Good evening, my name is Jerry and I will be your conference operator today. At this time, I would like to welcome everyone to the LivePerson second quarter review conference call. (Operator Instructions) Thank you. Mr. Tim Bixby, President and Chief Financial Officer, you may begin your conference.

Okay, thanks very much. Before we begin, I would like to remind listeners that during this conference call, comments that we make regarding LivePerson that are not historical facts are forward-looking statements and 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 we base our expectations today may change overtime and we undertake no obligation to inform you if they do. The results that we report today should not be considered as indication of future performance. Changes in economic, business, competitive, technology, regulatory and other factors could cause LivePerson's actual results to differ materially from those expressed or implied by the projections or forward-looking statements made today. For more detailed information about these factors and other risks that may affect 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 talking about the company's financial performance. We report our GAAP results as well as provide a reconciliation of these non-GAAP measures to GAAP financial measures in our earnings release. You can obtain a copy of our earnings release by visiting the investor relations section of our web site. 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 as we review our second quarter business. We had another solid quarter of topline growth as revenue increased 29% year-over-year to 26.4 million. This represents 4% sequential growth over Q1. We also had near record bookings and record new names within the quarter indicating that there are plenty of untapped opportunities for our core offerings. In fact the recent Forrester study on proactive chat indicated that only 5% of online retailers are using such a service today, but that 21% intend to implement a proactive chat program within a year. In addition, the research firm found that 44% of online consumers say that having questions answered in real-time while in the middle of an online purchase is one of the most important features a website can offer. We think this study is a positive indicator of further market opportunity for our business. EBITDA per share for the quarter was $0.10, in line with our guidance for the quarter of $0.10 to $0.11 per share. EPS for Q2 was $0.03, also in line with our guidance of $0.02 to $0.03 per share. Tim will provide more detail on this shortly. Our B to B business performed well this quarter generating 23 million of revenue in Q2 which represents a 29% year-over-year increase. The enterprise group grew 6% sequentially and the mix of customers remains a balance of telecom, banking, retail, high tech, travel and health care providers. Activity in Europe continues to expand with the majority of business still coming out of the UK. We have also started to invest in resources that will focus on countries where we see opportunity including France and Germany. During the quarter, we saw 18 new enterprise customers including Vitamin Shop, Toshiba America Information…

Thanks, Rob. We're really pleased that the strength of the results of the first half the year enable to us reiterate our full year guidance. Guidance that if achieved continues to puts our revenue growth rate and our operating margins at the top end of the range of public SaaS players that are leaders in each of their respective markets. With a nearly 30% annual growth rate and a 25% EBITDA margin our financial performance and expectations continue to speak for themselves. I will now provide a bit more detail on our quarterly results and some of the key operating milestones that we've achieved. Second quarter revenue increased 4% sequentially to $26.4 million. That was an increase of 29% as compared to the prior year. EBITDA per share for the second quarter as was $0.10. That's up from $0.09 per share in second quarter of 2009 and right in line with our guidance range of $0.10 to $0.11 per share. Second quarter GAAP EPS was $0.03 per share, also right within our guidance range of between $0.02 and $0.03 per share. Revenue from our business operations as opposed to our consumer operations for the second quarter was $23 million. This was a full 30% increase as compared to the second quarter of 2009 a year ago and a 5% sequential increase as compared to the first quarter of 2010. So we're seeing a nice pickup in sequential growth in that group. Revenue from consumer operations for the second quarter was $3.4 million and this is a 19% increase year-over-year versus the prior year from 2.8 million and it's down slightly from 3.5 million in the first quarter of this year. As Rob mentioned we had really strong bookings. We signed18 new large clients in the second quarter, and this is…

(Operator Instructions) And your first question comes from the line of Jeff Van Rhee. Jeff Van Rhee – Craig-Hallum: Hey guys, can you hear me?

Yes. Jeff Van Rhee – Craig-Hallum: Okay. Great. Several questions. Maybe you could just start – just in terms of the guidance implicit in there is also a look at Q4 and it seems as though it implies exceptionally small sequential growth. I understand conservatism, but just give your thoughts if there's any message in there. Is there anything suggested in terms of what you're seeing in pipeline or activity levels in terms of sessions that are being delivered that would suggest that to be the likely outcome for Q4?

No. I think we see as we typically do at Q4 that it is in line with Q3. Sometimes a little lighter, sometimes a little stronger but definitely the second half coming in stronger than the first half. So I think we're certainly not signaling that there is any deteriorating trend. So I think hopefully that covers that. Jeff Van Rhee – Craig-Hallum: Okay. And then, it does, and if you would also then just touch on new products. I think one of the things that really stood out about last quarter's call was just the depth and breadth of the products you had coming down the pipeline. Can you just give us an update in particular about the analytics product and also along those lines if there is any revenue built into this guidance from those products?

Yeah. For this year, there's no revenue built in the guidance for these products so the things that we're looking at delivering are really a 2011, and so no, everything we're forecasting now is just off the core businesses. Jeff Van Rhee – Craig-Hallum: Okay. And update on the analytics, just your sense of – I think you were going to try to go to market mid-year here and get some initial reaction and then you might have additional color on when that might (inaudible) generally able available?

Yeah, we're still looking at – we're actually doing some testing with the data and data analytic stuff that – the data we collect. We have some products around helping marketers better convert their customers using our behavioral targeting engine and our rules engine and that's where we are basically focused on right now just doing a lot of testing and beta testing and then we're looking at really first half of 2011 is bringing those products to market, so – Jeff Van Rhee – Craig-Hallum: Okay. All right. Then just two very brief ones then. Just any thoughts around pay-for-performance and particularly, pipeline around new deals and then also intra-quarter any additional color you could give about kind of the tone of business as the quarter played out, starting strong, ending strong. Any trends intra-quarter would be helpful as well. Thanks.

On the first one on pay-for-performance, we're definitely seeing a couple things. One is a fairly steady growth in line with the overall B2B growth. So as the B2B sequential growth increases in the second half which is kind of in line with what our expectations for the year have been for quite some time and what we have seen in the past we see a similar – we see pay-for-performance sort of keeping pace. We did see Q4 last year, a nice surge in pay-for-performance in line with higher consumer traffic and just a lot more transactions than we saw or kind of expected going into the quarter. So that certainly – we saw a consistent trend this year in terms of consumer activity. There's some upside there. The second thing we're seeing on PFP is continued interest from retailers. Initially it's really been a telco driven area for us because it's very easy to define the value of an incremental sale in the telco industry and so retail has been one where it's appropriate where there is an easily definable order value we're definitely getting some interest and have more business coming from that sector. So in general, going pretty well. Jeff Van Rhee – Craig-Hallum: Okay. And then any color on intra-quarter trends?

I don't think there's much. That's pretty granular month to month. I don't think there's anything that dramatically changed. You know it's a fairly steady pipeline and because we ramp up partners as part of it it's – we sort of have a longer view and a more stable view of the pipeline on that. So I wouldn't see huge month to month fluctuations.

Although I think one of the changes that we keep seeing and we started seeing it last year was chat is becoming much more of a – it is – we're getting a lot more RFPs now and it used to be that we were more out there doing the education because we're the leaders in the market by factors of ten and so we would go in educate and explain why chat is really important and then explain why proactive chat is really important. Now we're actually getting RFPs that say we want proactive chat or we want chat for our web site. So that's a big shift. So I think the market is – the market adoption has definitely shifted in some way where the heads of marketing, the heads of the websites are now like "I've got to have this" and then they're doing RFP processes, so – Jeff Van Rhee – Craig-Hallum: Great. Thank you.

And your next question comes from Brad Whitt with Gleacher & Company. Brad Whitt – Gleacher & Company: Hey guys. Thanks for taking my questions. Congratulations on the new hires. I wonder Robert, if you could kind of characterize the pipeline heading into the third quarter compared to what you have seen in the last couple quarters where you have had very strong bookings?

The pipeline right now is very strong. So obviously bookings were very strong for the quarter. And so, we can basically see for the rest of this year we feel pretty bullish on the business and feel that there's just a lot of demand for our product lines. Brad Whitt – Gleacher & Company: Okay. And the 18 large customers, great number there. How do these customers normally – do they normally start off small, you know, and when do they normally come back potentially for additional seats, additional products and have you started recognizing revenue from these customers or is that still in future quarters?

So the typical flow of a deal that's booked in, say, second quarter in this case, some of them are live now, but most go live over the next couple of months. So usual within 60 to 90 days of the end of the quarter in which they're booked. So a subset of those 18 are live now, but most go live over the rest of this quarter and we are seeing the typical pattern where customers will start in one business unit or at a relatively smaller revenue run rate and then grow. We're also seeing that in our new midmarket group where we've had a couple of larger small business deals that we handed over to that group that they've already been able to upsell just in their first three or four months of selling. So we're seeing that continue. Brad Whitt – Gleacher & Company: Okay. Great. Just one final question. Maybe, Rob, if you could help us understand a little bit, I know it's still very early, but what what's your monetization plan for the platform and how soon could we possibly see revenue contributions from that?

The real focus right now is just we're going to basically drive, you know, for every chat that we do we basically get $1 when you look at every chat that's created we're getting almost $1 for that chat and so what we want to do is just drive more chats and more interaction. So really – the first goal is not to sell anything off the application marketplace but really to drive more usage of chats. The real goal of the platform, too, and I think even a bigger goal is now that we have over 8,000 customers it makes it very hard for our development team to develop for every one of those 8,000 customers. So we tend to develop for the high-end and what we want to do is really give the flexibility for our customers and other third party developers to basically develop for every one of our customers. So if there's some small guy who wants to do something with chat transcripts and SEO fine, they can get access to chat transcripts and publish them for SEO. So there is a lot of reasons we want to do it because I think take the pressure off the development, get more innovation and then drive more usage off of it. Brad Whitt – Gleacher & Company: Great. Thanks for taking my questions, guys.

Okay.

And your next question comes from the line of Mike Latimore. Mike Latimore – Northland Securities: Good evening. Just on the demand – hi. On the demand, by the vertical I mean, it sounds like it's been pretty consistent among the various verticals. I guess as you look at the pipeline, is there any one vertical that seems to be getting more pronounced or less pronounced?

The big four, we call them have been pretty static so the primary four verticals. In the all other category, and I think we have spoken about this on the last couple calls, we've continued to see more traction in the sort of broader health care, pharmaceutical, medical information kind of category, which is obviously made up of several different categories. But there's so much activity there in terms of people wanting not only commerce information because they're buying a product but just pure information. And so we had an interesting case of a new customer, more of a pharmaceutical type company, where they're actually not selling any products directly online but they're going to be using chat through LivePerson to reach out to medical doctors so that they can provide marketing information in real-time, something it would typically happen either not at all or would happen over the telephone through multiple traded phone calls which is obviously not very efficient for anybody. And so we're definitely seeing more of that where it's both marketing and information flow related to health care, medicine and those areas. Mike Latimore – Northland Securities: Okay. And then it sounds like Europe was good in the quarter. I guess any color on just European buying pattern?

Continuing to see benefit from the – where we have new resources so we have a person on the ground now in France, we have support through a partner in Scandinavia and Germany, and we're looking at people on the ground in those territories as well so the deals tend to follow those resource investments. UK continues to be very strong. Pricing is holding quite strong in terms of average deal sizes tend to be higher even with the currency fluctuation which can cause a little bit of movement. We're still seeing higher average prices typically out of the UK. So those are all continuing good trends. Mike Latimore – Northland Securities: This last question around cost of goods. You know you're building up some data centers in different regions and probably you are going into Japan little more aggressively, or Asia more aggressively. When will the kind of investment in data centers and cost of goods start to slow? It sounds like you're expanding pretty rapidly in that regard.

Yeah. I mean the nature of our hosting cost is that the investments can be chunky, meaning it's not always a straight line, and so what we saw historically in – when we made the transition in our US hosting facility from co-location to our own – or from managed services to our own co-location facility, we saw gross margins drop in the 72 to 73% range and then as we continued to grow, move back up in the mid and higher 70% range. We're seeing that phenomenon again now as we made two major investments, one expanding the data warehouse last year, two, moving to co-location in our UK, our European facility. So the good news is that those investments were roughly the same magnitude of cost and our revenue base is obviously quite a bit higher, so we would expect that same phenomenon where gross margins can move a little bit between call it 72 and 76%. So when we see stronger growth as we expect in the second half and then into next year, you should expect that – the movement back towards the mid 70%s. Mike Latimore – Northland Securities: Great. Thanks a lot.

And your next question comes from Craig Nankervis with First Analysis. Craig Nankervis – First Analysis: Yes. Thanks very much and good afternoon. Maybe first of all, the new customer, I mean there was a few new dynamics in the metrics that you typically report, that the new customer pricing at 69 was an all time low as far as I can tell and because of the mid-market initiative do you expect forward performance to be in sort of this new range or do you think it could just as readily fluctuate back up to the 100,000 level that we've been seeing?

Well, obviously it really depends on how the mid-market team does. So far they are doing quite well and we would expect that they'll continue to perform well and the result of that is a higher number of deals, higher bookings, but the average deal size because of their target focus area would come down. So it's kind of in synch with our plan and our strategy and the real good news is that if you backed out those sales that the mid-market group had you have a higher average price, but you also have some deals that would be out there in the hands of potentially some of our small and mid-sized competitors. They're not getting those deals now and we are so that's sort of fulfilling our strategy with that group. Craig Nankervis – First Analysis: And so do you think the main difference then, Tim, between the 18 new customers added in Q2 and the ten in Q1 is the mid-market initiative? Is that – you had significant sequential increase in midmarket adds because they were just getting started in Q1? Is that the way to look at that?

It's certainly a part of it. It's not 100% but it's definitely the stronger contributor. We did also have more activity in sales, sorry, service focused deals, which tends to be at a lower price initially. So that was also part of the phenomenon and some of those deals were in the enterprise group sales force and not the mid-market group. Craig Nankervis – First Analysis: Okay and that would sort of get into my next question, that 50/50 split between proactive sales and customer service. Partly a mid-market phenomenon but apparently partly not, so you wouldn't be necessarily surprised for going forward that split to be more like what we're seeing in Q2 or do you think that would relax again some?

I think it's – this is probably the lower end of the range that we have seen, that 50/50 range. So I think historically we've been anywhere from 50/50 to 80/20 or even 85/15, you know, weighted towards sales. So I think we're probably at the low end of that range and we do see it swing back and forth just depending on the nature of the types of companies that come in, in a given quarter. Craig Nankervis – First Analysis: I also wanted to ask about your hiring rate. Dramatically different in Q2 than in Q1. What, 48 adds in Q1 or something like that and low double digits in Q2 I think. Yet it sounds like you're keeping your full year headcount add goal unchanged. Did I hear that part right?

Yes. That's correct. About, that's correct. Craig Nankervis – First Analysis: So any particular reason for – my understanding was most of the hires were going to be first half weighted. Has there been sort of a deliberate change in the pace of hiring for any particular reason or is it going to be all done in Q3? Just how are you looking at that at this point?

So, I would say that there maybe a little bit more spacing out over the course of the year. Our initial plan was weighted a little more heavily to the first half, but we are spacing out a little more over the course of the year. There is a decent number of hires that we expect to come in, July, August, just over the change in the quarter so that's part of it. Craig Nankervis – First Analysis: Sure. Okay. And then I guess just lastly on the consumer side, how are you assessing what's going on there with the drop in volume? I don't think that you saw that in Q2 in the previous couple years and is there some new dynamic at work or what do you feel – what's your gut feeling on what was driving that?

It was – it's was just a little bit more seasonality. Q2 was a normally a little bit slower. Kids are no longer in school. And during it so we do have the tutoring business so that just was a little bit more than normal and then Q3 looks pretty good. So things are bouncing back nicely and even a little bit better than last year, so it’s a (inaudible) little fluctuation and so – but it's not trend or anything because right now the daily numbers look really good. Craig Nankervis – First Analysis:

Thank you very much.

(Operator Instructions) Your next question comes from the line of Nathan Schneiderman at Roth Capital. Nathan Schneiderman – Roth Capital: Hi Rob and Tim, thanks for taking my question. Rob, you mentioned that the quarter had near record bookings. I was hoping you could share with us that number. I think last quarter it was 4 million.

It's right around 4.4. Nathan Schneiderman – Roth Capital: 4.4 million? Okay.

Yes Nathan Schneiderman – Roth Capital: Okay. Great. And hey, can you clarify on that. When you report a bookings number, is that a 12-month duration or is it something different than that?

Yeah. It's an annualized monthly run rate. So we take the monthly run rate of the deal, multiply by 12 and that's the – total those up, and that gives you the booking. Nathan Schneiderman – Roth Capital: Okay. So when we look at the bookings this year versus last everything is apples-to-apples then?

Yes. Nathan Schneiderman – Roth Capital: So it's an annual contract thing. Okay. Great. I was curious on the Q3 revenue guidance if we look at that, it implies much more – I mean you delivered fairly in line kind of quarter for revenue and yet your forward rev guide for the Q3 is a good bit above consensus, so you're going to experience a lot more sequential growth and I was wondering what's really driving that. Is that just the strong bookings you've had over the last few quarters, is it the acceleration in customer adds? What would drive that Q3 acceleration?

Well, it's really tied to the bookings from Q2 primarily. There can be a small impact from Q1 in terms of a deal that goes live later than is typical, but most of it is Q2 bookings and other expansions that are already scheduled. So it's not radically different than our original plan for the year internally, but since we don't give quarterly guidance initially for the year, you don't necessarily have that visibility outside the company so as we saw last year you know second half quite a bit stronger than the first half, we're seeing that phenomenon again this year. So, definitely driven by the bookings. Nathan Schneiderman – Roth Capital: Got it. And normally you have pretty good sequentials Q3 to Q4 and you had mentioned last year you got some P to P benefit. I imagine you would get some of that this year. So is there, just in helping us understand the implied Q4 sequentials in your guidance, is there any – I understand you like to be conservative here, but is there anything in the Q3 revenue that we should consider very one time in nature?

No. I think, you know, we're real comfortable with the full year numbers that we have out there and we obviously have good visibility into Q, so by default you can get a little bit of anomaly in Q4 than implied and maybe it's not as strong as Q3 but you just can't always know the timing between what hits in Q3 and Q4. Nathan Schneiderman – Roth Capital: Okay but there's no real revenue Q3 that just kind of disappears that's sort of a one time.

Nothing unique.

And then I think in Q4 we usually see a good jump in – especially on the PFP side because of the holiday season. Nathan Schneiderman – Roth Capital: Right.

So it's a little hard to calculate, is this year going to be a great holiday season, a wonderful, a low. So we kind of, we know it'll be what is, but usually when we see that real jump it's we get a lot of drive off the holiday season. So we try to be conservative just because who knows what the holiday will be this year. Nathan Schneiderman – Roth Capital: Okay then just a couple other quick ones. The sales and marketing, the big jump sequentially was there anything – was that just hiring and kind of ongoing spending? Was there anything that is fairly one time in nature there that or maybe another way to ask it is where do you think that number goes in Q3 just on the sales and marketing because it was such a fairly large sequential increase in Q2?

Yeah. I think it definitely was an increase. There were a couple of things that happened in Q2 that don't happen again in all of the lines but certainly in sales and marking we do salary reviews and that impacts once a year so we – that's a piece of the shift in Q2 that you will not see again in Q3. Second thing is bookings were quite strong as compared to Q1 obviously so that has some commission impact in the quarter. That was a good portion, did some new hiring as well and then the other data point I can give is I think we will see sales and marketing as a percent of revenue coming closer to 30% for the remainder of the year and the full year and that's a little bit lower and a little bit better than what we saw in Q2. Nathan Schneiderman – Roth Capital: Got it. And my final question for you the 18 new customers, new large customers, that looked like a pretty good number there. I was thinking given that they are large customers they weren't necessarily mid-market customers but it sounds like maybe there were some of those. How many of those 18 were mid-market?

That does include mid-market, we're not breaking them down exactly because there's going to be some overlap between those two groups. But some of them were mid-market, but not the whole difference so Q1 we had I think ten, this quarter we had 18. Let's say about half of those were mid-market, half were enterprise, roughly. Nathan Schneiderman – Roth Capital: Great. Thanks very much. Nice job guys.

Okay. We want to thank everybody for joining us.

Thank you and then we'll have our YouTube video out in the next couple of days so check it out. Bye.

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