Good afternoon. My name is Adam and I’ll be your conference operator today. At this time, I would like to welcome everyone to the LivePerson’s First Quarter 2017 Conference Call. On the call today are LivePerson’s Founder and CEO, Rob LoCascio; and CFO Dan Murphy. All lines have been placed on mute to prevent any background noise and after the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. LivePerson’s CFO, Dan Murphy, you may begin your conference.

Thanks very much. Before we begin, please note that we will make forward-looking statements during today’s call, which are predictions, projections or 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, in 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 which is available in the Investor Relations section of our website. I will now turn the meeting over to Robert LoCascio, CEO and Founder of LivePerson.

Thanks, Dan. Thank you for joining LivePerson’s first quarter conference call. 2017 marks a new chapter for LivePerson as we execute on our LiveEngage growth strategy. LiveEngage, we’re giving brands to power to reach huge efficiencies and strength in customer relations by replacing outdated voice contact center technology. LivePerson’s creating a real industry buzz as our mobile messaging platform gains momentum. We found several new messaging deals in the first quarter and now scaling multiple large enterprise customers in each region of the globe. These include several of the world’s largest telcos and will soon include many leading financial service institutions. Our ability to power and always on digital connection with consumer is already starting transformation of the customer care industry. Our announcement last week of LiveEngage for Bots further unlocks the potential of our platform to be a true game-changing scenario. This revolutionary extension of our platform treats bots and AI just like traditional agents and enables enterprise brands to match multiple bots at scale in tandem with human agent. It’s what we call Tango. AI and human agent seamlessly handoff conversations to each other with bots providing instantaneous intelligent responses to consumer queries and human agent supervising the exchanges. By marrying messaging with bots and AI, a brand can virtually eliminate capacity constraints, multiplying the benefits generated from a digital connection with consumers. And with LiveEngage, large enterprise can leverage one platform to power, measure and report on all messaging conversation regardless of channel or if they are led by human agents, AI or a combination of the two. Over the next years, we expect every leading brand to ship voice agents and even store-based employees to messaging. We also expect brands to leverage LiveEngage to have robust AI and bot capabilities into their messaging communications. Early adopters…

Thanks, Rob. We are pleased with the start of 2017 as we entered the year with four key priorities and hit the mark on each of them. Our first priority is to refocus on selling and growth as we put migrations behind us and we successfully shifted back into that mode in the first quarter, accelerating selling activity, back to premigration levels and generating a record average selling price. Our second priority is to extend our lead in mobile messaging space, and we did made solid progress here as well. We’ve signed multiple messaging wins in the first quarter, launched LiveEngage for bots and held the customer care industry’s first summit on leveraging AI and bots alongside messaging for customer care. LivePerson’s third priority is to complete the platform transition to LiveEngage, and we’re on track with that goal. We head to the first quarter with less than 20% of revenue on legacy. We’re now on target to end the migration in the third quarter with less than 5% remaining on legacy. Finally, we end the LivePerson for steady margin improvement was return to growth by capturing savings and efficiencies as we wind down legacy and realign on LiveEngage. We are executing on this goal, and expect to reduce total expenses excluding one-time restructuring and non-cash charges by $16 million to $19 million in 2017. This is in addition to the nearly $15 million we saved in 2016. As Rob stated earlier, LivePerson will started a new chapter in 2017 and we’re looking forward to capitalizing on the investments we have made in our product, customers and infrastructure this past few years. I will now review our first quarter operating results and 2017 financial guidance. Total revenue of $50.9 million is at the high-end of our guidance range and consisted…

[Operator Instructions] Our first question comes from the line of Koji Ikeda form Oppenheimer. Koji your line is open.

Hi, thanks for taking my question. Just a quick question here on the – it looks like there was a pretty big jump in the percentage of recurring revenue that is being generated on the LiveEngage platform in Q1. Was there anything in particular in the quarter that was contributing to that good pace of that recurring revenue migration? I guess just speaking about that remaining, that less than 20% out there that’s left is the profile of these revenue transitions more or less the same as what has been going on over the past few months? Or is the profile of these transitions a little different?

I’ll answer the second question first. The profile of these customers is relatively the same. We’ve gone through a lot of migrations with enterprise clients, midmarket clients, and these transitions are relatively the same, it’s just timing for us. And I’m sorry, the first part of the question is, just remember, Koji, on the RMR, there’s 2 things that are occurring, we’re selling obviously, the LiveEngage to the new customers, and that has an impact on the RMR, and the second thing is we’re migrating customers over from our legacy onto the LiveEngage platform which has an impact on RMR as well. So we made quite a bit of headway from Q4 into Q1, and as we’ve talked about on previous calls, our expectation is be done with the migration to have less approximately 5% or less of revenue on legacy platform which of course, we’ll sandbox and manage for profit.

I guess just as a follow-up, I think you had about $10 million, those $10 million in recurring revenue that you say you’re going to see sandboxing in the third quarter. And I believe you mentioned on a couple of calls before that some of the timing of those transitions is due to new product features. And if you could, could you please give an update on those updates? And how to think about the product roadmap going forward?

Yes. We’re very focused on those roadmap items to move that revenue back onto the LiveEngage platform. So I mean, we’re juggling between features that they want to make the move from the old platform to the new one, and then also all the new features that we have around messaging in AI and all that stuff. So – but they’re being prioritized around the revenue opportunities. But we’re very focused on obviously migrating all those customers or as much as we can onto the platform, that’s why we’re seeing on target will be gone at a less than 5% of revenue in Q3 because of all the capabilities that we’ve delivered in LiveEngage.

Great, thank you for taking my questions today.

Thank you.

[Operator Instructions] The next question comes from the line of Richard Baldry from Roth Capital. Richard your line is open.

Thanks. Can you talk a bit about the breadth of sales on the messaging, maybe across your sales quota teams, how well you think that’s spread around them, maybe geographically as well, so we get a feel for how that’s playing out across your go-to-market?

Yes. I mean, we’re seeing the high demand around the world, U.S. and Europe being the largest segments of customer demand. And the enterprise sales reps are just focused on that. There’s focus on new sales. We’ve put their compensation against selling and messaging, and all the capability so that it’s a very high focus obviously for each of them. As we know, last year, they were very focused on migrations and that really new revenue opportunity. There’s a big focus on new revenue opportunities and we had a very strong Q1 from a bookings perspective. And so, we’re seeing some good traction with those guys.

And you’ve had a lot of success with telcos like Orange, T-Mobile, Telstra. Can you talk about whether you see them as a really strong channel for you to get into their own customer basis on a go- forward sort of a leverage channel for you?

Not today. I mean, it’s a possibility in the future. We’re just very focused on, as you point out, telcos, we have telcos – we have the largest telcos in every region now except for South America, we’re really not active direct or we have some partners, but we have the largest teles that are on messaging. So they were the first to adapt and go live. Part of it is because they have control over their devices, they have very active apps and they understand messaging because they see it all day on those apps. So that’s really a focal point from selling. I think there’s other areas that you’re going to see some channel pickup for us, especially in the AI space and the cognitive space And there’s some partners there that we’ll be announcing in the next quarter. So I think there’s some exciting things happening on that side. We’re also becoming – because we built the platform, it’s truly an open platform. We have many companies that are integrating with us now too. So if we look at, I’d go back to Bob’s, I mean, it’s kind of like there’s a lot to talk about them, but actually implementing them and managing them and getting them onto a platform where they are transparent, most of the platforms don’t do that, they just provide core AI technology. The way it will put them onto a platform and you’re measuring them and deploying them like an agent. And so where we’ve been very direct in the past, I think you’re going to see more indirect opportunities for us coming up shortly. That’s what I can say.

And last one, if you look at the customer that you won back, is there anything unique about that customer that made that an opportunity to bring them back? Or something that would be more of a pattern that you think you could take that same sort of characteristics and look at the customers that have churned and put a concerted effort on bringing them back because of something that’s consistent in across the base? Thanks.

I think the most unique thing about this customer is that the person who let us go is the person who signed the deal. And so 2 years ago, he went to a one of the voice platforms that he has, they do chat in, and he did think strategic. And if we look, we work with that customer for 4 or 5 years, we got to a certain place. Well, a few years later, we just fit the strategy that he was thinking. And he signed with the deal at the start, which is a size of the chat ones at its end. And there’s an excitement around really attacking voice that instance what to about 500, 600 agents already in matter of weeks. So that’s really, I don’t think, its – I think the unique part is really that doesn’t happen like somebody fires you 24 months ago, they believe you’re backing up something new and cool. But our platform is so different and so unique in what it can provide that this person do that. So I do think there’s opportunity go back. We are inviting customers back to look at what we have on the platform and so that’s a very exciting opportunity in those customers maybe left us that we can bring back.

Thanks.

Thanks.

And your next question comes from the line of Jeff Van Rhee from Craig Hallum. Jeff your line is now open.

Great, thanks. Rob, a couple of questions. Just first on the bots. I don’t know how to best frame the question, but I guess I’m curious in terms of the cycles that you’re working on, what the frequency is where sort of this – one of this key your central features of that cycle revolves around your ability to cope or handle bots. I’m just curious where the adoption cycle is among the target customer base?

Fundamentally, what I’m seeing today is that most deals will include AI. And until we term that as a bot, so I believe we’re going to see a pretty heavy mix of bot and human together. And the way we built the platform is pretty unique in that they there – they actually live together side by side. So the agent can come in and there’s no transfer, agent comes in when a bots on working, and agent can watch a bot and see its performance, and actually we have a system to manage the performance and rate the performance on a scale, which we’re using the Meaningful Connection Score that we developed in the platform. And then we also have the ability for the human to call in the bot if they want to run an automated process. So they could be talking and messaging and then [indiscernible] you want to pay your bill, let me bring in the bill pay bot, and we’ll run the automated process on that. So we have Watson, we worked with Watson, we showcased Watson with a couple of clients at the conference last week and it was a pretty integrated, very, very comprehensive experience that the consumer gets with it and it will bring power of the bot to care. So I think we have a really good offering there, but I wouldn’t suspect going forward and see a lot – most of our deals having both.

Okay. And then with respect to sales, Dustin’s departure, can you expand on this a little bit, the timing? He – obviously, you haven’t had a lot of outbound sales, you’ve been much more focused on migration. Given his sort of core expertise in the outbound, let’s go book new business kind of mode, it would seem he would just be coming into a window that fits him really well. So I guess 2 things. One, just the timing and a little more color as to what to led that departure; and then two, churn. I’m just curious how the churn in the sales always trended over the last 2 or 3 quarters.

So there’s been a little churn over the last couple of quarters. So we have a stable enterprise customer base. And Dustin, what those – close to 10 years, he went from sales reps running Asia and then really came back during the transition and help with the migration. But we really are not going to go back to a global role. So we have a very small group of customers that we are focused on. We have strong regional heads that are working those deals and I hired a new global head of marketing 10 months ago. He was really doing a fantastic job overlaying all these conferences and go to markets and marketing is playing a far greater role on the global way to bring us the expertise to our customers and bring them together. So it’s kind of like for him and there’s not much to do here anymore. And unless you are going to go back to run a rep or run a region, and we have people doing that. So it seem like a good time that we are exiting migration and we wish him the best and it’s on very friendly terms and we want to thank them for all the service they did, but today, we have to align to where the business and that’s more of a regional-focused head very targeted group of accounts.

Last one for me then. What is – where are you with the rep count now? And how do you think about it, I guess, at year-end?

We’re at about 45, 46 reps right now. Based on where we are in the first quarter, we’re comfortable with that number. But as the quarters pick up, we can add to it if we think it’s necessary. But one’s goal is to do a very targeted group of enterprise customers that runs very large contact centers. And that’s where we are. This is a very targeted list. So we don’t need a ton of reps to do it. It’s more of a very focused approach to those reps owning telcos, banks, cable some retail healthcare in different regions.

Got it.

There are no further questions in the queue. At this point, I’ll turn the call back over to the presenters.

Thank you, everyone, and we will see you on the next Q2 call. Thank you.

Thanks, everybody

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