LivePerson Inc.

08/07/2026 | Press release | Distributed by Public on 08/07/2026 14:32

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in "Risk Factors."
Merger Agreement
On April 21, 2026, LivePerson, SoundHound AI, Inc. ("SoundHound") and Lightspeed Merger Sub, Inc., an indirect wholly owned subsidiary of SoundHound ("Merger Sub I") entered into a Merger Agreement (the "Original Merger Agreement"), which was amended and restated on July 2, 2026, by the Amended and Restated Merger Agreement (the "Amended and Restated Merger Agreement"), by and among LivePerson, SoundHound, Merger Sub I and Lightspeed Merger Sub II Inc., an indirect wholly owned subsidiary of SoundHound ("Merger Sub II"), under which, upon the terms and subject to the conditions set forth therein, Merger Sub I will be merged with and into LivePerson (the "First Merger"), with LivePerson surviving the First Merger as an indirect, wholly owned subsidiary of SoundHound and, immediately following the First Merger, Merger Sub II will be merged with and into LivePerson (the "Second Merger," and together with the First Merger, the "Mergers"), with LivePerson surviving the Second Merger as an indirect, wholly owned subsidiary of SoundHound. See Note 1 - Description of Business and Basis of Presentation under Item 1 of this Quarterly Report on Form 10-Q for additional information about the Amended and Restated Merger Agreement.
Revenue Retention and Current Trends
We continue to observe slower than anticipated renewals and new business bookings, primarily driven by customer uncertainty regarding our financial stability as well as broader macroeconomic and industry factors extending enterprise buying cycles, including for high-value AI solutions. Because we recognize revenue from subscriptions over the term of the customer contract, declines in our business may not be immediately reflected in our operating results, but could negatively impact the Company's revenue on a long-term basis.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). As such, we are required to make certain estimates, judgments and assumptions that management believes are reasonable based upon the information available. We base these estimates on our historical experience, future expectations and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments that may not be readily apparent from other sources. We evaluate these estimates on an annual basis. Actual results could differ from those estimates under different assumptions or conditions, and any differences could be material.
Except as described below, there have been no significant changes in our critical accounting policies and estimates during the three and six months ended June 30, 2026, as compared to the critical accounting policies and estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 16, 2026.
In connection with the interim goodwill impairment test performed as of June 30, 2026, we determined the fair value of our reporting unit using a direct, market-based approach, rather than the income and market approaches used in our annual test as of October 1, 2025 and interim test on December 31, 2025, which required significant judgment regarding forecasted future revenues, EBITDA, discount rates, and selected marketplace multiples of comparable public companies. The approach used as of June 30, 2026 estimates fair value on a total invested capital basis using (i) the potential settlement value of the outstanding 2026 Notes, (ii) the market capitalization of LivePerson common stock, which has an implied discount from the Original Merger Agreement purchase price (subject to the $7.00 - $12.00 per share collar), and (iii) the fair value of LivePerson's outstanding debt based on the purchase price in the Original Merger Agreement (subject to the collar), adjusted based on the closing price of SoundHound's Common Stock as of June 30, 2026, as described further in Note 5. We determined
this approach to be the most reliable indicator of fair value given the existence of the Original Merger Agreement negotiated with an unaffiliated third party, which we believe provides more direct evidence of fair value than internally developed cash flow forecasts and selected market multiples. This change reflects the evidence available as of the current measurement date and does not represent a change in the Company's goodwill impairment testing methodology. However, it reduces the degree of internally developed judgment involved in the estimate relative to our prior tests, while introducing dependency on factors outside our control, including the trading prices of LivePerson and SoundHound common stock, the timing and consummation of the Mergers, and the terms of the Original Merger Agreement and Notes Restructuring Agreement, including the $7.00-$12.00 per share collar. Because the fair value of our reporting unit as of June 30, 2026 approximated its carrying value after giving effect to the impairment charge described in Note 5, future declines in LivePerson's or SoundHound's stock price, adverse changes to or termination of the Amended and Restated Merger Agreement or Notes Restructuring Agreement, or increases in the carrying value of our reporting unit's net assets could result in additional goodwill impairment charges, which could be material to our consolidated financial statements.
Recently Issued Accounting Standards
See Note 1 - Description of Business and Basis of Presentation under Item 1 of this Quarterly Report on Form 10-Q for additional information about recent accounting guidance.
Results of Operations
We enable 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. Our platform enables businesses to have conversations with millions of consumers as personally as they would with one consumer.
Comparison of the Three and Six Months Ended June 30, 2026 and June 30, 2025
The following tables set forth our results of operations for the periods presented and as a percentage of our revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
Revenue
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Revenue
$ 52,496 $ 59,600 $ (7,104) (12) % $ 109,452 $ 124,300 $ (14,848) (12) %
Revenue decreased by 12% to $52.5 million and by 12% to $109.5 million for the three and six months ended June 30, 2026, respectively, from $59.6 million and $124.3 million for the comparable periods in 2025. This decrease in revenue is due to a decrease in hosted services of $4.7 million and $10.5 million primarily driven by customer cancellations and downsells and a decrease in professional services of $2.4 million and $4.4 million for the three and six months ended June 30, 2026, respectively.
Cost of Revenue (exclusive of depreciation and amortization shown separately below)
Cost of revenue consists of compensation costs relating to employees who provide customer service to our customers, compensation costs relating to our network support staff, outside labor provider costs, the cost of supporting our server and network infrastructure, and allocated occupancy costs and related overhead.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Cost of revenue $ 15,786 $ 18,038 $ (2,252) (12) % $ 31,311 $ 36,256 $ (4,945) (14) %
Percentage of total revenue 30 % 30 % 29 % 29 %
Headcount (at period end) 147 176 (16) % 147 176 (16) %
Cost of revenue decreased by 12% to $15.8 million for the three months ended June 30, 2026 from $18.0 million for the comparable period in 2025. This decrease in expense is primarily attributable to a decrease in software and hosting expenses of $1.4 million, a decrease in business services and outsourced expenses of $0.6 million, and a decrease in salary, stock-based compensation and employee-related expenses of $0.3 million due to restructuring activities.
Cost of revenue decreased by 14% to $31.3 million for the six months ended June 30, 2026 from $36.3 million for the comparable period in 2025. This decrease in expense is primarily attributable to a decrease in software and hosting expenses of $2.6 million, a decrease in business services and outsourced expenses of $1.7 million, and a decrease in salary, stock-based compensation and employee-related expenses of $0.7 million due to restructuring activities.
Sales and Marketing
Sales and marketing expenses consist of compensation and related expenses for sales and marketing personnel, as well as advertising, marketing events, public relations, trade show exhibit expenses and allocated occupancy costs and related overhead.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Sales and marketing $ 13,759 $ 19,888 $ (6,129) (31) % $ 27,529 $ 43,373 $ (15,844) (37) %
Percentage of total revenue 26 % 33 % 25 % 35 %
Headcount (at period end) 128 221 (42) % 128 221 (42) %
Sales and marketing expenses decreased by 31% to $13.8 million for the three months ended June 30, 2026 from $19.9 million for the comparable period in 2025. This decrease was primarily attributable to a decrease in salary, stock-based compensation expense and employee-related expenses of $6.1 million due to restructuring activities, and a decrease in software and hosting expenses of $0.5 million, partially offset by an increase in business services and outsourced expenses of $0.4 million.
Sales and marketing expenses decreased by 37% to $27.5 million for the six months ended June 30, 2026 from $43.4 million for the comparable period in 2025. This decrease was primarily attributable to a decrease in salary, stock-based compensation expense and employee-related expenses of $13.8 million due to restructuring activities, a decrease in marketing expenses of $1.0 million, a decrease in software and hosting expenses of $0.9 million, and a decrease in business services and outsourced expenses of $0.3 million.
General and Administrative
Our general and administrative expenses consist of compensation and related expenses for executive, accounting, legal, human resources and administrative personnel, professional fees and other general corporate expenses.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
General and administrative $ 23,979 $ 7,945 $ 16,034 202 % $ 36,099 $ 24,729 $ 11,370 46 %
Percentage of total revenue 46 % 13 % 33 % 20 %
Headcount (at period end) 97 138 (30) % 97 138 (30) %
General and administrative expenses increased by 202% to $24.0 million for the three months ended June 30, 2026 from $7.9 million for the comparable period in 2025. This is primarily attributable to merger-related costs of $13.4 million, an increase in other legal and consulting costs of $2.6 million, and an increase in bad debt expense of $2.2 million, partially offset by a decrease in salary, stock-based compensation expense and employee-related expenses of $2.2 million due to restructuring activities.
General and administrative expenses increased by 46% to $36.1 million for the six months ended June 30, 2026 from $24.7 million for the comparable period in 2025. This is primarily attributable to merger-related costs of $15.0 million and an increase in bad debt expense of $2.2 million, partially offset by a decrease in salary, stock-based compensation expense and employee-related expenses of $3.9 million due to restructuring activities and a decrease in other legal and consulting costs of $1.9 million.
Product Development
Our product development expenses consist of compensation and related expenses for product development personnel as well as allocated occupancy costs and related overhead and outsourced labor and expenses for testing new versions of our software.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Product development $ 10,385 $ 13,843 $ (3,458) (25) % $ 22,565 $ 29,877 $ (7,312) (24) %
Percentage of total revenue 20 % 23 % 21 % 24 %
Headcount (at period end) 241 358 (33) % 241 358 (33) %
Product development costs decreased by 25% to $10.4 million for the three months ended June 30, 2026 from $13.8 million for the comparable period in 2025. This decrease is primarily related to a decrease in salary, stock-based compensation expense and employee-related expenses of $3.9 million due to restructuring activities, partially offset by an increase in software and hosting expenses of $0.4 million.
Product development costs decreased by 24% to $22.6 million for the six months ended June 30, 2026 from $29.9 million for the comparable period in 2025. This decrease is primarily related to a decrease in salary, stock-based compensation expense and employee-related expenses of $7.6 million due to restructuring activities, partially offset by an increase in software and hosting expense of $0.5 million.
We continued to make investments in public cloud migration, and in the Conversational Cloud. While innovation remains a core component of our strategy, we are operating in a competitive environment characterized by aggressive investment in artificial intelligence and other technological innovation by competitors with significant resources and investment capital. For the three and six months ended June 30, 2026, $2.4 million and $4.8 million was capitalized, respectively, compared to $3.0 million and $6.3 million, respectively, for the comparable periods in 2025.
Depreciation and Amortization Expense
Our depreciation and amortization expense relates to depreciation and amortization of our property and equipment and to amortization of our intangible assets and finance leases.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Depreciation and amortization expense $ 5,184 $ 5,758 $ (574) (10) % $ 10,296 $ 11,576 $ (1,280) (11) %
Percentage of total revenue 10 % 10 % 9 % 9 %
Total depreciation and amortization expense decreased by 10% to $5.2 million for the three months ended June 30, 2026 from $5.8 million for the comparable period in 2025. There were no impairments of property and equipment in 2025 and for the first six months of 2026, but we recorded a non-cash impairment charge of $2.1 million related to patents in the fourth quarter of 2025 as a result of our annual impairment test, thus reducing our amortizable asset balance.
Total depreciation and amortization expense decreased by 11% to $10.3 million for the six months ended June 30, 2026 from $11.6 million for the comparable period in 2025.
Impairment of Goodwill
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Impairment of goodwill
$ 51,826 $ - $ 51,826 - % $ 51,826 $ - $ 51,826 - %
Percentage of total revenue 99 % - % 47 % - %
The impairment charge during the three and six months ended June 30, 2026 was a result of several triggering events including the execution of the Original Merger Agreement and Notes Restructuring Agreement in April 2026, and a decline in both LivePerson and SoundHound common stock prices. See Note 5 - Goodwill and Intangible Assets, Net under Item 1 of this Quarterly Report on Form 10-Q for additional information about the circumstances surrounding the goodwill impairment charge. There were no goodwill impairment charges for the three months ended March 31, 2026 and the three and six months ended June 30, 2025.
Restructuring (Reversals) Costs, Net
We maintain restructuring initiatives to realign our cost structure with our current business model, in which we have flattened the organization to align to more efficient sales and service support. While the Company's restructuring efforts are ongoing, the 2025 restructuring activities were substantially completed by December 31, 2025.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Restructuring (reversals) costs net $ (723) $ 561 $ (1,284) (229) % $ (723) $ 1,866 $ (2,589) (139) %
Percentage of total revenue (1) % 1 % (1) % 2 %
The net reversals in the three and six months ended June 30, 2026 were related to settlement of lease contracts of $0.5 million, with the remainder related to severance and other associated (reversals) costs, net.
The net costs in the three and six months ended June 30, 2025 were related to severance and other associated costs for the 2025 restructuring activities.
Total Other Expense, net
Interest expense represents interest expense from our senior notes, and amortization of debt issuance costs and debt discount. Interest income represents interest earned from cash deposits. Other income (expense), net consists primarily of fair value adjustments for our Warrants and foreign currency gains and losses.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Interest expense $ (8,490) $ (7,866) $ (624) (8) % $ (16,742) $ (15,344) $ (1,398) (9) %
Interest income 381 1,493 (1,112) (74) % 884 2,950 (2,066) (70) %
Gain on troubled debt restructuring 2,191 - 2,191 - % 2,191 - 2,191 - %
Other income (expense), net 1,518 (2,520) 4,038 160 % 2,516 5,967 (3,451) (58) %
Total other expense, net $ (4,400) $ (8,893) $ 4,493 51 % $ (11,151) $ (6,427) $ (4,724) (74) %
Total other expense, net improved by 51% to $4.4 million for the three months ended June 30, 2026 from $8.9 million for the comparable period in 2025. This improvement was primarily due to a $1.9 million gain on the fair value adjustment of the Warrants compared to a $3.0 million loss during the second quarter of fiscal 2025, and the $2.2 million gain on troubled debt restructuring related to the repurchase of a portion of the 2026 Notes in April 2026. These improvements were partially offset by lower interest income earned on a lower cash balance.
Total other expense, net increased by 74% to $11.2 million for the six months ended June 30, 2026 from $6.4 million for the comparable period in 2025. This was primarily due to a $3.0 million gain on the fair value adjustment of the Warrants in 2026 compared to a $5.8 million gain in 2025, higher interest expense due to the terms of the troubled debt restructuring in September 2025, and lower interest income earned on a lower cash balance. These were partially offset by the $2.2 million gain on troubled debt restructuring related to the repurchase of a portion of the 2026 Notes in April 2026.
Provision for Income Taxes
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Dollars in thousands)
(Dollars in thousands)
Provision for income taxes
$ 457 $ 384 $ 73 19 % $ 782 $ 39 $ 743 1,905 %
Provision for income taxes was $0.5 million and $0.8 million for the three and six months ended June 30, 2026, respectively, compared to $0.4 million and less than $0.1 million for the comparable periods in 2025. Our consolidated effective tax rate was impacted by the statutory income tax rates applicable to each of the jurisdictions in which we operate, valuation allowance recorded against losses generated in the U.S. and Germany, UK stock compensation windfall, and changes to unrecognized tax benefits in Israel. The overall tax provision recorded represents tax on non-U.S. earnings in the various jurisdictions in which we operate and the provision for U.S. state and local impacts. The total tax expense associated with non-U.S. jurisdictions is relatively consistent between periods.
Liquidity and Capital Resources
The following describes the Company's cash flows for the six months ended June 30, 2026 and 2025:
Six Months Ended June 30,
2026 2025
(In thousands)
Condensed Consolidated Statements of Cash Flows Data:
Net cash provided by (used in) operating activities $ 10,786 $ (14,772)
Net cash used in investing activities (5,613) (7,947)
Net cash (used in) provided by financing activities $ (2,784) $ 444
As of June 30, 2026, we had approximately $96.7 million in cash and cash equivalents, an increase of $1.7 million from December 31, 2025. The increase is primarily attributable to favorable working capital management during the six months ended June 30, 2026.
Cash Flows from Operating Activities
Net cash provided by operating activities was $10.8 million for the six months ended June 30, 2026. Our net loss of $81.4 million includes the effect of the goodwill impairment of $51.8 million, non-cash expenses of depreciation and amortization of $10.3 million, interest expense of $8.2 million, stock-based compensation of $4.6 million, amortization of debt issuance costs and accretion of debt discount of $4.2 million, and allowance for credit losses of $2.1 million, partially offset by a gain from the change in the fair value of our Warrants of $3.0 million and a gain on troubled debt restructuring of $2.2 million. Net cash provided by operating activities was further driven by an increase in accounts payable, accrued expenses and other current liabilities of $11.4 million, a decrease in accounts receivable of $7.3 million, and a decrease in contract acquisition costs of $5.8 million, partially offset by a decrease in deferred revenue of $7.5 million.
Net cash used in operating activities was $14.8 million for the six months ended June 30, 2025. Our net loss of $29.8 million includes the effect of non-cash expenses of depreciation and amortization of $11.6 million, stock-based compensation of $9.0 million, interest expense of $7.7 million, and amortization of debt issuance costs and accretion of debt discount of $3.7 million, partially offset by a gain from the change in the fair value of our Warrants of $5.8 million. Net cash used in operating activities was further driven by an increase in prepaid expenses and other current assets of $25.3 million and a decrease in deferred revenue of $2.1 million, partially offset by a decrease in accounts receivable of $5.7 million, a decrease in contract acquisition costs of $4.2 million, and an increase in accounts payable, accrued expenses and other current liabilities of $6.4 million.
Cash Flows from Investing Activities
Net cash used in investing activities was $5.6 million for the six months ended June 30, 2026, and was primarily driven by purchases of property and equipment and capitalization of internal-use software development costs.
Net cash used in investing activities was $7.9 million for the six months ended June 30, 2025, and was primarily driven by purchases of property and equipment and capitalization of internal-use software development costs.
Cash Flows from Financing Activities
Net cash used in financing activities was $2.8 million for the six months ended June 30, 2026, and was primarily driven by the repurchase of a portion of our 2026 Notes.
Net cash provided by financing activities was $0.4 million for the six months ended June 30, 2025, and was primarily driven by proceeds from the issuance of common stock under our ESPP.
We have incurred significant expenses to develop our technology and services, to hire employees in our customer service and sales and marketing departments, and for the amortization of purchased intangible assets, as well as acquisition costs and non-cash compensation costs. Historically, we have incurred net losses and negative cash flows for various quarterly
and annual periods since our inception, including during numerous quarters and annual periods in the past several years. As of June 30, 2026, we had an accumulated deficit of $1,139.9 million.
Our principal sources of liquidity are payments received from customers using our products. We anticipate that our current cash and cash equivalents will be sufficient to satisfy our working capital and capital requirements for at least the next 12 months. However, we cannot assure you that we will not require additional funds prior to such time, and we would then seek to sell additional equity or debt securities through public financings, or seek alternative sources of financing. We cannot assure you that additional funding will be available on favorable terms, when needed, if at all. If we are unable to obtain any necessary financing, we may be required to further reduce the scope of our planned sales and marketing and product development efforts, which could materially adversely affect our financial condition and operating results. In addition, we may require additional funds in order to fund more rapid expansion, to develop new or enhanced services or products or to invest in or acquire complementary businesses, technologies, services or products.
The indenture governing the 2029 Notes includes a financial covenant that requires the Company to maintain a minimum cash balance of $60.0 million (excluding the proceeds of the 2029 Notes) at all times. Proceeds of the 2029 Notes may be used only to (i) pay interest, or cash settle, the 2029 Notes, (ii) cash settle the Warrants, (iii) exchange, repurchase, redeem, replace or otherwise refinance 2026 Notes (or refund or replenish cash of the Company or any of its subsidiaries used to do so), or (iv) pay or reimburse certain fees, costs and expenses related to the foregoing and the other transactions contemplated by the Exchange and Purchase Agreement as amended or otherwise modified from time to time.
Upon conversion or exercise, the 2029 Notes and cash-settled warrants would be settled for cash. In addition, the 2026 Notes, the 2029 Notes and the Second Lien Notes are subject to repurchase at the option of holders if the Company undergoes a "Fundamental Change" (as defined in the indentures governing the 2026 Notes, the 2029 Notes and the Second Lien Notes, as applicable), and the 2026 Notes, the 2029 Notes and the Second Lien Notes are subject to events of default customary for notes issued in connection with similar transactions, which could result in the acceleration of amounts owed. See Note 8 - Senior Notes, Capped Call Transactions and Warrants for additional information.
The Company may from time to time, subject to board authorization and any applicable restrictions under contracts to which it may be or become a party, depending upon market conditions and the Company's financing needs, use available funds to refinance or repurchase its outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms the Company deems appropriate (which, in the case of debt securities, may be below par) and subject to the Company's cash requirements for other purposes and other factors management deems relevant.
We do not engage in off-balance sheet financing arrangements.
LivePerson Inc. published this content on August 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 07, 2026 at 20:33 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]