LivePerson Inc (LPSN) 2011 Q2 法說會逐字稿

Welcome to the Second Quarter 2011 LivePerson conference call. With us today we have Robert LoCascio, CEO of LivePerson, and Dan Murphy, Chief Financial Officer of LivePerson. Now I'd like to turn the call over to Mr. Murphy.

Thanks very much. Before we begin, I'd 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 material 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 over time, and we undertake no obligation to inform you if they do.

The results that we report today should not be considered as an indication of future performance. Changes in economic business, competitive technology, technological regulatory and other factors could cause LivePerson's actual results to differ material 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 relations section of our website.

Now I'd like to turn the call over to LivePerson's Chief Executive Officer, Robert LoCascio.

Thanks, Dan. Good afternoon, everyone, and thanks for joining us. I'm happy to report that we had a very strong second quarter. We generated $31.9 million in revenue, which is a 5% increase from the prior quarter, and a 21% increase from the prior year. Revenue exceeded our guidance, and we achieved an EBITDA of $0.13 per share, which is a 30% increase from second quarter of the prior year, and adjusted net income of $0.08 per share.

Beyond our core chat business, we continue to lay the foundation for our new product and platform strategy. Before diving into those details, I'd like to briefly take you through the exciting developments in LivePerson's division and strategy. Success of our intelligent realtime chat has largely been driven by the sophisticated behavioral targeting platform that supports this core application. Our platform processes data on nearly 100% of the traffic on our customers' websites, totaling about 450 million unique visitors per month.

Though we process data on all this traffic, our platform currently targets and practically delivers a chat to visitors most likely to convert, which is only about 2% of all visitors. So we continue to work towards unleashing the full value of our data and behavioral intelligence. Last year we architected an open platform that can support a broader set of online engagement applications and services developed by our team, our customers, and third-party partners. By supporting and delivering more engagement applications and services, we can maximize the value that we hold in our data monitoring and intelligence, and, in turn, enable businesses to meaningfully connect with a greater percentage of their consumers on and off their website.

On the last call, I introduced the strategic priorities that are guiding our Company's operations, and will help us to the next level. To remind you, these priorities are to increase the value of each unique monthly visitor that we monitor, deliver a platform that supports intelligent realtime applications and services, deliver products in a frictionless way, and provide meaningful connections between our clients and their customers. These priorities keep our Company focused on our strengths and differentiators, as well as our mission and why we do what we do, which is to provide meaningful connections in the world.

As we execute on our strategic plan, we've also been expanding our leadership team to align to where our business is headed over the next several years. In the past quarter, we hired a new Head of Global Professional Services, who will largely be focusing on creating a set of expanded service offerings to support the platform and our new applications.

Additionally, we brought on a Head of Platform, who cofounded a company that created one of the main advertising trading platforms. And we also added a Head of Data Strategy, who is a senior executive from one of the main advertising networks. As we continue to execute on our strategic plan, we are bringing in a new set of leaders to help guide our teams effectively in alignment with our tactical and strategic priorities.

Now I'd like to talk about activity in new areas before discussing the performance of our core product. Personally very excited by the advancements we've made in the past quarter, as we're starting to see opportunities in delivering new intelligent engagement products. With the re-architecting of our platform late last year, we developed a set of API's to enable customers and third-party partners to leverage our data and intelligence to expand their engaging capabilities to other channels of communication, such as mobile devices and social media. Today we have 15 partners developing on our platform, and over 100 customers using our various APIs and other applications. In fact, more than 10 enterprise customers are using our APIs and partner apps for use cases that include mobile live chat, visitor intelligence, and customer on-boarding.

Despite a recent success story, Adobe has been an early user of our third-party apps, and recently reported that they saw significant lift in conversion rates after implementing a LivePerson and Demandbase integration solution. The Demandbase app delivers the actionable company data of a specific visitor, so that the operator can better tell their message or offering to them.

The other aspect of our platform strategy is to build our own applications, driven by internal innovation. And today these applications include a product called ADE LP Marketer, and LP Insights. We've been seeing a lot of value in working with third parties, and integrating their data to improve the effectiveness of our chat applications. So we recently launched a tool called Analytics Driven Engagement, or ADE, which creates and updates the business rules dynamically using the customer's data to drive pro-active chat invitations. ADE has helped to win a dozen or so new customers in different segments between small business and midmarket.

The beta phase for LP Marketer is on schedule with 9 major customers signed in the program, and 4 customers already live, including 1 enterprise, 1 with midmarket and 2 small business. LP Marketer -- it's an application that delivers personalized content, like a coupon, to online visitors, leveraging current code and rules on their site with no agent label required. One midmarket customer who sells electronics online reported an 18% lift in conversion, and is eager to deploy LP Marketer on their subsidiary sites. We're scheduled to close the beta program at the end of September, and we're still on track for a GA release at the end of the year.

I first introduced LP Insights on the last call, and we continue to make steady progress in its development. LP Insights is a transcript analysis tool that will delivery actionable insights to the agent and business owner, and we hope to report some exciting initial results in the upcoming quarters.

Now I'd like to review the performance of our core chat products. Our core business performed very well last quarter, as we generated $28.1 million in revenue. All segments of the business contributed to topline growth, with revenue from business operations increasing by 22% as compared to the second quarter of 2010.

Overall revenue for our Enterprise business increased 6% over the last quarter, and grew 21% as compared to the prior quarter. We had strong bookings this quarter, totaling $5.8 million. We added 23 new Enterprise and midmarket customers to our customer base, including a top-5 software company, a top-5 interactive entertainment company, and a leading industrial supply company.

In Europe, we had the second highest sales bookings quarter ever. We signed a leading regional insurance company, expanded business with the leading telco company in the UK.

Our midmarket segment completed a strong quarter with several new-name signings and significant customer expansions. Revenue grew 4% over the last quarter, and nearly 100% as compared to the prior year. We're also seeing some wins in new verticals. For example, we have signed one of the largest university medical centers in the US, and a leading online university. We also added 2 new regional banks with several expansions in this sector.

There's been expansion in the government sector as well, particularly in the use case of online recruitment. Through a thriving reseller partnership, we now have a total of 4 branches of the US Armed Forces using LivePerson Solutions.

We also experienced a lot of momentum in the energy vertical with our pro-active services, as we signed the leading provider in the southeast, and expanded our services with PXU, another leading energy company which makes up 2 of the largest leading energy providers in the southwest.

Finally, I'd like to mention that we did extremely well in retail, adding 7 new names and expanding with 12 clients, including Patagonia, a leading outdoor clothing and equipment retailer, Neiman Marcus, a leading luxury retail department store, and a top cosmetics company.

Our small business groups' revenue grew 5% year-over-year from Q2 to 2010, and 3% from Q1. Average monthly attrition in Q2 ended at 2.2% of revenue, which is a 15% improvement over the 2010 average of 2.6%. Our small business is continuing to drive our platform business, leading all segments in the number of API deals sold. Also, our new application AD is a major advantage in that product line.

We are making strong and steady progress in the Asia-Pacific market, which we just entered last year. In addition to establishing our presence in Australia, we've developed a strong resell partnership to serve the AsiaPac region, and had several new-name signings, including a large insurance provider, one of the largest banks in Singapore, and SingTel, the largest telco in Singapore.

There are significant expansions with the leading telco in Australia, Optus. Also one of our financial services clients in the region has implemented social media integration provided by our partner, Trax, through our APIs, enabling them to expand their reach, and strengthen their relationship with customers by engaging with them beyond the website in the sphere of social networks.

We'll also be holding our first large customer summit at the end of October here in New York City, bringing together all of our B2B customers from diverse industries to share best practices and to gain insight on our new platform vision and exciting new capabilities. And we'll obviously expand -- invite our shareholders to come to this event.

Our consumer business had a solid quarter, and delivered $3.7 million in revenue. We expect the consumer group to contribute close to $4 million in overall cash flow for the Company this year, which is up significantly from $2.5 million in 2010.

Building meaningful connections in the communities in which we live is important to our employees, and resonates with our core value of helping others. Our London office successfully completed a 100-mile charity challenge, raising over $30,000 to donate directly to the Naomi House Hospice for terminally ill children and [Fadmeyers] Kitchen for undernourished families.

We're already planning our 11th Annual Feeding NYC event here in New York City. If you remember last year, we fed 8,000 families. And we believe this event, obviously, creates an important opportunity for people from different walks of life to come together during Thanksgiving and help each other.

And on the last call, I mentioned a special initiative we're supporting in our Israeli office. This is an Israeli-Arab Diversity at Workplace Initiative, led by the Israeli president, Shimon Peres. It's supported by other major US Tech Companies, including ourselves, who have offices in Israel, companies like Google, Microsoft, and IBM. The Arab developers that since joined our team have really become a part of our family, and are doing some great work around the new product offerings.

Before turning the call over to Dan, I just want to say that he's been doing a really great job since he came on board this quarter. He came in and really hit the ground running. I've already been out to several investor meetings with him, and he has been a great partner. Dan's experience working for a multibillion dollar company, Thomson Reuters, as well as a few start-ups, gives him the right balance to expand the finance team's function and infrastructure, and implement the next level of operational framework to support our rapidly growing Company.

It's a really exciting time here at LivePerson as we built a team of extremely talented leaders. Some new leaders, and then we have, obviously, a great set of leaders who have been here for several years. I'm eager to work with them as we drive our business forward and continue to lay the groundwork for our new product strategy.

And now I'll turn the call over to Dan. Dan?

Thanks, Rob. Thanks for the kind words. I appreciate that.

We're very pleased with the strong performance we delivered in the first half of 2011 and for the second quarter. We exceeded our stated revenue guidance provided last quarter, while EBITDA EPS, EPS and adjusted net income EPS were in line with our guidance. I will provide further details on these metrics in a minute.

As Rob mentioned, we made good progress in the quarter against our new product offerings. We expanded the number of beta clients for LP Marketer, and continue to see positive feedback. LP Insights continues to gain traction, and we launched Analytics Driven Engagement, which helps our clients increase conversions.

Revenue in the quarter was $31.9 million, an increase of 21% as compared to the prior year, and 5% sequentially quarter over quarter. Year-to-date, our revenue grew by 21% over the same period last year. Revenue from business operations for the second quarter was $28.1 million or a 22% increase as compared to the second quarter of 2010, and a 5% sequential increase as compared to the first quarter of 2011.

Revenue from consumer operations for the second quarter was $3.7 million, a 9% increase from $3.4 million in the second quarter of 2010. In addition, EBITDA margins expanded by 300 basis points in the first half of 2011 compared to the first half of 2010, and by 160 basis points in the current quarter compared to Q2 of 2010. EBITDA per share for the second quarter was $0.13, an increase of 30% as compared to the $0.10 per share in the second quarter of 2010.

Second-quarter EPS was $0.04 per share, up $0.01 per share from the second quarter of 2010. And adjusted net income per share was $0.08, also up $0.02 per share from a year ago.

Bookings were solid in the quarter at $5.8 million, which represents a 55% increase from the first quarter of 2011, and a 32% increase against the second quarter of 2010.

As Rob mentioned, we signed 23 new clients in the second quarter, and we signed a total of 96 deals in the quarter. Customer attrition for the Enterprise accounts was at 1.6% in Q2, which is in line with Q1 of 2011, and uptime exceeded 99.99%, while small business attrition rates held steady at the quarter at 2.2%. Pay-for-performance continued to be a solid contributor to revenue in the quarter, generating 18% of total Enterprise revenue.

As for the average deal size in the quarter, for all deals signed, it was an average deal size of $60,000. For new customers, the average deal size was $54,000; existing customers was $62,000; pro-active sales was $69,000; and customer service was $36,000. The breakdown in Enterprise bookings in revenue terms were 24% for new customers, 76% existing customers; and then 74% sales deployments versus 26% for customer service deployments.

Our SMB business delivered 3% sequential growth as compared to the first quarter. Our split of revenue coming from outside the US primarily in the UK remained steady at 24% of revenue, with the UK portion making up approximately 14%.

Revenue breakdown by industry verticals was consistent with Q1. Financial services was 21%; telco was 33%; retail 14%; tech 13%; and all other approximately 19%. As for the customer revenue breakdown, 20 customers were over $1 million in annualized revenue, which is no change from Q1. We have 30-plus customers about $500,000 per year, and 1 customer over $10 million per year.

The consumer group continued to improve cash flow this quarter. Revenue for the second quarter was $3.7 million, a 9% increase as compared to the second quarter of 2010. And the margins continue to be strong at approximately 30%. Gross margin for the quarter on the entire business was about 73%, which is in line as compared to most of 2010 and Q1.

Total Company headcount increased from 472 at the end of December 31, 2010, to 525 as of June 30, 2011. As we discussed, we were behind our hiring plan in Q1 in April, but we made up some of that shortfall in Q2. Also discussed on the Q1 call, we expected to offset the Q1 favorable variances with increased spending in quarters 2 through 4. In Q2, we increased headcount by approximately 30 employees.

In addition, the expensed 1-time recruiting fees associated with hiring several senior executives that Rob mentioned, as well as their associated stock-compensation expense. Also in Q2 of 2011, we had an impact from currency, and a marginally higher tax rate compared to Q1 of 2011.

Sales rep headcount increased by 6 heads compared to the prior quarter, with a number of midmarket reps being added in the middle to late part of the quarter. Since forming the midmarket group a little more than a year ago, the group has doubled in size, based on revenue. As we continue to grow the business overall, revenue outside the United States represents approximately 24% of our total revenue.

We ended the quarter with a cash balance of $74.4 million, as compared to $52.8 million as of June 30, 2010. In the quarter, we had strong cash flow from operations, and also had significant cash flows related to option exercises and a decrease in receivables.

Accounts receivable decreased as compared to the first quarter from $19.6 million to $17.7 million, or a DSO metric of 51 days compared to 58 days in Q1 of 2011. 51 days is within our target range given the higher proportion of business with larger accounts, and the level of pay-for-performance revenue that impacts AR disproportionately to revenue. We continue to focus resources on maintaining DSOs in our target range of 45 to 55 days, which is better than nearly all the comparable public SaaS leaders that we track.

Following is our updated guidance. We are giving our view of the third quarter for the first time, and we affirm our prior full-year guidance, which remains unchanged from the guidance given during the Q1 call. In the third quarter, we expect to see revenue between $34 million and $34.5 million. We expect EBITDA between $0.14 and $0.16 per share. Adjusted net income between $0.07 and $0.09 per share, and GAAP EPS between $0.04 and $0.06 per share, and a fully diluted share count of approximately $56.5 million for the quarter.

Our full-year guidance is unchanged from the prior quarter, with revenue of $133 million to $136 million, and EBITDA of $0.60 to $0.63 per share; adjusted net income of $0.33 to $0.36 per share; GAAP EPS of between $0.20 and $0.22 per share; and a fully diluted share count of approximately 57 million. For the full year, the effective tax rate is expected to be about approximately 38%, with a cash tax rate of the same.

Capital expenditures remain unchanged from our prior guidance at the $8 million level for the year, and we expect GAAP gross margin of about 73%, which corresponds to cash gross margin of about 4 points better, or about 77%.

We expect sales and marketing as a percentage of revenue at about 30% for the full year; G&A at about 14% for the full year. R&D is remaining consistent; we expect it to be about 15% of revenue for the full year. Full year depreciation, we expect to be $8 million. Roughly with full-year amortization of intangibles just above $1 million. And full-year stock compensation expense we expect to be approximately $7 million.

That covers the operational and revenue highlights. We'd now be happy to take any questions that you may have. Operator?

(Operator Instructions)

We'll pause for just a moment to compile the Q&A roster. Your first question comes from Nathan Schneiderman.

Hi, Rob and Dan. Thanks very much for taking my questions. That was a really, really great rebound in bookings and a nice strong number there.

Rob, in the past you've described a changing dynamic with the Enterprise bookings, that there's a lot of business that you signed that's not part of this number. So I was hoping you could go over that again.

What, actually, is not included in this Enterprise bookings number? And then if you look at that portion of the business signed, how did that fair relative to last quarter and year-over-year, maybe, on a percentage basis? Just give us some sense of what's outside this Enterprise bookings number. Thanks.

Outside the Enterprise bookings number, when we talk about bookings we don't include the consumer group. It's primarily transaction based. We also exclude the small business team. While it's quite steady and the attrition is fairly low, we don't sign long-term contracts with these customers. We don't include the pay-per-performance portion in our bookings metric.

So those are the three primary things that we don't include from a bookings perspective. I think there was another part of the question, Nate, that I --?

Well, related to that, if you look at that combination, how did that fair from a business- signed basis? Was that up meaningfully on a sequential and year-over-year basis? Anything you can say about that?

Nothing specifically that I can say about that other than it's fairly consistent with the way we looked at the business in the past.

Okay. You gave us a number of 23 for the new Enterprise deals, the combination of Enterprise and midmarket. Just to clarify, I think -- correct me if I'm wrong, but in the past, I believe we were just looking at a pure Enterprise number.

So if you were to include midmarket in the historicals, what would last quarter have been and the year ago? I mean, if you have the last four quarters, that would help. But maybe, at a minimum, last quarter and the year-over-year.

I don't have the last quarter, but maybe I should clarify something, Nate. As far as the new customer count, it included midmarket and Enterprise deals.

Oh, so that hasn't that changed? Okay. And then, final question area for you and then I'll drop. I understand that you absorbed some one-time expenses related to the exec hires and we had a surge in G&A about $1.3 million sequential by my calculation.

How much of the spike in G&A was related to this? How much of it was one time in nature that should effectively kind of bleed off next quarter? Thanks very much.

Yes, there was 1.4 sequential growth quarter over quarter in G&A. And roughly $600,000 or $700,000 of that was about one time that we wouldn't expect to recur. As Rob mentioned, we hired several senior executives and we hold that recruiting cost in G&A. We don't push it out to the other areas.

So it's not that all those heads were hired in G&A, it's that -- where we hold a good portion of that cost. There were stock compensation costs associated with those employees as well. And so those are the biggest drivers. Thanks for the call.

Your next question comes from Brad Whitt.

Hey, guys, thanks for taking my questions. Rob, I was wondering if you could maybe help us understand what gives you confidence in the sequential ramps that we're looking for in the second half of the year? I know seasonally you've got the pay-for- performance. But can you talk about last year versus this year and whether you have more pay-for-performance? And just kind of give us an idea of what gives you confidence there?

Yes, I mean, you know, the business seems to be trending like we normally see. And we had a very strong, obviously, bookings quarter, and the rest of the business is -- like pay-for-performance looks healthy.

And so far we feel really confident with it. So what we're seeing right now we feel good about, even though there's a ramp up, obviously there's a step up in Q3 and Q4. We feel good about that right now.

In the bookings, you are impressive this quarter. Were there any unusually large upsales or anything in that that skewed that higher?

No. Unlike Q4, if you remember, we had one -- we had one big upsell with the Telco. This one was just made up of a series of new deals and upsales, so there actually wasn't one specific deal that carried it where it did, unlike Q4 where we had that $6.1 million one. So it's just -- it's a mix of just the business accelerating.

Okay, good, that's very helpful. Finally, what's the update on the New York headquarters? Are you guys settled and how should we think about CapEx next couple quarters?

Well, we're settled -- we're getting settled in the space. We have been here for about 2.5 months. All the employees love it. It's a beautiful space and really represents our culture in a good way.

As far as capital expenditure is concerned, we reaffirmed that we're going to spend about $8 million this year. And we spent roughly $4 million year-to-date, but that's not all on fitting out space. We're still investing in our data centers in Europe as well. So we'll have about $8 million total capital expense in 2000 -- in 2011.

Okay, great. Thanks for taking my questions, guys.

Your next question comes from Mike Latimore.

Thanks. In terms of the -- I know you've been testing -- at least with the one large customer, some pay-for-performance options. How is that testing going? Or are you at testing at this point?

Yes, we continue -- we have a dozen --over a dozen pay-for-performance customers. And we're continuing to do our tests and expand with some of them, so nothing specific to report.

How about pay-for-performance -- looks like it was strong at the end of this quarter. Do you think that will grow with the overall business through the rest of the year or -- you know, faster or slower?

Yes, usually it starts to pick up. Obviously Q3 we start to get a pickup towards the end, and then, obviously, at the beginning of Q4 into the holiday season. So, we expect to get the same sort of trend happening this year. So, so far so good.

There has been some expansion opportunities in some of the current pay-for-performance accounts and they are -- they feel, overall, like we'll get to our targets this year.

And then just -- you had -- you mentioned the attrition numbers. Have they been relatively consistent this quarter so far with the second quarter?

Yes. Yes, they have been consistent. I believe it's a little early, but the delivery of the APIs and some of the new products around the platform, and obviously we're not giving a tremendous amount of detail on it yet until it's meaningful on their own with revenue. But they have started to contribute to deals being upsold to winning deals, and so -- and making our customers sticky.

So it's interesting, I guess, where we thought there was a segment of APIs themselves as a revenue stream, when we look at the revenue, it's actually being used also as just a combination of upselling customers or expanding them. Using them as a driver to expand them, let's say, into mobile or social or an integration into their own applications. So there's some interesting stuff that we didn't really anticipate with the APIs and I think that's helping to drive some of that attrition number.

Great. Thanks a lot. Nice quarter.

Your next question comes from Craig Nankervis.

Yes, thanks very much. I echo the congratulations on a nice quarter. I wonder, Rob, maybe if -- could you review what new LivePerson products are currently generating revenue or generated revenue in Q2? Can you just quickly go over what's actually available and what's still in beta?

Sure. Once again, there's very revenue impact right now from the actual new product because they've just started. So the things that are generating revenue is we have a product called ADE. Which is the ability to take a customer's third party data, let's say their CRM data, and inject it into our system and then use that to drive more interactions because we can understand more and we have a better set of data.

So that's been generating revenue. It's a small amount, but it's growing nicely. But it's just started.

We have LP Insights, which is the transcript analysis tool which has gone live and is being rolled out. But once again, the revenue was minimal or zero in the quarter, but it's going to start to generate some revenue.

And then the beta -- there's some paid betas with LP Marketer out there. And then we've got the APIs that are third-party APIs that -- or third-party products. We have about 15 right now companies that have developed partner applications. They are being used by our customers today primarily around mobile and social space.

And then, we saw about a little over 10 customers that have used the APIs to develop applications within their own development groups. They pay us for those APIs, so in order to get access to the APIs, they're paying anywhere between $50, if they're a small customer, to $1000 a month for the access to the API. And then we do a revenue share, but once again everything is fairly minimal, because we just started.

We just launched the stuff in Q1. So what the goal is really toward year end, is to get the pipelines built on the sales side so we can start to potentially break out the revenues and do some forecasting for you guys to say here is chat, here's LP Marketer, here's APIs and here is two or three other products. But right now the thing that we think is important is that the customers are actually buying them. They're paying for them and we just got started, which is a good sign.

Right. Thank you for that.

Also wondered if you could maybe comment a little more on your expanding leadership team? You talked about potentially expanding your services, offering maybe if you could give an example or two of what you might have in mind there? On the head of platform, can you maybe contrast what that person is doing versus what I thought Mark Trang was doing and stuff like that?

Sure. So Mark Trang owns the actual developers network. So he goes out and he has built and his team finds new developers. And we actually did two separate conferences back in Q1; one in Israel and one in California, where we had 100 to 200 developers show up.

And he's giving them access to the APIs and supporting them in developing the application. He gotten about 1400 developers to sign up for the -- in the developer platform and 15 developers have actually developed applications. That's one side.

The other side of his team is supporting the sales team as they go out. So when they're out there selling and a customer wants a mobile app, his team also supports bringing the partner and the developer with the sales guy and they'll go do the pitch. So he is working really customer facing and developer facing.

The person who we hired on the head of platform, she was the cofounder of an ad trading, actually, company. Her expertise is really around products. What she's doing is taking all the products that we're developing and all the intelligence and data layers and stitching them together now. So we can go out with a unified platform where our customers will log and get access to all these different applications on a single platform. That's really what she's focused on, the data intelligence, how the applications plug in to the data intelligence. And then all the reporting infrastructure behind that rolls into her now, so it's a fairly large role.

I guess, lastly, on your hiring, versus plan, sounds like you caught up some in Q2. Do you think it's likely you reach your full year headcount goal as you sit here today? Or do you think it's more likely you follow the short? How do you see things playing out the second half?

Yes, I think we're trying to get to our target headcount goal. It's always hard to hire good people and we take our time.

But we really want to execute on the strategy and get these new products to market. I guess we get more confidence as an organization as we start to see these products being sold and customers buying them it gives us more confidence to continue on with the head-count plan that we have in place today.

Thanks very much.

Your next question comes from Jon Hickman.

Hello. Hi, Rob.

Hey, John.

Two questions real quick. I understand how you're getting paid on the APIs, but could you explain how you get paid on the LP Marketer side of things?

We haven't put out the -- publicly yet because it's still in beta on how we're going to charge for LP Marketer. And It most likely will be on a per-usage basis, where every time a customer wants to serve a piece of content that we get a certain dollar amount for that or on a per thousand basis, like an advertising model. But as we go to the betas, we're really working through also the pricing model with our customers.

Okay. And then, one more question. As you repair these new products and work through these new intelligence set of products, are you -- what are you doing on the -- or do you have in place all the analytics that you need to really make these things come?

Yes, it's a place -- especially if we look on just the pure platform side, it's a place in which we continue to invest, and we need to expand in. Especially as we get different applications needed that different set of analytics. The good thing is we obviously have the platform that's driving for chat the realtime analytics and that's a place where we need to make continued investments in.

That and the data structure, because it's a lot of data and we need to be able to manage that data in a certain way so these other applications can handle it and use that data in realtime. And I think that's really the strength of the Company.

There are data analytics companies that do website analysis and it just -- they take the data in and they provide reporting, but it's not in realtime. And what we've been able to do, which makes us very unique in the world, is in realtime process consumer behavior on a website, do a decision, and then use the realtime analytics to drive an action, like a chat and now a coupon, a mobile app, social networking integration. That's kind of the really cool stuff that we're doing that is needed for realtime.

Okay. I'm sorry. If I could ask one more? Are you using LP Marketer yourself on your expert sites?

Yes, it's there. You can get -- you'll get a coupon for chatting with an expert. It started in the Alpha in Q4 and they continue to use it over there, and we continue to get feedback. They're obviously -- they became part of the beta program.

What's interesting about the beta program is we just -- the most important thing is to expand it to enough customers in enough different use cases for us to get the feedback to really hone in the products so we can get it out in the market in the later half of the year.

Could you share -- is it working? Are you seeing lift there?

Yes. So far, from what we've seen, we've seen positive results. We saw positive results on our site. We've seen positive results on some of these beta sites.

I think the interesting thing is the use cases are not always -- we've gotten to be called the coupon app. But internally the product owner really looks at it as a content app. So in some cases we're not delivering an actionable coupon, we just deliver content.

It's a really easy way for a marketer to create content and generate it and put it on the website without having to go to IT or all of the things that they need to do to get content changed on the website.

Thanks. Nice quarter.

Your next question comes from Jeff Van Rhee.

Great, thanks. Several questions for you guys. First, along the lines of LP Marketer and the Transcript Analysis products, particularly the LP Marketer, as you've gone through the beta process. Based on what you've learned, what are the adjustments it's driven in terms of your strategy for the product?

Also along those lines, can you talk about the go- to-market differences, primarily for LP but also for Transcript, around your point of contact, sales pitch, competition? Just a little more color on what you've learned so far on how you're going to go to market with those?

Yes, it's -- the first step is really the sales force has been taught a -- really a new way to strategically sell that was developed by one of the sales leaders who runs the -- gentleman who runs Enterprise sales. That's really the thing that we needed to really make the change on is that the sales guys need to go in now and not just look at the chat opportunities, but look at these other opportunities. And we call customer connect, the customer lifecycle. And they need to map where do you -- where are you touching your customers and where can we apply mobile here and a coupon there or a content there and chat there, and that changes the conversation. That's really where the sales guys are and they're really the first line to making these products successful. And they're going out and doing that.

And then right now, we're getting the feedback on things like LP Marketer and the Insights product from our customers and making adjustments where we need to. Remember also, these products were really generated from our customers saying we'd like these things from you guys, or can you do something similar? And so a lot of this has been driven out of that.

The ADE product actually came from one of our professional services personnel in the Company who obviously works very closely with customers and realized there's a way to import their third party -- their data and we can maybe enhance the delivery of conversions. That's how it's sort of happening here now.

Okay. And, Dan, you mentioned currency impact in the quarter. Can you quantify that for me?

We don't give that number out, Jeff, but there -- it was an impact of the translation of the shekel and some UK pound.

Shekel to the pound, okay.

No, shekel to the dollar and UK pound to the dollar.

All right. And then, lastly, just -- maybe, guys, contrast the pipeline and its composition now versus the start of Q2?

Yes. It's -- do you mean Q1 where it was a little lower, or Q2?

No, no, no, Q2.

Yes, looking at the pipeline now, once again it looks like a normal business-as-usual year where we see our pipeline starting to expand. So far it's business as usual.

Okay, great. Nice quarter. Thanks.

(Operator Instructions).

No further questions. Thank you and we will see you on the Q3 call.

Thanks, everybody. Appreciate it.

Have a good one. Bye.

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