Why LivePerson shares fell today

What happened

Actions of LivePerson (LPSN -21.30%) plunged today after the conversational AI company missed the mark on its second-quarter earnings report and lowered its guidance for the year.

As of 11:17 a.m. ET on Tuesday, the stock was down 21.9%.

And that

LivePerson, a software-as-a-service company that powers chatbots and other messaging tools for businesses, said revenue in the quarter rose 11% to $132.6 million, below estimates of $135.6 million. .

Revenue growth was slow in part due to the company’s efforts to weed out “low-quality revenue streams” to focus on larger deals with high-value customers to expand its margins.

The company signed five seven-figure deals in the quarter for a total of 104 deals, 45 of which were for new clients, showing that it continues to expand its client base. Average revenue per business (large customers) and mid-market customers increased 23% to $660,000, which may be a better reflection of underlying revenue growth.

Higher spending on marketing, salaries and other corporate overhead led LivePerson to post an Adjusted EBITDA loss of $5.5 million for the quarter, which was at the high end of its previous guidance but worse than its result for the year. earlier from a profit of $13.4 million.

Its adjusted operating loss was $12.6 million, or $0.16 per share, compared with estimates of a loss of $0.17 per share. Based on generally accepted accounting principles (GAAP), LivePerson lost $0.95 per share.

CEO Robert LoCascio said, “We continue to make substantial changes to our [profit and loss] — focusing on the most differentiated and high-value components of our business — with the intent to deliver high gross margins, strong operating margins and high-quality revenue growth. We believe we are putting in place the right operating framework to drive innovation and grow the company in a strong and sustainable way.”

Now what

The company cut guidance as part of its plan to improve its margins. For the full year, it now expects revenue of $507.1 million to $518.3 million, or 8% to 10% growth, down from its previous forecast of $544.8 million to $563.3 million, or a growth of 16% to 20%. For the third quarter, it sees top line growth of just 1.8% to 4.5%. As it plans to cut costs, management kept full-year Adjusted EBITDA guidance at $1 million to $10 million.

LivePerson’s stock has plummeted over the past year and its turnaround strategy has yet to bear fruit. Given the guidance cut and the broad GAAP loss, it’s not surprising to see the stock plunge again today.

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