Good afternoon. My name is Eli and I will be your conference operator today. At this time, I would like to welcome everyone to the LivePerson fourth quarter 2008 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remark, there will be a question-and-answer session. (Operator's instruction) Thank you. I would now like to turn the call over to Mr. Tim Bixby, President and CFO of LivePerson. Sir, you may begin your conference.

Thanks very much. Thanks for joining us everybody. Before we begin, I would like to remind everyone that during this conference call, comments that we make regarding LivePerson that are not historical facts are forward-looking statements and therefore are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The internal projections and beliefs, upon which are based on our expectations today, may change, over time, and we undertake no obligation to inform you if they do. Results that we report today should not be considered as an indication of future performance. Changes in economic, business, competitive, technological, regulatory, and other factors could cause LivePerson's actual results to differ materially from those expressed or implied by the projections of forward-looking statements made today. For more detailed information about these factors and other risks that may impact our business, please review the reports and documents filed from time to time by LivePerson with the Securities and Exchange Commission. Also, please note that on the call today, we will discuss some non-GAAP financial measures when we talk about the Company's financial performance. We report our GAAP results as well as provide a reconciliation of these non-GAAP measures to the GAAP financial measures in our earnings release. You can obtain a copy of our earnings release by visiting the Investor Relations section of our website. And now, I would like to turn the call over to LivePerson's Chief Executive Officer, Robert LoCascio.

Thanks, Tim. Good afternoon everyone and thank you for joining us. During the fourth quarter of 2008, we generated revenue of $19.6 million or 17% from a year ago and up 1% sequentially as compared to the third quarter of 2008. EBITDA per share was $0.07, which is the new high for LivePerson and better than our expectation at the beginning of the quarter. LivePerson have a solid fourth quarter capping off and we had a continued strong growth and margin improvement. In 2008, revenue increased 43% year-over-year and grew to nearly $75 million. EBITDA after the year was nearly $10 million and improved from 10% of revenue in the first quarter to 18% of revenue in the fourth. During 2008, we signed almost 40 new enterprise customers, 10 of them during the fourth quarter including companies like Sun Microsystems, Nestle, Sharp Electronics and Texas Instruments along with hundreds of small business customers. Within our customer base, we currently serve 5 of the 8 largest US financial institutions with the five US telecommunications companies, 5 of the 7 largest Fortune 500 high tech companies. We are pleased with our 2008 results especially given the challenging macroeconomic environment. Its attachments to the underlying strain from our product line did grow our business model. Furthermore, Forrester weekly validated the positive impact of our third generation chat solution used by of our enterprise customers. Working with one of the largest financial service customers, they conclude that LivePerson proactive chat enabled consumers to double their application completion rate. The study validated that our proactive engagement solutions help companies increase revenue and deliver better online experience. Looking at our business operations, enterprise revenue grew 2% sequentially and 27% for the year, while the small business groups revenues increased 5% sequentially and 35% over the course…

Thanks, Rob. We posted sequential revenue growth that Rob mentioned overall of 1% in the fourth quarter. This is a good result due to overall economy and specially the pressure on financial institutions. We performed extremely well in expense management, gross margin improvement as well as generating cash flow from operations. EBITDA per share for the full year ended very strong at $0.20 per share. We signed 38 enterprise deals in total in the quarter, again a very strong showing. Ten new names were among those deals and the number was right in line with our performance in the first three quarters of the Company. Pricing held well as the average yield measured per deal had not changed as compared to each of the three prior quarters of 2008. Net of total our clients will be in the note in the press release from today including ShopNBC.com as well as the global leader in consumer electronics, the top three global wireless carriers and the world largest online florist and gift shop. We also expanded the business with several large customers including Panasonic as well as the world leading provider of networking equipment, the leading online photo service, the leading global financial lending services company and the world's largest home improvement retailer. In terms of breakdown of our enterprise business, deals list in revenue terms were as follows; 40% of the new deals came from new customers in terms of revenue and about 60% or the balance came from existing customers expanding. This is actually a strong showing for revenue growth from new customers especially as compared with the prior quarter. In terms of the product line breakdown, almost 100%, 95% of business done in the quarter was sales driven as opposed to service driven which may have about 5% of…

(Operator's instruction) Your first question comes from the line of Richard Baldry - Canaccord Adams.

I think on the prior call, you thought the key works typically had something on the range of a three to four extra return on dollar spend. So, during the pullback in spending, did you do that to those metrics really tail off pretty quickly in the quarter? I am trying to figure out sort of how that decision was made.

Yes, when we started to run our campaigns, and we ran, we did some offline in radio and then we did some online with mostly in media stuff outside of the core. It gets sort of got lost. We saw it very quickly got lost and now our consumers were feeling about all the negative noise and so the rates are very good but the conversion rates were not. So, we decided to sort of pull it back and then on the keywords, in the media that we now get the solid return of investment which is down at our core categories that we have been working on the last couple of weeks that we started moving for probably a couple of years.

And maybe on looking at the balance sheet or cash resources versus the market account, can you talk about sort of your comfort levels, of what type of cash you want to have to run the business. It looks like it start of pulling back on growth or spending on one side of the table and maybe put under for increased buybacks over the year ahead.

Yes, I think if you look back I guess at the last couple of years, it is a good project. When we think about it, in the case of 2008, we generated a healthy cash flow from operations and then we felt comfortable enough with our cost structure and our outlook to reinvest that into primarily the co-location transition and also a healthy amount to the share repurchase. The share repurchase is obviously a little more discretionary. I think that is something that we are comfortable with. The cash at the beginning of the year was essentially unchanged at yearend but that range feels comfortable for us and I think we are looking into the 2009 something similar where $3 million ahead on cash or breakeven or better and so we will invest in this current ROI. That is what you should expect.

Yes, it is the pipeline as we feel like in the face of bluer economy and I think what everyone is seeing is it is sort of a slowdown in the buying process, not as much as people saying, I do not want this or I do not want that. They are just like us. We are doing the same thing. We have been very conservative on our cost side and even on the consumer group, we decided in the face of capital consumer market, let us generate cash. Let us not try to outbid what consumers feel. So the best thing we can do as a Company is generate as much cash as we can with the growth that is what we are going to achieve this year.

(Operator's instruction) Your next question comes from the line of Brad Whitt - Broadpoint AmTech.

Tim, just a clarification on some of the expense items that you gave, when you said sales and marketing 32%, G&A 20%, R&D 17%, is that a non-cash number that excludes stock base comp?

No.

Okay, I just want to clarify that. And Rob, maybe you can give us a little more color on what is going on in the consumer side. I think you said it was down 8 to 10 sequentially and I noticed you are using email. I am just curios as to what the dynamic is between email and chat and whether you are able to generate revenue from email as well as chat.

Yes, about 15% of revenues right now are offline so they are through email and the remainder is through chat and there is a little bit of voice in the platform too. Basically, focused in the later half of the year in Q4 was really to shift some of the marketing budget off the core which is all of the personal budget categories included into the general campaigns and so because of that, it has an impact on some of the core categories. The thing I was seeing now with core categories and all the personal budgets are hanging in there. The conversion rates are hanging in. The lifetime values are hanging in so the one way we got we feel like now that we have confidence is in that personal category. So that is the focus there and grow the business from there versus trying to do general brand building around the world of experts and that also allows us to basically change the dynamic of the spending and run it as a breakeven profitable group and that is our intention.

Rob, any new products that you are planning to launch this year that we can look forward to?

Couple of things that we have coming up, we got the whole data warehouse investment that we have been making over the later half of last year and I think going through full year of this year. We hired eight people in the data warehouse team and we are very focused on the analytic side of the business and we have some amazing data. We call it like voice of the customer that we will transfer data of what people are chatting about and we really do these transcripts seven million a month that we capture so I think we show that we are very focused on presenting that to our customers and making get real data out of it so they can see what are people talking about on the website, what issues they are having and we even talked about rolling that up on an industry wide so they can see what are the LivePerson, financial customers, what are they talking about, their customers talk about. So, that is an exciting project that we are putting a fair amount of focus on. We have got a couple of things in small business data that are coming but I would rather just will talk about it in the later half of the year from a competitive standpoint and then in the consumer side, we are testing voice now and we are just going to focus, like I said, on that core and getting back to growing it. So, I think data warehouse is the biggest project on the enterprise side.

Your next question comes from the line of [John Pintail - Pintail Micro Capital]. [John Pintail - Pintail Micro Capital]: I have a quick question on your guidance just for understanding that. But before then, can you just give me a little bit of sense, given the environment out there; can you get the auto focus on the consumer business and by that on some of your current client and trying to create the tie-overs that you did, for example, the Java or just a little bit of flavor?

Yes, I think we are really blocking and tackling with Java and it is really doing quite well in how it is growing and we want to just sort of get the models down. We have been doing all the sort of packaging and take it up for the customers because we have proven a basic point which I think a lot of people really did not believe which was- if you go to Java.com and you go to the Help Center, people are paying now for help versus sending in an email or picking up the phone to Java, to Sun Microsystems' call center and so we are seeing the point that consumers will pay for other consumers knowledge if they can get it in real time and they can it through chat. So, now I think we are very excited and I think in this economic environment, people do not want to staff as much and maybe play nicely into that. In the flip side, there is a lot of people are looking for alternative ways to make money and they are experts at something. So the supply side of our business is used to, if we get about a hundred new experts a day applying to be experts. So, yes I think both sides are working with the supply and demand side. So we are excited about that. [John Pintail - Pintail Micro Capital]: So, when you said you are focusing on the personal side and on the consumer then it sounds like you have got to set your focus also in really trying to mind your current business customers. Should we expect Java type relationships coming out soon or is that something that that is just taking longer than you ought to do?

Yes, I take it as; it is probably we will see some more throughout the year. We are just on resource perspective, we have a limited amount of resources and we just want to make Java work at a 110% and we may, if you keep going back to the site, you will see so many changes. Pretty much like every two weeks, there is a change to what we are doing because we are learning a lot because we have first gotten to do this. So expect a few more and for the core, we know the core. The core makes money. The core has strong return on investment. There was very strong lifetime value in the core categories between $200 and $300 we get from each consumer per year. So, we got to focus. We do not have an opportunity right now to go on and try to educate the market about experts when they are thinking about their mortgages or losing their houses and their jobs. So they shows how personal advice when it comes to that stuff. [John Pintail - Pintail Micro Capital]: And then maybe just to Tim or you Rob, on your EBITDA guidance for the year of $0.23 to $0.27 and then your Q1 guidance that is putting that in light with the goal of being breakeven beginning in Q2 for the personal business, the fact you blew or you spent the $4 million last year, when you look at that that should be a $0.06 benefit, you did $0.15 in the three quarters last year. It looks like your modeling right now at the top of other range you are guiding for flat EBITDA from the core business. Am I reading this wrong or..?

Yes, I think if you do a simple math count now, you will get the numbers that we just got to. I think a better way to think about how we are putting the guidance together is getting the consumer operations at breakeven. That is one specific piece of the business in isolation and so we want to be very clear on that. The timing of that is uncertain. We expect to be there early in Q2 and so we expect to get the majority of that business fit for the year but not a full year benefit. Now, the other piece of that business is unpredictable as well as the purpose starts to be a little bit conservative on both counts in terms of ROI and EBITDA guidance but your straight math is definitely correct in that it is going to be exactly as it is this year and we make that change and you will get to a number that would be better than our stated guidance. [John Pintail - Pintail Micro Capital]: Okay and something, you are not at this point trying to tell us something about the core business being down year-over-year on EBITDA.

No, to the contrary, I think it is definitely as strong as ever. The margins were strong. Gross margin improvement was better than we anticipated. There is some cost structure that issues the change in the first quarter every year in terms of payroll taxes and those kinds of things so you see a natural, maybe a half percent or so of change from a normal Q4 but other than that, it is all definitely good news on the business operation platform. [John Pintail - Pintail Micro Capital]: And you should get some benefit in the first two quarters on the server performance as well, right?

Yes, I mean we are not guiding to consistent improvement every quarter in gross margin but we certainly saw that and more in 2008 worth noting but I think we are getting to the levels now that are almost at our targets back at 75% and so I think, the range is 75% to 80% each bit of improvement gets a little bit tougher so we are going to be comfortable actually, very pleased with the 75% gross margin rate.

(Operator's instruction) Your next question comes from the line of Corbin Woodhull - Merriman Curhan Ford & Co. Corbin Woodhull - Merriman Curhan Ford & Co.: I jumped on the call a little bit late so I am sorry I miss this but I was just wondering if you can just give your underlying assumptions for 2009 revenue guidance in the consumer segment whether they are flat or down from the 2008 revenues.

So our assumption is that they are essentially flat with the current revenue. We are making adjustments to the revenue structure as Rob mentioned that would likely take effect later in the first quarter so we will expect to see a step change that will raise that run rate up. But all that is, we could see a number, the guidance number is very similar to the total we did in 2008. So, the $10 million net revenue number will be consistent with what we did in 2008.

You have a follow up question from the line of Brad Whitt - Broadpoint AmTech.

Can you just comment a little bit on the CapEx and expenditures? It seems a little higher than we have got for not only to this past year but for next year as well. Then also, I do not quite understand your 20% G&A guidance for next year. This quarter, I think G&A was about, fall on 13%. It is about 13.5% of revenue for the year and you got to come to 20%. That would imply G&A grow on probably three to four times faster than revenue, if you could just explain that too.

Sure. So, I will have the second one first and then I think the difference of the G&A is amortization of intangibles you may have separately and to that 20% includes, that include that number.

Right, I asked you awhile back if it would be included, if there is a cash number or not.

Yes, I am sorry. That is different because we breakout in the face of the P&L for G&A. My response earlier was not 100% correct so for the other line items, it includes the non-cash in G&A. You have to combine the two line items from the P&L and that should reflect but the demand will change from the Q4.

Okay. The Q4 has a pretty big drop from Q3, was there some one-time reversal of accruals or something like that in Q4?

In G&A?

Yes.

The biggest shift, two significant shifts. One was we have some higher legal expenses and accruals just for an ongoing legal cost in Q3 that tapered off really in Q4 and we also do accruals in the course of year due late bonus payments. There was a bit of an adjustment there. I think that was a little more in Q4 than in other quarter and so that, assuming that as it goes away in Q1 and that is why that rate might go up in Q1. So, I think we have to have big improvement in Q4. I think we will get most, but not all of that going to Q1.

Okay and just back to the CapEx, what kind of things are you going to be investing in this year, the $79 million capital expenditures?

Yes, the bulk of that is on servers and network infrastructure and in terms of what is in that in 2008, the main focus was moving on primary hosting facility in the US to co-location. That is essentially finished in terms of transition so all our small business enterprise and consumer has all been transitioned as of the latter part of 2008. We then moved to do a similar transition with our disaster recovery, or DR facility so we present sort of leverage other cost going forward in that transition. That will be the bulk of the investment in 2009 as well as some extent to date warehouse that about investment that Rob mentioned and that also has a sort of server and software component. I think the $8 million and the $79 million number at this point is somewhat conservative. It is figured early in the year. We wanted to have that out there and we will update that next quarter as we get a better view of the rest of year. It is somewhat fungible so if we think we want to be a little try to earn cash, we can delay and push some of the transition out and vice versa. If we are tracking well, we want to move forward and certainly move that accordingly.

Your next question comes from the line of Nathan Schneiderman - Roth Capital Partners. I am sorry. He has disconnected. There are no further questions at this time.

Thank you everybody for joining the call and we will see you on the Q1 call. Thanks very much.

Thanks very much.

That concludes today's conference. You may now disconnect.