LIVEPERSON INC
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(Mark One)
For the quarterly period ended
September 30, 2025
or
For the transition period from __________ to __________.
Commission File Number:
000-30141
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |||||||
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| (Address of principal executive offices) | (Zip Code) | |||||||
(Registrant’s telephone number, including area code)
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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The
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Participating Preferred Stock |
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The
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | ||||||||||||||
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☒ | Smaller Reporting Company |
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| Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
On
November 7, 2025
,
11,857,018
shares of the registrant’s common stock were outstanding.
1
LIVEPERSON, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025
INDEX
| Page | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
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2
FORWARD-LOOKING STATEMENTS
Statements in this Quarterly Report on Form 10-Q about LivePerson, Inc. (“LivePerson,” the “Company,” “we,” “our” or “us”) that are not historical facts are forward-looking statements. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about LivePerson and our industry. Our expectations, assumptions, estimates and projections are expressed in good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations, assumptions, estimates and projections will be realized. Examples of forward-looking statements include, but are not limited to, statements regarding future business, future results of operations or financial condition (including statements regarding expectations for restructuring activities and statements based on examinations of historical operating trends) and management strategies. Many of these statements are found in the “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Quarterly Report on Form 10-Q. When used in this Quarterly Report on Form 10-Q, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects” and variations of such words or similar expressions are intended to identify forward-looking statements. However, not all forward-looking statements contain these words. Forward-looking statements are subject to risks and uncertainties that could cause actual future events or results to differ materially from those exp
ressed or implied in the forward-looking statements. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q include those set forth in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2025 in the sec
tion entitled Part I, Item 1A., “Risk Factors” and in this Quarterly Report on Form 10-Q in the section entitled Part II, Item 1A., “Risk Factors.” It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of each quarter or the year. Although these expectations may change, we are under no obligation to inform you if they do. Our policy is generally to provide our expectations only once per quarter, and not to update that information until the next quarter. We do not undertake any obligation to revise forward-looking statements to reflect future events or circumstances. All forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
3
Part I — FINANCIAL INFORMATION
Item 1. Financial Statements
LIVEPERSON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
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September 30,
2025 |
December 31,
2024 |
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| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ |
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$ |
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Accounts receivable, net of allowances of $
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| Prepaid expenses and other current assets (Note 1) |
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| Total current assets |
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Property and equipment, net (Note 6)
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Contract acquisition costs, net
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Intangible assets, net (Note 5)
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Goodwill, net (Note 5)
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| Deferred tax assets, net |
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| Other assets |
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| Total assets | $ |
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$ |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ |
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$ |
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Accrued expenses and other current liabilities (Note 7)
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Deferred revenue (Note 2)
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| Total current liabilities |
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Senior notes (Note 8)
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| Deferred tax liabilities |
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| Other liabilities |
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| Total liabilities |
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Commitments and contingencies (Note 10)
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Preferred stock, $
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Stockholders’ equity:
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Common stock, $
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Treasury stock -
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(
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(
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| Additional paid-in capital |
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| Accumulated deficit |
(
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(
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| Accumulated other comprehensive loss |
(
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(
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| Total stockholders’ equity |
(
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(
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Total liabilities and stockholders’ equity
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
4
LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | $ |
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$ |
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$ |
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$ |
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Costs, expenses and other:
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| Cost of revenue (exclusive of depreciation and amortization shown separately below) |
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| Sales and marketing |
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| General and administrative |
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| Product development |
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Depreciation and amortization
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| Restructuring costs |
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Impairment of goodwill
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Impairment of intangibles and other assets
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| Loss on divestiture |
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Total costs, expenses and other
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| Loss from operations |
(
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(
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(
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(
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| Other income (expense), net: | |||||||||||||||||||||||
| Interest expense |
(
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(
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(
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(
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| Interest income |
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Gain on troubled debt restructuring
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Gain on debt extinguishment
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| Other income (expense), net |
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(
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(
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| Total other income (expense), net |
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(
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| Income (loss) before provision for income taxes |
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(
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(
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(
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| Provision for income taxes |
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| Net income (loss) | $ |
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$ |
(
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$ |
(
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$ |
(
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| Net income (loss) per share of common stock: | |||||||||||||||||||||||
| Basic | $ |
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$ |
(
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$ |
(
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$ |
(
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| Diluted | $ |
(
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$ |
(
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$ |
(
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$ |
(
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| Weighted-average shares used to compute net income (loss) per share: | |||||||||||||||||||||||
| Basic |
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| Diluted |
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See accompanying notes to condensed consolidated financial statements.
5
LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income (loss) | $ |
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$ |
(
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$ |
(
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$ |
(
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| Foreign currency translation adjustment |
(
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| Total comprehensive income (loss) | $ |
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$ |
(
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$ |
(
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$ |
(
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See accompanying notes to condensed consolidated financial statements.
6
LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)
| Preferred Stock | Common Stock | Treasury Stock |
Additional
Paid-in Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Loss |
Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | — | — |
|
$ |
|
(
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$ |
(
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$ |
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$ |
(
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$ |
(
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$ |
(
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| Common stock issued upon vesting of restricted stock units | — | — |
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— | — |
(
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— | — |
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|||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — |
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— | — |
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| Net loss | — | — | — | — | — | — | — |
(
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— |
(
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| Other comprehensive income | — | — | — | — | — | — | — | — |
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| Balance at March 31, 2025 | — | — |
|
$ |
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(
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$ |
(
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$ |
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$ |
(
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$ |
(
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$ |
(
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|||||||||||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — |
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— | — |
(
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— | — |
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|||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — |
|
— | — |
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| Common stock issued under Employee Stock Purchase Plan (“ESPP”) | — | — |
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— | — |
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— | — |
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| Net loss | — | — | — | — | — | — | — |
(
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— |
(
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| Other comprehensive income | — | — | — | — | — | — | — | — |
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| Balance at June 30, 2025 |
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$ |
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(
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$ |
(
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$ |
|
$ |
(
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$ |
(
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$ |
(
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Preferred stock issued in connection with troubled debt restructuring
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— | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
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Common stock issued in connection with troubled debt restructuring
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— | — |
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— | — |
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— | — |
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| Common stock issued upon vesting of restricted stock units | — | — |
|
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— | — |
(
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— | — |
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|||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — |
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— | — |
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| Net income | — | — | — | — | — | — | — |
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— |
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Other comprehensive loss
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— | — | — | — | — | — | — | — |
(
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(
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| Balance at September 30, 2025 |
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$ |
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$ |
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(
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$ |
(
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$ |
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$ |
(
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$ |
(
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$ |
(
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7
LIVEPERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
(in thousands, except share amounts)
(unaudited)
| Common Stock | Treasury Stock |
Additional
Paid-in Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Loss |
Total Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 |
|
$ |
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(
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$ |
(
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$ |
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$ |
(
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$ |
(
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$ |
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| Common stock issued upon vesting of restricted stock units |
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— | — | — |
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— | — |
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| Stock-based compensation | — | — | — | — |
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— | — |
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| Common stock issued under ESPP |
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— | — | — |
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— | — |
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| Net loss | — | — | — | — | — |
(
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— |
(
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| Other comprehensive loss | — | — | — | — | — | — |
(
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(
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| Balance at March 31, 2024 |
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$ |
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(
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$ |
(
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$ |
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$ |
(
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$ |
(
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$ |
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| Common stock issued upon vesting of restricted stock units |
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— | — |
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— | — |
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| Stock-based compensation | — | — | — | — |
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— | — |
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| Common stock issued under ESPP |
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— | — | — |
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— | — |
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| Activity related to divestiture | — | — | — | — |
(
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— | — |
(
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| Net income | — | — | — | — | — |
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— |
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| Other comprehensive loss | — | — | — | — | — | — |
(
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(
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| Balance at June 30, 2024 |
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$ |
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(
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$ |
(
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$ |
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$ |
(
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$ |
(
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$ |
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| Common stock issued upon vesting of restricted stock units |
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— | — |
(
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— | — |
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| Stock-based compensation | — | — | — | — |
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— | — |
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| Common stock issued under ESPP |
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— | — | — |
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— | — |
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| Net loss | — | — | — | — | — |
(
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— |
(
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| Other comprehensive income | — | — | — | — | — | — |
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| Balance at September 30, 2024 |
|
$ |
|
(
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$ |
(
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$ |
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$ |
(
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$ |
(
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$ |
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See accompanying notes to condensed consolidated financial statements.
8
LIVEP
ERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net loss | $ |
(
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$ |
(
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| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Stock-based compensation expense |
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| Depreciation |
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| Change in operating lease right-of-use assets |
(
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| Amortization of purchased intangible assets and finance leases |
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| Amortization of debt issuance costs and accretion of debt discount |
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| Impairment of goodwill |
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| Impairment of intangibles and other assets |
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Gain on troubled debt restructuring
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(
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Gain on debt extinguishment
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(
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| Change in fair value of warrants |
(
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| Interest expense |
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| (Reversal of) allowance for credit losses |
(
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| Loss on divestiture |
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| Deferred income taxes |
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| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable |
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| Prepaid expenses and other assets |
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| Contract acquisition costs |
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| Accounts payable, accrued expenses and other current liabilities |
(
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(
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| Deferred revenue |
(
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(
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| Other liabilities |
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(
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| Net cash used in operating activities |
(
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(
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| INVESTING ACTIVITIES: | |||||||||||
| Purchases of property and equipment, including internal-use software |
(
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(
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| Purchases of intangible assets |
(
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(
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| Net cash used in investing activities |
(
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(
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| FINANCING ACTIVITIES: | |||||||||||
| Proceeds from issuance of common stock in connection with the exercise of options and ESPP |
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| Principal payments for finance leases |
(
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(
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Payment on settlement of warrants
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(
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Payment in connection with troubled debt restructuring
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(
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| Proceeds from issuance of senior notes |
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| Payment of debt issuance costs |
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(
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| Payments on repurchase of 2024 convertible senior notes |
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(
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| Payments on repurchase of 2026 convertible senior notes |
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(
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| Net cash used in financing activities |
(
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(
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| Effect of foreign exchange rate changes on cash and cash equivalents |
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(
|
|||||||||
| Net decrease in cash and cash equivalents |
(
|
(
|
|||||||||
| Cash and cash equivalents - beginning of year |
|
|
|||||||||
| Cash and cash equivalents - end of period | $ |
|
$ |
|
|||||||
9
LIVEP
ERSON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Supplemental disclosure of other cash flow information: | |||||||||||
| Cash paid for income taxes, net | $ |
|
$ |
|
|||||||
| Cash paid for interest |
|
|
|||||||||
| Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
|
Issuance of Second Lien Notes due 2029 in connection with troubled debt restructuring
|
$ |
|
$ |
|
|||||||
|
Issuance of preferred stock in connection with troubled debt restructuring
|
|
|
|||||||||
|
Issuance of common stock in connection with troubled debt restructuring
|
|
|
|||||||||
| Purchase of property and equipment and intangible assets recorded in accounts payable |
|
|
|||||||||
|
Right-of-use assets obtained in exchange for operating lease liabilities
|
|
|
|||||||||
See accompanying notes to condensed consolidated financial statements
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1.
Description of Business and Basis of Presentation
LivePerson, Inc. (the “Company”) is a leader in digital customer conversation. Since 1998, LivePerson has enabled meaningful connections between consumers and its customers through digital and artificial intelligence (“AI”)-powered conversations. Our customers’ existing investments in Generative AI and Large Language Models (“LLMs”) are fully compatible with LivePerson’s enterprise-class digital customer conversation platform (the “LivePerson Platform”).
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, 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, in which humans oversee and are assisted by AI and can seamlessly step into conversations as needed. Agents become highly efficient, as they are able to leverage 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 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.
Basis of Presentation
The condensed consolidated financial statements and the financial data and other information disclosed in the notes to the condensed consolidated financial statements as of September 30, 2025 and for the three and nine months ended September 30, 2025 are unaudited. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated financial position, results of operations, comprehensive (loss) income, and cash flows for the interim periods presented. The results of operations for any interim period are not necessarily indicative of the results of operations for any other future interim period or for a full fiscal year. The condensed consolidated balance sheet as of December 31, 2024 has been derived from audited consolidated financial statements at that date.
In October 2025, the Company effected a 1-for-15 reverse stock split (the “Reverse Stock Split”) of its issued common stock. As a result, every 15 shares of its issued common stock were combined into one share of common stock. No fractional shares of the Company’s common stock were issued as a result of the Reverse Stock Split. Each stockholder who would otherwise have been entitled to receive a fractional share as a result of the Reverse Stock Split received a cash payment equal to the product obtained by multiplying the number of shares of common stock held by such stockholder before the Reverse Stock Split that would otherwise have been exchanged for such fractional share interest by the closing price per share of the common stock as reported on the Nasdaq Global Select Market on October 10, 2025. As a result of the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and the number of shares issuable upon the exercise of, or notional shares underlying, all outstanding warrants to purchase shares of the Company’s common stock. In addition, the number of authorized shares of common stock was proportionately reduced. Proportionate adjustments were also made to (i) the number of shares of common stock available for issuance under the Company’s equity plans, (ii) the number of shares underlying, the exercise prices of, and performance hurdles of, outstanding equity awards, as applicable, that have been previously granted under such equity plans or other arrangements, (iii) the number of shares or notional shares underlying, and the exercise prices of, the Company’s outstanding warrants, (iv) the number of shares or notional shares underlying, and the conversion prices of, the Company’s outstanding convertible notes and (v) the number of rights outstanding pursuant to the Company’s Tax Benefits Preservation Plan, in each case in accordance with their respective terms. The Reverse Stock Split did not affect the par value of the common stock or the number of shares of preferred stock that the Company is authorized to issue under its certificate of incorporation. These notes to the condensed consolidated financial statements and the accompanying condensed consolidated financial statements give retroactive effect to the Reverse Stock Split for all periods presented.
Certain information and note disclosures included in the Company’s audited financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as they are not required for interim financial statements pursuant to GAAP and the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2025
.
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Principles of Consolidation
The unaudited condensed consolidated financial statements reflect the operations of LivePerson and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on previously reported net income (loss) or equity.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with 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. These estimates are based on information available as of the date of the condensed 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;
•
allowance for credit losses;
•
the period of benefit for deferred contract acquisition costs;
•
valuation of goodwill;
•
valuation and useful lives of long-lived assets;
•
valuation of the cash-settled and share-settled warrants (together, “Warrants”);
•
valuation of features embedded in the 2029 Notes (as defined below);
•
income taxes; and
•
recognition, measurement, and disclosure of contingent liabilities.
As of the date of issuance of the financial statements, the Company is not aware of any material specific events or circumstances that would require it to update its estimates, judgments, or to revise the carrying values of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s condensed consolidated financial statements.
Significant Accounting Policies
The Company’s significant accounting policies are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes to these policies that have had a material impact on the Company’s condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2025.
Prepaid expenses and other current assets
The following table presents the detail of prepaid expenses and other current assets as of the dates presented:
|
September 30,
2025 |
December 31,
2024 |
||||||||||
| (In thousands) | |||||||||||
|
Prepaid software maintenance
|
$ |
|
$ |
|
|||||||
| VAT receivable |
|
|
|||||||||
| Other prepaid expenses |
|
|
|||||||||
| Other current assets |
|
|
|||||||||
| Total prepaid expenses and other current assets | $ |
|
$ |
|
|||||||
12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Leases
The Company has non-cancelable operating and finance leases for its corporate offices and other service agreements. As of September 30, 2025, the Company’s leases are immaterial, with a remaining lease term of
0.9
years with an option to extend. The Company uses the non-cancelable lease term when recognizing the right-of-use assets and lease liabilities, unless it is reasonably certain that a renewal or termination option will be exercised. The Company’s operating lease costs were $
2.4
million and $
2.3
million for the three months ended September 30, 2025 and 2024, respectively. The Company’s operating lease costs were $
7.3
million and $
7.8
million for the nine months ended September 30, 2025 and 2024, respectively.
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 Accounting Standards Codification (“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 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.
Recently Issued Accounting Pronouncements
In September 2025, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2025-06,
Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,
which removes all references to project stages related to internal-use software development. An entity is required to start capitalizing software costs when both of the following occur: (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. The guidance is effective for annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05,
Financial Instruments - Credit Losses (Top 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets,
which provides all entities with a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from certain transactions. In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The guidance is effective for annual periods beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03,
Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)
(“ASU 2024-03”) 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 retrospectively. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.
13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2.
Revenue Recognition
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. No single customer accounted for 10% or more of total revenue for the three and nine months ended September 30, 2025 and 2024.
The following table presents the Company’s revenues disaggregated by revenue source:
| Three Months Ended September 30, | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||
| Hosted services | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Professional services |
|
|
|
|
|||||||||||||||||||
| Total revenue | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Remaining Performance Obligation
As of September 30, 2025, the aggregate amount of the total transaction price allocated in contracts with original duration of one year or greater to the remaining performance obligations was $
182.4
million. As of September 30, 2025,
97
% of the Company’s remaining performance obligations are expected to be recognized during the next 24 months, with the balance recognized thereafter. The aggregate balance of unsatisfied performance obligations represents contracted revenue that has not yet been recognized, and does not include contract amounts that are cancellable by the customer, amounts associated with optional renewal periods, and any amounts related to performance obligations, which are billed and recognized as they are delivered. 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,
Revenue from Contracts with Customer
s.
Contracts with Multiple Performance Obligations
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. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. Judgment is required to determine the SSP for each distinct performance obligation. The Company determines SSP based on observable prices at which the performance obligations are sold separately. When not directly observable, SSP is estimated using an adjusted market assessment approach, which considers market conditions and other entity-specific factors.
14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 operations by region for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||
|
Americas
(1)
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
EMEA
(2)
|
|
|
|
|
|||||||||||||||||||
|
APAC
(3)
|
|
|
|
|
|||||||||||||||||||
| Total revenue | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
——————————————
(1)
United States, Canada, Latin America and South America (“Americas”)
(2)
Europe, the Middle East and Africa (“EMEA”)
(3)
Asia-Pacific (“APAC”)
Information about Contract Balances
The Company defers all incremental commission costs incurred to obtain the contract. These contract acquisition costs, which are comprised of sales commissions, have balances at September 30, 2025 and December 31, 2024 of $
27.2
million and $
33.6
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.
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 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 for credit losses on the condensed consolidated balance sheets.
The Company recognized revenue of $
3.7
million and $
44.9
million for the three and nine months ended September 30, 2025, respectively, and $
5.3
million and $
70.0
million for the three and nine months ended September 30, 2024, 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 condensed 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, Net
(Non-current)
|
Deferred Revenue
(Current)
|
Deferred Revenue
(Non-current) |
|||||||||||||||
| (In thousands) | |||||||||||||||||
| Balance as of December 31, 2023 | $ |
|
$ |
|
$ |
|
|||||||||||
| (Decrease) increase, net |
(
|
(
|
|
||||||||||||||
| Balance as of December 31, 2024 | $ |
|
$ |
|
$ |
|
|||||||||||
|
Decrease, net
|
(
|
(
|
(
|
||||||||||||||
| Balance as of September 30, 2025 | $ |
|
$ |
|
$ |
|
|||||||||||
15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The changes in deferred revenue during both periods presented were 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 cost was $
4.5
million and $
12.6
million for the three and nine months ended September 30, 2025, respectively. Amortization expense in connection with contract acquisition cost was $
4.1
million and $
13.8
million for the three and nine months ended September 30, 2024, respectively.
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 estimate 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 losses as of the dates presented is as follows:
|
September 30,
2025 |
December 31,
2024 |
||||||||||
|
(In thousands)
|
|||||||||||
| Balance, beginning of year | $ |
|
$ |
|
|||||||
|
(Reductions) charges to costs and expenses
|
(
|
|
|||||||||
| Deductions/write-offs |
(
|
(
|
|||||||||
|
Balance, end of period
|
$ |
|
$ |
|
|||||||
16
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3.
Net Income (Loss) Per Share
In September 2025, the Company issued Series B convertible preferred stock (“Series B Preferred Stock”). The Series B Preferred Stockholders do not have a contractual obligation to share in the Company’s losses. As such, losses are attributed entirely to common shareholders. Due to the Company’s net income for the quarter ended September 30, 2025, earnings per share (“EPS”) is calculated using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders but does not require the presentation of basic and diluted EPS for securities other than common stock. The two-class method is required because Series B Preferred Stock has the right to receive dividends or dividend equivalents should the Company have declared dividends on its common stock as if such Series B Preferred Stock had been converted to common stock. Under the two-class method, earnings for the period are allocated to the common and preferred stockholders taking into consideration the participation of holders of Series B Preferred Stock in dividends on an as-converted basis. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares.
Diluted EPS is computed in the same manner as basic EPS except that the numerator is decreased to reverse the gain on troubled debt restructuring associated with the exchange transaction of the 2026 Notes and the denominator is increased to include the number of the shares issuable upon the conversion of the 2026 Notes. For the diluted EPS calculation, the if-converted method assuming Series B Preferred Stock is converted into common shares is applied and compared to the two-class method and whichever method results in a more dilutive impact is utilized to calculate the diluted EPS. Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, excluding any common stock equivalents if their effect would be anti-dilutive.
The following table summarizes net income (loss) attributable to common stockholders and participating securities used in the calculation of basic and diluted net income (loss) per common share f
or the
three and nine months ended
September 30, 2025 and 2024, as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
|
(In thousands, except share and per share amounts)
|
|||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
|
Net income (loss) available to shareholders for basic net income (loss) per share
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Less: Undeclared cumulative dividends to preferred stockholders
|
(
|
|
(
|
|
|||||||||||||||||||
|
Less: Undistributed income allocated to participating securities
|
(
|
|
|
|
|||||||||||||||||||
|
Net income (loss) attributable to common shareholders
|
|
(
|
(
|
(
|
|||||||||||||||||||
|
Gain on troubled debt restructuring
|
(
|
|
(
|
|
|||||||||||||||||||
|
Net loss available to shareholders for diluted net loss per share
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
| Denominator: | |||||||||||||||||||||||
|
Weighted average number of shares outstanding used to compute basic net loss per share
|
|
|
|
|
|||||||||||||||||||
|
2026 Notes
|
|
|
|
|
|||||||||||||||||||
|
Weighted average number of shares outstanding used to compute diluted net loss per share
|
|
|
|
|
|||||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
|
Basic
|
$ |
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
| Diluted | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
17
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The securities listed below were excluded from the computation of diluted net income (loss) per share for the three and nine months ended September 30, 2025 and 2024 as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Shares subject to outstanding common stock options and ESPP |
|
|
|
|
|||||||||||||||||||
| Restricted stock units |
|
|
|
|
|||||||||||||||||||
| Share-settled warrants |
|
|
|
|
|||||||||||||||||||
|
Convertible preferred stock
|
|
|
|
|
|||||||||||||||||||
| 2024 Notes |
|
|
|
|
|||||||||||||||||||
| 2026 Notes |
|
|
|
|
|||||||||||||||||||
| Total |
|
|
|
|
|||||||||||||||||||
Note 4.
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. 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 income (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 condensed 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 income (loss) as its required measure of segment operating profit or loss. Significant expenses within income (loss) from operations, as well as within net income (loss) are separately presented on the Company’s condensed consolidated statements of operations. Other segment items within net income (loss) include Interest expense, Interest income, Gain on troubled debt restructuring, Gain on debt extinguishment, Other income (expense), net, and Provision for income taxes.
Geographic Information
The Company is domiciled in the United States and has international operations around the globe. The following table presents the Company’s long-lived assets by geographic region as of September 30, 2025 and December 31, 2024:
| September 30, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| United States | $ |
|
$ |
|
|||||||
| Germany |
|
|
|||||||||
| Australia |
|
|
|||||||||
| Netherlands |
|
|
|||||||||
|
Other
(1)
|
|
|
|||||||||
| Total long-lived assets | $ |
|
$ |
|
|||||||
——————————————
(1)
Israel, United Kingdom, Japan, France, Italy, Spain, Canada, and Singapore
18
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 5.
Goodwill and Intangible Assets, Net
Goodwill
Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. 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. Assumptions used in an impairment test require significant judgment, therefore, they are subject to change based on facts and circumstances present at each date goodwill is evaluated for impairment. The Company determined there were
no
events or circumstances during the three and nine months ended September 30, 2025 that would more likely than not reduce the fair value of the reporting unit below its carrying value. If, in future periods, the financial performance of the reporting unit does not meet expectations, or a prolonged decline occurs in the market place of our common stock, it may cause a material change in the results of the impairment assessment and result in future impairment to goodwill.
The changes in the carrying amount of goodwill as of September 30, 2025 and December 31, 2024 are as follows:
| Goodwill, net | |||||
| (In thousands) | |||||
|
Balance as of December 31, 2024
(1)
|
$ |
|
|||
| Foreign exchange adjustment |
|
||||
|
Balance as of September 30, 2025
(1)
|
$ |
|
|||
(1)
As of September 30, 2025 and December 31, 2024, the accumulated impairment balance was
$
72.4
million
.
During the nine months ended September 30, 2024, the Company recorded a non-cash impairment charge of $
3.6
million in the condensed consolidated statements of operations, to recognize a full impairment of goodwill associated with its WildHealth reporting unit, which was sold in 2024. There were no other impairments of goodwill during the three and nine months ended September 30, 2024.
Intangible Assets, Net
Intangible assets, net are summarized as follows:
| September 30, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Patents: | |||||||||||
| Gross carrying amount | $ |
|
$ |
|
|||||||
| Accumulated amortization |
(
|
(
|
|||||||||
| Net carrying amount | $ |
|
$ |
|
|||||||
| Weighted average amortization period |
|
|
|||||||||
Amortization expense is recognized over the estimated useful life of the asset. Aggregate amortization expense for intangible assets and finance leases, net was $
0.2
million and $
0.6
million for the three and nine months ended September 30, 2025, respectively, and $
3.7
million and $
11.6
million for the three and nine months ended September 30, 2024, respectively.
There were
no
impairments of intangible assets during the three and nine months ended September 30, 2025. The Company recognized a non-cash impairment charge of $
2.2
million included in Impairment of intangibles and other assets in the condensed consolidated statements of operations during the nine months ended September 30, 2024, related to intangible assets associated with its WildHealth reporting unit, which was sold in 2024.
19
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of September 30, 2025, estimated annual amortization expense for the next five years and thereafter is as follows:
| Estimated Amortization Expense | |||||
| (In thousands) | |||||
| Remainder of 2025 | $ |
|
|||
| 2026 |
|
||||
| 2027 |
|
||||
| 2028 |
|
||||
| 2029 |
|
||||
| Thereafter |
|
||||
| Total | $ |
|
|||
Note 6.
Property and Equipment, Net
Property and equipment are stated at cost, net of accumulated depreciation and amortization. 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 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 |
September 30,
2025 |
December 31,
2024 |
|||||||||||||||
| (In years) | (In thousands) | ||||||||||||||||
| Computer equipment and software |
|
$ |
|
$ |
|
||||||||||||
| Internal-use software |
|
|
|
||||||||||||||
| Finance lease right-of-use assets | 2 |
|
|
||||||||||||||
| Furniture, equipment and building improvements |
The lesser of
|
|
|
||||||||||||||
| Property and equipment, at cost |
|
|
|||||||||||||||
| Less: accumulated depreciation |
(
|
(
|
|||||||||||||||
| Property and equipment, net | $ |
|
$ |
|
|||||||||||||
Depreciation and amortization of property and equipment was $
5.5
million and $
16.6
million during the three and nine months ended
September 30, 2025
, respectively, and $
7.3
million and $
23.2
million during the three and nine months ended
September 30, 2024,
respectively. There were no impairments of property and equipment during the three and nine months ended September 30, 2025. There were no impairments related to internal-use software during the three months ended September, 2024. T
he Company recorded non-cash impairment
charges of $
8.3
million related to internal-use software during the nine months ended September 30, 2024. The impairment charges were included in Impairment of intangibles and other assets in the condensed consolidated statements of operations for the nine months ended September 30, 2024, and pertained to internal-use software that was discontinued and had no future economic benefit.
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.
20
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 7.
Accrued Expenses and Other Current Liabilities
The following table presents the detail of accrued expenses and other current liabilities as of the dates presented:
|
September 30,
2025 |
December 31,
2024 |
||||||||||
| (In thousands) | |||||||||||
| Professional services and consulting and other vendor fees | $ |
|
$ |
|
|||||||
| Payroll and other employee-related costs |
|
|
|||||||||
| Warrants liability (Note 9) |
|
|
|||||||||
| Accrued interest |
|
|
|||||||||
| Restructuring (Note 12) |
|
|
|||||||||
| Non-income tax |
|
|
|||||||||
| Sales commissions |
|
|
|||||||||
| Other |
|
|
|||||||||
| Total accrued expenses and other current liabilities | $ |
|
$ |
|
|||||||
Note 8.
Senior Notes, Capped Call Transactions, Warrants and Preferred Stock
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 (the “2024 Notes”) in a private placement. 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”). 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 and the associated 2024 capped calls expired unexercised.
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”) in a private placement, of which $
20.1
million aggregate principal amount was outstanding as of September 30, 2025. T
he 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.
Each $1,000 in principal amount of the 2026 Notes is convertible into
0.8862
shares of the Company’s common stock, which is equivalent to a conversion price of
$1,128.39
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 special 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 2026 Notes in connection with such a corporate event. 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. The indenture governing the 2026 Notes contains events of default customary for convertible notes issued in connection with similar transactions. If the Company
21
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (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 2026 Notes on each applicable trading day as determined by the Company; (2) during the
business day period after any
consecutive trading day period (the “2026 Notes measurement period”) in which the “trading price” (as defined in the indenture governing the 2026 Notes) per $1,000 principal amount of 2026 Notes for each trading day of the 2026 Notes measurement period was less than
98
% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the 2026 Notes on each such trading day; (3) with respect to any 2026 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; or (4) upon the occurrence of specified corporate events. On or after August 15, 2026, holders may convert all or any portion of their 2026 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, 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 the
three and nine months ended
September 30, 2025, the conditions allowing holders of the 2026 Notes to convert were not met.
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”). The 2026 capped calls each have a strike price of
$1,128.39
per share, subject to certain adjustments, which corresponds to the conversion price of the 2026 Notes. The 2026 capped calls have cap prices of
$
1,583.70
per share, subject to certain adjustment events. The 2026 capped calls cover, subject to anti-dilution adjustments, approximately
0.11
million shares of common stock. The 2026 capped calls are generally intended to reduce or offset the potential dilution to the common stock upon any conversion of the 2026 Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. The 2026 capped calls expire on December 15, 2026, subject to earlier exercise. The 2026 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 2026 capped calls are subject to certain specified additional disruption events that may give rise to a termination of the 2026 capped calls, including changes in law, failure to deliver, and hedging disruptions. 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 condensed consolidated balance sheets in fiscal 2024.
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 First Lien Convertible Senior Notes due 2029 (the “2029 Notes” and together with the 2024 Notes, the 2026 Notes and the Second Lien Notes, the “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 condensed consolidated statements of operations in fiscal 2024, and a corresponding portion of capped calls were terminated following the exchange and purchase as required by their terms for minimal consideration.
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
22
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
extinguishment, which was recorded in Gain on debt extinguishment in the condensed consolidated statements of operations. In addition, a corresponding portion of the 2026 capped calls were terminated in connection following the repurchase as required by their terms for no consideration.
September 2025 Debt Exchange
On September 12, 2025 (the “Exchange Closing Date”), the Company consummated an exchange of the $
341.1
million in aggregate principal amount of 2026 Notes held by certain former holders of the Company’s outstanding 2026 Notes (the “Noteholders”) for (i) an aggregate payment of $
45.0
million in cash, (ii) $
115.0
million in aggregate principal amount of the Company’s
10.0
% Second Lien Senior Subordinated Secured Notes due 2029 (the “Second Lien Notes”), (iii)
3,555,596
shares of common stock and (iv)
26,551
shares of Series B Fixed Rate Convertible Perpetual Preferred Stock, par value $
0.001
(the “Series B Preferred Stock”). On September 25, 2025, the Company issued an additional
143,192
shares of common stock to certain of the Noteholders, which shares were issued on a deferred basis due to a beneficial ownership limitation preventing such Noteholders from owning in excess of
9.90
% of the outstanding common stock of the Company. In addition, a corresponding portion of the 2026 capped calls were terminated following the exchange as required by their terms for no consideration. This September 2025 Debt Exchange was accounted for as a Troubled Debt Restructuring (“TDR”) in accordance with ASC 470-60, Troubled Debt Restructuring by Debtors. The Company recognized a TDR gain of $27.7 million, which is presented as Gain on troubled debt restructuring in the condensed consolidated statements of operations for the three and nine months ended September 30, 2025.
On the Exchange Closing Date, the principal amount of the exchanged 2026 Notes was $
341.1
million with a discount of $
1.7
million for a net carrying value of $
339.4
million. The Company recognized the Second Lien Notes at a carrying value of $
182.0
million. Under the TDR accounting treatment, the carrying value of the Second Lien Notes of $
182.0
million was comprised of the total future undiscounted cash flows which included principal of $
115.0
million, the maximum interest of $
58.7
million as well as a redemption premium of $
8.3
million. The redemption premium is related to the contingent redemption feature where the lenders can redeem the Second Lien Notes immediately prior to their maturity upon the occurrence of a Fundamental Change as defined in the indenture governing the Second Lien Notes at
105
% of the principal plus accrued but unpaid interest as discussed further below. The Company assumes contingent future payments will have to be paid and those amounts shall be included in the total future cash payments. If, in future periods, the contingency is resolved so that a contingent payment does not have to be made, the Company will recognize a gain in the period when the contingency has been resolved. Subsequently, no interest expense on the Second Lien Notes will be recorded, as all future interest payments will reduce the carrying value of the restructured debt.
The unexchanged 2026 Notes continue to be classified as long-term liabilities in the condensed consolidated balance sheets as of September 30, 2025. As of September 30, 2025, the aggregate principal amount of the unexchanged 2026 Notes was $
20.1
million and the carrying amount of the unexchanged 2026 Notes was $
20.0
million. The remaining term over which the unexchanged 2026 Notes’ debt issuance costs will be amortized is
1.17
years at an effective interest rate of
0.40
% for the three months ended September 30, 2025.
Second Lien Senior Subordinated Secured Notes due 2029
On the Exchange Closing Date, the Company issued $
115.0
million in aggregate principal amount of Second Lien Notes as part of the September 2025 Debt Exchange transaction. The Second Lien Notes accrue interest at a rate of
10.0
% per annum. Prior to March 15, 2027, all of the interest on the Second Lien Notes is payable in-kind (“PIK”). On and after March 15, 2027 and until June 15, 2028, interest will be payable, at the Company’s option, in cash or in-kind or partially in cash and partially in-kind. On and after June 15, 2028, until the maturity of the Second Lien Notes, interest on the Second Lien Notes will be payable in cash, or at the Company’s option, up to
6.0
% per annum in-kind. Unless earlier repurchased or redeemed by the Company, the Second Lien Notes will mature on December 15, 2029.
The Company may, at its option, redeem the Second Lien Notes, in whole or in part, prior to September 12, 2026 at a price equal to the sum of (i)
105
% of the accrued and unpaid interest (including cash and PIK components thereof), (ii)
105
% of the aggregate principal amount of the Second Lien Notes (including, without duplication of any amounts described in item (i), all increases to the principal amount as the result of previous payments of PIK interest) and (iii) the present value of the remaining future interest payments (including cash and PIK components thereof) through September 12, 2026, computed using a discount rate of T + 50 (such amount, the “Make Whole Amount”). On or after September 12, 2026, and prior to September 12, 2027, the Company may, at its option, redeem the Second Lien Notes, in whole or in part for an amount of cash equal to the sum of (i)
105
% of the aggregate principal amount of the Second Lien Notes (including all increases to the principal amount as the result of previous payments of PIK interest) plus (ii)
105
% of all accrued and unpaid interest (including, without duplication of any amounts described in item (i), cash and PIK components thereof). On or after September 12, 2027, and prior to
23
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 12, 2028, the Company may, at its option, redeem the Second Lien Notes, in whole or in part for an amount of cash equal to the sum of (i)
102.5
% of the aggregate principal amount of the Second Lien Notes (including all increases to the principal amount as the result of previous payments of PIK interest) plus (ii)
102.5
% of all accrued and unpaid interest (including, without duplication of any amounts described in item (i), cash and PIK components thereof). From September 12, 2028 until maturity, the Company may, at its option, redeem the Second Lien Notes, in whole or in part for an amount of cash equal to the sum of (i)
100
% of the aggregate principal amount of the Second Lien Notes (including all increases to the principal amount as the result of previous payments of PIK interest) plus (ii)
100
% of all accrued and unpaid interest (including, without duplication of any amounts described in item (i), cash and PIK components thereof). No sinking fund is provided for the Second Lien Notes.
The Second Lien Notes are guaranteed on a senior subordinated basis by certain of the Company’s direct and indirect domestic and foreign subsidiaries and secured by second lien priority security interests in substantially all of the assets of the Company and such subsidiary guarantors, subject to customary exceptions. Pursuant to an intercreditor agreement, the Second Lien Notes are subordinated in right of payment and to collateral, in each case, to the 2029 Notes.
The indenture governing the Second Lien 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. In the event the Second Lien Notes are accelerated on or prior to September 12, 2028, the applicable acceleration premium set forth in the indenture governing the Second Lien Notes will become due. The indenture governing the Second Lien Notes permits the Company and its subsidiaries to incur, subject to certain requirements, up to (i) $
150.0
million of debt that is junior in lien priority and subordinated in right of payment to the Second Lien Notes, and (ii) up to $
20.1
million as exchange consideration for, or the proceeds of which are used to repay, the remaining $
20.1
million aggregate principal amount of 2026 Notes, which debt may be in the form of additional Second Lien Notes.
If the Company undergoes a Fundamental Change as defined in the indenture governing the Second Lien 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 Second Lien Notes at a repurchase price equal to (i) to the Make Whole Amount, if such Fundamental Change occurs prior to September 12, 2026, or (ii) the sum of (A)
105
% of the aggregate principal amount of the Second Lien Notes (including all increases to the principal amount as the result of previous payments of PIK interest) plus (B)
105
% of all accrued and unpaid interest, if such Fundamental Change occurs on or after September 12, 2026.
Series B Preferred Stock
On the Exchange Closing Date, the Company filed a Certificate of Designation with respect to the Series B Preferred Stock (the “Series B Certificate of Designation”) with the Secretary of State of the State of Delaware and issued to the Noteholders an aggregate
26,551
shares of Series B Preferred Stock. Each share of Series B Preferred Stock has an initial stated value (“Stated Value”) of $1,000 per share, subject to adjustment for (i) any splits, combinations, or similar adjustment and (ii) accrued unpaid dividends. The Series B Preferred Stock does not have a stated maturity and is not subject to mandatory redemption or any sinking fund, and will remain outstanding indefinitely unless earlier converted, repurchased or redeemed.
The holders of the Series B Preferred Stock have the following rights, preferences and privileges:
Voting
Each share of Series B Preferred Stock is entitled to a number of votes equal to the number of shares of common stock into which such share of Series B Preferred Stock is convertible (subject to the Beneficial Ownership Limitation (as defined below)), and is entitled to vote on all matters submitted for voting to the common stockholders. In addition, the consent of the holders of a majority of shares of the then-outstanding Series B Preferred Stock is required in certain circumstances. See “
Protective Provisions
”.
Dividends
Dividends on each share of Series B Preferred Stock (i) accrue in an amount equal to
15.0
% of the Stated Value (“Regular Dividends”). In addition, holders of Series B Preferred Stock are entitled to receive, on an-as converted basis, any dividend or other distribution paid to holders of common stock (a “Participating Dividend”). Regular Dividends are paid, at the Company’s option, in cash or in-kind through the addition of such dividend amount to the Stated Value. In addition, (a) if any shares of Series B Preferred Stock remain outstanding following the Conversion (as defined below) due to a provision of the Certificate of Designation limiting the conversion of Series B Preferred Stock in a manner that would result in a holder
24
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder) in excess of
9.90
% of the outstanding common stock (the “Beneficial Ownership Limitation”), then the Regular Dividend rate will be reduced to
0
% beginning on the date of the Conversion and (b) if the Conversion has not occurred by September 12, 2026, the Regular Dividend rate will increase to
20.0
%. Regular Dividends are payable on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2025. Participating Dividends are payable as and when paid to holders of common stock. Any accrued cumulative dividends will reduce the income available to common shareholders for EPS purposes.
Redemption
The Series B Preferred Stock may be redeemed by the Company at any time at a price equal to
100
% of the Stated Value, plus accrued and unpaid dividends.
Conversion
Each outstanding share of Series B Preferred Stock will automatically convert (the “Conversion”) into
58.2968
shares of common stock (the “Conversion Ratio”, and such shares of common stock, “Conversion Shares”) upon the satisfaction of all of the following conditions:
•
Approval by the holders of the Company’s voting stock of an amendment to the Company’s Fourth Amended and Restated Certificate of Incorporation (the “Stock Increase Charter Amendment”) to increase the number of authorized shares of common shares (the “Stock Increase Charter Amendment Proposal”);
•
Adoption of the Stock Increase Charter Amendment Proposal by the Company’s board of directors; and
•
Filing and acceptance of the Stock Increase Charter Amendment by the Secretary of State of Delaware.
Liquidation Preference
In the event of any Fundamental Transaction (as defined in the Certificate of Designation) or voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (a “Liquidation Event”), holders of the Series B Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Company may be made to or set aside for the holders of any junior stock, including the common stock, and subject to the rights of the holders of any senior stock or parity stock and the rights of the Company’s existing and future creditors, to receive in full a liquidating distribution in cash and in the amount per share of Series B Preferred Stock equal to the greater of (i) the sum of
100
% of the then Stated Value per share of Series B Preferred Stock plus accrued and unpaid Regular Dividends and unpaid Participating Dividends to, but excluding, the date of such Liquidation Event and (ii) the amount the holder of such share of Series B Preferred Stock would receive if such share of Series B Preferred Stock was converted into Common Stock at the Conversion Ratio on the date of such Liquidation Event. In addition, (a) if the Conversion has not occurred prior to September 12, 2026, then upon the commencement of any voluntary or involuntary case under the United States Bankruptcy Code, Title 11 of the United States Code, the liquidation preference described in clause (i) of the preceding sentence will automatically increase to
150
% of the Stated Value and (b) if the Conversion has occurred but shares of Series B Preferred Stock remain outstanding due to the Beneficial Ownership Limitation, then percentage described in clause (i) of the preceding sentence will remain
100
% of the Stated Value as of the date of Conversion.
Protective Provisions
The Series B Preferred Stock includes certain protective rights, such as requiring the approval of holders of a majority of then-outstanding Series B Preferred Stock before the Company may amend the Certificate of Incorporation, Bylaws, or other governing documents in a manner that would materially and adversely affect the rights or preferences of the Series B Preferred Stock. The holders of the Series B Preferred Stock also have the right to approve any changes to the powers, preferences, or rights of the Series B Preferred Stock and to restrict the payment of dividends on junior securities, including common stock, while any dividends on the Series B Preferred Stock remain unpaid.
Classification of Series B Preferred Stock
The Series B Preferred Stock should be classified outside of stockholders’ equity because it is contingently redeemable upon certain Fundamental Transactions, which are outside the Company’s control. Accordingly, the Series B Preferred Stock is presented outside of permanent equity in the mezzanine section of the consolidated balance sheets. None of the Fundamental Transactions are deemed probable to occur at any time during the periods presented, and therefore, the Series B Preferred Stock
25
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
was not deemed probable to become redeemable, and no subsequent remeasurement to redemption value is required for the Series B Preferred Stock.
Conversion of Series B Preferred Stock
On October 2, 2025, the stockholders of the Company approved the Stock Increase Charter Amendment Proposal to increase the authorized common stock share capital of the Company from
13,333,333
shares to
20,000,000
shares. The Stock Increase Charter Amendment was filed with the Secretary of State of the State of Delaware on October 3, 2025. As a result, all of the outstanding shares of Series B Preferred Stock automatically converted pursuant to the terms of the Series B Certificate of Designation, and on October 7, 2025, an aggregate
1,547,840
shares of common stock were issued to holders of the Series B Preferred Stock.
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
% 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 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. 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 Make-Whole Amount will be payable in the event of an acceleration of the 2029 Notes or repurchase triggered by
26
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
certain asset sales. 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
September 30, 2025
.
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 “ 2029 Notes 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 2029 Notes 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 include certain embedded features requiring bifurcation, which did not have material values as of
September 30, 2025
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 condensed consolidated statements of operations.
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, corresponding to 0.8862 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 and nine months ended
September 30, 2025
, the conditions allowing holders of the 2029 Notes to convert were not met.
The 2029 Notes, including the Delayed Draw Notes, are accounted for as a single liability, and the combined carrying amount is $180.4 million as of
September 30, 2025
, consisting of principal of $
214.4
million, net of unamortized issuance costs of $
6.5
million and debt discount of $27.5 million. The 2029 Notes were classified as long-term liabilities in the condensed consolidated balance sheets as of
September 30, 2025
. The remaining term over which the 2029 Notes’ debt issuance costs will be amortized is
3.7
years at an effective interest rate of
19.13
% for the 2029 Notes (not including the Delayed Draw Notes) and
13.28
% for the Delayed Draw Notes as of
September 30, 2025
.
Unamortized debt issuance costs incurred in connection with securing the Company’s financing arrangements are presented in the condensed consolidated balance sheets as a direct deduction from the carrying amount of the outstanding
27
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
borrowings, consistent with debt discounts. All deferred financing costs are amortized to interest expense. The net carrying amount of the liability component of the Notes as of
September 30, 2025 and December 31, 2024 is as follows:
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
|
2026 Notes
|
2029 Notes |
Second Lien Notes
(1)
|
Total
|
2026 Notes
|
2029 Notes
|
Total
|
|||||||||||||||||||||||||||||||||||
|
(In thousands)
|
|||||||||||||||||||||||||||||||||||||||||
| Principal | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
|
Unamortized debt discount
|
|
(
|
|
(
|
|
(
|
(
|
||||||||||||||||||||||||||||||||||
| Unamortized issuance costs |
(
|
(
|
|
(
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||||
| Carrying value of long-term debt, net | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
(1)
Represents $
115.0
million of outstanding principal amount of Second Lien Notes, plus the maximum interest of $58.7 million as well as a redemption premium of $8.3 million.
The following table sets forth the interest expense recognized related to the Notes:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Contractual interest expense | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Amortization of debt issuance costs |
|
|
|
|
|||||||||||||||||||
| Amortization of debt discount |
|
|
|
|
|||||||||||||||||||
| Total interest expense | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Warrants
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 $
11.25
per share, exercisable for
649,782
shares of the Company’s common stock and
10-year
warrants with a strike price of $
11.25
per share, exercisable with respect to a notional amount of
156,318
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. In August 2025, Warrants with a notional amount of
200,000
shares were settled and a gain of $
1.3
million related to the fair value adjustment on settlement date was recognized in Other income (expense), net in the condensed consolidated statements of operations for the three months ended September 30, 2025.
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, and giving effect to the settlement of warrants with respect to a notional amount of
200,000
shares, the aggregate notional amount of the Warrants was
1,016,974
shares and the strike price was $
7.15
as of
September 30, 2025
.
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
28
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
%.
Note 9.
Fair Value Measurements
The Company measures its cash equivalents at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:
•
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
•
Level 2: Inputs reflect: quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; 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.
•
Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
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 September 30, 2025 and December 31, 2024, are summarized as follows:
| September 30, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 |
Total
|
||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents - money market funds | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Liabilities: | |||||||||||||||||||||||
|
Warrants liability
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Total liabilities
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
29
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 |
Total
|
||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents - money market funds | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Liabilities: | |||||||||||||||||||||||
|
Warrants liability
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Total liabilities
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
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. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions based on the best information available.
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 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 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.
Estimated fair values are Level 3 measures in the fair value hierarchy.
The estimated fair value of outstanding balances of the Notes as of the dates presented are as follows:
|
Level of
Hierarchy
|
Fair Value |
Principal
Balance |
Unamortized Debt Discount
|
Unamortized Debt Issuance Costs
|
Net Carrying
Value
|
||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||
| 2026 Notes | 2 | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
|
2029 Notes
|
3 | $ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
|
Second Lien Notes
|
3 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
|
2026 Notes
|
2 | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
|
2029 Notes
|
3 | $ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
Management determined the fair value of 2026 Notes by using Level 2 inputs based on observable market prices for the instrument and similar instruments. Management determined the fair value of the 2029 Notes as of September 30, 2025 by using Level 3 inputs, including volatility of
15.00
%, yield of
16.00
%, risk-free rate of
3.66
%, and credit spread of
12.03
%. Management determined the fair value of the Second Lien Notes as of September 30, 2025 by using Level 3 inputs, including the volatility of
15.00
%, yield of
25.00
%, and risk-free rate of
3.69
% and credit spread of
23.10
%. A change in those inputs to a different amount might result in a significantly higher or lower fair value measurement.
Warrants
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 condensed consolidated statements of operations. The valuation of the Warrants was classified as Level 3 within the fair value hierarchy
30
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 September 30, 2025 is as follows:
|
Stock price
|
$
|
||||
|
Risk free rate
|
|
||||
|
Expected life (in years)
|
|
||||
| Expected volatility |
|
||||
Any significant changes in the inputs may result in significantly higher or lower fair value measurements. Refer to Note 8 –
Senior Notes, Capped Call Transactions, Warrants and Preferred Stock
for additional information.
The changes in fair value of the Level 3 Warrants of the dates presented are as follows:
|
September 30,
2025 |
December 31,
2024 |
||||||||||
| (In thousands) | |||||||||||
| Balance, beginning of year | $ |
|
$ |
|
|||||||
| Issuance of Warrants |
|
|
|||||||||
|
Settlement of Warrants
|
(
|
|
|||||||||
| Change in the fair value |
(
|
|
|||||||||
| Balance, end of period | $ |
|
$ |
|
|||||||
Note 10.
Commitments and Contingencies
Employee Benefit Plans
The Company has a 401(k) defined contribution plan covering all eligible employees. The Company’s 401(k) policy is a Safe Harbor Plan, whereby the Company matches
100
% of the first
3
% of eligible compensation and
50
% of the next
2
% of eligible compensation. The match is immediately vested. Salaries and related expenses include $
0.4
million and $
1.6
million of employer matching contributions for the three and nine months ended September 30, 2025, respectively and $
0.5
million and $
2.3
million of employer matching contributions for the three and nine months ended September 30, 2024, respectively.
Letters of Credit
As of September 30, 2025, 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 and cloud computing servi
ces. During the three months ended September 30, 2025, the Company entered into a new three-year contract for $
76.4
million in purchase commitments over a three-year term. Total purchase commitments including those under this new contract are as follows: $
6.3
million for the remainder of 2025, $
21.2
million for 2026, $
24.6
million for 2027, and $
25.5
million for 2028.
Indemnifications
The Company enters into service and license agreements in its ordinary course of business. Pursuant to some of these agreements, the Company agrees to indemnify certain customers from and against certain types of claims and losses suffered or incurred by them as a result of using the Company’s products.
The Company also has agreements whereby its executive officers and directors are indemnified for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential
31
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a directors and officers insurance policy that reduces its exposure and enables the Company to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of September 30, 2025 and December 31, 2024.
Note 11.
Stockholders’ Equity
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 Employee Stock Purchase Plan (the “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. The stock-based compensation expense related to PRSUs is estimated at the grant date based
on the expectation that performance goals will be achieved at the stated target level. The amount of compensation cost recognized depends on the relative satisfaction of the performance condition based on performance to date.
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’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 September 30, 2025 was
3,487,182
, inclusive of
356,000
shares approved for issuance thereunder by stockholders of the Company at the Company’s annual meeting on June 25, 2025. Options to acquire common stock granted under the 2019 Stock Incentive Plan have
four-year
terms. As of September 30, 2025,
104,836
shares of common stock remained available for issuance (taking into account all stock option exercises and other equity award settlements through September 30, 2025).
Employee Stock Purchase Plan
The number of shares authorized for issuance under the ESPP as of September 30, 2025, was
300,000
shares. As of September 30, 2025,
162,658
shares of common stock remained available for issuance under the ESPP (taking into account all share purchases through September 30, 2025).
Inducement Plan
There are
1,027,489
shares of common stock authorized and reserved for issuance under the Inducement Plan. As of September 30, 2025,
69,364
shares of common stock remained available for issuance under the Inducement Plan (taking into account all option exercises and other equity award settlements through September 30, 2025).
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
66,666
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
66,666
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.
32
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Stock Option Activity
The following table is a summary of the Company’s stock option activity and weighted average exercise prices for the nine months ended September 30, 2025:
| Stock Option Activity |
Weighted Average Remaining Contractual Term
(In years) |
Aggregate Intrinsic Value
(In thousands) |
|||||||||||||||||||||
|
Options
(In thousands) |
Weighted
Average Exercise Price |
||||||||||||||||||||||
| Balance outstanding at December 31, 2024 |
|
$ |
|
|
$ |
|
|||||||||||||||||
| Granted |
|
|
|||||||||||||||||||||
| Cancelled or expired |
(
|
|
|||||||||||||||||||||
| Balance outstanding at September 30, 2025 |
|
|
|
|
|||||||||||||||||||
| Options vested and expected to vest |
|
|
|
|
|||||||||||||||||||
| Options exercisable at September 30, 2025 |
|
$ |
|
|
$ |
|
|||||||||||||||||
Restricted Stock Unit and Performance-Vesting Restricted Stock Unit Activity
The following table is a summary of the Company’s RSU and PRSU activity
and weighted average grant date fair value
for the nine months ended September 30, 2025:
|
Number of Shares
|
Weighted Average Grant Date Fair Value
|
Aggregate Fair Value
|
|||||||||||||||
| (In thousands) | (Per share) | (In thousands) | |||||||||||||||
| Balance outstanding at December 31, 2024 |
|
$ |
|
|
|||||||||||||
| Awarded |
|
|
|||||||||||||||
| Vested |
(
|
|
|||||||||||||||
| Forfeited |
(
|
|
|||||||||||||||
| Non-vested and outstanding at September 30, 2025 |
|
|
|
||||||||||||||
| Expected to vest |
|
$ |
|
$ |
|
||||||||||||
RSUs granted to employees generally vest over a
- to
four-year
period, or upon achievement of certain performance conditions. As of September 30, 2025, total unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested RSUs and PRSUs was $
11.1
million and the weighted-average remaining vesting period was
1.17
years.
PRSUs granted are generally subject to both a service-based vesting condition and a performance-based vesting condition. PRSUs will vest upon the achievement of specified performance targets and subject to continued service through the applicable vesting dates. The associated compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied. There were no PRSUs granted during the three and nine months ended September 30, 2025 and 2024, respectively. During the three months ended September 30, 2025, the outstanding PRSUs vested but have not been distributed as of September 30, 2025.
Total stock-based compensation costs included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2025 and
2024
are as follows:
33
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||
| Cost of revenue | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Sales and marketing |
|
|
|
|
|||||||||||||||||||
| General and administrative |
|
|
|
|
|||||||||||||||||||
| Product development |
|
|
|
|
|||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Note 12.
Restructuring
LivePerson has undertaken several restructuring initiatives to realign the Company’s cost structure with its current business model, a changing competitive environment and changes in the Company’s commercial performance. During the three months ended September 30, 2025, the Company initiated a new restructuring plan (the “2025 Restructuring Plan”) to reduce cash expenditures to align with the Company’s current commercial performance resulting in a charge of $
9.3
million for the quarter.
Such costs primarily include severance and other compensation costs and are recorded in Restructuring costs in the condensed consolidated statements of operations. The Company expects the restructuring activities to be substantially completed by the end of fiscal 2025.
The following table presents the detail of the liability for the Company’s restructuring costs, which is included in Accrued expenses and other current liabilities within the condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024:
|
September 30,
2025 |
December 31,
2024 |
||||||||||
| (In thousands) | |||||||||||
| Balance, beginning of the year | $ |
|
$ |
|
|||||||
| Severance and other associated costs |
|
|
|||||||||
| IT contract termination costs |
|
(
|
|||||||||
| Cash payments |
(
|
(
|
|||||||||
| Balance, end of period | $ |
|
$ |
|
|||||||
The following table presents the detail of expenses for the Company’s restructuring costs for the three and nine months ended September 30, 2025 and 2024:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||
| Severance and other associated costs | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| IT contract termination costs |
|
|
|
(
|
|||||||||||||||||||
| Total restructuring costs | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Note 13.
Legal Matters
Stockholder Litigation
In December 2023, a putative stockholder class action entitled Damri v. LivePerson, Inc., No. 1:23-cv-10517, was filed under the federal securities laws against the Company, its former Chief Executive Officer, and its Chief Financial Officer in the United States District Court for the Southern District of New York. 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
34
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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. In May 2024, the plaintiff filed an amended complaint. The Company moved to dismiss the amended complaint in August 2024, and in March 2025, the court granted the Company’s motion and dismissed the action with prejudice. In April 2025, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Second Circuit. The appeal remains pending. A parallel litigation on behalf of stockholders who purchased their shares on the Tel Aviv Stock Exchange, entitled Weissbrod v. LivePerson, Inc., is pending in the Tel Aviv District Court in Israel, but has been stayed pending further developments in the Damri case.
In January 2024, a purported derivative action entitled Marti v. 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, 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. Block, No. 1:24-cv-04481, filed in the United States District Court for the Southern District of New York; (ii) Ravi v. 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.
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. LivePerson, Inc., No. 2024-0103, in the Court of Chancery of the State of Delaware. The complaint alleged 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, involved 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. Starboard sought damages for its trading losses and purported lost anticipated profits. The defendants filed an answer denying the substantive allegations of the complaint, the parties engaged in discovery, and in July 2025, the litigation was settled. The settlement did not have an impact on the Company’s condensed consolidated statements of operations, as the cost was covered by insurance.
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 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.
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
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 “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 the Company’s business, as well as Actions brought against the Company’s customers for which the Company has a contractual indemnification obligation.
35
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
Accruals
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,
Contingencies
. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. The accruals or estimates, if any, resulting from the foregoing analysis, are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter.
Note 14.
Income Taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are expected to become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
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. The Company recorded a valuation allowance against its U.S., e-bot7 Germany, and Bulgaria deferred tax assets as it considered its cumulative losses in recent years as a significant piece of negative evidence. Since valuation allowances are evaluated by jurisdiction, the Company believes that the deferred tax assets related to LivePerson Australia Pty. Ltd., Engage Pty. Ltd., LivePerson (UK) Ltd., LivePerson Japan, and LivePerson Ltd. (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.
The One Big Beautiful Bill was signed into law on July 4th, 2025, and makes changes to the deductibility of certain business expenditures including interest expense, research and development expenditures, and property and equipment, and makes changes to elements of U.S. cross-border taxation. The Company’s third quarter provision incorporates these changes in law including the acceleration of historical domestic research and development expenditures previously capitalized and the immediate expense of domestic research and development expenses.
For the
three and nine months ended
September 30, 2025
, the Company recorded a tax provision o
f $
0.4
million and $
0.4
million respectively. This consists of a tax provision on operating earnings of non-U.S. subsidiaries, a tax benefit on an increase in tax receivables, and interest accrual on unrecognized tax benefits in Israel.
The Company had a valuation allowance on certain deferred tax assets for the year ended December 31, 2024 of $
234.6
million. Inherent in the Company’s 2025 annual effective tax rate is an estimated decrease in the valuation allowance
of $
2.6
million, al
l of which would be recorded through the consolidated statements of operations. During 2024, an increase in the valuation allowance in the amount of $
23.4
million was recorded as an expense.
Note 15.
Subsequent Events
Increase in Authorized Common Shares and Conversion of Series B Preferred Stock
On October 2, 2025, the stockholders of the Company approved the Stock Increase Charter Amendment Proposal to increase the authorized common stock share capital of the Company from
13,333,333
shares to
20,000,000
shares. The Stock Increase Charter Amendment was filed with the Secretary of State of the State of Delaware on October 3, 2025. As a result of the approval of the Stock Increase Charter Amendment Proposal, all of the outstanding shares of Series B Preferred Stock automatically converted pursuant to the terms of the Series B Certificate of Designation, and on October 7, 2025, an aggregate
1,547,840
Conversion Shares were issued to holders of the Series B Preferred Stock.
36
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Reverse Stock Split
37
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Item 2. 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.”
Key Metrics and Current Trends
Average Annual Revenue Per Enterprise and Mid-market Customer (“ARPC”) and revenue retention are currently the key performance metrics our management uses to assess the health and trajectory of the Company. These metrics should be viewed independently of revenue, deferred revenue and remaining performance obligations. ARPC is a measure of the average recurring revenue per enterprise and mid-market customer over the trailing twelve months. ARPC increased to approximately $665,000 as of September 30, 2025, as compared to approximately $630,000 as of September 30, 2024.
Revenue retention for our enterprise and mid-market customers on the LivePerson Platform, which represents
the trailing twelve month change in total revenue from existing customers after upsells, downsells and attrition,
was approximately
80% in the third quarter of 2025, above the comparable period in 2024, but below
our target range of
105% to 115%.
We continue to observe heightened renewal hesitation and slower than anticipated new business bookings, primarily driven by customer uncertainty regarding our financial stability as well as broader macroeconomic factors extending enterprise buying cycles, especially for high-value AI solutions that require additional compliance approvals, with a corresponding impact on the Company’s revenue.
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.
Goodwill
Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. We evaluate 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. Assumptions used in an impairment test require significant judgment, therefore, they are subject to change based on facts and circumstances present at each date goodwill is evaluated for impairment. We determined there were
no
events or circumstances during the three and nine months ended September 30, 2025 that would more likely than not reduce the fair value of the reporting unit below its carrying value. If, in future periods, the financial performance of the reporting unit does not meet expectations, or a prolonged decline occurs in the market place of our common stock, it may cause a material change in the results of the impairment assessment and result in future impairment to goodwill.
There have been no significant changes in our critical accounting policies and estimates during the three and nine months ended September 30, 2025, 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, 2024, filed with the SEC on March 14, 2025.
Recently Issued Accounting Standards
38
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 LivePerson Platform’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 Nine Months Ended September 30, 2025 and September 30, 2024
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Revenue
|
$ | 60,154 | $ | 74,244 | $ | (14,090) | (19) | % | $ | 184,454 | $ | 239,268 | $ | (54,814) | (23) | % | |||||||||||||||||||||||||||||||
Revenue
decrease
d by
19%
to
$60.2 million
and by
23% to $184.5 million
for the three and nine months ended
September 30, 2025, respectively,
from
$74.2 million and $239.3 million
for the comparable periods in
2024
. This decrease in revenue is due to a decrease in hosted services of
$11.5 million
and
$44.8 million
primarily driven by customer cancellations and downsells
and a decrease in professional services of
$2.6 million
and
$10.0 million
for the three and nine months ended
September 30, 2025, respectively
. Included in hosted services is a decrease of
$3.2 million
and
$11.2 million
in
revenue that is variable based on interactions and usage for the three and nine months ended
September 30, 2025, 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | 17,218 | $ | 19,983 | $ | (2,765) | (14) | % | $ | 53,474 | $ | 60,869 | $ | (7,395) | (12) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 29 | % | 27 | % | 29 | % | 25 | % | |||||||||||||||||||||||||||||||||||||||
| Headcount (at period end) | 158 | 184 | (14) | % | 158 | 184 | (14) | % | |||||||||||||||||||||||||||||||||||||||
Cost of revenue decreased by 14% to $17.2 million for the three months ended September 30, 2025 from $20.0 million for the comparable period in 2024. This decrease in expense is primarily attributable to a decrease in salary and employee-related expenses of $1.1 million due to attrition from prior periods, a decrease in business services and outsourced contracted labor of $1.1 million, and a decrease in software and hosting expenses of $0.4 million.
Cost of revenue decreased
by
12% to $53.5 million for the nine months ended September 30, 2025 from $60.9 million for the comparable period in 2024. This decrease in expense is primarily attributable to a decrease in salary and employee-related expenses of $5.0 million due to attrition from prior periods and a decrease in business services and outsourced contracted labor of $4.7 million, partially offset by an increase in software and hosting expenses of $2.7 million.
39
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 18,235 | $ | 22,093 | $ | (3,858) | (17) | % | $ | 61,608 | $ | 77,056 | $ | (15,448) | (20) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 30 | % | 30 | % | 33 | % | 32 | % | |||||||||||||||||||||||||||||||||||||||
| Headcount (at period end) | 150 | 249 | (40) | % | 150 | 249 | (40) | % | |||||||||||||||||||||||||||||||||||||||
Sales and marketing expenses decreased by 17% to $18.2 million for the three months ended September 30, 2025 from $22.1 million for the comparable period in 2024. This decrease was primarily attributable to a decrease in salary and employee-related expenses of $2.9 million due to attrition from prior periods, a decrease in marketing expenses of $0.6 million, and a decrease in software and hosting expenses of $0.5 million.
Sales and marketing expenses decreased by 20% to $61.6 million for the nine months ended September 30, 2025 from $77.1 million for the comparable period in 2024. This decrease was primarily attributable to a decrease in salary and employee-related expenses of $8.3 million due to attrition from prior periods, a decrease in software and hosting expenses of $2.4 million, a decrease in marketing expenses of $2.4 million, and a decrease in business services and outsourced contracted labor of $2.3 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 10,966 | $ | 17,662 | $ | (6,696) | (38) | % | $ | 35,695 | $ | 63,671 | $ | (27,976) | (44) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 18 | % | 24 | % | 19 | % | 27 | % | |||||||||||||||||||||||||||||||||||||||
| Headcount (at period end) | 121 | 138 | (12) | % | 121 | 138 | (12) | % | |||||||||||||||||||||||||||||||||||||||
General and administrative expenses decreased by 38% to $11.0 million for the three months ended September 30, 2025 from $17.7 million
for the comparable p
eriod in 2024. This decrease is primarily due to a decrease in legal and insurance costs of $3.2 million, a decrease in salary and employee-related expenses of $1.3 million due to attrition from prior periods, a decrease in bad debt expense of $1.0 million due to a lower receivable balance and improved collection efforts, and a decrease in stock based compensation of $0.5 million.
General and administrative expenses decreased by 44% to $35.7 million for the nine months ended September 30, 2025 from $63.7 million for the comparable period in 2024. This decrease is primarily due to a decrease in bad debt expense of $10.1 million, a decrease in legal and other consulting fees of $9.4 million, a decrease in salary and employee-related expenses of $2.8 million, a divestiture-related working capital adjustment of $1.8 million in the first quarter of 2024, a decrease in leadership transition costs of $1.1 million, and a decrease in business services and outsourced contracted labor of $1.1 million.
40
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
| Product development | $ | 13,376 | $ | 18,184 | $ | (4,808) | (26) | % | $ | 43,253 | $ | 62,493 | $ | (19,240) | (31) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 22 | % | 24 | % | 23 | % | 26 | % | |||||||||||||||||||||||||||||||||||||||
| Headcount (at period end) | 315 | 430 | (27) | % | 315 | 430 | (27) | % | |||||||||||||||||||||||||||||||||||||||
Product development costs decreased by 26% to $13.4 million for the three months ended September 30, 2025 from $18.2 million for
the comparable period in
2024
.
This decrease is primarily attributable to a decrease in salary and employee-related expenses of $1.6 million due to attrition from prior periods, a decrease in software and hosting expenses of $1.5 million, a decrease in business services and outsourced contracted labor of $1.0 million, and a decrease in stock compensation expense of $0.4 million.
Product development costs decreased by 31% to $43.3 million for the nine months ended September 30, 2025 from $62.5 million for the comparable period in 2024. This decrease is primarily attributable to a decrease in salary and employee-related expenses of $5.2 million due to attrition from prior periods, a decrease in software and hosting expenses of $5.4 million, a decrease in business services and outsourced contracted labor of $4.9 million, and a decrease in stock-based compensation expense of $2.2 million.
We continued to make investments in public cloud migration, and in the LivePerson Platform. 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 nine months ended September 30, 2025, $3.0 million and $9.3 million was capitalized for internal-use software, respectively, compared to $4.7 million and $15.2 million, respectively, for the comparable periods in 2024.
Depreciation and Amortization
Our depreciation and amortization relates to depreciation and amortization of our property and equipment and to amortization of our intangible assets and finance leases.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Depreciation and amortization
|
$ | 5,634 | $ | 10,912 | $ | (5,278) | (48) | % | $ | 17,210 | $ | 34,751 | $ | (17,541) | (50) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 9 | % | 15 | % | 9 | % | 15 | % | |||||||||||||||||||||||||||||||||||||||
Total depreciation and amortization decreased by 48% to $5.6 million for the three months ended September 30, 2025 from $10.9 million for the comparable period in 2024. The decrease was primarily driven by the lower intangible asset balance due to impairments during 2024, which drove a reduction in amortization of $3.5 million, in addition to a reduction in depreciation of $1.8 million primarily related to a lower internal-use software balance due to impairments during 2024.
Total depreciation and amortization decreased by 50% to $17.2 million for the nine months ended September 30, 2025 from $34.8 million for the comparable period in 2024. The decrease was primarily driven by the lower intangible asset balance due to impairments during 2024, which drove a reduction in amortization of $11.0 million, in addition to a reduction in depreciation of $6.5 million primarily related to a lower internal-use software balance due to impairments during 2024.
41
Restructuring Costs
We maintain restructuring initiatives to realign our cost structure with our current business model, in which we have flattened the Company’s organizational structure to align to more efficient sales and service support. While the Company’s restructuring efforts are ongoing, the 2024 restructuring activities were substantially completed by December 31, 2024, and the Company expects the 2025 restructuring activities to be substantially completed by December 31, 2025.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring costs | $ | 9,312 | $ | 1,448 | $ | 7,864 | 543 | % | $ | 11,178 | $ | 7,876 | $ | 3,302 | 42 | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 15 | % | 2 | % | 6 | % | 3 | % | |||||||||||||||||||||||||||||||||||||||
Restructuring costs increased by 543% to $9.3 million for the three months ended September 30, 2025, from $1.4 million for the comparable period in 2024. This increase is attributable to an increase in severance and other associated costs due to the 2025 Restructuring Plan during the third quarter of 2025.
Restructuring costs increased by 42% to $11.2 million for the nine months ended September 30, 2025, from $7.9 million for the comparable period in 2024. This increase is attributable to a $2.8 million increase in severance and other associated costs due to the 2025 Restructuring Plan during the third quarter of 2025, and a $0.6 million reversal of IT infrastructure contract termination costs in the comparable period.
Impairment of Goodwill
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Impairment of goodwill
|
$ | — | $ | — | $ | — | — | % | $ | — | $ | 3,627 | $ | (3,627) | (100) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | — | % | — | % | — | % | 2 | % | |||||||||||||||||||||||||||||||||||||||
There were no goodwill impairment charges for the three and nine months ended September 30, 2025, and the three months ended September 30, 2024. Goodwill impairment of $3.6 million during the nine months ended September 30, 2024 was a result of our impairment test in the first quarter of 2024, attributable to the goodwill associated with our WildHealth reporting unit, which was fully divested in 2024.
Impairment of Intangibles and Other Assets
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Impairment of intangibles and other assets
|
$ | — | $ | — | $ | — | — | % | $ | — | $ | 10,568 | $ | (10,568) | (100) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | — | % | — | % | — | % | 4 | % | |||||||||||||||||||||||||||||||||||||||
There were no impairment charges related to intangibles and other assets during the three and nine months ended September 30, 2025, and the three months ended September 30, 2024. The impairment charge of $10.6 million during the nine months ended September 30, 2024 represents a non-cash charge of $8.3 million related to the impairment of internal-use software, and a non-cash charge of $2.2 million related to our WildHealth reporting unit.
42
Total Other Income (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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | (8,113) | $ | (5,698) | $ | (2,415) | (42) | % | $ | (23,457) | $ | (8,450) | $ | (15,007) | (178) | % | |||||||||||||||||||||||||||||||
| Interest income | 1,207 | 1,551 | (344) | (22) | % | 4,157 | 4,798 | (641) | (13) | % | |||||||||||||||||||||||||||||||||||||
|
Gain on troubled debt restructuring
|
27,720 | — | 27,720 | — | % | 27,720 | — | 27,720 | — | % | |||||||||||||||||||||||||||||||||||||
|
Gain on debt extinguishment
|
— | — | — | — | % | — | 73,083 | (73,083) | (100) | % | |||||||||||||||||||||||||||||||||||||
| Other income (expense), net | 2,878 | (7,615) | 10,493 | 138 | % | 8,845 | (7,246) | 16,091 | 222 | % | |||||||||||||||||||||||||||||||||||||
| Total other income (expense), net | $ | 23,692 | $ | (11,762) | $ | 35,454 | 301 | % | $ | 17,265 | $ | 62,185 | $ | (44,920) | (72) | % | |||||||||||||||||||||||||||||||
Total other income (expense), net increased by 301% to income of $23.7 million for the three months ended September 30, 2025 from expense of $11.8 million for the comparable period in 2024. This increase is primarily due to a gain of $27.7 million on the troubled debt restructuring. In addition, a $2.9 million gain in the fair value of our Warrants was recorded in other income (expense), net during the current period, compared to a $7.8 million loss in the comparable period. The remaining amount of total other income (expense), net, is attributable to interest expense on our Notes, partially offset by interest income on our money market accounts, and the impact of currency rate fluctuations.
Total other income (expense), net decreased by 72% to income of $17.3 million for the nine months ended September 30, 2025 from income of $62.2 million for the comparable period in 2024. This decrease is primarily due to a gain of $27.7 million on the troubled debt restructuring, compared to a gain of $73.1 million on the extinguishment of the 2026 Notes during the comparable period. The decrease was partially offset by a $8.8 million gain in the fair value of our Warrants recorded in other income (expense), net during the current period, compared to a $7.8 million loss in the comparable period. The remaining amount of total other income (expense), net, is attributable to interest expense on our Notes, partially offset by interest income on our money market accounts, and the impact of currency rate fluctuations.
Provision for Income Taxes
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands)
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Provision for income taxes
|
$ | 394 | $ | 509 | $ | (115) | (23) | % | $ | 433 | $ | 2,129 | $ | (1,696) | (80) | % | |||||||||||||||||||||||||||||||
Provision for income taxes was $0.4 million and $0.4 million for the three and nine months ended September 30, 2025, compared to $0.5 million and $2.1 million for the comparable periods in 2024. 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, a tax benefit related to an increase in tax receivables, 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.
43
Liquidity and Capital Resources
The following describes the Company’s cash flows for the nine months ended September 30, 2025 and 2024:
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
|
Condensed Consolidated Statements of Cash Flows Data:
|
|||||||||||
| Net cash used in operating activities | $ | (20,781) | $ | (12,015) | |||||||
| Net cash used in investing activities | (11,215) | (23,505) | |||||||||
|
Net cash used in financing activities
|
$ | (45,852) | $ | (34,862) | |||||||
As of September 30, 2025, we had
$106.7 million
in cash and cash equivalents, a decrease of $76.6 million from December 31, 2024. The decrease is primarily attributable to cash paid of
$45.0 million
related to the troubled debt restructuring, various uses of cash for operating purposes, and purchases of property and equipment.
Cash Flows from Operating Activities
Net cash used in operating activities was $20.8 million for the nine months ended September 30, 2025. Our net loss of $21.1 million includes the effect of non-cash expenses of depreciation of $16.6 million, stock-based compensation of $11.6 million, interest expense of $13.8 million, and amortization of debt issuance costs and accretion of debt discount of $5.6 million, partially offset by a gain on troubled debt restructuring of $42.4 million, and a gain from the change in the fair value of our Warrants of $8.8 million. Net cash used in operating activities was further driven by a decrease in accounts payable, accrued expenses and other current liabilities of $12.4 million, and a decrease in deferred revenue of $2.8 million, partially offset by decreases in accounts receivable of $10.2 million, contract acquisition costs of $7.1 million, and prepaid expenses and other current assets of $1.5 million.
Net cash used in operating activities was $12.0 million for the nine months ended September 30, 2024. Our net loss of $22.1 million includes the effect of non-cash expenses related to depreciation of $23.2 million,
stock-based compensation of
$18.8 million
, amortization of purchased intangible assets and finance leases of
$11.6 million
, allowance for credit losses of
$9.6 million
, change in fair value of Warrants of
$7.8 million
, intangible and other assets impairment of
$10.6 million
and goodwill impairment of
$3.6 million
, partially offset by gain on debt extinguishment of
$73.1 million
, in connection with the exchange of our 2026 Notes. Cash used in operating activities was further driven by a decrease in accrued expenses and other current liabilities of $35.6 million and deferred revenue of
$6.1 million
, partially offset by decreases in accounts receivable of $22.2 million, and prepaid expenses and other current assets of
$6.2 million
.
Cash Flows from Investing Activities
Net cash used in investing activities was $11.2 million for the nine months ended September 30, 2025, and was primarily driven by purchases of property and equipment.
Net cash used in investing activities was
$23.5 million
for the
nine months ended
September 30, 2024
, and was primarily driven by purchases of property and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities was
$45.9 million
for the nine months ended September 30, 2025, and was primarily driven by payments to lenders of $45.0 million related to the troubled debt restructuring.
Net cash used in financing activities was
$34.9 million
for the nine months ended September 30, 2024,
which was driven primarily by the full repayment of our 2024 Notes for $72.5 million, the repurchase of 2026 Notes for $4.9 million and payments of debt issuance costs of
$7.4 million
in connection with the debt exchange transaction, partially offset by proceeds of $50.0 million from the issuance of 2029 Notes.
44
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
September 30, 2025
, we had an accumulated deficit of
$1,012.4 million
.
Our principal sources of liquidity are the net proceeds from the issuance of our convertible senior notes, after deducting purchaser discounts as applicable and debt issuance costs paid by us, and 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 financi
ng. W
e 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 after May 13, 2024) 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, Warrants and
Preferred Stock
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risks
We actively monitor the movement of the U.S. dollar against the Israeli new shekel, Pound Sterling, Euro, Australian dollar, and Japanese Yen and have considered the use of financial instruments, including but not limited to derivative financial instruments, which could mitigate such risk. If we determine that our risk of exposure materially exceeds the potential cost of derivative financial instruments, we may in the future enter into these types of arrangements.
Collection Risks
Our accounts receivable are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. During the nine months ended September 30, 2025, our allowance for credit losses decreased by $3.1 million to $5.5 million. During the nine months ended September 30, 2024, our allowance for credit losses increased by $0.2 million to $9.5 million. A large proportion of our receivables are due from larger corporate customers that typically have longer payment cycles. We base our
45
allowance for credit losses on specifically identified credit risks of customers, historical trends and other information that we believe to be reasonable. Receivables are written off and charged against the applicable recorded allowance when we have exhausted collection efforts without success. We adjust our allowance for credit losses when accounts previously reserved have been collected.
An allowance for credit losses is established for losses expected to be incurred on accounts receivable balances. Judgment is required in the estimation of the allowance and we evaluate the collectability of our accounts receivable and contract assets based on a combination of factors. If we become aware of a customer’s inability to meet its financial obligations, a specific allowance is recorded to reduce the net receivable to the amount reasonably believed to be collectible from the customer. For all other customers, we use an aging schedule and recognize allowances for credit losses based on the creditworthiness of the debtor, the age and status of outstanding receivables, the current business environment and our historical collection experience adjusted for current expectations for the customer or industry. Accounts receivable are written off against the allowance for uncollectible accounts when we determine amounts are no longer collectible.
Interest Rate Risk
Our investments consist of cash and cash equivalents. Therefore, changes in market interest rates do not affect in any material respect the value of the investments as recorded by us.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial conditions or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
46
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2025.
Disclosure controls and procedures ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed and summarized within the time periods specified in the Securities and Exchange Commission’s rules and forms, and ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of
September 30, 2025.
Limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, have been detected.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2025 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and Chief Financial Officer, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
The information called for by this Item is incorporated herein by reference to
Note 13
–
Legal Matters
, in the Notes to the Unaudited Condensed Consolidated Financial Statements.
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed on March 14, 2025, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. Other than as set forth below, there have been no material changes to the risk factors described in our most recent Annual Report on Form 10-K.
Our failure to comply with the continued listing requirements of the Nasdaq Global Select Market could result in a delisting of our common stock.
Our common stock currently is listed on the Nasdaq Global Select Market. We are required to meet specified financial requirements in order to maintain such listing, including a closing bid price of at least $1.00. On October 13, 2025, we effected a 1-for-15 reverse stock split of our common stock in order to regain compliance with the minimum bid price requirement.
We can provide no assurance that we will be able to prevent future non-compliance with the listing requirements, or that any actions taken by us in an effort to restore our compliance, including the reverse stock split, will stabilize the market price of our common stock, improve the liquidity of our common stock, prevent our common stock from again dropping below the minimum bid price requirement, prevent other future non-compliance with the listing requirements or allow our common stock to remain listed. If we fail to satisfy the minimum bid price requirement again at any time before or on October 13, 2026,
47
we will not be eligible for a 180-day compliance period to regain compliance with the minimum bid price requirement and Nasdaq will take steps to delist our common stock. In addition to satisfying the minimum bid price requirement, we must satisfy minimum financial and other continued listing requirements and standards to maintain a listing with Nasdaq, including certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. Further, the failure of our 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 would constitute a “fundamental change” under the indentures governing the 2026 Notes, the 2029 Notes and the Second Lien Notes.
If our common stock is delisted from Nasdaq, it is unlikely that our common stock would qualify for listing on another national securities exchange in the United States, and trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQX, the OTCQB or the Pink Market maintained by OTC Markets Group Inc. We cannot assure you that our common stock, if delisted from Nasdaq, will ever be listed on another securities exchange or quoted on an over-the-counter quotation system. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. Accordingly, delisting from Nasdaq could make trading our common stock more difficult for investors, likely leading to declines in our share price, trading volume and liquidity. Delisting from Nasdaq could also result in negative publicity and make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as transaction consideration or the value accorded our common stock by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market.
If our common stock is delisted, it may come within the definition of “penny stock” as defined in the Exchange Act and would be covered by Rule 15g-9 of the Exchange Act. This rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors which may further limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities by the issuer during the three months ended
September 30, 2025
.
Purchase of Equity Securities by the Issuer
There were no repurchases of equity securities by the issuer during
the three months ended September 30, 2025.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a) None.
(b) None.
48
(c) During the three months ended September 30, 2025, no
director or executive officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement”
or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulations S-K.
49
ITEM 6. EXHIBITS
|
3.1
|
||||||||
|
3.2
|
||||||||
|
3.3
|
||||||||
|
3.4
|
||||||||
| 3.3 | ||||||||
| 4.1 |
Indenture, dated as of September 12, 2025, by and among LivePerson
, Inc.,
the
subsidiary guarantors party thereto
and
U.S. Bank Trust Company, National Association, as Trustee and as Collateral Agent
(incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 15, 2025).
|
|||||||
| 4.2 | ||||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
| 10.1 | ||||||||
| 10.2 | ||||||||
| 31.1 | * | |||||||
| 31.2 | * | |||||||
| 32.1 | ** | |||||||
| 32.2 | ** | |||||||
| 101.INS | * | Inline XBRL Instance Document -- The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||||
| 101.SCH | * | Inline XBRL Taxonomy Extension Schema Document | ||||||
| 101.CAL | * | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||
| 101.DEF | * | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||||
| 101.LAB | * | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||||
| 101.PRE | * | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||
| 104 | * | Cover Page Interactive Data File (formatted as Inline XBRL) | ||||||
* Filed herewith
** Furnished herewith
50
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIVEPERSON, INC. | |||||||||||
| (Registrant) | |||||||||||
| Date: | November 12, 2025 | By: | /s/ JOHN SABINO | ||||||||
| Name: | John Sabino | ||||||||||
| Title: | Chief Executive Officer | ||||||||||
|
(
Principal Executive Officer
)
|
|||||||||||
| Date: | November 12, 2025 | By: |
/s/ JOHN COLLINS
|
||||||||
| Name: |
John Collins
|
||||||||||
| Title: |
Chief Financial Officer and Chief Operating Officer
|
||||||||||
|
(
Principal Financial Officer
)
|
|||||||||||
51
TABLE OF CONTENTS
Part I Financial InformationItem 1. Financial StatementsNote 1. Description Of Business and Basis Of PresentationNote 2. Revenue RecognitionNote 3. Net Income (loss) Per ShareNote 4. Segment InformationNote 5. Goodwill and Intangible Assets, NetNote 6. Property and Equipment, NetNote 7. Accrued Expenses and Other Current LiabilitiesNote 8. Senior Notes, Capped Call Transactions, Warrants and Preferred StockNote 9. Fair Value MeasurementsNote 10. Commitments and ContingenciesNote 11. Stockholders EquityNote 12. RestructuringNote 13. Legal MattersNote 14. Income TaxesNote 15. Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 2. ManagementItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits