LivePerson, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LivePerson's fourth quarter 2023 earnings conference call. My name is Denae, and I will be your conference operator today. At this time, all participants are in listen-only mode. After the prepared remarks, the management team from LivePersonal will conduct a question and answer session, and the 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 over to Mr. John Peracchio, Senior Director, Investor Relations. Please go ahead, sir.

Thank you, Denae. Joining me on today's call is John Sabino, CEO and John Collins, CFO and COO. Please note that today's call 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, February 28th, 2024, and are subject to risk and uncertainty. Actual results may differ materially due to various factors including those described in today's earnings press release and in the comments made during this conference call, as well as in 10-Ks, 10-Qs, and other reports we file with the SEC. We assume no obligation to update any forward-looking statements. Also during this call, we'll discuss certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release. Both the press release and the supplemental slides, which include highlights for the quarter, are available on the investor relations section of LivePerson's website. With that, I will turn the call over to John.

Thank you all for joining us today. I am excited to lead LivePerson as its new CEO. The past 20 years of my career has been focused on leading organizations through challenging transformations and unlocking growth through operational excellence, product alignment, and focused go-to-market execution. My experience in scaling software adoption for customers and in turn driving significant double-digit improvements in renewals, product consumption, expansion, and new logo acquisition is directly aligned to my priorities for LivePerson in the short term and the long term. We are refocusing our go-to-market strategies, product development, and strategic partnerships to unlock a new phase of growth. In the 50 days since joining LivePerson, My focus has been on assessing how our company operates and engages with customers and aligns its product development efforts to meet the needs of the market. As part of this process, I've had many conversations with the management team, board members, employees, investors, and with dozens of customers. What I've discovered from all of these interactions validates my hypothesis for joining the company. We have a tremendous opportunity with the products we provide, the customers we serve, and the market we compete in. This is because we have three fundamental strengths. Number one, we have a product that provides real value to our customers and opens the door for an AI-driven future that is still unfolding. Number two, we have an impressive list of Fortune 500 customers that value our strategic partnership and are willing to provide excellent, thoughtful input on how we can continue to best support their needs. And number three, our employees are passionate about our core enterprise offerings. and excited to deliver the vision to fully unlock enterprise digital conversations at scale. But to capitalize on these strengths and unlock our full potential value, LivePerson needs to set clear priorities and execute a rigorous transformation strategy to improve our financial performance, reinvigorate our go-to-market capabilities, and achieve operational excellence. All of this will take investment in our product, people, and customers so we can return the profitable growth. It is this transformation plan that I will share with you today before I transition the call to our CFO and COO, John Collins, to discuss our financial results. LivePerson's strategy is to act as a bridge for companies looking to manage their customer conversations digitally while orchestrating new and existing conversation channels for the most optimal customer experience. This is a multibillion-dollar market opportunity that LivePerson is currently exposed to and can win with the right operational and commercial rigor. Furthermore, this strategy will allow us to assist companies in preparing for an AI-driven future by orchestrating various customer conversations across their enterprise without being locked into one vendor or platform. In becoming the bridge to the future of digital conversations, LivePerson will continue to be an integral part of our customers' digital transformation strategy well into the future. To execute on this strategy and capture the opportunity within our reach, we'll focus on three key areas. The first is strengthening our capital structure. The second is focusing our go-to-market operations, which include renewals, pricing and packaging, and partnerships. And third is leaning in on our advantage with strong product integration and orchestration capabilities to improve time-to-value and increase customer flexibility to avoid vendor lock-in. First, let me address our capital structure. We are currently reviewing our capital structure with an eye towards refinancing our convertible notes due in 2026. We want to ensure our customers have confidence in us as a long-term partner. As such, strengthening our capital structure is a key priority for me in order to successfully implement our strategic initiatives to unlock the value of live person for our investors, customers, partners, and stakeholders. Second, as it relates to our go-to-market operations, There have been headwinds in the company's expansion and retention efforts that have slowed our ability to attract new customers to our product. I have significant experience in this area, and I'm already seeing opportunities to improve. First, improving go-to-market starts with addressing the renewal motion. The guidance given today is significantly driven by renewals issues that have root causes in events that occurred 9 to 12 months ago. There was a lack of focus on our core business that led to changes in leadership, and brought us to the situation we are in today. That being said, we're now in a better position to make key changes to improve results going forward. I believe in a strong customer success organization that allows the sales team to focus on hunting new business. Customer success should be like an engine that runs reliably to support the renewal base while ensuring each customer receives the utmost value from our product. This is an area that I have extensive experience in as a former chief customer officer. and I have a track record of bringing several organizations with low renewal rates to industry best above 90% GRR. The improvements needed are not capital intensive, and with the appropriate rigor and focus, it can be achieved over the next few quarters. Second, there is an opportunity to improve our pricing and packaging strategy to make it simpler for brands to do business with us and to standardize our offerings to unlock our differentiated value proposition across our product. I know our clients will respond positively to extracting more value from their spend with us, and this will reinforce my person's position as a strategic partner. Third, we need to drive partnerships with greater velocity. While I believe that the digital management of all customer conversations will lead to better customer outcomes and experiences, voice engagements will remain an integral part of the foreseeable future. Accelerating and deepening partnerships with voice providers will enable us to deliver the full impact of our orchestration, automation, and analytics capabilities across voice and digital channels, enhancing customer value with a 360-view conversational data and improved customer experience. Integrating with one or more strong voice partners, many of whom have reached out to us directly, seeing LivePerson as a potential value partner, will greatly enhance the multi-channel customer experience. Lastly, in order to help execute these commercial transformations, we'll need to bring in new talent with an experience in managing these turnarounds at scale. We recently hired our first chief customer officer, Kevin Meeks, who will focus on our existing customers to ensure they not only get value from our software, but they renew and expand the live person. I am confident that under his direction, we will improve our NRR and create greater strategic value. Kevin's already hit the ground running to implement operational changes that have proven successful in delivering double-digit improvements in renewal rates to other companies. We've also hired a skilled VP of sales operations, Eric Johnson, who's made a career of implementing data, systems, and operations to ensure commercial excellence and optimal go-to-market execution. Eric brings with him over 30 years of experience in the space and will ensure we create the capabilities that can scale and create profitable growth for the company. So this brings me to our third and final area of focus. We need to lean in our differentiated product strengths and our ability to integrate and orchestrate across our customers' current architecture and extend our current advantage in this space. One of LivePerson's greatest strengths is our ability to integrate a variety of systems and orchestrate customer conversations across many different third-party channels. Our Tango capability has been orchestrating conversations among bots and agents, agents and customers, and customers and bots for years. Customers love this capability. But given that we primarily serve large enterprise brands, we need to offer these features within a well-integrated product. Today, we connect to a range of third-party data, services, and AI to power the orchestration of our customer care conversations across channels. But the underlying integrations often require customizations. which can extend the time to value and delay ROI. To mitigate these constraints, we are prioritizing the following product initiatives in 2024. First, in order to bridge the divide between traditional synchronous call centers and fully digitized and automated customer care experiences, 5Person will put a renewed focus on integration into the voice channel, where most of our customer conversations are trapped today. By unlocking the data in the voice channel, customers are able to identify the intense ripest for digitization and automation. We do this today for many brands, but growing the breadth and depth of these integrations through partnerships will empower more brands to leverage their voice conversational data to accelerate their digital transformation. This is an area where we intend to expand strategic partnerships alongside our product development. We will announce such partnerships in the coming months. Second, customers want to extract value with the technology they have in use today. and we have experience and capabilities to help them. Many customers use our product for conversational orchestration across multiple channels, six to eight different automation technologies, including Amazon Lex, Google Dialogflow, IBM Watson, and others, underpinned by our orchestration layer. We will bring more CDP, CRM, and third-party consumer data into our product to dynamically personalize conversations in real time based on user profiles and behavior. This will allow us to orchestrate with greater precision and purpose and help customers extract greater efficiencies from their operations. Furthermore, this will generate more ROI from the technologies clients currently own and in which they've already invested in. Third, while live person can accommodate almost any channel, web and in-app remain the most widely adopted and where the greatest volume of conversation takes place. As such, we will improve the messaging experience within these channels by and increase usage and thickness. Lastly, customers often use multiple AI vendors and LLMs. We want to orchestrate all bots within our product. As such, we're enhancing third-party bot connectors to incentivize the quote-unquote bring-your-own-LLM strategies, which will further accelerate the return on AI investments. Speaking from my experience in leading customer care and experience organizations, customers do not want to be locked into a single product, platform, or vendor They want to extract more value from the technology they have already invested in without going through the costly and risky strategy of a rip and replace. At LivePerson, our strategy is to be the integral partner to seek to lower our customers' TCO for all conversational technologies, while leaving open the possibilities of further improvements through generative AI in the future. We are the preferred strategic partner to execute the strategy because we have the enterprise capabilities to manage customer conversations at scale, and we are product neutral. By improving our product integration and orchestration, it allows enterprise customers to use the best-in-breed technology seamlessly on our product and always have the freedom to evolve in the changing digital conversation space without risky vendor lock-in. In summary, I am confident that the transformation plan I have laid out will lead to a future of profitable growth for my person. The challenges we face today are solvable and are much lower cost to solve than product issues. which are more difficult to unravel or require significant capital expenditure to improve. Throughout my career, I've stepped into organizations in similar situations. Circumstances demand we execute with a sense of urgency and accuracy, and that is exactly what we're doing. With that in mind, as you can see from the guidance we issued, we have taken a hard reset. We believe this is a prudent decision given the significant transformation we are undertaking. and we look forward to sharing our progress quarter after quarter with all of you. Now, before passing the call off to John Collins, I would like to thank John for all he did as interim CEO and CFO leading the company. He has focused the company on our core digital messaging and voiced the messaging business. He's continued to right-size the cost structure while providing strong leadership in a time of significant transition. Lastly, and most importantly, I would like to thank the entire LivePerson team for their dedication and commitment during this time of change and for their passion for the next chapter of LivePerson success. And with that, let me hand the call over to John. John?