LivePerson, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LivePerson's third quarter 2020 earnings conference call. My name is Gary, and I will be your conference operator today. At this time, all participants earn a listen-only mode. After the prepared remarks, the management from LivePerson will conduct a question and answer session, and conference participants will be given instructions at that time. To give everyone the opportunity to participate, please limit yourself to one question and one follow-up. As a reminder, this conference is being recorded. I would now like to turn the conference all over to Mr. Matthew Kempler, the company's Senior Vice President of Investor Relations. Please go ahead, sir.

Thanks very much, Gary. Joining me on the call today is Rob Lacascio, LivePerson's founder and CEO, and John Collins, our Chief Financial Officer. Please note that during today's call, we will make forward-looking statements, which are predictions, projections, and other statements about future results. These statements are based on our current expectations and assumptions as of today and are subject to risks and uncertainties. Actual results may differ materially due to various factors, including those described in today's earnings press release and the comments made during this conference call, and in 10-Ks, 10-Qs, and other reports we file from time to time with the SEC. We assume no obligation to update any forward-looking statements. Also, during this call, we will discuss certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release. Both this press release and supplemental slides, which include highlights for the quarter, are available in the investor relations section of LivePerson's website. With that, I will turn the call over to Rob.

Thanks, Matt. Thank you for joining LivePerson's Q3 2020 earnings call. In the third quarter, LivePerson once again delivered peak performance in many key metrics, including setting records of revenue, contract signs, adjusted EBITDA, positive cash generation. Revenue in Q3 outpaced guidance, climbing 26% year-over-year to $95 million, fueled by 29% growth in our B2B-hosted software business. Our focus on internal automation and employee productivity yielded another step function in operational efficiency, as record-adjusted EBITDA of $15 million wildly outpaced guidance and generated a multi-year high profit margin of 16%. Our cash position increased by $26 million quarter-over-quarter to $199 million as we pivoted to positive cash generation. As we've shared on recent calls, consumers are driving a massive structural shift to remote digital engagement in the wake of COVID pandemic. Website and app traffic have risen sharply as consumers go online rather than visit brick-and-mortar banks, telcos, retailers, and food service establishments. In fact, a recent live-person survey found that two out of three consumers are planning to do most of their 2020 holiday shopping online rather than in stores. Brands are struggling to meet this increased digital demand. Consumers often face frustratingly long hours hold times on 800 numbers due to the closing of physical contact centers and reduced global capacity of contact center agents who can actually take calls in a work-from-home environment during COVID. Likewise, the typical 1% to 2% website conversion rates means that most brands are failing to sufficiently monetize their increased online traffic. LivePerson, the leader in conversational AI, benefiting from the powerful market dynamic In order to improve agent efficiency, increase sales conversions, and fuel higher customer satisfaction, brands are turning to our conversational cloud and deploying personalized consumer care and sales journeys over mobile messaging endpoints. All this being led by the ability to use AI automations instead of human agents. As a result, we've seen volumes on our platform surge since the pandemic started in February, now up nearly 50%. and led by a nearly 60% increase in AI-based conversations. We expect this strong tailwind to only intensify over the next five years as traditional retail shopping, web, and in-app-based e-commerce shifts to C-commerce or conversational commerce. The shift to conversational commerce requires a new set of technologies beyond web, social, and other traditional e-commerce-type platforms. The shift from e-commerce to C-commerce has arrived, and because LivePerson took an early bet on this massive change four years ago, we're clearly the leader in transforming some of the largest brands in the world. Conversational commerce is powered by a consumer's ability to have an always-on asynchronous connection, which can be delivered over messaging platforms like WhatsApp, Apple Business Chat, Facebook Messenger, Instagram, and SMS. Over that messaging connection, we run rich conversations, either automated with the use of AI or live agent, or both at the same time. We started out with a focus on customer care use cases with the goal of reducing contact center costs, and we are now expanding into sales, marketing, and brick-and-mortar retail with the goal of driving sales and commerce. In order to drive a better commerce journey for consumers, we're also introducing digital payments platform, that enables users to conveniently make purchases with any brand or any messaging endpoint. For example, a consumer enters their credit card information to purchase a ticket from an airline, and then we securely tokenize that credit card so that it can be used at a later date with some other company. Similarly, consumers can make purchases across different endpoints. For example, use a website for one purchase and then use WhatsApp for the next and then in-app for another without reentering their credit or debit cards. Our first few brands are now live and will steadily expand this program into 2021. Adoption trends confirm that our vision of conversational commerce is resonating more clearly than ever. Nearly every single enterprise customer is now using our AI capabilities within our platform. Automation has powered two-thirds of our messaging conversations today, and our goal is to automate over 80% of the conversations at scale. Our AIs have eliminated the need for any human involvement in approximately half of all conversations where they are deployed. And in other words, our customers can use the conversational cloud to power a virtually unlimited number of conversations at a fraction of the cost required by human agent-based conversations. Another testament to the transformational power of the conversational cloud is the first-of-a-kind global strategic partnership we just signed with Infosys. a world leader in next-generation digital services and consulting. This new strategic relationship will help a live person keep pace with surging demand for conversational AI by joining our conversational cloud with Infosys Cobalt Transformation Cloud Services and Public Cloud. Infosys will be creating a practice around our platform, and we will conversely have them manage our move to the public cloud. Our move to the public cloud will enable us to handle the increased demand for our services, with the ability to auto-scale capacity and also enable us to enter new geographical markets quickly. Infosys joins other TUI person partners, including IBM, T-Tech, and Accenture, in building a channel that is strengthening our go-to-market reach and sales distribution. In fact, three of the eight seven-figure deals we closed in Q3 came from our partners. Also noteworthy is that three of our eight seven-figure deals were new logos – demonstrating live persons' ability to win new customers, even with the change from physical to virtual marketing events. I'll highlight one of these new logo wins we did with a multimillion-dollar jewelry retailer. They were virtually sold over a three-month period, and they moved very quickly because all the impact that has happened to their physical stores during COVID. The stores where they are open, they now are adding QR codes next to the merchandise so that consumers can socially distance by chatting with AI and remote-based human agents while shopping. Human sales associates will have a special messaging app on their mobile devices that will enable them to maintain a continued connection with the consumer after they purchase and leave the store. And finally, the juror will offer appointment setting payments and curbside pickup over messaging. This example shows how conversational commerce is deep, multidimensional integration that enables the merger of physical store operations with digital. Another new logo win was with one of the largest dental insurance providers in the country. And the vertical of insurance right now in health care is really becoming very active for us. We saw a couple of different logos in the quarter beyond this one. The driver of this deal was that the insurance company recently lost a deal with a potential customer who has thousands of employees because they only offer voice as a customer care channel. Think about it. Consumers were no longer except being forced to call 800 numbers as messaging and AI have become a must-have consumer offering. We were chosen over several competitors because we don't treat messaging as just another channel of communication. We're highly differentiated because of our comprehensive approach to conversational AI and our broad messaging capabilities, operational expertise, and ability to offer an unmatched six times 6X ROI in the first year alone. In addition to strong rebound and new logo activity, LivePerson also continued to expand with existing customers during the quarter. As highlighted on our last earnings call, we're seeing two key drivers of revenue uplift, first being strategic upsells following initial demand during the COVID crisis. and the second involving upsells as customers on an all-you-can-eat enterprise license agreements now are being moved to cost-per-interaction or usage-based models. A win with one of the top 20 global banks is a great example of this shift. This customer signed a seven-figure upsell with us at the end of Q1 when the pandemic drove them to use messaging and automation to maintain business continuity as their contact center agents and in-store associates were sent home. After seeing the successes of these expanded use cases, the roughly 10x increase in messaging volume, the bank doubled down on their long-term commitment to the conversational cloud. In Q3, only six months later, we signed another seven-figure upsell with them. Another example of increased usage drive and growth is a win with one of the largest online lenders in the U.S. Like many of our customers, lenders saw a spike in volumes on our platform in the first half of 2020. RIPERS initially recognized no revenue benefit from the spike as customers locked in under an ELA enterprise license agreement. That changed in Q3 when the customer came up from null. We transitioned to a cost per interaction model and captured the value of those higher volumes by signing a seven-figure upsell that doubled our annual recurring revenue from this customer. We expect to repeat this successful formula when many of our ELA customers come up for renewal over the next two years. Record contract signing, accelerated revenue growth, a new landmark partnership with Infosys, expanding customer use cases, and broad adoption of our AI cloud are indisputable signals of live person's leadership in conversational commerce. We're executing with precision in this new remote work environment and, once again, are in a position to raise guidance for the year. We're now targeting 2020 revenue growth of 25%, achieving our long-term growth target one year ahead of planned. We've also built a strong discipline around capturing operating efficiencies through internal automation and tightened controls. An increasing scalable financial model is now emerging where we can invest in key growth drivers while still delivering bottom-line improvements. As a result, we are increasing our 2020 adjusted EBITDA guidance to a range of $29 to $31 million, which brings us back to peak historic profit level. I'll close with three key points. LivePerson's third quarter results, which follow an equally strong second quarter, reinforce that consumers are driving a permanent structural shift to conversational AI as a preferred means of communicating with brands. LivePerson's conversational cloud is setting a new standard for the technology required to support the shift, and we believe that a neat combination of our platform expertise and services will extend our industry lead. As we execute on our vision, our financial outlook is sharply improving, with revenue growth now at a path to accelerate to 25% in 2020, from 17% in 2019, and 14% in 2018, while adjusted EBITDA margins have firmly moved into the double digits. With that, I'll turn the call over to John to provide an operational update and more color on our guidance. John?