Good afternoon ladies and gentlemen, thank you for standing by. Welcome to LivePerson's Fourth Quarter 2019 results conference call. My name is Ian and I will be your conference operator today. [Operator Instructions] After the prepared remarks the management from LivePerson will conduct a question-and-answer session. And conference call participants will be given instructions at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Matthew Kempler, the Company's Senior Vice President of Investor Relations and Planning. Please go ahead, sir.

Thank you very much, Ian. Joining me on the call today is Robert LoCascio, LivePerson's Founder and CEO; and Chris Greiner, our Chief Financial Officer; and John Collins. Please note that during today's call we'll make forward-looking statements, which are predictions, projections or other statements about future results. These statements are based on our current expectations and assumptions as of today and are subject to risks and uncertainties. Actual results may differ materially due to various factors, including those described in today's earnings press release, in the comments made during this conference call, and in 10-Ks, 10-Qs and other reports we file from time to time with the SEC. We assume no obligation to update any forward-looking statements. Also, during this call, we will discuss certain non-GAAP financial measures, a reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release. Both this press release and supplemental slides, which include highlights of the quarter, are available in Investor Relations section of LivePerson's website. With that, I will turn the call over to Rob.

Thanks, Matt. Thank you for joining LivePerson's Q4 2019 earnings call. The fourth quarter marked yet another milestone for LivePerson, starting to create a new industry around conversational commerce and capped a year that demonstrated inflecting customer demand and market leadership. One year ago, we set a target of LivePerson hitting 20% organic growth. We delivered on that goal in Q4, accelerating 6 percentage points from 14% growth in 2018. We signed five 7-figure deals in the fourth quarter and 24 for the entirety of 2019, 167% increase over 2018. Annual contract values signed in 2019 grew by nearly 60% year-over-year. Within enterprise alone, the dollar weighted average term was 31 months, a testament to the increasing strategic nature of our offerings and our growing backlog. We invested in the sales and product momentum needed to reaffirm our goals of generating at least 20% growth in 2020 with continued acceleration toward at least 25% growth in 2021. Among the many wins we had in Q4, our success in opening up the healthcare vertical warrants call out. We signed new contracts with a Fortune 500 global biopharma company and a top-5 U.S. health insurance provider. The former seeking improved consumer experience and enhanced agent efficiency by replacing the legacy chat vendor with messaging powered over the web and Facebook. The latter is leaping straight to automation, leveraging LiveEngage and LiveIntent dashboards to create a highly scalable autonomous consumer engagement. 2019 we set our sights on healthcare as a key new vertical and I'm thrilled with a promising start. Another vertical we had targeted in 2019 was travel. And I'm pleased to report an in year 7 figure expansion with a top-5 global airline. This leading brand is on the path to become a true conversational airline. They will deploy our full…

Thanks, Rob. I want to echo my strong alignment with the decision for LivePerson to take the next step in its journey, by applying it vision for automation and AI to our internal corporate efforts. I personally recruited John last year with a view toward the next steps our company could take to leverage all the data, process and analytics engines we put in place the last 2 years. John's expertise and strong track record of execution has enabled him to hit the ground running and made key contributions and justice first several months. I'm confident John will be another strong addition to the management team as CFO. As we discuss our financial performance in more detail, it's helpful to recall the two primary dimensions that underpinned our 2019 outlook and contributed to our increasing momentum throughout the year. The first was an aggressive plan to increase investment in sales and engineering capacity. And the second called for capitalizing on our robust opportunity pipeline to rapidly grow contract activity and accelerate revenue growth to 20% by the fourth quarter of 2019. On both fronts, we executed extremely well. And to punctuate the point, we delivered 20% growth in four different key segment measures of our business. First, total LivePerson revenue grew 20.3% year-on-year in the fourth quarter and is up 520 basis points sequentially. Peeling back on that, our B2B growth was also up 20%, up from 15% in the third quarter. Further drilling into the B2B segment, our hosted services or software growth in the quarter was up 21% over last year. And finally, our consumer segment once again delivered strong top line performance, up 24% year-to-year. With these headlines as the backdrop, let's dive deeper into the details that propelled our strong cap to the year. Our enterprise…

Thank you, Chris, and hello to our shareholders, analysts, employees, partners and customers. I'm very grateful to Rob and Chris for the opportunity and for embracing the vision to deploy automation and machine learning to transform the finance organization and its impact on the business. Considering LivePerson's size and near-term market opportunities, now is the optimal time to invest in the model driven processes that will enhance operational leverage and accelerate growth. The CFO and the finance organization are at the center of a vast feed of data that could be used an organized into useful information to reduce uncertainty and reveal opportunity. Yet, data scientists and engineers are rare sight in finance departments. And most data lives in disconnected enterprise systems. We're changing that. My team of data scientists and engineers has already deployed automations and machine learning that is delivering meaningful ROI. The main goals are to support decision making under uncertainty and free capital and people from repetitive transactional task in order to redeploy them on strategic and innovative opportunities. These changes we're making will accelerate the natural evolution of the finance function and maximize its effectiveness as a steward of company resources and a strategic partner in the creation of long-term value. I look forward to getting better acquainted with all of you in the coming weeks and months. Thank you.

All right, operator. With that, we'll turn it over to the audience for questions.

[Operator Instructions] Thank you. Your first question is from the line of Samad Samana from Jefferies. Samad?

Hi, good evening. Thanks for taking my questions. Maybe Rob, one question for you. So, there is a big investment being put on to the payment side. We've seen the coalition of software and payments with other vendors. So, maybe if you could just expand on that a little bit, how you're investing the company's plans? Are you going to partner with a payment processor? Just give us a little bit more color on what the investments will be there, and then I have one follow-up.

Yes, so what we see today is hundreds of millions of dollars are running around our platform. So, the conversations take place on our platform and then even the transaction takes place in nearly a web form or some sort of our web experience off of messaging. So, as we analyze it, we see hundreds of millions of dollars running through our platform and we think there is an opportunity to create -- an opportunity to do a secure payment within the platform, and we'll work with other providers to process the payment. But we're going to handle the pure transactional element of that through a conversational UI. And then we're building all of the authentication services so we can do two-factor authentication with the consumers, so they can basically tokenize a credit card or debit card, tokenize it and then it can be used across different messaging platforms, including in app with our customer on the web, but on the other messaging platforms. And then we'll secure that and then they can invoke it and the brand can invoke it and use it as a payment. So, I think it's a pretty big opportunity. It's hard to do conversational commerce without the commerce part and that's the part we're really attacking today. We did hire someone in the banking space, who is now leading up that group at the company. He joined us about 4 or 5 months ago, and he is leading that effort and we have now a team here of ex-banking people who are leading the effort to build the payment's platform. And from there, we'll see. We'll start with payments and there's other services that we're looking at beyond that, but that's where we'll start.

Great, that's helpful. And then Chris, maybe one for you on the financial side. The 1Q guidance points to revenue ticking down from 4Q to 1Q. Can you maybe give us a little bit more color how we should think about the hosted services business revenue and if that's part of it -- if that's what's driving the decline or is it professional services? Just trying to understand better maybe a seasonality and what the cadence of that looks like in 2020?

Yes, thanks Samad. And good to talk to you again. The hosted services software should follow the growth of the overall company, so just as an underlying principle. The skew of the first half revenue growth versus the second half revenue growth is actually consistent with our internal models that we've had, dating back to our Investor Day. So, if you think about the ramping of our sales force, as I mentioned in the prepared remarks, is about half of our quota carriers today, they're at full productivity. That group is the group that drove, you heard from Rob, over 60% ACV growth in the year, 24/7 figure deals. They've been outstanding for us. We expect to have about 80% of our quota carriers fully online in by the end of -- by mid-year. So, as they start to scale and reach productivity, that will then layer on the growth in the second half. But in terms of the more immediate first quarter, seasonally, our gain share business has some peaks in the fourth quarter and tends to trend down in the first. And we're seeing that play out just like we had in past years in this first quarter of 2020.

And our next question is from line of Siti Panigrahi from Mizuho. Siti?

Hey, thanks for taking my question. So, I just want to dig into your guidance about 25% growth for 2021. What's your expectation baked into that in terms of adding more self-service process, increasing sales productivity or even increasing ASP?

Sure. We know now, we know from our models that the sales capacity that we have going into 2020. And again, when we expect them to reach productivity will put us at an exit profile in 2020 with the right momentum to achieve our longer-term range of at least 25% growth. Now, this year, while we're able to maintain relatively flat headcount, that's not to imply that there won't be hiring in the sales ranks and there won't be hiring in the engineering ranks. It's simply that through John's expertise and his team that he is beginning to hire and bring on board, we'll be able to drive efficiencies in the middle layer of the company in the back office, if you will, to be able to free up funding, just as we've done throughout the year, but to do it in a way that doesn't allow us, or doesn't require us to take our overall headcount up.

All right. And then the investment you talked about $16 million, how should we think about that throughout the year? Is it more on first half versus second half? And then, is that what you need for payment or we should think about even further in the next year? How should we think about the EBITDA going forward?

So, it grows over time, it's a team that's building right now. And there are people in that team as we speak. It will give us a good chunk of the technology that we need to just go to market and then we'll see where we want to go from there. It's going to be embedded in the LiveEngage platform. So, it's basically all of our thousands of brands can invoke it as a way to take payment on the platform. So, it's not writing outside the platform today. So, we're not promoting like an external consumer facing payment technology. It will be within the platform to start.

And our next question is from line of Arjun Bhatia from William Blair. Arjun?

Hey guys, thanks for taking my question. Just wanted to maybe touch on the go-to-market motion a little bit. It seems like the sales force is now fully built out. But just curious, as you're looking into 2020, what are you prioritizing in terms of growth avenues. It seems like there is plenty of opportunities available to you from opening the funnel to adopting the pipeline, to increasing endpoints. But would just love to get your thoughts on maybe what you're most excited about and what -- where the highest ROI lies on a go-to-market perspective?

So, I think there is a few areas. One is, we have some new verticals like the healthcare vertical, we really want to get a couple of key brands in, and we did toward the end of the year. And so, I think that vertical will be opening up. We've got the travel vertical. As you know, we've talked about Delta, but there is a number of other airlines now we signed in the U.S. and now globally. We're opening up, as Chris mentioned, South America. So, we're seeing some nice pipe develop. As many of you may know, like, WhatsApp in Brazil, Mexico, these are the main channels of how people are communicating in brands. So, we're bringing -- we're kind of coming in under that front end in that market. And then, we got a lot of expansion opportunities within our base when it comes to our conversational AI platform. So, as I wanted -- as I was mentioning, the real focus over the last 24 months was really about the channel of communication, which is messaging. And really what we started to focus on at the end of the year is how do we automate conversations up scale. Because what we found, as we hit 20% or 30% of voice calls get moved onto the LiveEngage platform, you now need to automate at real scale. So, that's a focus to expand our customers, to get them. Our goal is always to get like 80% of all customer contacts who are running through our platform. And they're going to have to be automated at some scale. So that will be the focus from a product perspective. You'll see some changes in the marketing in the next couple of months of how we're positioning our conversational AI and even the platform as a whole. So, that will be more AI, conversational AI focused.

Got it. That's very helpful, thanks. And then on the payments, real fast, just wanted to maybe follow-up, what role did endpoints play here, like Apple and Google and Facebook? And does the payment functionality that you're building out overlap with some of the functionality that the endpoints already have incorporated into their applications?

Yes, so the greatest chance we see is that there -- all the endpoints have, obviously, a payment platform. But not every consumer uses it in the -- who have these devices, nor is it cross-device. Obviously, I can't use Apple Pay on an Android device and so forth and so on. Half the world is on Android, the other half -- actually, about 70% of the world is on Android, 30% is on iOS, 50:50 in the U.S. But, so we found it's just very tough for a consumer and the brand to take a payment within messaging. And most of time what we do is we invoke a web experience. So, the secure form that's invoked, it's called a PCI form. It's encrypted. It has certain principles to it for security. It's a very cumbersome experience. So, we just feel that -- and hearing from our customers, there's got to be a way. We're having the conversation on the shown product. I've got service -- and I'm just invoking which card in. And so, we also, from a consumer perspective, see that they constantly have to put their card in every time they do a transaction versus put it in once into the platform, we'll tokenize it and then they can use it over and over again without having to put the card in ever again. So, that's kind of what we're focused on, on the payment side.

And our next question is from the line of Raimo Lenschow from Barclays. Raimo?

Thanks, guys. It's Mohit Gogia on for Raimo. Thanks for taking my question. So, wanted to start with -- I'll stay on this topic with the payments platform. So, I was wondering if you can talk a little bit more about the go-to-market motion there that you're initially thinking about. So, is there ideal customer profile or maybe a vertical that you're probably sort of like going to make the first move on with this payments platform? And also, I know its early stages, but I was wondering if you can speak about the potential ASP uplift and so how you think about pricing this new functionality and how do you think about the upside to ASPs from that? And then I have a follow-up question for Chris?

Yes, I think it's too early to go through all that. I will say that on the go-to-market, we have thousands of brands and we're doing close to $60 million conversations a month on our platform. So, there's -- a fair majority of those conversations are commerce based. And so, we are going to -- the go-to-market is embedded in the platform, make it available to our customers. You then invoke it in a transaction and then let the consumer then tokenize their card and start their payment of that process. And then once again, the card is tokenized once and then we can -- we can -- still can come back and use it again at that brand or other brands that are on LiveEngage. So, that's really where we're going to start. I don't really want to talk about the pricing of it or business model yet. I think later on in the year, we'll talk more as we do bring it to market. It looks like toward the end of the year we'll bring it to market. We'll be testing it with some of the large enterprise customers and then we'll go from there.

Understood. And then I have a follow-up question. So, just on the $16 million, I know you mentioned that the overall headcount you expect to be around the same number end of the next year, right? But you are trying to sort of like use AI and leverage machine learning sort of like to make sure that you can invest in that right areas in terms of headcount to leverage some efficiency there. But can you breakdown as to that additional $16 million as to which functions? So, is it more sales investment you're going to make or this is more -- you made the R&D headcount to grow just to provide the functionality of the platform? So, anymore color on that $16 million will be helpful.

Yes. I want to -- I think it's important first to highlight that we're purposeful in breaking out our core B2B and Consumer segments profitability versus the new innovations, payments being obviously a key area of that. The change in adjusted EBITDA year-over-year in the core is very meaningful, right? It's going from a negative 13 to a range of positive 13 to positive 19. So, at the midpoint, almost a $30 million improvement year-over-year. And as you highlight in your question, our ability, because of the extension of our vision from what was an external automation and AI to now internal is allowing us to make exciting inroads, not just in the office of G&A, which is obviously has been and will continue to be even more of a focus. But there are many processes inside the enterprise today that impact sales, that can free sales up, prioritize time better. I wouldn't want to give you definite play precision as to how we'll free up and what functional areas. But it should not be thought of as just being generated by G&A. it will be wider than that.

And our next question is from the line of Steve Enders from KeyBanc. Steve?

Hi, great. Thanks for taking the question. And Chris, it's been great working with you. I just want to kind of get a better sense of the deals that you're seeing coming in. I know that, historically, there has been more focus on the customer care side. But wondering if you're seeing any change in mix there that's more marketing driven?

Yes, I mean, we have now the proactive marketing capabilities in the platform. So, we are starting to sign more and more customers around that. So, obviously we are beach heading into customer care and then fanning out as we said, I think, mid last year, into the sales and marketing use cases. So, we're starting to see a pickup in that product area.

Okay, great. And just quick follow-up. Just want to better understand as you guys think about the changes in the finance Oregon, and how you think about that. I mean, what are the -- I might be a little bit early on this, but just kind of wondering what are the core areas that you think you can change and what are the new processes that could be put in place to help automate that?

Yes, as I wrote in my remarks, a couple of things. One is, I think it's important that our company take a lead with our own platform and vision around conversational AI and AI as a whole. It's one thing we sell the vision to our customers and we implement them, and they get these great results. But when you look at us, I think we should be sort of the leading test case. The next step in the thinking there was if we look at G&A lines as a whole and finance, these are really the central areas where a lot of data flows. And so we were thinking the best leader for that today would be someone who has the data science background also a business background, and if there is massive leverage we can get just in that alone right now, if we spend between 15% and 18% of our revenues on G&A, I think we can drive that one data on a 5%, 6%. 9% would be like world-class. But when you look at what we can do automation and when we brought John in, one of the things we told him is like, if you can do this for us, we'll productize it, run it on our platform and then we'll take it out and sell it. Because conversational business is not just about commerce with our customers, it's about also internal. And we use it now for -- like, we have an HR bought here and we do have some stuff in finance, very limited stuff. But I think of a company like our largest enterprise, they probably spend between $500 million and $700 million on G&A. You're talking about these giant brands. And I know what goes on there, we talk to them. So, we really want to use ourselves as a way to show the world that we can transform the way business gets momentum and growth and also scale on the bottom line by bringing AI machine learning and the conversational experience. So, that's why it's pretty exciting to have John takeover. And once again, Chris has done a great job. It's not something about Chris, it's really about, we have this vision, let's change and take a leadership. Not to go on, but I really believe you will see in the future that the CFO position will change. There's many articles written about it now about how it should be a data-centric place, but we're really taking a leadership position on saying we're going to put a leader who can drive that.

And our next question is from line of Ryan Macdonald from Needham & Company. Ryan?

Yes, good afternoon. I guess as you're looking at the pipeline and also back at the improvements that you've made in the ARPU this year. Can you talk about the mix of benefit that you're seeing from: one, interaction volume increases perhaps with the support of AI versus expansion of the number of messaging endpoints that customers are adopting?

Hey, Ryan, it's Chris. Good to talk to you. We don't look forward on that data externally. But let me maybe answer it in a different way. If you think about where the deal volume was contributed this year, right over a full year. So, it's pretty good swap of execution on the opportunity pipeline. Our deal counts for the year, as I mentioned, was up 34%, and about 44% were from new customers and about 25% from existing customers. We talked about the ACV attached to those deal volumes, its being up over 60%. So, then that's what you peel out and say, "Okay, how much is from existing business growth versus new?" We are seeing our messaging volumes continue to grow. It continues to be a strategy that goes deeper within the endpoint or wider. But what we've also seen, and we've commented on in the past, but now that we have evidence over the automations that we're selling continue to grow, we said we had over 300 customers on conversation builder, the ARPUs when our AI is present are twice what the standard ARPU is. So, a lot of exciting growth and execution of pipeline focused on leveraging our automation technologies and even more of our core AI.

Great. Thanks for that. And then just in terms of the pacing cadence of sales and marketing investment as we look into 2020, what role is our customer summit is going to play moving forward? I know obviously they've been a big lead generator in the past. Should we start to see that moderate a little bit in 2020? Thanks.

Yes, I mean, we did have -- we're doing a fair amount of in 2019. We'll sort of hold the cadence. We're not going to increase it right now. Some new markets like South America, we will, but we have a very good, I mean, it's like there is more than once a month now they're running. We just did one in San Diego while one coming up in New York. There's a lot in the month event. So, I think we've got a good process going and we're -- I don't think we need to add and accelerate it, because we got a lot happening. It would just, I think, dilute the quality of the ones we have now.

And our next question is from the line of Peter Levine from Evercore. Peter?

Yes, thanks for taking my questions. And, Chris, best of luck. First one here is -- with the sales hiring, I think, the goal was to kind of get the number of concurrent deals that reps carry down to more of an industry average. So, if you're looking at more of your senior reps as a benchmark. And really, I'm just trying to get a sense of -- if the funnel is working, how do you quantify the productivity of your newer reps? Meaning, if you have a senior rep with 20 deals to close a month, I mean does that turn the two reps closing 10 deals or is it more so distribution of the funnel getting kind of dispersed across the sales force?

Sure. A couple of different forces. And one very much linked to what you heard Rob speak to in terms of the evolution of the office of finance. First, we are more heavily scrutinizing what's coming in the top of the funnel and revolving how are SDRs canvas the market, to where it's not as much just an emphasis on quantity, but it's also an emphasis on quality. And that in turn should provide a filter to less burden on the individual seller and just how many deals they return. We talked about a 100 carrying on average 15 opportunities concurrently. You think that's far too many. What John and his team will be able to bring is an even more granular data length to be able to route and truly curate what are the best deals. And John, you can feel free to add any more commentary on that, but we're excited about what the data scientists can actually bring to the process.

Great. And just a final one here is, any updates on your conversation with SR's? I'm just trying to get a sense of what your confidence is in your sales or writers? Is the number of deals are getting larger in -- can your sales or kind of deliver on the last mile? Or are you at some point, you're going to have to rely on SIs to kind of get some of these deals, I guess, simple as it? Thanks.

Yes. I mean, we're starting to shift, especially in 2020 to a model where there is other people doing the implementations and integration. So, it's interesting, we talked about TTEC, which -- I've known the CEO for many years and we never really had any work together. But when we crafted this partnership at the end of last year and what we're seeing right now, they're really trying to -- they have -- part of their business obviously is about technical implementation, part is BPO. But that technical implementation group, we're seeing some very good pipeline being built and other ones around the world. So, some of the deals we're inking right now, we're about working with those SIs and having them do the work, because you're right, it's hard for us to add the capacity into the business. I'd also like us to move more toward just focusing on the transaction that happen on our platform versus all the services around the platform. We're a technology company, that's where we're very strong. Implementing and doing services, we have to do it. But I think it's better if we build an ecosystem around ourselves. So, 2020, we'll be more aggressive about that. Plus, we have a lot of learnings from '19 and '18 that now we know how to sort of operationalize messaging and do that. We can pass that to a partner.

And our next question is from the line of Sterling Auty from JPMorgan. Sterling?

Hey, guys. This is Sahil on for Sterling. Thank you for taking my question. So, customers that have gone live in the conversational commerce in the past year, are we seeing -- are they getting bigger in terms of the revenue opportunity? And then on the client summits, are there going to be anymore summits in 2020?

Yes, to be clear and -- hey, Sahil, Rob answered before that we're going to hold our customer summits roughly flat 2020 to 2019. And 2019 was a pretty hefty increase year-over-year. We do see the customers that we've signed get bigger with us, that comes in two different ways. Those that are signed and initially onboarded with us through a pilot program. We've seen nice success in scaling them from pilot to full launch. And as customers are starting to see volumes grow in the messaging platform and the value proposition, whether its cost savings or aligned in contact center, their CSAT scores, higher sales conversions is compelling them to add new endpoints or, if you will, open up this ticket for how much volume gets diverted away from voice and messaging. So, we are seeing growth from new customers.

Thank you.

And our next question is from line of Richard Baldry from ROTH Capital. Richard?

Thanks. Can you talk about the difference in growth between the U.S. up 17%, international 26%? Does it really feel like in fiscal '20 that the catch-up of the U.S. growth rate, because that really what you're counting on to get up to 25% growth exiting the year or do you think both will accelerate to some degree? Is there some structural delta between the two? For example, could the rollout of RCS in the U.S. over the next year or two bring that growth rate up to sort of on a natural demand increasing basis? Thanks.

Hey, Rich. I don't believe it will be driven by RCS. We're optimistic, but it's -- we're not counting on it. The U.S. has many businesses inside of it. What we're really excited about and we've commented in several calls is the enterprise business within North America continues to grow at very high rate, right? Materially higher than the overall company. And the pipeline that we have in North America, the talent that we have in North America, the marketing programs that are attached and enables the sellers, we're optimistic that that should continue on a really exciting rate and pace. The consumer business and the segment of consumer is also largely inside the U.S., that had a slightly slower growth profile. We think it will grow. You should think of as growing equal with the overall company in 2020. International, we are really happy with the performance of Asia Pacific. It's still a -- it's a young market for us. We're largely penetrated mostly in Australia, in Japan. But we're optimistic about the growth prospects that are there over the longer term in Asia Pacific.

And just last one will be, receivables kind of stepped up in the quarter fairly substantially. Is there anything to better understand that and what the trend should be starting the year throughout 2020? Thanks.

Yes. No, I think we anticipate DSO to return to regular levels in the first quarter. In fact, if you look at the aging of our customers, it's better today than it was a year ago. So, just a really good job on contracting activity and billings execution in the quarter.

And our next question is from the line of Jeff Van Rhee from Craig-Hallum. Jeff?

Thank you. So, Rob, maybe if I could start with you. If I take a longer-term view, you've outlined a $50 billion TAM and a substantial lead over your peers given what you're bringing to market now. Given the limited resources as a company, you've got to make a decision between incremental sales capacity or incremental products. Given the $50 billion TAM and the leadership position, I'm curious, the decision to front burner new product development, back burner sales capacity, which seemed like it had been the priority. Just walk me through how you weigh those two?

Yes, it's still -- if you look at our overall spend, we still have a fair amount. Let's say it's 50:50. But when you look at the field as a whole and engineering group as a whole, they are almost equal in headcount. So, we are funding some new innovation on the product side. We are a product-led company. So, sales can't sell air. They have to sell something that's innovative and unique. And so, we always have to maintain our leadership on the product side. And once again, we gave a little color about some of the areas we're looking like payments. But, I mean, the field we added a lot of capacity last year. And so, now we added a market in South America. So, we just want that capacity to really start to hit. And then, we'll add more throughout the year, but I don't see it as a terrible trade right now. I think we just feel like we've got to keep the product always 20 steps ahead of competitors. And the TAM is really big and we know there's a lot to fill out the product line. But I don't think it's a real change from the past.

I think in the last call, the comment was that you were going to come into the latter part of the year and do a real full like sort of deep dive on what happened in sales over the course of the year and make some decisions about capacity additions. As you went in and did that deep dive on sales, I'm curious what you learned? What are you doing well, what you're not doing well? What did the cohort analysis tell you about sales execution? I guess inherent in there is, did they hit quota and plan for the year in the quarter? But more importantly, what did you learn when you did that deep dive, what's working and what's not?

Hey, Jeff. It's Chris. I'll go ahead and take that and certainly others can jump in as well. We did have -- we didn't wait till the end of the year to have learnings. In fact, during the year when we started to really ramp investments, we began to look at, in particular, our sales investments, whether it was SDRs whether it was our quota carriers, whether they'd be hunters and farmers, even our marketing event looking monthly at the ROI. So, our strategy throughout the year evolved, does that data continue to come in? So key learning, to respond to your question, was North America is a hot market for us. We invested first in late 2018 in the SDR profile in our hunters and farmers there and obviously complemented their efforts with marketing events. And that strategy has paid off well. And we've continued to put resources behind it and the talent of leadership team is just exceptional. In terms of other key learnings, we were able to validate that in our enterprise business. Our quota carriers ramped to productivity in about 12 months. You can shave, call it, 3, 4 months off of that for the commercial business, but what that's opened our eyes up to and it's another area of investment this year that we're making inside the overall spend profile of the company, is aggressively on rethinking how training should be done in companies, specifically with reps. But not only reps, making everybody an AI expert, AI native. So, that was a key learning for us, that investment in training has a high ROI to it and we're going to get even better at how we train all of our employees, not just our sales reps. And then on the SDR front, it was about the quantity of opportunities that were coming through and it's bearing effect on the quota-carrier. And as we started to see the quality, I believe, their aging, how quickly they are being taken on board and progressed, there were deals being left behind. And we put a new lens on it. John will be instrumental in this and his team will be kind of putting a quality layer of the opportunities that we're starting to chase, so that we don't have 20 or 15 on top of each AEs, maybe we go down to 10 or 8. But the deals that are able to be faster progressed and even faster disqualified, that has the potential to shave a quarter off of the sales cycle when we do it well.

And our next question is from line of Zach Cummins from B. Riley FBR. Zach?

Yes. Hi, good afternoon. Thanks for taking my question. With the investments in the new payments capability expected to be kind of spread out over the year, can you provide a little more color around the current adjusted EBITDA guidance for Q1? Is there any major estimates that are there or happening more so than I guess what would be spread out through the rest of the year? Thanks.

Yes. First quarter for us has some timing built into it. These are couple different forces that are in play in terms of the cadence of profit and how should be thought of over the course of the year. The first is, you've got a lot of the heavy lifting of hiring behind us in 2019. But what comes with that is the continued annualization of those salaries, right? So that's present in the first quarter, present in the second, begins to fall off in terms of annualization in the third and certainly more in the fourth quarter. In terms of timing related items, how we treat our vacation accruals here, payroll, taxes, healthcare benefit cost, all those are quarter 4Q to 1Q dynamics that tend to sales commissions, bonus payment, things like that. Those are present in the first quarter that aren't as heavy in the fourth. So, the cadence of profit across the year will be a loss in the first, continued losses in the second and then those will get trimmed and turn positive by the fourth quarter.

And our next question is from the line of Mike Latimore from Northland Capital. Mike?

Yes. Thanks a lot. On the ACV up 60%, was that sort of across the board, meaning, small mid end enterprise or is that just mid end enterprise?

The deal count volume was driven by both, nice healthy growth by both. But the ACV was certainly more contributed on the enterprise side. If you think about the 24/7 figure deals that were signed in 2019, it's up 167% year-over-year. These are exciting transformational deals being done with enterprises, but probably still scratch the surface of what we could take down in the future.

Okay. And then on the conversational AI strategy, obviously you have double ARPU with that and that's the focus. What are the kind of core elements of improving attachment of conversational AI going forward, is it tailoring back to verticals or is it a sales strategy or what gets that attachment up?

Yes. So, I mean, we built a pretty major piece of the technology at year-end, which is called LiveIntent around analyzers. So, we have the ability to process conversations. We're also taking -- we can take in conversations outside of messaging platforms, could be emails, things like that. We're going to expand into picking voice calls in and that maps all the intents that are happening in the organization. Then, we built models based on the data we have of matching those intents to use cases. So, we can see that certain conversations in the intents are matched to, let's say, paying a bill at a bank, credit card payment. So, we pre-put that, populate that and we're able to organize. Now, we're about like 40%, 50% of conversations, we can get down based on those prepackaged intents. And the rest, the customer has a tool to sort of say. "Okay, this grouping of intents is related to something and this to something else." The next step is when they build the automation and the conversations, then they deploy the conversations that's in conversation builder. And then on the actual platform where the agent console is, that becomes a place that they actually improve the automation because they're watching at a real-time actually performing and they can change it. So, there is three major pieces to the conversational of AI platform and the intent moment was the last piece that we built and released at the end of the year and it's quite powerful. We're using it here. We actually use it here to optimize our keyword spend with Google and Facebook. So -- we can look at the intense that come through in our company, and then we're looking at what to do with them actually trying to use it in the company now to look at all the intense that are happening in our company, in employees and with our customers to map those intense and see where we can automate them. So it's a pretty major piece of technology that was built last year.

And our next question is from line of Brett Knoblauch from Berenberg Capital Markets. Brett?

Hi guys, thanks for taking my question. On Investor Day, you kind of broke out revenue contribution from large, mid and small customers in addition to their respective ARPUs. Do you plan on also giving that information for 2019?

If we do it will be part of another Investor Day, but it's not part of our plan as of right now.

Okay. And then on the last call, you guys kind of talked about, just pull forward a lot of investments and kind of going to take a seat or step off the table and kind of digest, and see how everything turns out. And then this quarter, you kind of announced another incremental 16 million investments kind of thought process or maybe the rest of the year like, should we see another announcement of investments or you think this is really going to be the bulk of it for the year?

Yes I think, first of all, you're right -- but I think it's important to distinguish the difference between investments throughout 2019 second half of 2018 that were devoted to the core. Core being B2B and our consumer segment versus was a truly new innovations. And as we talked about the core profitability year-over-year it is quite material, and almost a $30 million improvement, whereas on the innovation side, we see based upon the activity that we can first hand witness across our platform. The payment is an exciting and right opportunity that we should invest behind. So, I just think that's an important distinction. That is what we have line of sight to right now. I think we've made a pretty clear commitment to holding headcount flat.

Yes.

We wouldn't say that if we didn't mean it, right. So, if you took the 16 now, we would have headcount gone backwards. And so we've added -- we're going to keep it flat and basically focused down on these innovations. I think you all know, we raised some capital, close to $200 million in '19. We believe that we can organically build and grow and that's why we bought that capital in. We have a good muscle on innovating and going to market and we're innovating places where we can't buy a lot of stuff. So there is no Conversational AI payment platform out there today. Can't find it in the start-up, and the larger ones are not providing it, that's why we see the gap. So we do want to stay focused on filling the gap in the platform and in the market to win this space -- this conversational space.

Our next question is from the line of Mark Schappel from Benchmark. Mark?

Hi, thank you for taking my question. Most of them have been answered, just one though for you Chris, and I have a question around the 25% revenue growth number that you expect in 2021. Just a little clarity around that, do you expect that to average during -- to average 25% during 2021 or just to exit the year of 2021 with 25% revenue growth?

The latter, and we'll obviously -- went lot closer to 2021, and I think that the exact cadence of it, but the point being is that what we invested in 2019, how we see 2020 playing out with high-teens growth in the first half, and acceleration into '20 and then beyond will position us just like 2019 did for the right exit rate to achieve what we communicated at our Investor Day of our long-term model at the least 25%.

And our next question is from line of Koji Ikeda from Oppenheimer. Koji?

Hey, thanks guys. Thanks for taking my questions, and Chris it was great working with. Just a question here on the competitive landscape B2C messaging is really hot topic out there these days. I guess, how would you categorize the competitive landscape right now maybe versus a year ago. Are you still seeing the same players? Are you seeing anybody new out there? Any sort of color there would be helpful?

Yes, well, I mean it's pretty much the same players, the big contact center software guys are the major competitors that were out there. So the competitive force hasn't changed that much over the last year. So not really much change yet.

Okay.

Okay, sorry, just making one clarification on the -- 2021 growth target the 25% is for the full year.

Okay. And then I guess just for Rob the follow up here, big picture perspective. It sounds like the technology is in the right place, sales capacity is in the right place for 2020. It sounds like the R&D is where it needs to be in Seattle and elsewhere. And really the B2C messaging opportunity is really, really profound out there. I mean, I guess, from a real high-level perspective, Rob what's keeping you up at night these days?

I think it's a good question. My greatest worry is that we are operating in a space. The space we call as conversational and I fundamentally believe it will be as big as search and social, or any other space. Matter of fact, I know it's going to assume things like e-commerce. They will be C commerce. Conversational commerce will be the natural way in which consumers will buy. So what keeps me up at night is, I believe in 5 years from now, and I also believe -- we also have in our minds already, like we fundamentally believe right now, we should be talking to machines and saying, I want to buy car and machine says, OK, what kind of car and you go through a buying experience that's that easy. So it's in the mind collective of consciousness of us. I've got to as a leader and as a company shorten the timeframe to the 5 years, that's signing up enterprises, that's building consumer facing, user experiences, that's commerce and payments. And because this space, we know there is the biggest tech companies in the world are also after it. So although we talk about the contact center companies we're competing with today, I've said this many times, you've got Amazon, Facebook, Google and Apple, all in the game. And we are providing the back end into them but there will be a winner of the space. And so, for all the work we've done, what keeps me up at night is just how quickly can we shorten the timeframe to the 5 years, and can we deliver that. So that's really what we're doing. I really fundamentally believe 2020 will be another big year for us on getting to that vision. And it's exciting and -- but I wish we could just get through it today, then I can sleep peacefully, so.

And at this time, I'm showing that we have no further questions. I would like to turn it back to Rob LoCascio for closing remarks.

I felt like that was a closing remark, but I'll expand a little bit. So I'm very excited about what we did in '19. Especially if you follow this for the last couple of years, we went through this big transition and we came out of the box, strong and then we hit our 20% goal in Q4. And now we're looking at in 2021, you know the 25% and 2020 reaching that probably at the end of the year. Leading this transformation now, we've talked about the second phase of our strategy. We're very much focused on messaging as a channel. We weren't even sure people going to use it. We know now, not only people use it, they love it consumers, and brands love it. And now it's about how do we scale those conversations with Conversational AI. Many of you know, we hired Alex, from a value from Amazon. Alexa, he has built a great team globally and especially out in Seattle. So we've got this great talent here. And then, I think as there is just this tremendous opportunity for us to change how we run as a company. The best technology and companies use their own technology to transform their company. And I think it's important that we do the same. And so look for us in 2020 to show the things that LiveEngage and Conversational AI and AI as a whole can do. We all talk about how AI fundamentally is going to change the world, and we have an opportunity as a company to not only sell that technology but use it internally, and once again I'm excited about John being on Board and the whole company. So very excited for 2020, and thank you for all the support. And we'll see you on the next call.

Ladies and gentlemen we thank you once again for joining us for LivePerson's Fourth Quarter 2019 Results Conference Call. This concludes the call and you may now disconnect.