LivePerson (LPSN) Q4 2006 earnings summary

Executive summary

• FY 2006 revenue rose 50% YoY to $33.5M; net income was $2.2M versus $2.5M in 2005, as operating expenses rose faster than revenue.

• Q4 revenue reached $10.35M; sequential organic revenue growth was 15%, following 12% in Q3.

• The hosted engagement platform served more than 5,000 organizations and handled over 4M live chats monthly; voice was added to the platform in 2006.

Financial highlights

• FY revenue was $33.521M versus $22.277M in 2005; new clients, including Proficient clients, contributed ~$8.1M, existing clients ~$3.0M and professional services ~$618K of the increase.

• FY operating income declined to $1.049M from $2.917M; net income was $2.202M versus $2.542M.

• Q4 revenue was $10.347M, operating income $605K and net income $1.245M; basic and diluted EPS were each $0.03.

• FY gross margin was 77%, down from 81% in 2005; cost of revenue increased 77% to $7.6M, partly reflecting Proficient and higher infrastructure spending.

• FY operating expenses increased to $32.472M from $19.360M, including $2.180M of stock-based compensation under SFAS 123(R).

Outlook and guidance

• 2007 priorities include developing products and services for online engagement, extending the multi-channel platform and maximizing clients’ e-commerce investments.

• Cash and cash equivalents were expected to cover working capital and capital needs for at least 12 months; 2007 capital expenditures were not expected to exceed $1.0M.

• Integration of Proficient was expected to reduce the acquisition-related pressure on cost of revenue, product development, sales and marketing, and G&A over time.