Good afternoon, my name is Brandon. I will be your conference operator today. At this time I would like to welcome everyone to the LivePerson Second Quarter 2015 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. [Operator Instructions] On the call today are LivePerson's Founder and CEO Rob LoCascio and Dan Murphy. Sir, you may take it away. Dan Murphy.

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 overtime and we undertake no obligation to inform you if they do. Results that we report today should not be considered as 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 Web site. With that I'd like to turn the call over to Rob LoCascio.

Thank you for joining us on LivePerson second quarter 2015 call. We’re pleased to report revenue and adjusted-EBITDA at the high-end of our guidance ranges, and LivePerson delivered its 52nd consecutive period of year-over-year revenue growth in the second quarter, with revenue increasing 22% in constant currency year-over-year. We made great strides this past quarter in delivering our vision to the market through our LiveEngage. As I mentioned in the past our vision is to eliminate the need to deliver the majority of customer care through the use of antiquated 800 numbers and that’s the majority of how we get our service today. My dream is to obviously get rid of it altogether, I think the 800 number is a very big problem it is about 270 billion calls are made a year that consumers are making to brands and we have a platform that is a weapon for us to really impact those phone calls and that’s LiveEngage. There are some interesting stats around calling the 800 number, each call on average costs the company about $6, so there is about $1.2 trillion in spending that’s going into something that 85% of the time puts a consumer on hold. So that’s a lot of money to spend and really pissing people off when you think about the amount of funding a brand is putting into it. Most of our competitors today and we will start to talk a little bit differently about the competitive set, which is the genesis of the world of IM Cisco in their call center solutions they keep trying to sell the fact that people like to call the 800 number because there is 270 billion calls made a year. So the concept is like of course people like to call, but the brands are…

Thanks Rob. I will begin with a review of our second quarter 2015 operational and financial highlights and finish with an update to our guidance. The operational highlights for the quarter include LivePerson generated 19% growth in its B2B segment despite a negative 6 percentage point impact from foreign exchange. We've doubled the number of enterprise in mid-market brands on the LiveEngage platform sequentially. We now have approximately 25% of LivePerson's customer base on the platform. We had the second seven figure enterprise for LiveEngage. In total LiveEngage interactions more than tripled sequentially in the second quarter. Brands on LiveEngage on average and increasing interactions more rapidly than customers still on our legacy offering, we’re examining to see an increase in annual paid and advanced and multiyear deals as evidenced by the growth in deferred revenue, and mobile remains the fastest growing new channel interactions more than triple on the year-over-year. As we move into the back half of the year we’ll continue to focus on execution and our opportunity to help brands communicate with customers on their mobile devices. We’ll also remain committed to expanding profitability by capitalizing on our scalable model. In fact we pursued several initiatives in the second quarter ended capturing 13 million of additional leverage in our model in 2015 as we scale our operations. Turning the attention to our second quarter 2015 operating results, we delivered revenue near the top of our guidance range. Total revenue increased 16% year-over-year to 59.3 million, excluding an approximately 2.9 million primarily 6% drag from foreign exchange. Total revenue would have increased 22%. B2B advanced 19% to 55.5 million or 25% year-over-year in constant currency, considering the revenue decline 15% to 3.9 million. We signed 129 transactions in the second quarter and 36 of those were with new…

[Operator Instructions] And your first question comes from the line of Michael Nemeroff.

Hi. This is Kyle Chen for Michael Nemeroff. Thanks for taking the question. I guess Rob to start off can you share your thoughts on your sales capacity and productivity this quarter? Are you satisfied with the level of productivity currently? And I guess longer term, what is your strategy to bring sales investments and unit economics more in line with historical levels?

I think we still have a fair amount of capacity in the sales team as obviously we have had some changes and that team in the last two quarters or so but so I think there is a fair amount of capacity still left so I think we're going to hold where we are right now capture that capacity and sort of growth from there we are doing larger deals so it's basically focused on a very targeted account list right now we know who we need and we also have a large group of customers that we are obviously trying to expand the large portion of revenues come from expansion so the capacity we have right now we're just focused on getting more add of and leveraging them.

And I guess Dan, can you give us updates on the pay for performance business. What was that as a percent of total revs in Q2 and what are your expectations for this business over the next six to 12 months.

Yes. So pay for performance as a percent of total revenues was about 10% of our total revenues 2Q and what was the second part of the question Kyle?

I am sorry you said it was 10% of total revs?

That's correct.

Okay. I just thought that it might look somewhat different post AT&T in the second quarter.

Yes it is a great question. We had a couple of customers in PFP in the pipeline and we actually were able to start ramping them in the second quarter so we've had the benefit of ramping some of those customers on our PFP products and have seen very good results.

Okay. That's really good to hear. So I guess if we were to exclude AT&T or normalize AT&T for last year and this year and kind of exclude contribution from Contact at Once, do you think you can achieve an organic ex-AT&T growth in excess of 10% this year?

For the year if I exclude AT&T and exclude what is the other component?

If you normalized for AT&T in both years and exclude Contact at Once in terms of organic ex-AT&T, do you think kind of 10% is the right way to think about the growth rate?

Yes. I mean I think it's a right way to think about the growth rate Kyle but the big impact is currency we have a quite a bit of billing happening in Australia and the euro and the pound and as you know currency has been ahead of quite a few companies including us and in our guidance we are assuming about $6 million of currency impact but it played a large factor on our growth yes.

And I guess if I could squeeze one more in. Just expectations for Contact at Once it seems like there's some revenue synergies here. Are you still expecting the $31 million from that business this year?

The expectation is still the $31 million as we integrate our businesses it's getting harder and harder to break that out and then as we focused on the real estate and issuing one of the things that Rob highlighted part of the thesis around the Contact at Once acquisition was building our product automotive and putting them into another industries. So making some headwind in the real estate industry but it is getting harder and harder to break those numbers out but as our expectations are now approximately $31 million.

And your next question comes from the line of Richard Baldry.

Thanks. Can you walk us through how you see the similarities or differences in this new real estate piece for the Contact at Once? Go through having one sort of a major portal now, what the Company's experience has been and, working from that relationship down to the end user relationship and how that sort of payment model works? Thanks.

So it’s very similar to the automotive area so you get the marketplace and then the marketplace owners, the owner basically creates what’s called an advertising unit and says we can add chat to your advertising, new homebuilder dealer or agent, real estate agent and so basically what happens then is most of the agents and builders want to buy and it’s an extra way to promote themselves on that portal on the marketplace. Then what happens is we go back to the actual broker, dealer and also the homebuilder sell for their individual Web sites and so because we’re taking the chat off the marketplace usually they want to take the chat on their local Web site and have all that integrated. We at LivePerson, for a second, already have a fair amount of homebuilders because we have very large Web sites and we talk about that we have some synergy there. So we can sort of bring that base we have some homebuilders already and we’ll integrate those into the Contact at Once offering. So the synergies are pretty great and there is a great similarity between that and the automotive industry.

With 25% of the base now on LiveEngage, can you talk a little about early experiences with customers who have been moved on to the platform who probably thought we're still just going to stick with chat but they now have all that functionality available to them? Are you seeing more or less than you might have expected testing the other functionality and how sort of that uptake maybe has been in that audience? Thanks.

Yes, there is a lot of content impressions on the platform so they are using a lot of content. There is lot increases in click through on the content, that’s how we get paid. So we’re seeing usage with the content side. The other side is obviously what we’re going to be doing with mobile and all the mobile interactions and so we are seeing great use. The second part of the analytics so we’re reporting in it and also we released a pretty big part of it which allows you to basically look at the relationship you have with the consumer. So on real time you can see that the consumer has a connected relationship with you, and we score it and we can see that that customer is happy or sad if I can put in those terms in real time. So you see all the messages happening on the console, -- console you can see smiley faces and happy faces or sad faces that’s how we show the indication. And they’re finding it very valuable. And you can imagine like the heads of marketing or the heads of sales or the heads of contact center can overlook all the interactions in real time and see, wow there is an issue with this specific consumer, let me jump and see what’s going on. And then we’re measuring the impact of that on the business if we have got some really interesting metrics around, and if you can drive a more connected consumer you can have more profitable consumer. So these are some of the features the analytics that are built into the platform now that are also great benefits and being used by the customer base.

Your next question comes from Brian Schwartz.

Rob, I had a follow-up question from Kyle's, his first question, just on the productivity of the deal flow activity in the quarter. Did the reprioritization of the growth initiative, did that have any impact on the sales productivity or the deal flow in the quarter?

No, no impact, which growth initiatives [indiscernible]?

I'm coming out of Q1 you were talking about reprioritization. I didn't know if maybe there was some training or maybe you pulled some reps out of for some training or new initiatives.

Yes, obviously in the first quarter we did all the training and all that stuff is benefiting -- the impact of some of the sales and pipeline is growing nicely. So we’re seeing the take rate customers increasing so that’s good. So there is benefit of that obviously. I just think the leadership there now is knows the business and there is very little guessing work in what’s got to be done and they just basically back to the basics but bring it back to how got to where we are and just working with the team in executing on that.

Well, you're raising your profitability targets so I assume you're feeling that there's some leverage here in the second half, which is great. Rob, the other question I wanted to dive into, I thought it was really interesting in your introductory comments, you gave an update on the competitive landscape, and you talked about displacing -- it sounds like mostly the legacy telco vendors that are out there in the enterprise market. And what I was kind of curious about is those vendors typically sell either into central IT departments in the enterprise or they sell into the contact center, they're selling very large deals that typically got out of CapEx budgets verse selling into a line of business managers and selling more productivity apps. So I'm just trying to understand, is that maybe more of the focus and the direction now that you have the platform, you're looking to sell bigger deals maybe even to the suite level out of CapEx budgets versus going for a higher volume of deals selling productivity apps into the line of business managers?

Yes and I think the thing that we're seeing is a big shift in the market and so like I just -- I was up to a meeting with a CIO, of one of the largest banks in the U.S. who is not a customer of ours and I was very surprised that what he's been working on at the bank is really about how to integrate all the pieces in them and then talked about moving to messaging and mobile messaging and so what I've seen is he had a bunch of companies, so what's happen is from -- it's really like; it's really a CEO initiative in many ways and it is a suite initiative which is especially banks and telcos, when we look at them today and let's look at a banking industry, they are highly regulated and so the products don’t differentiate and so they are very focused right now how do we differentiate with service. And so they are looking at a way which everyone keeps talking about. How to create deeper connection with our customers and they do look at voicemail and say we're in the past it was like, yes, voice is the only way to do it and we have got this infrastructure they see and they hear from their customers that they are finding that disconnection because they are using our channel and it's costly. And some of that and what they come to the conclusions, no matter how they how they staff it and unless they want to overstaff it and really be unprofitable; there is no winning, there is no win. So, they are saying can we move that to something different and then in their own personnel lives they are using messaging to communicate with their friends and…

Dan, last question from me, just a real quick one on metrics, just wondering if you were able to buy back any shares of the Company stock in Q2? Thanks again for taking my questions today.

We bought back a small number of shares.

And your next question comes from the line of Glenn Mattson.

I just based one metric, Dan, was it the renewal rate. Could you repeat that, please?

Sure, it was 88%.

Maybe I'm just splitting hairs. Is that a down tick a little bit? I think you were running maybe the low 90s. Is there anything to read into that or anything?

No there is nothing to read into there was a downtick of 1% from the previous what we reported in Q1.

Curious, just maybe feedback from the sales force on when they're trying to transition people over to LiveEngage, do you ever get any feedback from them saying, well, this is giving the customer maybe a chance to take a step back and kind of evaluate what other options are out there one more time before they make the plunge on to this new platform or anything like that? Is there anything similar to that in the competition front? Thanks.

No. I don’t think LiveEngage per se drives that and then honestly we have got competitors and there is always thinking of how do they sack-up against you guys because we are the leader in what we do, but I don’t it particularly drives that competition. I think the exciting thing is when we show LiveEngage as I said in the past week. Imagine our core platform it is the leading platform in the market. Imagine we are replacing with a product that apart from that plus all those great things that we built into as far as future and so in itself it's such I think a fantastic platform and when the customer see it they love it we have had a couple of thousand customers on that are ready so in our mind in the company it's a question of time obviously we are going to get every customer on to it it's not a question about whether it works or whether you really like it when they are on it because they really do it's a question of time and we are working with them we are also adding more features that some of the enterprises need but in our mind it's not sort of the show stopper anymore because of that and it's going.

And I guess just last the -- did I hear it right? Did you say that 80% of the new enterprise, the mid-market customers went on to LiveEngage? Is that the metric?

No. The metric just to clarify the metric was 80% of the 129 deals we did in the second quarter [Multiple Speakers].

Okay got it, okay great.

That's inclusive of selling to new customers and selling to existing customers.

And your next question comes from the line of Mike Latimore.

Nice quarter there, guys. The pay for performance being 10% of revenue, were these customers that were kind of already customers and they moved to the pay for performance model or were they new customers?

So it was a combination of two things Mike some were new customers and some were existing PFP customers that were able to expand also but if I understand the question correctly was the license customers moving over to PFP was that your question?

Yes.

No primarily it's all new PFP or existing PFP over expanding.

Did you see this kind of PFP category growing faster than the overall company?

I think it is a good opportunity I mean we have always been talking around PFP and we've got a couple of customers like I said that we’re ramping up and as we move forward we will still continue to pursue PFP. We don’t give guidance on specific lines of business but we are happy with things going right now.

And the small business segment how is that doing overall? Do you see that growing this year?

It's actually doing well were seeing it picking up we just put out a new offer into the market sort of the try and buy types of the situation and we also our mobile products out there it is getting a very good take rate so it's like to returning a corner and it's going in the right direction we are getting a lot of downloads and signups a day which is very different than the past and we just started to put it in the marketing about little over two months ago so it's moving in the right direction and so we are pretty happy with it.

And just last question LiveEngage drives a fair amount of efficiencies, I believe. Gross margin eventually, I guess, when do you think sort of LiveEngage implementations and use will help the gross margin line?

And so we've given guidance for 2015 that we expect our gross margin to be about 70% there is a cost around in that some of these PFP customers but our goal as we move into 2016 is to focus on obviously our obviously growth in revenue and profit and gross margins but eventually I do see it helping in gross margin area but after 2015 we’ve given that guidance.

And your next question comes from the line of Craig Nankervis.

I guess, Rob, my question is around sort of a forward-looking question. If you were to look a couple years out at how you view these 800 number conversions playing out, I guess, number one, what portion of 800 conversions might you expect to be for service primarily and what portion might be using the platform for sales-related? And then, secondly, how do you see uptake or usage of LiveEngage for 800 number conversion customers versus other customers that you might win for other reasons? Thank you.

The first one I understand. Can you give a little more color on the second question?

Is the 800 number conversion business that you expect to do, would that on average show a different profile of your platform usage than a non-800 number conversion customer, new customer?

Okay, yes. I think I got it there, so on the first one the biggest implementations will be service related because that's where the majority of the pain is with the 800 number so you put on hold mostly post sales. Pre sales is most of the time you will not put on hold because they will staff those channels to a certain degree so expect that 70% of interactions to be service related, 30% to be sales related the interesting thing is it kind of blurs in a messaging world servicing sales actually blends to one because the consumer is always connecting to the brand because the brand can proactively get back to them through mobile. So I think long-term it becomes a blurry world, but at the beginning the big ones we’re looking at are on the service side. When you look at the usage of the platform it’s really the mobile capabilities of the platform we do have a piece of the platform now that just came out which is allowing for IVR deflection. We have a piece of code that goes into the IVR and the IVR -- one, two or three or four it does the routing. We have a piece of code now that’s off of LiveEngage you stick it into the IVR and we can say plus one for this and press two and for press three to get a message and not do a call and it SMSs back to the mobile device to the consumer and then they start a secure message right on the mobile device or we can even launch an app, we have we go to launch an app. So we are taking the call out of the IVR which is pretty unique situation especially against the voice guys because we’re attacking the first line as their business which is IVRs. So I expect those types of technologies they are the ones that wind up playing into the platform. There is content that we can target back to mobile like we do on the Web and then there is a combination of where the mobile where consumer comes to a web channel, they can be pulled into the mobile and we know that they are unique consumers, the mobile capability and the ability to reflect out of the IVR -- so as the replay that we’re out with today.

So you're saying just on that last sentence that you said, you're saying if we thought about the say, your pipeline right now that has 800 numbers is for 800 number replacement opportunities, that is largely characterized by desire to be more mobile enabled for those prospects? Is that -- do I hear that correctly?

Yes and when we walk in a deal now obviously last year I think I said at the last call the first time when mobile Web interactions increased over browser based interaction. So the mobile is accelerating and then Web based of the desktop is decelerating right now and being replaced. So we’re aligning to that. So we walk in and do, we lead with mobile capabilities obviously there is still we want to do web chat, and they’re all integrated on to a single platform. So it’s the same platform, same strategy, except because mobile today is the lead dog even to them we are connected to that and we have our series of mobile products that are out today.

Your next question comes from Jeff Van Rhee.

Rob, with respect to the pricing model as you move to LiveEngage and the more transaction oriented pricing structure, is that model matured and ironed out and stable? You see that likely unchanged going forward, or is that still in the process of tweaking and a little more fluid?

Good question Jeff from the model perspective, it remains largely unchanged. We think we’re in a good spot and we’re talking about customers all the time about the pricing but we can contribute to that.

I'm not sure I understood. So it probably is -- probably stays the way it is? There's no -- I shouldn't be thinking of major tweaks to the variable pricing model as it stands is now.

No.

And then to the growth question, just -- I guess help me understand. If the math is this 10% growth out, I understand there's currency moving here, but if you exclude the AT&T and contact at once, should we think of that 10 as coming exclusively from the newly signed customers on LiveEngage and that the existing customers that are being migrated to LiveEngage are -- it's a probably a wash event for those customers in terms of what they're likely to spend, say, in the forward 12? Or do I have that backward?

I think you’re asking a very good think we’re still flowing into the existing customer and existing customers whether on the legacy platform they continue to grow and there even on the new pricing model. So I think you are slicing it too thin by just saying the growth is going to come from all new people on LiveEngage or only legacy we’re still out there talk to our customers and we’re still engaged the model and growing the business.

Understanding it's a little early on the enterprise customers on LiveEngage, but you've got a lot more history with the SMB guys who you've migrated a lot earlier. Are there any quantified data points that give us a better sense of what an adoption of LiveEngage looks like over three, six, 12 months in terms of increased spend based on that usage times whatever the pricing model is?

Jeff, when you look at the small business customers because they’re not using high volumes of our product on a monthly or quarterly basis, but we’ve seen in our small customers where they’re using more than just chat and they are using more interactions than they were on the legacy product moving on. So from our perspective it’s going in the right direction but again we’re talking about a small number of interactions. Even as we started using enterprise in mid-market so we are starting to see the same trend but it is still little bit early.

Then just, I guess, one high level question, Rob, as it relates to the 800 -- the strategy to kill the 800 number. If users prove to slow to change in terms of, I'm using 800, that's the way I want to interact, I may be comfortable with technology, I may be comfortable with chat but I prefer 800. If that morphing of the user and the user's desired method of interacting changes slowly, say, five, ten years it takes people to morph away from that, does the current marketing message still make sense?

We move -- we've already moved. So, concerned behavior we don’t use our mobile devices to call people. So the number one and two usage of a mobile device is messaging, number three is taking a picture, four is Facebook, five alarm clock and six is voice call. So you are right, actually what you are seeing is right. Consumer behavior you can't change but the consumer behavior changed the brand portion is that they are not aligned with consumer behavior and that’s the interesting part of the strategy. So we don’t want to change consumer behavior. It's now just a brand aligning to the consumer behavior and as I believe it's going to go fast because it's not just us who's in the market, you know there is a lot of people talking about it and even the companies like Facebook and some of the messenger products of course somewhere they want to connect with businesses and they have the consumers too. I don’t think that it is a question of consumer behavior I think it is brand behavior aligning. So we could say brand behavior could be slow but what I'm seeing in the market right now is that brands will move and again they are going to move shortly, and when saw even with proactive chat or chat, when the big brands go like one of the telcos goes or one of the banks goes they will follow because it becomes a competitive weapon and that’s the goal. So I think you can move quite quickly. I think it's a three year it's not going to happen over like 12 months but I think we can fire it up the post telcos and banks and airlines and get those guys going in the next 12 months and then from there I think you’d move quite quickly but the consumer part is kind of done.

And there are no more questions in queue at this time.

Thank you for joining us on the call and we'll see you next quarter and if you get a chance you can sign-up for Aspire and at our Web site. Thank you. Have a good day.

Thank you.

This concludes today's conference call. You may now disconnect.