LivePerson Inc (LPSN) 2014 Q3 法說會逐字稿

Welcome to the Q3 2014 Financial Results Earnings call. On the call are LivePerson CFO, Dan Murphy, and LivePerson CEO, Robert LoCascio. I will now turn the call over to Dan Murphy. You may begin your conference.

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 materially from actual future events or results. These statements are made pursuant to the Safe Harbor Provision 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 economics, business, competitive, technological, regulatory, and other factors could cause the LivePerson 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 Relations section of our website.

With that, I'd like to turn the call over to Rob LoCascio.

Thanks Dan, and thanks, everyone, for joining us.

I'm very excited to report another strong quarter. This is our 49th consecutive quarter of growth.

We hit the high end or exceeded the guided ranges for revenue, earnings, and EBITDA in Q3. Bookings growth right now stands at 23% year-over-year, and we're seeing some good accelerations in bookings, at this time last year we were around 16% growth. So we're also seeing some very good uptake on the LiveEngage conversions, and usage posts to our customer event, Aspire, which I know many of you were at.

I feel like right now we're in a really good place when it comes to the overall strategy of the Company. It's becoming clearer every day that messaging, or what we call chat today, is going to win out over voice when it comes to how companies are communicating with their customers. And alone today, we have 24 million messages or chats happening on our platform per month.

So we're clearly dominating in this area of communication between company and consumer. And the consumer is also in the game saying we don't want to call anymore.

And last call, I spoke about Comcast how one of their consumers taped a call, posted it, and then 5 million people listened to it. And 60,000 articles have been written about the poor customer service that was done, so the consumers are saying we want something different. So the question is really about scale.

And the goal is really about attacking traditional voice, and moving more of that to our platform in the form of messaging. It's a simple and very focused effort.

With that, I'm excited to announce we're acquiring a company called ContactAtOnce! They have a leading real-time engagement platform, and today they do about 10 million chats through that platform a year. So in their vertical, they have a lot of interactions.

And we're excited about this because they bring some technology and really a strong team. They were founded in 2005, and they really focused on the automotive vertical. And today, they are the leader in the space.

So they have a very unique way in which they provide their platform. Basically how it works is more of a network play, in which they work with aggregators like let's say in the automotive it would be cars.com. And basically when a dealer is advertising on that platform, they're using the ContactAtOnce! system.

This would include Auto Trader and many other aggregator sites. So they have a relationship both with the aggregators, and with the actual individual dealers and the manufacturers. In the car industry, if you go to a manufacturer's website, they're going to really push you down to a dealer.

So they're able to aggregate all of those interactions, and then the give it to a single dealer. And that person is interacting with the consumer through one of those three areas.

They have a very good mobile capabilities, as you can imagine. If I'm a dealer and I'm working in a showroom, I'm maybe on the floor. But I can handle the chats through the mobile capabilities that they provide. So the routing, the attribution model, how they integrate is really I think a unique thing.

The automobile industry as a whole is a multi-billion dollar industry. Currently, they have about 13,000 out of 61,000 total dealers in the US and UK. When we look at each of the markets globally whether it's Australia, or Germany, or Brazil, every one of these markets acts the same way.

There's an aggregator, there's the dealers, and there's the manufacturer. So we can actually I think leverage a lot of what we do globally.

They've also started to work on other verticals. One of those verticals is real estate. And so you can imagine, same sort of model.

So when I'm, as a consumer searching for a home whether it's a rental property or buying a new house, I'm going to go to an aggregator website. And I usually don't go to Google, I go some place where all the listings are. And then I'm going to chat with either someone who works as the real estate agent, or if it's a new home I may chat with someone who is constructing that home.

So they are now moving into the real estate vertical, and we also see things like insurance. We have some big insurance companies, these are dealer networks. And basically, it would play into that area also.

So it's a very different way in which we provide our technology. It's very similar to our core about providing interactions between the consumer and the business. And it's just more about a different distribution model.

They have about 170 employees down in Atlanta. We have three founders who will be joining our team, John Hanger, Mark Hayes, and Scott Bogarts. And this acquisition will be accretive both on the top line and the bottom line.

So from an earnings perspective and from a top line growth perspective, their growth rate is a little bit above ours, it will be accretive. And when we do acquisitions like this, we think it's important to make these acquisitions accretive, and that's a focus of our Company being financially sound.

Going forward, we'll look at putting some of those capabilities onto the LiveEngage platform. It was on our roadmap in the future. Obviously, we're focused on more of the direct model, large enterprise customers, but we'll work with their development team in moving and developing some of their network capabilities onto our platform.

LiveEngage as a whole is seeing some really strong momentum. We had the first wave of mid market customers who went live in Q3, and we even put our first enterprise customer on. Which is ahead of our plan, which was supposed to be early next year.

So what's really continuing to drive that adoption is three things. The first thing is, we created a platform in which it's very easy to get up and running. It's very easy that if you're a large enterprise or even mid market, multiple users internally, whether it's marketing or sales or customer support can use the product very easily.

So it has a lot of, what we'll call, fictionalist capabilities. We put the power in the hands of all of those people, our predictive and intelligence capabilities, to target consumers on a website or mobile device or social. And it allows for also the integration of video voice chat and content into a single interface to deliver a digital engagement to social mobile web. So it's those three things that are got driving it, and we've built that to really scale.

And as you know, we started three years ago building LiveEngage. It came out a couple months ago, LiveEngage 2.

And when you look at the world that we're approaching, there are currently about 300 billion interactions that happen through call centers. Primarily through phone, and one 800. And that's the world we're going after.

So there's a big market. We've got a very scalable platform, and we continue to attack the market.

When we look at the verticals we go after, obviously telco is very big for us, hardware, software. And we've done quite well in the financial services arena.

When we look at today what's happening in financial services, we've signed some new ones. We have one of the biggest top three banks in the world we've signed out of the UK.

This bank is going to really bring together the opportunity of what happens in a branch, and also what happens online and bring that together through one engagement. And so we're very focused with them, especially with mobile, is bringing a consistent experience to their consumers.

We're going to be deploying globally, and this is a global deal. We're working in several regions around the world already to get them up and running, and that's a very exciting opportunity.

Also, we've just signed in Japan, Mizuho. It's one of the top 20 banks in the world, one of the largest banks in Japan. And their goal is to really replicate the branch experience, the really high touch branch experience, through LiveEngage.

And we're really on track in that region to really expand in Japan. They're our first large financial services. And with that, I think we'll be enrolling more financial services and then we're obviously also working on the telco space.

We have a couple partnerships there with Dentsu Razorfish, ISID [Evixia]. And they've helped with some of these opportunities with our customers today.

When we look at also some of the things that are happening on LiveEngage. In the mid market, we've seen some good stuff with one of the things we've got, we just signed one of the big car rental providers in North America.

They really wanted to use LiveEngage to -- they have a very complex way in which they're renting cars and their [bi-flow] process is very complicated. So they're really using LiveEngage to change how the consumer is going to convert and get content on the site.

We also just signed one of the largest news sites, where they have subscriptions online. And they really love LiveEngage because it's allowing to really to look at how operators are interacting with consumers in real-time. It's allowing to get all that reporting, and they're really focused on a great customer experience and increasing conversion rates.

We've had some good case studies with the mid market, we're seeing some stuff obviously in the enterprise already. So we're excited about that.

We continue to dominate in our cores of bank telco and hardware. As we laid out our strategy three years ago at LiveEngage, we're delivering on it. I think our competitors continue to be focused on the past.

We developed proactive chat seven years ago, and they're just catching up to that. Now we've moved on, and we've continued to take proactive chat and that became digital engagement. And we're really I think obviously going to lead that effort.

If you were at the Aspire event, you would have seen this. You would have seen some of our largest enterprise customers. And then at one point, all the big banks were together in a circle talking about digital engagement, and it was exciting to see them even talking together even though their competitors.

Because they're all trying to do the same thing. How do we create a better customer experience overall in the world? And with our help, they're able to do that strategically.

So finally, I want to highlight -- we have our event, CD NYC,it's our 14th year of doing it. We see about 3,500 families right before Thanksgiving. If you're in New York City, we always invite our shareholders and obviously our employees and partners, and people from the community come out and help.

It will be on November 25th at Chelsea Piers. You can go to CDNYC.org and you can sign up there, and we look forward to having you at that event.

We're seeing great momentum in the core business. We continue to see very positive market trends. And how consumers want to communicate through messaging.

I believe we're in a very optimal position with our LiveEngage platform. And we also have a really good team here toward delivering on that.

And once again, we're excited about the acquisition of ContactAtOnce! that plays into our core strengths of providing digital connections between consumers and brands. And their business model I think is unique enough to really allow us to expand, and get to where we want to on our growth rate.

So with that, I want to turn the call over to Dan to give you more information on the financials.

Thanks, Rob. We'll start with a review of the financial and operational highlights. I will then provide some color on our agreement to acquire ContactAtOnce!, and then update guidance including the acquisition of ContactAtOnce!.

For the third quarter of 2014, revenue and adjusted net income were at the high end of our guidance range. Our GAAP net loss per share and adjusted EBITDA exceeded our guidance range.

Revenue from our enterprise and mid market segment, which excludes small business, once again led overall growth climbing 23% over the third quarter of 2013. The revenue of $52.8 million in the third quarter increased 17% versus the same period last year.

B2B revenue was $48.8 million, and revenue from our consumer segment was $4 million. Bookings were $10.6 million in the third quarter of 2014, which is the second highest reported quarterly bookings in our history, following the $10.8 million reported in the second quarter of 2014. We think these results reflect the increase in the strategic nature of our conversations with customers.

Year-to-date, our bookings are up 23% versus the same period in 2013. In the third quarter, approximately 70% of our bookings came from existing customers, and 30% came from new customers. Our average deal size was $68,000 for all deals.

We include in our bookings metric new or incremental contractual commitments for the first year of the contractual relationship. And either new or existing customers for recurring subscription-based fees, but exclude from such amounts non-recurring fees such as one-time [identification] costs or one-time consulting fees.

The booking metric generally did not include to represent usage-based and/or pay for performance based contracts, month-to-month contracts, transaction-based services, or [subsequent] years of multi or contractual arrangements.

As in the past few quarters, during Q3, we continued to expand relationships with new and existing customers. In the third quarter of 2014, we had 51 customers spending more than $500,000 on an annualized basis. Which is up from 43 in the third quarter of 2013.

In addition, we have 29 customers spending more than $1 million annually, up from 25 in Q3 of 2013. We signed 156 deals during the quarter, including 41 new enterprise and mid market customers. The average deal size for new customers was $78,000, while the average for existing customers signing for an upsell or expanded business was $64,000.

Customer attrition for enterprise and mid market accounts averaged 1.5% per month for the second quarter, and is averaging 1% per month for the year. Small business attrition rates have averaged 1.1% per month in the third quarter.

The revenue breakdown by industry verticals was consistent with prior quarters. Telecommunications made up approximately 29%, financial services 26%, retail 17%, technology 16%, and other 12%. Revenue coming from outside the US was approximately 36% of total revenue, with the UK representing our largest revenue concentration outside of the US.

The third-quarter gross margins came in at 74.8%, which is up sequentially from Q2 of 2014's gross margin of 74.2%. The Company's cash balance was $87.1 million as of September 30, 2014, as compared to $71.2 million as of June 30, 2014. The increase is partly attributable to upfront cash payments of several customer contracts, in addition we had $2.3 million of capital expenditures in the quarter.

As part of it's previously announced stock repurchase program, the Company also spent approximately $800,000 during the third quarter of 2014 to repurchase shares of its common stock. Year-to-date in 2014, we have repurchased approximately 1.2 million shares.

Third-quarter accounts receivable came in at $32.4 million, and our DSO metric for the third quarter was 56 days. From a bottom line perspective, our third-quarter adjusted net income per share was $0.07, our GAAP net loss per share was $0.02, and adjusted EBITDA per share was $0.13. All of which were above or at the high end of our guidance range.

Let me now turn your attention to today's agreement to acquire ContactAtOnce!. We are very excited about this acquisition, as ContactAtOnce! aligns perfectly with our core vision of digital engagement and it expected to be accretive to our revenue growth rate and EPS in its first year. ContactAtOnce! is a cloud-based digital engagement solution [provided], that has a proven track record of penetrating large market verticals such as automotive, multi family, apartments, and home builder communities.

The Company's technology provides a distribution platform that is uniquely suited for verticals or businesses such as automotive dealers who list inventory and advertise it in online marketplaces. ConactAtOnce!'s patented protected software enables business (inaudible) and [bed] communication wants within the advertisements on these market places, as well as on their own websites. Thus providing a single platform to connect with online consumers wherever they research their future purchases.

Search providers, publishers and internet listing systems benefit by bundling ContactAtOnce!'s software into their advertising packages. Thereby increasing new generation and sales conversions from advertisers on their sites.

Under the merger agreement for the transaction, LivePerson will acquire all of the outstanding equity interest at ContactAtOnce! for an aggregate purchase price of $65 million. Consisting of approximately $43 million of cash, and $22 million of stock. ContactAtOnce! may also receive up to $5 million of contingent consideration subject to the achieved and certain targeted financial, strategic, and integration objectives and milestones.

That covers the highlights from the quarter. Now I'd like to discuss our financial expectations, providing some color on the ContactAtOnce! acquisition.

We are leading our guidance for 2014 revenue to a range of $208.5 million to $209.5 million from $204 million to $207 million. This update reflects a tightening of our 2014 organic revenue guidance toward the upper end of our previous issued range, and an expected conservation from ContactAtOnce! for the fourth quarter of 2014's [stump] period.

We expect ContactAtOnce! to be net neutral to adjusted earnings and adjusted EBITDA in the fourth quarter of 2014. But to negatively impact GAAP EPS by approximately $0.02 to $0.03 due to transaction costs and the amortization of intangibles.

Our full-year 2014 GAAP and adjusted EPS guidance is also impacted by a change in our tax rate. Absent the deal cost and tax effects, we would be on track to deliver within our previously guided 2014 ranges.

The line item guidance details are as follows, which include the impact of ContactAtOnce!. For Q4 2014, we expect revenue of $57 million to $58 million. Adjusted EBITDA of $0.08 to $0.10 per share.

Adjusted net income of $0.02 to $0.04 per share, and a GAAP net loss of $0.06 to $0.04 per share. With a fully diluted share count of approximately 66.2 million shares.

Current expectations for the full year of 2014 include the impact of ContactAtOnce!. We are increasing our revenue guidance as previously discussed to $208.5 million to $209.5 million from previous guidance of $204 million to $207 million. Adjusted EBITDA per share of $0.38 to $0.40 from previous guidance of $0.37 to $0.41.

Adjusted net income per share of $0.20 to $0.22 from previous guidance of $0.21 to $0.25. And GAAP net loss per share of $0.12 to $0.10 from previous guidance of $0.11 to $0.07. With a fully diluted share count of approximately 55.6 million shares.

Although full-year 2014 assumptions include amortization of purchased intangibles of approximately $5 million, stock compensation expense of approximately $13 million. Depreciation of approximately $10 million. An effective tax rate of a negative 20%, capital expenditures of approximately $11 million.

We expect gross margin on a GAAP basis to be approximately 75%. And as a reminder, our cost of goods sold continues to be sensitive to foreign currency fluctuations. Furthermore, as a percentage of revenue for the year and including the impact of ContactAtOnce!, we anticipate sales and marketing to be approximately 40%, G&A 19%, and R&D to be 19%.

As we look forward to 2015, we expect ContactAtOnce! to be accretive to our overall growth rate. The Company is on target to generate total revenue of approximately $24 million in 2014, which represents nearly 40% growth over 2013.

However, the 2014 growth rate includes the benefit of an acquisition. As such, we are targeting in the low 30% revenue growth rate for ContactAtOnce! in 2015. ContactAtOnce! is profitable, and produces margins modestly above our corporate average.

So to sum up the financial highlights of the quarter, LivePerson is on track to deliver organic revenue toward the higher end of previously issued and updated guidance for 2014. W delivered our second strongest bookings in our history, following the record bookings of second-quarter of 2014.

The enterprise and mid market vertical is growing at a greater than 20% range, and we are on track to meet full-year EBITDA forecast, and our EPS estimates are also on target. With the exception of the ContactAtOnce! deal costs and below the line change to our tax forecast. And then finally, we announced an acquisition that will add a unique network based technology platform to diversify and expand our end markets, and is expected to be accretive to our revenue growth rate and EPS.

With that I'll turn the call back over to the operator to take questions.

(Operator Instructions)

Jeff Stanley, Craig Hallum.

Thanks, guys. Rob, if you talk first on the LiveEngage side, as it's been out and you worked through some of the early hiccups on sales cycles and technology. And you got a bigger base of people that can see all the available features, can you just expand on what you've learned so far about the adoption as they see what's available? What are you learning about how quickly they're taking you up on the additional capabilities of the platform offers?

Yes. We're seeing good adoption with different features. There going live very quickly, so when we convert them over and there's a couple hundred on them right now, there's hundreds that we've already migrated. The LiveEngage 2 platform is the one that just came out which is the final version of it, so we keep iterating on that one.

So far so good. As a good take rate, I gave some examples. There's they like the operator consoles, they like the features, they like they can use all the mobile capabilities. So, so far so good.

Okay. And then the large UK bank you referenced just to be clear, that was a Q3 signing?

That's a Q3 signing, yes. That's a global deal, so we will be in all of their digital properties around the world, and branches and things like that.

Okay. And then the enterprise rollout of the new platform, last I had remembered it was going to be Q4 or end of year I think is how I had heard last, if I remember right. And you're looking in the earlier part of this year, just give a little color on the push out there, if I'm remembering that right.

We started like I said, I said that there's one -- we already put one enterprise customer on, but we were targeting early next year to put the start (inaudible). Because we're not going to do anything in Q4, because we got the holiday season and everything else where the enterprise locks down.

So pretty much, we're on target and we started to move some already. So we're pretty much on the target that we wanted to do

Got it. Okay. And just the last one, just to clarify, Dan, you mentioned the ContactAtOnce! what you're expecting for organic for 2015. What was organic 2014? You gave the number with acquisitions, but do you have the organic for it in 2014?

I don't, Jeff. But I can look up that information, but I don't have organic at my fingertips.

Okay, great. Thanks, nice quarter.

Thanks.

Mike Latimore.

Hello, this is Jim Fitzgerald sitting in for Mike Latimore. My first question is regarding LiveEngage 2.0. I'm wondering if you're seeing any current customers booking delays because they want to have access to that product?

No. They're basically going live if they want it. So we're moving them quickly on it, so there's no real delays in bookings or anything like that.

Okay, great. And then you expect to see operating margin leverage with the new platform. When do you see that effect hitting the bottom line?

We haven't given any guidance on that when that will happen. So far, we like where the margins are today.

Obviously with the new platform, we baked in a lot of pieces to it that will reduce the use of professional services and things that we think don't have value versus being very strategic with our customers. But as we roll out the LiveEngage platform broadly, then we'll give more color around that.

Okay, great. And then one more question from me. Could you comment on chat volume growth a little bit? Is that going at a consistent pace or maybe accelerating or slowing a little bit?

So from a chat volume growth perspective, we've actually seen growth over the last couple of quarters -- actually it's been consistent growth over the last couple of years in chat growth. And we do a couple of different measurements.

So as Rob talked about, greater than 24 million chats. And with the acquisition of ContactAtOnce!, they will add roughly another 10 million interactions per year from a chat perspective as well. So we've seen good growth in the business.

Okay, great. Thank you.

Brian Schwartz, Oppenheimer.

Hello, this is Julian Serafini in for Brian Schwartz. I had one question I wanted to ask you on pricing specifically. So I believe you introduced some new pricing earlier this year, you have a new pricing model.

I want to understand if you started migrating the base over to that new model, or they are all migrated already? And can you talk a little bit about how this is has been received and if that's had any impacts against some on customers who have converted pricing?

So we started rolling out the pricing as of the end of last year. And no, not all the customers are converted over to the new pricing model, but as they come up for renewals or are looking for upsells we are introducing that pricing model to them.

As far as the second half of the question, it's been accepted by customers. It's allowing us to roll out the platform and all our products, and makes it an easier discussion of, here's our platform or here's what we can offer, and it's about engagements and how they can use those engagement to best effect their business. So it's not only chat but it's content, click to call and other components that we have on the platform.

Okay, thanks. And I had one more question too. And back to Aspire, you talked a little bit about on the mobile. You were doing some progress there with mobile chat. I just want to know if you could give us an update against [napacy] adoption that you're seeing? Are you expecting in 2015, are people starting to use the product, and how that's going?

Yes, we basically grew mobile from zero to about 4% or 5% of our total interactions today on the platform. So it's where the focus is of the business in many ways, because our customers are going a lot into the mobile space, whether they have their own mobile apps they can introduce chat into it.

With our APIs or if someone enters the website on a mobile device, we have a different type of interface that they will use. So mobile for us is a very important part of our strategy, and we continue to focus on it because our customers are there.

Okay, thank you.

Shyam Patel with Wedbush Securities.

Hello there. Can you hear me?

Yes.

This is Andy Chang in for Shyam. I just have a question on how should we feel about the current cash on the balance sheet post the ContactAtOnce! deal?

We feel good. We have $87 million on the balance sheet at the end of the third quarter, we used about $43 million in the acquisition. So we still have north of $40 million on the balance sheet, and we've been generating cash. So we feel comfortable with the amount of cash on the balance sheet.

Great. And I know you are not guiding to it next year, but what kind of baseline growth do think your bookings year-to-date such as for the baseline growth for next year?

We're not guiding for 2015. We did give some insight into ContactAtOnce!, and what we think it will be maybe for 2015. But right now, we're just focused on 2014 and closing out the year strong, and our bookings so far year-to-date our 23% up over the same period last year. So it's heads down, and focusing on Q4.

Okay. And lastly, I just saw it. Can you just talk about your small business segment, and how changes you've made there are impacting the business?

So yes, we've talked about the small business segment on the past couple of calls. We need a little bit of time to get going in the right direction, but we're putting in a great foundation around our small business and acquiring customers online using different methods to look for high volume acquisition of customers. And so we made a management change there a couple quarters back, and we expect the small business to lay that foundation and move forward in 2015.

Great. Thanks very much.

Jon Hickman.

Hello. Can you hear me okay?

Yes.

By my calculations, the number of shares for the acquisition is roughly 16 million. Is that in the ballpark?

The number of shares is what, I'm sorry, John?

16 million?

No. We get about the -- the acquisition was $43 million in cash, and $22 million in stock. So our stock price is trading somewhere in the neighborhood of $13 to $14. So it's not 16 million shares, it's actually significantly less than that.

I'm sorry, I got the decimal place wrong. It should be 1.6 million.

In that neighborhood.

Okay. Thanks. And then could you -- were there any acquisition related expenses in Q3?

There was no acquisition expenses in Q3. We recognized all the acquisition expenses in conjunction with the deal, and we talked about the $0.02 to $0.03 impact due to deal costs and the amortization of intangibles associated the deal. That will happen in Q4.

Okay. And then one last question. On the competition front, are you seeing anything new or different? Anybody emerging, anybody going away?

No, it's the usual set of competitors. Obviously, Oracle Bond right now and some other companies in the last couple years, and we don't see them as much the companies they acquired. It's sort of nothing really has changed in the competitive set.

We continue to obviously I think [fives] is picking up much larger customers banks in the quarter. We continue to really lead and dominate in our field.

Okay, thank you. Nice quarter.

Thank you.

Thanks, John.

Michael Nemeroff, Credit Suisse.

Hello?

Michael Nemeroff, your line is open.

All right, operator, maybe you should go to the next call. It sounds like he got disconnected.

(Operator Instructions)

Jeff Stanley, Craig Hallum.

Just a couple follow-ups. Dane, you mentioned the tax -- there were two things that accounted for the EPS shortfall relative to the pro forma consensus. One was tax, just what is the -- I don't think I caught it. What should we assume tax rate Q4?

A negative 20%. So although we're at a loss, we're actually going to have a tax liability for the year for a couple of different reasons. One is because of option exercises, and the second is we've created a profit a little faster than we expected outside the United States. So we'd be paying taxes there as well.

Okay. And then, Rob, on the pipeline, can you talk about the characteristics? Certainly our sense from some of the fieldwork is the engagements you're getting into are much deeper and much broader. Does the pipeline clearly reflect that trend in the sense of significantly larger deals? Is that what you're seeing populating here? If you can expand on that.

Yes. When we look at some of stuff other that the bookings, obviously we're getting much larger deals. The existing customers, we're seeing much larger deals. So as we mentioned, I think it was about a year ago, we even divide up the sales force to be a -- we have a global sales group which is focusing on really global strategics, and then obviously there's the enterprise group.

So even bifurcated it in the sales teams because we see that. It's really the world is changing. On an average, let's take and average financial institution.

They may spend $1 billion to $3 billion a year on answering phone calls. And they know their consumers are messaging and chatting, and those consumers wanted different ways besides making a phone call. It's also very costly.

So they're very aggressive now. Our customers, looking at how are you guys going to help us really move it? Where in the past, we were always focused on just convincing them that chat is a channel of communication.

And now they're just like, we got it, help us move it. And that's why the LiveEngage platform is always part of the strategy, because we can scale as a different rate with it.

We've signed larger deals now, are current existing customers are growing. It gets a little chunkier when we're selling on the booking side sometimes, but it's all about the big deals. Those are the ones that are really going to change our Company and the world we live in, so that's what we're focused on.

Makes sense. Last one, I didn't hear, Dan, did you give the pay-for-performance number?

I did not Jeff. Pay-for-performance was about 9% of overall revenue.

Okay, great. Thank you.

Michael Nemeroff, Credit Suisse.

Hey, guys. Sorry about before. Thanks for taking my questions.

I've been jumping around from a couple of calls, so I apologize if this was answered already. I'm curious why an acquisition now.

You've spent a couple of years getting a LiveEngage platform to the point where it's that you're starting to roll it out, signed some new big enterprise customers. Why would you want to do a technology integration now as you're on the cusp of a pretty major product release and a platform?

So there's not really a technology integration. We're going to leave their platform, it's really a distribution play. So we're focused on scale.

How do we scale our own distribution, obviously we've got our platform. What they have is they've got a really unique way to scale when it comes to networks. And so we're seeing -- let's look at the car industry or the real estate industry or the insurance industry.

These are areas where we haven't had too much success because they're really focused on these networks of agents. So they have more or less, it's not as much a technology play where we've got to do the integrations now, and we've got to mess with what we've created. It's more of we get more interactions on our platform that are profitable to us.

They're growing at a higher rate. And so we get to enter markets that we think are really exciting and interesting, and we get it with a very solid [view]. So that's why we want to do it, but we're not looking at now we've got to put the platforms together and we've got to stop what we do.

We are still focused here at getting our customers onto LiveEngage and expanding, they're focused on building out those network plays. And together I think we've got a -- it's obviously accretive, both top line and bottom line, I think we've good got a good one plus one equals three.

So I don't see any disturbance. We would not touch it if we thought it was going to disturb what we know we have to do, which is get our platform out and scale it.

So just to be clear, Rob, this is a separate platform that you're planning to run separately on a go forward basis? And there's not going to be an integration of their technology into your LiveEngage platform at some point in time in the near future?

Not today. And really what's got to get integrated is not the communication pieces. It's really the algorithms about the network. And so what we really would have to put into our platform is because it's -- they're using chat, they're using mobile. It's very similar in that case.

The part that we would have to bring in or program is really how do you do the distribution? So how does one that chats on lives an Auto Trader, in the Ford website, and an advertisement? How does that all get aggregated into a single interface and get routed to a business?

And so they have some algorithms that are really interesting that we would then built into our platform. But the rest of it it's chat, and it's mobile chat. And so those are the things that we have.

So right now, we don't really need to bring them together. We will in the future, but right now I don't really want to go and jam those platforms together. We just look to build their algorithms on top of ours.

Which is something that we wanted to do in the future when we're thinking about the network play. The network play is interesting. We signed a very large insurance company, and they've got all these agents.

What we also really what we want to do is create that network for them. And that would be a phase 2, so we there's some learnings that we'll get from them.

But today, we're going to let them run independent. They're focused on a different distribution model, and then we'll start to bring the technology together over time. But we're not going to disturb what we have in our pipeline today, we don't need to.

And forgive me if you went through this. Did you give any sense of expectations or set expectations for 2015, and the growth rate that you're looking for both on a revenue basis and maybe on a bookings basis?

No we didn't give guidance, Michael, we gave guidance or at least guidance on ContactAtOnce!. So what we expect is ContactAtOnce! to grow in the 30% range in 2015. But we didn't give guidance for LivePerson.

So for LivePerson, if I may, now that we've got a public forum. Are you expecting the growth rate to accelerate on an organic basis as a result of the release of the new platform? And in earnest to a larger number of enterprise customers in 2015? Is that how we should think about the business?

Our goal is to obviously accelerate, our bookings have accelerated. So up to about 23% growth year-over-year. It's obviously bookings translate into recognize revenue.

It's up over 16% the year before. So that's the focus.

You're at the line of gates that's inspired our customers and how they're engaged with our business, so obviously our focus is to grow those growth rates like we did this year. And continue those growth rates, and then once again having ContactAtOnce! as part of that is accretive to us anyway. So they won't take our growth rates down.

Rob, can you tell us what your conversations have been like with some of the existing enterprise customers? I know going to the conference a couple of weeks ago, really interesting to see the customer reactions to the new platform which were quite strong. I'm curious, the conversations coming out of that, the willingness of the customers to adopt a relatively new platform.

And then also from the revenue side, there is a little bit of a change in how you're going to bill the customers for using the product. I'm curious what the initial feedback has been from the customers with some of those initial conversations that you've had.

Yes. The revenue model and changing it into interactions has been received very positively, even before we put people on LiveEngage we started to move them into that business model. It aligns with what they want. They want to basically break everything down to what's the cost per interaction, or what type of value does every interaction bring.

When I look at the overall opportunity, I literally have gestated with one of our large financial institutions, and they have over 100 million interactions a year that they have with their consumers. And it's costs. And this costs billions of dollars.

So they're trying to figure out how do we take that hundred million and how do we move that onto your platform? Because we're more leveragable, and we're creating a better experience. Already what we do with them, we have higher net promoter scores, we've got a higher conversion rates of people who fill out applications.

But the conversations we're having now is not about what's happening just on the website either. It's what's happening on mobile, but what's happening off-line. What's happening when somebody calls off a credit card? How do they go through your platform you?

You can see it at LiveEngage that the conversations are -- they're big conversations. The platform is out, and it's working, and it's doing great.

So we don't have any technology hitches in front of us. Now it's just continue on sales and marketing execution, which we have a lot of capacity. So I think we still have a lot of room to grow, even with the cost structure we have.

Dan, did you give any indication of what you expect the sales headcount to grow over the next couple of quarters? Did you add any this quarter, and how should we think about that on a go forward basis?

From enterprise mid market perspective, I didn't give any numbers. But we're at about 52, or we ended the third quarter at about 52. Enterprise/mid market quota carrying sales people.

We think, as we've talked about in the past, we've got capacity in the sales organization. We'll continue to add, but maybe not at the aggressive rate that we've added in the past.

But we think there's a good opportunity in front of us. We're tying to bring on the right people that can sell at that strategic level that we've been talking about.

All right. Fair enough. Thanks for taking my questions. Nice quarter.

Thanks, Michael.

There are no further questions at this time. That concludes today's Q3 2014 financial results earnings call.

Thank you, everyone, and we look forward to seeing you on the next quarter. Thank you.