Liveperson's Journey Begins
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Liveperson (NASDAQ: LPSN) provides online engagement solutions, hosting platforms support and managing online interactions for businesses. The company’s services include chat, voice/click-to-call, and personalized content delivery, all managed from a single agent desktop.
Liveperson operates through two segments: business and consumer. The business segment provides real-time online interactions, voice & click-to-call, email, and self-service/knowledge bases to small & large businesses. The consumer segment provides online transactions between independent service providers and individual consumers seeking help on the Web.
Business operations (B2B) & consumer operations saw revenues for Q3 ‘12 of $36.1 and $3.6 million, respectively. This is an increase of 17% in B2B revenue compared to Q3 ‘11. Adjusted EBITDA for Q3 ‘12 is $7.4 million, a decrease of 16.9% ($8.9 million, Q3 ‘11). Adjusted net income for Q3 ‘12 is $4.6 million, a decrease of 4.2% ($4.8 million, Q3 ‘11). The major impact on the adjusted EBITDA & net income is from acquisition and litigation expenses.
Liveperson is constantly adding more personnel to its sales force. Since the beginning of FY 2012 it has added 24.3% additional representatives to its sales force. It takes approximately a year for sales personnel to get trained. Hence, I expect that the company will perform well as the productivity of these newer employees will be fully realized in FY 2013.
Until recently Liveperson provided a single product, but now has multiple products. However, initial implementations for the Live Engage platform are taking longer to go live than expected. Nevertheless, once the company gained experience with the implementations, it was able to streamline the process and will improve its performance.
Liveperson is not only trying to expand domestically but also internationally, particularly to the developing countries of the world where e-business is a new concept. In FY 2011 23.7% of the company's total revenue was non-US revenue. At an industry level the company is trying to gain business from under-penetrated businesses like financial services, mineral industry, etc. All this adds increased potential for LivePerson to become a key player in the e-commerce, online customer support, and call center infrastructure software markets.
The company is also trying to spread its wings inorganically, especially in non-US regions. Recently, the company has initiated an acquisition for Australia-based customer contact solutions provider ENGAGE Ltd. The transaction is expected to close during Q4 FY 2012. ENGAGE has been a reseller and champion of LivePerson solutions for several years, in addition to having its own successful hosted contact center solutions, which complement LivePerson’s offerings. Management believes that this acquisition will enhance its ability to offer intelligent engagement solutions to businesses in the Asia Pacific region.
One of the major competitors of LivePerson is Oracle (NYSE: ORCL), since it acquired e-commerce infrastructure vendor Art Technology Group (ATG) in FY 2011 and customer service vendor RightNow Technologies in FY 2012. Oracle also offers some form of chat software through RightNow.
Another major competitor of LivePerson is Adobe (NASDAQ: ADBE), which competes against LivePerson’s evolving data intelligence solutions. I expect that LivePerson will try to encroach on the broader web analytics market that has been a traditional stronghold of Adobe’s Omniture business.
The recent M&A activities and urge to grow both domestically & internationally makes LivePerson a very lucrative stock. It is expected that in FY 2013 LivePerson will gain more financial strength. Therefore, I suggest buying this stock.
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