Good afternoon. My name is Keisha and I will be your conference operator today. At this time, I'd like to welcome everyone to the LivePerson third quarter 2010 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I will now turn the call over to today's host, Mr. Tim Bixby. Sir, you may begin.

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. 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 or 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 in 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 Investor Relations section of our website. And now I'd like to turn the call over to LivePerson's Chief Executive Officer, Robert LoCascio. Robert?

Thanks, Tim. Good afternoon, everyone and thank you for joining us as we review our third quarter business results. The second half of our fiscal year is off to a great start. Revenue increased 27% year over year to $28.2 million. This represents 7% quarterly sequential growth. EBITDA per share for the quarter was $0.14, in line with our guidance for the quarter of $0.13 or $0.14 per share. EPS for Q3 was $0.05, a bit better than our guidance range of $0.03 to $0.04. Tim will provide more detail on this shortly. We saw acceleration within our B2B business this quarter and signed 18 new names, including some of the leading online retailers, financial institutions and telecommunication providers. The team generated (inaudible) million, which represents a 29% year-over-year increase and 7% sequential quarter-over-quarter increase. Our enterprise business grew 9% sequentially and we began to see the Asia-Pacific, a new region of focus, contributing to revenue growth. The North American team had a particular strong quarter and we anticipate this momentum to continue into Q4. Activity in Europe continues to expand and we achieved the second best bookings quarter ever in that region. This is a positive sign given the traditional summer holiday slowdown. Revenue was primarily driven from customer expansion within the enterprise group as well as new name accounts in the midmarket segment. We saw several of our larger accounts expand beyond their initial sales deployments into service deployments. This is a trend we typically see in our larger accounts. We have also increased our efforts in France, where we now have a local sales office, as well in Germany and anticipate seeing the pipeline build in these countries. We continue our expansion efforts in the Asia-Pacific region and just last week announced a channel partnership with Engage.…

Thanks, Rob. And I appreciate the kind words and we want to acknowledge that we are undergoing a significant transition over the next several months. And I think it speaks to how we work to run our company and work together to give as much transparency as we can to our shareholders and to our employee base. And that's what we aim to do with you during this transition. While there's no perfect time or great time to leave what has been a fantastic opportunity for me here at LivePerson, there is a best time, if such a transition has to take place and that time is when a company is on very firm financial footing, growing very quickly, highly profitable and with a terrific amount of opportunity in front of us. And LivePerson, without question, falls into that category. So I look forward to working through this transition process in partnership with Rob and the team here, as well as our Board of Directors. And we'll be here to see it through, through the end of the first quarter. Strong performance is what LivePerson has been about for a long time and I think the third quarter was no exception. The third quarter came in at the upper end of our guidance range for revenue, as a matter of fact and it puts us on very solid footing to deliver the kind of revenue acceleration we've seen in the second half of prior years. We now have visibility into the fourth quarter and we can see that sequential growth will likely exceed the third quarter's excellent performance, leaving us well positioned to exceed our revenue guidance for the year. We'll give increased growth expectations in a moment in a little more detail, after we review some of the key…

(Operator Instructions) And your first question comes from Richard Baldry with Signal Hill Capital. Richard Baldry – Signal Hill Capital: Congrats on a great quarter. Year-to-date, each of your sequential growth comparisons has been up versus the year-ago performance, sort of curious about the Q4 guide that would imply something in the sort of a low $2 million, maybe slightly below the year before. Were there any one-time sort of revenue hits in Q4 a year ago that we should understand as maybe one of the factors driving that versus just a conservatism that allows for some upside? Thanks.

Yes. I think that's a fair assumption. There were a couple of one-time things. If you look back at our guidance a year ago and compare that to our guidance now, I think you'll find a closer similarity than comparing the actuals a year ago to the guidance this time. The one outlier I think a year ago that we saw was a pretty strong surge during the fourth quarter of consumer activity, consumer traffic, which drives higher fees for us and a higher chat volume, all of which, for some of our customers, drives higher usage fees. And then we also saw a pay-for-performance result in Q4 tied in part, due to these higher traffic levels and higher close rates to outperformance. I think the number was about $0.50 million of revenue that exceeded our guidance in Q4 a year ago. So that's not something we typically build into the guidance but certainly something we could experience this year depending on how the holiday season shapes up from a consumer perspective. Richard Baldry – Signal Hill Capital: Thanks. And maybe on your largest customer, since they're obviously a meaningful part of revenue, could you talk a little bit about sort of qualitatively that customer in terms of the length of time you've dealt with them, whether that's a long-term master services agreement that has some predictability, stability to it, maybe what protocol they're in, so we can kind of judge the health of their end market, et cetera. Thanks.

We've had that customer for about five years and they are in Telco space. And they are a pay-for-performance customer and so they're fairly predictable. And so we continue to grow and continue to expand. And so we – the revenues feel, I think very stable and predictable.

Yes. It's certainly fair to describe them as blue chip, very large and very active in the internet very focused on incremental sales and have been a good partner and willing to bring us in as a real strategic partner to drive revenue for them. Richard Baldry – Signal Hill Capital: Thanks.

Your next question comes from Nathan Schneiderman with Roth Capital. Nathan Schneiderman – Roth Capital: Hi, Rob and Tim. Thanks very much for taking my questions. Tim, sorry to hear that you're leaving, but I was hoping you might take advantage of the opportunity to share with us your decision and why you want to leave now.

Sure. So, you know, it's a gradual steady process that we're going through. I'm not walking out the door tomorrow to go someplace. We have, I think, looked out over the next couple of years and looked at where the company is going and what the company needs. I've been here for 11 years, which has gone very quickly, but in the internet world is an extraordinarily long period of time. So while there's never a perfect time, especially with that length of tenure to leave, when such a transition is right for the individual, which it is for me at this point, the time to do it is when things are very steady, strong, growing and profitable and that's why we felt that approaching it now is really the right thing for the company. One thing you all know, having tracked the company, is that we're growing quickly. We're heading above $100 million. We expect continued growth in the future. And the needs for the financial organization will just become more and more rigorous and challenging with a great opportunity. And that's a great opportunity for someone, but it didn't 100% sync up with where I see myself in sort of five years and it felt like now is a good time to work through an orderly transition. Nathan Schneiderman – Roth Capital: Okay, got it. That was helpful. If I heard you correctly that your one biggest customer now is generating more than $9 million or about the $9 million per year level. What – did that – was that a major step function up from where that customer was last quarter? Did that customer, in particular have much to do with this increase in AR at this quarter?

It's been more gradual. I mean, that metric we like to share, obviously, as much as we can with folks, so they can get a view into the size of our customers. But we're also conservative because customer revenues can fluctuate up and down overtime. So it has been a gradual ramp, but that – you know, reaching that level is pretty significant. So we felt it's important to, sort of, share that information with folks. Our largest customers are tied typically to our largest receivables, so those tend to go hand in hand. It's not always the exact same one in number 2, number 3, number 4 slots but they certainly go hand in hand. And the key thing is that our analysis of bad debt and collectability has really not changed at all. So accounts receivable is really the timing and big companies are typically good payers, but they can be slightly slower payers. Nathan Schneiderman – Roth Capital: Can you – just on this $4 million sequential increase in AR, I guess your explanation was it did have to do with your pay for performance customer or customers. But could you explain this in more detail? Are they effectively being billed in arrears for monies owed to you or is this an in advance kind of billing? Or maybe you could just explain it because I've never seen the AR take such a sequential jump and I just want to make sure I understand the dynamics.

Yes. So there's two things happening. One is, there was an increase in the quarter in general AR overall, so only a portion of the increase would I ascribe to P – the PFP impact. So there were a couple of other customers who are in the traditional billing model whose AR increased. That being said, there is one unique aspect of our pay for performance from an accounting standpoint that I will note, which there's quite a bit of disclosure in our filings. But there's a concept where we bill a customer, for example, in the pay for performance model, $10 for services that we provide to them along with our labor partner, if we pass through, for example, $5 of the $10 to a labor partner for providing the labor, we only recognize the remaining $5 as our net revenue. And so you do get an anomaly where receivables can move more quickly than revenue because of that net revenue accounting methodology. So that is unique and as it grows, that can be a greater swing, quarter-to-quarter. But we expect that in the fourth quarter that number will come to a more reasonable level and we're certainly focused on that. Nathan Schneiderman – Roth Capital: Okay. Thank you very much.

Your next question comes from Richard Fetyko with Merriman Capital. Richard Fetyko – Merriman Capital: Hey, just to follow up, Tim, on that – you saying that on the accounts receivables you are book – you are reflecting gross revenues versus the P&L on an only net revenues?

Yes. Solely for that – the PFP based revenue, so it's just a subset of the enterprise revenue. Richard Fetyko – Merriman Capital: Okay. Enough on that topic. Curious on the Asia Pacific, you know, you're going with a partner there. Is that a strategy for that region that you will continue? And I assume this is not an exclusive or is it with the Engage partner?

Today it is exclusive and in certain countries like Australia and New Zealand. And that's our first countries that we've entered with them. And so we decided to work on partnerships first because, as you know expanding into countries is an expensive endeavor, so we said let's try out certain countries, English speaking countries first and then let's expand from there. So far we've seen some very good results with them. We want to continue to expand with them. And then we will evaluate somewhere next year about shall we build, facilities there and actually expand with our own employee base. And that's something we'll look at next year. Richard Fetyko – Merriman Capital: Okay. And how does that partnership work in terms of revenue recognition, revenue share? And what other responsibilities do you take on in terms of customer support, if there are?

So the way that's working is they're frontline on sales and support and then we support them from the U.S., from all our territories really on sort of second and third line support. But they're our direct sales folks on the ground, they're our direct professional services folks on the ground. And we share revenue with them. We recognize net revenue and then they get a revenue share from everything that they sell. Richard Fetyko – Merriman Capital: And the pricing and the recurring nature of that revenue is unchanged from your normal course of business?

Right. Richard Fetyko – Merriman Capital: Got it. And then with respect to, sales obviously, that's sales and therefore, bookings drive your growth. I was just wondering why not get more aggressive on expanding an enterprise sales force to accelerate that growth in 2011 and beyond or is that the plan? Are you just having a hard time finding the right candidate? It seems like, you know, there's an opportunity to be more aggressive.

Yes. I mean, we'll continue to expand the team, as we're planning right now, for 2011 and looking at what we want to go after. The market is definitely – as I think I said one or two quarters ago, there's definitely demand, where in the past, we were doing a lot of education about chat and about intelligent engagement. Today, large companies, small companies have to have it and so we're getting a lot of pull into the market. And so we will continue to look at expanding the sales teams and alternative channels. I really think we have to start expanding into channel partners, resellers ISVs and things like that. Richard Fetyko – Merriman Capital: Yes. Okay. And then lastly, Tim before we lose you, with respect to the EBITDA margins, they've kind of fluctuated last year, this year as well and we're between 20% and 29% even just in the recent quarter, in the first quarter there as 24%, then 20%, now 27%. You know, I guess help us sort of understand what kind of level investment this company will need and what sort of margins, we should see a little more consistent margin levels or what would be the range in the next couple of years?

Yes. That's a great sort of a setup question because I did want to highlight for everybody what we've seen in the last couple of years in term of how that margin flows through each of the quarters of the years. So as you'll note if you look at 2010 and back at 2009, you'll see that the second quarter is our lightest margin, EBITDA margin in terms of both absolute dollars and also percentage. And that's something that makes sense and is by design. We usually have a slower revenue growth rate in the first half, stronger in the second half of the year. And we also are usually expanding and growing our cost base, our employee base a little more in the first half of the year. So that's something – while we're not today discussing 2011 and beyond, that's something that you should take into account when you're modeling the business looking forward, that the overall outlook for the year should be consistent with what you think, but that the second quarter should be lighter as a percentage. It typically delivers about 20% of the full year's profit, whether it's EBITDA or net income or adjusted net income and that's something I would expect that may continue next year as well. In terms of overall margin, I think the situation tends to be driven by two key things. Key investments in new initiatives and this year we were, pretty clear upfront at the beginning of the year and I think I followed through consistently on our pledge to spend $3 million, $3.5 million on folks to support new initiatives. And then the second half of the year we typically see revenue uptick and base don our actuals in Q3 and guidance in Q4, that's happening as well. Overall, a 25% EBITDA margin is – continues to be at a very high range of all of the, dozen or so most successful status players and we're very proud of that. The max we've hit a year ago, hit right around the 30% margin, as you mentioned, 30% EBITDA. So that's really the, very strong performance. 25% to 30% is strong performance and we'll come in February and update you on our outlook for 2011. But we think continuing to balance the growth with the margin improvements will be part of our strategy. Richard Fetyko – Merriman Capital: All right. Thanks. That's all I had.

Your next question comes from Brad Whitt with Gleacher & Company. Brad Whitt – Gleacher & Company: Hey, guys. Thanks for taking my questions. Can you talk a little bit about the administrative cost associated with the dual listing? You know, it seems like that could be kind of expensive. And talk about some of the cost benefit analysis you did around that.

The costs are pretty light. You know, it's certainly a little more than zero. But one of the things that Israel has done is made it as seamless as possible for U.S. listed companies to list over there. So there's literally no incremental filing requirements other than you have to make sure that our existing filings that hit the SEC and the NASDAQ here end up in the right place in Israel. So they've really focused on making it as seamless as possible. So the only really incremental overhead is a little bit on the startup, getting folks educated and getting some support on the ground in the time zone there. But within a year it should be pretty minimal overhead.

And where we're looking right now is we're doing a pretty big push in Israel on the developer side and we are now becoming a very large company on the technical – as a technical presence in Israel with 300 people. And so we decided especially with the platform and the launch of the platform, instead of going to California where we're competing with a lot of platform players, we're basically embracing all the Israeli developers, which are as good as developers in Silicon Valley. So we're making a push. We want to elevate the company there and our presence and if you're listed, you're then carried in the financial papers there. And so people start to recognize you as a company that's in Israel that's doing great things and we want to raise our awareness there for employees and for getting developers on our platform because we think that will generate value to our customers. Brad Whitt – Gleacher & Company: Okay. That’s helpful. Thanks a lot guys.

And it also – just one other note, sort of a nice side benefit is it opens up quite a bit of trading hour capacity. So it's not just the Israel, but actually it overlaps – the trading week overlaps quite a bit with European trading hours and so you get that added benefit of the stock is tradable for not 24 hours a day but quite close to the entire week. Brad Whitt – Gleacher & Company: Do you have a timeframe as to when you think you'll start trading in Tel Aviv?

We're working through the process now and it requires some filings. And we're heading in that direction and then we'll put out an announcement when it's pretty much final and ready to go. Brad Whitt – Gleacher & Company: Okay. And Tim, do you have a CapEx number for the quarter?

Yes. CapEx was right around $2 million and I think we'll track us to – for the full year of right around $7 million or so. Brad Whitt – Gleacher & Company: Okay. And Rob, I'm just curious as to if you're seeing social media, how that may impact your business, where you're – whether you're looking to do any modules to integrate with some of the social media outlets and maybe being able to launch a chat straight from Facebook or something with a customer. I'm just curious as to what your thoughts are around that.

Yes. So we – there is, right now out on our platform area, there is a Twitter integration, so you can literally read all the Twitter feeds. So it sniffs all the Twitter feeds and you can put in keywords as a business owner. And if those keywords come up, let's say somebody is like I want to buy an iPhone or I want to buy whatever, you – we can inject a tweet in there with a link to a chat and that happens automatically. So I know there are a couple of customers out there that are playing with it, so I think it's definitely something important. I know on Facebook someone put a page up with a chat button in the page, so you can put a link with a chat button in it, but there's not like an integration yet into Facebook, but Twitter there is today. But I actually think mobile is where we're seeing a lot of focus right now. And we have an API for all the mobile devices. And so our customers are starting to write apps with embedding chat into their own apps. So we have a retailer, a very large retailer, that has a mobile shopping app and they embedded chat into it. So our strategy is we don't want to write the mobile apps as much as we want to give the API to enable our customers to embed chat or any type of intelligent engagement into their own presence on mobile. Brad Whitt – Gleacher & Company: Okay. And so that would, I guess, in turn potentially drive more seats from you guys? Is that the way you look at it?

Yes, absolutely. And that's where we're starting to move the business towards is where are all the areas that consumers are having conversations or want to have conversations? And we need – we know we want our chat to be there or our voice to be there or whatever is going to be there. We did develop a chat – excuse me, a mobile app for operators. And so our small business customers and midmarket customers are starting to use it. If you go to the App Store in Apple, you will see LivePerson. You can download it, put it onto your iPhone and you can literally chat as an operator from your phone. So we are starting to move more into these areas. Brad Whitt – Gleacher & Company: Okay, great. A final question I guess for Tim, getting back to the AR a little bit, since you are, a good 30 days into Q4. Have you seen that – I mean, have you collected some of the AR? I mean, should we expect the DSOs to go down the next quarter?

I mean, it's certainly our target to bring that into a range that we're a little bit more comfortable with in this coming quarter and we've certainly taken some steps towards that. It is pretty typical to collect a fair amount in the early part of the subsequent quarters. That's a normal pattern and we're seeing that this quarter. Also, let me correct. I misspoke from my notes on your CapEx question. CapEx in Q3 was $3.6 million, I gave you the – an earlier number. But the full year number is correct. It's $7 million. Brad Whitt – Gleacher & Company: Okay. You expect that to go down next quarter?

Yes. Brad Whitt – Gleacher & Company: Okay. All right. Thanks for taking my questions.

Thanks a lot, Brad.

Operator, do we have any more questions in the queue? If we could ask the operator to rejoin the call and check on the Q&A queue, that would be great. Bear with us, folks. We'll work on getting you back into the queue.

Operator, there's people in the queue. Could you put them through for questions? We're going to wrap up the call now, although there's a couple questions in the queue. Somehow, we have lost the operator. And that's been our Q3 2010 call and I will see you and Tim will see you in Q4. Thanks very much.

Have a great one.