538146AB7 Filings — Liveperson Inc

538146AB7 Filings — Liveperson Inc - FilingSpy

10-Q · Quarter ended Jun 30, 2026 · SEC filing ↗

Summary not available yet

The original filing sections are available below.

Original filing text

Management's Discussion and Analysis

You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors.” Merger Agreement On April 21, 2026, LivePerson, SoundHound AI, Inc. (“SoundHound”) and Lightspeed Merger Sub, Inc., an indirect wholly owned subsidiary of SoundHound (“Merger Sub I”) entered into a Merger Agreement (the “Original Merger Agreement”), which was amended and restated on July 2, 2026, by the Amended and Restated Merger Agreement (the “Amended and Restated Merger Agreement”), by and among LivePerson, SoundHound, Merger Sub I and Lightspeed Merger Sub II Inc., an indirect wholly owned subsidiary of SoundHound (“Merger Sub II”), under which, upon the terms and subject to the conditions set forth therein, Merger Sub I will be merged with and into LivePerson (the “First Merger”), with LivePerson surviving the First Merger as an indirect, wholly owned subsidiary of SoundHound and, immediately following the First Merger, Merger Sub II will be merged with and into LivePerson (the “Second Merger,” and together with the First Merger, the “Mergers”), with LivePerson surviving the Second Merger as an indirect, wholly owned subsidiary of SoundHound. See Note 1 – Description of Business and Basis of Presentation under Item 1 of this Quarterly Report on Form 10-Q for additional information about the Amended and Restated Merger Agreement. Revenue Retention and Current Trends We continue to observe slower than anticipated renewals and new business bookings, primarily driven by customer uncertainty regarding our financial stability as well as broader macroeconomic and industry factors extending enterprise buying cycles, including for high-value AI solutions. Because we recognize revenue from subscriptions over the term of the customer contract, declines in our business may not be immediately reflected in our operating results, but could negatively impact the Company’s revenue on a long-term basis. Critical Accounting Policies and Estimates Our condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). As such, we are required to make certain estimates, judgments and assumptions that management believes are reasonable based upon the information available. We base these estimates on our historical experience, future expectations and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments that may not be readily apparent from other sources. We evaluate these estimates on an annual basis. Actual results could differ from those estimates under different assumptions or conditions, and any differences could be material. Except as described below, there have been no significant changes in our critical accounting policies and estimates during the three and six months ended June 30, 2026, as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 16, 2026. In connection with the interim goodwill impairment test performed as of June 30, 2026, we determined the fair value of our reporting unit using a direct, market-based approach, rather than the income and market approaches used in our annual test as of October 1, 2025 and interim test on December 31, 2025, which required significant judgment regarding forecasted future revenues, EBITDA, discount rates, and selected marketplace multiples of comparable public companies. The approach used as of June 30, 2026 estimates fair value on a total invested capital basis using (i) the potential settlement value of the outstanding 2026 Notes, (ii) the market capitalization of LivePerson common stock, which has an implied discount from the Original Merger Agreement purchase price (subject to the $7.00 - $12.00 per share collar), and (iii) the fair value of LivePerson’s outstanding debt based on the purchase price in the Original Merger Agreement (subject to the collar), adjusted based on the closing price of SoundHound’s Common Stock as of June 30, 2026, as described further in Note 5. We determined 38 this approach to be the most reliable indicator of fair value given the existence of the Original Merger Agreement negotiated with an unaffiliated third party, which we believe provides more direct evidence of fair value than internally developed cash flow forecasts and selected market multiples. This change reflects the evidence available as of the current measurement date and does not represent a change in the Company’s goodwill impairment testing methodology. However, it reduces the degree of internally developed judgment involved in the estimate relative to our prior tests, while introducing dependency on factors outside our control, including the trading prices of LivePerson and SoundHound common stock, the timing and consummation of the Mergers, and the terms of the Original Merger Agreement and Notes Restructuring Agreement, including the $7.00–$12.00 per share collar. Because the fair value of our reporting unit as of June 30, 2026 approximated its carrying value after giving effect to the impairment charge described in Note 5, future declines in LivePerson’s or SoundHound’s stock price, adverse changes to or termination of the Amended and Restated Merger Agreement or Notes Restructuring Agreement, or increases in the carrying value of our reporting unit’s net assets could result in additional goodwill impairment charges, which could be material to our consolidated financial statements. Recently Issued Accounting Standards See Note 1 – Description of Business and Basis of Presentation under Item 1 of this Quarterly Report on Form 10-Q for additional information about recent accounting guidance. Results of Operations We enable brands to leverage the Conversational Cloud’s sophisticated intelligence engine to connect with consumers through an integrated suite of mobile and online business messaging technologies. Our platform enables businesses to have conversations with millions of consumers as personally as they would with one consumer. Comparison of the Three and Six Months Ended June 30, 2026 and June 30, 2025 The following tables set forth our results of operations for the periods presented and as a percentage of our revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results. Revenue Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Revenue $ 52,496 $ 59,600 $ (7,104) (12) % $ 109,452 $ 124,300 $ (14,848) (12) % Revenue decreased by 12% to $52.5 million and by 12% to $109.5 million for the three and six months ended June 30, 2026, respectively, from $59.6 million and $124.3 million for the comparable periods in 2025. This decrease in revenue is due to a decrease in hosted services of $4.7 million and $10.5 million primarily driven by customer cancellations and downsells and a decrease in professional services of $2.4 million and $4.4 million for the three and six months ended June 30, 2026, respectively. 39 Cost of Revenue (exclusive of depreciation and amortization shown separately below) Cost of revenue consists of compensation costs relating to employees who provide customer service to our customers, compensation costs relating to our network support staff, outside labor provider costs, the cost of supporting our server and network infrastructure, and allocated occupancy costs and related overhead. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Cost of revenue $ 15,786 $ 18,038 $ (2,252) (12) % $ 31,311 $ 36,256 $ (4,945) (14) % Percentage of total revenue 30 % 30 % 29 % 29 % Headcount (at period end) 147 176 (16) % 147 176 (16) % Cost of revenue decreased by 12% to $15.8 million for the three months ended June 30, 2026 from $18.0 million for the comparable period in 2025. This decrease in expense is primarily attributable to a decrease in software and hosting expenses of $1.4 million, a decrease in business services and outsourced expenses of $0.6 million, and a decrease in salary, stock-based compensation and employee-related expenses of $0.3 million due to restructuring activities. Cost of revenue decreased by 14% to $31.3 million for the six months ended June 30, 2026 from $36.3 million for the comparable period in 2025. This decrease in expense is primarily attributable to a decrease in software and hosting expenses of $2.6 million, a decrease in business services and outsourced expenses of $1.7 million, and a decrease in salary, stock-based compensation and employee-related expenses of $0.7 million due to restructuring activities. Sales and Marketing Sales and marketing expenses consist of compensation and related expenses for sales and marketing personnel, as well as advertising, marketing events, public relations, trade show exhibit expenses and allocated occupancy costs and related overhead. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Sales and marketing $ 13,759 $ 19,888 $ (6,129) (31) % $ 27,529 $ 43,373 $ (15,844) (37) % Percentage of total revenue 26 % 33 % 25 % 35 % Headcount (at period end) 128 221 (42) % 128 221 (42) % Sales and marketing expenses decreased by 31% to $13.8 million for the three months ended June 30, 2026 from $19.9 million for the comparable period in 2025. This decrease was primarily attributable to a decrease in salary, stock-based compensation expense and employee-related expenses of $6.1 million due to restructuring activities, and a decrease in software and hosting expenses of $0.5 million, partially offset by an increase in business services and outsourced expenses of $0.4 million. Sales and marketing expenses decreased by 37% to $27.5 million for the six months ended June 30, 2026 from $43.4 million for the comparable period in 2025. This decrease was primarily attributable to a decrease in salary, stock-based compensation expense and employee-related expenses of $13.8 million due to restructuring activities, a decrease in marketing expenses of $1.0 million, a decrease in software and hosting expenses of $0.9 million, and a decrease in business services and outsourced expenses of $0.3 million. 40 General and Administrative Our general and administrative expenses consist of compensation and related expenses for executive, accounting, legal, human resources and administrative personnel, professional fees and other general corporate expenses. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) General and administrative $ 23,979 $ 7,945 $ 16,034 202 % $ 36,099 $ 24,729 $ 11,370 46 % Percentage of total revenue 46 % 13 % 33 % 20 % Headcount (at period end) 97 138 (30) % 97 138 (30) % General and administrative expenses increased by 202% to $24.0 million for the three months ended June 30, 2026 from $7.9 million for the comparable period in 2025. This is primarily attributable to merger-related costs of $13.4 million, an increase in other legal and consulting costs of $2.6 million, and an increase in bad debt expense of $2.2 million, partially offset by a decrease in salary, stock-based compensation expense and employee-related expenses of $2.2 million due to restructuring activities. General and administrative expenses increased by 46% to $36.1 million for the six months ended June 30, 2026 from $24.7 million for the comparable period in 2025. This is primarily attributable to merger-related costs of $15.0 million and an increase in bad debt expense of $2.2 million, partially offset by a decrease in salary, stock-based compensation expense and employee-related expenses of $3.9 million due to restructuring activities and a decrease in other legal and consulting costs of $1.9 million. Product Development Our product development expenses consist of compensation and related expenses for product development personnel as well as allocated occupancy costs and related overhead and outsourced labor and expenses for testing new versions of our software. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Product development $ 10,385 $ 13,843 $ (3,458) (25) % $ 22,565 $ 29,877 $ (7,312) (24) % Percentage of total revenue 20 % 23 % 21 % 24 % Headcount (at period end) 241 358 (33) % 241 358 (33) % Product development costs decreased by 25% to $10.4 million for the three months ended June 30, 2026 from $13.8 million for the comparable period in 2025. This decrease is primarily related to a decrease in salary, stock-based compensation expense and employee-related expenses of $3.9 million due to restructuring activities, partially offset by an increase in software and hosting expenses of $0.4 million. Product development costs decreased by 24% to $22.6 million for the six months ended June 30, 2026 from $29.9 million for the comparable period in 2025. This decrease is primarily related to a decrease in salary, stock-based compensation expense and employee-related expenses of $7.6 million due to restructuring activities, partially offset by an increase in software and hosting expense of $0.5 million. We continued to make investments in public cloud migration, and in the Conversational Cloud. While innovation remains a core component of our strategy, we are operating in a competitive environment characterized by aggressive investment in artificial intelligence and other technological innovation by competitors with significant resources and investment capital. For the three and six months ended June 30, 2026, $2.4 million and $4.8 million was capitalized, respectively, compared to $3.0 million and $6.3 million, respectively, for the comparable periods in 2025. 41 Depreciation and Amortization Expense Our depreciation and amortization expense relates to depreciation and amortization of our property and equipment and to amortization of our intangible assets and finance leases. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Depreciation and amortization expense $ 5,184 $ 5,758 $ (574) (10) % $ 10,296 $ 11,576 $ (1,280) (11) % Percentage of total revenue 10 % 10 % 9 % 9 % Total depreciation and amortization expense decreased by 10% to $5.2 million for the three months ended June 30, 2026 from $5.8 million for the comparable period in 2025. There were no impairments of property and equipment in 2025 and for the first six months of 2026, but we recorded a non-cash impairment charge of $2.1 million related to patents in the fourth quarter of 2025 as a result of our annual impairment test, thus reducing our amortizable asset balance. Total depreciation and amortization expense decreased by 11% to $10.3 million for the six months ended June 30, 2026 from $11.6 million for the comparable period in 2025. Impairment of Goodwill Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Impairment of goodwill $ 51,826 $ — $ 51,826 — % $ 51,826 $ — $ 51,826 — % Percentage of total revenue 99 % — % 47 % — % The impairment charge during the three and six months ended June 30, 2026 was a result of several triggering events including the execution of the Original Merger Agreement and Notes Restructuring Agreement in April 2026, and a decline in both LivePerson and SoundHound common stock prices. See Note 5 – Goodwill and Intangible Assets, Net under Item 1 of this Quarterly Report on Form 10-Q for additional information about the circumstances surrounding the goodwill impairment charge. There were no goodwill impairment charges for the three months ended March 31, 2026 and the three and six months ended June 30, 2025. Restructuring (Reversals) Costs, Net We maintain restructuring initiatives to realign our cost structure with our current business model, in which we have flattened the organization to align to more efficient sales and service support. While the Company’s restructuring efforts are ongoing, the 2025 restructuring activities were substantially completed by December 31, 2025. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Restructuring (reversals) costs net $ (723) $ 561 $ (1,284) (229) % $ (723) $ 1,866 $ (2,589) (139) % Percentage of total revenue (1) % 1 % (1) % 2 % The net reversals in the three and six months ended June 30, 2026 were related to settlement of lease contracts of $0.5 million, with the remainder related to severance and other associated (reversals) costs, net. 42 The net costs in the three and six months ended June 30, 2025 were related to severance and other associated costs for the 2025 restructuring activities. Total Other Expense, net Interest expense represents interest expense from our senior notes, and amortization of debt issuance costs and debt discount. Interest income represents interest earned from cash deposits. Other income (expense), net consists primarily of fair value adjustments for our Warrants and foreign currency gains and losses. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Interest expense $ (8,490) $ (7,866) $ (624) (8) % $ (16,742) $ (15,344) $ (1,398) (9) % Interest income 381 1,493 (1,112) (74) % 884 2,950 (2,066) (70) % Gain on troubled debt restructuring 2,191 — 2,191 — % 2,191 — 2,191 — % Other income (expense), net 1,518 (2,520) 4,038 160 % 2,516 5,967 (3,451) (58) % Total other expense, net $ (4,400) $ (8,893) $ 4,493 51 % $ (11,151) $ (6,427) $ (4,724) (74) % Total other expense, net improved by 51% to $4.4 million for the three months ended June 30, 2026 from $8.9 million for the comparable period in 2025. This improvement was primarily due to a $1.9 million gain on the fair value adjustment of the Warrants compared to a $3.0 million loss during the second quarter of fiscal 2025, and the $2.2 million gain on troubled debt restructuring related to the repurchase of a portion of the 2026 Notes in April 2026. These improvements were partially offset by lower interest income earned on a lower cash balance. Total other expense, net increased by 74% to $11.2 million for the six months ended June 30, 2026 from $6.4 million for the comparable period in 2025. This was primarily due to a $3.0 million gain on the fair value adjustment of the Warrants in 2026 compared to a $5.8 million gain in 2025, higher interest expense due to the terms of the troubled debt restructuring in September 2025, and lower interest income earned on a lower cash balance. These were partially offset by the $2.2 million gain on troubled debt restructuring related to the repurchase of a portion of the 2026 Notes in April 2026. Provision for Income Taxes Three Months Ended June 30, Six Months Ended June 30, 2026 2025 $ Change % Change 2026 2025 $ Change % Change (Dollars in thousands) (Dollars in thousands) Provision for income taxes $ 457 $ 384 $ 73 19 % $ 782 $ 39 $ 743 1,905 % Provision for income taxes was $0.5 million and $0.8 million for the three and six months ended June 30, 2026, respectively, compared to $0.4 million and less than $0.1 million for the comparable periods in 2025. Our consolidated effective tax rate was impacted by the statutory income tax rates applicable to each of the jurisdictions in which we operate, valuation allowance recorded against losses generated in the U.S. and Germany, UK stock compensation windfall, and changes to unrecognized tax benefits in Israel. The overall tax provision recorded represents tax on non-U.S. earnings in the various jurisdictions in which we operate and the provision for U.S. state and local impacts. The total tax expense associated with non-U.S. jurisdictions is relatively consistent between periods. 43 Liquidity and Capital Resources The following describes the Company’s cash flows for the six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 2025 (In thousands) Condensed Consolidated Statements of Cash Flows Data: Net cash provided by (used in) operating activities $ 10,786 $ (14,772) Net cash used in investing activities (5,613) (7,947) Net cash (used in) provided by financing activities $ (2,784) $ 444 As of June 30, 2026, we had approximately $96.7 million in cash and cash equivalents, an increase of $1.7 million from December 31, 2025. The increase is primarily attributable to favorable working capital management during the six months ended June 30, 2026. Cash Flows from Operating Activities Net cash provided by operating activities was $10.8 million for the six months ended June 30, 2026. Our net loss of $81.4 million includes the effect of the goodwill impairment of $51.8 million, non-cash expenses of depreciation and amortization of $10.3 million, interest expense of $8.2 million, stock-based compensation of $4.6 million, amortization of debt issuance costs and accretion of debt discount of $4.2 million, and allowance for credit losses of $2.1 million, partially offset by a gain from the change in the fair value of our Warrants of $3.0 million and a gain on troubled debt restructuring of $2.2 million. Net cash provided by operating activities was further driven by an increase in accounts payable, accrued expenses and other current liabilities of $11.4 million, a decrease in accounts receivable of $7.3 million, and a decrease in contract acquisition costs of $5.8 million, partially offset by a decrease in deferred revenue of $7.5 million. Net cash used in operating activities was $14.8 million for the six months ended June 30, 2025. Our net loss of $29.8 million includes the effect of non-cash expenses of depreciation and amortization of $11.6 million, stock-based compensation of $9.0 million, interest expense of $7.7 million, and amortization of debt issuance costs and accretion of debt discount of $3.7 million, partially offset by a gain from the change in the fair value of our Warrants of $5.8 million. Net cash used in operating activities was further driven by an increase in prepaid expenses and other current assets of $25.3 million and a decrease in deferred revenue of $2.1 million, partially offset by a decrease in accounts receivable of $5.7 million, a decrease in contract acquisition costs of $4.2 million, and an increase in accounts payable, accrued expenses and other current liabilities of $6.4 million. Cash Flows from Investing Activities Net cash used in investing activities was $5.6 million for the six months ended June 30, 2026, and was primarily driven by purchases of property and equipment and capitalization of internal-use software development costs. Net cash used in investing activities was $7.9 million for the six months ended June 30, 2025, and was primarily driven by purchases of property and equipment and capitalization of internal-use software development costs. Cash Flows from Financing Activities Net cash used in financing activities was $2.8 million for the six months ended June 30, 2026, and was primarily driven by the repurchase of a portion of our 2026 Notes. Net cash provided by financing activities was $0.4 million for the six months ended June 30, 2025, and was primarily driven by proceeds from the issuance of common stock under our ESPP. We have incurred significant expenses to develop our technology and services, to hire employees in our customer service and sales and marketing departments, and for the amortization of purchased intangible assets, as well as acquisition costs and non-cash compensation costs. Historically, we have incurred net losses and negative cash flows for various quarterly 44 and annual periods since our inception, including during numerous quarters and annual periods in the past several years. As of June 30, 2026, we had an accumulated deficit of $1,139.9 million. Our principal sources of liquidity are payments received from customers using our products. We anticipate that our current cash and cash equivalents will be sufficient to satisfy our working capital and capital requirements for at least the next 12 months. However, we cannot assure you that we will not require additional funds prior to such time, and we would then seek to sell additional equity or debt securities through public financings, or seek alternative sources of financing. We cannot assure you that additional funding will be available on favorable terms, when needed, if at all. If we are unable to obtain any necessary financing, we may be required to further reduce the scope of our planned sales and marketing and product development efforts, which could materially adversely affect our financial condition and operating results. In addition, we may require additional funds in order to fund more rapid expansion, to develop new or enhanced services or products or to invest in or acquire complementary businesses, technologies, services or products. The indenture governing the 2029 Notes includes a financial covenant that requires the Company to maintain a minimum cash balance of $60.0 million (excluding the proceeds of the 2029 Notes) at all times. Proceeds of the 2029 Notes may be used only to (i) pay interest, or cash settle, the 2029 Notes, (ii) cash settle the Warrants, (iii) exchange, repurchase, redeem, replace or otherwise refinance 2026 Notes (or refund or replenish cash of the Company or any of its subsidiaries used to do so), or (iv) pay or reimburse certain fees, costs and expenses related to the foregoing and the other transactions contemplated by the Exchange and Purchase Agreement as amended or otherwise modified from time to time. Upon conversion or exercise, the 2029 Notes and cash-settled warrants would be settled for cash. In addition, the 2026 Notes, the 2029 Notes and the Second Lien Notes are subject to repurchase at the option of holders if the Company undergoes a “Fundamental Change” (as defined in the indentures governing the 2026 Notes, the 2029 Notes and the Second Lien Notes, as applicable), and the 2026 Notes, the 2029 Notes and the Second Lien Notes are subject to events of default customary for notes issued in connection with similar transactions, which could result in the acceleration of amounts owed. See Note 8 – Senior Notes, Capped Call Transactions and Warrants for additional information. The Company may from time to time, subject to board authorization and any applicable restrictions under contracts to which it may be or become a party, depending upon market conditions and the Company’s financing needs, use available funds to refinance or repurchase its outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms the Company deems appropriate (which, in the case of debt securities, may be below par) and subject to the Company’s cash requirements for other purposes and other factors management deems relevant. We do not engage in off-balance sheet financing arrangements.

Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risks We actively monitor the movement of the U.S. dollar against the Israeli new shekel, Pound Sterling, Euro, Australian dollar, and Japanese Yen and have considered the use of financial instruments, including but not limited to derivative financial instruments, which could mitigate such risk. If we determine that our risk of exposure materially exceeds the potential cost of derivative financial instruments, we may in the future enter into these types of arrangements. Collection Risks Our accounts receivable are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. During the six months ended June 30, 2026, our allowance for credit losses increased by $1.6 million to $6.0 million. During the six months ended June 30, 2025, our allowance for credit losses decreased by $2.5 million to $6.1 million. A large proportion of our receivables are due from larger corporate customers that typically have longer payment cycles. We base our allowance for credit losses on specifically identified credit risks of customers, historical trends and other information that we believe to be reasonable. Receivables are written off and charged against the applicable recorded allowance when we have exhausted collection efforts without success. We adjust our allowance for credit losses when accounts previously reserved have been collected. 45 An allowance for credit losses is established for losses expected to be incurred on accounts receivable balances. Judgment is required in the estimation of the allowance and we evaluate the collectability of our accounts receivable and contract assets based on a combination of factors. If we become aware of a customer’s inability to meet its financial obligations, a specific allowance is recorded to reduce the net receivable to the amount reasonably believed to be collectible from the customer. For all other customers, we use an aging schedule and recognize allowances for credit losses based on the creditworthiness of the debtor, the age and status of outstanding receivables, the current business environment and our historical collection experience adjusted for current expectations for the customer or industry. Interest Rate Risk Our investments consist of cash and cash equivalents. Therefore, changes in market interest rates do not affect in any material respect the value of the investments as recorded by us. Inflation Risk We do not believe that inflation has had a material effect on our business, financial conditions or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 46

Read original filing text →

Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed on March 16, 2026, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. Other than as set forth below, there have been no material changes to the risk factors described in our most recent Annual Report on Form 10-K. Risks Related to the Pending Merger with SoundHound The Mergers may not be completed, and the Amended and Restated Merger Agreement may be terminated in accordance with its terms. Failure to complete the Mergers could negatively impact the price of shares of LivePerson Common Stock, as well as LivePerson’s respective future businesses and financial results. The Mergers are subject to a number of conditions that must be satisfied, including the approval by LivePerson stockholders of the merger proposal, or, to the extent permitted by applicable law, waived, in each case prior to the completion of the Mergers. These conditions to the completion of the Mergers, some of which are beyond the control of SoundHound and LivePerson, may not be satisfied or waived in a timely manner or at all, and, accordingly, the Mergers may be delayed or may not be completed. In addition, if the First Merger is not completed by October 21, 2026, or, in certain instances, on or before December 5, 2026, either SoundHound or LivePerson may choose not to proceed with the Mergers by terminating the Amended and 47 Restated Merger Agreement, and the parties can mutually decide to terminate the Amended and Restated Merger Agreement at any time, before or after LivePerson stockholder approval. Further, either SoundHound or LivePerson may elect to terminate the Amended and Restated Merger Agreement in certain other circumstances. If the transactions contemplated by the Amended and Restated Merger Agreement are not completed for any reason, LivePerson’s ongoing business, financial condition and financial results may be adversely affected. Without realizing any of the benefits of having completed the transactions, LivePerson will be subject to a number of risks, including the following: •LivePerson may be required to pay its costs relating to the transactions, which are substantial, such as legal, accounting, financial advisory and printing fees, whether or not the transactions are completed; •LivePerson may owe a termination fee of $5 million, plus SoundHound transaction expenses, as further described below; •time and resources committed by LivePerson’s management to matters relating to the transactions could otherwise have been devoted to pursuing other beneficial opportunities; •LivePerson may experience negative reactions from financial markets, including negative impacts on the prices of its common stock, including to the extent that the current market price reflects a market assumption that the transactions will be completed; •LivePerson may experience negative reactions from employees, customers or vendors; and •since the Amended and Restated Merger Agreement restricts the conduct of LivePerson’s business prior to completion of the Mergers, LivePerson may not have been able to take certain actions during the pendency of the Mergers that would have benefited it as an independent company and the opportunity to take such actions may no longer be available. If the Amended and Restated Merger Agreement is terminated and the LivePerson board of directors seeks another merger or business combination, LivePerson may not be able to find a party willing to offer equivalent or more attractive consideration than the consideration SoundHound has agreed to provide in the Mergers, or that such other merger or business combination is completed. If the Amended and Restated Merger Agreement is terminated under specified circumstances, LivePerson may be required to pay SoundHound a termination fee of $5 million, plus an additional amount equal to SoundHound’s documented expenses incurred prior to and including the date of the termination of the Amended and Restated Merger Agreement. LivePerson stockholders that receive SoundHound Common Stock in the First Merger will not receive cash consideration (other than cash in lieu of fractional shares of SoundHound Common Stock) with which to pay any tax liability resulting from the First Merger. The receipt of SoundHound Common Stock and any cash in lieu of fractional shares of SoundHound Common Stock by LivePerson stockholders entitled to receive the Per Share Merger Consideration in exchange for LivePerson Common Stock in the First Merger is intended to be treated as a taxable transaction for U.S. federal income tax purposes. The amount of gain or loss, if any, recognized by such LivePerson stockholders will vary depending on such LivePerson stockholders’ particular situation, including the fair market value of the SoundHound Common Stock and the amount of any cash in lieu of fractional shares of SoundHound Common Stock received by such LivePerson stockholder in the First Merger, and the adjusted tax basis of the LivePerson Common Stock exchanged by such LivePerson stockholder in the First Merger. LivePerson stockholders that receive SoundHound Common Stock in the First Merger will not receive any cash consideration (other than any cash received in lieu of fractional shares of SoundHound Common Stock) with which to pay any tax liability resulting from the First Merger. LivePerson will be subject to business uncertainties while the Mergers are pending, which could adversely affect their business. Uncertainty about the effect of the Mergers on employees, industry contacts and business partners may have an adverse effect on LivePerson. These uncertainties may impair LivePerson’s ability to attract, retain and motivate key personnel until the Mergers are completed and for a period of time thereafter and could cause industry contacts, business partners and others that deal with LivePerson to seek to change their existing business relationships with LivePerson. Employee retention at LivePerson may be particularly challenging during the pendency of the Mergers, as employees may experience uncertainty about their roles with SoundHound following the Mergers. In addition, the Amended and Restated Merger Agreement restricts 48 LivePerson from entering into certain corporate transactions and taking other specified actions without the consent of SoundHound. These restrictions may prevent LivePerson from pursuing attractive business opportunities that may arise prior to the completion of the Mergers. SoundHound and LivePerson will incur significant transaction and merger-related costs in connection with the Mergers, which may be in excess of those anticipated by SoundHound or LivePerson. Each of SoundHound and LivePerson has incurred and expects to continue to incur a number of non-recurring costs associated with negotiating and completing the Mergers and combining the operations of the two companies. These fees and costs have been, and will continue to be, substantial. The substantial majority of non-recurring expenses will consist of transaction costs related to the Mergers and include, among others, employee retention costs, fees paid to financial, legal and accounting advisors, severance and benefit costs, and filing fees. SoundHound and LivePerson will also incur transaction fees and costs related to the integration of the companies, which may be substantial. Moreover, each company may incur additional unanticipated expenses in connection with the Mergers and the integration, including costs associated with any stockholder litigation related to the Mergers. Although SoundHound and LivePerson each expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow SoundHound and LivePerson to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all. For additional information, see the risk factor entitled “The integration of LivePerson and SoundHound may not be as successful as anticipated, and SoundHound may not achieve the intended benefits or do so within the intended timeframe” below. The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results of the combined company following the completion of the Mergers. The Amended and Restated Merger Agreement limits LivePerson’s ability to pursue alternatives to the Mergers, which may discourage certain other companies from making favorable alternative transaction proposals and, in specified circumstances, could require LivePerson to pay SoundHound a termination fee. The Amended and Restated Merger Agreement contains provisions that may discourage a third party from submitting a competing proposal to LivePerson that might result in greater value to LivePerson stockholders than the Mergers or, in the event that a third party competing proposal is made, a third party may propose to pay a lower per share price to acquire LivePerson than it might otherwise have proposed to pay. These provisions include a general prohibition on LivePerson soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by the LivePerson board of directors, entering into discussions with any third party regarding any acquisition proposal. Furthermore, there are only limited exceptions to the requirement under the Amended and Restated Merger Agreement that the LivePerson board of directors not withdraw or modify the LivePerson board of directors recommendation. Although the LivePerson board of directors is permitted to effect a recommendation change, after complying with certain procedures set forth in the Amended and Restated Merger Agreement, in response to certain superior proposals or certain intervening events (if the LivePerson board of directors determines in good faith, after having taken into account the advice of outside legal counsel, that a failure to do so would be inconsistent with its fiduciary duties under applicable law), such recommendation change would entitle SoundHound to terminate the Amended and Restated Merger Agreement and receive a cash termination fee in the amount of $5 million, plus an additional amount equal to SoundHound’s documented transaction expenses incurred prior to and including the date of the termination of the Amended and Restated Merger Agreement. The integration of LivePerson into SoundHound may not be as successful as anticipated, and SoundHound may not achieve the intended benefits or do so within the intended timeframe. The Mergers involve numerous operational, strategic, financial, accounting, legal, tax and other risks, potential liabilities associated with the acquired businesses, and uncertainties related to design, operation and integration of LivePerson’s internal control over financial reporting. Difficulties in integrating LivePerson into SoundHound may result in LivePerson performing differently than expected, operational challenges, or the failure to realize anticipated expense-related efficiencies. Potential difficulties that may be encountered in the integration process include, among others: •the inability to successfully integrate the businesses of LivePerson into SoundHound in a manner that permits SoundHound to achieve the full revenue and cost savings anticipated from the Mergers; •complexities associated with managing the larger, more complex, integrated business; 49 •integrating personnel from the two companies and the loss of key employees; •potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Mergers; •integrating relationships with industry contacts and business partners; •performance shortfalls as a result of the diversion of management’s attention caused by completing the Mergers and integrating LivePerson’s operations into SoundHound; and •the disruption of, or the loss of momentum in, ongoing business or inconsistencies in standards, controls, procedures and policies. Additionally, the success of the Mergers will depend, in part, on SoundHound’s ability to realize the anticipated benefits from combining SoundHound’s and LivePerson’s businesses. The anticipated benefits of the Mergers may not be realized fully or at all, may take longer to realize than expected, or could have other adverse effects that SoundHound does not currently foresee. Because the value ascribed to the SoundHound Common Stock, the Aggregate Consideration Amount and the Closing TASE Cash Merger Consideration will be subject to adjustment and because the market price of SoundHound Common Stock will fluctuate, LivePerson stockholders cannot be certain of the precise value of the Per Share Merger Consideration they may receive in the First Merger or the Per Share Cash Merger Consideration they may receive in the Second Merger, as applicable. If the First Merger is completed, at the First Effective Time, each issued and outstanding eligible share of LivePerson Common Stock (other than (i) shares held by LivePerson as treasury shares, (ii) shares held by any subsidiary of LivePerson, (iii) shares held by SoundHound or any subsidiary of SoundHound (such shares described in the foregoing clauses (i) through (iii), “Cancelled LivePerson Shares”) or (iv) TASE Shares) will be converted into the right to receive the Per Share Merger Consideration. The Per Share Merger Consideration is calculated by dividing the Closing Merger Consideration by the total number of shares of LivePerson Common Stock that are issued and outstanding, or that are issuable upon the conversion, exercise or settlement in full of other rights to acquire LivePerson Common Stock, immediately prior to the First Effective Time (other than Cancelled LivePerson Shares and the TASE Shares). The Closing Merger Consideration, being the aggregate amount of consideration payable by SoundHound to holders of LivePerson Common Stock (other than Cancelled LivePerson Shares and TASE Shares) in connection with the First Merger, will be a number of shares of SoundHound Common Stock equal to the quotient of (a) the Aggregate Consideration Amount, divided by (b) the SoundHound Closing Stock Price. The Aggregate Consideration Amount refers to an amount equal to (I) $42,784,532.64, minus (II) the LivePerson Shortfall Cash, plus (III) the aggregate dollar amount of the exercise prices of all In-the-Money Options (other than Assumed Options). LivePerson Shortfall Cash refers to an amount equal to (x) $74,000,000, minus (y) the aggregate principal amount of the 2026 Notes repurchased by LivePerson between April 1, 2026 and the closing date, minus (z) the cash and cash equivalents on LivePerson’s balance sheet as of 12:01 a.m. Pacific Time on the closing date (net of certain LivePerson transaction expenses) (as estimated in accordance with the Amended and Restated Merger Agreement); provided that, if a negative number results from such calculation, LivePerson Shortfall Cash will be $0. The SoundHound Closing Stock Price is subject to a collar and will be the volume-weighted average sales price per share of SoundHound Common Stock on the Nasdaq for each of the ten consecutive trading days ending on (and including) the trading day that is three (3) trading days prior to the Closing Date (the “SoundHound Closing VWAP Stock Price”); provided that it will be no greater than $12.00 and no less than $7.00. If the Second Merger is completed, at the Second Effective Time, each issued and outstanding eligible TASE Share (other than any Dissenting Shares) will be converted into the right to receive the Per Share Cash Merger Consideration. The Per Share Cash Merger Consideration is calculated by dividing the Closing TASE Cash Merger Consideration by the Fully Diluted TASE Common Number. The Closing TASE Cash Merger Consideration will be equal to the Closing Merger Consideration, multiplied by the SoundHound Closing VWAP Stock Price, multiplied further by the Closing TASE Merger Consideration Percentage, which will be a figure equal to the total number of TASE Shares issued and outstanding immediately prior to the Second Effective Time, divided by the Fully Diluted Common Number. If the Closing TASE Cash Merger Consideration is greater than $7.5 million, then the Closing TASE Cash Merger Consideration will be deemed to equal $7.5 million. If the Mergers are completed, there will be a time lapse between each of the date of the proxy statement/prospectus for the special meeting at which LivePerson stockholders vote to approve the merger proposal, the date of the special meeting and the date on which LivePerson stockholders entitled to receive the Per Share Merger Consideration or the Per Share Cash Merger Consideration, as applicable, actually receive the Per Share Merger Consideration or the Per Share Cash Merger Consideration, as applicable. The market value of shares of SoundHound Common Stock will fluctuate, possibly materially, during and after these periods as a result of a variety of factors, including general market and economic conditions, changes in 50 SoundHound’s businesses, operations and prospects, and regulatory considerations. Such factors are difficult to predict and, in many cases, may be beyond the control of SoundHound and LivePerson. Furthermore, LivePerson’s cash balance will fluctuate over the interim period. The actual value of any Per Share Merger Consideration or Per Share Cash Merger Consideration, as applicable, received by LivePerson stockholders at the completion of the Mergers will depend in part on the market value of the shares of SoundHound Common Stock and the cash and cash equivalents on LivePerson’s balance sheet at that time and, in the case of the Per Share Cash Merger Consideration, the total number of TASE Shares issued and outstanding at that time. Additionally, if the market value of the SoundHound shares exceeds $12.00 or is less than $7.00 at the relevant measurement time before Closing, the SoundHound Closing Stock Price used to determine the number of shares of SoundHound Common Stock the LivePerson stockholders will be entitled to receive in the First Merger will be adjusted. Consequently, at the time LivePerson stockholders decide whether to approve the merger proposal, they will not know the actual market value of the Per Share Merger Consideration or the Per Share Cash Merger Consideration, as applicable, they will receive when the Mergers are completed. For additional information about the merger consideration, please see Note 1 to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q. LivePerson stockholders who receive the Per Share Merger Consideration will have a reduced ownership and voting interest in the combined company after the First Merger compared to their current ownership in LivePerson and will exercise less influence over the combined company’s management, and LivePerson stockholders who receive the Per Share Cash Merger Consideration as a result of the Second Merger will not have any ownership or voting interest in the combined company after the Second Merger. Currently, LivePerson stockholders have the right to vote in the election of the LivePerson board of directors and the power to approve or reject any matters requiring stockholder approval under Delaware law and the LivePerson organizational documents. Upon completion of the First Merger, each LivePerson stockholder who receives shares of SoundHound Common Stock in the First Merger will become a stockholder of SoundHound with a percentage ownership of SoundHound that is smaller than such LivePerson stockholder’s current percentage ownership of LivePerson. Based on the number of issued and outstanding shares of SoundHound Common Stock and LivePerson Common Stock and LivePerson Options as of July 6, 2026, and assuming there is no cash adjustment to the Aggregate Consideration Amount and the Closing Merger Consideration is approximately 3.0 million to 5.1 million shares of SoundHound Common Stock, after the First Merger LivePerson stockholders who receive the Per Share Merger Consideration are expected to become owners of approximately 1.5% to 0.9% of the outstanding shares of SoundHound Common Stock. Even if all former LivePerson stockholders voted together on all matters presented to SoundHound stockholders from time to time, the former LivePerson stockholders would exercise significantly less influence over the management and policies of SoundHound after the Mergers than they now have on the management and policies of LivePerson. SoundHound and LivePerson may be targets of securities class action and derivative lawsuits that could result in substantial costs and may delay or prevent the Mergers from being completed. Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on SoundHound’s and LivePerson’s respective liquidity and financial condition. Any such lawsuit could also seek, among other things, injunctive relief or other equitable relief, including a request to rescind parts of the Amended and Restated Merger Agreement already implemented or to otherwise enjoin the parties from consummating the Mergers. If a plaintiff is successful in obtaining an injunction prohibiting completion of the Mergers, then that injunction may delay or prevent the Mergers from being completed, which may adversely affect SoundHound’s and LivePerson’s respective business, financial position and results of operations. One of the conditions to the closing of the Mergers is that no injunction, order or award by any court or governmental entity having jurisdiction over any party has been entered and continues to be in effect and no law has been adopted or is effective, in either case, that prohibits or makes illegal the consummation of the Mergers. Consequently, if a lawsuit is filed and a plaintiff is successful in obtaining an injunction prohibiting consummation of the Mergers, then that injunction may delay or prevent the Mergers from being completed within the expected timeframe or at all, which may adversely affect SoundHound’s and LivePerson’s respective business, financial position, and results of operations. 51