. Actual 
results could differ from those estimates under different assumptions or conditions, and any differences could be material. For 
further  information  on  all  of  our  significant  accounting  policies,  see  Note  1  –  Description  of  Business  and  Summary  of 
Significant Accounting Policies in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on 
Form 10-K.

Revenue Recognition

The majority of our revenue is generated from hosted service revenues, which is inclusive of our platform usage pricing 
model, and related professional services from the sale of our services. Revenues are recognized when control of these services 
is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those 
services.  A  large  proportion  of  our  revenue  from  new  customers  comes  from  large  corporations.  These  companies  typically 
have more significant implementation requirements and more stringent data security standards. Such customers also have more 

64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
sophisticated  data  analysis  and  performance  reporting  requirements,  and  are  likely  to  engage  our  professional  services 
organization to provide such analysis and reporting on a recurring basis.

We determine revenue recognition through the following steps:

•

•

•

•

•

identification of the contract, or contracts, with a customer;

identification of the performance obligations in the contract;

determination of the transaction price;

allocation of the transaction price to the performance obligations in the contract; and

recognition of revenue when, or as, we satisfy a performance obligation.

Total revenue of $469.6 million, $366.6 million, and $291.6 million was recognized during the years ended December 31, 

2021, December 31, 2020, and December 31, 2019, respectively.

We  defer  all  incremental  commission  costs  to  obtain  the  contract  (contract  acquisition  costs).  The  contract  acquisition 
costs  consist  of  prepaid  sales  commissions  and  have  balances  as  of  December  31,  2021  and  December  31,  2020  of  $40.7 
million and $41.0 million, respectively. We amortize these costs over the related period of benefit using the expected life of the 
customer contract, which we determine to be three to five years, consistent with the transfer to the customer of the services to 
which the asset relates. We classify contract acquisition costs as long-term unless they have an original amortization period of 
one year or less.

Hosted Services - Business Revenue

Hosted  services  -  Business  revenue  is  reported  at  the  amount  that  reflects  the  ultimate  consideration  expected  to  be 
received  and  primarily  consist  of  fees  that  provide  customers  access  to  the  Conversational  Cloud.  We  have  determined  such 
access represents a stand-ready service provided continually throughout the contract term. As such, control and satisfaction of 
this stand-ready performance obligation is deemed to occur over time. We recognize this revenue over time on a ratable basis 
over  the  contract  term,  beginning  on  the  date  that  access  to  the  Conversational  Cloud  platform  is  made  available  to  the 
customer.  The  passage  of  time  is  deemed  to  be  the  most  faithful  depiction  of  the  transfer  of  control  of  the  services  as  the 
customer  simultaneously  receives  and  consumes  the  benefit  provided  by  our  performance.  Subscription  contracts  are 
generally one year or longer in length, billed monthly, quarterly or annually in advance. Additionally, for certain of our larger 
customers, we may provide call center labor through an arrangement with one or more of several qualified vendors.  For most 
of these customers, we pass the fee we incur with the labor provider and its fee for the hosted services through to our customers 
in the form of a fixed fee for each order placed via our online engagement solutions. For these Gainshare arrangements, we act 
as a principal in a transaction if we control the specified goods or services before they are transferred to the customer.  

Revenue  attributable  to  our  monthly  hosted  Business  services  accounted  for  78%  of  total  revenue  for  the  years  ended 

December 31, 2021 and 2020, and 77% of total revenue for the year ended December 31, 2019.

Professional Services Revenue

Professional  Services  revenue  primarily  consists  of  fees  for  deployment  and  optimization  services,  as  well  as  training 
delivered on an on-demand basis which is deemed to represent a distinct stand-ready performance obligation and is recognized 
at a point in time. Professional Services revenue is reported at the amount that reflects the ultimate consideration we expect to 
receive in exchange for such services. Control for the majority of our Professional Services contracts passes over time to the 
customer and is recognized ratably over the contracted period, as the passage of time is deemed to be the most faithful depiction 
of the transfer of control. For certain deployment services, which are not deemed to represent a distinct performance obligation, 
revenue will be recognized in the same manner as the fee for access to the Conversational Cloud platform, and as such will be 
recognized on a straight-line basis over the contract term. For services billed on a fixed price basis, revenue is recognized over 
time based on the proportion performed using time and materials as the measure of progress toward complete satisfaction of the 
performance  obligation.  Our  Professional  Services  contracts  are  generally  one  year  or  longer  in  length,  billed  monthly, 
quarterly or annually in advance. There is no significant variable consideration related to these arrangements.

Revenue attributable to Professional Services accounted for 14% of total revenue for the years ended December 31, 2021, 

2020, and 2019. 

65

Contracts with Multiple Performance Obligations

Some  of  our  contracts  with  customers  contain  multiple  performance  obligations.  For  these  contracts,  we  account  for 
individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance 
obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing 
objectives,  taking  into  consideration  market  conditions  and  other  factors,  including  the  value  of  our  contracts,  the  cloud 
applications sold, and the number and types of users within our contracts.

Hosted Services- Consumer Revenue

For  revenue  from  our  Consumer  segment  generated  from  online  transactions  between  Experts  and  Users,  revenue  is 
recognized at an amount net of Expert fees primarily because the Expert is the primary obligor. We do not act as a principal in a 
transaction since we do not control the specified goods or services before they are transferred to the customer. Additionally, we 
perform as an agent without any risk of loss for collection, and we are  not involved in selecting the Expert or establishing the 
Expert’s  fee.  We  collect  a  fee  from  the  consumer  and  retain  a  portion  of  the  fee,  and  then  remit  the  balance  to  the  Expert. 
Revenue  from  these  transactions  is  recognized  at  the  point  in  time  when  the  transaction  is  complete  and  no  significant 
performance obligations remain.

Revenue  from  our  Consumer  segment  accounted  for  approximately  8%  of  total  revenue  for  each  of  the  years  ended 

December 31, 2021, 2020, and 2019, respectively.

Remaining Performance Obligation

As of December 31, 2021, the aggregate amount of the total transaction price allocated in contracts with original duration 
of  one  year  or  greater  to  the  remaining  performance  obligations  was  $362.8  million.  Approximately  94%  of  our  remaining 
performance obligations is expected to be recognized during the next 24 months, with the balance recognized thereafter. The 
aggregate balance of unsatisfied performance obligations represents contracted revenue that has not yet been recognized, and 
does not include contract amounts that are cancellable by the customer, amounts associated with optional renewal periods, and 
any  amounts  related  to  performance  obligations,  which  are  billed  and  recognized  as  they  are  delivered.  We  have  elected  the 
optional  exemption,  which  allows  for  the  exclusion  of  the  amounts  for  remaining  performance  obligations  that  are  part  of 
contracts with an original expected duration of less than one year. Such remaining performance obligations represent unsatisfied 
or partially unsatisfied performance obligations pursuant to ASC 606.

Deferred Revenues

We record deferred revenues when cash payments are received or due in advance of our performance. The increase of 
$9.6  million  in  the  deferred  revenue  balance  for  the  year  ended  December  31,  2021  is  primarily  driven  by  cash  payments 
received  or  due  in  advance  of  satisfying  our  performance  obligations,  partially  offset  by  approximately  $75.5  million  of 
revenues recognized that were included in the deferred revenue balance as of December 31, 2020.

Costs and Expenses

Our cost of revenue consists of:

•

•

•

•

•

•

•

•

compensation  costs  relating  to  employees  who  provide  customer  support  and  implementation  services  to  our 
customers;

outside labor provider costs;

compensation costs relating to our network support staff;

depreciation of certain hardware and software;

allocated occupancy costs and related overhead;

the cost of supporting our infrastructure, including expenses related to server leases, infrastructure support costs 
and Internet connectivity;

the credit card fees and related payment processing costs associated with the consumer and SMB services; and

amortization of certain intangibles.

66

Our  sales  and  marketing  expenses  consist  of  compensation  and  related  expenses  for  sales  personnel  and  marketing 
personnel, online marketing, allocated occupancy costs and related overhead, advertising, sales commissions, public relations, 
promotional materials, travel expenses, global customer summits and trade show exhibit expenses.

Our  general  and  administrative  expenses  consist  primarily  of  compensation  and  related  expenses  for  executive, 
accounting,  legal,  information  technology  and  human  resources  personnel,  allocated  occupancy  costs  and  related  overhead, 
litigation, professional fees, provision for doubtful accounts and other general corporate expenses.

Our  product  development  expenses  consist  primarily  of  compensation  and  related  expenses  for  product  development 
personnel,  allocated  occupancy  costs  and  related  overhead,  outsourced  labor  and  expenses  for  testing  new  versions  of  our 
software. Product development expenses are charged to operations as incurred.

During 2021, we increased our allowance for doubtful accounts from approximately $5.3 million to approximately $6.3 
million.  During  2020,  we  increased  our  allowance  for  doubtful  accounts  from  approximately  $3.1  million  to  approximately  
$5.3 million. We perform a detailed assessment of the collectability of our accounts receivable. In estimating the allowance for 
doubtful accounts, management considers, among other factors, the aging of the accounts receivable, historical write-offs and 
the creditworthiness of each customer. A large proportion of receivables are due from larger corporate customers that typically 
have longer payment cycles. 

Non-Cash Compensation Expense

The net non-cash compensation amounts are as follows:

Year Ended December 31, 

2021

2020

2019

(In thousands)

Stock-based compensation expense      ............................................................................... $ 

69,656  $ 

65,946  $ 

44,105 

Stock-Based Compensation

We  follow  ASC  718-10,  “Stock  Compensation,”  which  addresses  the  accounting  for  transactions  in  which  an  entity 
exchanges  its  equity  instruments  for  goods  or  services,  with  a  primary  focus  on  transactions  in  which  an  entity  obtains 
employee  services  in  share-based  payment  transactions.  ASC  718-10  requires  measurement  of  the  cost  of  employee  services 
received  in  exchange  for  an  award  of  equity  instruments  based  on  the  grant-date  fair  value  of  the  award  (with  limited 
exceptions).  Incremental  compensation  costs  arising  from  subsequent  modifications  of  awards  after  the  grant  date  must  be 
recognized.

Our forfeiture rate assumptions, which estimate the share-based awards that will ultimately vest, requires judgment, and 
to  the  extent  actual  results  or  updated  estimates  differ  from  our  current  estimates,  such  amounts  will  be  recorded  as  a 
cumulative  adjustment  in  the  period  of  change  and  could  be  materially  different  from  share-based  compensation  expense 
recorded in prior periods.

For the year ended December 31, 2021, we accrued approximately $18.4 million for cash awards related to bonus to be 
settled  in  shares  of  our  stock  and  recorded  a  corresponding  expense,  which  is  included  as  a  component  of  stock-based 
compensation  expense  in  the  accompanying  consolidated  financial  statements.  For  the  year  ended  December  31,  2020,  we 
accrued approximately $20.4 million and $8.9 million for cash awards related to bonus and for the achievement of long term 
incentive plan awards, respectively, to be settled in shares of our stock and recorded a corresponding expense, which is included 
as a component of stock-based compensation expense in the accompanying consolidated financial statements. 

As  of  December  31,  2021,  there  was  approximately  $44.8  million  of  total  unrecognized  compensation  cost  related  to 
nonvested stock options. That cost is expected to be recognized over a weighted average period of approximately 2.7 years. As 
of December 31, 2021, there was approximately $141.9 million of total unrecognized compensation cost related to nonvested 
restricted stock units. That cost is expected to be recognized over the remaining weighted average period of approximately 3.2 
years.

67

 
Accounts Receivable

We  perform  ongoing  credit  evaluations  of  our  customers’  financial  condition  (except  for  customers  who  purchase  the 
LivePerson services by credit card via Internet download) and have established an allowance for doubtful accounts based upon 
factors  surrounding  the  credit  risk  of  customers,  historical  trends  and  other  information  that  we  believe  to  be  reasonable, 
although  they  may  change  in  the  future.  If  there  is  a  deterioration  of  a  customer’s  credit  worthiness  or  actual  write-offs  are 
higher than our historical experience, our estimates of recoverability for these receivables could be adversely affected. Although 
our large number of customers limits our concentration of credit risk, if we experience a significant write-off from one of our 
large  customers,  it  could  have  a  material  adverse  impact  on  our  consolidated  financial  statements.  No  single  customer 
accounted  for  or  exceeded  10%  of  our  total  revenue  in  2021,  2020  and  2019.  During  2021,  we  increased  our  allowance  for 
doubtful  accounts  from  approximately  $5.3  million  to  approximately  $6.3  million.  A  large  proportion  of  receivables  are  due 
from  larger  corporate  customers  that  typically  have  longer  payment  cycles.  Accounts  receivable  is  presented  net  of  an 
allowance for doubtful accounts and sales reserve of $6.3 million and $4.1 million as of December 31, 2021, respectively, and 
$5.3 million and $3.4 million as of December 31, 2020, respectively.

An  allowance  for  doubtful  accounts  is  established  for  losses  expected  to  be  incurred  on  accounts  receivable  balances. 
Judgment is required in the estimation of the allowance and we evaluate the collectability of our accounts receivable based on a 
combination of factors. If we become aware of a customer’s inability to meet its financial obligations, a specific allowance is 
recorded  to  reduce  the  net  receivable  to  the  amount  reasonably  believed  to  be  collectible  from  the  customer.  For  all  other 
customers,  we  use  an  aging  schedule  and  recognize  allowances  for  doubtful  accounts  based  on  the  creditworthiness  of  the 
debtor, the age and status of outstanding receivables, the current business environment and our historical collection experience 
adjusted  for  current  expectations  for  the  customer  or  industry.  Accounts  receivable  are  written  off  against  the  allowance  for 
uncollectible accounts when we determine amounts are no longer collectible.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a 
business combination. During 2021, we added $198.2 million to goodwill with the acquisition of e-bot7, VoiceBase, Inc., and 
Tenfold.  Goodwill  is  not  amortized  and  is  tested  for  impairment  at  least  annually  or  whenever  events  or  changes  in 
circumstances indicate that the carrying value may not be recoverable. We have determined that we operates as two reporting 
units  and  have  selected  September  30  as  the  date  to  perform  our  annual  impairment  test.  In  the  valuation  of  goodwill, 
management must make assumptions regarding estimated future cash flows to be derived from our business. If these estimates 
or their related assumptions change in the future, the Company may be required to record impairment for these assets.

We have the option to first perform a qualitative assessment to determine if it is more likely than not that the fair value of 
a  reporting  unit  is  less  than  its  carrying  amount.  However,  we  may  elect  to  bypass  the  qualitative  assessment  and  proceed 
directly to the quantitative impairment tests. The impairment test involves comparing the fair value of the reporting unit to its 
carrying  value,  including  goodwill.  A  goodwill  impairment  will  be  the  amount  by  which  a  reporting  unit’s  carrying  value 
exceeds its fair value. The impairment is limited to the carrying amount of goodwill.

No goodwill impairment charges have been recorded for any period presented.

Impairment of Long-Lived Assets

The  carrying  amounts  of  our  long-lived  assets,  including  property  and  equipment,  lease  right-of-use  assets,  capitalized 
internal-use software, costs to obtain customer contracts, and acquired intangible assets, are reviewed for impairment whenever 
events  or  changes  in  circumstances  indicate  that  the  carrying  value  of  these  assets  may  not  be  recoverable  or  that  the  useful 
lives are shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying 
amount of an asset to future undiscounted net cash flows the asset is expected to generate over its remaining life. If the asset is 
considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair 
value of the impaired asset. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over 
the  new  shorter  useful  life.  There  was  a  loss  on  disposal  of  approximately  $5.1  million  in  October  2020.  We  recognized 
accelerated  depreciation  of  fixed  assets  that  were  determined  to  no  longer  be  of  future  economic  benefit  to  us  based  on  the 
decision to vacate the leased office space. 

68

Income Taxes 

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities 
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of 
existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets 
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary 
differences are expected to be recovered or settled. In assessing the realizability of deferred tax assets, management considers 
whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of 
deferred  tax  assets  is  dependent  upon  the  generation  of  future  taxable  income  during  the  periods  in  which  those  temporary 
differences  are  expected  to  become  deductible.  Management  considers  the  scheduled  reversal  of  deferred  tax  liabilities, 
projected future taxable income and tax planning strategies in making this assessment. The Company includes interest accrued 
on the underpayment of income taxes in interest expense and penalties, if any, related to unrecognized tax benefits in general 
and administrative expenses. The Company recorded a valuation allowance against its U.S. and Germany deferred tax assets as 
it  considered  its  cumulative  loss  in  recent  years  as  a  significant  piece  of  negative  evidence.  Since  valuation  allowances  are 
evaluated  on  a  jurisdiction  by  jurisdiction  basis,  we  believe  that  the  deferred  tax  assets  related  to  LivePerson  Australia, 
LivePerson UK, Kasamba Israel, LivePerson Japan and LivePerson LTD Israel are more likely than not to be realized as these 
jurisdictions have positive cumulative pre-tax book income after adjusting for permanent and one-time items. During the year 
ended December 31, 2021, there was an increase in the valuation recorded of $51.7 million. 

Legal Contingencies

We are subject to legal proceedings and litigation arising in the ordinary course of business. Periodically, we evaluate the 
status  of  each  legal  matter  and  assess  our  potential  financial  exposure.  If  the  potential  loss  from  any  legal  proceeding  or 
litigation  is  considered  probable  and  the  amount  can  be  reasonably  estimated,  we  accrue  a  liability  for  the  estimated  loss. 
Significant  judgment  is  required  to  determine  the  probability  of  a  loss  and  whether  the  amount  of  the  loss  is  reasonably 
estimable. The outcome of any proceeding is not determinable in advance. As a result, the assessment of a potential liability and 
the  amount  of  accruals  recorded  are  based  only  on  the  information  available  at  the  time.  As  additional  information  becomes 
available,  we  reassess  the  potential  liability  related  to  the  legal  proceeding  or  litigation,  and  may  revise  our  estimates.  Any 
revisions could have a material effect on our results of operations. See Note 15 – Legal Matters in the Notes to the Consolidated 
Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information on our legal proceedings and 
litigation.

Recently Issued Accounting Standards

See Note 1 – Description of Business and Summary of Significant Accounting Policies in the Notes to the Consolidated 
Financial  Statements  under  Item  8  of  this  Annual  Report  on  Form  10-K  for  a  full  description  of  recently  issued  accounting 
standards.

Recently Adopted Accounting Pronouncements

See Note 1 – Description of Business and Summary of Significant Accounting Policies in the Notes to the Consolidated 
Financial Statements under Item 8 of this Annual Report on Form 10-K for a full description of recently adopted accounting 
pronouncements.

Results of Operations

We  are  organized  into  two  operating  segments  for  purposes  of  making  operating  decisions  and  assessing  performance. 
The Business segment enables brands to leverage the Conversational Cloud sophisticated intelligence engine to connect with 
consumers through an integrated suite of mobile and online business messaging technologies. The Consumer segment facilitates 
online transactions between Experts and Users seeking information and knowledge for a fee via mobile and online messaging.

69

Revenue 

The following tables set forth our results of operations for the years presented and as a percentage of our revenues for 

those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Revenue by Segment:

Business   ...................................... $ 

431,929  $ 

336,856 

 28 % $ 

336,856  $ 

267,129 

Consumer    ...................................

37,695 

29,764 

 27 %  

29,764 

24,480 

Total    ...................................... $ 

469,624  $ 

366,620 

 28 % $ 

366,620  $ 

291,609 

 26 %

 22 %

 26 %

Business revenue increased by 28% to $431.9 million for the year ended December 31, 2021, from $336.9 million for the 
year  ended  December  31,  2020.  This  increase  in  Business  revenue  is  driven  primarily  by  increases  in  hosted  services  of 
approximately  $77.6  million  and  an  increase  in  Professional  Services  of  approximately  $17.4  million.  Included  in  hosted 
services is an increase in revenue that is variable based on interactions and usage of approximately $37.6  million. 

Business revenue increased by 26% to $336.9 million for the year ended December 31, 2020, from $267.1 million for the 
year ended December 31, 2019. This increase in Business revenue is primarily attributable to an increase in hosted services of 
approximately $60.9 million and an increase in Professional Services of approximately $8.8 million. Included in hosted services 
is an increase in revenue that is variable based on interactions and usage of approximately $30.1 million.

The increase in Business revenue was driven in nearly equal parts by existing and new customers as we generated greater 
demand for its Conversational Commerce software and Gainshare solutions. In the wake of the COVID-19 pandemic, leading 
brands  are  turning  to  our  AI-powered  messaging  to  overcome  a  capacity  gap  created  by  voice  call  agent  work-from-home 
measures  and  increased  demand  for  digital  engagement  as  consumers  practice  social  distancing.  We  are  powering 
Conversational  AI,  automation  and  messaging  strategies  across  a  growing  number  of  use  cases  from  care  and  sales,  to 
marketing, social, conversational advertising, and brick and mortar. As adoption increases, we are seeing higher revenue per 
customer.  However,  in  the  fourth  quarter  of  2021,  we  observed  that  pandemic-specific  shopping  trends  began  to  normalize 
within the Gainshare portfolio, including the type and frequency of purchases and a more balanced interest in physical, in-store 
experiences.  Our  ARPU  for  our  enterprise  and  mid-market  customers  was  approximately  $610,000  in  2021,  as  compared  to 
approximately $465,000 in 2020. Similarly, we are seeing strong revenue retention rates. Revenue retention rate for enterprise 
and mid-market customers on Conversational Cloud exceeded the high end of our target range of 105% to 115% in 2021 and 
2020. 

Consumer revenue increased by 26.6% to $37.7 million for the year ended December 31, 2021, from $29.8 million for the 
year ended December 31, 2020. This improvement was driven by an increasingly effective user value and higher demand by 
consumers  to  engage  with  experts  and  advisors  through  conversational  messaging  channels.  Consumer  revenue  increased  by 
22% to $29.8 million for the year ended December 31, 2020, from $24.5 million for the year ended December 31, 2019. This 
increase is primarily attributable to an increase in chat minutes and price per minute.

Cost of Revenue - Business

Cost  of  revenue  -  business  consists  of  compensation  costs  relating  to  employees  who  provide  customer  service  to  our 
customers,  compensation  costs  relating  to  our  network  support  staff,  outside  labor  provider  costs,  the  cost  of  supporting  our 
server and network infrastructure, and allocated occupancy costs and related overhead.

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Cost of revenue - business     ............. $ 

149,983 

$ 

99,394 

 51 % $ 

99,394 

$ 

74,460 

Percentage of total revenue   ...........

Headcount (at period end)     .............

 32 %

280 

 27 %

245 

 14 %  

 27 %

245 

 26 %

257 

 33 %

 (5) %

70

 
 
 
 
 
 
Cost of revenue increased by 51% to $150.0 million for the year ended December 31, 2021, from $99.4 million for the 
year  ended  December  31,  2020.  This  increase  in  expense  is  primarily  attributable  to  an  increase  in  business  services  and 
outsourced  subcontracted  labor  of  approximately  $30.5  million  driven  by  Health  and  Gainshare  services,  which  power 
Conversational  Commerce  programs  on  behalf  of  customers.  We  also  recognized  an  increase  in  expenses  for  backup  server 
facilities  of  approximately  $11.2  million,  in  salary  and  employee  related  expenses  of  approximately  $3.0  million,  and  in 
amortization expense of approximately $5.4 million.

Cost of revenue increased by 33% to $99.4 million for the year ended December 31, 2020, from $74.5 million for the year 
ended December 31, 2019. This increase in expense is primarily attributable to an increase in business services and outsourced 
subcontracted  labor  of  approximately  $17.0  million  as  the  Company  saw  a  significant  increase  in  demand  for  its  Gainshare 
services, which power Conversational Commerce programs on behalf of customers. The Company also recognized an increase 
in  salary  and  employee  related  expenses  of  approximately  $5.0  million,  in  expenses  for  backup  server  facilities  of 
approximately  $1.6  million,  in  depreciation  expense  of  approximately  $1.2  million,  and  in  amortization  expense  of 
approximately $0.8 million.

Cost of Revenue - Consumer  

Cost  of  revenue  -  consumer  consists  of  compensation  costs  relating  to  employees  who  provide  customer  service  to 
Experts  and  Users,  compensation  costs  relating  to  our  network  support  staff,  the  cost  of  supporting  our  server  and  network 
infrastructure, credit card and transaction processing fees and related costs, and allocated occupancy costs and related overhead. 

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Cost of revenue - consumer  ........... $ 

6,897 

$ 

6,874 

 — % $ 

6,874 

$ 

4,418 

Percentage of total revenue   ...........

Headcount (at period end)     .............

 1 %

15 

 2 %

21 

 (29) %  

 2 %

21 

 2 %

17 

 56 %

 24 %

Cost of revenue - consumer remained flat at $6.9 million for the year ended December 31, 2021 compared to the year 

ended December 31, 2020. 

Cost of revenue - consumer increased by 56% to $6.9 million for the year ended December 31, 2020, from $4.4 million 
for the year ended December 31, 2019. This increase in expense is primarily related to an increase in outsourcing subcontracted 
labor  of  approximately  $1.3  million  is  due  to  the  investment  in  technology  infrastructure.  We  increased  outside  labor  to 
accelerate a technology change which assisted us in the rollout of HeyExpert, a leading platform for online expert guidance. In 
addition, there was an increase in salary and employee related expenses of approximately $0.4 million, in credit card processing 
fees  of  approximately  $0.3  million,  in  depreciation  expense  of  approximately  $0.3  million,  and  backup  server  facilities  of 
approximately $0.1 million. 

Sales and Marketing - Business  

Our  Sales  and  marketing  -  business  expenses  consist  of  compensation  and  related  expenses  for  sales  and  marketing 
personnel, as well as advertising, marketing events, public relations, trade show exhibit expenses and allocated occupancy costs 
and related overhead. 

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Sales and marketing - business   ...... $ 

139,866 

$ 

128,752 

 9 % $ 

128,752 

$ 

140,880 

 (9) %

Percentage of total revenue   ...........

Headcount (at period end)     .............

 30 %

460 

 35 %

309 

 49 %  

 35 %

309 

 48 %

449 

 (31) %

Sales and marketing - business expenses increased by 9% to $139.9 million for the year ended December 31, 2021, from 
$128.8 million for the year ended December 31, 2020. This is primarily related to an increase in salary and employee related 
expenses  of  approximately  $7.7  million,  an  increase  in  marketing  events,  advertising,  and  public  relations  of  approximately 

71

 
 
 
 
 
 
 
$6.6 million, and an increase in depreciation expense of approximately $0.2 million, partially offset by a decrease in business 
services and outsourcing subcontracted labor of approximately $3.4 million. 

We have adjusted our marketing and hiring efforts to account for the impact of the COVID-19 pandemic. In particular, 
we  have  adapted  our  marketing  strategy  to  include  targeted  digital  experiences  that  emphasize  the  unique  positioning  of  our 
messaging  and  AI  offerings  to  help  brands  succeed  in  this  new  environment.  Our  marketing  message  has  shifted  to  include 
business continuity and virtualization of the contact center in addition to business improvement. 

Sales  and  marketing  -  business  expenses  decreased  by  9%  to  $128.8  million  for  the  year  ended  December  31,  2020, 
from  $140.9  million  for  the  year  ended  December  31,  2019.  This  is  primarily  related  to  a  decrease  in  salary  and  employee 
related expenses of approximately $7.5 million, a decrease in marketing events, advertising, public relations, and trade show 
exhibit  expenses  of  approximately  $3.3  million,  and  a  decrease  in  business  services  and  outsourcing  subcontracted  labor  of 
approximately $2.6 million. These decreases were offset in part by an increase in backup server facilities of approximately $0.7 
million and in depreciation expense of approximately $0.6 million. 

Sales and Marketing - Consumer  

Our Sales and marketing - consumer expenses consist of compensation and related expenses for marketing personnel, as 

well as online promotion, public relations, and allocated occupancy costs and related overhead. 

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Sales and marketing - consumer  .... $ 

25,555 

$ 

21,021 

 22 % $ 

21,021 

$ 

15,934 

 32 %

Percentage of total revenue   ...........

Headcount (at period end)     .............

 5 %

17 

 6 %

19 

 (11) %  

 6 %

19 

 5 %

18 

 6 %

Sales and marketing - consumer expenses increased by 22% to $25.6 million for the year ended December 31, 2021, from 
$21.0 million for the year ended December 31, 2020. This increase is primarily attributable to an increase in marketing expense 
of approximately $4.2 million, an increase in outsourcing subcontracted labor of approximately $0.2 million, and an increase in 
salary and employee related expenses of approximately $0.2 million.

Sales  and  marketing  -  consumers  expenses  increased  by  32%  to  $21.0  million  for  the  year  ended  December  31,  2020, 
from $15.9 million for the year ended December 31, 2019. This increase is primarily attributable to an increase in marketing 
expense  of  approximately  $4.8  million,  in  outsourcing  subcontracted  labor  of  approximately  $0.2  million,  and  credit  card 
processing fees of approximately $0.1 million. 

General and Administrative  

Our general and administrative expenses consist of compensation and related expenses for executive, accounting, legal, 

human resources and administrative personnel, professional fees and other general corporate expenses.

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

General and administrative  ............ $ 

76,757 

$ 

60,557 

 27 % $ 

60,557 

$ 

56,967 

Percentage of total revenue   ...........

Headcount (at period end)     .............

 16 %

166 

 17 %

140 

 19 %  

 17 %

140 

 20 %

149 

 6 %

 (6) %

General  and  administrative  expenses  increased  by  27%  to  $76.8  million  for  the  year  ended  December  31,  2021,  from 
$60.6  million  for  the  year  ended  December  31,  2020.  This  is  primarily  related  to  an  increase  in  in  business  services  and 
outsourced labor of approximately $7.1 million, an increase in acquisition related costs of $5.8 million, an increase in one time 
charges of $3.9 million, an increase in salary and employee related expenses of approximately $0.2 million, and an increase in 
amortization of approximately $0.4 million. These increases were offset in part by a decrease in facilities of approximately $1.1 
million and depreciation expense of approximately $0.1 million.

72

 
 
 
 
 
 
General and administrative expenses increased by 6% to $60.6 million for the year ended December 31, 2020, from $57.0 
million for the year ended December 31, 2019. This is primarily related to an increase in salary and employee related expenses 
of  approximately  $4.3  million  and  in  business  services  and  outsourced  labor  of  approximately  $2.6  million.  These  increases 
were  offset  in  part  by  a  decrease  in  facilities  of  approximately  $2.7  million  and  depreciation  expense  of  approximately  $0.7 
million.

Product Development

Our product development expenses consist of compensation and related expenses for product development personnel as 
well  as  allocated  occupancy  costs  and  related  overhead  and  outsourced  labor  and  expenses  for  testing  new  versions  of  our 
software. 

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Product development    ..................... $ 

158,390 

$ 

108,414 

 46 % $ 

108,414 

$ 

82,145 

 32 %

Percentage of total revenue   ...........

Headcount (at period end)     .............

 34 %

602 

 30 %

467 

 29 %  

 30 %

467 

 28 %

451 

 4 %

Product  development  costs  increased  by  46%  to  $158.4  million  for  the  year  ended  December  31,  2021,  from  $108.4 
million for the year ended December 31, 2020. This is primarily related to an increase in salaries and employee related expenses 
of  approximately  $34.4  million,  in  business  services  and  outsourcing  subcontracted  labor  of  approximately  $7.6  million,  in 
backup  server  facilities  of  approximately  $3.5  million  related  to  costs  supporting  our  backup  servers  and  in  depreciation 
expense  of  approximately  $4.4  million.  We  continued  to  make  investments  in  public  cloud  migration,  and  in  enhancing  and 
expanding  new  features  of  the  Conversational  Cloud,  including  Voice.  Also,  we  continued  to  invest  in  bringing  more  data 
scientists and machine learning engineers to focus on Conversational Al. 

Product  development  costs  increased  by  32%  to  $108.4  million  for  the  year  ended  December  31,  2020,  from  $82.1 
million for the year ended December 31, 2019. This is primarily related to an increase in salaries and employee related expenses 
of  approximately  $11.9  million,  in  business  services  and  outsourcing  subcontracted  labor  of  approximately  $8.6  million,  in 
backup  server  facilities  of  approximately  $1.1  million  related  to  costs  supporting  our  backup  servers  and  in  depreciation 
expense of approximately $5.0 million. We made investments in public cloud migration, and in enhancing and expanding new 
features  of  the  Conversational  Cloud.  Also,  we  invested  in  bringing  more  data  scientists  and  machine  learning  engineers  to 
focus on Conversational Al. 

We  continue  to  invest  in  new  product  development  efforts  to  expand  the  capability  of  the  Conversational  Cloud.  In 
accordance  with  ASC  350-40,  “Internal-Use  Software”,  as  new  projects  are  initiated  that  provide  functionality  to  the 
Conversational  Cloud  platform,  the  associated  development  and  employee  costs  will  be  capitalized.  Upon  completion,  the 
project costs will be depreciated over five years. During the years ended December 31, 2021, 2020, and 2019, $36.1 million, 
$33.9 million, and $29.1 million was capitalized, respectively.

Restructuring Costs

Restructuring  costs  consist  of  reprioritizing  and  reallocating  resources  to  focus  on  areas  believed  to  show  high  growth 

potential.

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Restructuring Costs    ....................... $ 

3,397 

$ 

29,420 

 (89) % $ 

29,420 

$ 

2,043 

 1,340 %

Percentage of total revenue   ...........

 1 %

 8 %

 8 %

 1 %

Restructuring costs decreased by 89% to $3.4 million for the year ended December 31, 2021, from $29.4 million for the 
year ended December 31, 2020. This decrease is attributable primarily as a result of a decrease in restructuring costs related to 
lease abandonment recorded in 2020. 

73

 
 
 
Restructuring costs increased by 1,340% to $29.4 million for the year ended December 31, 2020, from $2.0 million for 
the  year  ended  December  31,  2019.  This  increase  is  attributable  to  an  increase  in  restructuring  costs  related  to  lease 
abandonment  of  approximately  $24.1  million,  along  with  severance  and  other  compensation  costs  of  approximately  $5.3 
million.  

In  response  to  the  COVID-19  pandemic,  the  Company  went  through  a  re-evaluation  of  our  real  estate  needs.  In 
connection with this re-evaluation, and the success we have had working remotely, it was decided in July 2020 that we would 
significantly reduce the real estate space we lease. This decision resulted in the significant reduction of the real estate space we 
lease  and  the  removal  of  the  associated  right  of  use  assets  (“ROU  assets”).  Furthermore,  this  resulted  in  various  one-time 
expenses in connection with the abandonment of the majority of our leased facilities. The lease restructuring costs noted above 
are a result of this transition to an employee-centric workforce model that does not rely on traditional offices. During the second 
quarter of 2021, the Company decided to reoccupy some of its leased space to provide its employees with the option of working 
in an office space environment if they choose to do so. 

Amortization of Purchased Intangibles  

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Amortization of purchased 
intangibles   ..................................... $ 

2,045 

$ 

1,639 

 25 % $ 

1,639 

$ 

1,794 

 (9) %

Percentage of total revenue   ...........

 — %

 — %

 — %

 1 %

Amortization expense for purchased intangibles increased by 25% to $2.0 million for the year ended December 31, 2021, 
from $1.6 million for the year ended December 31, 2020, and decreased by 9% to $1.6 million for the year ended December 31, 
2020,  from  $1.8  million  for  the  year  ended  December  31,  2019.  The  year  over  year  variance  is  primarily  attributable  to 
amortization  of  patents  and  customer  relationships  as  well  as  the  intangible  assets  acquired  in  the  three  acquisitions  that 
occurred in 2021. 

Additional  amortization  expense  in  the  amount  of  $7.3  million,  $1.9  million,  and  $1.1  million  for  the  years  ended 
December 31, 2021, 2020, and 2019, respectively, is included in cost of revenue. The increase from 2020 to 2021 was due to 
the three acquisitions that occurred in 2021. See Note 9 – Acquisitions in the Notes to the Consolidated Financial Statements 
under Item 8 of this Annual Report on Form 10-K for a full description of the acquisitions.

Other Expense, net  

Other expense, net consists of interest income on cash and cash equivalents, investment income, and financial (expense) 
income which is a result of currency rate fluctuations associated with exchange rate movement of the U.S. dollar against the 
New Israeli Shekel, British Pound, Euro, Australian Dollar, and Japanese Yen.

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Interest expense    ............................. $ 

(37,406)  $ 

(14,334) 

 161 % $ 

(14,334)  $ 

Other income (expense)    ................

3,294 

(1,343) 

 345 %  

(1,343) 

Other expense, net    ......................... $ 

(34,112)  $ 

(15,677) 

 118 % $ 

(15,677)  $ 

(7,407) 

1,213 

(6,194) 

 94 %

 (211) %

 153 %

Other expense, net increased by $18.4 million to an expense of $34.1 million for the year ended December 31, 2021, from 
an expense of $15.7 million for the year ended December 31, 2020. This increase was primarily attributable to an increase in 
interest  expense  attributable  to  the  2024  Notes  and  the  2026  Notes,  partially  offset  by  interest  income  on  cash  and  cash 
equivalents and financial income which is attributable to currency rate fluctuations.

Other expense, net increased by $9.5 million to an expense of $15.7 million for the year ended December 31, 2020, from 
an expense of $6.2 million for the year ended December 31, 2019. This increase was primarily attributable to an increase in 
interest expense attributable to the 2024 Notes, partially offset by interest income on cash and cash equivalents and financial 
income which is attributable to currency rate fluctuations.

74

 
 
 
(Benefit From) Provision For Income Taxes  

Year Ended December 31,

Year Ended December 31,

2021

2020

% Change

2020

2019

% Change

(Dollars in thousands)

Provision for (benefit from) 
income taxes    .................................. $ 

(2,404)  $ 

2,466 

 (198) % $ 

2,466  $ 

2,845 

 (13) %

We had a tax benefit from income taxes of $2.4 million for the year ended December 31, 2021 and a provision for income 
taxes of $2.5 million for the year ended December 31, 2020. Our consolidated effective tax rate was impacted by the statutory 
income tax rates applicable to each of the jurisdictions in which we operate. During 2021, the Company recorded a benefit of 
$3.2  million  for  a  release  of  valuation  allowance  on  certain  LivePerson,  Inc.  net  operating  losses  in  connection  with  the 
acquisitions of Tenfold and VoiceBase. The decrease in tax expense is primarily due to these factors. 

Income tax expense decreased by 13% to $2.5 million for the year ended December 31, 2020, from $2.8 million for the 
year ended December 31, 2019.  Our consolidated effective tax rate was impacted by the statutory income tax rates applicable 
to each of the jurisdictions in which we operate. During 2020, we recognized a benefit of $0.6 million due to net operating loss 
and research and development credits carryback resulting from the CARES Act. The decrease in tax expense is primarily due to 
these factors. 

Net Loss  

We had a net loss of $125.0 million for the year ended December 31, 2021 compared to a net loss of $107.6 million for 
the  year  ended  December  31,  2020.  Revenue  increased  approximately  $103.0  million,  operating  expenses  increased  by 
approximately  $106.8  million,  the  benefit  from  income  taxes  increased  approximately  $4.9  million,  and  other  expense,  net 
increased by $18.4 million, contributing to a net increase in net loss of approximately $17.4 million.

We had a net loss of $107.6 million for the year ended December 31, 2020 compared to a net loss of $96.1 million for the 
year  ended  December  31,  2019.  Revenue  increased  approximately  $75.0  million,  operating  expenses  increased  by 
approximately  $77.4  million,  the  provision  for  income  taxes  decreased  approximately  $0.4  million,  and  other  expense,  net 
increased by approximately $9.5 million,  contributing to a net increase in net loss of approximately $11.5 million.

Liquidity and Capital Resources

Year Ended December 31,

2021

2020

2019

(In thousands)

Consolidated Statements of Cash Flows Data:

Cash flows provided by (used in) operating activities   .................................................. $ 

3,247  $ 

33,605  $ 

Cash flows used in investing activities      .........................................................................

(140,249) 

Cash flows provided by financing activities  .................................................................

11,843 

(43,476) 

483,843 

(59,158) 

(48,506) 

217,851 

As  of  December  31,  2021,  we  had  approximately  $521.8  million  in  cash  and  cash  equivalents,  a  decrease  of 
approximately  $130.6  million  from  December  31,  2020.  The  decrease  is  primarily  attributable  to  cash  used  in  investing 
activities related to the acquisitions of e-bot7, VoiceBase, and Tenfold partially offset by proceeds from issuance of common 
stock in connection with the exercise of options and the ESPP.

Net cash provided by operating activities was $3.2 million in the year ended December 31, 2021. Our net loss was $125.0 
million,  which  includes  the  effect  of  non-cash  expenses  related  to  stock-based  compensation,  amortization  of  purchased 
intangibles  and  finance  leases,  depreciation,  provision  for  doubtful  accounts,  and  gain  on  termination  of  lease,  as  well  as 
increases  in  accrued  expenses  and  deferred  revenue.  This  was  partially  offset  by  increases  in  accounts  receivable,  prepaid 
expenses and decrease in operating lease liability. Net cash provided by operating activities was $33.6 million in the year ended 
December  31,  2020.  Our  net  loss  was  $107.6  million,  which  includes  the  effect  of  non-cash  expenses  related  to  stock-based 
compensation, amortization of purchased intangibles and finance leases, depreciation, and provision for doubtful accounts, as 
well  as  increases  in  operating  lease  liability  due  to  the  transition  to  an  employee  centric  model  under  which  employees  will 

75

 
 
 
 
 
 
work remotely, and increase in accrued expenses and decrease in accounts receivable. This was partially offset by increases in 
prepaid expenses and other current assets and decrease in deferred revenue. 

Net cash used in investing activities was $140.2 million in the year ended December 31, 2021 was driven primarily by the 
acquisition costs related to goodwill for the purchase of e-bot7, VoiceBase, and Tenfold, the  purchase of fixed assets for our 
co-location facilities, capitalization of internally developed software, and the repayment of the indebtedness acquired with e-
bot7, VoiceBase, and Tenfold. Net cash used in investing activities was $43.5 million in the year ended December 31, 2020 due 
primarily to the purchase of fixed assets for our co-location facilities and capitalization of internally developed software. 

Net cash provided by financing activities was $11.8 million in the year ended December 31, 2021 due primarily to the 
proceeds from issuance of common stock in connection with the exercise of stock options by employees partially offset by the 
finance lease payment. Net cash provided by financing activities was $483.8 million in the year ended December 31, 2020 due 
primarily to the proceeds from issuance of the 2026 Notes and proceeds from issuance of common stock in connection with the 
exercise of stock options by employees. This was partially offset by purchases of capped calls, debt issuance costs, and payment 
of our finance lease. The net proceeds of the 2026 Notes was approximately $506.6 million, after deducting initial purchaser 
debt issuance costs paid or payable by us, from issuance of the 2026 Notes, as described in Note 8 – Convertible Senior Notes 
and Capped Call Transactions of the Notes to the Consolidated Financial Statements.

We have incurred significant expenses to develop our technology and services, to hire employees in our customer service, 
sales, marketing and administration departments, and for the amortization of purchased intangible assets, as well as non-cash 
compensation costs. Historically, we have incurred net losses and negative cash flows for various quarterly and annual periods 
since our inception, including during numerous quarters and annual periods in the past several years. As of December 31, 2021, 
we had an accumulated deficit of approximately $516.9 million.

In response to the COVID-19 pandemic, we had undertaken a re-evaluation of our real estate needs. In connection with 
this re-evaluation, and the success we have had working remotely for the past several months, we significantly reduced the real 
estate  space  we  lease.  This  resulted  in  various  one-time  cash  expenses  in  connection  with  early  termination  of  some  of  our 
leases. During the second quarter of 2021, we decided to reoccupy some of our leased space to provide our employees with the 
option of working in an office space environment if they choose to do so as well as provide some remote shared space working 
locations globally.

Our principal sources of liquidity are the net proceeds from the issuance of our convertible senior notes, after deducting 
purchaser discounts and debt issuance costs paid by us, issuance of common stock in connection with the exercise of options, 
and  payments  received  from  customers  using  our  products.  We  anticipate  that  our  current  cash  and  cash  equivalents  will  be 
sufficient to satisfy our working capital and capital requirements for at least the next 12 months. However, we cannot assure 
you  that  we  will  not  require  additional  funds  prior  to  such  time,  and  we  would  then  seek  to  sell  additional  equity  or  debt 
securities through public financings, or seek alternative sources of financing. We cannot assure you that additional funding will 
be available on favorable terms, when needed, if at all. If we are unable to obtain any necessary additional financing, we may be 
required  to  further  reduce  the  scope  of  our  planned  sales  and  marketing  and  product  development  efforts,  which  could 
materially adversely affect our financial condition and operating results. In addition, we may require additional funds in order to 
fund  more  rapid  expansion,  to  develop  new  or  enhanced  services  or  products,  or  to  invest  in  or  acquire  complementary 
businesses, technologies, services or products.

Capital Expenditures

Total capital expenditures in 2021 were approximately $45.7 million, primarily related to software capitalization and to 
the continued expansion of our co-location facilities. Our total capital expenditures are not currently expected to exceed $49.5 
million in 2022. We anticipate that our current cash and cash equivalents and cash from operations will be sufficient to fund 
these capital expenditures.

Indemnifications

We enter into service and license agreements in the ordinary course of business. Pursuant to some of these agreements, 
we agree to indemnify certain customers from and against certain types of claims and losses suffered or incurred by them as a 
result of using our products.

76

We also have agreements whereby our executive officers and directors are indemnified for certain events or occurrences 
while  the  officer  or  director  is,  or  was  serving,  at  our  request  in  such  capacity.  The  maximum  potential  amount  of  future 
payments we could be required to make under these indemnification agreements is unlimited; however, we have a directors and 
officers insurance policy that reduces our exposure and enables us to recover a portion of any future amounts paid. As a result 
of  our  insurance  policy  coverage,  we  believe  the  estimated  fair  value  of  these  indemnification  agreements  is  minimal. 
Currently, we have no liabilities recorded for these agreements as of December 31, 2021.

Off Balance Sheet Arrangements

We do not engage in off-balance sheet financing arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risks

Our Israeli operations have currency rate fluctuation risk associated with the exchange rate movement of the U.S. dollar 
against the NIS. For the year ended December 31, 2021, the U.S. dollar depreciated as compared to the NIS by an average of 
6% as compared to December 31, 2020.  For the year ended December 31, 2021, expenses generated by our Israeli operations 
totaled  approximately  $69.5  million.  Based  on  our  exposure  to  NIS  exchange  rate  fluctuation  against  a  dollar  as  of 
December 31, 2021, a 1% increase or decrease in the value of the NIS would increase or decrease our income before income 
taxes by approximately $0.7 million.

We  actively  monitor  the  movement  of  the  U.S.  dollar  against  the  NIS,  Pound  Sterling,  Euro,  Australian  dollar,  and 
Japanese Yen and have considered the use of financial instruments, including but not limited to derivative financial instruments, 
which  could  mitigate  such  risk.  If  we  determine  that  our  risk  of  exposure  materially  exceeds  the  potential  cost  of  derivative 
financial instruments, we may in the future enter in to these types of investments. The functional currency of our wholly-owned 
Israeli subsidiaries, LivePerson Ltd. (formerly HumanClick Ltd.) and Kasamba Ltd., is the U.S. dollar; the functional currency 
of our operations in the United Kingdom is the Pound Sterling; the functional currency of our operations in the Netherlands, 
Germany, France and Italy is the Euro; the functional currency of our operations in Australia is the Australian Dollar; and the 
functional currency of our operations in Japan is the Japanese Yen.

Collection Risks

Our accounts receivable are subject, in the normal course of business, to collection risks. We regularly assess these risks 
and have established policies and business practices to protect against the adverse effects of collection risks. During 2021, we 
increased our allowance for doubtful accounts from approximately $5.3 million to approximately $6.3 million. During 2020, we 
increased  our  allowance  for  doubtful  accounts  from  approximately  $3.1  million  to  approximately  $5.3  million.  A  large 
proportion  of  receivables  are  due  from  larger  corporate  customers  that  typically  have  longer  payment  cycles.  We  base  our 
allowance for doubtful accounts on specifically identified credit risks of customers, historical trends and other information that 
we believe to be reasonable. Receivables are written-off and charged against the applicable recorded allowance when we have 
exhausted collection efforts without success. We adjust our allowance for doubtful accounts when accounts previously reserved 
have been collected. 

An  allowance  for  doubtful  accounts  is  established  for  losses  expected  to  be  incurred  on  accounts  receivable  balances. 
Judgment  is  required  in  the  estimation  of  the  allowance  and  we  evaluate  the  collectability  of  our  accounts  receivable  and 
contract assets based on a combination of factors. If we become aware of a customer’s inability to meet its financial obligations, 
a  specific  allowance  is  recorded  to  reduce  the  net  receivable  to  the  amount  reasonably  believed  to  be  collectible  from  the 
customer.  For  all  other  customers,  we  use  an  aging  schedule  and  recognize  allowances  for  doubtful  accounts  based  on  the 
creditworthiness of the debtor, the age and status of outstanding receivables, the current business environment and our historical 
collection experience adjusted for current expectations for the customer or industry. Accounts receivable are written off against 
the allowance for uncollectible accounts when we determine amounts are no longer collectible.

Interest Rate Risk

Our  investments  consist  of  cash  and  cash  equivalents.  Therefore,  changes  in  market  interest  rates  do  not  affect  in  any 

material respect the value of the investments as recorded by us.

77

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial conditions or results of operations. If 
our  costs  were  to  become  subject  to  significant  inflationary  pressures,  we  may  not  be  able  to  fully  offset  such  higher  costs 
through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

78

Item 8. Consolidated Financial Statements and Supplementary Data

Index to Financial Statements

Report of Independent Registered Public Accounting Firm (BDO USA, LLP New York, New York; PCAOB ID 243)    ..........

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2021 and 2020     ..........................................................................................

Consolidated Statements of Operations for each of the years ended December 31, 2021, 2020, and 2019    ...........................
Consolidated Statements of Comprehensive Loss for each of the years ended December 31, 2021, 2020, and 2019    ...........
Consolidated Statements of Stockholders’ Equity for each of the years ended December 31, 2021, 2020, and 2019   ...........

Consolidated Statements of Cash Flows for each of the years ended December 31, 2021, 2020, and 2019      ..........................

Notes to Consolidated Financial Statements      ...........................................................................................................................

Page

80

82

83
84
85

86

87

79

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
LivePerson, Inc.
New York, New York

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of LivePerson, Inc. and subsidiaries (the “Company”) as 
of  December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity 
and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to 
as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material 
respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash 
flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally 
accepted in the United States of America.

We  also  have  audited,  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United 
States)  (“PCAOB”),  the  Company’s  internal  control  over  financial  reporting  as  of  December  31,  2021,  based  on  criteria 
established  in  Internal  Control  -  Integrated  Framework  (2013)  issued  by  the  Committee  of  Sponsoring  Organizations  of  the 
Treadway Commission (“COSO”) and our report dated February 28, 2022 expressed an unqualified opinion thereon. 

Basis for Opinion

These  consolidated  financial  statements  are  the  responsibility  of  the  Company’s  management.  Our  responsibility  is  to 
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm 
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal 
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We  conducted  our  audits  in  accordance  with  the  standards  of  the  PCAOB.  Those  standards  require  that  we  plan  and 
perform  the  audit  to  obtain  reasonable  assurance  about  whether  the  consolidated  financial  statements  are  free  of  material 
misstatement, whether due to error or fraud.

Our  audits  included  performing  procedures  to  assess  the  risks  of  material  misstatement  of  the  consolidated  financial 
statements,  whether  due  to  error  or  fraud,  and  performing  procedures  that  respond  to  those  risks.  Such  procedures  included 
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits 
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating 
the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our 
opinion.

Critical Audit Matters

The  critical  audit  matters  communicated  below  are  matters  arising  from  the  current  period  audit  of  the  consolidated 
financial  statements  that  were  communicated  or  required  to  be  communicated  to  the  audit  committee  and  that:  (1)  relate  to 
accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, 
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the 
consolidated  financial  statements,  taken  as  a  whole,  and  we  are  not,  by  communicating  the  critical  audit  matters  below, 
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Contracts with Multiple Performance Obligations

As described in Note 1 to the Company’s consolidated financial statements, certain of the Company’s revenue contracts 
contain  multiple  performance  obligations  primarily  relating  to  the  sale  of  hosted  subscription  and  professional  services.  For 
these revenue contracts, the Company is required to assess all services promised in its contracts with customers and identify 
separate  performance  obligations.    The  Company  accounts  for  the  individual  performance  obligations  separately  if  they  are 
distinct or represent a series of distinct services that are substantially the same and that have the same pattern of recognition. 

80

We  identified  revenue  recognition  related  to  contracts  that  contain  multiple  performance  obligations  as  a  critical  audit 
matter.  The  determination  of  whether  multiple  services  within  a  contract  are  distinct  performance  obligations  that  should  be 
accounted  for  separately  requires  management  to  exercise  significant  judgment  that  includes  a  high  degree  of  subjectivity. 
Auditing this element involved especially challenging auditor judgment due to the nature and extent of audit effort required to 
address this matter.

The primary procedures we performed to address this critical audit matter included:

•

•

•

Testing the design and operating effectiveness of certain controls relating to management’s determination of separately 
identified performance obligations.

Evaluating  management’s  technical  accounting  conclusions  and  assessing  the  reasonableness  of  management’s 
judgments and assumptions in the determination of whether the services are distinct performance obligations.

Testing  a  sample  of  revenue  contracts  to  evaluate  the  determination  of  the  identification  of  distinct  performance 
obligations made by management.

Business Combinations – Valuation of Acquired Intangible Asset and Accounting for Contingent Consideration 

As  described  in  Note  9  to  the  Company’s  consolidated  financial  statements,  during  fiscal  year  2021,  the  Company 
completed acquisitions of e-bot7, VoiceBase, Inc. and Callinize, Inc. dba Tenfold for $50.7 million, $111.4 million and $112.2 
million, respectively. The Company accounted for these acquisitions under the acquisition method of accounting for business 
combinations. Accordingly, the purchase price of each acquisition was allocated to the assets acquired and liabilities assumed 
based on their respective fair values, including intangible assets related to acquired technology and customer relationships and 
liabilities related to contingent consideration.

The fair value determination of the intangible assets required management to make subjective estimates and assumptions, 
specifically related to forecasts of future cash flows and the selection of the discount rates.  Additionally, management had to 
evaluate  the  accounting  for  contingent  consideration  to  determine  if  the  amounts  should  be  included  as  a  component  of  the 
purchase price or as transactions separate from the business combinations. 

We  identified  the  valuation  of  the  intangible  assets  and  the  accounting  for  contingent  consideration  as  a  critical  audit 
matter. The principal consideration for our determination included the subjectivity and judgment required to determine the fair 
value of acquired technology and customer relationships and the judgment management uses to determine the accounting for 
contingent  consideration.  Auditing  the  valuation  of  acquired  technology  and  customer  relationships  and  evaluating  the 
application  of  the  accounting  standard  for  contingent  consideration  involved  a  high  degree  of  auditor  judgment  due  to  the 
subjectivity  and  judgment  used  in  evaluating  management’s  assumptions  used  in  determining  the  fair  value  of  acquired 
technology and customer relationships and the evaluation of management’s accounting assessment of contingent consideration. 

The primary procedures we performed to address this critical audit matter included:

•

•

•

•
•

Testing  the  design  and  operating  effectiveness  of  controls  over  the  valuation  of  the  intangible  assets,  including 
management’s  controls  over  forecasts  of  future  cash  flows  and  selection  of  discount  rates  and  management’s 
evaluation of the accounting for contingent consideration.
Testing  assumptions  used  to  develop  forecasts  of  future  cash  flows  such  as  revenue  growth  rates  and  operating 
margins.     
Utilizing personnel with specialized knowledge and skill with valuation to assist in: (i) assessing the reasonableness of 
discount  rates  incorporated  into  the  various  valuation  models  (ii)  assessing  the  appropriateness  of  various  valuation 
models utilized by management to determine the fair values of the acquired technology and customer relationships. 
Evaluating the application of the accounting standard in the determination of the recording of contingent consideration. 
Testing the mathematical accuracy of the future cash flows used in the fair value calculations of acquired technology 
and customer relationships.  

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2005. 
New York, New York
February 28, 2022 

81

LIVEPERSON, INC.

CONSOLIDATED BALANCE SHEETS

Current assets:

ASSETS

Cash and cash equivalents   ...................................................................................................................... $ 
Accounts receivable, net of allowances of $6,338 and $5,344, as of December 31, 2021 and 2020, 
respectively .............................................................................................................................................

Prepaid expenses and other current assets   ..............................................................................................

Total current assets    .............................................................................................................................

Operating lease ROU asset (Note 10)   ........................................................................................................

Property and equipment, net (Note 6)    ........................................................................................................

Contract acquisition costs  ...........................................................................................................................

Intangibles, net (Note 5)    .............................................................................................................................

Goodwill (Note 5)    ......................................................................................................................................

Deferred tax assets    .....................................................................................................................................

Other assets    ................................................................................................................................................

December 31,

2021

2020

(In thousands)

521,846  $ 

654,152 

93,804 

20,626 

636,276 

1,977 

124,726 

40,675 

85,554 

291,215 

5,034 

1,199 

80,423 

14,236 

748,811 

614 

106,055 

41,021 

10,927 

95,192 

2,032 

1,780 

Total assets ......................................................................................................................................... $ 

1,186,656  $ 

1,006,432 

Current liabilities:

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable    ................................................................................................................................... $ 

16,942  $ 

Accrued expenses and other current liabilities (Note 7)    ........................................................................

Deferred revenue (Note 2)   ......................................................................................................................

Operating lease liability (Note 10)      .........................................................................................................

Total current liabilities     .......................................................................................................................

Deferred revenue, net of current portion (Note 2)      .....................................................................................

Convertible senior notes, net (Note 8)    .......................................................................................................

Operating lease liability, net of current portion (Note 10)     .........................................................................

Deferred tax liability      ..................................................................................................................................

Other liabilities     ...........................................................................................................................................

Total liabilities  ....................................................................................................................................

104,297 

98,808 

3,380 

223,427 

54 

574,238 

2,733 

2,049 

34,718 

837,219 

14,115 

99,870 

88,848 

5,718 

208,551 

409 

538,432 

7,180 

1,622 

6,304 

762,498 

Commitments and contingencies (Note 12)

Stockholders’ equity:

Preferred stock, $0.001 par value - 5,000,000 shares authorized, none issued    ......................................
Common stock, $0.001 par value - 200,000,000 and 200,000,000 shares authorized, 74,980,546 and 
70,264,265 shares issued, and 72,234,303 and 67,554,435 shares outstanding as of December 31, 
2021 and 2020, respectively       .................................................................................................................

Additional paid-in capital   .......................................................................................................................
Treasury stock, at cost; 2,746,243 and 2,709,830 shares as of December 31, 2021 and 2020, 
respectively   ...........................................................................................................................................

Accumulated deficit     ...............................................................................................................................

Accumulated other comprehensive (loss) income      .................................................................................

Total stockholders’ equity   ..................................................................................................................

— 

— 

75 

70 

871,788 

635,672 

(3) 

(516,859) 

(5,564) 

349,437 

(3) 

(391,885) 

80 

243,934 

 Total liabilities and stockholders’ equity      .................................................................................................. $ 

1,186,656  $ 

1,006,432 

See accompanying notes to consolidated financial statements.

82

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Revenue    .......................................................................................................................... $ 
Costs and expenses: (1) (2)
Cost of revenue (3)
Sales and marketing     ...................................................................................................

   ......................................................................................................

General and administrative  .........................................................................................

Product development    ..................................................................................................

Restructuring costs  .....................................................................................................

Amortization of purchased intangibles    ......................................................................

Total costs and expenses    ........................................................................................

Loss from operations  ......................................................................................................

Other expense, net:

Interest expense, net    ..................................................................................................

Other income (expense), net  .....................................................................................

Total other expense, net      .................................................................................................

Loss before (benefit from) provision for income taxes  ..................................................

(Benefit from) provision for income taxes   ................................................................

Year Ended December 31,

2021

2020

2019

(In thousands, except share and per share amounts)

469,624  $ 

366,620  $ 

291,609 

156,880 

165,421 

76,757 

158,390 

3,397 

2,045 

562,890 

(93,266) 

(37,406) 

3,294 

(34,112) 

(127,378) 

(2,404) 

106,268 

149,773 

60,557 

108,414 

29,420 

1,639 

456,071 

(89,451) 

(14,334) 

(1,343) 

(15,677) 

(105,128) 

2,466 

78,878 

156,814 

56,967 

82,145 

2,043 

1,794 

378,641 

(87,032) 

(7,407) 

1,213 

(6,194) 

(93,226) 

2,845 

Net loss   ........................................................................................................................... $ 

(124,974)  $ 

(107,594)  $ 

(96,071) 

Net loss per share of common stock:

Basic   .......................................................................................................................... $ 

Diluted ....................................................................................................................... $ 

(1.80)  $ 

(1.80)  $ 

(1.63)  $ 

(1.63)  $ 

(1.53) 

(1.53) 

Weighted-average shares used to compute net loss income per share:

Basic   ..........................................................................................................................

69,606,105

Diluted .......................................................................................................................

69,606,105

65,888,450

65,888,450

62,593,026

62,593,026

(1) Amounts include stock-based compensation expense, as follows:

Cost of revenue   .................................................................................................................. $ 
Sales and marketing      ...........................................................................................................

General and administrative    ................................................................................................

Product development     ..........................................................................................................

$ 

6,497 
16,942 

15,487 

30,730 

$ 

6,511 
16,106 

15,772 

27,557 

(2) Amounts include depreciation expense, as follows:

Cost of revenue   .................................................................................................................. $ 

10,186 

$ 

10,082 

$ 

Sales and marketing      ...........................................................................................................

General and administrative    ................................................................................................

Product development     ..........................................................................................................

2,448 

160 

14,629 

2,268 

239 

10,237 

4,218 
10,010 

12,216 

17,661 

8,557 

1,642 

908 

5,259 

(3) Amounts include amortization of purchased intangibles and finance leases, as follows:

Cost of revenue   .................................................................................................................. $ 

7,282 

$ 

1,913 

$ 

1,138 

See accompanying notes to consolidated financial statements.

83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Net loss   ........................................................................................................................... $ 

(124,974)  $ 

(107,594)  $ 

(96,071) 

Foreign currency translation adjustment      ........................................................................

(5,644) 

4,604 

(93) 

Comprehensive loss  ........................................................................................................ $ 

(130,618)  $ 

(102,990)  $ 

(96,164) 

See accompanying notes to consolidated financial statements.

Year Ended December 31,

2021

2020

2019

(In thousands)

84

 
 
 
LIVEPERSON, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock

Treasury Stock

Shares

Amount

Shares

Amount

Additional
Paid-in
Capital

Accumulated
Deficit

Accumulated 
Other
Comprehensive
Loss

Total

(In thousands, except share data)

Balance at December 31, 2018     .......

  63,676,229  $ 

64 

  (2,681,285)  $ 

(3)  $  362,590  $  (187,491)  $ 

(4,431)  $  170,729 

Common stock issued upon 
exercise of stock options    .............

  1,523,018 

Common stock issued upon 
vesting of restricted stock units     ..

  1,197,576 

Stock-based compensation  ..........

— 

Common stock issued under 
ESPP    ...........................................

Common stock repurchase    ..........

Equity component of convertible 
senior notes  .................................

Equity component of convertible 
senior notes issuance costs  ..........

Purchase of capped call option      ...

Net loss   .......................................

Other comprehensive loss   ...........
Balance at December 31, 2019     .......

146,250 

— 

— 

— 

— 

— 

— 

  66,543,073  $ 

Common stock issued upon 
exercise of stock options    .............

  1,683,315 

Common stock issued upon 
vesting of restricted stock units     ..
Common stock as earnout 
payment in connection with 
AdvantageTec Inc.     ......................

Stock-based compensation  ..........
Bonus cash payment settled in 
shares of the Company’s 
common stock     .............................

ASU 2016-13 (Topic 326) 
adjustment  ...................................

Common stock issued under 
ESPP    ...........................................

Equity component of convertible 
senior notes  .................................

Equity component of convertible 
senior notes issuance costs  ..........

Purchase of capped call option      ...
Net loss   .......................................

Other comprehensive income      .....

915,827 

11,508 

— 

991,905 

— 

118,637 

— 

— 

— 
— 

— 

Balance at December 31, 2020     .......

  70,264,265  $ 

Common stock issued upon 
exercise of stock options    .............

Common stock issued upon 
vesting of restricted stock units     ..

Stock-based compensation  ..........
Bonus cash payment settled in 
shares of the Company’s 
common stock     .............................

Common stock repurchase    ..........
Issuance of common stock in 
connection with acquisitions 
(Note 9)   .......................................

Common stock issued under 
ESPP    ...........................................
Net loss   .......................................

Other comprehensive loss   ...........

864,227 

  1,058,361 

— 

538,000 

30,344 

  2,130,213 

95,136 
— 

— 

Balance at December 31, 2021     .......

  74,980,546  $ 

2 

1 

— 

— 

— 

— 

— 

— 

— 

— 
67 

1 

1 

— 

— 

1 

— 

— 

— 

— 

— 
— 

— 

70 

1 

1 

— 

1 

— 

2 

— 
— 

— 

75 

— 

— 

— 

— 

(28,545) 

— 

— 

— 

— 

— 

  (2,709,830)  $ 

— 

— 

— 

— 

— 

— 

— 

— 

— 

16,916 

999 

25,083 

4,142 

(903) 

52,900 

(1,986) 

(23,184) 

— 

— 

— 

— 

— 

— 

— 

— 

— 

(96,071) 

— 
(3)  $  436,557  $  (283,562)  $ 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 
— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 
— 

— 

21,353 

— 

293 

36,132 

24,656 

— 

— 

— 

— 

— 

— 

(729) 

4,002 

162,534 

(3,797) 

(46,058) 
— 

— 

— 

— 

— 

— 
(107,594) 

— 

— 

— 

— 

— 

— 

— 

— 

— 

16,918 

1,000 

25,083 

4,142 

(903) 

52,900 

(1,986) 

(23,184) 

(96,071) 

(93) 

(93) 
(4,524)  $  148,535 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 
— 

21,354 

1 

293 

36,132 

24,657 

(729) 

4,002 

162,534 

(3,797) 

(46,058) 
(107,594) 

— 

4,604 

4,604 

  (2,709,830)  $ 

(3)  $  635,672  $  (391,885)  $ 

80  $  243,934 

— 

— 

— 

— 

(36,413) 

— 

— 
— 

— 

— 

— 

— 

— 

— 

— 

— 
— 

— 

11,700 

(1) 

58,422 

33,502 

(709) 

128,793 

4,409 
— 

— 

— 

— 

— 

— 

— 

— 

— 
(124,974) 

— 

— 

— 

— 

— 

— 

— 
— 

11,701 

— 

58,422 

33,503 

(709) 

128,795 

4,409 
(124,974) 

— 

(5,644) 

(5,644) 

  (2,746,243)  $ 

(3)  $  871,788  $  (516,859)  $ 

(5,564)  $  349,437 

See accompanying notes to consolidated financial statements.

85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES:

Net loss ....................................................................................................................... $ 

(124,974)  $ 

(107,594)  $ 

(96,071) 

Year Ended December 31,

2021

2020

2019

(In thousands)

Adjustments to reconcile net loss to net cash provided by (used in) operating 
activities:
Stock-based compensation expense  .........................................................................
Depreciation  .............................................................................................................
Loss on disposal .......................................................................................................
Amortization of tenant allowance   ............................................................................
Amortization of purchased intangibles    ....................................................................
Amortization of finance leases   ................................................................................
Amortization of debt issuance costs   ........................................................................
Accretion of debt discount on convertible senior notes     ..........................................
Change in fair value of contingent consideration   ....................................................
Allowance for credit losses  ......................................................................................
Gain on settlement of leases   ....................................................................................
Deferred income taxes     .............................................................................................
Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable      ...........................................................................................
Prepaid expenses and other current assets   ..........................................................
Contract acquisition costs noncurrent      ................................................................
Other assets    ........................................................................................................
Accounts payable    ...............................................................................................
Accrued expenses and other current liabilities   ...................................................
Deferred revenue     ................................................................................................
Operating lease liabilities    ...................................................................................
Other liabilities     ...................................................................................................
Net cash provided by (used in) operating activities    ........................................

69,656 
27,423 
— 
— 
5,609 
3,718 
2,499 
33,309 
— 
4,879 
(3,483) 
(6,239) 

(17,309) 
(3,178) 
(1,876) 
547 
801 
8,626 
7,774 
(4,590) 
55 
3,247 

INVESTING ACTIVITIES:

Purchases of property and equipment, including capitalized software   ......................
Payments for acquisitions, net of cash acquired     ........................................................
Purchases of intangible assets     ....................................................................................
Repayment of debt acquired in acquisition     ................................................................
Net cash used in investing activities   ...............................................................

FINANCING ACTIVITIES:

Principal payments for financing leases     .....................................................................
Repurchase of common stock      ....................................................................................
Proceeds from issuance of common stock in connection with the exercise of 
options and ESPP     .......................................................................................................
Proceeds from issuance of convertible senior notes ...................................................
Payment of issuance costs in connection with convertible senior notes     ....................
Payment related to contingent consideration     .............................................................
Purchase of capped call option     ...................................................................................
Net cash provided by financing activities   ......................................................
Effect of foreign exchange rate changes on cash and cash equivalents      ..........................
Net (decrease) increase in cash, cash equivalents, and restricted cash     ...........................
Cash, cash equivalents, and restricted cash - beginning of year    .....................................
Cash, cash equivalents, and restricted cash - end of year      ............................................... $ 

(45,703) 
(70,759) 
(2,610) 
(21,177) 
(140,249) 

(3,554) 
(709) 

16,110 
(4) 
— 
— 
— 
11,843 
(5,461) 
(130,620) 
654,152 
523,532  $ 

65,946 
22,826 
5,147 
— 
2,780 
772 
1,340 
11,564 
(263) 
3,211 
— 
579 

6,371 
23 
(6,463) 
(37) 
(733) 
22,931 
(3,118) 
8,276 
47 
33,605 

(41,641) 
— 
(1,835) 
— 
(43,476) 

(1,154) 
— 

25,355 
517,500 
(11,800) 
— 
(46,058) 
483,843 
3,657 
477,629 
176,523 
654,152  $ 

44,105 
16,366 
— 
(516) 
2,932 
— 
956 
7,605 
(328) 
2,159 
— 
(1,207) 

(43,757) 
(4,712) 
(13,718) 
(30) 
3,808 
(10,882) 
33,953 
388 
(209) 
(59,158) 

(47,582) 
— 
(924) 
— 
(48,506) 

— 
(903) 

21,060 
230,000 
(8,635) 
(487) 
(23,184) 
217,851 
(113) 
110,074 
66,449 
176,523 

86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

2021

2020

2019

(In thousands)

Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance 
sheets

Cash and cash equivalents   ........................................................................................... $ 
Restricted cash in prepaid expenses and other current assets    .....................................
Total cash, cash equivalents, and restricted cash    ........................................................ $ 

521,846  $ 
1,686 
523,532  $ 

654,152  $ 
— 
654,152  $ 

176,523 
— 
176,523 

Supplemental disclosure of other cash flow information:

Cash paid for income taxes     ........................................................................................ $ 
Cash paid for interest  ..................................................................................................

582  $ 

2,090 

4,651  $ 
1,931 

3,304 
848 

Supplemental disclosure of non-cash investing and financing activities:

Purchase of property and equipment recorded in accounts payable   .......................... $ 
ROU assets obtained in exchange for operating lease liabilities      ...............................
ROU assets obtained in exchange for finance lease liabilities   ...................................
Issuance of 38,462 shares of common stock in connection with the Conversable 
transaction on December 13, 2019   .............................................................................
Issuance of 11,508 shares of common stock as earn-out payment in connection 
with AdvantageTec Inc.    .............................................................................................
Issuance of 400,700 and 991,905 shares of common stock to settle cash awards for 
the years 2021 and 2020, respectively    .......................................................................

470  $ 

2,125 
— 

1,638  $ 
— 
10,818 

— 

— 

— 

293 

33,503 

24,657 

Supplemental disclosure of non-cash financing activities related to the e-bot7 
acquisition:

Issuance of 351,462 shares of common stock in connection with the e-bot7 
transaction in July 2021  .............................................................................................. $ 
Fair value of contingent earn-out recorded in other long-term liabilities    ..................

20,012  $ 
6,170 

Supplemental disclosure of non-cash financing activities related to the Tenfold 
acquisition:

Issuance of 698,219 shares of common stock in connection with the Tenfold  
transaction in November 2021     ................................................................................... $ 
Fair value of contingent earn-out recorded in other long-term liabilities    ..................

41,224  $ 
6,946 

Supplemental disclosure of non-cash financing activities related to the VoiceBase 
acquisition:

Issuance of 1,080,532 shares of common stock in connection with the VoiceBase 
transaction in November 2021     ................................................................................... $ 
Fair value of contingent earn-out recorded in other long-term liabilities    ..................

67,557  $ 
16,714 

See accompanying notes to consolidated financial statements.

—  $ 
— 

—  $ 
— 

—  $ 
— 

1,198 
21,588 
— 

1,000 

— 

— 

— 
— 

— 
— 

— 
— 

87

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Description of Business and Summary of Significant Accounting Policies

LivePerson, Inc. (“LivePerson”, the “Company”, “we” or “our”) is a leading Conversational AI company creating digital 
experiences  that  are  Curiously  Human.  Conversational  AI  allows  humans  and  machines  to  interact  using  natural  language, 
including speech or text. During the past decade, consumers have made mobile devices the center of their digital lives, and they 
have  made  mobile  messaging  the  center  of  communication  with  friends,  family  and  peers.  This  trend  has  been  significantly 
accelerated  by  the  COVID-19  pandemic  and  we  believe  can  now  be  viewed  as  a  permanent,  structural  shift  in  consumer 
behavior. Our technology enables consumers to connect with businesses through these same preferred conversational interfaces, 
including  Facebook  Messenger,  SMS,  WhatsApp,  Apple  Business  Chat,  Google  Rich  Business  Messenger  and  Alexa.  These 
messaging  conversations  harness  human  agents,  bots  and  AI  to  power  convenient,  personalized  and  content-rich  journeys 
across  the  entire  consumer  lifecycle,  from  discovery  and  research,  to  sales,  service  and  support,  and  increasingly  marketing, 
social, and brick and mortar engagements. For example, consumers can look up product info like ratings, images and pricing, 
search  for  stores,  see  product  inventory,  schedule  appointments,  apply  for  credit,  approve  repairs,  and  make  purchases  or 
payments - all without ever leaving the messaging channel. These AI and human-assisted conversational experiences constitute 
the  Conversational  Space,  within  which  LivePerson  has  strategically  developed  one  of  the  industry’s  largest  ecosystems  of 
messaging endpoints and use cases. 

The  Conversational  Cloud,  our  enterprise-class  cloud-based  platform,  enables  businesses  to  become  conversational  by 
securely deploying AI-powered messaging at scale for brands with tens of millions of customers and many thousands of agents. 
The  Conversational  Cloud  powers  conversations  across  each  of  a  brand’s  primary  digital  channels,  including  mobile  apps, 
mobile and desktop web browsers, SMS, social media and third-party consumer messaging platforms. Brands can also use the 
Conversational Cloud to message consumers when they dial a 1-800 number instead of forcing them to navigate IVRs and wait 
on hold. Similarly, the Conversational Cloud can ingest traditional emails and convert them into messaging conversations, or 
embed  messaging  conversations  directly  into  web  advertisements,  rather  than  redirect  consumers  to  static  website  landing 
pages.  Agents  can  manage  all  conversations  with  consumers  through  a  single  console  interface,  regardless  of  where  the 
conversations originated.

LivePerson’s robust, cloud-based suite of rich messaging, real-time chat, AI and automation offerings features consumer 
and  agent  facing  bots,  intelligent  routing  and  capacity  mapping,  real-time  intent  detection  and  analysis,  queue  prioritization, 
customer  sentiment,  analytics  and  reporting,  content  delivery,  PCI  compliance,  co-browsing  and  a  sophisticated  proactive 
targeting engine. An extensible API stack facilitates a lower cost of ownership by facilitating robust integration into back-end 
systems, as well as enabling developers to build their own programs and services on top of the platform. More than 40 APIs and 
software development kits are available on the Conversational Cloud.

LivePerson’s Conversational AI offerings put the power of bot development, training, management and analysis into the 
hands of the contact center and its agents, the teams most familiar with how to structure sales and service conversations to drive 
successful outcomes. The platform enables what we call “the tango” of humans, AI and bots, whereby human agents act as bot 
managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed. Agents 
become ultra-efficient, leveraging the AI engine to serve up relevant content, define next-best actions and take over repetitive 
transactional  work,  so  that  the  agent  can  focus  on  relationship  building.  By  seamlessly  integrating  messaging  with  our 
proprietary Conversational AI, as well as third-party bots, the Conversational Cloud offers brands a comprehensive approach to 
scaling automations across  their millions of customer conversations.

LivePerson’s  consumer  services  offering  is  an  online  marketplace  that  connects  Experts  who  provide  information  and 
knowledge  for  a  fee  via  mobile  and  online  messaging  with  Users.  Users  seek  assistance  and  advice  in  various  categories 
including personal counseling and coaching, computers and programming, education and tutoring, spirituality and religion, and 
other topics.

LivePerson was incorporated in the State of Delaware in November 1995 and the LivePerson service was introduced in 
November 1998. The Company completed an initial public offering in April 2000 and is currently traded on the Nasdaq and the 
TASE.  LivePerson  is  headquartered  in  New  York  City.  In  light  of  the  COVID-19  pandemic  and  the  company’s  strong 
performance  working  remotely,  LivePerson  has  adopted  an  “employee-centric”  workforce  model  that  does  not  rely  on 
traditional offices. During the second quarter of 2021, the Company decided to reoccupy some of its leased space to provide its 
employees with the option of working in an office space environment if they choose to do so. 

88

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Principles of Consolidation

The  consolidated  financial  statements  reflect  the  operations  of  LivePerson  and  its  wholly-owned  subsidiaries.  All  

intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates 
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the 
date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. 

Significant items subject to such estimates and assumptions include: 

•

•

•

•

•

•

•

revenue recognition; 

stock-based compensation; 

accounts receivable;

valuation of goodwill;

valuation of intangible assets; 

income taxes; and

legal contingencies.

Many of the Company’s estimates require increased judgment due to the significant volatility, uncertainty and economic 
disruption  of  the  COVID-19  pandemic.  The  Company  continues  to  monitor  the  effects  of  the  COVID-19  pandemic,  and  its 
estimates and judgments may change materially as new events occur or additional information becomes available.

As  of  the  date  of  issuance  of  the  financial  statements,  the  Company  is  not  aware  of  any  material  specific  events  or 
circumstances that would require it to update its estimates, judgments, or to revise the carrying values of its assets or liabilities. 
These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated 
financial statements as soon as they become known. Actual results could differ from those estimates and any such differences 
may be material to the Company’s financial statements.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of 
cash and cash equivalents and accounts receivable which approximate fair value at December 31, 2021 because of the short-
term nature of these instruments. The Company invests its cash and cash equivalents with financial institutions that it believes 
are of high quality, and the Company performs periodic evaluations of these instruments and the relative credit standings of the 
institutions with which it invests. At certain times, the Company’s cash balances with any one financial institution may exceed 
Federal  Deposit  Insurance  Corporation  insurance  limits.  The  Company  believes  it  mitigates  its  risk  by  depositing  its  cash 
balances with high credit, quality financial institutions.

The  Company  performs  ongoing  credit  evaluations  of  its  customers’  financial  condition  (except  for  customers  who 
purchase the LivePerson services by credit card via Internet download) and has established an allowance for doubtful accounts 
based upon factors surrounding the credit risk of customers, historical trends and other information. Concentration of credit risk 
is limited due to the Company’s large number of customers. No single customer accounted for or exceeded 10% of revenue in 
2021,  2020, and 2019. 

Foreign Currency Translation

The Company’s operations are conducted in various countries around the world and the financial statements of its foreign 
subsidiaries  are  reported  in  the  applicable  foreign  currencies  (functional  currencies).  Financial  information  is  translated  from 
the  applicable  functional  currency  to  the  U.S.  dollar  (the  reporting  currency)  for  inclusion  in  the  Company’s  consolidated 
financial statements.  Income, expenses, and cash flows are translated at weighted average exchange rates prevailing during the 
fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are 
included  as  a  component  of  accumulated  other  comprehensive  (loss)  income  in  stockholders’  equity.  Foreign  exchange 

89

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

transaction  gain  or  losses  are  included  in  other  income  (expense),  net  in  the  accompanying  consolidated  statements  of 
operations. 

Cash and Cash Equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be 
cash equivalents. Cash equivalents, which primarily consist of money market funds, are recorded at cost, which approximates 
fair value.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is 
the  Company’s  best  estimate  of  the  amount  of  probable  credit  losses  in  the  Company’s  existing  accounts  receivable.  The 
Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful 
accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All 
other  balances  are  reviewed  on  a  pooled  basis.  Account  balances  are  charged  off  against  the  allowance  after  all  means  of 
collection  have  been  exhausted  and  the  potential  for  recovery  is  considered  remote.  The  Company  does  not  have  any  off-
balance sheet credit exposure related to its customers. The activity in the allowance for doubtful accounts is as follows:

Year Ended December 31,

2021

2020

2019

(In thousands)

Balance, beginning of period  ......................................................................................... $ 

5,344  $ 

3,070  $ 

Additions charged to costs and expenses   ....................................................................

Deductions/write-offs    ..................................................................................................

ASU 2016-13 (Topic 326) adjustment    ........................................................................

4,879 

(3,885) 

— 

3,211 

(1,666) 

729 

Balance, end of period     ................................................................................................... $ 

6,338  $ 

5,344  $ 

2,276 

2,159 

(1,365) 

— 

3,070 

Property and Equipment

Property  and  equipment  are  stated  at  cost,  net  of  accumulated  depreciation,  and  amortization.  Depreciation  and 
amortization is calculated using the straight-line method over the estimated useful lives of the related assets, generally three to 
five years for equipment and software. Leasehold improvements are amortized using the straight-line method over the shorter of 
the  lease  term  or  the  estimated  useful  life  of  the  asset.  Depreciation  expense,  which  includes  amortization  of  internal  use 
software  totaled  $27.4  million,  $22.8  million,  and  $16.4  million  for  the  years  ended  December  31,  2021,  2020,  and  2019, 
respectively.

Internal-Use Software Development Costs

In accordance with ASC 350-40, “Internal-Use Software”, the Company capitalizes its costs to develop its internal use 
software when preliminary development efforts are successfully completed, management has authorized and committed project 
funding,  and  it  is  probable  that  the  project  will  be  completed  and  the  software  will  be  used  as  intended.    These  costs  are 
included  in  property  and  equipment  in  the  Company’s  consolidated  balance  sheets  and  are  amortized  on  a  straight-line  basis 
over the estimated useful life of the related asset, which approximates five years. Costs incurred prior to meeting these criteria, 
together with costs incurred for training and maintenance, are expensed as incurred. 

The  Company  capitalized  internal-use  software  costs  of  $36.0  million,  $33.9  million,  and  $29.1  million  for  the  years 

ended December 31, 2021, 2020, and 2019, respectively. 

Goodwill and Intangible Assets

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a 
business  combination.  During  2021,  the  Company  recorded  $198.2  million  of  goodwill  with  the  acquisition  of  e-bot7, 
VoiceBase,  and  Tenfold.  Goodwill  is  not  amortized  and  is  tested  for  impairment  at  least  annually  or  whenever  events  or 
changes in circumstances indicate that the carrying value may not be recoverable. The Company has determined that it operates 
as  two  reporting  units  and  has  selected  September  30  as  the  date  to  perform  its  annual  impairment  test.  In  the  valuation  of 

90

 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

goodwill,  management  must  make  assumptions  regarding  estimated  future  cash  flows  to  be  derived  from  the  Company’s 
business.  If  these  estimates  or  their  related  assumptions  change  in  the  future,  the  Company  may  be  required  to  record 
impairment for these assets.

The Company has the option to first perform a qualitative assessment to determine if it is more likely than not that the fair 
value of a reporting unit is less than its carrying amount. However, the Company may elect to bypass the qualitative assessment 
and proceed directly to the quantitative impairment tests. The impairment test involves comparing the fair value of the reporting 
unit to its carrying value, including goodwill. A goodwill impairment will be the amount by which a reporting unit’s carrying 
value exceeds its fair value. The impairment is limited to the carrying amount of goodwill.

No goodwill impairment charges have been recorded for any period presented.

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated 
residual values, and reviewed for impairment in accordance with ASC 360-10-35, “Accounting for Impairment or Disposal of 
Long-Lived Assets.” 

Acquired  intangible  assets  consist  of  identifiable  intangible  assets,  primarily  developed  technology  and  customer 

relationships, resulting from our acquisitions. Intangible assets are recorded at fair value on the date of acquisition. 

Business Combinations

Business  combinations  are  accounted  for  using  the  acquisition  method  and  accordingly,  the  assets  acquired  (including 
identified intangible assets), the liabilities assumed and any noncontrolling interest in the acquired business are recorded at their 
acquisition date fair values. The Company’s acquisition model typically provides for an initial payment at closing and for future 
additional  contingent  purchase  price  obligations.  Contingent  purchase  price  obligations  are  recorded  as  deferred  acquisition 
consideration on the balance sheet at the acquisition date fair value and are remeasured at each reporting period. Changes in 
such estimated values are recorded in the results of operations. For further information, see Note 9 – Acquisitions.

For each acquisition, the Company undertakes a detailed review to identify intangible assets and a valuation is performed 
for all such identified assets. The Company uses several market participant measurements to determine estimated value. This 
approach  includes  consideration  of  similar  and  recent  transactions,  as  well  as  utilizing  discounted  expected  cash  flow 
methodologies. A substantial portion of the intangible asset value that the Company acquires is the specialized know-how of the 
workforce,  which  is  treated  as  part  of  goodwill  and  is  not  required  to  be  valued  separately.  The  majority  of  the  value  of  the 
identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well 
as trade names. In executing the Company’s overall acquisition strategy, one of the primary drivers in identifying and executing 
a specific transaction is the existence of, or the ability to, expand the existing client relationships. The expected benefits of the 
Company’s acquisitions are typically shared across multiple agencies and regions.

Impairment of Long-Lived Assets

The  carrying  amounts  of  our  long-lived  assets,  including  property  and  equipment,  lease  right-of-use  assets,  capitalized 
internal-use software, costs to obtain customer contracts, and acquired intangible assets, are reviewed for impairment whenever 
events  or  changes  in  circumstances  indicate  that  the  carrying  value  of  these  assets  may  not  be  recoverable  or  that  the  useful 
lives are shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying 
amount of an asset to future undiscounted net cash flows the asset is expected to generate over its remaining life. If the asset is 
considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair 
value of the impaired asset. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over 
the  new  shorter  useful  life.  There  was  a  loss  on  disposal  of  approximately  $5.1  million  in  September  2020.  The  Company 
recognized  accelerated  depreciation  of  fixed  assets  that  were  determined  to  no  longer  be  of  future  economic  benefit  to  the 
Company based on the decision to vacate the leased office space. Please refer to Note 14 – Restructuring.

Advertising

The Company expenses the cost of advertising and promoting its services as incurred in the sales and marketing expense 
on the consolidated statement of operations. Such costs totaled approximately $41.2 million, $29.1 million, and $28.6 million 
for the years ended December 31, 2021, 2020, and 2019, respectively. 

91

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

In  accordance  with  ASC  718-10,  “Stock  Compensation”,  the  Company  measures  stock  based  awards  at  fair  value  and 
recognizes compensation expense for all share-based payment awards made to its employees and directors, including employee 
stock options.

The  Company  estimates  the  fair  value  of  stock  options  granted  using  the  Black-Scholes  valuation  model.  This  model 
requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time 
an employee will retain vested stock options before exercising them, the estimated volatility of its common stock price and the 
number  of  options  that  will  be  forfeited  prior  to  vesting.  The  fair  value  is  then  recognized  on  a  straight  line  basis  over  the 
requisite service period of the award, which is generally three to four years. Changes in these estimates and assumptions can 
materially  affect  the  determination  of  the  fair  value  of  the  stock-based  compensation  and  consequently,  the  related  amount 
recognized in the consolidated statement of operations.

Deferred Rent

The Company records rent expense on a straight-line basis over the term of the related lease. The difference between the 
rent expense recognized for financial reporting purposes and the actual payments made in accordance with the lease agreement 
is recognized as deferred rent liability included in other liabilities on the Company’s consolidated balance sheets.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities 
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of 
existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets 
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary 
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is 
recognized in results of operations in the period that the tax change occurs. In evaluating our ability to recover our deferred tax 
assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled 
reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. We 
include interest accrued on the underpayment of income taxes in interest expense and penalties, if any, related to unrecognized 
tax benefits in general and administrative expenses. Valuation allowances are established, when necessary, to reduce deferred 
tax assets to the amount expected to be realized.

Comprehensive Loss

In accordance with ASC 220, “Comprehensive Income”, the Company reports by major components and as a single total, 
the change in its net assets during the period from non-owner sources. Comprehensive loss consists of net loss and accumulated 
other comprehensive (loss) income, which includes certain changes in equity that are excluded from net loss. The Company’s 
comprehensive loss for all periods presented is related to the effect of foreign currency translation.

Recently Issued Accounting Standards

Earnings  Per  Share  (Topic  260),  Debt—Modifications  and  Extinguishments  (Subtopic  470-50),  Compensation—Stock 
Compensation,(Topic  718),  and  Derivatives  and  Hedging—Contracts  in  Entity’s  Own  Equity  (Subtopic  815-40):  Issuer’s 
Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. In May 2021, the 
FASB  issued  ASU  2021-04  to  clarify  and  reduce  diversity  in  an  issuer’s  accounting  for  modifications  or  exchanges  of 
freestanding  equity-classified  written  call  options  (for  example,  warrants)  that  remain  equity  classified  after  modification  or 
exchange. The guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal 
years. The Company does not expect the adoption of ASU 2021-04 to have a significant impact on its consolidated financial 
statements.

Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s 
Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. In August 
2020,  the  FASB  issued  Accounting  Standards  Update  (“ASU”)  2020-06  which  simplifies  the  accounting  for  convertible 
instruments  by  eliminating  existing  accounting  models  that  require  separation  of  a  cash  conversion  or  beneficial  conversion 
feature from the host contract. Accordingly, a convertible debt instrument will be accounted as a single liability measured at its 

92

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amortized cost and a convertible preferred stock will be accounted as a single equity instrument measured at its historical cost, 
as long as no other embedded features require bifurcation as derivatives and the convertible debt was not issued at a substantial 
premium. The ASU also simplifies the derivative scope exception for accounting for contracts in an entity’s own equity by:

•

•

•

removing certain conditions required to meet the settlement criterion;

clarifying  that  instruments  that  are  not  indexed  to  the  issuer’s  own  stock  must  be  remeasured  at  fair  value 
through earnings at each reporting period; and

clarifying the scope of reassessment guidance and disclosure requirements in Subtopic 815-40. 

The ASU also makes targeted improvements to the disclosure requirements for convertible instruments and earnings-per-
share  guidance.  There  will  no  longer  be  a  debt  discount  representing  the  difference  between  the  carrying  value,  excluding 
issuance costs, and the principal of the convertible debt instrument and, as a result, there will no longer be interest expense from 
the  amortization  of  the  debt  discount  over  the  term  of  the  convertible  debt  instrument.  The  amendments  in  this  update  also 
require the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share. 

For SEC filers, excluding smaller reporting companies, the ASU is effective for fiscal years beginning after December 15, 
2021,  including  interim  periods  within  those  fiscal  years.  The  ASU  specifies  that  the  guidance  should  be  adopted  as  of  the 
beginning of the annual fiscal year. The Company will adopt the standard on January 1, 2022 using the modified retrospective 
method,  which  would  result  in  a  cumulative  effect  adjustment  as  of  the  date  of  adoption.  The  Company  expects  a  material 
change on its consolidated balance sheet related to the recognition of convertible senior notes that was previously classified as 
equity. The Company also expects interest expense to decrease as non-cash interest expense due to the discount created by the 
separation of the equity component of its convertible instruments will be eliminated. The Company will also need to assume 
share  settlement  of  the  entire  convertible  debt  instrument  under  the  if-converted  method  therefore  increasing  the  potentially 
dilutive common stock equivalents for the diluted earnings per share calculation. This will only have an impact on the Company 
if it is profitable. 

Recently Adopted Accounting Standards

Business  Combinations  (Topic  805):  Accounting  for  Contract  Assets  and  Contract  Liabilities  from  Contracts  with 
Customers. In October 2021, the FASB issued ASU 2021-08 which provides guidance for recognizing and measuring contract 
assets and contract liabilities in a business combination. 

This ASU amendment is to improve comparability after the business combination by providing consistent recognition and 
measurement  guidance  for  revenue  contracts  with  customers  acquired  in  a  business  combination  and  revenue  contracts  with 
customers not acquired in a business combination. 

This  ASU  requires  entities  to  apply  Topic  606  to  recognize  and  measure  contract  assets  and  contract  liabilities  in  a 
business  combination  beginning  after  December  15,  2022  for  public  business  entities.  This  includes  interim  periods  within 
those  fiscal  years.  Early  adoption  is  permitted.  Entities  are  instructed  to  apply  this  ASU  prospectively  if  the  business 
combination occurs after the effective date and/or date of adoption if early adoption is elected. We elected to early adopt this 
standard  in  the  third  quarter  of  2021  and  there  was  no  impact  on  the  Company’s  consolidated  financial  statements.  The 
Company applied the standard prospectively to the acquisitions of e-bot7, VoiceBase, and Tenfold.

With the exception of the new standards discussed above, there have been no other recent accounting pronouncements or 
changes  in  accounting  pronouncements  during  the  year  ended  December  31,  2021,  that  are  of  significance  or  potential 
significance to the Company.

Note 2. Revenue Recognition

The majority of the Company’s revenue is generated from hosted service revenues and related professional services from 
the sale of the LivePerson services. Revenues are recognized when control of these services is transferred to the Company’s 
customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company determines revenue recognition through the following steps:

•

Identification of the contract, or contracts, with a customer;

93

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

•

•

•

•

Identification of the performance obligations in the contract;

Determination of the transaction price;

Allocation of the transaction price to the performance obligations in the contract; and

Recognition of revenue when, or as, the Company satisfies a performance obligation.

Total revenue of $469.6 million, $366.6 million, and $291.6 million was recognized during the years ended December 31, 

2021, 2020, and 2019, respectively.

Under  ASC  606,  the  Company  defers  all  incremental  commission  costs  (“contract  acquisition  costs”)  to  obtain  the 
contract.  The  contract  acquisition  costs,  which  are  comprised  of  prepaid  sales  commissions,  have  balances  at  December  31, 
2021 and 2020 of $40.7 million and $41.0 million, respectively. The Company amortizes these costs over the related period of 
benefit  using  the  customer  expected  life  that  the  Company  determined  to  be  three  to  five  years  which  is  consistent  with  the 
transfer to the customer of the services to which the asset relates. The Company classifies contract acquisition costs as long-
term unless they have an original amortization period of one year or less.

Hosted Services - Business Revenue

Hosted  Services  -  Business  revenue  is  reported  at  the  amount  that  reflects  the  ultimate  consideration  expected  to  be 
received and primarily consist of fees that provide customers access to the Conversational Cloud, the Company’s enterprise-
class,  cloud-based  platform.  The  Company  has  determined  such  access  represents  a  stand-ready  service  provided  continually 
throughout the contract term. As such, control and satisfaction of this stand-ready performance obligation is deemed to occur 
over time. The Company recognizes this revenue over time on a ratable basis over the contract term, beginning on the date that 
access to the Conversational Cloud platform is made available to the customer. The passage of time is deemed to be the most 
faithful depiction of the transfer of control of the services as the customer simultaneously receives and consumes the benefit 
provided  by  the  Company’s  performance.  Subscription  contracts  are  generally  one  year  or  longer  in  length,  billed  monthly, 
quarterly or annually in advance. There is no significant variable consideration related to these arrangements. Additionally, for 
certain  of  the  Company’s  larger  customers,  the  Company  may  provide  call  center  labor  through  an  arrangement  with  one  or 
more of several qualified vendors.  For most of these customers, the Company passes the fee it incurs with the labor provider 
and its fee for the hosted services through to its customers in the form of a fixed fee for each order placed via the Company’s 
online  engagement  solutions.  For  these  Gainshare  arrangements  in  accordance  with  ASC  606,  “Principal  Agent 
Considerations”, the Company acts as a principal in a transaction if it controls the specified goods or services before they are 
transferred to the customer.  

Professional Services Revenue

Professional  Services  revenue  primarily  consists  of  fees  for  deployment  and  optimization  services,  as  well  as  training 
delivered on an on-demand basis which is deemed to represent a distinct stand-ready performance obligation and is recognized 
at a point in time. Professional Services revenue is reported at the amount that reflects the ultimate consideration the Company 
expects  to  receive  in  exchange  for  such  services.  Control  for  the  majority  of  the  Company’s  Professional  Services  contracts 
passes over time to the customer and is recognized ratably over the contracted period, as the passage of time is deemed to be the 
most faithful depiction of the transfer of control. For certain deployment services, which are not deemed to represent a distinct 
performance  obligation,  revenue  will  be  recognized  in  the  same  manner  as  the  fee  for  access  to  the  Conversational  Cloud 
platform,  and  as  such  will  be  recognized  on  a  straight-line  basis  over  the  contract  term.  For  services  billed  on  a  fixed  price 
basis, revenue is recognized over time based on the proportion performed using time and materials as the measure of progress 
toward  complete  satisfaction  of  the  performance  obligation.  Our  Professional  Services  contracts  are  generally  one  year  or 
longer in length, billed, monthly, quarterly or annually in advance. There is no significant variable consideration related to these 
arrangements.

Remaining Performance Obligation

As of December 31, 2021, the aggregate amount of the total transaction price allocated in contracts with original duration 
of  one  year  or  greater  to  the  remaining  performance  obligations  was  $362.8  million.  Approximately  94%  of  the  Company’s 
remaining  performance  obligations  is  expected  to  be  recognized  during  the  next  24  months,  with  the  balance  recognized 
thereafter.  The  aggregate  balance  of  unsatisfied  performance  obligations  represents  contracted  revenue  that  has  not  yet  been 
recognized,  and  does  not  include  contract  amounts  that  are  cancellable  by  the  customer,  amounts  associated  with  optional 
renewal periods, and any amounts related to performance obligations, which are billed and recognized as they are delivered. 

94

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has elected the optional exemption, which allows for the exclusion of the amounts for remaining performance 
obligations  that  are  part  of  contracts  with  an  original  expected  duration  of  less  than  one  year.  Such  remaining  performance 
obligations represent unsatisfied or partially unsatisfied performance obligation pursuant to ASC 606.

Contracts with Multiple Performance Obligations

Some  of  the  Company’s  contracts  with  customers  contain  multiple  performance  obligations.  For  these  contracts,  the 
Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to 
the  separate  performance  obligations  on  a  relative  standalone  selling  price  basis.  The  Company  determines  the  standalone 
selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the 
value of its contracts, the cloud applications sold, and the number and types of users within its contracts.

Hosted Services- Consumer Revenue

For  revenue  from  the  Company’s  Consumer  segment  generated  from  online  transactions  between  Experts  and  Users, 
revenue  is  recognized  at  an  amount  net  of  Expert  fees  in  accordance  with  ASC  606,  “Principal  Agent  Considerations”,  due 
primarily to the fact that the Expert is the primary obligor. Additionally, the Company performs as an agent without any risk of 
loss for collection, and is not involved in selecting the Expert or establishing the Expert’s fee. The Company collects a fee from 
the  consumer  and  retains  a  portion  of  the  fee,  and  then  remits  the  balance  to  the  Expert.  Revenue  from  these  transactions  is 
recognized at the point in time when the transaction is complete and no significant performance obligations remain.

Deferred Revenues

The  Company  records  deferred  revenues  when  cash  payments  are  received  or  due  in  advance  of  its  performance.  The 
increase  of  $9.6  million  in  the  deferred  revenue  balance  for  the  year  ended  December  31,  2021  is  primarily  driven  by  cash 
payments received or due in advance of satisfying performance obligations, partially offset by approximately $75.5 million of 
revenues recognized that were included in the deferred revenue balance as of December 31, 2020.

The following table presents deferred revenue by revenue source:  

December 31,

2021

2020

(In thousands)

Hosted services – Business   .......................................................................................................................... $ 

94,107  $ 

Hosted services – Consumer   ........................................................................................................................

Professional services – Business  ..................................................................................................................

870 

3,831 

Total deferred revenue - current    ............................................................................................................. $ 

98,808  $ 

Professional services – Business  .................................................................................................................. $ 

Total deferred revenue - non-current    ...................................................................................................... $ 

54  $ 

54  $ 

86,144 

835 

1,869 

88,848 

409 

409 

Disaggregated Revenue

The following table presents the Company’s revenues disaggregated by revenue source:

Year Ended December 31,

2021

2020

2019

(In thousands)

Revenue:

Hosted services – Business     ........................................................................................ $ 

364,231  $ 

286,588  $ 

225,705 

Hosted services – Consumer     ......................................................................................

Professional services – Business    ................................................................................

37,695 

67,698 

29,764 

50,268 

24,480 

41,424 

Total revenue     ............................................................................................................ $ 

469,624  $ 

366,620  $ 

291,609 

95

 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue by Geographic Location

The Company is domiciled in the United States and has international operations around the globe. The following table 

presents the Company’s revenues attributable to domestic and foreign operations for the periods presented:

United States      ................................................................................................................ $ 
Other Americas (1)

    .........................................................................................................

Total Americas   .........................................................................................................

      .......................................................................................................................

EMEA (2)
APAC     ............................................................................................................................

Year Ended December 31,

2021

2020

2019

(In thousands)

306,700  $ 

230,557  $ 

18,128 

324,828 

91,227 

53,569 

13,420 

243,977 

83,326 

39,317 

170,815 

11,462 

182,277 

78,301 

31,031 

Total revenue     ............................................................................................................ $ 

469,624  $ 

366,620  $ 

291,609 

——————————————
(1) Canada, Latin America, and South America.

(2)

Includes revenue from the United Kingdom of $56.7 million, $53.4 million, and $50.4 million  for the years ended December 31, 2021, 2020, and 2019, 
respectively.  and  from  the  Netherlands  of  $4.8  million,  $3.2  million,  and  $10.0  million    for  the  years  ended  December  31,  2021,  2020,  and  2019, 
respectively.

Information about Contract Balances

Amounts  collected  in  advance  of  services  being  provided  are  accounted  for  as  deferred  revenue.  Nearly  all  of  the 

Company’s deferred revenue balance is related to hosted services- business revenue.

In some arrangements, the Company allows customers to pay for access to the Conversational Cloud over the term of the 
software  license.    The  Company  refers  to  these  as  subscription  transactions.  Amounts  recognized  as  revenue  in  excess  of 
amounts billed are recorded as unbilled receivables. Unbilled receivables, anticipated to be invoiced in the next twelve months, 
are  included  in  accounts  receivable  on  the  consolidated  balance  sheet.  The  opening  and  closing  balances  of  the  Company’s 
accounts receivable, unbilled receivables, and deferred revenues are as follows:

Accounts 
Receivable

Unbilled  
Receivable

Contract 
Acquisition Costs 
(Non-current)

(In thousands)

Deferred 
Revenue 
(Current)

Deferred 
Revenue 
(Non-current)

Opening balance as of December 31, 2020     ..... $ 

61,801  $ 

18,622  $ 

41,021  $ 

88,848  $ 

Increase (decrease), net    .................................

7,458 

5,923 

(346) 

9,960 

Ending balance as of December 31, 2021   ........ $ 

69,259  $ 

24,545  $ 

40,675  $ 

98,808  $ 

409 

(355) 

54 

Note 3. Net Loss Per Share

Basic  earnings  per  share  (“EPS”)  excludes  dilution  for  common  stock  equivalents  and  is  computed  by  dividing  net 
income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding 
for the period. All options, warrants, or other potentially dilutive instruments issued for nominal consideration are required to 
be included in the calculation of basic and diluted net income attributable to common stockholders. Diluted EPS is calculated 
using  the  “if-converted”  method.  The  “if-converted”  method  is  only  assumed  in  periods  where  such  application  would  be 
dilutive. In applying the “if-converted” method for diluted net income per share, the Company would assume conversion of the 
2024 Notes at ratio of 25.9182 shares of our stock per $1,000 principal amount of the 2024 Notes. The Company would assume 
conversion of the 2026 Notes at a ratio of 13.2933 shares of our stock per $1,000 principal amount of the 2026 Notes. Assumed 
converted shares of our common stock are weighted for the period the Notes were outstanding. The shares of common stock 
underlying  the  conversion  option  of  the  Notes  were  not  included  in  the  calculation  of  diluted  income  per  share  for  the  year 
ended December 31, 2021.

See Note 8 – Convertible Senior Notes and Capped Call Transactions for a full description of the Notes.

96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of shares used in calculating basic and diluted net loss per share follows:

Net loss (in thousands)  .................................................................................................. $ 

(124,974)  $ 

(107,594)  $ 

(96,071) 

Weighted average number of shares outstanding, basic and diluted  .............................

69,606,105 

65,888,450 

62,593,026 

Net loss per share, basic and diluted  ............................................................................. $ 

(1.80)  $ 

(1.63)  $ 

(1.53) 

The anti-dilutive securities excluded from the shares used to calculate diluted net loss per share are as follows:

Year Ended December 31,

2021

2020

2019

December 31,

2021

2020

Shares subject to outstanding common stock options and employee stock purchase plan   ..........................

4,782,487 

Restricted stock units  ...................................................................................................................................

3,732,013 

Conversion option of the 2024 Notes    ..........................................................................................................

5,961,186 

Conversion option of the 2026 Notes    ..........................................................................................................

6,879,283 

4,330,686 

2,953,252 

5,961,186 

6,879,283 

21,354,969 

20,124,407 

Note 4. Segment Information

The  Company  accounts  for  its  segment  information  in  accordance  with  the  provisions  of  ASC  280-10,  “Segment 
Reporting.” ASC 280-10 establishes annual and interim reporting standards for operating segments of a company. ASC 280-10 
requires disclosures of selected segment-related financial information about products, major customers, and geographic areas 
based on the Company’s internal accounting methods. The Company is organized into two operating segments for purposes of 
making operating decisions and assessing performance. The Business segment enables brands to leverage the Conversational 
Cloud sophisticated intelligence engine to connect with consumers through an integrated suite of mobile and online business 
messaging technologies. The Consumer segment facilitates online transactions between Experts and Users seeking information 
and  knowledge  for  a  fee  via  mobile  and  online  messaging.  Both  segments  currently  generate  their  revenue  primarily  in  the 
United States. The chief operating decision maker, who is the chief executive officer, evaluates performance, makes operating 
decisions,  and  allocates  resources  based  on  the  operating  income  of  each  segment.  The  reporting  segments  follow  the  same 
accounting  polices  used  in  the  preparation  of  the  Company’s  consolidated  financial  statements  which  are  described  in  the 
summary of significant accounting policies. The Company allocates cost of revenue, sales and marketing and amortization of 
purchased  intangibles  to  the  segments,  but  it  does  not  allocate  product  development  expenses,  general  and  administrative 
expenses,  restructuring  costs  and  income  tax  expense  because  management  does  not  use  this  information  to  measure 
performance of the operating segments. There are currently no inter-segment sales.

Summarized  financial  information  by  segment  for  the  periods  presented,  based  on  the  Company’s  internal  financial 

reporting system utilized by the Company’s chief operating decision maker, follows: 

Year Ended December 31, 2021

Business

Consumer

Corporate

Consolidated

(In thousands)

Revenue:

Hosted services – Business   ......................................................... $ 

364,231  $ 

—  $ 

—  $ 

364,231 

Hosted services – Consumer   .......................................................

Professional services – Business      ................................................

Total revenue  ..........................................................................

Cost of revenue     ...............................................................................

Sales and marketing     ........................................................................

Amortization of purchased intangibles    ...........................................

Unallocated corporate expenses      .....................................................

— 

67,698 

431,929 

149,983 

139,866 

2,045 

— 

37,695 

— 

37,695 

6,897 

25,555 

— 

— 

— 

— 

— 

— 

— 

— 

238,544 

37,695 

67,698 

469,624 

156,880 

165,421 

2,045 

238,544 

Operating income (loss)     ............................................................ $ 

140,035  $ 

5,243  $ 

(238,544)  $ 

(93,266) 

97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2020

Business

Consumer

Corporate

Consolidated

(In thousands)

Revenue:

Hosted services – Business   ......................................................... $ 

286,588  $ 

—  $ 

—  $ 

286,588 

Hosted services – Consumer   .......................................................

Professional services – Business      ................................................

Total revenue  ..........................................................................

Cost of revenue     ...............................................................................

Sales and marketing     ........................................................................

Amortization of purchased intangibles    ...........................................

Unallocated corporate expenses      .....................................................

— 

50,268 

336,856 

99,394 

128,752 

1,639 

— 

29,764 

— 

29,764 

6,874 

21,021 

— 

— 

— 

— 

— 

— 

— 

— 

198,391 

29,764 

50,268 

366,620 

106,268 

149,773 

1,639 

198,391 

Operating income (loss)     ............................................................ $ 

107,071  $ 

1,869  $ 

(198,391)  $ 

(89,451) 

Year Ended December 31, 2019

Business

Consumer

Corporate

Consolidated

(In thousands)

Revenue:

Hosted services – Business   ......................................................... $ 

225,705  $ 

—  $ 

—  $ 

225,705 

Hosted services – Consumer   .......................................................

Professional services – Business      ................................................

Total revenue  ..........................................................................

Cost of revenue     ...............................................................................

Sales and marketing     ........................................................................

Amortization of purchased intangibles    ...........................................

Unallocated corporate expenses      .....................................................

— 

41,424 

267,129 

74,460 

140,880 

1,794 

— 

24,480 

— 

24,480 

4,418 

15,934 

— 

— 

— 

— 

— 

— 

— 

— 

141,155 

24,480 

41,424 

291,609 

78,878 

156,814 

1,794 

141,155 

Operating income (loss)     ............................................................ $ 

49,995  $ 

4,128  $ 

(141,155)  $ 

(87,032) 

Geographic Information 

The Company is domiciled in the United States and has international operations around the globe. The following table 

presents the Company’s long-lived assets by geographic region for the periods presented:

December 31, 

2021

2020

(In thousands)

United States .................................................................................................................................................. $ 

444,318  $ 

202,275 

Germany   .........................................................................................................................................................

Israel   ...............................................................................................................................................................

Australia    .........................................................................................................................................................

Netherlands    ....................................................................................................................................................
Other (1)

    ..........................................................................................................................................................

52,342 

20,754 

12,771 

4,566 

15,629 

1,597 

16,657 

13,792 

8,301 

14,999 

Total long-lived assets    .............................................................................................................................. $ 

550,380  $ 

257,621 

——————————————
(1) United Kingdom, Japan, France, Italy, Spain, Canada, and Singapore

98

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5. Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill for the periods presented are as follows:

Business

Consumer

Total

(In thousands)

Balance as of December 31, 2020    ................................................................................. $ 

87,168  $ 

8,024  $ 

95,192 

Adjustments to goodwill:

Acquisitions   ...........................................................................................................

Foreign exchange adjustments     ..............................................................................

198,205 

(2,182) 

— 

— 

198,205 

(2,182) 

Balance as of December 31, 2021    ................................................................................. $ 

283,191  $ 

8,024  $ 

291,215 

The total accumulated goodwill impairment charges are $23.5 million through December 31, 2021. No impairment was 

recognized for the years ended December 31, 2021, 2020, and 2019. 

Intangible Assets

Intangible assets are summarized as follows (for details about the intangible assets acquired see Note 9 – Acquisitions):

December 31, 2021

Gross
Carrying
Amount

Accumulated
Amortization

(In thousands)

Net Carrying 
Amount

Weighted
Average
Amortization
Period

Amortizing intangible assets:

Technology    ................................................................................... $ 

90,626  $ 

(30,757)  $ 

Customer relationships ..................................................................

Patents    ...........................................................................................

Trademarks     ...................................................................................

Trade names    ..................................................................................

Other    .............................................................................................

32,162 

7,988 

1,474 

460 

314 

(15,164) 

(1,137) 

(135) 

(43) 

(234) 

59,869 

16,998 

6,851 

1,339 

417 

80 

5.1 years

10.0 years

11.8 years

5.0 years

2.1 years

2.2 years

Total      .......................................................................................... $ 

133,024  $ 

(47,470)  $ 

85,554 

December 31, 2020

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying 
Amount

(In thousands)

Weighted
Average
Amortization
Period

Amortizing intangible assets:

Technology       ..................................................................................... $ 

30,499  $ 

(26,818)  $ 

Customer relationships    ...................................................................

Patents   .............................................................................................

Other       ...............................................................................................

16,981 

5,076 

314 

(13,982) 

(908) 

(235) 

3,681 

2,999 

4,168 

5.4 years

8.4 years

12.5 years

79 

2.2 years

Total    ............................................................................................ $ 

52,870  $ 

(41,943)  $ 

10,927 

99

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amortization  expense  is  calculated  over  the  estimated  useful  life  of  the  asset.  Aggregate  amortization  expense  for 
intangible  assets  was  $5.6  million,  $2.8  million,  and  $2.9  million  for  the  years  ended  December  31,  2021,  2020,  and  2019, 
respectively.  For  the  years  ended  December  31,  2021,  2020,  and  2019,  a  portion  of  this  amortization  is  included  in  cost  of 
revenue. Estimated amortization expense for the next five years is as follows:

Estimated 
Amortization 
Expense

(In thousands)

2022    ............................................................................................................................................................................................ $ 

2023    ............................................................................................................................................................................................

2024    ............................................................................................................................................................................................

2025    ............................................................................................................................................................................................

2026    ............................................................................................................................................................................................

Thereafter   ....................................................................................................................................................................................

Total    ....................................................................................................................................................................................... $ 

16,446 

15,162 

14,980 

14,579 

11,570 

12,817 

85,554 

Note 6. Property and Equipment

The following table presents the detail of property and equipment for the periods presented:

December 31,

2021

2020

(In thousands)

Computer equipment and software     ............................................................................................................... $ 

120,685  $ 

107,666 

Internal-use software development costs    ......................................................................................................

122,479 

Finance lease right-of-use assets      ..................................................................................................................

Furniture, equipment, and building improvements   ......................................................................................

Less: accumulated depreciation     ....................................................................................................................

6,797 

258 

250,219 

(125,493) 

86,454 

10,045 

— 

204,165 

(98,110) 

Total    .......................................................................................................................................................... $ 

124,726  $ 

106,055 

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis.   As 
of  December  31,  2021  and  2020,  there  was  approximately  $36.1  million  and  $30.5  million,  respectively,  of  internal-use 
software  development  costs  related  to  projects  currently  still  in  development,  which  are,  therefore,  not  yet  subject  to 
amortization. Aggregate depreciation and amortization expense for property and equipment was $27.4 million, $22.8 million, 
and $16.4 million for the years ended December 31, 2021, 2020, and 2019, respectively. 

Note 7. Accrued Expenses and Other Current Liabilities

The following table presents the detail of accrued liabilities and other current liabilities for the periods presented:

December 31,

2021

2020

(In thousands)

Professional services, consulting and other vendor fees       .............................................................................. $ 

58,811  $ 

Payroll and other employee related costs   .....................................................................................................

29,855 

Sales commissions    ........................................................................................................................................

Financing lease liability (Note 10)    ...............................................................................................................

Unrecognized tax benefits      ............................................................................................................................

Restructuring (Note 14)     ................................................................................................................................

Non income tax   .............................................................................................................................................

Other       .............................................................................................................................................................

4,269 

3,738 

2,424 

1,694 

918 

2,588 

38,796 

39,820 

6,988 

3,488 

2,039 

4,732 

2,954 

1,053 

Total accrued expenses and other current liabilities    ................................................................................. $ 

104,297  $ 

99,870 

100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8. Convertible Senior Notes and Capped Call Transactions

Convertible Senior Notes due 2024 and Capped Calls

In March 2019, the Company issued $230.0 million aggregate principal amount of its 0.750% Convertible Senior Notes 
due  2024  in  a  private  placement,  which  amount  includes  $30.0  million  aggregate  principal  amount  of  such  Notes  issued 
pursuant to the exercise in full by the initial purchasers of their option to purchase additional 2024 Notes. Interest on the Notes 
is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2019. 

The  2024  Notes  will  mature  on  March  1,  2024,  unless  earlier  repurchased  or  redeemed  by  the  Company  or  converted 
pursuant to their terms. The total net proceeds from the offering of the 2024 Notes, after deducting debt issuance costs, paid, or 
payable by the Company, was approximately $221.4 million.

Each $1,000 in principal amount of the 2024 Notes is initially convertible into 25.9182 shares of the Company’s common 
stock par value $0.001, which is equivalent to an initial conversion price of approximately $38.58 per share. The conversion 
rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid 
interest.  In  addition,  following  certain  corporate  events  that  occur  prior  to  the  maturity  date,  the  Company  will  increase  the 
conversion rate for a holder who elects to convert its 2024 Notes in connection with such a corporate event. The 2024 Notes are 
not redeemable prior to the maturity date of the 2024 Notes and no sinking fund is provided for the 2024 Notes. If the Company 
undergoes a fundamental change (as defined in the indenture governing the 2024 Notes) prior to the maturity date, holders may 
require  the  Company  to  repurchase  for  cash  all  or  any  portion  of  their  Notes  in  principal  amounts  of  $1,000  or  a  multiple 
thereof at a fundamental change repurchase price equal to 100% of the principal amount of the 2024 Notes to be repurchased, 
plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Holders of the 2024 Notes may convert their 2024 Notes at their option at any time prior to the close of business on the 
business  day  immediately  preceding  November  1,  2023,  in  multiples  of  $1,000  principal  amount,  only  under  the  following 
circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2019 (and only during 
such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or 
not  consecutive)  during  a  period  of  30  consecutive  trading  days  ending  on,  and  including,  the  last  trading  day  of  the 
immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2024 Notes on each 
applicable trading day as determined by the Company; (2) during the five business day period after any five consecutive trading 
day period (the “measurement period”) in which the “trading price” (as defined in the indenture governing the 2024 Notes) per 
$1,000 principal amount of 2024 Notes for each trading day of the measurement period was less than 98% of the product of the 
last reported sale price of the Company’s common stock and the conversion rate for the 2024 Notes on each such trading day; 
or (3) upon the occurrence of specified corporate events. On or after November 1, 2023, holders may convert all or any portion 
of their 2024 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the 
maturity date, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may 
be, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election. 

During the three months ended December 31, 2021, the conditions allowing holders of the 2024 Notes to convert were 

not met.

The  2024  Notes  are  senior  unsecured  obligations  and  will  rank  senior  in  right  of  payment  to  any  of  the  Company’s 
indebtedness  that  is  expressly  subordinated  in  right  of  payment  to  the  2024  Notes;  equal  in  right  of  payment  with  the 
Company’s existing and future liabilities that are not so subordinated; effectively subordinated to any of the Company’s secured 
indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and 
other liabilities (including trade payables) of current or future subsidiaries of the Company.

In  accounting  for  the  issuance  of  the  2024  Notes,  the  Company  separated  the  2024  Notes  into  liability  and  equity 
components.  The  carrying  amount  of  the  liability  component  was  calculated  by  measuring  the  fair  value  of  a  similar  debt 
instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the 
conversion option was $52.9 million and was determined by deducting the fair value of the liability component from the par 
value  of  the  2024  Notes.  The  equity  component  is  not  remeasured  as  long  as  it  continues  to  meet  the  conditions  for  equity 
classification. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, is 
amortized to interest expense at an effective interest rate over the contractual term of the 2024 Notes.

101

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In  accounting  for  the  transaction  costs  related  to  the  2024  Notes,  the  Company  allocated  the  total  amount  incurred  of 
approximately $8.6 million to the liability and equity components of the 2024 Notes based on the proportion of the proceeds 
allocated  to  the  debt  and  equity  components.  Issuance  costs  attributable  to  the  liability  component  were  approximately  $6.6 
million, were recorded as an additional debt discount and are amortized to interest expense using the effective interest method 
over  the  contractual  term  of  the  2024  Notes.  Issuance  costs  attributable  to  the  equity  component  were  approximately  $2.0 
million and recorded as a reduction of additional paid in capital in stockholders’ equity.

In  connection  with  the  offering  of  the  2024  Notes,  the  Company  entered  into  privately-negotiated  capped  call  option 
transactions  with  certain  counterparties  (the  “2024  capped  call”).  The  2024  capped  calls  each  have  an  initial  strike  price  of 
approximately $38.58 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2024 
Notes. The 2024 capped calls have initial cap prices of $57.16 per share, subject to certain adjustment events. The 2024 capped 
calls cover, subject to anti-dilution adjustments, approximately 5.96 million shares of common stock. The 2024 capped calls are 
generally intended to reduce or offset the potential dilution to the common stock upon any conversion of the 2024 Notes with 
such reduction or offset, as the case may be, subject to a cap based on the cap price. The 2024 capped calls expire on March 1, 
2024, subject to earlier exercise. The 2024 capped calls are subject to either adjustment or termination upon the occurrence of 
specified  extraordinary  events  affecting  the  Company,  including  a  merger  event,  a  tender  offer,  and  a  nationalization, 
insolvency  or  delisting  involving  the  Company.  In  addition,  the  2024  capped  calls  are  subject  to  certain  specified  additional 
disruption events that may give rise to a termination of the 2024 capped calls, including changes in law, failure to deliver, and 
hedging disruptions. The 2024 capped calls are recorded in stockholders’ equity and are not accounted for as derivatives. The 
net cost of $23.2 million incurred to purchase the 2024 capped calls was recorded as a reduction to additional paid-in capital in 
the accompanying consolidated balance sheet.

The remaining term over which the 2024 Notes’ debt discount and debt issuance costs will be amortized is 2.2 years. The 

effective interest rate on the debt was 3.43% for the period ended December 31, 2021. 

Convertible Senior Notes due 2026 and Capped Calls

In December 2020, the Company issued $517.5 million aggregate principal amount of its 0% Convertible Senior Notes 
due  2026  in  a  private  placement,  which  amount  includes  $67.5  million  aggregate  principal  amount  of  such  Notes  issued 
pursuant to the exercise in full by the initial purchasers of their option to purchase additional 2026 Notes.

The 2026 Notes will mature on December 15, 2026, unless earlier repurchased or redeemed by the Company or converted 
pursuant to their terms. The total net proceeds from the offering of the 2026 Notes, after deducting debt issuance costs, paid or 
payable by the Company, was approximately $505.3 million.

Each $1,000 in principal amount of the 2026 Notes is initially convertible into 13.2933 shares of the Company’s common 
stock par value $0.001, which is equivalent to an initial conversion price of approximately $75.23 per share. The conversion 
rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid 
special interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase 
the conversion rate for a holder who elects to convert its 2026 Notes in connection with such a corporate event. The 2026 Notes 
are  not  redeemable  prior  to  the  maturity  date  of  the  2026  Notes  and  no  sinking  fund  is  provided  for  the  2026  Notes.  If  the 
Company undergoes a fundamental change (as defined in the indenture governing the 2026 Notes) prior to the maturity date, 
holders may require the Company to repurchase for cash all or any portion of their Notes in principal amounts of $1,000 or a 
multiple  thereof  at  a  fundamental  change  repurchase  price  equal  to  100%  of  the  principal  amount  of  the  2026  Notes  to  be 
repurchased, plus accrued and unpaid special interest to, but excluding, the fundamental change repurchase date.

Holders of the 2026 Notes may convert their 2026 Notes at their option at any time prior to the close of business on the 
business  day  immediately  preceding  August  15,  2026,  in  multiples  of  $1,000  principal  amount,  only  under  the  following 
circumstances:  (1)  during  any  calendar  quarter  commencing  after  the  calendar  quarter  ending  on  March  31,  2021  (and  only 
during  such  calendar  quarter),  if  the  last  reported  sale  price  of  the  Company’s  common  stock  for  at  least  20  trading  days 
(whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the 
immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2026 Notes on each 
applicable trading day as determined by the Company; (2) during the five business day period after any five consecutive trading 
day period (the “measurement period”) in which the “trading price” (as defined in the indenture governing the 2026 Notes) per 
$1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the 
last reported sale price of the Company’s common stock and the conversion rate for the 2026 Notes on each such trading day; 
(3) with respect to any Notes that the Company calls for redemption, at any time prior to the close of business on the scheduled 

102

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after 
August 15, 2026, holders may convert all or any portion of their 2026 Notes at any time prior to the close of business on the 
second  scheduled  trading  day  immediately  preceding  the  maturity  date,  regardless  of  the  foregoing  circumstances.  Upon 
conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and 
shares of its common stock, at the Company’s election.

During the three months ended December 31, 2021, the conditions allowing holders of the 2026 Notes to convert were 

not met.

The  2026  Notes  are  senior  unsecured  obligations  and  will  rank  senior  in  right  of  payment  to  any  of  the  Company’s 
indebtedness  that  is  expressly  subordinated  in  right  of  payment  to  the  2026  Notes;  equal  in  right  of  payment  with  the 
Company’s existing and future liabilities that are not so subordinated; effectively subordinated to any of the Company’s secured 
indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and 
other liabilities (including trade payables) of current or future subsidiaries of the Company.

In  accounting  for  the  issuance  of  the  2026  Notes,  the  Company  separated  the  2026  Notes  into  liability  and  equity 
components.  The  carrying  amount  of  the  liability  component  was  calculated  by  measuring  the  fair  value  of  a  similar  debt 
instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the 
conversion option was $162.5 million and was determined by deducting the fair value of the liability component from the par 
value  of  the  2026  Notes.  The  equity  component  is  not  remeasured  as  long  as  it  continues  to  meet  the  conditions  for  equity 
classification. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, is 
amortized to interest expense at an effective interest rate over the contractual term of the 2026 Notes.

In  accounting  for  the  transaction  costs  related  to  the  2026  Notes,  the  Company  allocated  the  total  amount  incurred  of 
approximately $12.2 million to the liability and equity components of the 2026 Notes based on the proportion of the proceeds 
allocated  to  the  debt  and  equity  components.  Issuance  costs  attributable  to  the  liability  component  were  approximately  $8.5 
million, were recorded as an additional debt discount and are amortized to interest expense using the effective interest method 
over  the  contractual  terms  of  the  2026  Notes.  Issuance  costs  attributable  to  the  equity  component  were  approximately  $3.7 
million and recorded as a reduction of additional paid in capital in stockholders’ equity.

The remaining term over which the 2026 Notes’ debt discount and debt issuance costs will be amortized is 4.9 years. The 

effective interest rate on the debt was 5.49% for the period ended December 31, 2021. 

In  connection  with  the  offering  of  the  2026  Notes,  the  Company  entered  into  privately-negotiated  capped  call  option 
transactions  with  certain  counterparties  (the  “2026  capped  call”).  The  2026  capped  calls  each  have  an  initial  strike  price  of 
approximately $75.23 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2026 
Notes.  The  2026  capped  calls  have  initial  cap  prices  of  $105.58  per  share,  subject  to  certain  adjustment  events.  The  2026 
capped calls cover, subject to anti-dilution adjustments, approximately 6.88 million shares of common stock. The 2026 capped 
calls  are  generally  intended  to  reduce  or  offset  the  potential  dilution  to  the  common  stock  upon  any  conversion  of  the  2026 
Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. The 2026 capped calls expire on 
December 15, 2026, subject to earlier exercise. The 2026 capped calls are subject to either adjustment or termination upon the 
occurrence  of  specified  extraordinary  events  affecting  the  Company,  including  a  merger  event,  a  tender  offer,  and  a 
nationalization,  insolvency  or  delisting  involving  the  Company.  In  addition,  the  2026  capped  calls  are  subject  to  certain 
specified additional disruption events that may give rise to a termination of the 2026 capped calls, including changes in law, 
failure to deliver, and hedging disruptions. The 2026 capped calls are recorded in stockholders’ equity and are not accounted for 
as  derivatives.  The  net  cost  of  $46.1  million  incurred  to  purchase  the  2026  capped  calls  was  recorded  as  a  reduction  to 
additional paid-in capital in the accompanying consolidated balance sheet.

103

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The net carrying amount of the liability component of the Notes was as follows:

Principal       ....................................................................................................................................................... $ 

747,500  $ 

747,500 

Unamortized discount  ..................................................................................................................................

Unamortized issuance costs   .........................................................................................................................

(162,960) 

(10,302) 

(196,269) 

(12,799) 

Net carrying amount     .................................................................................................................................... $ 

574,238  $ 

538,432 

The net carrying amount of the equity component of the Notes was as follows:

December 31, 

2021

2020

(In thousands)

December 31,

2021

2020

(In thousands)

Proceeds allocated to the conversion options (debt discount)    ..................................................................... $ 

215,434  $ 

215,434 

Issuance costs    ...............................................................................................................................................

(5,783) 

(5,783) 

Net carrying amount     .................................................................................................................................... $ 

209,651  $ 

209,651 

The following table sets forth the interest expense recognized related to the Notes:

Year Ended December 31,

2021

2020

2019

(In thousands)

Contractual interest expense  .......................................................................................... $ 

1,725  $ 

1,725  $ 

Amortization of issuance costs  ......................................................................................

Amortization of debt discount   .......................................................................................

2,499 

33,309 

1,340 

11,564 

Total interest expense    .................................................................................................... $ 

37,533  $ 

14,629  $ 

1,438 

956 

7,605 

9,999 

Interest expense of $37.5 million, $14.6 million, and $10.0 million is reflected as a component of interest expense, net in 

the accompanying consolidated statement of operations for the years ended December 31, 2021, 2020, and 2019, respectively.

Note 9. Acquisitions 

e-bot7 Acquisition

In  July  2021,  the  Company  acquired  e-bot7,  a  Conversational  AI  company  based  in  Germany  for  a  purchase  price  of 
$50.7 million. This acquisition is accounted for as a part of the Company’s Business segment. This transaction was accounted 
for as a business combination. The purchase price consisted of approximately $24.3 million in cash, $20.2 million in shares of 
common stock of the Company, and potential earn-out consideration of up to $8.8 million in common stock of the Company, 
which is based on achieving certain objectives and milestones and is included as part of the purchase price. The current fair 
value  of  the  earn-out  is  $6.2  million.  Also  as  part  of  the  transaction,  there  is  a  potential  earn-out  consideration  of  up  to 
$4.4 million payable in common stock of the Company that is being treated as compensation expense over the next two years. 
The earn-out consideration cannot exceed the maximum base earn-out consideration of $3.9 million. The base earn-out payment 
consists  of  the  revenue  earn-out  payment  only.  The  fair  value  of  the  revenue  earn-out  consideration  is  approximately 
$3.1 million of the current fair value of the earn-out of $6.2 million. The Company incurred $1.5 million in acquisition costs for 
this  transaction  that  were  expensed  in  the  year  ended  December  31,  2021,  and  are  included  in  General  and  administrative 
expense in the accompanying consolidated statements of operations.

The purchase price allocation resulted in approximately $45.1 million of goodwill and $7.7 million of intangible assets. 
The goodwill will not be deductible for tax purposes. The intangible assets are being amortized over their expected period of 
benefit. A deferred tax liability for the identified intangibles has been recorded. 

104

 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  following  table  summarizes  the  fair  value  amounts  of  identifiable  assets  acquired  and  liabilities  assumed  at  the 

acquisition date:

Assets acquired

e-bot7 
Acquisition

(In thousands)

Cash ......................................................................................................................................................................................... $ 

Other current assets    ..................................................................................................................................................................

Intangible assets   .......................................................................................................................................................................

Other assets  ..............................................................................................................................................................................

Assets acquired    ........................................................................................................................................................................... $ 

Liabilities assumed

Current liabilities assumed     ....................................................................................................................................................... $ 

Long-term liabilities assumed    ..................................................................................................................................................

Deferred tax liabilities, non-current    .........................................................................................................................................

Total liabilities assumed  ............................................................................................................................................................. $ 

Net assets acquired     .....................................................................................................................................................................

Total acquisition consideration ...................................................................................................................................................

Goodwill      ..................................................................................................................................................................................... $ 

1,325 

706 

7,714 

221 

9,966 

(1,055) 

(3,063) 

(315) 

(4,433) 

5,533 

50,678 

45,145 

Other current assets acquired in connection with the acquisition consisted primarily of accounts receivable and other short 
term  assets.  Current  liabilities  assumed  in  connection  with  the  acquisition  consisted  primarily  of  accounts  payable  and  other 
short  term  liabilities.  Long-term  liabilities  assumed  in  connection  with  the  acquisition  consisted  of  the  long-term  portion  of 
deferred revenue, other long-term liabilities, and long-term debt, which was paid in full subsequent to the acquisition date. 

The following is the breakout of the intangible assets acquired:

Amortizing intangible assets:

Technology   ................................................................................................................................................ $ 

Customer relationships     ..............................................................................................................................

Trademark    .................................................................................................................................................

Total    .......................................................................................................................................................... $ 

Fair Value

(In thousands)

Useful life 

3,560 

2,611 

1,543 

7,714 

5 years

10 years

5 years

The  Company  applied  a  relief  from  royalty  method  of  the  income  approach  to  estimate  the  present  values  of  the 
intangible assets acquired. The intangible assets acquired in the business acquisition were technology, customer relationships, 
and trademark for the fair value of  $7.7 million, determined based on the present value of royalty savings after-tax benefits, 
attributable  to  total  revenue  of  the  Company.  The  Company  applied  various  estimates  and  assumptions  with  respect  to 
forecasted  revenue  growth  rates,  the  revenue  attributable  to  the  existing  customers  over  time  and  the  discount  rate.  The  fair 
values assigned to the other tangible and identifiable intangible assets acquired and liabilities assumed as part of the business 
combination  were  based  on  management’s  estimates  and  assumptions.  The  Company  began  amortizing  the  customer 
relationships on the date of acquisition over a period of ten years based on expected future cash flow attributable to existing 
revenue by customer type. The amortization expense is recorded to amortization of purchased intangibles in the consolidated 
statements of operations.  

VoiceBase, Inc. Acquisition

In October 2021, the Company acquired VoiceBase, Inc., a voice analytics platform operating in the United States for a 
purchase  price  of  $111.4  million.  This  acquisition  is  accounted  for  as  a  part  of  the  Company’s  Business  segment.  This 
transaction was accounted for as a business combination. The purchase price consisted of approximately $17.1 million in cash, 
$63.8 million in shares of common stock of the Company, a management retention plan (“MIP”) of $9.3 million to be paid in 

105

 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

shares  of  common  stock  of  the  Company,  potential  earn-out  consideration  of  up  to  $16.7  million  in  common  stock  of  the 
Company,  which  is  based  on  achieving  certain  objectives  and  milestones  and  is  included  as  part  of  the  purchase  price,  and 
replacement options of $4.5 million, which means an option granted by LivePerson to purchase its common stock granted under 
the VoiceBase, Inc. 2010 Equity Incentive Plan, as amended (the “VoiceBase Stock Plan”), whether vested or unvested. The 
current fair value of the earn-out is $22.5 million, of which $5.8 million payable in common stock of the Company is being 
treated  as  compensation  expense  over  the  next  two  years.  The  earn-out  consideration  cannot  exceed  the  maximum  earn-out 
consideration of $29.5 million. The MIP is a retention plan for the VoiceBase employees payable in two installments; 50% after 
the Company shares are registered with the SEC and 50% after January 1, 2022, but no later than March 15, 2022. 

As part of the acquisition, we also assumed the VoiceBase Stock Plan and the outstanding vested and unvested options to 
purchase  shares  of  common  stock  of  VoiceBase  thereunder,  and  such  options  become  exercisable  to  purchase  shares  of 
LivePerson’s  common  stock,  subject  to  appropriate  adjustments  to  the  number  of  shares  and  the  exercise  price  of  each  such 
option.  In  connection  with  the  above,  we  registered  16,322,217  vested  shares  and  5,167,530  unvested  shares  under  the 
VoiceBase Stock Plan. 

We estimated the fair value of the aforementioned vested and unvested options at the completion of the acquisition at $5.9 
million. Of the total consideration, $4.5 million was allocated to the purchase price, $0.8 million was accelerated and expensed 
immediately following the closing, and $0.7 million was allocated to future services and will be expensed over the remaining 
requisite  service  periods.  Vesting  schedules  vary  based  on  the  VoiceBase  Stock  Plan.  The  estimated  fair  value  of  the  stock 
options  was  determined  using  the  Black-Scholes  option  pricing  model.  The  share  conversion  ratio  of  0.0091  was  applied  to 
convert VoiceBase’s outstanding stock awards into shares of LivePerson’s common stock.

The purchase price allocation resulted in approximately $81.3 million of goodwill and $28.8 million of intangible assets. 
The goodwill will not be deductible for tax purposes. The intangible assets are being amortized over their expected period of 
benefit. A deferred tax liability for the identified intangibles has been recorded. 

The  following  table  summarizes  the  fair  value  amounts  of  identifiable  assets  acquired  and  liabilities  assumed  at  the 

acquisition date:

Assets acquired

VoiceBase, Inc. 
Acquisition

(In thousands)

Cash ......................................................................................................................................................................................... $ 

Other current assets    ..................................................................................................................................................................

Intangible assets   .......................................................................................................................................................................

Other assets  ..............................................................................................................................................................................

2,367 

611 

28,810 

56 

Assets acquired    ........................................................................................................................................................................... $ 

31,844 

Liabilities assumed

Current liabilities assumed     ....................................................................................................................................................... $ 

Deferred tax liabilities  ..............................................................................................................................................................

Total liabilities assumed  ............................................................................................................................................................. $ 

Net assets acquired     .....................................................................................................................................................................

Total acquisition consideration ...................................................................................................................................................

(1,473) 

(267) 

(1,740) 

30,104 

111,369 

Goodwill      ..................................................................................................................................................................................... $ 

81,265 

Other current assets acquired in connection with the acquisition consisted primarily of accounts receivable and other short 
term  assets.  Current  liabilities  assumed  in  connection  with  the  acquisition  consisted  primarily  of  accounts  payable  and  other 
short term liabilities.  

106

 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is the breakout of the intangible assets acquired:

Amortizing intangible assets:

Fair Value

(In thousands)

Useful life 

Developed technology     ............................................................................................................................... $ 

24,900 

Customer relationships     ..............................................................................................................................

Trade name  ................................................................................................................................................

3,700 

210 

Total    .......................................................................................................................................................... $ 

28,810 

5 years

5 years

2 years

The Company applied a multi-period excess earnings method of the income approach to estimate the fair values of the 
intangible  assets  acquired.  The  intangible  assets  acquired  in  the  business  acquisition  were  developed  technology,  customer 
relationships, and trademark for the fair value of $28.8 million, determined based on the estimated fair value of expected after-
tax  cash  flows  attributable  to  annual  recurring  revenue  from  enterprise  and  API  customers.  The  Company  applied  various 
estimates and assumptions with respect to forecasted revenue growth rates, the revenue attributable to the existing customers 
over time and the discount rate. The fair values assigned to the other tangible and identifiable intangible assets acquired and 
liabilities assumed as part of the business combination were based on management’s estimates and assumptions. The Company 
began amortizing the customer relationships on the date of acquisition over a period of five years based on expected future cash 
flow attributable to existing customers. The amortization expense is recorded to amortization of purchased intangibles in the 
consolidated statements of operations.  

The  Company  incurred  $2.8  million  in  acquisition  costs  for  this  transaction  that  were  expensed  in  the  year  ended 
December 31, 2021, and are included in General and administrative expense in the accompanying consolidated statements of 
operations.

Tenfold Acquisition

In October 2021, the Company acquired Callinize Inc., dba Tenfold, a leading customer experience integration platform 
operating  in  the  United  States.  Tenfold  was  built  to  integrate  the  world’s  leading  communication  service  providers  with  the 
leading CRM and support systems. The purchase price was $112.2 million. This acquisition is accounted for as a part of the 
Company’s Business segment. This transaction was accounted for as a business combination. The purchase price consisted of 
approximately $56.9 million in cash, $42.0 million in shares of common stock of the Company, potential earn-out consideration 
of up to $6.9 million in common stock of the Company, which is based on achieving certain objectives and milestones and is 
included as part of the purchase price, and replacement options of $6.4 million, which means an option granted by LivePerson 
to purchase its common stock granted under the Callinize Inc. dba Tenfold 2015 Stock Plan, as amended most recently as of 
June 26, 2019 (the “Tenfold Stock Plan”), whether vested or unvested. The current fair value of the earn-out is $10.1 million, of 
which $3.1 million payable in common stock of the Company is being treated as compensation expense over the next two years. 
The earn-out consideration cannot exceed the maximum earn-out consideration of $14.3 million.

As part of the acquisition, the Company also assumed the Tenfold Stock Plan and the outstanding vested and unvested 
options to purchase shares of common stock of Tenfold thereunder, and such options become exercisable to purchase shares of 
LivePerson’s  common  stock,  subject  to  appropriate  adjustments  to  the  number  of  shares  and  the  exercise  price  of  each  such 
option. In connection with the above, we registered 60,082,513 vested shares and 42,964,711 unvested shares under the Tenfold 
Stock Plan.

We  estimated  the  fair  value  of  the  aforementioned  vested  and  unvested  options  at  the  completion  of  the  acquisition  at 
$31.5 million. Of the total consideration, $13.5 million was allocated to the purchase price (with $7.1 million of this paid in 
cash instead of shares), $4.0 million was related to earn-outs and escrow that were held back, $2.4 million was accelerated and 
expensed immediately following the closing, and $11.6 million was allocated to future services and will be expensed over the 
remaining requisite service periods of approximately four years on a straight-line basis. The estimated fair value of the stock 
options  was  determined  using  the  Black-Scholes  option  pricing  model.  The  share  conversion  ratio  of  0.0055  was  applied  to 
convert Tenfold’s outstanding stock awards into shares of LivePerson’s common stock.

The purchase price allocation resulted in approximately $71.8 million of goodwill and $41.2 million of intangible assets. 
The goodwill will not be deductible for tax purposes. The intangible assets are being amortized over their expected period of 
benefit. A deferred tax liability for the identified intangibles has been recorded. 

107

 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  following  table  summarizes  the  fair  value  amounts  of  identifiable  assets  acquired  and  liabilities  assumed  at  the 

acquisition date:

Assets acquired

Cash ......................................................................................................................................................................................... $ 

Other current assets    ..................................................................................................................................................................

Intangible assets   .......................................................................................................................................................................

Other assets  ..............................................................................................................................................................................

Assets acquired    ........................................................................................................................................................................... $ 

Liabilities assumed

Current liabilities assumed     ....................................................................................................................................................... $ 

Long-term liabilities assumed    ..................................................................................................................................................

Deferred tax liabilities, non-current    .........................................................................................................................................

Liabilities assumed    ..................................................................................................................................................................... $ 

Net assets acquired     .....................................................................................................................................................................

Total acquisition consideration ...................................................................................................................................................

Tenfold 
Acquisition

(In thousands)

3,770 

2,339 

41,150 

1,144 

48,403 

(1,470) 

(3,524) 

(3,005) 

(7,999) 

40,404 

112,187 

Goodwill      ..................................................................................................................................................................................... $ 

71,783 

Other current assets acquired in connection with the acquisition consisted primarily of accounts receivable and other short 
term  assets.  Current  liabilities  assumed  in  connection  with  the  acquisition  consisted  primarily  of  accounts  payable  and  other 
short  term  liabilities.  Long-term  liabilities  assumed  in  connection  with  the  acquisition  consisted  of  the  long-term  portion  of 
deferred revenue. 

The following is the breakout of the intangible assets acquired:

Amortizing intangible assets:

Fair Value
(In thousands)

Useful life 

   Developed technology     ............................................................................................................................... $ 

31,900 

Customer relationships     ..............................................................................................................................

Trade name  ................................................................................................................................................

9,000 

250 

Total    .......................................................................................................................................................... $ 

41,150 

5 years

15 years

2 years

The Company applied a multi-period excess earnings method of the income approach to estimate the fair values of the 
intangible  assets  acquired.  The  intangible  assets  acquired  in  the  business  acquisition  were  developed  technology,  customer 
relationships, and trademark for the fair value of $41.2 million, determined based on the estimated fair value of expected after-
tax  cash  flows  attributable  to  annual  recurring  revenue  from  commercial,  enterprise,  and  partner  customer  segments.  The 
Company applied various estimates and assumptions with respect to forecasted revenue growth rates, the revenue attributable to 
the existing customers over time and the discount rate. The fair values assigned to the other tangible and identifiable intangible 
assets  acquired  and  liabilities  assumed  as  part  of  the  business  combination  were  based  on  management’s  estimates  and 
assumptions. The Company began amortizing the customer relationships on the date of acquisition over a period of 15 years 
based on expected future cash flow attributable to existing customers. The amortization expense is recorded to amortization of 
purchased intangibles in the consolidated statements of operations.  

The  Company  incurred  $1.5  million  in  acquisition  costs  for  this  transaction  that  were  expensed  in  the  year  ended 
December 31, 2021, and are included in General and administrative expense in the accompanying consolidated statements of 
operations.

108

 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Financial Information

The  following  unaudited  pro  forma  information  presents  the  combined  results  of  operations  as  if  the  acquisitions  of  e-
bot7, VoiceBase, and Tenfold had been completed as of the beginning of the Company’s fiscal year 2020. The unaudited pro 
forma results include adjustments primarily related to the amortization of intangible assets and the inclusion of acquisition costs 
as of the earliest period presented. There were no transactions between the Company and the acquired companies during the 
periods presented that would need to be eliminated.

The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies, or the effect of the 
incremental costs incurred from integrating these companies. For pro forma purposes, 2021 earnings were adjusted to exclude 
acquisition-related  costs,  and  2020  earnings  were  adjusted  to  include  these  costs.  Accordingly,  these  unaudited  pro  forma 
results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations 
of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they 
indicative of future results of operations.

The unaudited pro forma financial information was as follows:

(Unaudited)

December 31,

2021

2020

(In thousands)

Revenue    ........................................................................................................................................................ $ 

482,152  $ 

382,683 

Net loss   ......................................................................................................................................................... $ 

(159,697)  $ 

(131,826) 

The amounts of revenue and net loss of acquisitions included in the Company’s consolidated statement of operations from 

the acquisition date to December 31, 2021 were $4.9 million and $14.1 million, respectively. 

Note 10.  Leases

We have operating and finance leases for our corporate offices and other service agreements. Our leases have remaining 

lease terms of less than one to five years, some of which include options to extend. 

In connection with the leases, we recognized operating lease right of use assets of $2.0 million and $0.6 million and an 
aggregate  lease  liability  of  $6.1  million  and  $12.9  million  in  our  consolidated  balance  sheet  as  of  December  31,  2021  and 
December 31, 2020, respectively. 

On  July  13,  2020,  the  Company  announced  its  decision  to  transition  to  an  employee-centric  model  under  which 
employees will work remotely rather than in traditional offices. In connection with this decision, the Company abandoned 14 
leases in its global portfolio of office leases during 2020. As a result, the Company recognized accelerated amortization to fully 
reduce  the  carrying  value  of  the  associated  right  of  use  assets  between  the  decision  date  and  the  cease  use  date.  During  the 
second quarter of 2021, the Company decided to reoccupy some of its leased space to provide its employees with the option of 
working in an office space environment if they choose to do so. There were no changes to the accounting for the lease liabilities 
associated with the leased office spaces. During 2021, we had a $3.5 million gain resulting from the settlement of leases. 

As of December 31, 2021, due to a dispute with one of the leases in Israel, the Company was required to pledge cash as 
collateral  security  to  be  maintained  at  an  Israeli  bank.  The  collateral  security  would  remain  in  control  of  the  bank,  to  be 
available in order to satisfy outstanding obligations under the lease contracts. Accordingly, the Company had cash at an Israeli 
bank of approximately $1.5 million at December 31, 2021, which is recorded as restricted cash in Prepaid expenses and other 
current assets in the consolidated balance sheets. In the third quarter of 2021, the Company entered into a new lease in Australia 
and was required to pledge $0.2 million in cash as collateral security. 

We continue to actively assess our global lease portfolio. However, any additional de-recognition of right of use assets 
and incurrence of various one-time expenses in connection with early termination of additional leases are not expected to be 
material to our financial condition or results of operations.

109

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow information related to leases for the periods listed are as follows:

Year Ended December 31,

2021

2020

2019

(In thousands)

Cash paid for amounts included in the measurement of lease liabilities:

   Operating cash flows for operating leases    .................................................................. $ 

2,927  $ 

4,901  $ 

6,963 

   Operating cash flows for finance leases     .....................................................................

   Financing cash flows for finance leases    .....................................................................

362 

3,554 

88 

1,154 

— 

— 

The components of lease costs for the periods listed are as follows:

Year Ended December 31,

2021

2020

2019

(In thousands)

Finance lease cost

   Amortization of right-of-use assets      ............................................................................ $ 

3,718  $ 

772  $ 

   Interest    ........................................................................................................................

Operating lease cost      ......................................................................................................

362 

8,912 

88 

12,649 

   Total lease cost    ........................................................................................................... $ 

12,992  $ 

13,509  $ 

— 

— 

12,984 

12,984 

Weighted Average Remaining Lease Term:

Operating leases     ......................................................................................................................................

Finance leases    .........................................................................................................................................

2.5 years

2.0 years

3.0 years

2.8 years

December 31,
2021

December 31,
2020

Weighted Average Discount Rate:

Operating leases     ......................................................................................................................................

Finance leases    .........................................................................................................................................

 7 %

 4 %

 7 %

 4 %

Supplemental balance sheet information related to leases is as follows:

Classification on the Consolidated Balance Sheet

December 31,
2021

December 31,
2020

(In thousands)

Assets

Operating ROU assets    .....................................

Operating lease ROU assets

$ 

1,977  $ 

Finance ROU assets   ........................................

Property and equipment, net

6,797 

Liabilities

Current liabilities:

Operating lease liability      ...............................

Operating lease liability

$ 

3,380  $ 

Finance lease liability   ...................................

Accrued expenses and other current liabilities

Non-current liabilities:

Operating lease liability      ...............................

Operating lease liability, net of current portion

Finance lease liability   ...................................

Other liabilities

3,738 

2,733 

2,780 

614 

10,045 

5,718 

3,488 

7,180 

6,176 

110

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Future minimum lease payments under non-cancellable operating and finance leases (with an initial or remaining lease 

terms in excess of one year) are as follows:

Year Ending December 31,

December 31, 2021

Operating 
Leases

Finance 
Leases

(In thousands)

2022   ............................................................................................................................................................. $ 

3,773  $ 

2023   .............................................................................................................................................................

1,578 

2024   .............................................................................................................................................................

2025   .............................................................................................................................................................

2026   .............................................................................................................................................................

Thereafter   .....................................................................................................................................................

Total minimum lease payments    ...............................................................................................................

Less: present value adjustment      ....................................................................................................................

526 

625 

261 

— 

6,763 

(650) 

Present value of lease liabilities    ............................................................................................................... $ 

6,113  $ 

3,936 

2,623 

123 

92 

— 

— 

6,774 

(256) 

6,518 

Rental expense for operating leases and other service agreements was approximately $13.0 million, $13.5 million  and  

$13.0 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Note 11. Fair Value Measurements

The Company measures its cash equivalents at fair value based on an expected exit price as defined by the authoritative 
guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to 
transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based 
on  assumptions  that  market  participants  would  use  in  pricing  an  asset  or  liability.  The  authoritative  guidance  on  fair  value 
measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby 
inputs,  used  in  valuation  techniques,  are  assigned  a  hierarchical  level.  The  following  are  the  hierarchical  levels  of  inputs  to 
measure fair value:

•

•

•

Level  1:  Observable  inputs  that  reflect  quoted  prices  (unadjusted)  for  identical  assets  or  liabilities  in  active 
markets.

Level  2:  Inputs  reflect:  quoted  prices  for  identical  assets  or  liabilities  in  markets  that  are  not  active;  quoted 
prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for 
the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by 
correlation or other means.

Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used 
to  determine  fair  value.  These  assumptions  are  required  to  be  consistent  with  market  participant  assumptions 
that are reasonably available.

111

 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Assets and Liabilities

The carrying amount of cash, accounts receivable, and accounts payable approximate their fair value due to their short-
term nature.  The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair 
value hierarchy as of December 31, 2021 and December 31, 2020, are summarized as follows:

December 31, 2021

Level 1

Level 2

Level 3

Total

(In thousands)

Assets:

Cash equivalents:

Money market funds    .................................................................... $ 

416,178  $ 

Total assets     ................................................................................ $ 

416,178  $ 

—  $ 

—  $ 

—  $ 

—  $ 

416,178 

416,178 

Liabilities:

Contingent earn-out    ...................................................................... $ 

Total liabilities    ........................................................................... $ 

—  $ 

—  $ 

—  $ 

—  $ 

29,686  $ 

29,686  $ 

29,686 

29,686 

December 31, 2020

Level 1

Level 2

Level 3

Total

(In thousands)

Assets:

Cash equivalents:

Money market funds    ..................................................................... $ 

328,195  $ 

Total assets     ................................................................................. $ 

328,195  $ 

Liabilities:

Contingent earn-out    ....................................................................... $ 

Total liabilities    ............................................................................ $ 

—  $ 

—  $ 

—  $ 

—  $ 

—  $ 

—  $ 

—  $ 

—  $ 

328,195 

328,195 

—  $ 

—  $ 

— 

— 

In  determining  fair  value,  the  Company  utilizes  valuation  techniques  that  maximize  the  use  of  observable  inputs  and 
minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of 
fair  value.  Observable  or  market  inputs  reflect  market  data  obtained  from  independent  sources,  while  unobservable  inputs 
reflect the Company’s assumptions based on the best information available.

The  Company’s  money  market  funds  are  measured  at  fair  value  on  a  recurring  basis  based  on  quoted  market  prices  in 
active  markets  and  are  classified  as  level  1  within  the  fair  value  hierarchy.  The  Company’s  contingent  earn-out  liability  is 
measured at fair value on a recurring basis and is classified as level 3 within the fair value hierarchy. On a nonrecurring basis, 
the  Company  uses  fair  value  measures  when  analyzing  asset  impairment.  Long-lived  tangible  assets  are  reviewed  for 
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 
If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on 
undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair 
value.  The  Company  uses  an  income  approach  and  inputs  that  constitute  level  3.  During  the  third  quarter  of  each  year,  the 
Company  evaluates  goodwill  for  impairment  at  the  reporting  unit  level.  The  Company  uses  qualitative  factors  in  accordance 
with ASC 820 - Fair Value Measurement to determine whether it is “more likely than not” that the fair value of a reporting unit 
is less than its carrying amount as a basis for determining whether it is necessary to perform a goodwill impairment test.  This 
measurement is classified based on level 3 input.

As of December 31, 2021, the fair value of the Notes issued in the two Convertible Senior Note transactions, as further 
described  in  Note  8  –  Convertible  Senior  Notes  and  Capped  Call  Transactions  above,  was  approximately  $711.0  million. 
Management determines the fair value by utilizing an independent valuation specialist using the antithetic variable technique 
and is considered a Level 2 fair value measurement.

112

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We  recorded  contingent  earn-outs  as  of  December  2021  in  connection  with  the  acquisitions  of  e-bot7,  VoiceBase,  and 

Tenfold. The contingent earn-outs are based on achieving certain targeted objectives and milestones. 

The changes in fair value of the Level 3 liabilities are as follows:

Balance, Beginning of year   .............................................................................................................................. $ 

e-bot7 acquisition (Note 9)     ............................................................................................................................

Tenfold acquisition (Note 9) ..........................................................................................................................

December 31,

2021

2020

(In thousands)

— 

6,170 

6,946 

VoiceBase acquisition (Note 9)    .....................................................................................................................

16,714 

AdvantageTec, Inc. fair value adjustment     .....................................................................................................

Payments   ........................................................................................................................................................

132 

(132) 

Balance, End of year  ......................................................................................................................................... $ 

29,830  $ 

557 

— 

— 

— 

(263) 

(294) 

— 

Note 12. Commitments and Contingencies

Employee Benefit Plans

The Company has a 401(k) defined contribution plan covering all eligible employees. The Company’s 401(k) policy is a 
Safe Harbor Plan, whereby the Company matches 100% of the first 3% of eligible compensation and 50% of the next 2% of 
eligible  compensation.  Furthermore,  the  match  is  immediately  vested.  Total  Company  matching  contributions  were 
$3.7 million, $3.1 million, and $3.2 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Letters of Credit

As of December 31, 2021, the Company had letters of credit totaling $0.8 million outstanding as a security deposit for the 

due performance by the Company of the terms and conditions of a supply contract. 

Indemnifications

The  Company  enters  into  service  and  license  agreements  in  its  ordinary  course  of  business.  Pursuant  to  some  of  these 
agreements, the Company agrees to indemnify certain customers from and against certain types of claims and losses suffered or 
incurred by them as a result of using the Company’s products.

The  Company  also  has  agreements  whereby  its  executive  officers  and  directors  are  indemnified  for  certain  events  or 
occurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The maximum potential 
amount  of  future  payments  the  Company  could  be  required  to  make  under  these  indemnification  agreements  is  unlimited; 
however,  the  Company  has  a  directors  and  officers  insurance  policy  that  reduces  its  exposure  and  enables  the  Company  to 
recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated 
fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of 
December 31, 2021 and 2020. 

Non-Income Related Taxes

The  Company  is  in  the  process  of  finalizing  its  sales  tax  liability  analysis  for  states  in  which  it  has  economic  nexus. 
During the first quarter of 2020, the Company determined it was probable the Company would be subject to sales tax liabilities 
plus applicable interest in these states and has estimated the potential exposure to range between $2.5 million to $6.3 million. 
The Company determined that its best estimate of what would be reasonably expected for the Company to settle the potential 
exposure was $2.5 million and accordingly, the Company accrued this amount with a corresponding charge to earnings as of 
March 31, 2020. As of  December 31, 2021, there is a $0.8 million accrual balance for sales tax liabilities. The decrease in the 
balance of this accrual is primarily due to payments made for the sales tax liabilities.

113

 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COVID-19 Pandemic

In December 2019, COVID-19 was first reported. On March 11, 2020, due to worldwide spread of the virus, the World 
Health  Organization  characterized  COVID-19  as  a  pandemic.  The  COVID-19  global  pandemic  has  resulted  in  a  widespread 
health crisis, and the resulting impact on governments, businesses and individuals and actions taken by them in response to the 
situation have resulted in widespread economic disruptions, significantly affecting broader economies, financial markets, and 
overall demand for the Company’s products. The COVID-19 outbreak also has caused increased uncertainty in estimates and 
assumptions affecting the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities in the 
Company’s  consolidated  financial  statements  as  the  extent  and  period  of  recovery  from  the  COVID-19  outbreak  and  related 
economic disruption is difficult to forecast. 

The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving 
factors including, but not limited to, the magnitude and duration of COVID-19, the extent to which it will impact worldwide 
macroeconomic  conditions,  the  speed  of  the  anticipated  recovery,  and  governmental  and  business  reactions  to  the  pandemic. 
The  Company  assessed  certain  accounting  matters  that  generally  require  consideration  of  forecasted  financial  information  in 
context  with  the  information  reasonably  available  to  the  Company  and  the  unknown  future  impacts  of  COVID-19.  The 
accounting matters assessed included, but were not limited to, the Company’s allowance for credit losses and the carrying value 
of  the  goodwill  and  other  long-lived  assets.  While  there  was  not  any  significant  impact  to  the  operations  of  the  Company, 
during  the  twelve  months  ended  December  31,  2020,  the  Company  moved  to  an  employee-centric  model  under  which 
employees will work remotely rather than in traditional offices due to concerns about COVID-19. As a result of this decision, 
the Company recognized accelerated amortization to fully reduce the carrying value of the associated ROU assets for 14 leases 
within its global lease portfolio, which is a material impact to the Company’s consolidated financial statements as of and for the 
twelve months ended December 31, 2020. Refer to earlier paragraphs of this Note 10 for a detailed discussion of the impacts of 
this lease restructuring.

The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in 

other material impacts to the Company’s consolidated financial statements in future reporting periods.

Note 13. Stockholders’ Equity

Common Stock

As  December  31,  2021,  there  were  200,000,000  shares  of  common  stock  authorized,  and  74,980,546  and  72,234,303 
shares  issued  and  outstanding,  respectively.  As  of  December  31,  2020,  there  were  200,000,000  shares  of  common  stock 
authorized, and 70,264,265 and 67,554,435 shares issued and outstanding, respectively. The par value for the common stock is 
$0.001 per share.

Preferred Stock

As of December 31, 2021 and 2020, there were 5,000,000 shares of preferred stock authorized, and zero shares issued and 

outstanding. The par value for the preferred stock is $0.001 per share.

Stock-Based Compensation

Stock Option Plans

The  Company’s  2019  Stock  Incentive  Plan,  as  amended  and  restated  (the  “2019  Plan”),  became  effective  on  April  11, 
2019.  The  2019  Plan  allows  the  Company  to  grant  incentive  stock  options  and  restricted  stock  units  to  its  employees  and 
directors  to  participate  in  the  Company’s  future  performance  through  stock-based  awards  at  the  discretion  of  the  board  of 
directors.  On  April  19,  2021,  the  Company’s  board  of  directors  amended  the  plan  and  authorized  5,000,000  new  shares  for 
issuance. The number of shares authorized for issuance is 40,067,744 shares in the aggregate. Options to acquire common stock 
granted thereunder have ten-year terms. As of December 31, 2021, approximately 5.0 million shares of common stock remained 
available for issuance (taking into account all option exercises and other equity award settlements through December 31, 2021). 

114

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Stock Purchase Plan

There are 1,000,000 shares authorized and reserved for issuance under the 2019 Employee Stock Purchase Plan. As of 
December 31, 2021, approximately 0.7 million shares of common stock remain available for issuance under the 2019 Employee 
Stock Purchase Plan (taking into account all share purchases through December 31, 2021).

Inducement Plan

There  are  3,368,048  shares  of  common  stock  authorized  and  reserved  for  issuance  under  the  Inducement  Plan.  As  of 
December 31, 2021, no more shares of common stock remained available for issuance under the Inducement Plan (taking into 
account all option exercises and other equity award settlements through December 31, 2021). 

Stock Option Activity 

A summary of the Company’s stock option activity and weighted average exercise prices follows:

Stock Option Activity

Options 
(In thousands)

Weighted
Average
Exercise Price

Weighted 
Average 
Remaining 
Contractual 
Term 
(In years)

Aggregate 
Intrinsic Value 
(In thousands)

Balance outstanding at December 31, 2018     ...................................

6,266  $ 

Granted    ......................................................................................

Exercised    ...................................................................................

Cancelled or expired   ..................................................................

Balance outstanding at December 31, 2019     ...................................

Options vested and expected to vest    ...............................................

Options exercisable at December 31, 2019    ....................................

1,425 

(1,523) 

(369) 

5,799  $ 

5,096  $ 

2,901  $ 

Balance outstanding at December 31, 2019     ...................................

5,799  $ 

Granted    ......................................................................................

Exercised    ...................................................................................

Cancelled or expired   ..................................................................

Balance outstanding at December 31, 2020     ...................................

Options vested and expected to vest    ...............................................

Options exercisable at December 31, 2020    ....................................

737 

(1,683) 

(521) 

4,332  $ 

1,470  $ 

2,280  $ 

Balance outstanding at December 31, 2020     ...................................

4,332  $ 

Granted    ......................................................................................

Exercised    ...................................................................................

Cancelled or expired   ..................................................................

Balance outstanding at December 31, 2021     ...................................

Options vested and expected to vest    ...............................................

Options exercisable at December 31, 2021    ....................................

1,705 

(863) 

(392) 

4,782  $ 

1,419  $ 

2,564  $ 

12.13 

29.76 

11.12 

14.76 

16.57 

15.29 

12.03 

16.57 

31.21 

12.69 

23.27 

19.78 

23.88 

14.80 

19.78 

48.24 

13.55 

32.94 

27.52 

36.41 

17.87 

6.79

6.49

4.95

$ 

$ 

$ 

119,064 

110,934 

72,424 

6.79

8.19

5.40

$ 

$ 

$ 

183,825 

56,382 

108,128 

6.77

8.61

5.05

$ 

$ 

$ 

62,300 

11,387 

46,932 

The total fair value of stock options exercised during the years ended December 31, 2021 and 2020 was approximately 
$6.6  million  and  $10.0  million,  respectively.  As  of  December  31,  2021,  there  was  approximately  $44.8  million  of  total 
unrecognized  compensation  cost  related  to  nonvested  share-based  compensation  arrangements.  That  cost  is  expected  to  be 
recognized over a weighted average period of approximately 2.7 years.

115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Unit Activity

A summary of the Company’s restricted stock units (“RSUs”) activity and weighted average exercise prices follows:

Restricted Stock Unit Activity

Number of 
Shares 
(In thousands)

Weighted 
Average 
Grant Date Fair 
Value 
(Per Share)

Aggregate Fair 
Value 
(In thousands)

Balance outstanding at December 31, 2018      ..................................................................

2,690  $ 

15.81  $ 

50,756 

Awarded    .....................................................................................................................

Released     .....................................................................................................................

Forfeited    .....................................................................................................................

1,979 

(1,197) 

(423) 

30.99 

14.24 

20.28 

Non-vested and outstanding at December 31, 2019   ......................................................

3,049  $ 

24.73  $ 

112,848 

Balance outstanding at December 31, 2019      ..................................................................

3,049  $ 

24.73  $ 

112,848 

Awarded    .....................................................................................................................

Released     .....................................................................................................................

Forfeited    .....................................................................................................................

2,530 

(1,906) 

(723) 

26.51 

23.40 

25.19 

Non-vested and outstanding at December 31, 2020   ......................................................

2,950  $ 

27.00  $ 

183,781 

Balance outstanding at December 31, 2020      ..................................................................

2,950  $ 

27.00  $ 

183,781 

Awarded    .....................................................................................................................

Released     .....................................................................................................................

Forfeited    .....................................................................................................................

Non-vested and outstanding at December 31, 2021   ......................................................

Expected to vest    ............................................................................................................

3,066 

(1,596) 

(688) 

3,732  $ 

2,246  $ 

43.63  $ 

41.86  $ 

133,308 

80,242 

RSUs granted to employees generally vest over a three to four-year period, or upon achievement of certain performance 
conditions.  As  of  December  31,  2021,  total  unrecognized  compensation  cost,  adjusted  for  estimated  forfeitures,  related  to 
nonvested RSUs was approximately $141.9 million and the weighted-average remaining vesting period was 3.2 years.

For  the  year  ended  December  31,  2021,  the  Company  accrued  approximately  $18.4  million  for  cash  awards  related  to 
bonus to be settled in shares of the Company’s stock and recorded a corresponding expense, which is included as a component 
of stock-based compensation expense in the accompanying consolidated financial statements. For the year ended December 31, 
2020,  the  Company  accrued  approximately  $20.4  million  and  $8.9  million  for  cash  awards  related  to  bonus  and  for  the 
achievement of long term incentive plan awards, respectively, to be settled in shares of the Company’s stock and recorded a 
corresponding  expense,  which  is  included  as  a  component  of  stock-based  compensation  expense  in  the  accompanying 
consolidated financial statements. 

Stock-based  compensation  expense  recognized  in  the  Company’s  consolidated  statements  of  operations  and  cash  flows 

was $69.7 million,  $65.9 million, and $44.1 million for the years ended  December 31, 2021, 2020, and 2019, respectively.

116

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The per share weighted average fair value of stock options granted during the years ended December 31, 2021, 2020 and 
2019 was $28.68, $13.84, and $12.12, respectively. The fair value of each option grant is estimated on the date of grant using 
the Black-Scholes option-pricing model with the following weighted average assumptions for the periods presented:

Dividend yield    ...............................................................................................................

Year Ended December 31,

2021

—%

2020

—%

2019

—%

Risk-free interest rate  ....................................................................................................

0.46% – 1.33%

0.26% – 0.66%

1.66% – 3.05%

Expected life (in years)    .................................................................................................

5

5

5

Historical volatility    ........................................................................................................ 53.51% – 54.55% 46.50% – 53.91% 43.42% – 44.00%

A  description  of  the  methods  used  in  the  significant  assumptions  used  to  estimate  the  fair  value  of  stock-based-based 

compensation awards follows:

•

•

•

•

Dividend  yield  –  The  Company  uses  0%  as  it  has  never  issued  dividends  and  does  not  anticipate  issuing 
dividends in the near term.

Risk-free  interest  rate  –  The  Company  uses  the  market  yield  on  U.S.  Treasury  securities  at  five  years  with 
constant maturity, representing the current expected life of stock options in years.

Expected life – The Company uses historical data to estimate the expected life of a stock option

Historical volatility – The Company uses a trailing five year from grant date to determine volatility.

Note 14. Restructuring

In response to the COVID-19 pandemic, the Company went through a re-evaluation of its real estate needs. In connection 
with this re-evaluation, and the success the Company has had working remotely, it was decided in July 2020 that the Company 
would  significantly  reduce  the  real  estate  space  it  leases.  This  decision  resulted  in  the  significant  reduction  of  the  real  estate 
space  leased  by  the  Company  and  the  removal  of  the  associated  ROU  assets.  Furthermore,  this  resulted  in  various  one-time 
expenses in connection with the abandonment of the majority of the Company’s leased facilities. The lease restructuring costs 
noted below are a result of this transition to an employee-centric workforce model that does not rely on traditional offices.

On top of the lease restructuring costs, the Company went through a further restructuring related to costs associated with 

re-prioritizing and reallocating resources to focus on areas believed by management to show high growth potential. 

The expenses associated with these restructuring events were approximately $3.4 million, $29.4 million, and $2.0 million 
during the years ended December 31, 2021, 2020, and 2019, respectively, and are classified in the consolidated statements of 
operations  as  restructuring  costs.  The  restructuring  liability  was  approximately  $1.7  million  and  $4.7  million  as  of 
December  31,  2021  and  2020,  respectively,  and  is  classified  as  accrued  expenses  and  other  current  liabilities  on  the 
consolidated balance sheets, as the liability is expected to be settled in the next 12 months.

The following table presents the detail of the liability for the Company’s restructuring charges for the periods presented:

Balance at January 1     .................................................................................................................................... $ 

4,732  $ 

Lease restructuring costs     .........................................................................................................................

Severance and other associated costs   ......................................................................................................

Cash payments   ........................................................................................................................................

724 

2,673 

(6,435) 

Balance at December 31     .............................................................................................................................. $ 

1,694  $ 

314 

5,034 

5,090 

(5,706) 

4,732 

December 31, 

2021

2020

(In thousands)

117

 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the detail of expenses for the Company’s restructuring charges for the periods presented:

Year Ended December 31,

2021

2020

2019

(In thousands)

Lease restructuring costs:

ROU assets write down     ................................................................................. $ 

—  $ 

13,938  $ 

Abandonment of property and equipment     .....................................................

Other lease restructuring costs  .......................................................................

Total lease restructuring costs     ............................................................................

— 

724 

724 

5,147 

5,245 

24,330 

Severance and other associated costs     .................................................................

2,673 

5,090 

Total restructuring costs     ................................................................................ $ 

3,397  $ 

29,420  $ 

— 

— 

— 

— 

2,043 

2,043 

Note 15. Legal Matters

The Company filed an intellectual property suit against [24]7 Customer, Inc. (“[24]7”) in the Southern District of New 
York  on  March  6,  2014  seeking  damages  on  the  grounds  that  [24]7  reverse  engineered  and  misappropriated  the  Company’s 
technology to develop competing products and misused the Company’s business information. On June 22, 2015, [24]7 filed suit 
against the Company in the Northern District of California alleging patent infringement. On December 7, 2015, [24]7 filed a 
second patent infringement suit against the Company, also in the Northern District of California. On March 16, 2017, the New 
York case was voluntarily transferred and consolidated with the two California cases in the Northern District of California for 
all pre-trial purposes. Rulings by both the Court and the United States Patent and Trademark Office in the Company’s favor 
have  invalidated  the  majority  of  [24]7  patents  that  were  asserted  in  the  patent  cases.  The  Company  believes  the  remaining 
claims  filed  by  [24]7  are  entirely  without  merit  and  intends  to  defend  them  vigorously.  Trial  for  the  Company’s  intellectual 
property and other claims asserted against [24]7 related to three of the customers at issue occurred on May 24, 2021 and the 
jury  awarded  approximately  $30.3  million  in  favor  of  the  Company,  including  approximately  $6.7  million  in  compensatory 
damages  and  approximately  $23.6  million  in  punitive  damages.  The  Company  currently  anticipates  that  [24]7  may  elect  to 
pursue challenges to this award on procedural grounds. Accordingly, no amounts for the settlement have been reflected in the 
Company’s financial statements. Trial for [24]7’s patent infringement claims has been vacated, to be reset by the Court.

From  time  to  time,  the  Company  is  involved  in  or  subject  to  legal,  administrative  and  regulatory  proceedings,  claims, 
demands,  and  investigations  arising  in  the  ordinary  course  of  business,  including  direct  claims  brought  by  or  against  the 
Company with respect to intellectual property, contracts, employment and other matters, as well as claims brought against the 
Company’s  customers  for  whom  the  Company  has  a  contractual  indemnification  obligation.  The  Company  accrues  for  a 
liability  when  it  is  both  probable  that  a  liability  has  been  incurred  and  the  amount  of  the  loss  can  be  reasonably  estimated. 
Significant  judgment  is  required  in  both  the  determination  of  probability  and  the  determination  as  to  whether  a  loss  is 
reasonably estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, 
and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will 
include  disclosure  related  to  such  matter  as  appropriate  and  in  compliance  with  ASC  450.  The  accruals  or  estimates,  if  any, 
resulting  from  the  foregoing  analysis,  are  reviewed  at  least  quarterly  and  adjusted  to  reflect  the  impact  of  negotiations, 
settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. To the extent 
there  is  a  reasonable  possibility  that  the  losses  could  exceed  the  amounts  already  accrued,  the  Company  will,  as  applicable, 
adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate 
that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be 
reasonably  estimated,  disclose  that  an  estimate  cannot  be  made.  From  time  to  time,  third  parties  assert  claims  against  the 
Company regarding intellectual property rights, privacy issues, and other matters arising in the ordinary course of business. 

Note 16. Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities 
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of 
existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets 
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary 
differences are expected to be recovered or settled. In assessing the realizability of deferred tax assets, management considers 
whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of 

118

 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

deferred  tax  assets  is  dependent  upon  the  generation  of  future  taxable  income  during  the  periods  in  which  those  temporary 
differences  are  expected  to  become  deductible.  Management  considers  the  scheduled  reversal  of  deferred  tax  liabilities, 
projected future taxable income and tax planning strategies in making this assessment. The Company includes interest accrued 
on the underpayment of income taxes in interest expense and penalties, if any, related to unrecognized tax benefits in general 
and administrative expenses. The Company recorded a valuation allowance against its U.S. and Germany deferred tax assets as 
it  considered  its  cumulative  loss  in  recent  years  as  a  significant  piece  of  negative  evidence.  Since  valuation  allowances  are 
evaluated  on  a  jurisdiction  by  jurisdiction  basis,  we  believe  that  the  deferred  tax  assets  related  to  LivePerson  Australia, 
LivePerson UK, Kasamba Israel, LivePerson Japan and LivePerson LTD Israel are more likely than not to be realized as these 
jurisdictions have positive cumulative pre-tax book income after adjusting for permanent and one-time items. During the year 
ended December 31, 2021, there was an increase in the valuation recorded of $51.7 million. 

The Company had a valuation allowance on certain deferred tax assets for the years ended December 31, 2021, 2020, and 
2019 of $107.1 million, $55.4 million, and $48.5 million, respectively. An increase in the valuation allowance in the amount of 
$34.3 million was recorded as an expense and an additional increase of $17.4 million was recorded to goodwill against acquired 
federal and state net operating losses during 2021. An increase in the valuation allowance in the amount of $35.1 million was 
recorded as an expense and a decrease of $28.2 million related to the issuance of convertible notes was charged to equity during 
2020.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company’s use of its federal net 
operating loss (“NOL”) carryforwards may be limited if the Company experiences an ownership change, as defined in Section 
382 of the Code. The use of NOLs from acquired businesses may also be limited under Section 382. Such an annual limitation 
could result in the expiration of the NOL carryforwards before utilization. Corresponding provisions of state law may limit the 
Company’s  ability  to  utilize  NOL  carryforwards  for  state  tax  purposes.  As  of  December  31,  2021,  the  Company  had 
approximately $553.4 million of federal NOL carryforwards available to offset future taxable income. Included in this amount 
is $5.1 million of federal NOL carryovers from the Company’s acquisition of Proficient in 2006, $51.8 million of federal NOL 
carryovers  from  the  Company’s  acquisition  of  Tenfold  in  2021,  and  $65.6  million  of  federal  NOL  carryovers  from  the 
Company’s acquisition of VoiceBase in 2021. Approximately $78.2 million of these federal NOL carryforwards were generated 
in  taxable  years  ending  on  or  before  December  31,  2017  and  will  expire  in  various  years  through  2037.  Federal  NOL 
carryforwards generated in taxable years ending after December 31, 2017, do not expire, but generally may only offset up to 
80% of federal taxable income earned in a taxable year. 

The domestic and foreign components of income (loss) before provision for income taxes consist of the following: 

Year Ended December 31,

2021

2020

2019

(In thousands)

United States     .................................................................................................................. $ 

(128,210)  $ 

(113,689)  $ 

(105,961) 

Israel     ...............................................................................................................................

United Kingdom    .............................................................................................................

Netherlands .....................................................................................................................

Australia    .........................................................................................................................

Germany     .........................................................................................................................
Other (1)

     ...........................................................................................................................

1,414 

1,145 

3,629 

755 

(6,450) 

339 

2,214 

536 

3,398 

1,663 

243 

507 

2,791 

5,377 

(465) 

716 

3,854 

462 

$ 

(127,378)  $ 

(105,128)  $ 

(93,226) 

——————————————
(1)

Includes Bulgaria, Canada,  Japan, France, India, Italy, Singapore, and Spain

No  additional  provision  has  been  made  for  U.S.  income  taxes  on  the  undistributed  earnings  of  its  Israeli  subsidiary, 
LivePerson Ltd. (formerly HumanClick Ltd.), as such earnings have been taxed in the U.S. and accumulated earnings of the 
Company’s other foreign subsidiaries are immaterial through December 31, 2021.

119

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The provision for income taxes consists of the following:

Year Ended December 31,

2021

2020

2019

(In thousands)

Current income taxes:

U.S. Federal    .............................................................................................................. $ 

(22)  $ 

(581)  $ 

State and local   ...........................................................................................................

Foreign      ......................................................................................................................

Total current income taxes   .............................................................................................

Deferred income taxes:

U.S. Federal    ..............................................................................................................

State and local   ...........................................................................................................

Foreign      ......................................................................................................................

Total deferred income taxes  ...........................................................................................

159 

3,698 

3,835 

(2,908) 

20 

(3,351) 

(6,239) 

59 

2,408 

1,886 

(151) 

459 

272 

580 

Total provision for income taxes  .................................................................................... $ 

(2,404)  $ 

2,466  $ 

(452) 

89 

4,415 

4,052 

126 

135 

(1,468) 

(1,207) 

2,845 

The difference between the total income taxes computed at the federal statutory rate and the provision for income taxes 

consists of the following:

Year Ended December 31,

2021

2020

2019

Federal statutory rate    ......................................................................................................

State taxes, net of federal benefit    ...................................................................................

Non-deductible expenses – stock based compensation      ..................................................

Global intangible low tax income inclusion  ...................................................................

Non-deductible expenses – other    ...................................................................................

Non-deductible excess compensation     ............................................................................

Foreign taxes    ..................................................................................................................

 21.00 %

 4.83 %

 (1.73) %

 — %

 (0.54) %

 (2.30) %

 (0.86) %

 21.00 %

 4.82 %

 (1.21) %

 — %

 0.14 %

 (5.52) %

 (3.98) %

 21.00 %

 2.95 %

 1.82 %

 (2.29) %

 (0.37) %

 (1.20) %

 (1.86) %

Valuation allowance   .......................................................................................................

 (26.92) %

 (30.87) %

 (26.42) %

Stock based compensation – excess tax benefit   .............................................................

Other   ...............................................................................................................................

Total provision    ...........................................................................................................

 6.58 %

 1.83 %

 1.89 %

 9.93 %

 3.34 %

 (2.35) %

 6.18 %

 (2.86) %

 (3.05) %

120

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  effects  of  temporary  differences  and  federal  NOL  carryforwards  that  give  rise  to  significant  portions  of  federal 

deferred tax assets and deferred tax liabilities as of the dates presented:

Year Ended December 31,

2021

2020

(In thousands)

Deferred tax assets:

Net operating loss carryforwards   .............................................................................................................. $ 

141,930  $ 

Foreign tax credit     ......................................................................................................................................

R&D tax credit ..........................................................................................................................................

Original issue discount     .............................................................................................................................

Interest    ......................................................................................................................................................

Operating lease liability    ............................................................................................................................

Accounts payable and accrued expenses    ..................................................................................................

Non-cash compensation     ............................................................................................................................

Intangibles amortization    ...........................................................................................................................

Allowance for doubtful accounts   ..............................................................................................................

Total deferred tax assets  .......................................................................................................................

        Less valuation allowance   ................................................................................................................

        Deferred tax assets, net of valuation allowance     ...................................................................................

Deferred tax liabilities:   .................................................................................................................................

Property and equipment     ............................................................................................................................

Intangibles amortization    ...........................................................................................................................

Goodwill amortization and contingent earn-out adjustments ...................................................................

Convertible notes issuance     .......................................................................................................................

Operating lease right of use asset   .............................................................................................................

Total deferred tax liabilities   ..................................................................................................................

1,222 

1,761 

13,530 

4,188 

3,145 

7,010 

13,591 

— 

1,280 

187,657 

(107,061) 

80,596 

(12,586) 

(15,361) 

(6,165) 

(41,666) 

(1,833) 

(77,611) 

Net deferred tax assets (liabilities)      ............................................................................................................... $ 

2,985  $ 

78,651 

1,222 

— 

16,464 

1,986 

5,150 

7,289 

7,401 

3,620 

954 

122,737 

(55,357) 

67,380 

(10,048) 

— 

(5,294) 

(49,118) 

(2,511) 

(66,971) 

409 

We  have  income  tax  NOL  carryforwards  related  to  federal,  Australian,  and  German  income  tax  carryforwards  of 
$553.4  million,  $1.9  million,  and  $10.9  million,  respectively.  The  Australian  and  German  NOLs  can  be  carried  forward 
indefinitely. For the federal NOLs, $475.2 million can be carried forward indefinitely, $5.1 million will expire between 2023 
and 2026, and $73.1 million will expire between 2030 and 2037. We have $387.0 million of state NOLs, of which $86.3 million 
can be carried forward indefinitely and $300.7 million expire between 2022 and 2041. 

ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance 
with other provisions contained within this guidance. This topic prescribes a recognition threshold and a measurement attribute 
for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those 
benefits  to  be  recognized,  a  tax  position  must  be  more  likely  than  not  to  be  sustained  upon  examination  by  the  taxing 
authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized 
upon  ultimate  audit  settlement.  The  Company  had  unrecognized  tax  benefits  of  $2.9  million  as  of  December  31,  2021  and 
$3.6 million as of December 31, 2020, respectively. Accrued interest and penalties included in the Company’s liability related 
to unrecognized tax benefits and recorded in accrued expenses and other current liabilities were immaterial at  December 31, 
2021 and 2020.

121

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Year Ended December 31,

2021

2020

2019

(In thousands)

Unrecognized tax benefits balance at January 1  ........................................................... $ 

3,615  $ 

2,053  $ 

1,921 

Increase due to business combinations  ...................................................................

Gross decrease for tax positions of prior years    ......................................................

Gross increase for tax positions of current years  ...................................................

Decrease due to expiration of statue     ......................................................................

488 

— 

376 

— 

Decrease due to settlement    .....................................................................................

(1,562) 

— 

(438) 

2,984 

— 

(984) 

— 

— 

584 

(452) 

— 

Gross unrecognized tax benefits at December 31    ......................................................... $ 

2,917  $ 

3,615  $ 

2,053 

The tax years subject to examination by major tax jurisdictions include the years 2015 and forward for U.S. states and 

New York City, the years 2016 and forward for U.S. Federal, and the years 2015 and forward for certain foreign jurisdictions.  

Tax Legislation

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law making 
several changes to the Code. The changes include, but are not limited to: increasing the limitation on the amount of deductible 
interest expense, allowing companies to carryback certain net operating losses, and increasing the amount of net operating loss 
carryforwards  that  corporations  can  use  to  offset  taxable  income.    As  a  result  of  the  CARES  Act,  the  Company  filed  refund 
claims relating to prior years totaling $0.6 million.  

A  statutory  rate  change  in  the  United  Kingdom  was  enacted  as  of  the  balance  sheet  date  ending  December  31,  2021. 
Effective April 1, 2023, the tax rate will increase from 19% to 25%. During the period, the Company assessed and concluded 
the impact of the rate change is immaterial to its deferred taxes.

Note 17. Subsequent Events

WildHealth Acquisition

In  February  2022,  the  Company  closed  on  an  acquisition  of  WildHealth,  a  precision  medicine  company.  The  purchase 
price was approximately $150.0 million and consisted of an upfront purchase price of $30.0 million in cash and common stock 
and a $120.0 million contingent earn-out component potentially payable over three years.

The transaction is still being evaluated but most likely will be accounted for under the purchase method of accounting 
and, if so, the operating results of WildHealth will be included in the Company’s consolidated results of operations from the 
date of acquisition. Due to the timing of this transaction, the initial accounting for the business combination is incomplete and a 
preliminary allocation of purchase consideration cannot be estimated. However, the Company does anticipate that a significant 
portion of the purchase price will be allocated to goodwill and acquired identifiable intangible assets.

Joint Venture Formation

In February 2022, the Company entered into an agreement to form a joint venture (the “JV”), to develop, own, and sell a 

software platform and applications marketplace. 

The Company has agreed to contribute a total of approximately $19.0 million for approximately 19.2% of the common 
equity of the JV. The Company also has agreed to provide certain build-out, professional services, and licenses to the JV under 
a separate agreement.

122

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not Applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our 
“disclosure  controls  and  procedures,”  as  that  term  is  defined  in  Rule  13a-15(e)  promulgated  under  the  Exchange  Act,  as  of 
December  31,  2021.  Based  on  that  evaluation,  the  Chief  Executive  Officer  and  Chief  Financial  Officer  concluded  that  our 
disclosure controls and procedures were effective as of December 31, 2021 to ensure that the information we are required to 
disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within 
the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that such information is 
accumulated  and  communicated  to  our  management,  including  the  Chief  Executive  Officer  and  Chief  Financial  Officer,  as 
appropriate to allow timely decisions regarding required disclosure. 

Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurance that 
the  objectives  of  the  internal  control  system  are  met.  Because  of  the  inherent  limitations  of  any  internal  control  system,  no 
evaluation of controls can provide absolute assurance that all control issues, if any, have been detected.

Changes in Internal Control over Financial Reporting

There  were  no  changes  in  our  internal  control  over  financial  reporting  during  the  quarter  ended  December  31,  2021 
identified  in  connection  with  the  evaluation  thereof  by  our  management,  including  the  Chief  Executive  Officer  and  Chief 
Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial 
reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and 
maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) promulgated under the 
Exchange  Act.  Our  internal  control  system  is  designed  to  provide  reasonable  assurance  to  our  management  and  Board  of 
Directors  regarding  the  preparation  and  fair  presentation  of  published  financial  statements.  Our  management,  including  the 
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting 
as of December 31, 2021 based on the framework established in “Internal Control — Integrated Framework (2013),” issued by 
the  Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission  (“COSO”).  Based  on  its  evaluation,  our 
management, including the Chief Executive Officer and Chief Financial Officer, concluded that as of December 31, 2021, our 
internal control over financial reporting was effective based on those criteria.

In  accordance  with  guidance  issued  by  the  SEC,  companies  are  permitted  to  exclude  acquisitions  from  their  first 
assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Our evaluation 
of the effectiveness of our internal control over financial reporting as of December 31, 2021 did not include the internal controls 
of  e-bot7,  VoiceBase,  or  Tenfold  as  these  businesses  were  acquired  in  business  combinations  in  July,  October,  and  October 
2021 respectively, as discussed in Note 9 – Acquisitions to the consolidated financial statements. These acquisitions represent 
less than 1% of the total assets excluding goodwill and intangibles, net, 1% of total revenue, and 11% of total net loss of the 
related consolidated financial statement amounts as of and for the year ended December 31, 2021.

The  effectiveness  of  our  internal  control  over  financial  reporting  as  of  December  31,  2021  has  been  audited  by  BDO 

USA, LLP, an independent registered public accounting firm. Their attestation report is included herein.

123

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
LivePerson, Inc.
New York, New York

Opinion on Internal Control over Financial Reporting

We have audited LivePerson, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2021, 
based  on  criteria  established  in  Internal  Control  –  Integrated  Framework  (2013)  issued  by  the  Committee  of  Sponsoring 
Organizations  of  the  Treadway  Commission  (the  “COSO  criteria”).  In  our  opinion,  the  Company  maintained,  in  all  material 
respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We  also  have  audited,  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United 
States)  (“PCAOB”),  the  consolidated  balance  sheets  of  the  Company  as  of    December  31,  2021  and  2020,  the  related 
consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in 
the period ended December 31, 2021, and the related notes and our report dated February 28, 2022 expressed an unqualified 
opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its 
assessment  of  the  effectiveness  of  internal  control  over  financial  reporting,  included  in  the  accompanying  Item  9A, 
Management’s  Report  on  Internal  Control  over  Financial  Reporting.  Our  responsibility  is  to  express  an  opinion  on  the 
Company’s  internal  control  over  financial  reporting  based  on  our  audit.  We  are  a  public  accounting  firm  registered  with  the 
PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the 
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We  conducted  our  audit  of  internal  control  over  financial  reporting  in  accordance  with  the  standards  of  the  PCAOB. 
Those  standards  require  that  we  plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  effective  internal 
control  over  financial  reporting  was  maintained  in  all  material  respects.  Our  audit  included  obtaining  an  understanding  of 
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design 
and  operating  effectiveness  of  internal  control  based  on  the  assessed  risk.  Our  audit  also  included  performing  such  other 
procedures  as  we  considered  necessary  in  the  circumstances.  We  believe  that  our  audit  provides  a  reasonable  basis  for  our 
opinion.

As  indicated  in  the  accompanying  Item  9A,  Management’s  Report  on  Internal  Control  over  Financial  Reporting, 
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the 
internal  controls  of  e-bot7  GmBH  (“e-bot7”),  VoiceBase,  Inc.  (“VoiceBase”)  and  Callinize,  Inc.  dba  Tenfold  which  were 
acquired on July 14, 2021, October 18, 2021 and October 25, 2021, respectively, all of which were included in the consolidated 
balance sheets of the Company as of December 31, 2021, and the related consolidated statements of operations, comprehensive 
loss, stockholders’ equity, and cash flows for the year then ended. These acquisitions constituted less than 1% of total assets as 
of  December  31,  2021,  and  approximately  1%  and  11%  of  revenues  and  net  loss,  respectively,  for  the  year  then  ended. 
Management did not assess the effectiveness of internal control over financial reporting of these acquired entities because of the 
timing  of  their  acquisitions.  Our  audit  of  internal  control  over  financial  reporting  of  the  Company  also  did  not  include  an 
evaluation of the internal control over financial reporting of these acquired entities.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the 
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally 
accepted  accounting  principles.  A  company’s  internal  control  over  financial  reporting  includes  those  policies  and  procedures 
that  (1)  pertain  to  the  maintenance  of  records  that,  in  reasonable  detail,  accurately  and  fairly  reflect  the  transactions  and 
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit 
preparation  of  financial  statements  in  accordance  with  generally  accepted  accounting  principles,  and  that  receipts  and 
expenditures  of  the  company  are  being  made  only  in  accordance  with  authorizations  of  management  and  directors  of  the 

124

company;  and  (3)  provide  reasonable  assurance  regarding  prevention  or  timely  detection  of  unauthorized  acquisition,  use,  or 
disposition of the company’s assets that could have a material effect on the financial statements.

Because  of  its  inherent  limitations,  internal  control  over  financial  reporting  may  not  prevent  or  detect  misstatements. 
Also,  projections  of  any  evaluation  of  effectiveness  to  future  periods  are  subject  to  the  risk  that  controls  may  become 
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

New York, New York
February 28, 2022

125

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information required by this Item 10 is incorporated by reference to the sections captioned “Matters to be Considered 
at Annual Meeting — Election of Directors,” “Executive Officers,” “Board Committees and Meetings — Audit Committee,” 
“Codes of Conduct and Corporate Governance Documents” and “Section 16(a) Beneficial Ownership Reporting Compliance” 
in the definitive proxy statement for our 2022 Annual Meeting of Stockholders.

There  have  been  no  changes  to  the  procedures  by  which  stockholders  may  recommend  nominees  to  our  Board  of 
Directors since our last disclosure of such procedures, which appeared in the definitive proxy statement for our 2021 Annual 
Meeting of Stockholders.

We have adopted a Code of Ethics that applies to our Chief Executive Officer, who is our principal executive officer, and 
other senior financial officers. Our Code of Ethics is available at: www.liveperson.com under “Investor Relations / Corporate 
Governance.” The Company’s web site address provided above is not intended to function as a hyperlink, and the information 
on  the  Company’s  web  site  is  not  and  should  not  be  considered  part  of  this  Annual  Report  on  Form  10-K  and  is  not 
incorporated by reference herein. The Company will post on this website any amendments to our Code of Ethics.

Item 11. Executive Compensation

The  information  required  by  this  Item  11  is  incorporated  by  reference  to  the  sections  captioned  “Compensation 
Discussion  and  Analysis,”  “Compensation  Committee  Report”  (which  information  shall  be  deemed  furnished  in  this  Annual 
Report  on  Form  10-K),  “Executive  and  Director  Compensation”  and  “Compensation  Committee  Interlocks  and  Insider 
Participation” in the definitive proxy statement for our 2022 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The  information  required  by  this  Item  12  is  incorporated  by  reference  to  the  sections  captioned  “Ownership  of 
Securities,”    “Potential  Payments  Upon  Termination  or  Change-in-Control”  and  “Securities  Authorized  for  Issuance  Under 
Equity Compensation Plans” in the definitive proxy statement for our 2022 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The  information  required  by  this  Item  13  is  incorporated  by  reference  to  the  sections  captioned  “Certain  Relationships 
and Related Party Transactions” and “Director Independence” in the definitive proxy statement for our 2022 Annual Meeting of 
Stockholders.

Item 14. Principal Accountant Fees and Services

The information required by this Item 14 is incorporated by reference to the section captioned “Independent Registered 
Public Accounting Firm Fees and Pre-Approval Policies and Procedures” in the definitive proxy statement for our 2022 Annual 
Meeting of Stockholders.

126

Item 15. Exhibits and Financial Statement Schedules

PART IV

The following documents are filed as part of this Annual Report on Form 10-K:

1. Financial  Statements.  Incorporated  by  reference  to  the  index  of  consolidated  financial  statements  included  in 

Item 8 of this Annual Report on Form 10-K.

2. Financial Statements Schedules. None.

3. Exhibits.  Incorporated  by  reference  to  the  Exhibit  Index  immediately  preceding  the  exhibits  attached  to  this 

Annual Report on Form 10-K.

Item 16. Form 10-K Summary

None.

127

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant 

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 28, 2022.

SIGNATURES

LIVEPERSON, INC.

By:

/s/ Robert P. LoCascio
Name: Robert P. LoCascio
Title: Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by 

the following persons on behalf of the Registrant and in the capacities indicated on February 28, 2022.

Signature

Title(s)

/s/ Robert P. LoCascio
Robert P. LoCascio

/s/ John D. Collins
John D. Collins

/s/ Norman M. Osumi
Norman M. Osumi

/s/ Peter Block
Peter Block

/s/ Ernest L. Cu
Ernest L. Cu

/s/ Kevin C. Lavan
Kevin C. Lavan

/s/ Jill Layfield
Jill Layfield

/s/ Fred Mossler
Fred Mossler

/s/ William G. Wesemann
William G. Wesemann

Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)

Chief Financial Officer 
(Principal Financial Officer)

Chief Accounting Officer
(Principal Accounting Officer)

Director

Director

Director

Director

Director

Director

128

Number

2.1

2.2

3.1(a)

3.1(b)

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

10.1(a)*

10.1(b)*

10.2*

10.3*

10.4*

EXHIBIT INDEX

Description

Agreement and Plan of Merger, dated as of June 22, 2006, among LivePerson, Inc., Soho Acquisition 
Corp., Proficient Systems, Inc. and Gregg Freishtat as Shareholders’ Representative (incorporated by 
reference to Exhibit 2.1 to LivePerson’s Current Report on Form 8-K filed on June 22, 2006 (Filed 
No. 000-30141))

Agreement  and  Plan  of  Merger,  dated  as  of  November  5,  2014,  among  LivePerson,  Inc.  Catalyst 
Lightning  LLC,  Contact  At  Once!,  LLC  and  Fulcrum  Growth  Fund  II  QP,  LLC  (incorporated  by 
reference  to  Exhibit  2.1  to  LivePerson’s  Current  Report  on  Form  8-K  filed  on  November  12,  2014 
(File No. 000-30141))

Fourth Amended and Restated Certificate of Incorporation (incorporated by reference to the Exhibit 
3.1(a) to LivePerson’s Annual Report on Form 10-K for the year ended December 31, 2000 and filed 
March 30, 2001 (File No. 000-30141))

Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation effective 
as of November 12, 2019 (incorporated by reference to Exhibit 4.2 to LivePerson’s Registration 
Statement on Form S-8 filed on November 13, 2019 (File No. 333-234676))

Second Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.2 to 
LivePerson’s Annual Report on Form 10-K for the year ended December 31, 2000 and filed on 
March 30, 2011 (File No. 000-30141))

Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to LivePerson’s 
Registration Statement on Form S-1, as amended (Registration No. 333-96689))

Second Amended and Restated Registration Rights Agreement, dated as of January 27, 2000, by and 
among LivePerson, the several persons and entities named on the signature pages thereto as Investors, 
and Robert LoCascio (incorporated by reference to Exhibit 4.2 to LivePerson’s Registration 
Statement on Form S-1, as amended (Registration No. 333-96689))

Indenture, dated as of March 4, 2019, by and between LivePerson, Inc. and U.S. Bank National 
Association, as Trustee (incorporated by reference to Exhibit 4.1 to LivePerson’s Current Report on 
Form 8-K filed on March 5, 2019 (File No. 000-30141))

Form of 0.750% Convertible Senior Notes due 2024 (included within the Indenture filed as Exhibit 
4.3 hereto)

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities 
Exchange Act of 1934 (incorporated by reference to LivePerson’s Annual Report on Form 10-K for 
the year ended December 31, 2020 and filed on March 8, 2021 (File No. 000-30131))

Indenture, dated as of December 4, 2020, by and between LivePerson, Inc. and U.S. Bank National 
Association, as Trustee (incorporated by reference to Exhibit 4.1 to LivePerson’s Current Report on 
Form 8-K/A filed on December 10, 2020 (File No. 000-30141))

Form of 0% Convertible Senior Notes due 2026 (included within the Indenture filed as Exhibit 4.6 
hereto)

2009 Stock Incentive Plan (incorporated by reference to Exhibit 99.1 to LivePerson’s Registration 
Statement on Form S-8 filed on June 9, 2009) and Forms of Grant Agreements under the 2009 Stock 
Incentive Plan (incorporated by reference to Exhibit 10.1 to LivePerson’s Quarterly Report on Form 
10-Q filed on May 6, 2011 (File No. 000-30141))

2009 Stock Incentive Plan (amended and restated as of June 7, 2012) (incorporated by reference to 
Exhibit 99.1 to LivePerson’s Current Report on Form 8-K filed on June 8, 2012 (File No. 
000-30141))

LivePerson, Inc. 2010 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.1 to 
LivePerson’s Registration Statement on Form S-8 filed on August 19, 2010 (File No. 000-30141))

Employment Agreement between LivePerson and Robert P. LoCascio, dated as of January 1, 1999 
(incorporated by reference to Exhibit 10.1 to LivePerson’s Registration Statement on Form S-1, as 
amended (Registration No. 333-96689))

Agreement between LivePerson and Dan Murphy, dated as of March 27, 2011 (incorporated by 
reference to Exhibit 10.5 to LivePerson’s Annual Report on Form 10-K for the year ended December 
31, 2011 and filed March 13, 2012)

129

Number

10.5*

10.6*

10.7*

10.8*

10.9*

10.10*

10.11*

10.12*

10.13*

10.14*

10.15*

10.16*

10.17*

10.18*

10.19

10.20

10.21*

Description

Form of Indemnification Agreement entered into with Executive Officers and Directors of 
LivePerson (incorporated by reference to Exhibit 10.6 to LivePerson’s Annual Report on Form 10-K 
for the year ended December 31, 2011 and filed March 13, 2012)

Agreement between LivePerson and Monica L. Greenberg, dated as of October 25, 2006 
(incorporated by reference to Exhibit 10.8 to LivePerson’s Annual Report on Form 10-K for the year 
ended December 31, 2011 and filed March 13, 2012)

Incentive Plan (incorporated by reference to Exhibit 10.1 to LivePerson’s Current Report on Form 8-
K filed on April 28, 2011)

Employment Agreement between LivePerson and Eran Vanounou, dated as of February 22, 2014 
(incorporated by reference to Exhibit 10.2 to LivePerson’s Quarterly Report on Form 10-Q filed on 
May 9, 2014) (File No. 000-30141))

Separation Agreement General Release between LivePerson and Daniel Murphy, dated as of 
November 9, 2017 (incorporated by reference to Exhibit 10.5 (B) to LivePerson’s Quarterly Report 
on Form 10-Q filed on November 9, 2017) (File No. 000-30141))

Amendment to Separation Agreement General Release between LivePerson and Daniel Murphy, 
dated as of February 9, 2018 (incorporated by reference to Exhibit 10.11 to LivePerson’s Annual 
Report on Form 10-K for the year ended December 31, 2017, filed on March 15, 2018 (File No. 
000-30141))

Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.12 to 
LivePerson’s Annual Report on Form 10-K for the year ended December 31, 2017, filed on March 
15, 2018 (File No. 000-30141))

Form of Restricted Stock Unit Award Agreement for Robert LoCascio (incorporated by reference to 
Exhibit 10.13 to LivePerson’s Annual Report on Form 10-K for the year ended December 31, 2017, 
filed on March 15, 2018 (File No. 000-30141))

Inducement Plan dated January 19, 2018 (incorporated by reference to Exhibit 10.14 to LivePerson’s 
Annual Report on Form 10-K for the year ended December 31, 2017, filed on March 15, 2018 (File 
No. 000-30141))

Amended Employment Agreement between LivePerson and Robert LoCascio, dated as of December 
27, 2017 (incorporated by reference to Exhibit 10.15 to LivePerson’s Annual Report on Form 10-K 
for the year ended December 31, 2017, filed on March 15, 2018 (File No. 000-30141))

Agreement between LivePerson and Alex Spinelli, dated as of January 12, 2018 (incorporated by 
reference to Exhibit 10.1 to LivePerson’s Quarterly Report on Form 10-Q for the quarter ended 
March 31, 2018, filed May 8, 2018 (File No. 000-30141))

Agreement between LivePerson and Chris Greiner, dated as of February 19, 2018 (incorporated by 
reference to Exhibit 10.2 to LivePerson’s Quarterly Report on Form 10-Q for the quarter ended 
March 31, 2018, filed May 8, 2018 (File No. 000-30141))

Long Term Incentive Plan dated July 31, 2018 (incorporated by reference to Exhibit 10.1 to 
LivePerson’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed on August 6, 
2018 (File No. 000-30141))

Separation Agreement General Release between LivePerson and Eran Vanounou, dated as of April 
30, 2018 (incorporated by reference to Exhibit 10.2 to LivePerson’s Quarterly Report on Form 10-Q 
for the quarter ended June 30, 2018, filed on August 6, 2018 (File No. 000-30141))

Form of Capped Call Transaction Confirmation relating to the 0.750% Convertible Senior Notes due 
2024 (incorporated by reference to Exhibit 10.1 to LivePerson’s Form 8-K filed on March 5, 2019 
(000-30141))

Form of Additional Capped Call Transaction Confirmation relating to the 0.750% Convertible Senior 
Notes due 2024 (incorporated by reference to Exhibit 10.1 to LivePerson’s Form 8-K filed on March 
14, 2019 (000-30141))

Nonstatutory Stock Option Agreement, by and between LivePerson, Inc. and Robert P. LoCascio, 
dated as of February 21, 2019 (incorporated by reference to Exhibit 10.3 to LivePerson’s Quarterly 
Report on Form 10-Q for the quarter ended March 31, 2019, filed on May 7, 2019 (File 
No.000-30141))

130

Number

10.22*

10.23*

10.24*

10.25

10.26

21.1

23.1

31.1

31.2

32.1**

32.2**

101.INS†

101.SCH†

101.CAL†

101.DEF†

101.LAB†

101.PRE†

Description

2009 Stock Incentive Plan Restricted Stock Unit Award Agreement, by and between LivePerson, Inc. 
and Robert P. LoCascio, dated as of February 21, 2019 (incorporated by reference to Exhibit 10.4 to 
LivePerson’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed on May 
7,2019 (File No. 000-30141))

LivePerson, Inc. 2019 Stock Incentive Plan (incorporated by reference to Exhibit 99.1 to 
LivePerson’s Registration Statement on Form S-8 filed on August 14, 2020 (File No. 333-245808))

LivePerson, Inc. 2019 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.2 to 
LivePerson’s Registration Statement on Form S-8 filed on November 13, 2019 (File No. 
333-234676))

Form of Base Capped Call Transaction Confirmation relating to the 0% Convertible Senior Notes due 
2026 (incorporated by reference to Exhibit 10.1 to LivePerson’s Current Report on Form 8-K/A filed 
on December 10, 2020 (File No. 000-30141))

Form of Additional Capped Call Transaction Confirmation relating to the 0% Convertible Senior 
Notes due 2026 (incorporated by reference to Exhibit 10.2 to LivePerson’s Current Report on Form 
8-K/A filed on December 10, 2020 (File No. 000-30141)) 

Subsidiaries of the Registrant

Consent of BDO USA, LLP, an Independent Registered Public Accounting Firm

Certification by principal executive officer pursuant to Exchange Act Rule 13a-14(a), as adopted 
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification by principal financial officer pursuant to Exchange Act Rule 13a-14(a), as adopted 
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to 
Section 906 of the Sarbanes-Oxley Act of 2002

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to 
Section 906 of the Sarbanes-Oxley Act of 2002

Inline XBRL Instance Document - The instance document does not appear in the interactive Data File 
because its XBRL tags are embedded within the Inline XBRL document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL)

——————————————
*  Management contract or compensatory plan or arrangement

**  The  certifications  furnished  as  Exhibit  32.1  and  Exhibit  32.2  accompany  the  Annual  Report  on  Form  10-K  pursuant  to 
Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 
of the Securities Exchange Act of 1934, as amended.

†  Pursuant  to  applicable  securities  laws  and  regulations,  the  Registrant  is  deemed  to  have  complied  with  the  reporting 
obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-
fraud provisions of the federal securities laws as long as the Registrant has made a good faith attempt to comply with the 
submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files 
fail to comply with the submission requirements. These interactive data files are deemed not filed or part of a registration 
statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed 
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability 
under these Sections.

131

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Board of Directors

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Robert P. LoCascio
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John Collins
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Monica L. Greenberg
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Norman Osumi
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Robert P. LoCascio
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Peter Block
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Ernest Cu
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Kevin C. Lavan
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Fred Mossler
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William G. Wesemann
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Stockholder Information 

Corporate Headquarters
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Counsel
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Investor Relations
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Independent Registered  
Public Accounting Firm
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Transfer Agent
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Stock Listings
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Company Information on the Web
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Our values guide our continued, holistic growth— 

as individuals, teams, and as a global organization.

OUR FOUR VALUES 

Dream big
Help others
Pursue expertise
Own it

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