Good afternoon. At this time I would like to welcome everyone to the LivePerson fourth quarter year end earnings conference call. After the speakers remarks, there will be a question and answer session. (Operator Instructions) Now, I would now like to turn the conference over to your host for today Mr. Dan Murphy, CFO.

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 or 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 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 the 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 the investor relation section of our website. Now, I'd like to turn the call over to LivePerson's Chief Executive Officer, Robert LoCascio.

Thanks, Dan. And thanks for joining us today. I'm pleased to report that fourth quarter and 2011 was very strong for LifePerson in terms of financial metrics and more important in executing our overall strategic goals. During 2011, we began to take the unique parts of our core chat products namely our data and real-time intelligent layers and use them to power our number of other home-grown and third-party developed application. Last quarter, during our customer summit Aspire, we formally launched several of our latest innovation including LP Marketer, LP Insights and ADE. Our LP Marketer product when GA during the fourth quarter. At that time, we had at about a dozen customers and data which presented a great opportunity to discover use cases and areas of product improvements. We've seen a good amount of traction with non-weighted customer as well as converting beta into paid accounts. Overall 16 customers are using the product. Going forward with LP market, I will continue to build a rode map with new features including mobile enablement, better integration with first-party data all which will make it easier for companies to target and convert more consumers into paying customers. Another product, ADE or analytical driven engagement, leverages website analytics data to maximize the value of our customers' online chat, LP Marketer and search engine marketing programs. Using our customers third-party analytics data such Google analytics, ADE creates dynamic business rules that are automatically updated as website business behaviors patterns evolves. There is a lot of opportunity in our small business to mid-market segments for ADE. We currently have over 150 customers using this product. As with ADE, LP Insights is another homegrown product from LivePerson. LP Insights take the company's unstructured data from chat transcripts and analyze these customers conversion from marketing intelligence. Because…

Thanks, Rob. As Rob mentioned, 2011 was an important year for LivePerson both in terms of strategic accomplishments and financial performance. We've continued to deliver solid growth rates and strong operating margins throughout 2011 and had strong bookings in cash flow for the quarter in the year. As we reflect on 2011 and look forward to 2012, we're taking a close look at the long-term plan in terms of revenue growth and operating margins including the recent investments we've made in people processes and products. We continue to refining our model in terms of internal expectations for revenue growth as well as margin and EPS measures over the next few years, and I'll aim at with how we intend to propel the business forward. Again in the more detail once we review the year in the quarter. We were pleased with the performance of the year as a whole. Revenue for the year was inline with guidance and EPS were slightly ahead of guidance and adjusted EPS at the top of our guidance range. We demonstrated solid quarter-over-quarter revenue growth. And also reach record revenue and exceeded EPS and EBITDA per share expectations for the fourth quarter. Fourth quarter B2B revenue was $32.9 million, a 26% increase as compared to the prior year quarter and a 7% sequential increase as compared to the third quarter of 2011. Total revenue increased 6% sequentially to $36.5 million and increased 22% as compared to the prior year. B2B revenue for the full year was $118.6 million, a 24% increase from 2010. Total revenue for the full year was a $133.1 million, a 21% increase from 2010. Revenue from the consumer operations for the fourth quarter was $3.6 million which is relatively flat compared to the first three quarters of 2011 as well as…

(Operator Instructions) And your first question comes from the line of Nathan Schneiderman.

I was just curious when you look to your 2012 guidance, what assumptions are you making for the dollar contribution of new product revenue and when are you expecting the bulk of that to kick in if you were to look at that new product revenue and how much would be in the second half versus the first half of the year?

We think the majority will come in the second half of the year. Our expectation is we're ramping up the sales organization in Q4 and Q1. And as well know, it takes time for salespeople to become productive. So our expectation is to build pipeline in the first half of the year and start to generate revenue in the second half of the year.

Do you have certain dollar amount from these new products that you can share with us, that's kind of embedded in your 2012 guidance?

It's less than 10% now overall. So just trying to ramp revenues. And I think by next quarter, we'll be able to give a little more clarity as we already start to sell some, but we're starting to see the build-up in that pipeline.

I understand you've added six reps during Q4. I was curious if you could share with us where did you end in terms of number of mid-markets reps versus number of enterprise? And then, where do you expect that number to go to why the end of 2012 and both of those sub-areas?

As far as reps are concerned, we ended the year with 25 in enterprise and 12 in mid-market. And our goal is to, we've actually added several in the first quarter, already and we'll continue to build up the sales organization. Part of this, from a target perspective our goal is to add them in the first half of 2012 as we built up the pipeline for revenue. As far as the target is concerned we expect to be north of 50-quarter carrying sales heads by the end of the year.

And then final question for you. I was just curious, my understanding is that in that $6.3 million of bookings for the quarter, that did not include any contribution from the new products or ADE Insights or the API? I was just curious, though if you look at that new product bookings, what was that bookings in Q4?

The Q4 booking from new products was approximately 5%. And it's within the number of the overall bookings number. There is some new product revenue in there. But about 5% of that is new product revenue.

(Operator Instructions) Your next question comes from Shyam Patel.

In terms of the new product particularly LP Marketer and Insights, can you talk at all about how to think about pricing. And even for those two, just how to think about inter-relative contribution of the 5% of bookings and what you might expect for the balance of the year?

As far as pricing model, the pricing model is pretty straightforward for LP Insights. We don't have enough data to talk specifically about the pricing around LP Marketer. But from an LP Insights perspective it's based on the number of chats that our customers would like to use in our software. So it's a usage based model with a fixed fee. And as far as LP Marketer is concerned, we are still working with our pricing, with our customers. We think we've got a pretty solid pricing model and will be ready to share more in the next quarters call.

And then for the guidance for the year, how are you thinking about growth from enterprise and mid-market versus the small business.

The growth between the three segments, we actually expect all three segments to grow quite a bit. And from a growth percentage perspective we expect in 2012 our B2B to grow approximately 26% to 27% in the business.

And just my last question on the margins, you guys gave great color for 2012 margins. But if we want to kind of think about the intermediate-term margins, should we think about the 2012 guidance kind of being a good range to stand or should we expect modest expansion beyond that?

No, I would expect the guidance to be in that 75% range.

Your next comes from Richard Baldry.

It seems some from other SaaS companies dipping forward profitability to try to talk about accelerating the topline. You haven't done that here. You're seeing good earnings growth next year on the solid top line number. So can you talk you sort of how you weight the two and if you weren't see the top line acceleration through the year? You think you really push that back into the expense side versus an earnings upside scenario to keep funneling to faster growth mix?

Yes, it's always a balance. Obviously, we are looking at growth. The interesting part about our growth was that the new products that were built off fixed infrastructure. So I think that gives us a unique play on the margin side. And right now we're just balancing that. And the growth rates will tick up a little bit this year and we're excited about that. And maybe margins shift down a little bit. But we want to keep it within the range that we think it keeps the company healthy. The other think is that our entire business is driven by headcount and affectively hiring people, brining them in, training them especially people like kind of fit the culture that we're building, it takes time. So you can only really ramp out of certain pace. But once again I think one of the things is getting leverage on our overall fixed cost and our platform of the data intelligence tax that are there with chat and just leveraging those to drive these other products, like LP Insights, it's basically just taking chat transcripts and analyzing them. And we store those transcripts and as cost of storing them. And now we're making a revenue stream them. So I think we have sort of unique situation compared to other SaaS companies where they may have a second or third product line that have a different infrastructure cost associated with it.

And if we look at the balance sheet here, up almost double from, say, September '10 from $50 million to just under $100 million pretty quickly. Are there some of the partners that are working with the data side of your business that you looked at as interesting acquisition targets. How should we really think about that cash balances that contribute to scale pretty quickly?

We're always looking at different strategic opportunities out there. Right now, we're really focused, as you can see, organically, building our products. Obviously, the data intelligence, some technology on the wall, but we built a pretty strong set of technologies. But we're always looking at stuff and if we can accelerate our pace of development or open up some new markets as opportunities, we may look at that. But we like cash. We like generating it.

Your next question comes from Richard Fetyko.

Quickly on the sales approach for the new products. I think you mentioned you're looking for salespeople who are able to sell multiple products. I was wondering if you're also looking to hire product specialists. And going forward, how do you see this selling process of the new products versus the core products, whether having salespeople selling multiple products? How do we get confident that that doesn't take away from the focus on the core products?

We developed a pretty interesting structure that seems to be working, and that's why the products are going out in the market. So there is two sides to it. One is the distribution channels, which is big market, small business enterprise and then international. And those guys lead that. On the other side, there are product owners. So there is a guy who jumped up LPN sites and he has his team. He has got his own P&L. He has got his own goals. Him team has a goal. And they're really like subject matter experts like SME. So they're pushing the teams and we're working with the sales teams. And so there is a nice balance there, because you're right people may drift towards one product or another, especially the core chat products that we have a lot of experience in. But the sales team now is all been trained in with a new Isis methodology that was developed our current sales guys who head enterprise. So they know to sell multiple products. And then we're layering in the product owners. And that's what's getting us our traction in for the market today. And so I feel really good about the structure of the balance between product owners and sales heads.

And then secondly, if I may, in the opening remarks you mentioned the LP market. How many customers are now using it and are they actually paying customers?

Yes, there is 16 paying customers.

Your next question comes from Brian Schwartz.

Rob, I wanted to just cap into what's behind this accelerating revenue growth trajectory that your business has been experiencing here for a couple of quarters now, and it looks based on your guidance that that's going to continue. It doesn't seem like it's necessarily the ASPs out there, but is it possible to comment maybe proportionally what percentage do you think is to come from sales productivity gains, what percentage is from the traction you're getting on the new product cycles? And then also, Rob, just wondering if you could comment on how you're feeling about the pipeline when you look at the size of that and the quality of that compared to three months ago.

There is a couple of dynamics that are going on that make me feel very confident in the business. One is chat as an overall communication tool, it's going much broader now. And what happened is because I really think social has taken off. Businesses now want to connect with their customers online in real time. And that's really Facebook and Twitter has driven that globally in people's minds. And we are the leading provider of that technology. So that's one part. The second part is some of our competitors like RightNow and ATG got acquired. And I think those products aren't as important to a company like Oracle. And that really opens up our ability to just continue to roll out into the core. The other thing is, as I mentioned, our best customer really has 10% penetration of the overall operators headcount. If you take that, it's a multi-billion dollar industry if we converted everyone from voice into chat and this chat is the place to be now. So we're accelerating in the core and that's really what's making up a lot of the growth. The second part is that there has been a shift in the conversation with our business and our sales team with our customers talking about intelligent engagement and stimulating that conversation with the new products. Now, the new products haven't yet contributed obviously significantly on the revenue side, but it's stimulating a conversation and it's getting our customers to think. And they're seeing a lot of co-innovations coming from us. And so all of that is really what's making the company grow in the last couple of quarters. And that's why I feel great about 2012, because I can honestly say we've an aligned organization. Everyone is here, is focused on the new products and delivering the platform or focused on the core products. And so it's like an aligned company around intelligent engagement in our platform and that's a good feeling for me.

And then the follow-up I had for you, Rob, also then have just one here for Dan. You did mention a couple of competitors that have kind of exited the market here. And I was just wondering if you look at your win-loss ratio or maybe again looking at your pipeline growth, have you seen any changes maybe over the last three or four months now that RightNow Technologies is getting absorbed in Oracle? I remember when ATG had gone into Oracle, they'd kind of disappeared from the marketplace for a while. And I am wondering if you're starting to see, I guess it's still early days here, maybe a similar fact where you're getting a benefit in your win-loss ratio, then pipeline growth from them exiting?

I can't attribute it directly to RightNow exiting. We still see them in deals every now and then. But we've actually done a good job of bringing in some of the right people and growing the organization. So I can't attribute it directly to RightNow, but we feel comfortable in that pipeline. As far as ATG is concerned, they have been absorbed in Oracle, and we've been able to obviously make headway against ATG. But most of it's coming from organic and pipeline growth from our existing sales organization.

And then just kind of two metric follow-ups for you. One, was there any currency effect on the revenue or the deferred revenue for you in the quarter if you had any adverse effects from that? And then also on the record bookings number, congratulations again to you and the team on that, did you have any large deals, any 10% customer in that booking number like you did following the previous Q4?

As far currency is concerned, minimal fluctuation from a revenue perspective from foreign currency. I know there is a $6.3 million of pipeline growth. It wasn't a big customer and it was basically a spread out from a bunch of different customers. So there wasn't one big impact from customer. And that's what I think makes the bookings more significant than even last year.

Your next question comes from Mike Latimore.

On the Pay-for-Performance side of things, any changes there? I think in the fourth quarter, you talked about a couple of customers going to a standard pricing model. Given your customers that might go from Pay-for-Performance to standard in the next few quarters here, what do you think the sort of percent of revenue is Pay-for-Performance over paper performance over the course of the year?

So from a Pay-for-Performance perspective, there is no specific customers that I'm aware of today that are planning on moving to fixed deals. But if a customer does approach us and want to move to a fixed deal, we're obviously willing to entertain and talk to the customer about it. As far as PFP as a percentage of total revenue, we say consistently we're comfortable with it being between 17% and 20% as the business continues to grow. So it's been in that range for all of 2011. We're actually pretty excited about PFP. We're just about to launch our first LP market of PFP deal. And we're doing a mobile PFP pilot with one of our customers as well. So we still think there is obviously plenty of opportunity in PFP and we're comfortable with it being 17% to 20% of the enterprise revenue of our business.

And then did you say what the currency benefit was to our earnings from quarter?

I did not, and we haven't stated that in the past. It did have a positive impact on a gross margin perspective. Most of our expenses from a gross margin perspective are located in Israel. So the positive impact of the shackle for the third quarter had a nice benefit from a gross margin perspective.

Historically, I think you have higher expense in the second quarter. Are you going to have so much of a similar pattern this year? Is that the view?

We do expect that. We've done quite a bit of hiring in the fourth quarter. Our expectation is to do decent amount of hiring in the first quarter. And so you're having the full quarter effect of that hiring happening in that second quarter. So our expectation is for that to happen, and as we alluded to before, we plan on holding several customer events in 2012 of which one is schedule for the second quarter.

And just last from a booking perspective, how did Europe perform during the quarter.

They performed actually very well. I mean if the question is about potential weakness in Europe, I don't have the exact number off the top of my head, but they actually performed well pro rata from the $6.3 million in bookings. So Europe is doing very well from the bookings and revenue perspective against our expectations.

Your next question comes from Craig Nankervis.

On the core enterprise chat business, Rob, you talked about chat is going broader. I wonder if you could maybe relate some signs of the newer verticals perhaps peaking up. Newer verticals you've talked about in the past I think helped. I can't remember the others. So I just, for starters, wondering if there is any color on the vertical side in expanding the market?

On the core enterprise chat business, Rob, you talked about chat is going broader. I wonder if you could maybe relate some signs of the newer verticals perhaps peaking up. Newer verticals you've talked about in the past I think helped. I can't remember the others. So I just, for starters, wondering if there is any color on the vertical side in expanding the market?

Insurance, healthcare, financial services continues to do quite well and so we are pretty excited about that. There is government that we're just starting to get going in. We don't have a huge penetration in government. So there is that. And then the other parts are APAC, Asia-Pacific, and Latin America where we have some very small partners, but we're trying to get fairly focused and aggressive. We are doing quite well in our Australian operations with our partner there, and we are going to start to put more focus. I think there is market outside the U.S. Then you've got the verticals that are trying to go. And then you've got just growth within customer base as part of what we think can drive the core business.

Just curious on the investment profile for this year, I'm assuming you're going to hire more sales head this year than you hired last year yet. As been discussed, you're not taking too much of a hit on the margin front. Is there a trade-off in the mix, some sort of offset to the emphasis on sales heads in your investment mix? Is it lighter R&D than you did last year? Can you just maybe give a flavor for the trade-offs and your emphasis on sales and marketing part?

Last year or so, we put a big emphasis on products to roll these products out and less on sales side, because we want to start staffing without having the right focus and processes in place and the products to support more salespeople. And so now that we're there, we're going to start to go a little heavy on sales and marketing. Marketing is a department in which we're going to really start to ramp from a headcount perspective. So we can get some real good lead flow. And the interesting part is that we are entering new markets. Take LP Insights, that's a whole different market than what we currently play in. It's the analytics market. And you've got amateur, you've got some BI tools. It's about a $2 billion marketplace in its own between the structured amateur type stuff and the unstructured voice of customer. So that opens a whole different area to sell sale into, different decision makers and different marketing. So those are types of things that we're going to be investing in now to get the marketplace to understand what we're doing as a business.

Lastly on the consumer front, what's the latest thinking about how you view the business and the prospects and discuss what's going on there?

Lastly on the consumer front, what's the latest thinking about how you view the business and the prospects and discuss what's going on there?

The consumer business, as you know, we've focused on really cash flow versus growth in that one. And we're working on some things to align it to the core business, and we have some time to wait to get to those places. So that's what's we're doing is optimizing cash flow until we can get potentially that business one way or another aligned with what we're doing as an overall company. I see the majority of our focus is on the core execution of the platform for real-time intelligence in data and that's where the majority of our focus is as a company. And then they're working on the optimizing their business today.

Your next comes from Jon Hickman. Jon Hickman - Ladenburg Thalmann & Company: Just a question back on the sales guys that you're hiring. They're not going to be product-specific, right? They're going to sell everything?

The majority will sell everything. There are some people that come out of the analytics world, and they might come out of specific verticals, advertising, things like that, that we may hire. But everyone is expected to sell every product regardless of their backgrounds. Jon Hickman - Ladenburg Thalmann & Company: And then, Dan, you talked too fast for me to right a little bit. What was the percentage of the international business?

24%. Jon Hickman - Ladenburg Thalmann & Company: For the year?

Yes. Jon Hickman - Ladenburg Thalmann & Company: And the Pay-for-Performance for the year and the quarter?

As far as overall revenue, 10% for 2010 and 11% for 2011 and 18% of enterprise revenue. Jon Hickman - Ladenburg Thalmann & Company: You talked about LP Marketer that you were still working on billing model, but you had one for LP Insights? What about ADE?

ADE is on a per seat, per user basis, primarily focused on the small business section of our business. Jon Hickman - Ladenburg Thalmann & Company: Is there a vertical in the small business section, or do you even keep that kind of data?

No. It's across the board. There is no specific vertical that's adopting ADE specifically. It's really around the client and what their needs are. Jon Hickman - Ladenburg Thalmann & Company: And then one more question on competition. People talked about Oracle and RightNow, et cetera. Are you seeing anybody new?

No, not right now, not on the chat side. And in the new businesses, there is a couple of startups against LP Marketer. LP Insights, like I said, will go broad against in the future amateur and other analytics types businesses. But there is a more consulting. A lot of what LP Insights goes up against is companies that consult and take data and analyze it. And we're doing it in a much more efficient way with data that we capture. And then ADE is just a total new innovation. We are importing Google Analytics and SEM data and using that to drive behavior and changes in behavior on the websites. So that's a whole new innovation that no one is doing today.

And your final question comes from Jeff Van Rhee.

As it relates to LP Marketer, when you look at the used cases in the verticals and how the market for that product is evolving, what's changes in terms of your thoughts on the addressable market, what have you learned based on the early uptake?

As I originally discussed it, like this online coupon, and it's got two uses. One, it's actually driving conversion instantly. And the other one is to just drive sometimes just to change in a behavior that's non-conversion related on a real-time basis. It just maybe educating someone about a product or getting someone to sign up for something. And so that's one part. It's also been connected with ADE to try driving things around, increasing conversions around keywords and optimizing keywords. So there is some new uses there. It's got such a broad use. That's why we're playing it out a little longer, because the business models are evolving. We even have a Pay-for-Performance model that just launched with a big consumer electronics company. And we're selling like laptops and things like that. It's got such broad usage that we just continue to evolve it, but it definitely has a lot of use. And the beauty of it is that a customer can get up and running instantly. They don't have to retag their page or do anything. They just start working with it.

Is it fair to say your thoughts on the addressable revenue opportunity at this point are that it's a larger market than what you thought it was three months ago?

Yes, I think it's got broader used cases. I never really thought about the keyword part of it and I never really thought about the practical aspects of enabling a marketer to change content on a website without having to go to the designer IT departments to do tagging. And so there is a just a use on the flexibility of changing creative instantly without having to go and get a lot permission in that sort of market. So they are all broader sections of usage beyond just conversion.

I think you touched on it few times, but I am not quite sure I heard any conclusion as to sales cycles. Are you seeing any change in sales cycles here versus maybe three or six months ago?

No, I think they've been relatively same. I mean one of our concerns with what's going on in Europe, we see a slowdown. But we think from a bookings perspective, we didn't experience that in the fourth quarter and we're keeping a watchful eye as we go through the first quarter.

And there are no further questions at this time.

Okay. I want to thank everybody for being on the call. And once again, I want to thank everyone who is working here for all that tremendous work we did in delivering a bunch of new products that didn't exist last year and really aligning the company to this goal. So thank you and we will see you next quarter.

Thanks everyone.

Thank you for participating in today's conference call. You may now disconnect.