Good afternoon. My name is Josh and I will be your conference operator today. At this time I would like to welcome everyone to the LivePerson second quarter 2009 financial results. (Operator Instructions) Mr. Bixby, you may begin your conference.

All right. Thanks very much. Before we begin, I would like to remind listeners that during this conference call comments that we make regarding LivePerson that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The internal projections and beliefs upon which we base our expectations today may change over time, and we undertake no obligation to inform you if they do. Results that we report today should not be considered an indication of future performance. Changes in economic, business, competitive, technological, regulatory and other factors could cause LivePerson's actual results to differ materially from those expressed or implied by the projections or forward-looking statements made today. For more detailed information about these factors and other risks that may impact our business, please review the reports and documents filed from time to time by LivePerson with the Securities and Exchange Commission. Also, please note that on the call today we will discuss some non-GAAP financial measures in talking about the company's financial performance. We report our GAAP results as well as provide a reconciliation of these non-GAAP measures to GAAP financial measures in our earnings release. You can obtain a copy of our earnings release by visiting the Investor Relations section of our website. And now I'd like to turn the call over to LivePerson's Chief Executive Officer, Robert LoCascio.

Thanks, Tim. Good afternoon, everyone, and thank you for joining us. During the second quarter of 2009 we generated revenue of $20.5 million, up 11% from a year ago and up 3% sequentially as compared to the first quarter of 2009. EBITDA per share came in at $0.09, above our guidance range of $0.06 to $0.08 per share. EPS was $0.02 and also exceeded our guidance range of zero to $0.01 per share. Tim will provide more detail on the financials shortly. We are very pleased with our second quarter results from each business unit, especially given the challenging macroeconomic environment. It's a testament to the underlying strength of our teams, our product lines and our overall business model. Within our business operation, Enterprise revenue was up 2% sequentially and grew 11% as compared to the prior year, while our Small Business group revenue increased 1% sequentially and 14% from the prior year. We believe that our overall addressable market remains large for our B2B products. According to our estimates we currently serve more than 300 of approximately 3,000 potential Enterprise customers and more than 8,000 of approximately 200,000 potential SMB customers. We're seeing growing interest and lead flow as compared to the past several quarters and are confident that the second half will reflect at least some of this macro environment improvement. For the Enterprise group we're starting to see some substantial sales activity as companies look to expand their online sales and marketing efforts. We're even for the first time seeing big box retailers begin to evaluate using our real-time solutions for their websites. During the latter half of Q2 we saw our sales pipeline and bookings start to expand. In Q3 we expect to add more incremental revenue than we have seen in the past three quarters…

Okay. Thanks, Rob. We'll get into a little more detail on the financials and talk about our guidance for the third quarter and for the rest of the year. As Rob mentioned, the second quarter revenue came in nicely with 3% sequential growth to $20.5 million. It was our 31st consecutive growth quarter. This is an improvement in the sequential growth rate up from 2% sequential growth that we saw in the first quarter. We again performed well on expense management and generating cash flow from operations. EBITDA per share came in above our guidance range of $0.06 to $0.08 per share at $.09 per share. EPS was $0.02 per share, also $0.01 above our guidance range of between zero and $0.01 per share. If we combine and look at the first half of the year, Q1 and Q2 combined, EBITDA is nearly tripled as compared to the same period in the prior year and this continues to provide us with financial flexibility to manage in a strengthening economic environment. We continue to be vigilant in managing cash and expenses, but we do have plans to expand resources and investment that have a clear ROI, particularly within sales and marketing efforts. Within our B2B Enterprise group we signed 40 new deals in the second quarter, again, a very strong showing and up from 33 in the prior quarter. We signed seven new names; that was down slightly from the prior quarter. But the first and second quarters together are right on the same rate of new adds as we saw a year ago in the first half of last year. Pricing in terms of annualized revenue per deal in Enterprise was up from the first quarter to about $65,000. This is up from about $50,000 in the first quarter. New…

(Operator Instructions) Your first question comes from Richard Baldry - Canaccord Adams.

In the past you've talked a little bit about what I guess you'd call a pay-for-performance model where you partner with another firm to provide the headcount behind the technologies for some customers. Is that one of the reasons that teleco picked up in the quarter and could you maybe give a little bit more of an update on that part of the model?

Yes, it is a real driver behind both the telco percentage of business and pay-for-performance. I think it's continuing to do well. We're actually seeing among our top five customers by year end we anticipate one or more of those may be a pay-for-performance customer, so that's really a testament to how well that's working. We're also continuing internal investment in that group; we'll be adding at least one more and potentially two more headcount to support that expansion. So things definitely continue to go according to plan and continue to expand there.

And you've in the past talked about customers [break in audio] over certain break points per year [break in audio] over half a million or over a million. Do you have those numbers you can share again?

Yes. We're going to give a little less detail on that because it was becoming a little bit - as those numbers got large it became a little cumbersome we're going to clean it up and give a number of $1 million. So the number of customers over $1 million of annualized revenue last quarter was eight and this quarter it increased to 10. So we're going to try and keep it to that metric going forward just to give you some flavor for it but keep it a little less complicated.

Your next question comes from Richard Fetyko - Merriman Curhan Ford & Co. Richard Fetyko - Merriman Curhan Ford & Co.: A couple of questions with respect to your guidance for the full year. It assumes a revenue acceleration in dollar and growth terms for the third and fourth quarters. I'm just curious what level of confidence and visibility you have in that? It sounds like the activity in your pipeline and the size of deals has increased but any other sort of light you could shed on your visibility and confidence in the acceleration of revenue growth in the second half of '09?

Yes, I think there's two things we can point to. One is, as you know, we can see increases that are essentially booked and scheduled out beyond the coming quarters, so some of the growth in the third quarter was actually booked and scheduled in Q4 last year or Q1 of this year, and so some of this is not new information for us; it's just new because we're giving Q3 guidance for the first time. And then the second piece is just normal visibility. Now we're far enough long that we can see the vast majority of activity we expect to happen in Q3. And so the pipeline looks strong; the percentage, the sort of absolute number of deals that are in that higher price point, that $15,000 per month and up, is several deals. That's new as compared to the last nine months. And so those are the kinds of things that have changed in a real way - real bookings and real scheduled deals that support the expectations for the second half. Richard Fetyko - Merriman Curhan Ford & Co.: You mentioned sales cycles have improved. Are they back to sort of the historical normal levels perhaps in early '08 or late '07 or they're still elongated relative to those levels?

Okay, I'll clarify that a little bit. The sales cycles have not dramatically changed in terms of their length. What has changed is what we saw over the previous nine months was quite a large increase of scrutiny on just the sheer dollars. And so when companies came up for renewal there was some downward pressure not on pricing but just on usage. So where in the past customers licensed at a certain level they would typically renew at the level or something higher. That was a phenomenon we saw changing in the latter half of last year where people were really looking hard at cost cutting. So that phenomenon has now seemed to slow in sort of heading towards zero and heading back the other way, and that's really what's driving the improvement. So people more focused on expansion, more investment and that's driving the dollars up, but the length of the sales cycles has not changed too dramatically. Richard Fetyko - Merriman Curhan Ford & Co.: And then lastly, with respect to the mid-market sort of expansion or initiative you have to penetrate some of the mid-market accounts, what kind of accounts are we talking about? I thought you sort of covered the full spectrum of companies out there already with your services, so I'm curious about the deal sizes that you think you can generate in the mid-market and also does the product need to change, the sales approach, what kind of competition do you face there?

Yes. We traditionally have done a good job across the spectrum, but there's this growing customer base that sort of falls between how we execute and sell on the SMB, which is predominantly online, and how we sell on the Enterprise, which is traditional cold calling or outbound telemarketing and then follow it up with a high-end account executive. So there's sort of a mid-market where we would have more of a telemarketing organization and going after companies that would spend somewhere between $30,000 and $60,000 a year and that's definitely in the middle of Enterprise and above the SMB. So we're going to take sort of a hybrid approach of what we do with SMB so there'll be an online sales team, but there's going to be a telemarketing team and they're going to do a lot more outbound and stuff like that. We're seeing a lot of lead flow right now and sometimes these leads get caught between the two groups and they're not handled properly 100%. Sometimes they're sold into a small product or they're pitched such a big product that they can't afford it. So we think there's a real opportunity here right now to go after this. I think a lot of it has to do with on the Internet right now there's a lot of small businesses that have graduated up to being mid-market businesses and they're selling specific products but they're generating leads from Google and all that and they want a more sophisticated tool but at a good price, like $3,000 to $6,000 a month. So that's what we're looking at. Richard Fetyko - Merriman Curhan Ford & Co.: And the product, does that change?

It'll be predominantly just - it's taking - it doesn't change. All of the products are off of a single code base, and so we're going to package it a little bit differently. And it'll have everything in it, so it'll have chat, e-mail, voice, and the proactive capabilities, so it'll look like the product suite; it'll look like the high-end SMB product that we sell today, which is our Timpani product. Richard Fetyko - Merriman Curhan Ford & Co.: Is the competition in this tier of the market different from the other two?

No, it's the same competition. It's just we look at it as opportunity. We're seeing, like I said, a lot more lead flow. The competitors will be the same, but we're going to be much more focused on it and, like I said, have a little bit of a different approach to more like an outbound telemarketing group, someone who's been in sales, let's say, five years or so, so it's more like a mid-level salesperson.

Your next question comes from Bradley Whitt - American Technology Research.

Rob, on the Consumer business, nice sequential uptick this quarter. I'm just curious as to how much visibility do you have on that business quarter to quarter and what gives you confidence it's going to grow 3% to 4% sequentially in Q3 when I think you said there would be some negative seasonality?

We're already seeing the seasonality because it's when school's out our tutoring area really goes down significantly. It shaves about $100,000 a month off of revenues so we really sort of see that in the numbers. We have a lot of visibility because about 80% of revenues is existing customers, so 80% of our revenues come from the base and then 20% is just the new customers on top of that, so we have a pretty good handle on that business. It's been pretty resilient, as you can see, even in the face of slow consumer spending for many things.

And, Tim, just curious about any impact from the shekel this quarter since you gave guidance last. I haven't been tracking it.

In the second quarter it's been slightly favorable impact but not so significant that we talked about it. In Q1 you might remember it was a pretty strong impact. Q2 is immaterial to slightly positive.

And also how much of the increase in the EBITDA and EPS guidance is just attributed to the lower tax rate?

Well, on the EBITDA, EBITDA is before taxes and so the majority of it is from operating changes. On a rounding basis the tax is not a huge impact. EBITDA basis, it's partially just taking credit for Q1 and Q2 and then assuming a flow-through impact from some of the increase in revenue in the second half of the year. I think there's some - as always there's some favorable that could come in, cause those numbers to be a little bit higher, but that goes both ways so I think the middle to high end of those ranges are pretty good.

And just so I'm clear on the guidance and your visibility, it looks like Q4 you're expecting probably the strongest sequential increase you've had in six-plus quarters, so are you saying the majority of that business has been booked already or is it stuff that you see in the pipeline that will book between now and then and allow you to start recognizing revenue?

It's not a majority of it that's been booked, but I would say a significant proportion and in line with what we've seen in prior years is booked versus anticipated. So part of the implication for Q3 and Q4, some of it is timing, so something that might go live in September might hit October and vice versa and that's why the full year number we're still comfortable with and makes sense. But there could be still some flux between Q3 and Q4. But I would say our confidence is as high as it has historically been when we give those ranges.

Your next question comes from Nathan Schneiderman - Roth Capital Partners LLC.

Rob, both of you referenced several times in your presentation strength in bookings and some improvements in the pipeline, but I was hoping maybe you could maybe try to quantify that for us a little bit maybe in terms of how that's improved on a percentage basis quarter-over-quarter, year-over-year, something just to help us gauge that.

I think one of the data points we give is the average number of deals and the average size of the deals. So if you look just on that basis, 40 deals, average price point of about 65, that gives you an implied bookings for us of about $2.6 million. And that's not an absolute number but that's a good guidepost, a good metric to use. And that's up about 60% from Q1, so I think that's probably the best indicator of the real improvement because those are actual booked deals. Some of that revenue hits the P&L in Q3, some in Q4, so it's not a direct quarter to quarter correlation, but that I think is the clearest signal that things are improving.

And then just on your references to a build in the pipeline, any kind of math you can do for us there to help us scope that?

Well, I think the average price is certainly going up per deal and that's supported by the fact that we're again seeing a return to the $15,000, $20,000, $30,000 RMR deals, a higher proportion of those. And we also see, if you sort of look down the names of the companies in the pipeline, the kinds of names of companies that we think have real growth potential, so household names with big online businesses that we think can expand. So comparing that to a company that might start at $20,000 and stay at $20,000 forever, that's a real strong indicator also of longer-term growth.

Shifting gears to the Enterprise business, that seemed to come in at the low end of expectations so I'm just curious what you think happened as the quarter played out, what happened relative to what you were expecting to happen there or why you feel that came in at the lower end.

I think it's mostly timing. I mean, you'll notice if you sort of flow through our guidance you'll see the full year hasn't changed much, the Enterprise number hasn't changed much, but you can see these shifts quarter to quarter. We'll see the same thing in Q3 and Q4. You can't always get it down to the exact month, but it came in right within the range that we gave so I don't think there was any one particular driver I would point to that drove that.

On the Consumer business I know that you have a goal to get to a breakeven to profitable level and you came pretty close in the month of June but I'm wondering do you feel you'll be at that level in July or what month would you expect to actually turn that business profitable?

Yes, I think right now we're just maintaining sort of this - I think $50,000 plus or minus is good for this business right now because, for instance, we had the ability to buy some media on a cheaper rate and so we pay out now for those clicks and those conversions and then they come over about a year, we have a lifetime value that we achieve and that's why we spent a little bit ahead. So it'll be $50,000 plus or minus until the end of the year and depending on how we want to allocate those dollars, if we get better deals or if we don't we'll just save the money and tuck it in.

You gave us SMB churn stats of I believe a little over 3% on a monthly basis, but what would that have been last quarter and last year?

That's higher than it has been historically. Historically it's been sort of below the 3% range, 2.5% to 3% range. It's definitely spiked up a little bit in the past couple of quarters and that's something that we're obviously very focused on right now. Part of that in some ways can be favorable in that if you bring in more companies that test that can create lead flow but it can increase your attrition rate so you don't want that to continue too long. But I think we're making some changes in that group to sort of reinvigorate the growth and I think the second half should definitely show some improvement.

(Operator Instructions) Your next question comes from Richard Baldry - Canaccord Adams.

It looks like cash is at an all-time high and you've been a pretty strong generator over recent quarters so could you maybe re-visit the concepts of acquisitions, maybe also a buyback. kind of done lightly to approach that kind of recently, sort of an outlook kind of intermediate term on the balance sheet?

Yes, I think we're definitely at a nice pace at adding cash to the balance sheet every quarter. I think the $20 to $30 million range has historically been where we feel comfortable. The repurchase is still in place. [Break in audio] have any, you know, specific plans at the moment for deals or repurchases but it's definitely something we look at. Those are the three areas we really focus on - capital expenditures, where we're investing in things that'll drive future operating improvement, we're adding new people in the second half of the year that we think can expand our sales and marketing efforts, but also we'll continue to look at the repurchase and at M&A opportunities. Historically M&A's been fairly opportunistic in terms of the use of cash versus stock and combinations, but that's definitely something that gives us flexibility, to have a little more cash on the balance sheet.

And theoretically your fourth quarter implied guidance, it's still relatively flat with pro forma EPS versus your first half, even though the top line stepped up to a pretty incrementally higher level. Could you talk about if there's some areas that by definition need to delever in the second half or whether that's - I'm essentially asking if that's just simply conservative guidance?

Well, there's some specific areas where we expect to increase our investment. We've kept headcount in check; we've actually reduced headcount a little bit net-net overall. And continue to grow, with the stronger Enterprise growth anticipated, hitting the P&L is a lagging indicator, meaning we have to gear up now to support increased growth in the second half, especially as we go into the holidays. So that means two things - we expand our team and our production team that supports customers [break in audio] and so we'll continue to invest in that area. That'll start to hit in the second half. We're also looking at expanding our sales and marketing, primarily sales resources both in the mid-market, as Rob mentioned, as well as continuing to build out the Enterprise sales team at least, well, one or two over the second half of the year. So those are the specific investments. We're confident enough in the growth that we're willing to continue to hire in those areas. And then the other piece of it I think is somewhat conservative on some of these things that we don’t control in terms of exchange rates and things like that.

Can you also talk a little bit about the sales capacity concept? With bookings up 60%, like you said, sequentially, how much headroom do you feel like you have there? Is there some point where - and it's not often talked about in this market - but is there a constraint level there and do you really feel like adding only maybe one person to the Enterprise sales side is adequate as you head into the second half and then ready for '10?

There's quite a bit of headroom, I think, in the existing team. So when price points go up and deal sizes increase you can drive a fair bit of growth with no increase in headcount. And so if you factor that in and also look at where people are relative to quota, we probably have as much as 50% untapped capacity in the existing sales team. Historically if I look back over a couple three years we've booked almost double what we booked in the second quarter in a very top quarter in 2007, for example, with a team that was either the same or maybe one or two smaller. So I think there's plenty of room there.

Your next question comes from [Bill Balken - Unidentified Firm].

What are your thoughts on the expert channel that Java is utilizing - where do we go from here, which I find the most interesting part of the expert channel, by the way. And then secondarily or the second question, can you comment on the earlier reluctance and I guess now the interest out of the big box retailers?

Yes. For the Java one, I agree, I think we've got - and it's only been in the last couple of months that we've really been able to really take that to the next level for many reasons; the implementation, we keep changing things and sort of optimizing it. So I agree with you; I think it shows that businesses - and we have, obviously, 8,000 B2B customers - there's a way to put experts on your website and have them field questions and let consumers pay for those questions. And in Java's case they're able to decrease - normally it would be a cost for them to support those questions and now they've turned it into a revenue stream. Now I think Stage 1's kind of over and Stage 2 is now let's go out to our base now that we have sort of the model down, and that's what we're doing right now and the sales guys have added it as part of their pitch. So that's that part. And the second part is the big box retailers, which have I think traditionally been slower to adopt our technology, there's a couple of them in the pipeline and it just seems like everyone else they're focused on increasing conversion rates and they need our products to do it. So, like I said, in the next two quarters I think we'll have a couple of these guys in our customer list and it's exciting for us. It's sort of taking it to a whole other level.

Your next question comes from Richard Fetyko - Merriman Curhan Ford & Co. Richard Fetyko - Merriman Curhan Ford & Co.: Tim, what was the CapEx in the quarter?

About $2.8 million. Richard Fetyko - Merriman Curhan Ford & Co.: Could you tell us what you spent it on?

That is a year in our hosted server facilities, primarily for backup, the expansion of our backup facility. So we've essentially completed our initial build out of the primary facility and now that's just expanding the growth. But we've sort of moved on to the backup facility as we move and expand that. And then to some extent the data warehouse that we're building, those two capture most of that.

Your next question comes from [Jordan Benchay - Unidentified Firm].

I have a question with regards to your Enterprise and your Consumer. Do you see one or the other of them being your main driver or leader or do you sort of see them - for your business going forward or do you see them sort of equally?

Yes. I see them as - there's a strategy behind the acquisition we did of Cassava two years ago and we're executing on it. More and more of the businesses we're bringing together and ultimately I'd like LivePerson to be known as a brand by consumers where they can, when they see it, whether they get it on a customer's B2B website on our website, that they think I'm going to get the best possible advice, I'm going to get expert knowledge through our system. It's all part of a bigger strategy of enabling consumers to get expert advice, whether it's from a B2B or an individual expert.

And which do you see growing more going forward or do you see them sort of being the same?

Yes. I think they equally have a lot of room to grow. I mean, we've only got 8,000 customers out of about 200,000 or so on the B2B side. And in the Consumer business we're not known, we're not Twitter. We're not a household name brand. We do a lot of direct marketing to get consumers to our website and they like the service when they get there, but when we step it up and people know about us that's when we know we've really reached our potential. So we've got a long way to go.

What were those numbers that you just quoted for the Enterprise - 800 out of 2,000, is that what you said?

We have 8,000 customers in the Small Business segment and we've got 300 customers on the Enterprise side.

And I think you said out of a potential, was that correct?

Yes, for the 8,000 Small Business it's about 200,000 businesses that are there and in the Enterprise we've got 300 out of what we target about 3,000.

Your next question comes from Richard Fetyko - Merriman Curhan Ford & Co. Richard Fetyko - Merriman Curhan Ford & Co.: You guys mentioned the burn in the Consumer segment for the month of June and March. Can you give us the EBITDA burn for the Consumer segment for the second quarter in total?

Yes, between $150,000 and $200,000. Richard Fetyko - Merriman Curhan Ford & Co.: And then just more of a bigger picture question with respect to the [inaudible] that you're implementing or using and the Timpani to [practice] sales product, there's been a fair amount of advancement made in [omni] media, [inaudible] space on the behavioral targeting of ads that improved the performance of those ads [inaudible] whatnot. Is that something you're using, sort of past behavioral data and purchased data from third parties? Is that something you're looking to implement or perhaps you're contemplating developing a new product or a new generation of your product?

Yes. I mean, we've been looking at - I think lately we've been looking at how do we expand the use of our engine, which in real time tracks, monitors and then does a proactive engagement. And we are tracking about 700 million uniques a month, in which about 7 million chats take place. So we have a tremendous amount of data. The first step is the data warehouse that we're on the tail end of building and the business intelligence about that will give us a lot of insight into what have we got on the data side, and then from there we can decide how are we going to take that data and then expand our business with it. But there's definitely something interesting in the data when you track that many people and their purchase behavior on some of the biggest websites in the world. Richard Fetyko - Merriman Curhan Ford & Co.: I would think so. And then the business intelligence, the data warehouse that you're building, is that something that you will make available to your customers as well to gain insight? Will that be part of the existing services or deals or will that be an extra fee?

I think it's three pieces, really. We provide it according to our customers today and I think we will continue to provide that at the current level. And ideally we expect to be at a much more sophisticated level. There's a second category that's things that we don't and can't do for our customers today that we plan on doing that we think we can generate additional revenue for. And then the third piece is new business opportunity, new uses for the data, potentially new customers, and that's the most greenfield piece, also with real potential. So that's how it breaks down. Richard Fetyko - Merriman Curhan Ford & Co.: And timing on some of these things?

The data warehouse is gearing up now. We'll head towards beta and testing with customers in the second half of this year and then we'll roll that out from there once we're comfortable that the thing is doing what we expect it to do.

And there are no more questions at this time.

Thank you for the call and, as I mentioned at the beginning, if you go to YouTube we'll have up there a couple videos sort of doing a little commentary on the quarter and you can just search MyLivePerson and you'll find the videos there. So I will see you in Q3.

And this concludes today's conference call. You may now disconnect.