What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-14 compared with 2024-03-04 · 634 added, 614 removed, 852 unchanged (59% of the section changed)

17 unchanged sentences

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 4, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

1 unchanged sentence

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

2 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Goodwill – Business reporting unit

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $285.6 million as of December 31, 2023.

Goodwill is tested for impairment at the reporting unit level on an annual basis, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from the Company’s business.

If these estimates or their related assumptions change in the future, the Company may be required to record impairment.

In connection with the annual impairment test completed as of September 30, 2023 using the quantitative “Step 1” assessment, the Company determined the fair value of its reporting units, using both an income approach and a market approach.

approach uses a discounted cash flow model that reflects management assumptions that mainly relate to revenue growth rates and operating margins.

There were no impairments in the Company’s Business reporting unit, as the fair value of this reporting unit exceeded its carrying value.

We identified the valuation of goodwill for the Business reporting unit as a critical audit matter.

Management’s determination of the fair value of the Business reporting unit required the use of significant judgment due to the subjectivity and uncertainty of the revenue growth rates and operating margins assumptions used in the income approach.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of Embedded Features in 2029 Notes

As described in Notes 1 and 8 to the consolidated financial statements, in June 2024, the Company issued $150 million aggregate principal amount of its 2029 Notes including $100 million aggregate principal amount issued in exchange for $146 million aggregate principal amount of 2026 Notes and $50 million aggregate principal amount issued for cash.

The Company evaluates convertible debt instruments and related transactions at inception to determine if those contracts include embedded features that should be bifurcated as an embedded derivative.

The 2029 Notes include certain embedded features requiring bifurcation, which did not have material values as of December 31, 2024 due to management’s estimates of the likelihood of triggering events, but that may have value in the future should those estimates change, with any change in fair value recorded in the Company’s consolidated statements of operations.

We identified the evaluation of whether the embedded features included in the 2029 Notes should be bifurcated as embedded derivatives as a critical audit matter.

Determining whether the embedded features included in the 2029 Notes should be bifurcated and accounted for separately as derivatives involved the use of significant judgment in the application of highly complex

accounting standards.

Auditing these elements involved especially challenging and complex auditor judgment due to the nature and extent of audit effort required to evaluate management’s application of highly complex accounting standards to these elements.

The primary procedures we performed to address this critical audit matter included:

• Reading and analyzing the relevant agreements to identify relevant terms and conditions that affect whether embedded features should be bifurcated.

• With the assistance of professionals in our firm having expertise in accounting for derivatives, we evaluated the Company’s conclusions regarding whether the embedded features should be bifurcated and accounted for as derivatives under accounting principles generally accepted in the United States of America.

Impairment Testing of Goodwill and Long-Lived Assets

As described in Notes 1, 5 and 6 to the consolidated financial statements, the Company’s consolidated goodwill, intangible assets and property and equipment, net balances as of December 31, 2024 were $222.6 million, $15.1 million and $100.6 million, respectively.

Prior to testing goodwill for impairment, the Company first tests its long-lived assets for impairment.

Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from their use and eventual disposition.

If such review indicates that the carrying amount of an asset is not recoverable and the asset's fair value is less than the carrying amount, an impairment charge is recognized.

In connection with the annual goodwill impairment completed as of October 2024, using the quantitative “Step 1” assessment, the Company determined the fair value of its reporting unit, using both an income approach and a market approach.

The fair value determination using an income approach requires management to make significant estimates and assumptions that related to forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and the discount rate.

As a result of the impairment tests in the fourth quarter of 2024, the Company recorded non-cash impairment charges of $56.9 million for goodwill and $35.2 million for intangible assets which is included in Impairment of goodwill and Impairment of intangibles and other assets in the consolidated statements of operations, respectively.

We identified the Company’s impairment testing of its long-lived assets and goodwill in the fourth quarter of 2024 as a critical audit matter.

The cash flows used in determining the fair value of the Company’s reporting unit and recoverability of the asset group required the use of significant judgment due to the subjectivity and uncertainty of the forecasts of future revenues for certain years and EBITDA.

Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the reasonableness of the assumptions regarding revenue growth rates and operating margins by:

i) evaluating the consistency of the revenue growth rates and operating margins with historical results, and ii) evaluating the consistency of the revenue growth rates and operating margins with the Company’s objectives and strategies.

• Testing the accuracy and completeness of information used by management to determine revenue growth rates.

• Evaluating the reasonableness of the assumptions regarding forecasts of future revenues for certain years and EBITDA by:

i) evaluating the consistency of the forecasts of future revenues and EBITDA with historical results, and ii) evaluating the consistency of the forecasts of future revenues and EBITDA with the Company’s objectives and strategies.

• Testing the accuracy and completeness of information used by management to determine the forecasts of future revenues for certain years.

/s/ BDO USA, P.C.

11 unchanged sentences

Prepaid expenses and other current assets (Note 1) 19,250 26,981

Assets held for sale — 30,984

Total current assets 231,224 321,708

1 unchanged sentence

Property and equipment, net (Note 6) 100,557 119,325

Contract acquisition costs (Note 2) 37,354 43,804

Contract acquisition costs, net (Note 2)

33,559 37,354

Intangible assets, net (Note 5) 15,070 61,625

Goodwill (Note 5) 285,631 296,214

Goodwill, net (Note 5)

222,554 285,631

Deferred tax assets, net (Note 15)

Investment in joint venture (Note 17) — 2,264

Other assets 355 1,208

7 unchanged sentences

Operating lease liabilities (Note 9)

Liabilities associated with assets held for sale — 10,357

Total current liabilities 139,940 267,549

25 unchanged sentences

Cost of revenue 93,404 142,823 184,699

142,823 184,699 156,880

Sales and marketing 100,475 125,677 214,027

2 unchanged sentences

Impairment of goodwill

60,551 11,895 —

Impairment of intangibles and other assets

46,872 7,974 —

Restructuring costs 11,139 22,664 19,967

Gain on divestiture ( 17,591 ) — —

Loss (gain) on divestiture

558 ( 17,591 ) —

Amortization of purchased intangible assets 2,745 3,505 3,678

2 unchanged sentences

Other income (expense), net:

Interest income (expense), net 4,669 ( 352 ) ( 37,406 )

Other income (expense), net 10,434 ( 1,784 ) 3,294

Interest expense

( 14,486 ) ( 4,882 ) ( 5,503 )

Interest income

5,860 9,551 5,151

Gain on debt extinguishment

73,083 7,200 —

Other (expense) income, net

( 12,800 ) 3,234 ( 1,784 )

Total other income (expense), net 51,657 15,103 ( 2,136 )

Loss before provision for (benefit from) income taxes ( 96,272 ) ( 224,020 ) ( 127,378 )

Provision for (benefit from) income taxes 4,163 1,727 ( 2,404 )

Loss before provision for income taxes ( 131,538 ) ( 96,272 ) ( 224,020 )

Provision for income taxes 2,735 4,163 1,727

Net loss $ ( 134,273 ) $ ( 100,435 ) $ ( 225,747 )

5 unchanged sentences

Diluted 88,715,161 78,593,274 74,509,404

(1) Amounts include stock-based compensation expense, as follows:

Cost of revenue $ 1,456 $ 9,933 $ 6,497

Sales and marketing 10,354 19,575 16,942

General and administrative ( 5,706 ) 40,690 15,487

Product development 5,750 39,440 30,730

(2) Amounts include depreciation expense, as follows:

Cost of revenue $ 8,072 $ 9,763 $ 10,186

Sales and marketing 3,103 2,451 2,448

General and administrative 453 452 160

Product development 20,929 19,618 14,629

(3) Amounts include amortization of purchased intangibles and finance leases, as follows:

Cost of revenue $ 18,691 $ 18,434 $ 7,282

See accompanying notes to consolidated financial statements.

18 unchanged sentences

(In thousands, except share data)

Balance at December 31, 2020 70,264,265 $ 70 ( 2,709,830 ) $ ( 3 ) $ 635,672 $ ( 391,885 ) $ 80 $ 243,934

Balance as of December 31, 2021

74,980,546 $ 75 ( 2,746,243 ) $ ( 3 ) $ 871,788 $ ( 516,859 ) $ ( 5,564 ) $ 349,437

Cumulative adjustment due to adoption of ASU 2020-06

— — — — ( 209,651 ) 50,244 — ( 159,407 )

Common stock issued upon exercise of stock options 272,770 — — — 1,327 — — 1,327

8 unchanged sentences

Other comprehensive loss — — — — — — ( 5,113 ) ( 5,113 )

Balance at December 31, 2021 74,980,546 $ 75 ( 2,746,243 ) $ ( 3 ) $ 871,788 $ ( 516,859 ) $ ( 5,564 ) $ 349,437

Cumulative adjustment due to adoption of ASU 2020-06 — — — — ( 209,651 ) 50,244 — ( 159,407 )

Balance as of December 31, 2022 78,350,984 $ 78 ( 2,766,073 ) $ ( 3 ) $ 771,052 $ ( 692,362 ) $ ( 10,677 ) $ 68,088

Common stock issued upon exercise of stock options 66,736 — — — 175 — — 175

1 unchanged sentence

Stock-based compensation — — — — 35,483 — — 35,483

Bonus cash payment settled in shares of the Company’s common stock 735,519 1 — — 17,299 — — 17,300

Common stock repurchase — — ( 19,830 ) — ( 222 ) — — ( 222 )

Issuance of common stock in connection with acquisitions 10,297,374 10 — — 38,418 — — 38,428

Common stock issued under ESPP 355,199 1 — — 1,715 — — 1,716

Activity related to divestiture

— — — — 66,681 ( 64,191 ) 57 2,547

Net loss — — — — — ( 100,435 ) — ( 100,435 )

Other comprehensive loss — — — — — — ( 5,113 ) ( 5,113 )

Balance at December 31, 2022 78,350,984 $ 78 ( 2,766,073 ) $ ( 3 ) $ 771,052 $ ( 692,362 ) $ ( 10,677 ) $ 68,088

Other comprehensive income

— — — — — — 2,136 2,136

Balance as of December 31, 2023 90,603,519 $ 91 ( 2,766,073 ) $ ( 3 ) $ 913,522 $ ( 856,988 ) $ ( 8,484 ) $ 48,138

Common stock issued upon exercise of stock options 13 — — — — — — —

1 unchanged sentence

Stock-based compensation — — — — 21,989 — — 21,989

Issuance of common stock in connection with acquisitions 10,297,374 10 — — 38,418 — — 38,428

Common stock issued under ESPP 334,726 — — — 419 — — 419

Activity related to divestiture — — — — 66,681 ( 64,191 ) 57 2,547

Other — — — — 120 — — 120

Net loss — — — — — ( 134,273 ) — ( 134,273 )

Other comprehensive loss — — — — — — ( 3,709 ) ( 3,709 )

Balance at December 31, 2023 90,603,519 $ 91 ( 2,766,073 ) $ ( 3 ) $ 913,522 $ ( 856,988 ) $ ( 8,484 ) $ 48,138

Balance as of December 31, 2024 93,956,738 $ 94 ( 2,766,073 ) $ ( 3 ) $ 936,047 $ ( 991,261 ) $ ( 12,193 ) $ ( 67,316 )

See accompanying notes to consolidated financial statements.

6 unchanged sentences

Net loss $ ( 134,273 ) $ ( 100,435 ) $ ( 225,747 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense 21,989 11,854 109,638

Depreciation 30,310 32,557 32,284

Reduction of operating lease right-of-use assets 4,059 — —

Amortization of purchased intangible assets and finance leases 11,962 22,196 22,112

Amortization of debt issuance costs 4,043 3,778 2,499

Accretion of debt discount on convertible senior notes — — 33,309

Amortization of debt issuance costs and accretion of debt discount 4,513 4,043 3,778

Impairment of goodwill 60,551 11,895 —

Impairment of intangible and other assets

Impairment of intangibles and other assets

46,872 7,974 —

Change in fair value of Warrants

Change in fair value of contingent consideration — 4,629 ( 8,516 )

Gain on repurchase of convertible notes ( 7,200 ) — —

Gain on debt extinguishment ( 73,083 ) ( 7,200 ) —

Paid-in-kind interest expense

Allowance for credit losses 14,959 3,319 5,644

Gain on divestiture ( 17,591 ) — —

Loss (gain) on divestiture 558 ( 17,591 ) —

Gain on settlement of leases — — ( 242 )

6 unchanged sentences

Other assets 652 1,361 ( 153 )

Accounts payable ( 13,570 ) 12,050 801

Accrued expenses and other current liabilities 24,343 7,485 8,626

Accounts payable, accrued expenses and other current liabilities ( 44,518 ) 10,773 19,535

Deferred revenue ( 23,058 ) ( 3,169 ) ( 12,341 )

1 unchanged sentence

Other liabilities 1,401 ( 7,796 ) 8,093

Net cash (used in) provided by operating activities ( 19,765 ) ( 62,101 ) 3,247

Net cash used in operating activities ( 15,130 ) ( 19,765 ) ( 62,101 )

INVESTING ACTIVITIES:

3 unchanged sentences

Purchases of intangible assets ( 3,074 ) ( 4,004 ) ( 2,680 )

Repayment of debt acquired in acquisition — — ( 21,177 )

Investment in joint venture — — ( 2,264 )

1 unchanged sentence

FINANCING ACTIVITIES:

Principal payments for financing leases ( 3,330 ) ( 3,734 ) ( 3,558 )

Repurchase of common stock — ( 221 ) ( 709 )

Proceeds from issuance of common stock in connection with the exercise of options and ESPP 1,890 5,573 16,110

Proceeds from issuance of 2029 convertible senior notes

Payment for repurchase of 2024 convertible senior notes ( 72,492 ) ( 149,702 ) —

Net cash (used in) provided by financing activities ( 151,142 ) 1,618 11,843

Payment for repurchase of 2026 convertible senior notes ( 4,901 ) — —

Payment of debt issuance costs ( 7,584 ) — —

Principal payments for finance leases

( 401 ) ( 3,330 ) ( 3,734 )

Proceeds from issuance of common stock in connection with the exercise of options and ESPP 350 1,890 5,573

Repurchase of common stock — — ( 221 )

Net cash provided by (used in) financing activities 14,972 ( 151,142 ) 1,618

Year Ended December 31,

2024 2023 2022

(In thousands)

Effect of foreign exchange rate changes on cash and cash equivalents ( 1,314 ) 465 ( 3,980 )

3 unchanged sentences

Cash, cash equivalents, and restricted cash - end of year $ 183,237 $ 212,925 $ 392,198

Year Ended December 31,

2023 2022 2021

Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets:

3 unchanged sentences

Supplemental disclosure of other cash flow information:

Cash paid for income taxes $ 1,858 $ 3,237 $ 582

Cash paid for income taxes, net

$ 1,886 $ 1,858 $ 3,237

Cash paid for interest 3,710 1,235 1,932

Supplemental disclosure of non-cash investing and financing activities:

Increase in convertible senior notes, net upon adoption of ASU 2020-06 (Note 1) $ — $ ( 159,407 ) $ —

Increase in convertible senior notes, net upon adoption of ASU 2020-06

$ — $ — $ ( 159,407 )

Purchase of property and equipment and intangible assets in accounts payable 1,093 2,088 1,022

3 unchanged sentences

Supplemental disclosure of non-cash financing activities related to acquisitions

Issuance of shares of common stock in connection with e-bot7 transaction $ — $ — $ 20,012

Fair value of contingent earn-out in connection with e-bot7 transaction $ — $ — $ 7,362

Issuance of shares of common stock in connection with Tenfold transaction — — 41,224

Fair value of contingent earn-out in connection with Tenfold transaction — — 6,558

Issuance of shares of common stock in connection with VoiceBase transaction — — 67,557

Fair value of contingent earn-out in connection with VoiceBase transaction — — 16,067

6 unchanged sentences

LivePerson, Inc.

is the enterprise leader in digital customer conversation.

Over the past decades, consumers have made digital conversations a primary way to communicate with others.

Since 1998, we have enabled meaningful connections between consumers and our customers through our platform and currently power more than one billion connections and conversations each month.

These digital and artificial intelligence (“AI”)-powered conversations decrease costs and increase revenue for our brands, resulting in more convenient, personalized and content-rich journeys across the entire consumer lifecycle, and across consumer channels.

AI has accelerated our capability to leverage prior conversations and our customers’ existing investments in Generative AI and Large Language Models (“LLMs”) to enhance the consumer experience and to improve results for our customers by empowering them to leverage the latest developments in AI and LLMs, in a safe and secure environment.

The Conversational Cloud, the Company’s enterprise-class digital customer conversation platform, is trusted by the world’s top brands to accelerate their contact center transformation, orchestrate conversations across all channels, departments and systems, increase agent productivity, and deliver more personalized, AI-empowered customer experiences.

The Conversational Cloud powers conversations across each of a brand’s primary digital channels, including mobile apps, mobile and desktop web browsers, short messaging service (“SMS”), social media and third-party consumer messaging platforms.

Brands can also use the Conversational Cloud to message consumers when they dial a 1-800 number instead of forcing them to navigate interactive voice response systems and wait on hold.

Most recently, the Conversational Cloud has been enhanced to provide a secure platform with appropriate guardrails to deploy Generative AI and LLMs in ways that help consumers and drive results for brands without sacrificing trust.

LivePerson’s digital customer conversation platform enables what the Company calls “the tango” of humans, LivePerson bots, third-party bots and LLMs, whereby humans act as bot managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed.

Agents become highly efficient, leveraging the AI engine (including generative AI capabilities) to surface relevant content, define next-best actions and take over repetitive transactional work so that the agent can focus on relationship building.

By seamlessly integrating messaging with the Company’s proprietary Conversational AI, as well as bots, the Conversational Cloud offers brands a comprehensive approach to scaling automations across their millions of customer conversations.

(the “Company”) is a leader in digital customer conversation.

Since 1998, LivePerson has enabled connections between consumers and its customers through digital and artificial intelligence (“AI”)-powered conversations.

The LivePerson Platform powers conversations across each of a brand’s primary digital channels, including mobile apps, mobile and desktop web browsers, short messaging service (“SMS”), social media and third-party consumer messaging platforms.

Brands can also use the LivePerson Platform to connect conversations across voice and digital channels to give customers additional options and ensure their interactions with brands are integrated no matter where they choose to reach out.

The LivePerson Platform enables what the Company calls “the tango” of humans, LivePerson bots, third-party bots and LLMs, whereby humans act as bot managers, overseeing AI-powered conversations and seamlessly stepping into the flow when a personal touch is needed.

Agents are able to leverage the AI engine (including generative AI capabilities) to surface relevant content, define next-best actions.

By integrating customer engagement channels, LivePerson’s proprietary AI, and third-party bots and AI, the LivePerson Platform offers brands a comprehensive approach to scaling automations across customer conversations.

Principles of Consolidation

10 unchanged sentences

When deciding whether a decline in carrying value is more than temporary, a number of factors are considered, including the investee’s financial condition and business prospects, as well as the Company’s investment intentions.

The Company’s equity method investment in joint venture was reduced to zero during 2023 based on 2023 losses, and remained at zero on the consolidated balance sheet as of December 31, 2024.

The Company recorded its ownership percentage of losses of Claire in Other (expense) income, net in the amount of $2.3 million for the year ended December 31, 2023.

Variable Interest Entities

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements include the financial statements of LivePerson, its wholly-owned subsidiaries, and each variable interest entity (“VIE”) for which the Company is the primary beneficiary.

3 unchanged sentences

VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights and a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity).

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation”, an entity consolidates a VIE if it is determined to be the primary beneficiary of the VIE.

4 unchanged sentences

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

Items subject to such estimates and assumptions include:

These estimates are based on information available as of the date of the consolidated financial statements.

On a regular basis, management evaluates these estimates and assumptions.

Items subject to such estimates and assumptions include, but are not limited to:

• stock-based compensation expense;

2 unchanged sentences

• valuation of goodwill;

• valuation and useful lives of other long-lived assets;

• fair value of assets acquired and liabilities assumed in business combinations;

• valuation and useful lives of long-lived assets;

• valuation of the cash-settled and share-settled warrants (together, “Warrants”);

• valuation of features embedded in 2029 Notes;

• income taxes;

8 unchanged sentences

Resulting translation adjustments are included as a component of accumulated other comprehensive loss in stockholders’ equity.

Foreign exchange transaction gains or losses are included in other income (expense), net in the accompanying consolidated statements of operations.

Foreign exchange transaction gains or losses are included in Other (expense) income, net in the accompanying consolidated statements of operations, and were not material for the years ended December 31, 2024, 2023 and 2022.

Cash, Cash Equivalents and Restricted Cash

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents.

Cash equivalents, which primarily consist of money market funds, are recorded at cost, which approximates fair value.

Restricted cash primarily relates to funds held in connection with the divestiture of Kasamba.

See Note 20 – Divestiture for additional information.

Restricted cash primarily related to funds held in connection with the divestiture of Kasamba.

See Note 19 – Divestitures for additional information.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Prepaid Expenses and Other Current Assets

1 unchanged sentence

(In thousands)

Other assets $ 8,757 $ 4,196

Prepaid software maintenance

$ 9,868 $ 8,592

VAT receivable 2,452 4,399

2 unchanged sentences

Total prepaid expenses and other current assets $ 19,250 $ 26,981

Goodwill, Intangibles and Other Long-Lived Assets

Goodwill and Intangible Assets

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination.

Goodwill is not amortized, but is tested for impairment at the reporting unit level using either a qualitative or quantitative assessment on an annual basis, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from the Company’s business.

If these estimates or their related assumptions change in the future, the Company may be required to record impairment for these assets.

As of December 31, 2023, our reporting units included Business and WildHealth.

The Company evaluates goodwill for impairment on an annual basis on October 1, and more frequently whenever events or substantive changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its fair value in accordance with ASC 820, Fair Value Measurements .

In performing the goodwill impairment test, the Company first assesses qualitative factors to determine the existence of impairment.

If the qualitative factors indicate that the carrying value of a reporting unit more likely than not exceeds its fair value, the Company proceeds to a quantitative test to measure the existence and amount, if any, of goodwill impairment.

The Company may also choose to bypass the qualitative assessment and proceed directly to the quantitative test.

In performing the quantitative test, impairment loss is recorded to the extent that the carrying value of the reporting unit exceeds its assessed fair value.

In connection with the annual impairment test completed as of October 1, 2024 using the quantitative “Step 1” assessment, the Company determined the fair value of the reporting unit, using both an income approach and a market approach.

The income approach uses a discounted cash flow model that reflects the Company’s assumptions regarding revenue growth rates, operating margins, risk-adjusted discount rate, economic and market trends and other expectations about the anticipated operating results of the reporting unit.

Under the market approach, the Company estimates the fair value based on market multiples of revenues derived from comparable publicly traded companies with operating characteristics similar to the reporting unit.

During the fourth quarter of 2023, the Company voluntarily changed its annual goodwill testing date from September 30 to October 1.

The Company believes this change of method of applying the accounting principle is preferable, as it more closely aligns the annual impairment testing date with the most current information from the budgeting and strategic planning process and provides management with sufficient time to complete its annual assessment.

This change will be applied prospectively, as retrospective application would be impracticable.

The Company completed its most recent annual evaluation of impairment as of September 30, 2023 using a quantitative assessment method.

The Company has the option to first perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

However, the Company may elect to bypass the qualitative assessment and proceed directly to the quantitative impairment test.

The impairment test involves comparing the fair value of the reporting unit to its carrying value, including goodwill.

A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value.

The impairment is limited to the carrying amount of goodwill.

The Company’s assessment of goodwill impairment as of September 30, 2023, resulted in a noncash impairment of $ 11.9 million of goodwill for its WildHealth reporting unit.

See Note 5 – Goodwill and Other Intangible Assets, Net for additional information.

Intangible assets with estima ble useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with ASC 360-10-35, “Accounting for Impairment or Disposal of Long-Lived Assets”.

Acquired intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from our acquisitions.

Intangible assets are recorded at fair value on the date of acquisition.

During the year ended December 31, 2023, the Company recognized an immaterial non-cash impairment charge of $ 3.0 million associated with WildHealth developed technology.

See Note 5 – Goodwill and Other Intangible Assets, Net for additional information.

The change was applied prospectively and did not have a material impact on the Company.

In the second quarter of 2024, the Company entered into an agreement for and completed the sale of 100% of the equity in WildHealth with a third party.

WildHealth was part of the Business segment and was a separate reporting unit.

Subsequent to WildHealth divestiture, the Company has one reporting unit.

See Note 19 – Divestitures for additional information.

Long-lived Assets

Intangible assets

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with ASC 360-10-35, Accounting for Impairment or Disposal of Long-Lived Assets .

Acquired intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from the Company’s acquisitions.

Intangible assets are recorded at fair value on the date of acquisition and are amortized on a straight-line basis over their estimated economic lives, which are generally 3 to 15 years.

The Company’s capitalized patents are stated at cost, which approximates fair value at inception, and are amortized on a straight-line basis over their estimated economic lives, which are generally 12 to 13 years.

See Note 5 – Goodwill and Intangible Assets, Net for additional information.

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Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset.

The Company reviews the estimated useful lives of its fixed assets on an ongoing basis.

The Company reviews the estimated useful lives of its property and equipment on an annual basis.

Internal-Use Software Development Costs

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These costs are included in Property and equipment in the Company’s consolidated balance sheets and are amortized on a straight-line basis over the estimated useful life of the related asset, which approximates five years .

Management evaluates the useful lives of these assets on an annual basis.

Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred.

The Company reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the asset (or asset group) may not be recoverable.

Events and changes in circumstances considered by the Company in determining whether the carrying value of long-lived assets may not be recoverable, include, but are not limited to, significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, and changes in the Company’s business strategy.

Impairment testing is performed at an asset level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (an “asset group”).

An impairment loss would be recognized when estimated discounted future cash flows expected to result from the use of the asset (or asset group) and its eventual disposition are less than its carrying amount.

Business Combinations

The Company allocates the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets.

Although the Company believes the assumptions and estimates it has made are reasonable, they are based in part on historical experience, market conditions, and information obtained from management of the acquired companies and are inherently uncertain.

Examples of judgments used to estimate the fair value of intangibles assets include, but are not limited to, future expected cash flows, expected customer attrition rates, estimated obsolescence rates, and discount rates.

These estimates are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

During the measurement period, which is no later than one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.

See Note 9 – Acquisitions for additional information.

Management evaluates the useful lives of these assets and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

See Note 6 – Property and Equipment, Net for additional information.

Prior to testing goodwill for impairment, the Company first tests its long-lived assets for impairment.

The carrying values are adjusted, if necessary, for the result of each impairment test prior to performing the next test.

Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from their use and eventual disposition.

If such review indicates that the carrying amount of an asset is not recoverable and the asset's fair value is less than the carrying amount, an impairment charge is recognized.

Convertible Senior Notes

Convertible Notes

The Company accounts for convertible debt and related transactions in accordance with ASC 470, Debt , ASC 815, Derivatives and Hedging , and ASC 480, Distinguishing Liabilities from Equity .

The Company evaluates convertible debt instruments and related transactions at inception to determine if those contracts include embedded features that should be bifurcated as an embedded derivative.

The 2029 Notes issued during the current year are accounted for as a liability.

The transaction was accounted for as a debt extinguishment and a gain on extinguishment was recorded.

The Company paid third party fees in connection with the transaction, which were capitalized as debt issuance costs.

Unamortized debt issuance costs incurred in connection with securing the Company’s financing arrangements are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the outstanding borrowings, consistent with debt discounts.

All deferred financing costs are amortized to interest expense.

T he 2029 Notes include certain embedded features requiring bifurcation.

The Company estimates the fair value of these features on a quarterly basis by assessing the likelihood of triggering events.

The features do not have material values as of December 31, 2024, but they may have value in the future, should the estimates change, with any change in fair value recorded in the Company’s consolidated statements of operations.

The Warrants issued by the Company are classified as current liabilities in the consolidated balance sheets and recorded at their fair value.

Changes in fair value are recorded in the Company’s consolidated statements of operations.

See Note 8 – Convertible Senior Notes, Net of Current Portion, Capped Call Transactions, and Warrants and Note 10 – Fair Value Measurements for additional information.

The Company classifies long-lived assets and liabilities to be disposed of as held for sale in the period in which they are available for immediate sale in their present condition and the sale is probable and expected to be completed within one year.

The Company initially measures assets and liabilities held for sale at the lower of their carrying value or fair value less costs to sell.

When the divestiture represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results, the disposal is presented as a discontinued operation.

The Company expenses the cost of advertising and promoting its services as incurred in the sales and marketing expense on the consolidated statement of operations.

Such costs totaled approximately $ 10.9 million, $ 45.5 million, and $ 41.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Research and Development

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When the divestiture represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results, the disposal is presented as a discontinued operation.

The Company expenses the cost of advertising and promoting its services as incurred in Sales and marketing expense on the consolidated statements of operations.

Such costs totaled $ 5.1 million, $ 10.9 million, and $ 45.5 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Research and Development

Research and development (“R&D”) costs are expensed when incurred, except for certain internal-use software development costs, which may be capitalized as noted above.

R&D expenses consist primarily of personnel and related headcount costs, costs of professional services associated with the ongoing development of the Company’s technology, and allocated overhead.

R&D expenses consist primarily of personnel and related headcount costs, costs of professional services associated with the ongoing development of the Company’s technology, and allocated overhead, and are included in Product development in the consolidated statements of operations.

Stock-Based Compensation

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The Company estimates the fair value of its stock options using the Black Scholes option pricing model.

The stock-based compensation expense relating to stock options is recognized on a straight-line basis over the period during which the employee or director is required to provide service in exchange for the award, usually the vesting period, which is generally three to four years .

Restricted stock units (“RSUs”) are generally subject to a service-based vesting condition over three to four years .

Restricted stock units (“RSUs”) are generally subject to a service-based vesting condition over one to four years .

The valuation of these RSUs is based solely on the Company’s stock price on the date of grant, and the corresponding compensation expense is amortized on a straight-line basis.

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The associated compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied.

In accordance with ASC 718-10, “Stock Compensation”, the Company measures stock-based awards at fair value and recognizes compensation expense for all stock-based payment awards made to its employees and directors, including employee stock options.

In accordance with ASC 718-10, Compensation - Stock Compensation , the Company measures stock-based awards at fair value and recognizes compensation expense for all stock-based payment awards made to its employees and directors, including employee stock options.

See Note 12 – Stockholders’ Equity for additional information.

We determine if an arrangement is or contains a lease at contract inception.

In certain of our lease arrangements, judgment is required in determining if a contract contains a lease.

For these arrangements, there is judgment in evaluating if the arrangement involves an identified asset that is physically distinct or whether we have the right to substantially all of the capacity of an identified asset that is not physically distinct.

In arrangements that involve an identified asset, there is also judgment in evaluating if we have the right to direct the use of that asset.

Operating leases are recorded in our consolidated balance sheets.

The Company determines if an arrangement is or contains a lease at contract inception.

In certain of the Company’s lease arrangements, judgment is required in determining if a contract contains a lease.

For these arrangements, there is judgment in evaluating if the arrangement involves an identified asset that is physically distinct or whether the Company has the right to substantially all of the capacity of an identified asset that is not physically distinct.

In arrangements that involve an identified asset, there is also judgment in evaluating if the Company has the right to direct the use of that asset.

Operating leases are recorded in the consolidated balance sheets.

Right-of-use (“ROU”) assets and lease liabilities are measured at the lease commencement date based on the present value of the remaining lease payments over the lease term, determined using the discount rate for the lease at the commencement date.

Because the rate implicit in our leases is not readily determinable, we use our incremental borrowing rate as the discount rate, which approximates the interest rate at which we could borrow on a collateralized basis with similar terms and payments and in similar economic environments.

Because the rate implicit in the leases is not readily determinable, the Company uses its incremental borrowing rate as the discount rate, which approximates the interest rate at which the Company could borrow on a collateralized basis with similar terms and payments and in similar economic environments.

Optional periods to extend the lease, including by not exercising a termination option, are included in the lease term when it is reasonably certain that the option will be exercised.

We account for lease and non-lease components, principally common area maintenance for our facilities leases, as a single lease component.

The Company accounts for lease and non-lease components, principally common area maintenance for the facilities leases, as a single lease component.

Variable costs, such as maintenance and utilities based on actual usage, are not included in the measurement of ROU assets and lease liabilities but are expensed when the event determining the amount of variable consideration to be paid occurs.

The lease expense is recognized on a straight-line basis over the lease term.

Our real estate leases asset class with an initial expected term of 12 months or less (short-term) is not accounted for on our consolidated balance sheets.

Our finance leases are recorded in property and equipment, net in our consolidated balance sheets.

For finance leases, interest expense on the lease liability is recognized based on the incremental borrowing rate and the ROU assets are amortized on a straight-line basis over the shorter of the lease term or the useful life of the ROU assets.

The Company’s real estate leases asset class with an initial expected term of 12 months or less (short-term) is not accounted for on the consolidated balance sheets.

The Company’s finance leases are recorded in Property and equipment, net in the consolidated

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balance sheets.

For finance leases, interest expense on lease liabilities is recognized based on the incremental borrowing rate and the ROU assets are amortized on a straight-line basis over the shorter of the lease term or the useful life of the ROU assets.

Income taxes are accounted for under the asset and liability method.

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that the tax change occurs.

In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled

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reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations.

We include interest accrued on the underpayment of income taxes and certain interest expense and penalties, if any, related to unrecognized tax benefits as a component of the income tax provision.

In evaluating the Company’s ability to recover its deferred tax assets in the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations.

The Company includes interest accrued on the underpayment of income taxes and certain interest expense and penalties, if any, related to unrecognized tax benefits as a component of the income tax provision.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

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The Company’s comprehensive loss for all periods presented is related to the effect of foreign currency translation.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The updated standard is effective for annual periods beginning after December 15, 2023.

The Company adopted this guidance in the fourth quarter of 2024, which did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to clarify that a contractual restriction on the sale of an equity security is not considered part of a unit of account of the equity security, and, therefore, is not considered in measuring fair value.

The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction.

The amendments also require the following disclosures for equity securities subject to the contractual sale restrictions.

The fair value of equity securities subject to the contractual sale restrictions reflected on the balance sheet.

The nature and remaining duration of the restriction(s).

The circumstances that could cause a lapse in the restriction(s).

This guidance was effective for fiscal years beginning after December 15, 2023, and interim periods within those financial years.

The Company adopted this guidance on January 1, 2024, which did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In December 2023, FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) which seeks to expand disclosures about a public entity’s expenses, including more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, sales and marketing, general and administrative, and research and development).

The amendments in this update are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

ASU 2024-03 should be applied

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retrospectively.

The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards , which provides illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of ASC 718, Compensation—Stock Compensation .

Specifically, the amendments in ASU 2024-01 add an illustrative example that includes four fact patterns to demonstrate how an entity should apply the scope guidance in paragraph ASC 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with ASU 718.

The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or non-employees in exchange for goods or services.

The amendments in this update are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

ASU 2024-01 should be applied either retrospectively or prospectively.

The Company does not expect this standard to have a material impact on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign).

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The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

The updated standard is effective for annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026.

Early adoption is permitted.

We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60):

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The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842):

Common Control Arrangements, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control.

Specifically, the ASU:

1) Offers private companies, as well as not-for-profit entities that are not conduit bond obligors, a practical expedient that gives them the option of using the written terms and conditions of a common-control arrangement when determining whether a lease exists and the subsequent accounting for the lease, including the lease’s classification and 2) Amends the accounting for leasehold improvements in common-control arrangements for all entities.

ASU 2023-01 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted in any annual or interim period as of the beginning of the related fiscal year.

The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to clarify that a contractual restriction on the sale of an equity security is not considered part of a unit of account of the equity security, and, therefore, is not considered in measuring fair value.

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amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction.

The amendments also require the following disclosures for equity securities subject to the contractual sale restrictions.

The fair value of equity securities subject to the contractual sale restrictions reflected on the balance sheet.

The nature and remaining duration of the restriction(s).

The circumstances that could cause a lapse in the restriction(s).

This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those financial years.

The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.

Revenue Recognition

The majority of the Company’s revenue is generated from hosted service revenues, which is inclusive of its platform pricing model.

The majority of the Company’s revenue is generated from hosted service revenues, including platform access, usage and related professional services.

Revenues are recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

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Total revenue of $ 312.5 million, $ 402.0 million, and $ 514.8 million was recognized during the years ended December 31, 2024, 2023, and 2022, respectively.

The Company defers all incremental commission costs to obtain the contract.

These contract acquisition costs, which are comprised of prepaid sales commissions, have balances at December 31, 2023 and 2022 of $ 37.4 million and $ 43.8 million, respectively.

The Company amortizes these costs over the related period of benefit using the customer expected life that the Company determined to be four years , which is consistent with the transfer to the customer of the services to which the asset relates.

The Company classifies contract acquisition costs as long-term.

No single customer accounted for 10% or more of total revenue for the years ended December 31, 2024, 2023 and 2022.

None of the Company’s contracts contain a significant financing component.

During the year ended December 31, 2023, we recognized approximately $ 8.9 million of revenue from performance obligations satisfied during the year ended December 31, 2022, in connection with delivery of products and services related to COVID-19 testing.

Refer to Note 15 – Legal Matters for additional details.

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Hosted Services Revenue

Hosted services revenue is reported at the amount that reflects the ultimate consideration expected to be received and primarily consist of fees that provide customers access to the Conversational Cloud, the Company’s enterprise-class digital customer conversation platform.

Hosted services revenue is reported at the amount that reflects the ultimate consideration expected to be received and primarily consist of fees that provide customers access to the LivePerson Platform, the Company’s enterprise-class digital customer conversation platform.

The Company has determined such access represents a stand-ready service provided continually throughout the contract term.

As such, control and satisfaction of this stand-ready performance obligation is deemed to occur over time.

The Company recognizes this revenue over time on a ratable basis over the contract term, beginning on the date that access to the Conversational Cloud platform is made available to the customer.

The Company recognizes this revenue over time on a ratable basis over the contract term, beginning on the date that access to the LivePerson Platform is made available to the customer.

The passage of time is deemed to be the most faithful depiction of the transfer of control of the services as the customer simultaneously receives and consumes the benefit provided by the Company’s performance.

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There is no significant variable consideration related to these arrangements.

Additionally, for certain of the Company’s larger customers, the Company may provide call center labor through an arrangement with one or more of several qualified vendors.

For most of these customers, the Company passes the fee it incurs with the labor provider and its fee for the hosted services through to its customers in the form of a fixed fee for each order placed via the Company’s online engagement solutions.

For these Gainshare arrangements in accordance with ASC 606, “Principal Agent Considerations”, the Company acts as a principal in a transaction if it controls the specified goods or services before they are transferred to the customer.

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Professional Services Revenue

Professional Services revenue is reported at the amount that reflects the ultimate consideration the Company expects to receive in exchange for such services.

Our professional services revenue consists of fees that provide customers with product support and updates during the term of the arrangement, which is typically one year or longer in length, billed;

monthly, quarterly or annually in advance.

The Company’s professional services revenue consists of fees that provide customers with product support and updates during the term of the arrangement, which is typically one year or longer in length, billed monthly, quarterly, or annually in advance.

Revenue is generally recognized ratably over the contract term.

Our professional services revenue also includes custom support services, which differ from our standard product support.

These professional services revenues are recognized as the services are performed.

Professional services revenue also includes custom support services, which differ from standard product support.

The professional services revenues are recognized as the services are completed.

Disaggregated Revenue

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This sale eliminated the entire Consumer segment, as a result of which revenue is presented within a single consolidated segment.

Hosted services included $ 7.1 million, $ 37.1 million, and $ 37.7 million for the years ended December 31, 2023, 2022, and 2021, respectively, relating to Kasamba.

Hosted services included $ 7.1 million and $ 37.1 million for the years ended December 31, 2023 and 2022, respectively, relating to Kasamba.

Remaining Performance Obligation

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The Company has elected the optional exemption, which allows for the exclusion of the amounts for remaining performance obligations that are part of contracts with an original expected duration of less than one year.

Such remaining performance obligations represent unsatisfied or partially unsatisfied performance obligations pursuant to ASC 606.

Such remaining performance obligations represent unsatisfied or partially unsatisfied performance obligations pursuant to ASC 606, Revenue from Contracts with Customers .

Contracts with Multiple Performance Obligations

Some of the Company’s contracts with customers contain multiple performance obligations.

Most of the Company’s contracts with customers contain multiple performance obligations.

For these contracts, the Company accounts for individual performance obligations separately if they are distinct.

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Judgment is required to determine the SSP for each distinct performance obligation.

The Company determines the SSP based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, product offerings and the cloud applications sold.

The Company determines the SSP based on its overall pricing objectives, taking into

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consideration market conditions and other factors, including the value of its contracts, product offerings and the cloud applications sold.

Revenue by Geographic Location

The Company is domiciled in the United States and has international operations around the globe.

The following table presents the Company’s revenues attributable to domestic and foreign operations for the periods presented:

The following table presents the Company’s revenues attributable to operations by region for the periods presented:

Year Ended December 31,

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(In thousands)

United States $ 277,542 $ 350,349 $ 306,700

Other Americas (1)

$ 219,288 $ 286,924 $ 363,057

Total Americas 286,924 363,057 324,828

57,698 62,613 74,298

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(1) Canada, Latin America, and South America.

(1) United States, Canada, Latin America and South America (“Americas”).

(2) Europe, the Middle East and Africa (“EMEA”).

(3) Includes revenue from the United Kingdom (“U.K.”) of $ 44.8 million, $ 55.3 million, and $ 56.7 million for the years ended December 31, 2023, 2022, and 2021, respectively, and from the Netherlands of $ 0.8 million, $ 6.6 million, and $ 4.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

(3) Asia-Pacific (“APAC”).

Information about Contract Balances

The Company defers all incremental commission costs to obtain the contract.

These contract acquisition costs, which are comprised of prepaid sales commissions, have balances at December 31, 2024 and 2023 of $ 33.6 million and $ 37.4 million, respectively.

The Company classifies contract acquisition costs as long-term.

The deferred revenue balance consists of services, which have been invoiced upfront, and are recognized as revenue only when the revenue recognition criteria are met.

In some arrangements, the Company allows customers to pay for access to the Conversational Cloud over the term of the software license.

The Company refers to these as subscription transactions.

In some arrangements, the Company allows customers to pay for access to the LivePerson Platform over the term of the software subscription.

Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables.

Unbilled receivables, anticipated to be invoiced in the next twelve months, are included in accounts receivable, net of allowances on the consolidated balance sheet.

The Company recognized revenue of $ 86.8 million and $ 98.3 million for the fiscal years ended December 31, 2023 and 2022, respectively, which was included in the corresponding contract liability balance at the beginning of the year.

The deferred revenue balance consists of services, which have been invoiced upfront, and are recognized as revenue only when the revenue recognition criteria are met.

Our long-term deferred revenues are included in Other liabilities on the consolidated balance sheets.

The opening and closing balances of the Company’s accounts receivable, unbilled receivables, and deferred revenues are as follows:

Accounts Receivable Unbilled Receivable Contract Acquisition Costs (Non-current) Deferred Revenue (Current) Deferred Revenue

Unbilled receivables, anticipated to be invoiced in the next twelve months, are included in Accounts receivable, net of allowances for credit losses on the consolidated balance sheets.

The Company recognized revenue of $ 81.4 million, $ 86.8 million and $ 98.3 million for the fiscal years ended December 31, 2024, 2023 and 2022, respectively, which was included in the corresponding deferred revenue balance at the beginning of the year.

The Company’s long-term deferred revenues are included in Other liabilities on the consolidated balance sheets.

The opening and closing balances of the Company’s contract acquisition costs, net, and deferred revenues are as follows:

Contract Acquisition Costs (Non-current) Deferred Revenue (Current) Deferred Revenue

(Non-current)

(In thousands)

Opening balance as of December 31, 2021 $ 69,259 $ 24,545 $ 40,675 $ 98,808 $ 54

Increase (decrease), net ( 15,791 ) 8,524 3,129 ( 14,314 ) 120

Balance as of December 31, 2022

Increase (decrease), net 6,914 ( 11,649 ) ( 6,450 ) ( 2,636 ) 9

Ending balance as of December 31, 2023 $ 60,382 $ 21,420 $ 37,354 $ 81,858 $ 183

$ 43,804 $ 84,494 $ 174

(Decrease) increase, net ( 6,450 ) ( 2,636 ) 9

Balance as of December 31, 2023 $ 37,354 $ 81,858 $ 183

(Decrease) increase, net

( 3,795 ) ( 23,878 ) 140

Balance as of December 31, 2024

$ 33,559 $ 57,980 $ 323

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Amortization expense in connection with contract acquisition cost was approximately $ 27.6 million and $ 36.4 million for the years ended December 31, 2023 and 2022, respectively.

The decrease in deferred revenue during the year ended December 31, 2024 was primarily driven by changes in customer renewal patterns and contract structures, including the timing of renewals and shifts in service commitments.

Amortization expense in connection with contract acquisition costs was $ 18.3 million, $ 27.6 million and $ 36.4 million for the years ended December 31, 2024, 2023 and 2022, respectively, and was included in Cost of revenue in the consolidated statements of operations.

Accounts Receivable, Net

Accounts receivable are recorded at the invoiced amount and do not bear interest.

The allowance for credit losses is the Company’s best estimat e of the amount of probable credit losses in the Company’s existing accounts receivable, based on historical write-off experience.

The Company reviews its allowance for credit losses monthly.

Past due balances over 90 days and over a specified amount are reviewed individually for collectability.

All other balances are reviewed on a pooled basis.

We maintain general reserves on a collective basis by considering factors such as historical experience, creditworthiness, the age of the trade receivable balances, and current econom ic conditions.

The allowance for credit losses is the Company’s estimat e of the amount of expected credit losses in the Company’s existing accounts receivable, based on both specific and general reserves.

The Company maintains general reserves on a collective basis by considering factors such as historical experience, creditworthiness, the age of the trade receivable balances, and current econom ic conditions.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The Company does not have any off-balance sheet credit exposure related to its customers.

The activity in the allowance for credit loss is as follows:

The activity in the allowance for credit loss as of the dates presented is as follows:

2024 2023 2022

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Net Loss Per Share

Basic earnings per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted EPS is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period.

Potentially dilutive securities consist of common stock options, restricted stock units, contingently issuable shares and convertible securities.

The dilutive effect of stock options, restricted stock units and contingently issuable shares is reflected in diluted EPS by application of the treasury stock method.

The dilutive effect of convertible securities is reflected in the diluted EPS by application of the “if-converted” method.

The “if-converted” method is only assumed in periods where such application would be dilutive.

In applying the “if-converted” method for diluted EPS, the Company would assume conversion of the 0.750 % Convertible Senior Notes due 2024 (“2024 Notes”) at a ratio of 25.9182 shares of its common stock per $1,000 principal amount of the 2024 Notes.

The Company would assume conversion of the 2026 Notes at a ratio of 13.2933 shares of its common stock per $1,000 principal amount of the 2026 Notes.

Assumed converted shares of the Company’s common stock are weighted for the period the Notes were outstanding.

See Note 8 – Convertible Senior Notes, Net of Current Portion and Capped Call Transactions for additional information about the Notes.

Reconc iliation of shares used in calculating basic and diluted EPS for the years ended December 31, 2023, 2022, and 2021, were as follows:

Basic loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period.

Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents outstanding for the period.

For purposes of this calculation, stock options, restricted stock units, share-settled warrants, 0.750 % Convertible Senior Notes due 2024 (the “2024 Notes”), and 0 % Convertible Senior Notes due 2026 (the “2026 Notes”) are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share when including them has an anti-dilutive effect.

The Company uses the treasury stock method for stock options, restricted stock units, and share-settled warrants, and uses the if-converted method for convertible debt.

As the average market price of the Company ’ s common stock is below the conversion price of the Company ’ s 2024 Notes and 2026 Notes, the impact of conversion is anti-dilutive.

See Note 8 – Convertible Senior Notes, Net of Current Portion, Capped Call Transactions, and Warrants for additional information about the 2024 Notes, 2026 Notes and First Lien Convertible Senior Notes due 2029 (the “2029 Notes” and together with the 2024 Notes and the 2026 Notes, the “Notes”).

Reconc iliation of shares used in calculating basic and diluted net loss per share for the years ended December 31, 2024, 2023, and 2022, were as follows:

Year Ended December 31,

2024 2023 2022

Net loss (in thousands) $ ( 100,435 ) $ ( 225,747 ) $ ( 124,974 )

(In thousands, except number of shares and per share amounts)

$ ( 134,273 ) $ ( 100,435 ) $ ( 225,747 )

Weighted average number of shares outstanding, basic and diluted 88,715,161 78,593,274 74,509,404

Net loss per share, basic and diluted $ ( 1.51 ) $ ( 1.28 ) $ ( 3.03 )

During the third quarter of 2023, the Company reached settlement agreements regarding the final portions of the VoiceBase and Tenfold earn-outs for approximately $ 15.0 million and $ 13.0 million, respectively.

These settlements were paid in shares during the year ended December 31, 2023.

Additionally, during the fourth quarter of 2023, the Company reached a settlement agreement regarding the eBot-7 earn-out for approximately $ 8.0 million, which was paid in shares during the year ended December 31, 2023.

The assumed conversion of the earn-out settlements would have no impact on the basic and diluted

The securities listed below were excluded from the computation of diluted net loss per share for all periods presented, as their effect would have been anti-dilutive:

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EPS as presented in the table above.

Further, the following securities were excluded from the computation of diluted EPS for the years ended December 31, 2023 and 2022, as their effect would have been anti-dilutive:

Year Ended December 31,

6 unchanged sentences

Conversion option of the 2026 Notes 5,681,596 6,879,283 6,879,283

Share-settled warrants

10,581,178 — —

Total 31,800,690 17,008,514 34,583,737

Segment Information

The Company accounts for its segment information in accordance with the provisions of ASC 280-10, “Segment Reporting.” ASC 280-10 establishes annual and interim reporting standards for operating segments of a company.

The Company accounts for its segment information in accordance with the provisions of ASC 280-10, Segment Reporting .

ASC 280-10 establishes annual and interim reporting standards for operating segments of a company.

ASC 280-10 requires disclosures of selected segment-related financial information about products, major customers, and geographic areas based on the Company’s internal accounting methods.

T he chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, evaluates performance, makes operating decisions, and allocates resources based on the financial information presented on a consolidated basis using net loss.

Expenses are reviewed by the nature of the cost (Cost of revenue, Sales and marketing, General and administrative and Product development), consistent with the Company’s presentation on its consolidated statements of operations.

There are no segment managers who are held accountable by the CODM, or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level.

Accordingly, management has determined that the Company operates as one operating and reportable segment.

The Company identifies net loss as its required measure of segment operating profit or loss.

Significant expenses within loss from operations, as well as within net loss are separately presented on the Company’s consolidated statements of operations.

Other segment items within net loss include Interest expense, Interest income, Gain on debt extinguishment, Other (expense) income, net, and Provision for income taxes.

The Company was previously organized into two operating segments for purposes of making operating decisions and assessing performance:

The Business segment enables brands to leverage the Conversational Cloud’s sophisticated intelligence engine to connect with consumers through an integrated suite of mobile and online business messaging technologies.

The Consumer segment facilitated online transactions between i ndependent service providers (“ Experts”) and individual consumers (“Users”) seeking information and knowledge for a fee via mobile and online messaging.

the Business segment and the Consumer segment.

During the first quarter of 2023, the Consumer segment (consisting solely of the Kasamba business) was divested.

As a result, the divestiture of Kasamba eliminated the Company’s Consumer segment.

See Note 20 – Divestiture for additional information.

Subsequent to the divestiture of Kasamba, the chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, evaluates performance, makes operating decisions, and allocates resources based on the financial information presented on a consolidated basis.

Accordingly, management has determined that the Company operates as one operating and reportable segment.

See Note 19 – Divestitures for additional information.

Geographic Information

4 unchanged sentences

Germany 29,925 45,424

Israel — 4,064

Australia 10,830 11,660

3 unchanged sentences

——————————————

(1) U.K., Japan, France, Italy, Spain, Canada, and Singapore.

(1) Israel, United Kingdom, Japan, France, Italy, Spain, Canada, and Singapore.

LIVEPERSON, INC.

1 unchanged sentence

Goodwill and Intangible Assets, Net

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination.

In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from the Company’s business.

If these estimates or their related assumptions change in the future, the Company may be required to record impairment for these assets.

The changes in the carrying amount of goodwill for the years ended December 31, 2024 and 2023 are as follows:

Accumulated Impairment

(In thousands)

Balance as of December 31, 2022 $ 296,214 $ — $ 296,214

Adjustments to goodwill:

Acquisitions 15,511

Goodwill impairment

— ( 11,895 ) ( 11,895 )

Foreign exchange adjustment 1,312 — 1,312

Goodwill reclassified to assets held for sale ( 8,024 )

Balance as of December 31, 2023 297,526 ( 11,895 ) 285,631

Adjustments to goodwill:

Goodwill impairment

— ( 60,551 ) ( 60,551 )

Foreign exchange adjustment ( 2,526 ) — ( 2,526 )

Balance as of December 31, 2024 $ 295,000 $ ( 72,446 ) $ 222,554

(1) The amount represents the entire accumulated goodwill impairment balance as of December 31, 2023.

The income approach uses a discounted cash flow model that reflects management assumptions regarding revenue growth rates, operating margins, risk-adjusted discount rate, terminal period growth rate, economic and market trends and other expectations about the anticipated operating results of the reporting units.

Under the market approach, the fair value is estimated based on market multiples of revenues derived from comparable publicly traded companies with operating characteristics similar to the reporting units.

As a result of the Company’s annual goodwill impairment test in the third quarter of 2023, the Company recorded a no n-cash impairment charge of $ 11.9 million in th e consolidated statements of operations during the year ended December 31, 2023 , to recognize the im pairment of goodwill in the WildHealth reporting unit.

This conclusion was primarily based upon slower growth in existing revenue streams and strategic decisions to reduce or eliminate investment in new and existing revenue streams previously planned for expansion.

The Company’s latest available financial forecasts at the time of the annual goodwill impairment test reflected lower cash flows than previously projected related to the WildHealth reporting unit.

There were no impairments in the Company’s Business reporting unit, as the fair value of this reporting unit substantially exceeded its carrying value.

In connection with the divestiture of Kasamba under the Consumer segment, the Company recorded a reduction to its goodwill of $ 8.0 million during the year ended December 31, 2022.

See Note 20 – Divestiture for additional information.

In connection with the annual impairment test completed on October 1, 2024, using the quantitative “Step 1” assessment, the Company determined the fair value of its reporting unit using both an income approach and a market approach.

The Company applied an equal weighting to the value conclusions resulting from the two employed approaches, because there was sufficient information to estimate the fair value of the reporting unit under both methods.

Estimated fair values of reporting units are Level 3 measures in the fair value hierarchy.

The fair value determination using an income approach requires management to make significant estimates and assumptions related to forecasts of future revenues, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and the discount rate.

The discount rate used in the income approach model was 13 %.

The fair value determination using a market approach requires management to make significant assumptions related to marketplace multiples from within a peer public company group.

In connection with the Company’s annual budget process in the fourth quarter of 2024, management completed a comprehensive review of the Company’s operations, which resulted in reduced estimated future cash flows.

The revised projections were used as a key input into the annual goodwill impairment test performed in the fourth quarter of 2024.

As a result of this impairment test, the Company recorded a non-cash impairment charge of $ 56.9 million in the consolidated statements of operations during the year ended December 31, 2024, to recognize the impairment of goodwill in the Company’s one reporting unit.

In addition, during the first quarter of 2024, the Company recorded a non-cash impairment charge of $ 3.6 million in the consolidated statements of operations, to recognize a full impairment of goodwill associated with its WildHealth reporting unit, which was sold during the second quarter of fiscal 2024.

As a result of the Company’s annual goodwill impairment test in the third quarter of 2023, the Company recorded a non-cash impairment charge of $ 11.9 million in the consolidated statements of operations during the year ended December 31, 2023, to recognize the impairment of goodwill in the WildHealth reporting unit.

There were no impairments in the Company’s Business reporting unit during the year ended December 31, 2023, as the fair value of this reporting unit substantially exceeded its carrying value.

No impairment losses were recorded during the fiscal year ended December 31, 2022.

LIVEPERSON, INC.

1 unchanged sentence

Intangible Assets, Net

Intangible assets, net are summarized as follows:

Intangible assets, net are summarized as follows as of the dates presented:

December 31, 2024

3 unchanged sentences

Amortizing intangible assets:

Technology $ 94,549 $ ( 60,465 ) $ 34,084 5.0

Customer relationships 32,025 ( 19,542 ) 12,483 10.0

Patents $ 17,609 $ ( 2,539 ) $ 15,070 12.7

Trademarks 1,400 ( 707 ) 693 5.0

Trade names 1,044 ( 672 ) 372 2.8

Other 914 ( 355 ) 559 4.1

Total $ 17,609 $ ( 2,539 ) $ 15,070

12 unchanged sentences

Amortization expense is calculated over the estimated useful life of the asset.

Aggregate amortization expense for intangible assets and finance leases, net was $ 22.2 million, $ 22.1 million, and $ 9.3 million for the years ended December 31, 2023, 2022, and 2021, respectively, and a portion of this amortization was included in cost of revenue in the consolidated statements of operations.

Aggregate amortization expense for purchased intangible assets and finance leases, net was $ 12.0 million, $ 22.2 million, and $ 22.1 million for the years ended December 31, 2024, 2023, and 2022, respectively, and $ 9.2 million, $ 18.7 million, and $ 18.4 million, respectively, of this amortization was included in Cost of revenue in the consolidated statements of operations.

Intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable and the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows that are expected to result from the use of the asset.

As a result of our impairment test in the third quarter of 2023 , the Company recognized an immaterial non-cash impairment charge of $ 3.0 million included in the impairment of intangibles and other assets in the consolidated statements of operations, related to our intangible assets – developed technology associated with WildHealth, due to updated forecasts as discussed above.

The fair value of these intangible assets as of September 30, 2023 was estimated using a relief from royalty method.

A terminal multiple was applied on an assumed sale of the asset group subsequent to the life of the primary asset.

There were no impairments of intangible assets during the year ended December 31, 2022.

The revised projections were used as a key input into the annual impairment test performed in the fourth quarter of 2024.

As a result of this impairment test, t he Company recognized a non-cash impairment charge of $ 35.2 million included in Impairment of intangibles and other assets in the consolidated statements of operations.

The fair value was determined using a combination of income and market approach.

This non-cash charge resulted in a full impairment of the following intangible assets acquired in connection with historical business combination transactions:

developed technology in the amount of $ 23.7 million, customer relationships in the amount of $ 11.0 million and trademarks in the amount of $ 0.5 million.

During the first quarter of 2024, the Company recognized a non-cash impairment charge related to WildHealth of $ 2.2 million included in Impairment of intangibles and other assets in the consolidated statements of operations.

During the year ended December 31, 2023, t he Company recognized a non-cash impairment charge of $ 3.0 million included in Impairment of intangibles and other assets in the consolidated statements of operations related to developed technology associated with WildHealth.

There were no impairment losses during the year ended December 31, 2022.

LIVEPERSON, INC.

3 unchanged sentences

(In thousands)

2024 $ 15,425

Thereafter 12,061

2 unchanged sentences

Property and equipment are stated at cost, net of accumulated depreciation, and amortization.

Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the related assets.

Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the related assets.

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset.

The Company reviews the estimated useful lives of its fixed assets on an ongoing basis.

The following table presents the detail of property and equipment as follows:

The Company reviews the estimated useful lives of its property and equipment on an annual basis.

The following table presents the detail of property and equipment, net as of the dates presented:

Useful Life (Years) 2024 2023

6 unchanged sentences

Property and equipment, at cost 311,668 308,046

accumulated depreciation ( 188,721 ) ( 155,706 )

Property and equipment, net

119,325 137,722

Less assets held for sale (Note 20) — ( 11,223 )

accumulated depreciation and amortization ( 211,111 ) ( 188,721 )

Total Property and equipment, net $ 100,557 $ 119,325

Aggregate depreciation and amortization expense for property and equipment was $ 32.6 million, $ 32.3 million, and $ 27.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company recorded non-cash impairment charges of $ 9.5 million and $ 5.0 million related to internal-use software development costs during the years ended December 31, 2024 and 2023, respectively .

The impairment charges were included in Impairment of intangibles and other assets in the consolidated statements of operations for the years ended December 31, 2024 and 2023 and pertained to internal projects that were discontinued and had no future economic benefit.

There were no impairment losses during the year ended December 31, 2022.

Expenditures for routine maintenance and repairs are charged to operating expense as incurred.

Major renewals and improvements are capitalized and depreciated over their estimated useful lives.

During the fourth quarter ended December 31, 2023, the Company recorded a noncash impairment charge of $ 5.0 million related to capitalized software development costs.

The impairment charges were included in the consolidated statements of operations for the year ended December 31, 2023.

These impairment charges pertained to internal projects that were discontinued and had no future economic benefit.

There were no impairments of property and equipment during the year ended December 31, 2022.

The following table presents total depreciation included in the consolidated statements of operations for the periods presented:

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

Year ended December 31,

2024 2023 2022

(In thousands)

Cost of revenue

$ 6,792 $ 8,072 $ 9,763

Sales and marketing 3,138 3,103 2,451

General and administrative 247 453 452

Product development

20,133 20,929 19,618

Total depreciation expense

$ 30,310 $ 32,557 $ 32,284

Accrued Expenses and Other Current Liabilities

3 unchanged sentences

Payroll and other employee-related costs 10,061 20,767

Financing lease liability 3,037 2,569

Restructuring 2,076 803

Warrants liability (Note 10)

Finance lease liabilities (Note 9)

Restructuring (Note 13)

Sales commissions 2,207 734

Non-income tax

Short-term contingent earn-out — 47,819

Other 1,688 2,269

Total accrued expenses and other current liabilities $ 66,530 $ 97,024

Convertible Senior Notes, Net of Current Portion and Capped Call Transactions

Convertible Senior Notes, Net of Current Portion, Capped Call Transactions, and Warrants

Convertible Senior Notes due 2024 and Capped Calls

In March 2019, the Company issued $ 230.0 million aggregate principal amount of its 0.750 % Convertible Senior Notes due 2024 in a private placement.

Interest on the 2024 Notes is payable semi-annually in arrears on March 1 and September 1 of each year.

The 2024 Notes will mature on March 1, 2024, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms.

The total net proceeds from the offering of the 2024 Notes, after deducting debt issuance costs, was approximately $ 221.4 million.

Each $1,000 in principal amount of the 2024 Notes is initially convertible into 25.9182 shares of the Company’s common stock par value $ 0.001 , which is equivalent to an initial conversion price of approximately $ 38.58 per share.

The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid interest.

In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its 2024 Notes in connection with such a corporate event.

The 2024 Notes are not redeemable prior to the maturity date of the 2024 Notes and no sinking fund is provided for the 2024 Notes.

If the Company undergoes a fundamental change (as defined in the indenture governing the 2024 Notes) prior to the maturity date, holders may require the Company to repurchase for cash all or any portion of their 2024 Notes in principal amounts of $1,000 or a multiple thereof at a fundamental change repurchase price equal to 100 % of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Holders of the 2024 Notes may convert their 2024 Notes at their option at any time prior to the close of business on the business day immediately preceding November 1, 2023, in multiples of $1,000 principal amount, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2019 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2024 Notes on each applicable trading day as determined by the Company;

or (3) upon the occurrence of specified corporate events.

On or after November 1, 2023, holders may convert all or any portion of their 2024 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date,

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

regardless of the foregoing circumstances.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election.

During a portion of the year ended December 31, 2023, the conditions allowing holders of the 2024 Notes to convert were met.

The 2024 Notes are senior unsecured obligations of the Company.

Prior to the adoption of ASU 2020-06 on January 1, 2022, the Company separated the 2024 Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that did not have an associated convertible feature.

The carrying amount of the equity component representing the conversion option was $ 52.9 million and was determined by deducting the fair value of the liability component from the par value of the 2024 Notes.

The equity component was not remeasured as long as it continued to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount, or the debt discount, was amortized to interest expense at an effective interest rate over the contractual term of the 2024 Notes.

This accounting treatment no longer applies under ASU 2020-06.

Prior to the adoption of ASU 2020-06 on January 1, 2022, the Company allocated the total amount of issuance costs incurred of approximately $ 8.6 million to the liability and equity components of the 2024 Notes based on the proportion of the proceeds allocated to the debt and equity components.

Issuance costs attributable to the liability component were approximately $ 6.6 million, were recorded as an additional debt discount and were amortized to interest expense using the effective interest method over the contractual term of the 2024 Notes.

Issuance costs attributable to the equity component were approximately $ 2.0 million and recorded as a reduction of additional paid in capital in stockholders’ equity.

This accounting treatment no longer applies under ASU 2020-06.

As a result of the adoption of ASU 2020-06, the 2024 Notes are accounted for as a single liability, and the carrying amount of the 2024 Notes, after giving effect to the March 2023 repurchases described below, is $ 72.4 million as of December 31, 2023 , consisting of principal of $ 72.5 million, net of unamortized debt issuance costs of $ 0.1 million .

The 2024 Notes were classified as short-term liabilities in the accompanying consolidated balance sheet as of December 31, 2023.

The remaining term ov er which the 2024 Notes’ debt issuance costs will be amortized is 0.2 years at an effective interest rate of 1.57 % for the year ended December 31, 2023.

In connection with the offering of the 2024 Notes, the Company entered into privately-negotiated capped call option transactions with certain counterparties (the “2024 capped calls”).

The 2024 capped calls each have an initial strike price of approximately $ 38.58 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2024 Notes.

The 2024 capped calls have initial cap prices of $ 57.16 per share, subject to certain adjustment events.

The 2024 capped calls cover, subject to anti-dilution adjustments, approximately 5.96 million shares of common stock.

The 2024 capped calls are generally intended to reduce or offset the potential dilution to the common stock upon any conversion of the 2024 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.

The 2024 capped calls expire on March 1, 2024, subject to earlier exercise.

The 2024 capped calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event, a tender offer, and a nationalization, insolvency or delisting involving the Company.

In addition, the 2024 capped calls are subject to certain specified additional disruption events that may give rise to a termination of the 2024 capped calls, including changes in law, failure to deliver, and hedging disruptions.

The 2024 capped calls are recorded in stockholders’ equity and are not accounted for as derivatives.

The net cost of $ 23.2 million incurred to purchase the 2024 capped calls was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheets.

On March 21, 2023, the Company entered into individual privately negotiated transactions (the “Note Repurchase Agreements”) with certain holders of its 2024 Notes, pursuant to which the Company agreed to pay an aggregate of approximately $ 149.7 million in cash for the repurchase of approximately $ 157.5 million in aggregate principal amount of the 2024 Notes (the “Note Repurchases”).

A s of December 31, 2023 , t he Company recognized a $ 7.2 million gain, net of transaction costs of $ 0.5 million on debt extinguishment, which represented the difference between the carrying value and the fair value of the 2024 Notes just prior to Note Repurchases.

Interest on the 2024 Notes was payable semi-annually in arrears on March 1 and September 1 of each year.

On March 21, 2023, the Company entered into individual privately negotiated transactions (the “Note Repurchase Agreements”) with certain holders of its 2024 Notes, pursuant to which the Company agreed to pay an aggregate of $ 149.7 million in cash for the repurchase of $ 157.5 million in aggregate principal amount of the 2024 Notes (the “Note Repurchases”).

During the year ended December 31, 2023, the Company recognized a $ 7.2 million gain, net of transaction costs of $ 0.5 million on debt extinguishment, which represented the difference between the carrying value and the fair value of the 2024 Notes just prior to the Note Repurchases, which was recorded in Gain on debt extinguishment in the consolidated statements of operations.

Upon completion of the Note Repurchases, the aggregate principal amount of the 2024 Notes was reduced by $ 157.5 million to $ 72.5 million and the carrying amount of the 2024 Notes reduced by $ 228.3 million to $ 72.0 million.

A corresponding portion of the 2024 capped calls were terminated in connection following the Note Repurchases as required by their terms for minimal consideration.

The remaining 2024 Notes matured on March 1, 2024, on which date the Company repaid in full the outstanding $ 72.5 million in aggregate principal amount.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

corresponding portion of the 2024 capped calls were terminated in connection following the Note Repurchases as required by their terms for minimal consideration.

Convertible Senior Notes due 2026 and Capped Calls

In December 2020, the Company issued $ 517.5 million aggregate principal amount of its 0 % Convertible Senior Notes due 2026 (the “2026 Notes” and together with the 2024 Notes, the “Notes”) in a private placement.

In December 2020, the Company issued $ 517.5 million aggregate principal amount of its 2026 Notes in a private placement, of which $ 361.2 million aggregate principal amount was outstanding as of December 31, 2024.

The 2026 Notes are senior unsecured obligations of the Company.

The 2026 Notes will mature on December 15, 2026, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms.

The total net proceeds from the offering of the 2026 Notes, after deducting debt issuance costs, was approximately $ 505.3 million.

The total net proceeds from the offering of the 2026 Notes, after deducting debt issuance costs, was $ 505.3 million.

Each $1,000 in principal amount of the 2026 Notes is initially convertible into 13.2933 shares of the Company’s common stock par value $ 0.001 , which is equivalent to an initial conversion price of approximately $ 75.23 per share.

2 unchanged sentences

The 2026 Notes are not redeemable prior to the maturity date of the 2026 Notes and no sinking fund is provided for the 2026 Notes.

If the Company undergoes a fundamental change (as defined in the indenture governing the 2026 Notes) prior to the maturity date, holders may require the Company to repurchase for cash all or any portion of their 2026 Notes in principal amounts of $1,000 or a multiple thereof at a fundamental change repurchase price equal to 100 % of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid special interest to, but excluding, the fundamental change repurchase date.

The indenture governing the 2026 Notes contains events of default customary for convertible notes issued in connection with similar transactions.

If the Company undergoes a “fundamental change” (as defined in the indenture governing the 2026 Notes) which includes a change of control or the failure of the Company’s common stock to be listed or quoted on any of The Nasdaq Global Select Market, The Nasdaq Global Market or the New York Stock Exchange, holders may require the Company to repurchase for cash all or any portion of their 2026 Notes in principal amounts of $1,000 or a multiple thereof at a fundamental change repurchase price equal to 100 % of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid special interest to, but excluding, the fundamental change repurchase date.

Holders of the 2026 Notes may convert their 2026 Notes at their option at any time prior to the close of business on the business day immediately preceding August 15, 2026, in multiples of $1,000 principal amount, only under the following circumstances:

6 unchanged sentences

During the twelve months ended December 31, 2024, the conditions allowing holders of the 2026 Notes to convert were not met.

The 2026 Notes are senior unsecured obligations of the Company.

Prior to the adoption of ASU 2020-06 on January 1, 2022, the Company separated the 2026 Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that did not have an associated convertible feature.

The carrying amount of the equity component representing the conversion option was $ 162.5 million and was determined by deducting the fair value of the liability component from the par value of the 2026 Notes.

The equity component was not remeasured as long as it continued to meet the conditions for equity classification.

This accounting treatment no longer applies under ASU 2020-06.

Prior to the adoption of ASU 2020-06 on January 1, 2022, the Company allocated the total amount of issuance costs incurred of approximately $ 12.2 million to the liability and equity components of the 2026 Notes based on the proportion of the proceeds allocated to the debt and equity components.

Issuance costs attributable to the liability component were approximately

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ 8.5 million, were recorded as an additional debt discount and are amortized to interest expense using the effective interest method over the contractual term of the 2026 Notes.

Issuance costs attributable to the equity component were approximately $ 3.7 million and recorded as a reduction of additional paid in capital in stockholders’ equity.

This accounting treatment no longer applies under ASU 2020-06.

As a result of the adoption of ASU 2020-06, the 2026 Notes are accounted for as a single liability, and the carrying amount of the 2026 Notes is $ 511.5 million as of December 31, 2023 , consisting of principal of $ 517.5 million, net of unamortized issuance costs of $ 6.0 million .

The 2026 Notes were classified as long-term liabilities in the accompanying consolidated balance sheets as of December 31, 2023.

The remaining term over which the 2026 Notes’ debt issuance costs will be amortized is 2.9 years at an effective interest rate on the debt was 0.40 % for the year ended December 31, 2023.

In connection with the offering of the 2026 Notes, the Company entered into privately-negotiated capped call option transactions with certain counterparties (the “2026 capped calls”).

7 unchanged sentences

The 2026 capped calls are recorded in stockholders’ equity and are not accounted for as derivatives.

The net cost of $ 46.1 million incurred to purchase the 2026 capped calls was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheet.

The net cost of $ 46.1 million

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

incurred to purchase the 2026 capped calls was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheets.

Pursuant to a privately negotiated exchange and purchase agreement (the “Exchange and Purchase Agreement”), on June 3, 2024, the Company exchanged $ 146.0 million principal amount of the 2026 Notes then held by an investor for $ 100.0 million principal amount of new 2029 Notes, and the same investor purchased an additional $ 50.0 million principal amount of the 2029 Notes for cash.

In connection with the exchange and purchase, the Company also issued the Warrants to the investor, and the investor agreed to purchase up to $ 50.0 million of additional 2029 Notes upon the Company’s request and subject to certain conditions (the “Delayed Draw Notes”).

As a result of the exchange and purchase transactions, during the second quarter of 2024, the Company recognized a $ 68.1 million gain on debt extinguishment which represented the difference between the carrying value of the 2026 Notes so exchanged and the collective fair value of the 2029 Notes and the Warrants, net of the cash payment received from the investor.

The extinguishment gain was recorded in Gain on debt extinguishment in the consolidated statements of operations.

On June 13, 2024, the Company repurchased $ 10.3 million principal amount of the 2026 Notes for $ 4.9 million in cash.

As a result of the transaction, during the second quarter of 2024, the Company recognized a $ 5.0 million gain on debt extinguishment, which was recorded in Gain on debt extinguishment in the consolidated statements of operations.

The 2026 Notes were classified as long-term liabilities in the consolidated balance sheets as of December 31, 2024.

After the completion of the exchange and repurchase, the aggregate principal amount of the 2026 Notes was reduced to $ 361.2 million and the carrying amount of the 2026 Notes reduced to $ 357.8 million.

A corresponding portion of the 2026 capped calls were terminated in connection following the transactions as required by their terms for no consideration.

The remaining term over which the 2026 Notes’ debt issuance costs will be amortized is 1.9 years at an effective interest rate of 0.40 % for the year ended December 31, 2024.

First Lien Convertible Senior Notes due 2029

In June 2024, the Company issued $ 150.0 million aggregate principal amount of its 2029 Notes pursuant to the Exchange and Purchase Agreement including $ 100.0 million aggregate principal amount issued in exchange for $ 146.0 million aggregate principal amount of 2026 Notes and $ 50.0 million aggregate principal amount issued for cash.

The Company paid third parties $ 7.6 million in connection with the transaction, which was capitalized as debt issuance costs.

At the time of the exchange, the fair value of the 2029 Notes approximated $ 118.1 million, and the Company recognized a debt discount of $ 31.9 million.

In December 2024, the Company issued $ 50.0 million aggregate principal amount of its 2029 Notes, constituting the Delayed Draw Notes, for $ 50.0 million cash.

Unless earlier repurchased or redeemed by the Company or converted pursuant to their terms, the 2029 Notes will mature on the earlier of (a) June 15, 2029 and (b) 91 days before the maturity of the 2026 Notes, if greater than $ 60.0 million principal amount of 2026 Notes remains outstanding on such date.

The amount payable by the Company if the 2029 Notes mature pursuant to clause (b) will be equal to 100 % of the aggregate principal amount of the 2029 Notes, plus accrued and unpaid interest, plus the remaining future interest payments that would have been payable through June 15, 2029, discounted at a rate equal to the comparable treasury rate plus 50 basis points (the “Make-Whole Amount”).

From June 3, 2024, until the date of issuance of the Delayed Draw Notes, interest on the 2029 Notes accrued at a rate of 10.83 % (consisting of 4.17 % cash and 6.66 % paid in kind (“PIK”)) per annum.

From the date of issuance of the Delayed Draw Notes and prior to December 15, 2026, interest on the 2029 Notes has increased and accrues at a rate of 11.375 % (consisting of 4.375 % cash and 7.00 % PIK) per annum.

On and after December 15, 2026, interest on the 2029 Notes will further increase and accrue at a rate of 13 % (consisting of 5 % cash and 8 % PIK) per annum.

The Company may, at its option, redeem the 2029 Notes, in whole or in part, prior to June 15, 2025 at a price equal to the Make-Whole Amount.

On or after June 15, 2025, and prior to June 15, 2026, the Company may, at its option, redeem the 2029 Notes, in whole or in part for an amount of cash equal to the sum of (i) 106.50 % of the aggregate principal amount of the 2029 Notes (including all increases to the principal amount as the result of previous payments of PIK interest) plus (ii) 106.50 % of all accrued and unpaid PIK interest plus (iii) all accrued and unpaid cash interest.

On or after June 15, 2026, and prior to December 15, 2026, the Company may, at its option, redeem the 2029 Notes, in whole or in part for an amount of cash equal to the sum of (i) 103.25 % of the aggregate principal amount of the 2029 Notes (including all increases to the principal amount as the result of

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

previous payments of PIK interest) plus (ii) 103.25 % of all accrued and unpaid PIK interest plus (iii) all accrued and unpaid cash interest.

From December 15, 2026 until maturity, the Company may, at its option, redeem the 2029 Notes, in whole or in part for an amount of cash equal to the sum of (i) 113 % of the aggregate principal amount of the 2029 Notes (including all increases to the principal amount as the result of previous payments of PIK interest) plus (ii) 113 % of all accrued and unpaid PIK interest plus (iii) all accrued and unpaid cash interest.

In addition, the Make-Whole Amount will be payable in the event of an acceleration of the 2029 Notes or repurchase triggered by certain asset sales.

No sinking fund is provided for the 2029 Notes.

The 2029 Notes are guaranteed on a senior basis by certain of the Company’s direct and indirect domestic and foreign subsidiaries and secured by first priority security interests in substantially all of the assets of the Company and such subsidiary guarantors, subject to customary exceptions.

The indenture governing the 2029 Notes contains affirmative and negative covenants and events of default customary for senior secured notes issued in connection with similar transactions.

The negative covenants include limitations on asset sales, the incurrence of debt, preferred stock and liens, fundamental changes, investments, dividends and other payment restrictions affecting subsidiaries, restricted payments and transactions with affiliates.

Among other things, these covenants generally prohibit the payment of cash dividends on the Company’s common stock.

The indenture governing the 2029 Notes permits the Company and its subsidiaries to incur, subject to certain requirements, up to $ 150.0 million of debt that is junior in lien priority and subordinated in right of payment to the 2029 Notes.

The indenture governing the 2029 Notes also includes a financial covenant that requires the Company at all times to maintain a minimum cash balance of $ 60.0 million (excluding proceeds of the 2029 Notes).

Upon request of the investor, the indenture governing the 2029 Notes requires the Company to enter into a registration rights agreement with respect to the 2029 Notes containing customary terms including demand, shelf and piggyback registration rights.

The Company was in compliance with its financial covenants as of December 31, 2024.

If the Company undergoes a “fundamental change” (as defined in the indenture governing the 2029 Notes), which includes a change of control or the failure of the Company’s common stock to be listed or quoted on any of The Nasdaq Global Select Market, The Nasdaq Global Market or the New York Stock Exchange, holders may require the Company to repurchase all or any portion of their 2029 Notes at a repurchase price equal to 100 % of the aggregate principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest, plus an amount equal to 66 % of the remaining future interest payments (including PIK interest) that would have been payable through June 15, 2029, discounted at a rate equal to the comparable treasury rate plus 50 basis points.

Holders of the 2029 Notes may convert their 2029 Notes at their option at any time prior to the close of business on the business day immediately preceding February 15, 2029 only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2024 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2029 Notes on each applicable trading day as determined by the Company;

(2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the indenture governing the 2029 Notes) per $1,000 principal amount of 2029 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the product of (x) the quotient of (i) the “conversion amount” (as defined in the Indenture) in respect of $1,000 principal amount of the 2029 Notes on such trading day divided by (ii) 1,000 times (y) the conversion rate for the 2029 Notes on each such trading day;

(3) with respect to any 2029 Notes that the Company calls for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

(4) upon the occurrence of specified corporate events;

or (5) during the period from August 17, 2026 through September 14, 2026, if the aggregate principal amount of 2026 Notes exceeds $ 60.0 million on August 16, 2026.

On or after February 15, 2029, holders may convert all or any portion of their 2029 Notes at any time prior to the close of business on June 13, 2029, regardless of the foregoing circumstances.

The 2029 Notes (including all accrued and unpaid interest) are convertible at the option of the holders at certain times into cash based on a daily conversion value calculated on a proportionate basis for each trading day in a 50 trading day observation period, initially corresponding to 13.2933 shares of the Company’s common stock per $1,000 principal amount of 2029 Notes.

The Company is not required to deliver its common stock upon conversion under any circumstances.

The conversion rate for the 2029 Notes is subject to adjustment if certain events occur and contains customary anti-dilution protections.

During the three months ended December 31, 2024, the conditions allowing holders of the 2029 Notes to convert were not met.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 2029 Notes, including the Delayed Draw Notes, are accounted for as a single liability, and the combined carrying amount is $ 168.6 million as of December 31, 2024, consisting of principal of $ 207.1 million, net of unamortized issuance costs of $ 7.4 million and debt discount of $ 31.1 million.

The 2029 Notes were classified as long-term liabilities in the consolidated balance sheets as of December 31, 2024.

The remaining term over which the 2029 Notes’ debt issuance costs will be amortized is 4.5 years at an effective interest rate of 19.18 % for the 2029 Notes and 13.25 % for the Delayed Draw Notes as of December 31, 2024.

1 unchanged sentence

The net carrying amount of the liability component of the Notes as of December 31, 2024 and 2023 was as follows:

December 31, 2024 December 31, 2023

(In thousands)

Principal $ 361,204 $ 207,125 $ 568,329 $ 72,492 517,500 $ 589,992

Unamortized debt discount

— ( 31,137 ) ( 31,137 ) — — —

Unamortized issuance costs ( 2,757 ) ( 7,365 ) ( 10,122 ) ( 99 ) ( 5,935 ) ( 6,034 )

9 unchanged sentences

Amortization of debt discount 2,407 — —

Total interest expense $ 4,882 $ 5,503 $ 37,533

Interest expense of $ 4.9 million, $ 5.5 million, and $ 37.5 million is reflected as a component of interest expense, net in the accompanying consolidated statement of operations for the years ended December 31, 2023, 2022, and 2021, respectively.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In February 2022, the Company completed the acquisition of 100 % of the equity of WildHealth, Inc.

(“WildHealth”), a precision medicine company operating in the United States, for a total purchase price of $ 22.3 million.

The purchase price consisted of approximately $ 4.6 million in cash and $ 17.7 million in shares of common stock of the Company.

As part of the purchase price, the Company issued 776,825 common shares that had a total fair value of $ 20.8 million based on the closing market price of $ 26.81 per share on the acquisition date of February 7, 2022.

The transaction was accounted for as a business combination.

In connection with the acquisition, the Company entered into stock forfeiture agreements with certain employees of WildHealth, under which a portion of the purchase price would be subject to vesting conditions based on continuing employment post acquisition.

The Company allocated the purchase consideration subject to the stock forfeiture agreements between pre and post combination periods.

The purchase price allocation resulted in approximately $ 15.5 million of goodwill, $ 8.3 million of intangible assets and net liabilities assumed of $ 1.5 million.

WildHealth is part of the Business segment and is a separate reporting unit.

Goodwill is primarily attributed to synergies from future expected economic benefits, including enhanced revenue growth from expanded capabilities.

The goodwill was not deductible for tax purposes.

The intangible assets are being amortized over their expected period of benefit.

A deferred tax liability for the identified intangibles has been recorded for $ 1.6 million and an indemnification asset of $ 1.2 million relating to a pre-acquisition liability assumed as of December 31, 2022.

The following table sets forth the fair value of the identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):

Fair Value Useful life

(In thousands) (In years)

Amortizing intangible assets:

Developed technology $ 7,100 5.0

Trade name 600 5.0

Fellowship content 600 5.0

Total amortizing intangible assets $ 8,300

Based on our 2023 annual goodwill impairment test, the Company recorded a non-cash impairment charge of $ 11.9 million in our consolidated statements of operations, representing a portion of goodwill related to the WildHealth reporting unit.

Additionally, based on the impairment test in the third quarter of 2023 , the Company recognized an immaterial non-cash impairment charge of $ 3.0 million included in the cost of revenue in the consolidated statements of operations, related to our intangible assets – developed technology associated with WildHealth.

See Note 5 – Goodwill and Intangible Assets, Net for additional information.

Additionally, former stockholders of WildHealth had the right to receive in the aggregate up to an additional $ 120.0 million earn-out (to be settled in the Company’s equity or cash at the Company’s election, but with the cash election restricted to 18.0 percent of the total earn-out) based upon satisfaction of certain financial milestones over the period from October 31, 2022 through December 31, 2025.

The Company accounted for the earn-out as a compensation arrangement in accordance with ASC 718, “Compensation - Stock Compensation,” pursuant to which such earn-out payments are classified as liability awards to be recognized over the requisite service periods.

On May 30, 2023, the Company and stockholders of WildHealth agreed to amend the terms of the merger agreement with respect to certain contingent potential earn-out payments under the agreement.

Pursuant to the amended terms, in full satisfaction of all potential earn-out payments under the merger agreement, the parties agreed that the Company would pay (a) a lump sum cash payment of $ 12.0 million, less applicable withholding taxes to pre-acquisition stockholders, and (b) in the event of a future direct or indirect sale of WildHealth on or before May 30, 2033, the former WildHealth stockholders will receive an additional cash payment equal to 30 % of the then-current equity value of WildHealth less all applicable escrows and closing payments and costs, up to a maximum payment of $ 23.0 million.

On May 31, 2023, the Company made the lump sum payment of $ 12.0 million in connection with the settlement and reversed the preexisting accrued stock-based compensation of $ 40.2 million.

As of December 31, 2023, there is no remaining

Total interest expense related to the Notes $ 14,486 $ 4,882 $ 5,503

On June 3, 2024, pursuant to the Exchange and Purchase Agreement, the Company issued to the investor 10-year warrants with a strike price of $ 0.75 per share, exercisable for 9,746,723 shares of the Company’s common stock and 10-year warrants with a strike price of $ 0.75 per share, exercisable with respect to a notional amount of 2,344,775 shares of the Company’s common stock for cash payments equal to the excess of “fair market value” (as defined therein) per share over the strike price, fully diluted subject to certain adjustments.

The cash-settled warrants will permit the Company, subject to certain conditions (including to the extent that the Company, following payment, would have “available cash” (as defined therein) of less than $ 100.0 million), to defer payment of the settlement amount at an annualized interest rate of 6.0 %, compounded monthly.

Warrants outstanding at the 10-year expiration will be exercised automatically (and in the case of the share-settled warrants, will be exercised on a cashless basis) if, immediately prior to the expiration, the Fair Market Value per share is greater than the strike price.

The Warrants contain customary anti-dilution protections.

The triggers for the anti-dilution adjustments include (a) subdivision, combination or reclassification of the outstanding shares of common stock into a greater or smaller number of shares, (b) certain below market issuances of common stock, (c) certain issuances of common stock at a price that is less than the strike price of the Warrant, (d) certain issuances of a dividend or distribution to all holders of common stock, (e) an above market tender offer or exchange offer by the Company for common stock.

Pursuant to the anti-dilution terms of the Warrants, the aggregate notional amount of the Warrants increased to 13,126,698 shares as of December 31, 2024 .

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

earn-out liability related to WildHealth.

The contingent cash settlement feature was deemed not probable as of December 31, 2023 and, therefore, the award was not recorded as a liability.

In the event of a “Cash/Public Acquisition” (as defined therein), the Warrants may be automatically exercised, cash settled or expire, depending on the fair market value per share.

The Warrants contain a beneficial ownership limitation on the investor’s ownership of the Company’s common stock, on a post-exercise basis (aggregating all securities convertible into or exercisable for the Company’s common stock), of 4.99 %, subject to increase upon 61 days’ notice by the investor, but not to exceed 9.99 %.

The Warrants were classified as current liabilities under ASC 480 in the Company’s consolidated balance sheets and recorded at fair value of $ 5.3 million at the issuance date with any subsequent changes in fair value to be recorded in the Company’s consolidated statements of operations.

As of December 31, 2024, the Warrants had a fair value of $ 17.5 million.

A loss of $ 12.2 million for the change in fair value was recorded in Other (expense) income, net, in the Company’s consolidated statements of operations for the year ended December 31, 2024.

The Company has non-cancelable operating and finance leases for its corporate offices and other service agreements.

Its leases have remaining lease terms of less than one to five years , some of which include options to extend.

Its leases have remaining lease terms of approximately 1 year or less, some of which include options to extend.

The Company uses the non-cancelable lease term when recognizing the ROU assets and lease liabilities, unless it is reasonably certain that a renewal or termination option will be exercised.

The Company continues to actively assess its global lease portfolio.

However, any additional de-recognition of right-of-use assets and incurrence of various one-time expenses in connection with early termination of additional leases are not expected to be material to its financial condition or results of operations.

Supplemental cash flow information related to leases for the periods listed are as follows:

Supplemental cash flow information related to leases for the periods presented is as follows:

Year Ended December 31,

5 unchanged sentences

Financing cash flows for finance leases 401 3,330 3,734

The components of lease costs for the periods listed are as follows:

The components of lease costs for the periods presented are as follows:

Year Ended December 31,

15 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases is as follows:

Classification on the Consolidated Balance Sheet December 31,

Supplemental balance sheet information related to leases as of the dates presented is as follows:

Classification on the Consolidated Balance Sheets

2024 December 31,

2 unchanged sentences

Finance ROU assets Property and equipment, net 62 3,060

Operating lease liabilities Operating lease liability $ 2,719 $ 2,160

Operating lease liabilities Operating lease liabilities

Finance lease liabilities Accrued expenses and other current liabilities 104 3,037

Operating lease liabilities Operating lease liability, net of current portion 2,173 682

Operating lease liabilities Operating lease liabilities, net of current portion

Finance lease liabilities Other liabilities — 85

Future minimum lease payments under non-cancellable operating and finance leases (with an initial or remaining lease term in excess of one year) are as follows:

December 31, 2023

Leases Finance

Year Ending December 31, (In thousands)

2024 $ 3,058 $ 3,120

2025 1,705 87

Total minimum lease payments 5,369 3,207

present value adjustment ( 477 ) ( 85 )

Present value of lease liabilities $ 4,892 $ 3,122

Rental expense for operating leases and other service agreements was approximately $ 15.3 million, $ 15.2 million and $ 13.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Future minimum lease payments under non-cancellable operating and finance leases are immaterial.

Fair Value Measurements

7 unchanged sentences

quoted prices for similar assets or liabilities in active markets;

inputs other than quoted prices that are observable for the assets

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

or liabilities;

inputs other than quoted prices that are observable for the assets or liabilities;

or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

1 unchanged sentence

These assumptions are required to be consistent with market participant assumptions that are reasonably available.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Assets and Liabilities

The carrying amount of cash, accounts receivable, and accounts payable approximate their fair value due to their short-term nature.

The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of December 31, 2023 and December 31, 2022, are summarized as follows:

The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of December 31, 2024 and 2023, are summarized as follows:

December 31, 2024

1 unchanged sentence

(In thousands)

Cash equivalents:

Money market funds $ 174,701 $ — $ — $ 174,701

Cash equivalents - money market funds

$ 105,772 $ — $ — $ 105,772

Total assets $ 105,772 $ — $ — $ 105,772

Warrants liability

$ — $ — $ 17,498 $ 17,498

Total liabilities

$ — $ — $ 17,498 $ 17,498

December 31, 2023

1 unchanged sentence

(In thousands)

Cash equivalents:

Money market funds $ 308,295 $ — $ — $ 308,295

Cash equivalents - money market funds

$ 174,701 $ — $ — $ 174,701

Total assets $ 174,701 $ — $ — $ 174,701

Earn-outs treated as contingent consideration $ — $ — $ 20,722 $ 20,722

Earn-outs treated as liability awards — — 51,499 51,499

Total liabilities $ — $ — $ 72,221 $ 72,221

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

1 unchanged sentence

The Company’s money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as Level 1 within the fair value hierarchy.

The Company’s contingent earn-out liability is measured at fair value on a recurring basis and is classified as Level 3 within the fair value hierarchy.

During 2022, the unobservable inputs used for valuation of the earn-outs primarily included asset volatility, revenue volatility, weighted-average cost of capital and market price of risk for revenue.

For 2023, the fair value was based on the negotiated contracts with the selling shareholders.

The Company’s Warrants liability was measured at fair value on a recurring basis and was classified as Level 3 within the fair value hierarchy.

Significant changes in unobservable inputs could result in significantly lower or higher fair value measurements.

On a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment.

Long-lived tangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value.

The Company uses an income approach and inputs that constitute Level 3.

Estimated fair values are Level 3 measures in the fair value hierarchy.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair value of outstanding balances of our 2024 Notes and 2026 Notes are as follows:

The estimated fair value of outstanding balances of the Notes as of the dates presented are as follows:

Fair Value Principal

Balance Unamortized Issuance Costs

Balance Unamortized Debt Discount

Unamortized Debt Issuance Costs

(In thousands)

December 31, 2024

2024 and 2026 Notes 2 $ 435,883 $ 589,992 $ ( 6,034 ) $ 583,958

2 $ 164,348 $ 361,204 $ — $ ( 2,757 ) $ 358,447

3 $ 180,360 $ 207,125 $ ( 31,137 ) $ ( 7,365 ) $ 168,623

December 31, 2023

2024 and 2026 Notes 2 $ 512,900 $ 747,500 $ ( 10,077 ) $ 737,423

Management determines the fair value by using Level 2 inputs based on antithetic variable technique done by an independent valuation specialist.

Refer to Note 8 – Convertible Senior Notes, Net of Current Portion and Capped Call Transactions for additional information.

The changes in fair value of the Level 3 liabilities are as follows:

2 $ 71,396 $ 72,492 $ — $ ( 99 ) $ 72,393

2 $ 364,487 $ 517,500 $ — $ ( 5,935 ) $ 511,565

Management determined the fair value of 2026 Notes and 2024 Notes by using Level 2 inputs based on observable market prices for similar instruments.

Management determined the fair value of the 2029 Notes and Delayed Draw Notes as of December 31, 2024 by using Level 3 inputs, including the yield of 16 %, risk-free rate of 4.35 %, and credit spread of 11.42 %.

A change in those inputs to a different amount might result in a significantly higher or lower fair value measurement.

The Company recorded the fair value of the Warrants upon issuance using the Black-Scholes valuation model and is required to revalue these Warrants at each reporting date with any changes in fair value recorded on the Company’s consolidated statements of operations.

The valuation of the Warrants was classified as Level 3 within the fair value hierarchy and is influenced by the fair value of the underlying, or notional amount of, common stock of the Company.

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the Warrants as of December 31, 2024 is as follows:

Risk free rate

Expected life (in years)

Expected volatility 76.00 %

Any significant changes in the inputs may result in significantly higher or lower fair value measurements.

Refer to Note 8 – Convertible Senior Notes, Net of Current Portion, Capped Call Transactions, and Warrants for additional information.

The changes in fair value of the Level 3 Warrants and earn-out liabilities as of the dates presented are as follows:

(In thousands)

Balance, beginning of year $ — $ 72,221

Additions in the period — 61,920

Change in fair value of contingent consideration — 4,629

1 unchanged sentence

Payments — ( 48,993 )

Issuance of Warrants

Change in fair value of Warrants

Balance, end of year $ 17,498 $ —

Certain former stakeholders of the Company’s acquisitions were eligible to receive additional cash or share considerations based on the attainment of certain operating metrics in the periods subsequent to the acquisitions of e-bot7, Tenfold and VoiceBase.

These earn-out arrangements were accounted for as either contingent considerations arrangements or compensation arrangements.

Contingent considerations were fair valued using significant inputs that are not observable in the market.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The earn-outs determined to be compensatory were remeasured each reporting period based on whether the performance targets were probable of being achieved and recognized over the related service periods.

During the year ended December 31, 2023, the Company settled the VoiceBase, Tenfold and e-Bot7 earn-outs for approximately $ 19.9 million, $ 9.3 million, and $ 7.7 million, respectively.

During the year ended December 31, 2023, the Company paid approximately $ 12.0 million in connection with the WildHealth settlement.

R efer to Note 9 – Acquisitions for additional information.

Changes to the fair value of the earnouts were recognized as a component of stock-based compensation expense and other income (expense), net in the accompanying consolidated statements of operations.

During the year ended December 31, 2023, the Company settled the VoiceBase, Tenfold and e-Bot7 earn-outs for $ 19.9 million, $ 9.3 million, and $ 7.7 million, respectively.

During the year ended December 31, 2023, the Company paid $ 12.0 million in connection with the WildHealth earn-out settlement.

Changes to the fair value of the earnouts were recognized as a component of stock-based compensation expense and Other (expense) income, net in the accompanying consolidated statements of operations.

Payments in cash were recognized as a component of compensation expense and payments in stock were recognized as a component of equity in the accompanying consolidated statements of operations.

The carrying value of earnout liabilities are recorded in accrued expenses and other current liabilities and other liabilities as of December 31, 2022 in the accompanying consolidated balance sheet.

There were no outstanding earnout liabilities as of December 31, 2024.

Commitments and Contingencies

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Benefit Plans

5 unchanged sentences

As of December 31, 2024, the Company had letters of credit totaling $ 0.5 million outstanding as a security deposit for the due performance by the Company of the terms and conditions of a supply contract.

Contractual obligations

The Company’s purchase obligations consist of agreements to purchase goods and services entered into in the ordinary c ourse of business.

The Company has purchase obligation agreements primarily relating to contracts with vendors in connection with Information Technology (“IT”) infrastructure with remaining terms of one year or less.

The Company’s non-cancellable unconditional purchase obligation in connection with these arrangements is $ 15.5 million for 2025.

Indemnifications

6 unchanged sentences

The Company has no liabilities recorded for these agreements as of December 31, 2024 and 2023.

Non-Income Related Taxes

The Company is subject to sales tax liabilities, plus applicable interest, for states in which it has an economic nexus.

As of December 31, 2023, there is a $ 0.5 million accrual balance for sales tax liabilities included within the consolidated balance sheets.

Contractual obligations

Our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business.

The Company has purchase obligation agreements primarily relating to contracts with vendors in connection with Information Technology (“IT”) infrastructure and cloud computing-related services with remaining terms of 2 years or less.

The Company’s non-cancellable unconditional purchase obligation in connection with these arrangements is approximately $ 21.3 million for 2024 and $ 14.7 million for 2025.

Stockholders’ Equity

2 unchanged sentences

The par value for the common stock is $ 0.001 per share.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Preferred Stock

1 unchanged sentence

The par value for the preferred stock is $ 0.001 per share.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

The Company’s stock-based compensation generally includes stock options, restricted stock units (“RSUs”), performance-vesting restricted stock units (“PRSUs”), and purchases under the Company’s 2019 ESPP.

The Company’s stock-based compensation generally includes stock options, RSUs, PRSUs, and purchases under the Company’s 2019 ESPP.

Stock-based compensation expense related to RSUs is based on the market value of the underlying stock on the date of grant and the related expense is recognized ratably over the requisite service period.

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The amount of compensation cost recognized depends on the relative satisfaction of the performance condition based on performance to date.

Stock Option Plans

Stock Incentive Plans

The Company’s 2019 Stock Incentive Plan became effective on April 11, 2019.

The 2019 Stock Incentive Plan, as amended and restated, allows the Company to grant incentive stock options and restricted stock units to its employees and directors to participate in the Company’s future performance through stock-based awards at the discretion of the board of directors.

The number of shares authorized for issuance as of December 31, 2023 was 42,367,744 shares in the aggregate.

Options to acquire common stock granted thereunder have ten-year terms.

As of December 31, 2023, approximately 1.3 million shares of common stock remained available for issuance (taking into account all option exercises and other equity award settlements through December 31, 2023).

At the Company’s annual meeting on October 5, 2023, the stockholders of the Company approved an amendment to increase the number of shares available for issuance thereunder by 2,300,000 shares.

The 2019 Stock Incentive Plan, as amended and restated, allows the Company’s employees and directors to participate in the Company’s future performance through grants of stock-based awards of stock options and RSUs at the discretion of the board of directors.

The number of shares authorized for issuance under the 2019 Stock Incentive Plan as of December 31, 2024 was 46,967,744 shares in the aggregate, inclusive of 4,600,000 shares approved for issuance thereunder by the stockholders of the Company at the Company’s annual meeting on November 25, 2024.

Options to acquire common stock granted under the 2019 Stock Incentive Plan have ten-year terms.

As of December 31, 2024, approximately 3.5 million shares of common stock remained available for issuance (taking into account all stock option exercises and other equity award settlements through December 31, 2024).

Employee Stock Purchase Plan

As of December 31, 2023, there were 2,000,000 shares authorized and reserved for issuance under the 2019 ESPP.

The number of shares authorized for issuance under the ESPP as of December 31, 2024 was 4,500,000 shares, inclusive of 2,500,000 shares approved for issuance thereunder by the stockholders of the Company at the Company’s annual meeting on November 25, 2024.

As of December 31, 2024, approximately 3.2 million shares of common stock remained available for issuance under the ESPP (taking into account all share purchases through December 31, 2024).

At the Company’s annual meeting on October 5, 2023, the stockholders of the Company approved an amendment of the ESPP to increase the number of shares available for issuance thereunder by 1,000,000 shares.

Inducement Plan

There are 6,159,009 shares of common stock authorized and reserved for issuance under the Inducement Plan.

On February 9, 2022, the Company’s board of directors amended the plan and authorized 2,790,961 new shares for issuance.

As of December 31, 2023, 0.7 million shares of common stock remained available for issuance under the Inducement Plan (taking into account all option exercises and other equity award settlements through December 31, 2023).

There are 15,412,342 shares of common stock authorized and reserved for issuance under the Inducement Plan, inclusive of 2,333,333 shares authorized for issuance during the fourth quarter of 2024 .

As of December 31, 2024, approximately 1.2 million shares of common stock remained available for issuance under the Inducement Plan (taking into account all option exercises and other equity award settlements through December 31, 2024).

CEO Inducement Award

As part of an equity compensation package negotiated to induce John Sabino, the Company’s Chief Executive Officer, to accept employment with the Company, pursuant to the terms of the employment agreement entered into between Mr.

Sabino and the Company, the Company granted Mr.

Sabino an option to purchase 1,000,000 shares of common stock (the “CEO Inducement Award”) that will vest upon the satisfaction of certain performance-based and time-based vesting conditions.

On May 17, 2024, the Company’s board of directors authorized 1,000,000 shares for issuance under the CEO Inducement Award in compliance with and in reliance on Nasdaq Listing Rule 5635(c)(4).

The CEO Inducement Award was a standalone award granted outside of the 2019 Stock Incentive Plan and 2018 Inducement Plan.

As of December 31, 2024, no shares of common stock remained available for issuance under the CEO Inducement Award.

LIVEPERSON, INC.

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Stock Option Activity

A summary of the Company’s stock option activity and weighted average exercise prices follows:

The following table is a summary of the Company’s stock option activity and weighted average exercise prices for the years ended December 31, 2022, 2023 and 2024:

Stock Option Activity Weighted Average Remaining Contractual Term

2 unchanged sentences

Exercise Price

Balance outstanding at December 31, 2020 4,332 $ 19.78

Balance outstanding as of December 31, 2021 4,782 $ 27.52

Granted 993 20.34

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Cancelled or expired ( 1,052 ) 41.56

Balance outstanding at December 31, 2021 4,782 $ 27.52 6.77 $ 62,300

Balance outstanding as of December 31, 2022 4,459 $ 24.25 6.08 $ 1,327

Options vested and expected to vest 1,047 $ 29.80 8.06 $ 242

Options exercisable at December 31, 2021 2,564 $ 17.87 5.05 $ 46,932

Balance outstanding at December 31, 2021 4,782 $ 27.52

Options exercisable as of December 31, 2022

2,758 $ 21.26 4.94 $ 986

Balance outstanding as of December 31, 2022

4,459 $ 24.25

Granted 18 11.37

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Cancelled or expired ( 1,273 ) 22.69

Balance outstanding at December 31, 2022 4,459 $ 24.25 6.08 $ 1,327

Balance outstanding as of December 31, 2023

3,137 $ 22.68 4.84 $ 40

Options vested and expected to vest 379 $ 28.83 7.89 $ —

Options exercisable at December 31, 2022 2,758 $ 21.26 4.94 $ 986

Balance outstanding at December 31, 2022 4,459 $ 24.25

Options exercisable as of December 31, 2023

2,643 $ 21.67 4.20 $ 40

Balance outstanding as of December 31, 2023

3,137 $ 22.68

Granted 1,000 1.02

Exercised ( 67 ) 2.62

Cancelled or expired ( 1,474 ) 21.96

Balance outstanding at December 31, 2023 3,137 $ 22.68 4.84 $ 40

Balance outstanding as of December 31, 2024

2,663 $ 22.93 3.95 $ 7

Options vested and expected to vest 674 $ 4.91 8.93 $ 290

Options exercisable at December 31, 2023 2,643 $ 21.67 4.20 $ 40

The total fair value of stock options exercised during the years ended December 31, 2023, 2022 and 2021 was approximately $ 3.4 million, $ 11.3 million and $ 6.6 million, respectively.

As of December 31, 2023, there was approximately $ 5.3 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements.

That cost is expected to be recognized over a weighted average period of approximately 1.9 years.

Options exercisable as of December 31, 2024

1,595 $ 22.93 3.65 $ 7

The total fair value of stock options exercised during the years ended December 31, 2024 was immaterial.

The total fair value of stock options exercised during the years ended December 31, 2023 and 2022 was $ 3.4 million and $ 11.3 million, respectively.

As of December 31, 2024, there was $ 1.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements.

That cost is expected to be recognized over a weighted average period of 5.85 years.

The per share weighted average fair value of stock options granted during the years ended December 31, 2024, 2023 and 2022 was $ 0.17 , $ 6.54 , and $ 10.20 , respectively.

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1.62 % – 4.20 %

0.46 % – 1.33 %

Expected life (in years) 10 5 5

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53.87 % – 64.13 %

53.51 % – 54.55 %

LIVEPERSON, INC.

3 unchanged sentences

• Risk-free interest rate – The Company uses the market yield on U.S.

Treasury securities at 5 years with constant maturity, representing the current expected life of stock options in years.

Treasury securities at 5 years with constant maturity, representing the current expected life of stock options in years, with the exception of the 2024 grants, which had a 10-year life.

• Expected life – The Company uses historical data to estimate the expected life of a stock option.

1 unchanged sentence

Restricted Stock Unit and Performance-Vesting Restricted Stock Unit Activity

A summary of the Company’s RSUs and PRSUs activity and weighted average grant date fair value, as follows:

The following table is a summary of the Company’s RSUs and PRSUs activity and weighted average grant date fair value, for the years ended December, 31, 2022, 2023 and 2024:

Number of Shares

2 unchanged sentences

(In thousands) (Per share) (In thousands)

Balance outstanding at December 31, 2020 2,950 $ 27.00 $ 183,781

Balance outstanding as of December 31, 2021 3,732 $ 43.63 $ 133,308

Awarded 4,927 18.61

1 unchanged sentence

Forfeited ( 1,486 ) 40.30

Non-vested and outstanding at December 31, 2021 3,732 $ 43.63 $ 133,308

Balance outstanding at December 31, 2021 3,732 $ 43.63 $ 133,308

Non-vested and outstanding as of December 31, 2022 5,235 $ 25.42 $ 53,080

Balance outstanding as of December 31, 2022 5,235 $ 25.42 $ 53,080

Awarded 4,315 4.41

1 unchanged sentence

Forfeited ( 1,779 ) 25.21

Non-vested and outstanding at December 31, 2022 5,235 $ 25.42 $ 53,080

Balance outstanding at December 31, 2022 5,235 $ 25.42 $ 53,080

Non-vested and outstanding as of December 31, 2023 5,064 $ 12.53 $ 19,193

Balance outstanding as of December 31, 2023 5,064 $ 12.53 $ 19,193

Awarded 11,929 0.97

1 unchanged sentence

Forfeited ( 1,455 ) 14.49

Non-vested and outstanding at December 31, 2023 5,064 $ 12.53 $ 19,193

Non-vested and outstanding as of December 31, 2024 12,522 $ 2.03

Expected to vest 9,591 $ 2.06 $ 14,578

RSUs granted to employees generally vest over a three to four-year period, or upon achievement of certain performance conditions.

As of December 31, 2023, total unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested RSUs and PRSUs was approximately $ 48.3 million and the weighted-average remaining vesting period was 1.9 years.

For the years ended December 31, 2023 and 2022, the Company opted to settle cash awards related to bonuses entirely in cash.

For the year ended December 31, 2021, the Company accrued approximately $ 18.4 million for cash awards related to bonuses to be settled in shares of the Company’s stock and recorded a corresponding expense, which is included as a component of stock-based compensation expense in the accompanying consolidated statement of operations.

RSUs granted to employees generally vest over a 1 to 4-year period, or upon achievement of certain performance conditions.

As of December 31, 2024, total unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested RSUs and PRSUs was $ 17.6 million and the weighted-average remaining vesting period was 0.8 years.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense recognized in the Company’s consolidated statements of operations and cash flows was $ 11.9 million, $ 109.6 million, and $ 69.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.

PRSUs granted are generally subject to both a service-based vesting condition and a performance-based vesting condition.

1 unchanged sentence

The associated compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied.

PRSUs granted in years 2023, 2022 and 2021 are immaterial.

There were no PRSU grants in 2024.

PRSUs granted in years 2023 and 2022 were immaterial.

Total stock-based compensation costs included in the consolidated statements of operations for the periods presented are as follows:

Year Ended December 31,

2024 2023 2022

(In thousands)

Cost of revenue $ 1,080 $ 1,456 $ 9,933

Sales and marketing 7,394 10,354 19,575

General and administrative 6,789 ( 5,706 ) 40,690

Product development 6,726 5,750 39,440

Total $ 21,989 $ 11,854 $ 109,638

Restructuring

During the second quarter of 2022, LivePerson began a restructuring initiative to realign the Company’s cost structure to better reflect significant product and business model innovation and then-recent changes due to acquisitions and factors outside the control of the Company.

As part of the restructuring initiative, the Company reoriented its global product and engineering organization for greater efficiency and focus, and reallocated some spending to increase its investment in customer success and go-to-market initiatives.

In 2023, due to the changing technology landscape related to the evolution of LLMs, we were able to identify opportunities for significant cost savings because the latest generation of LLMs is able to build a bot in minutes, enabling reduction of headcount previously devoted to bot-building.

Additionally, we have moved to a product-led growth structure where we flattened the organization to align to more efficient sales and service support ratios.

LivePerson maintains restructuring initiatives to realign the Company’s cost structure with its current business model.

In connection with the restructuring initiatives, the Company recognized restructuring costs of $ 11.1 million, $ 22.7 million, and $ 20.0 million during the years ended December 31, 2024, 2023, and 2022, respectively, which is included in Restructuring costs in the accompanying consolidated statements of operations.

Such costs primarily include severance and other compensation-related costs as well as IT infrastructure contract termination costs.

Such costs primarily include severance and other compensation costs as well as IT infrastructure contract termination costs.

While the Company’s restructuring efforts are ongoing, the 2024 restructuring activities were considered to be substantially completed as of December 31, 2024.

The following table presents the detail of the liability for the Company’s restructuring charges, which is included within Accrued expenses and other current liabilities within the consolidated balance sheets as of December 31, 2024 and 2023:

1 unchanged sentence

Balance, beginning of year $ 2,076 $ 803

Lease restructuring costs — 442

IT contract termination costs 5,744 —

IT contract termination (reversals) costs, net

( 1,217 ) 5,744

Severance and other associated costs 12,356 16,920

6 unchanged sentences

Lease restructuring costs $ — $ — $ 442

IT contract termination costs 5,744 — —

IT contract termination (reversals) costs, net

( 1,217 ) 5,744 —

Severance and other associated costs 12,356 16,920 19,525

Total restructuring costs $ 11,139 $ 22,664 $ 19,967

Legal Matters

Stockholder Litigation

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Legal Matters

Stockholder Litigation

In December 2023, a putative stockholder class action entitled Damri v.

2 unchanged sentences

The complaint alleges that the Company’s Form 10-Q filings and forecasts for the first, second, and third quarters of fiscal year 2022 were false and misleading in violation of Section 10(b) of the Securities Exchange Act of 1934, based on the Company’s later disclosures and report on Form 10-K on March 16, 2023.

On May 31, 2024, the plaintiff filed an amended complaint.

The Company moved to dismiss the amended complaint in August 2024, and the motion is awaiting decision.

A parallel litigation on behalf of stockholders who purchased their shares on the Tel Aviv Stock Exchange, entitled Weissbrod v.

2 unchanged sentences

LoCascio, No.

1:24-cv-00598, was filed in the United States District Court for the Southern District of New York by a purported stockholder of the Company against the Company’s former Chief Executive Officer, its Chief Financial Officer, most of the members of the current board of directors and several former directors.

The derivative litigation claims that the Company itself was harmed by the same acts and omissions underlying the Damri federal securities lawsuit, and seeks to recover unspecified losses on behalf of the Company.

The Marti case is stayed pending further developments in the Damri case .

1:24-cv-00598, was filed in the United States District Court for the Southern District of New York by a purported stockholder of the Company against the Company’s former Chief Executive Officer, its Chief Financial Officer, members of the current Board of Directors and several former Directors.

The Marti litigation claims that the Company itself was harmed by the same acts and omissions underlying the Damri federal securities lawsuit and seeks to recover unspecified losses on behalf of the Company.

Between June and September 2024, four other purported derivative actions were filed by purported stockholders of the Company against the Company’s former Chief Executive Officer, its Chief Financial Officer, members of the current Board of Directors and several former Directors.

These four purported derivative actions, similar to the Marti litigation, claim that the Company itself was harmed by the same acts and omissions underlying the Damri federal securities lawsuit, and seek to recover unspecified losses on behalf of the Company.

The four actions are entitled:

(i) Steffens v.

1:24-cv-04481, filed in the United States District Court for the Southern District of New York;

LoCascio, Index No.

653498/2024, filed in the Supreme Court of the State of New York, New York County;

(iii) Morales v.

LoCascio, No.

1:24-cv-05297, filed in the United States District Court for the Southern District of New York;

and (iv) Perkins v.

LoCascio, Index No.

654992/2024, filed in the Supreme Court of the State of New York, New York County.

The Marti, Steffens and Morales cases are stayed, and the Perkins case is in abeyance, pending further developments in the Damri case.

I n January 2024, a purported stockholder of the Company filed a lawsuit against the Company and its Board of Directors entitled Browne v.

3 unchanged sentences

In February 2024, the Board approved technical amendments to the Tax Benefits Preservation Plan which were filed by the Company on Form 8-K, and the case was dismissed as moot, subject to attorneys’ fees on behalf of the plaintiff.

The plaintiff has sought $ 850,000 in fees and expenses, which the Company opposed.

On September 5, 2024, the Court awarded the plaintiff $ 735,000 , which has been paid and is recorded in General and administrative expenses in the consolidated statement of operations for the year ended December 31, 2024.

In February 2024, Starboard Value LP and several of its related entities and investment funds filed a lawsuit against the Company, its former Chief Executive Officer, and its Chief Financial Officer entitled Starboard Value LP v.

2 unchanged sentences

The complaint alleges common law fraud, fraudulent inducement and negligent misrepresentation in connection with an alleged scheme to induce Starboard to settle its 2022 proxy contest against the Company and, as stated in the complaint, involves previous Starboard allegations of misrepresentations in the Company’s public disclosures that the Company previously informed Starboard were found to be unsubstantiated following an independent investigation.

The complaint seeks unspecified damages.

Starboard seeks damages for its trading losses and purported lost anticipated profits.

The defendants have filed an answer denying the substantive allegations of the complaint.

The parties are currently engaged in discovery and the case is scheduled for trial in June 2025.

COVID-Related Matters

As has been widely reported, there is heightened scrutiny by the federal government across many programs related to global novel coronavirus disease (“COVID-19”) that were introduced during the COVID-19 pandemic.

The Company and its wholly-owned subsidiary WildHealth were each previously engaged in the delivery of products and services related to COVID-19 testing, and have been subsequently subject to governmental inquiries with respect to those COVID-19 related products and services, including inquiries by Medicare, the Department of Justice and the U.S.

Food and Drug Administration (“governmental agencies”).

In November 2022, a professional corporation managed by WildHealth received notice that Medicare reimbursements for its services rendered under a Medicare demonstration program related to COVID-19 testing (the “Program”) were suspended pending further review.

Subsequently, WildHealth received and successfully responded to inquiries from additional governmental agencies with respect to its participation in the Program.

The Centers for Medicare and Medicaid Services (CMS) has provided notice that the Medicare payment suspension was terminated.

The reimbursements for services rendered under the Program were released in November and December 2023.

The Company previously provided other products and services related to COVID-19 testing and accompanying software.

Those COVID-19 related products and services have also been the subject of inquiry and review by governmental agencies.

The Company and WildHealth have discontinued all products and services related to COVID-19, and have responded to and intend to continue to cooperate with governmental inquiries related to their previous engagement in COVID-19 related product and service offerings.

Other Legal, Administrative, Governmental and Regulatory Matters

From time to time, the Company is or may be subject to or involved in legal, administrative, governmental and/or regulatory proceedings, inquiries and investigations as well as actual or threatened litigation, claims and/or demands (each an

The Company previously provided products and services related to COVID-19 testing and accompanying software.

Those products and services have been the subject of inquiry and review by Medicare, the Department of Justice and the U.S.

Food and Drug Administration.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

“Action” and collectively “Actions”).

These have included and may include (without limitation) Actions brought by or against the Company, its affiliates, subsidiaries, directors and/or officers with respect to intellectual property, contracts, financial, commercial, employment, legal, compliance, privacy, data security, regulatory and/or other matters related to our business, as well as Actions brought against the Company’s customers for which the Company has a contractual indemnification obligation.

The Company has discontinued all products and services related to COVID-19, and has responded to and intends to continue to cooperate with governmental inquiries related to its previous engagement in COVID-19 related product and service offerings.

Other Legal, Administrative, Governmental and Regulatory Matters

These have included and may include (without limitation) Actions brought by or against the Company, its affiliates, subsidiaries, directors and/or officers with respect to intellectual property, contracts, financial, commercial, employment, legal, compliance, privacy, data security, regulatory and/or other matters related to the Company’s business, as well as Actions brought against the Company’s customers for which the Company has a contractual indemnification obligation.

Regardless of the outcome, Actions can have an adverse impact on the Company because of defense and/or settlement costs, diversion of management resources, reputational risks and other factors.

The Company accrues for certain contingencies when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated and discloses certain contingencies for which no accrual has been made as appropriate and in compliance with ASC 450.

Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable.

12 unchanged sentences

(Israel) are more likely than not to be realized as these jurisdictions have positive cumulative pre-tax book income after adjusting for permanent and one-time items.

During the year ended December 31, 2023, there was an increase in the valuation allowance recorded of $ 23.7 million.

The Company had a valuation allowance on certain deferred tax assets for the years ended December 31, 2024, 2023, and 2022 of $ 234.6 million, $ 211.2 million, and $ 187.5 million, respectively.

For the year ended December 31, 2023, an increase in the valuation allowance in the amount of $ 23.7 million was recorded as an expense.

For the year ended December 31, 2022, an increase in the valuation allowance in the amount of $ 38.7 million was recorded as an expense and an additional increase of $ 0.5 million was recorded to goodwill against acquired federal and state net operating losses and due to the adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , the Company recorded an increase of the valuation allowance to other comprehensive income of $ 41.2 million.

For the years ended December 31, 2024 and 2023, increases in the valuation allowance in the amounts of $ 23.4 million and $ 23.7 million were recorded as an expense.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company’s use of its federal net operating loss (“NOL”) carryforwards may be limited if the Company experiences an ownership change, as defined in Section 382 of the Code.

2 unchanged sentences

Corresponding provisions of state law may limit the Company’s ability to utilize NOL carryforwards for state tax purposes.

As of December 31, 2023, the Company had approximately $ 583.1 million of federal NOL carryforwards available to offset future taxable income.

Included in this amount is $ 0.9 million of federal NOL carryovers from the Company’s acquisition of Proficient in 2006, $ 49.4 million of federal NOL carryovers from the Company’s acquisition of Tenfold in 2021, $ 64.9 million of federal NOL carryovers from the Company’s acquisition of VoiceBase in 2021 and $ 1.0 million of federal NOL carryovers from the Company’s acquisition of WildHealth in 2022.

Approximately $ 70.2 million of these federal NOL carryforwards were generated in taxable years ending on or before

As of December 31, 2024, the Company had $ 644.0 million of federal NOL carryforwards available to offset future taxable income.

Included in this amount is $ 0.9 million of

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017 and will expire in various years through 2037.

federal NOL carryovers from the Company’s acquisition of Proficient in 2006, $ 49.4 million of federal NOL carryovers from the Company’s acquisition of Tenfold in 2021, $ 64.9 million of federal NOL carryovers from the Company’s acquisition of VoiceBase in 2021 and $ 1.0 million of federal NOL carryovers from the Company’s acquisition of WildHealth in 2022.

Of these federal NOL carryforwards, $ 70.3 million were generated in taxable years ending on or before December 31, 2017 and will expire in various years through 2037.

Federal NOL carryforwards generated in taxable years ending after December 31, 2017, do not expire, but generally may only offset up to 80% of federal taxable income earned in a taxable year.

The Company has entered into a Tax Benefits Preservation Plan (the “Tax Benefits Preservation Plan”), which is designed to reduce the risk of substantial impairment to the Company’s NOLs and certain other tax attributes that could result from an “ownership change” within the meaning of Section 382 of the Code.

See “Tax Benefits Preservation Plan” in Note 21 – Subsequent Events for additional information.

The domestic and foreign components of income (loss) before provision for (benefit from) income taxes consist of the following:

On January 22, 2024, the Company entered into a Tax Benefits Preservation Plan designed to reduce the risk of substantial impairment to its NOLs that could result from an “ownership change” within the meaning of Section 382 of the Code.

The Tax Benefits Preservation Plan creates a disincentive for any person or group of affiliated or associated persons to acquire 4.9% or more of the Company’s outstanding common stock (any such person or group, an “Acquiring Person”), or to further accumulate shares of the Company’s outstanding common stock if such person or group of person already owns 4.9% or more of the Company’s outstanding common stock, without the approval of the Company’s Board, unless and until the Board determines that the Tax Benefits Preservation Plan is no longer necessary or desirable for preservation of the Company’s NOLs.

In connection therewith, on January 22, 2024, the Board authorized a dividend of one right (a “Right”) for each outstanding share of common stock of the Company.

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $ 0.001 per share, at a price of $ 18.00 , subject to certain adjustments.

The Rights will separate from the common stock and become exercisable and separately transferable at the close of business on the date that is the tenth ( 10 th) business day after the earlier of (i) the date on which on which a press release is issued or other public announcement is made indicating that a person or group of affiliated or associated persons has become an Acquiring Person and (ii) the date on which a tender offer or exchange offer is commenced that, upon consummation, would result in a person or group of affiliated or associated persons becoming an Acquiring Person.

If issued and not redeemed by the Company, each holder of a Right (other than the Acquiring Person, the Rights of which shall become null and void) will, upon exercise, be entitled to purchase shares of the Company’s common stock having a then-current market value equal to two times the exercise price of the Right.

However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

The domestic and foreign components of loss before provision for income taxes consist of the following:

Year Ended December 31,

7 unchanged sentences

Germany ( 10,246 ) ( 5,453 ) ( 10,400 )

1,446 781 501

Total $ ( 131,538 ) $ ( 96,272 ) $ ( 224,020 )

——————————————

(1) Includes Bulgaria, Canada, France, India, Italy, Japan, Mexico, Poland, Singapore and Spain.

(1) Includes Bulgaria, Canada, France, India, Italy, Japan, Poland, Singapore and Spain.

No additional provision has been made for U.S.

2 unchanged sentences

tax liability would be immaterial through December 31, 2024.

The provision for (benefit from) income taxes consists of the following:

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The provision for income taxes consists of the following:

Year Ended December 31,

11 unchanged sentences

Total deferred income taxes 623 1,046 ( 1,162 )

Total provision for (benefit from) income taxes $ 4,163 $ 1,727 $ ( 2,404 )

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total provision for income taxes $ 2,735 $ 4,163 $ 1,727

The difference between the total income taxes computed at the federal statutory rate and the provision for income taxes consists of the following:

12 unchanged sentences

7.18 % 1.69 % — %

Debt restructuring ( 1.83 ) % — % — %

Other 0.37 % ( 0.93 ) % ( 0.48 ) %

Total provision ( 2.08 ) % ( 4.32 ) % ( 0.78 ) %

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The effects of temporary differences and federal NOL carryforwards that give rise to significant portions of federal deferred tax assets and deferred tax liabilities as of the dates presented:

2 unchanged sentences

Net operating loss carryforwards $ 172,923 $ 157,919

Foreign tax credit — 1,222

R&D tax credit 1,757 1,757

1 unchanged sentence

Interest 7,544 4,582

Operating lease liability 2,111 760

Operating lease liabilities

Accounts payable and accrued expenses 4,266 6,934

Non-cash compensation 7,617 10,632

Intangibles amortization

R&D capitalization 58,237 52,878

8 unchanged sentences

Outside basis difference in subsidiary stock ( 8,040 ) —

Operating lease right-of-use asset ( 1,904 ) ( 524 )

Operating lease right-of-use assets

Total deferred tax liabilities ( 29,421 ) ( 32,102 )

Net deferred tax assets $ 869 $ 1,597

The Company has U.S.

federal, Australian, and German NOLs of $ 644.0 million, $ 0.6 million, and $ 26.8 million, respectively.

The Australian and German NOLs can be carried forward indefinitely.

For the federal NOLs, $ 512.8 million can be carried

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

forward indefinitely, $ 0.9 million will expire between 2024 and 2029, and $ 69.4 million will expire between 2030 and 2037.

We have $ 449.3 million of state NOLs, of which $ 108.0 million can be carried forward indefinitely and $ 341.4 million expire between 2024 and 2044.

For the federal NOLs, $ 573.7 million can be carried forward indefinitely, $ 0.9 million will expire between 2025 and 2030, and $ 69.4 million will expire between 2030 and 2037.

The Company has $ 491.1 million of state NOLs, of which $ 107.0 million can be carried forward indefinitely and $ 384.1 million expire between 2024 and 2045.

ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with other provisions contained within this guidance.

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The Company had unrecognized tax benefits of $ 3.5 million as of December 31, 2024 and $ 3.1 million as of December 31, 2023, respectively, that would affect the effective tax rate if recognized.

Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits and recorded in accrued expenses and other current liabilities was $ 0.5 million as of December 31, 2023 and was immaterial as of December 31, 2022.

Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits and recorded in Accrued expenses and other current liabilities was $ 0.7 million and $ 0.5 million as of December 31, 2024 and 2023, respectively.

There are no unrecognized tax benefits expected to reverse in the next twelve months and impact the effective tax rate.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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Unrecognized tax benefits balance, beginning of year $ 3,061 $ 2,721 $ 2,917

Increase due to business combinations — — 488

Gross increase for tax positions of current years 340 205 376

Decrease due to settlement — — ( 1,562 )

Gross increase for tax positions of prior years

Gross increase for tax positions of current year

Uncertain tax basis classified as held-for-sale liabilities — — ( 401 )

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On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA imposes a number of

significant changes, including, among other things, a 15% minimum tax on the book income of certain corporations and a 1%

excise tax on stock buybacks by U.S.

The IRA imposes a number of significant changes, including, among other things, a 15% minimum tax on the book income of certain corporations and a 1% excise tax on stock buybacks by U.S.

public companies.

Only limited guidance has been issued to date with respect to these

The Company does not currently expect the tax-related provisions of the IRA to have a material impact on its financial

A statutory rate change in the United Kingdom was enacted as of the balance sheet date ending December 31, 2021.

Only limited guidance has been issued to date with respect to these changes.

The Company does not currently expect the tax-related provisions of the IRA to have a material impact on its financial results.

A statutory rate change in the United Kingdom was enacted as of the balance sheet date ended December 31, 2021.

Effective April 1, 2023, the tax rate increased from 19% to 25%.

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The Company accounts for its 19.2 % interest in Claire using the equity method of accounting.

The Company recorded its ownership percentage of losses of Claire in Other income (expense), net of $ 2.3 million and $ 7.7 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company’s equity method investment in joint venture was reduced to zero on the consolidated balance sheets, based on current period losses.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s equity method investment in joint venture was reduced to zero during the prior year, based on the prior year losses, and remained at zero on the consolidated balance sheet as of December 31, 2024.

The Company recorded its ownership percentage of losses of Claire in Other (expense) income, net in the amount of $ 2.3 million for the year ended December 31, 2023.

Variable Interest Entities

The Company prepares its consolidated financial statements in accordance with ASC 810, which provides for the consolidation of VIEs of which the Company is the primary beneficiary.

In February 2022, the Company acquired WildHealth as well as certain variable interests that WildHealth has in four Professional Corporations (“PCs”).

The PCs are owned by a medical practitioner in accordance with certain state laws which restrict the corporate practice of medicine and require medical practitioners to own such entities.

WildHealth provides management and other services to the PCs in exchange for a management fee and provides financial support to the PCs through a revolving credit arrangement.

WildHealth also has separate agreements with the equity holder of the PCs where it may acquire and assign such equity interests for certain PCs.

The agreement entitles WildHealth to control rights sufficient to require the Company to consolidate the balance sheet and results of operations of the PCs as VIEs.

The Company determined that the PCs are VIEs as WildHealth is the primary beneficiary of the PCs.

In February 2022, the Company acquired WildHealth as well as certain variable interests that WildHealth had in four Professional Corporations (“PCs”).

The PCs were owned by a medical practitioner in accordance with certain state laws which restrict the corporate practice of medicine and require medical practitioners to own such entities.

WildHealth provided management and other services to the PCs in exchange for a management fee and provided financial support to the PCs through a revolving credit arrangement.

WildHealth also had separate agreements with the equity holder of the PCs where it may acquire and assign such equity interests for certain PCs.

The agreement entitled WildHealth to control rights sufficient to require the Company to consolidate the balance sheet and results of operations of the PCs as VIEs.

The Company determined that the PCs were VIEs as WildHealth was the primary beneficiary of the PCs.

The assets, liabilities, revenues, and operating results of the VIEs after elimination of intercompany transactions were not material as of and for the years ended December 31, 2024, 2023 and 2022.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the second quarter of 2024, the Company entered into an agreement for and completed the sale of 100 % of the equity in WildHealth.

As a result, as of December 31, 2024, the PCs related to WildHealth are no longer considered VIEs of the Company.

Refer to Note 19 - Divestitures for additional information.

Related Parties

Related parties are defined as entities related to the Company’s directors or main shareholders as well as equity method affiliates.

Related parties include entities related to the Company’s directors or main stockholders as well as equity method affiliates.

During the year ended December 31, 2023, the Company provided services to Claire, an equity method affiliate (refer to Note 16 – Equity Method Investment for additional information on the equity method affiliate), in exchange for fees through certain commercial arrangements.

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In connection with the JV Agreement, the Company entered into commercial agreements with Claire, under which the Company agreed to provide custom software development and managed services in exchange for fees governed by the terms and conditions set forth therein.

In accordance with guidance under ASC 606, Claire is considered a customer of the Company.

Revenues for the services provided to Claire included in the Company’s Consolidated Statements of Operations were $ 3.8 million and $ 38.7 million for the years ended December 31, 2023 and 2022, respectively.

Accounts receivable totaling $ 2.1 million as of December 31, 2023 was included in the Company’s consolidated balance sheets, for which the Company recognized $ 1.5 million in its allowance for credit losses.

Total unbilled invoices and accounts receivable were $ 4.8 million and $ 1.4 million as of December 31, 2022 , respectively, and were included in the Company’s consolidated balance sheets.

In accordance with guidance under ASC 606, Claire was considered a customer of the Company.

No revenues were recognized for the services provided to Claire included in the Company’s consolidated statements of operations for the year ended December 31, 2024, compared to revenues of $ 3.8 million for the year ended December 31, 2023.

Fiscal 2024 Divestitures

In the second quarter of 2024, the Company completed the sale of 100% of the equity in WildHealth to a third party.

Pursuant to ASC Subtopic 205-20 , Presentation of Financial Statements - Discontinued Operations , the divestiture did not meet the criteria for presentation as a discontinued operation.

WildHealth was part of the Business segment and was a separate reporting unit.

The transaction resulted in a loss of $ 0.6 million which was recognized and presented separately in Loss (gain) on divestiture on the Company’s consolidated statements of operations for the year ended December 31, 2024.

Subsequent to the closing, the Company does not have ongoing involvement or arrangements with WildHealth.

Fiscal 2023 Divestitures

In the fourth quarter of 2022, the Company entered into a non-binding Letter of Intent to divest Kasamba, Inc.

and Kasamba LTD (together “Kasamba”).

The Company determined that Kasamba met the criteria for classification as held for sale in accordance with ASC Subtopic 360-10, and the related net assets were separately presented in current assets and current liabilities as held for sale on the consolidated balance sheets as of December 31, 2022 and depreciation of long-lived assets ceased.

Pursuant to ASC 205-20, the divestiture did not meet the criteria for presentation as a discontinued operation.

Kasamba represented the Company’s Consumer segment.

The Share Purchase Agreement between Ingenio, LLC (“Ingenio”) and the Company was executed and the transaction closed on March 20, 2023.

In accordance with the Share Purchase Agreement, the Company sold all of the issued and outstanding shares of Kasamba.

Cash of $ 16.9 million was received upon closing, $ 2.6 million as a deferred payment is expected to be received within a year, and was included in prepaid expenses and other current assets on the Company’s consolidated balance sheets as of December 31, 2023 .

and Kasamba LTD (together “Kasamba”) which represented the Company’s Consumer segment.

Pursuant to ASC Subtopic 360-10, Impairment or Disposal of Long-Lived Assets , the Company applied held for sale accounting treatment to the assets and liabilities of Kasamba.

Accordingly, the related net assets were separately presented in current assets and current liabilities as held for sale on the consolidated balance sheets as of December 31, 2022, up until the close of the transaction.

The held for sale classification also resulted in ceasing depreciation and amortization on the designated assets.

The Share Purchase Agreement between Ingenio, LLC and the Company closed on March 20, 2023.

In accordance with the Share Purchase Agreement, the Company sold all of the issued and outstanding shares of Kasamba for $ 16.9 million which was received in cash upon closing;

and $ 2.6 million deferred payment to be received within a year of the close transaction date .

$ 11.8 million was required to be held in various escrow accounts for up to 15 months, and was included in Restricted cash on the Company’s consolidated balance sheets;

however, $ 9.8 million of this escrow amount was released as of December 31, 2023 .

The transaction resulted in a gain of $ 17.6 million, which was recognized and presented separately as a gain on divestiture on the Company’s consolidated statements of operations during the year ended December 31, 2023 .

The Company received $ 0.9 million in cash in connection with the net working capital settlement during the third quarter of 2023.

LIVEPERSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Major classes of assets and liabilities sold were as follows:

As of March 20, 2023

Assets (In thousands)

Cash and cash equivalents $ 3,058

Accounts receivable, net 381

Prepaid expenses and other current assets 956

Property and equipment, net 9,614

Goodwill 8,024

Deferred tax assets 721

Other assets 334

Total assets held for sale $ 23,088

Accounts payable $ 2,433

Accrued expenses and other current liabilities 4,859

Deferred tax liability 798

Deferred revenue 679

Total liabilities related to assets held for sale $ 8,769

Subsequent Events

Tax Benefits Preservation Plan

In connection therewith, on January 22, 2024, the Board authorized a dividend of one right (a “Right”) for each outstanding share of common stock of the Company.

The Rights will separate from the common stock and become exercisable and separately transferrable at the close of business on the date that is the tenth ( 10 th) business day after the earlier of (i) the date on which on which a press release is issued or other public announcement is made indicating that a person or group of affiliated or associated persons has become an Acquiring Person and (ii) the date on which a tender offer or exchange offer is commenced that, upon consummation, would result in a person or group of affiliated or associated persons becoming an Acquiring Person.

However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

Convertible Senior Notes due 2024 and Capped Calls

On March 1, 2024, the Company repaid in full at maturity the outstanding $ 72.5 million in aggregate principal amount of the 2024 Notes.

In June 2024, restricted cash of $ 2.0 million was released and was classified as Cash and cash equivalents on the consolidated balance sheet as of December 31, 2024.

The transaction resulted in a gain of $ 17.6 million, which was recognized and presented separately in Loss (gain) on divestiture on the Company’s consolidated statements of operations during the year ended December 31, 2023 .

During the year ended December 31, 2024, the Company recognized $ 1.8 million of post-closing adjustments pertaining to the final agreement amount which is recorded in General and administrative expenses in the consolidated statements of operations.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data