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November
25, 2009
By
EDGAR Transmission
Securities
and Exchange Commission
Division
of Corporation Finance
100 F
Street, N.E., Mail Stop 3561
Washington,
DC 20549
Attn: H.
Christopher Owings
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Re:
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LivePerson,
Inc.
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Form 10-K for the Fiscal Year Ended
December 31, 2008
Filed
March 13, 2009
Definitive
Proxy Statement on Schedule 14A
Filed
April 30, 2009
Forms
10-Q for the Fiscal Quarters Ended March 31, 2009 and June 30,
2009
Filed
May 11, 2009 and August 7, 2009
File No.
000-30141
Dear Mr.
Owings:
On behalf
of LivePerson, Inc. (the “Company”), we respectfully provide the following
responses to comments contained in the letter dated October 28, 2009 (the
“Letter”) from H. Christopher Owings of the Staff (the “Staff”) of the
Securities and Exchange Commission (the “Commission”) to Robert P. LoCascio, the
Company’s Chairman and Chief Executive Officer. The responses set
forth below are based upon information provided to Wilmer Cutler Pickering Hale
and Dorr LLP by the Company. The responses are keyed to the numbering
of the comments and the headings used in the Letter. Except where
noted otherwise, the Company intends to comply with the comments in all future
filings.
Securities
and Exchange Commission
November
25, 2009
Page
2
Form 10-K for the Fiscal
Year Ended December 31, 2008
Governmental Regulation,
page 8
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1.
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We
note your response to comment one from our letter dated September 21,
2009. Please discuss the effect of existing governmental regulations on
your business.
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Response: In
future filings, the Company intends to include disclosure substantially similar
to what is included below.
“We, and
our customers, are subject to a number of foreign and domestic laws and
regulations that apply to the conduct of business on the Internet such as, but
not limited to, laws and regulations relating to user privacy, data privacy,
content, advertising, information security and intellectual property
rights. We post on our web site our privacy policies and practices
concerning the use and disclosure of user data, and we observe data security
protocols and other business practices to comply with applicable
laws. Interpretation of user privacy and data protection laws, and
their application to the Internet in the U.S. and foreign jurisdictions is
ongoing. There is a risk that these laws may be interpreted and
applied differently in any given jurisdiction in a manner that is not consistent
with our current practices, which could cause us to incur substantial costs and
otherwise negatively impact our business.
Various
U.S. and foreign jurisdictions impose laws regarding the collection of
data. Some U.S. states have enacted legislation designed to protect
consumers’ privacy by prohibiting the distribution of “spyware” over the
Internet. Such legislation typically focuses on restricting the proliferation of
software that, when installed on an end user’s computer, is used to
intentionally and deceptively take control of the end user’s machine. We do not
believe that the data monitoring methods employed by our technology constitute
“spyware” or that our data monitoring methods are prohibited by applicable
laws. If the scope of this type of legislation were changed to
include Web analytics, such legislation could be deemed to apply to the
technology we use and could potentially restrict our ability to conduct our
business.
Domestic
and foreign governments are also considering restricting the collection and use
of Internet visitor data generally. Some jurisdictions are
considering whether the collection of even anonymous data may invade the privacy
of Web site visitors. If laws that limit data collection practices are enacted,
we and/or our customers may be required to obtain the express consent of web
visitors in order for our technology to perform certain of its basic functions
that are based on collection of data. Requirements that a website
must first obtain consent from its Web visitors before using our technology
could reduce the amount and value of the services we provide to customers, which
might impede sales and/or cause some existing customers to discontinue using our
services. We could also need to expend considerable effort and resources to
develop new product features and/or procedures to comply with any such legal
requirements.
Securities
and Exchange Commission
November
25, 2009
Page
3
Businesses
using our products may collect personal information from their web users when
those web users contact them with inquiries. Federal, state and
foreign government bodies and agencies, however, have adopted and are
considering adopting laws and regulations regarding the collection, use and
disclosure of personal information obtained from consumers. When
required, we use a variety of data security procedures and practices such as
encryption and masking algorithms to comply with applicable regulations, and
encourage our customers to do the same. Changes to applicable laws
and or interpretation thereof could significantly increase the economic burden
to us of such compliance, and could negatively impact our
business. European Union members have imposed restrictions on the
collection and use of data that are far more stringent, and impose more
substantial burdens on subject businesses than current privacy standards in the
United States. All of these domestic and international legislative and
regulatory initiatives have the potential to adversely affect our clients’
ability to use our products.
The
Digital Millennium Copyright Act has provisions that limit, but do not
necessarily eliminate, our liability for third-party content delivered through
our website and products. In the U.S., laws relating to the liability
of providers of online services for activities of their users and other third
parties are currently being tested and could change. Certain foreign
jurisdictions are also testing the liability of providers of online services for
activities of their users and other third parties. While providers of online
services currently are generally not held liable for activities of their third
party users, changes in applicable laws imposing liability on providers of
online services for activities of their users and other third parties could harm
our business.
Securities
and Exchange Commission
November
25, 2009
Page
4
Item 7a. Quantitative and
Qualitative Disclosures About Market Risk, page 36
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2.
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We
note your response to comment five from our letter dated September 21,
2009. In your response you state that you have not entered into
any "formal hedging programs." Please tell us what you mean by "formal
hedging programs" in this instance. Also, if you have any hedging
strategies, formally or informally, please discuss those
strategies.
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Response: In
future filings, the Company intends to include disclosure substantially similar
to what is included below.
“Currency Rate
Fluctuations
As a
result of the expanding scope of our Israeli operations, our currency rate
fluctuation risk associated with the exchange rate movement of the U.S. dollar
against the New Israeli Shekel (“NIS”) has increased. During the year ended
December 31, 2008, the depreciation of the U.S. dollar against the NIS had
an unfavorable impact on our results of operations and financial condition
as compared to prior periods because the U.S. dollar cost of expenses
incurred in NIS increased. During the nine months ended September 30, 2009, the
U.S. dollar appreciated against the NIS to levels more consistent with the
recent historical average which had a positive impact on our results of
operations and financial conditions as compared to 2008. During the nine month
period ended September 30, 2009, expenses generated by our Israeli operations,
which are primarily incurred in NIS, totaled $17.1 million. We do not currently
hedge our foreign currency risk exposure. We monitor the movement of the U.S.
dollar against the NIS and U.K. pound and have considered and expect to consider
in the future, the use of financial instruments, including but not limited to
derivative financial instruments, which could mitigate such risk. The functional
currency of our wholly-owned Israeli subsidiaries, LivePerson Ltd. (formerly
HumanClick Ltd.) and Kasamba Ltd., is the U.S. dollar and the functional
currency of our operations in the United Kingdom is the U.K.
pound.”
Securities
and Exchange Commission
November
25, 2009
Page
5
Definitive Proxy Statement
on Schedule 14A
Compensation Objectives and
Strategies, page 12
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3.
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We
note your response to comments eight and eleven from our letter dated
September 21, 2009. We note that you consider individual performance in
making your various compensation discussions. Please describe what factors
you consider when assessing each named officer's individual performance
for purposes of compensation
decisions.
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Response: The
Company would like to modify its prior response to this question to clarify
exactly what the factors are that are considered in determining the equity
incentives granted to certain of its executive officers. In
connection with that, the Company intends to modify slightly its prior response,
as illustrated by the blacklining marks showing deletions and additions to the
additional disclosure the Company intends to include in its future filings, for
the purpose of clarifying its prior response.
“Chief Executive Officer and
President/Chief Financial Officer. On an annual basis, the
salary of our Chief Executive Officer and President/Chief Financial Officer is
reviewed by the Compensation Committee. Adjustments, if any, are made
based on peer group data, the officer’s historical salary level, the Company’s
performance in the previous year as compared to the financial plan and strategic
achievements, such as but not limited to new product introductions, new markets
and/or acquisitions, accomplished during the previous year. Each
officer’s annual incentive compensation is determined based on peer group data
as well as the Company’s performance against objectives, in particular related
to revenue, EBITDA per share, employee compensation cost as compared to revenue,
and Company strategic achievements accomplished. Each one of these
metrics contributes to the calculation of the bonus amount, which can then be
adjusted up or down by the Compensation Committee in its
discretion. Each officer’s incentive equity is determined based on
peer group data, historical equity grants (including the amount, exercise prices
and vesting status of previous grants), existing common stock holdings,
strategic achievements and the Company’s performance in the previous year as
compared to the financial plan. The actual amount of incentive equity
granted is determined by the Compensation Committee in its
discretion.
Executive Vice President of
Marketing, Executive Vice President and GM Technology
Operations. Each year the salary of our Executive Vice
President, Marketing and Executive Vice President, GM, Technology Operations is
determined by the Chief Executive Officer and President/Chief Financial Officer
based on peer group data and the officer’s historical salary
levels. While the size of the bonus pool for all executives is based
on the Company’s profits as compared to the financial plan, as discussed under
“—Role of the Compensation Committee and Executive Officers in Determining
Executive Compensation,” the Chief Executive Officer and President/Chief
Financial Officer recommend the actual bonus amounts for each officer based on
the officer’s performance as compared to stated objectives. Each
officer’s incentive equity is determined based on peer group data, historical
equity grants (including the amount, exercise prices and vesting status of
previous grants) and the Company’s performance in the areas under the general
direction of each respective officer in the previous year as
compared to the financial and operating plan. The actual
amount of incentive equity granted is recommended by the Chief Executive Officer
and President/Chief Financial Officer in their discretion, and approved by the
Compensation Committee in its discretion.
Securities
and Exchange Commission
November
25, 2009
Page
6
Senior Vice President of Enterprise
Sales and Services. Each year the salary of our Senior Vice
President, Enterprise Sales and Services is determined by the Chief Executive
Officer and President/Chief Financial Officer based on peer group data and the
officer’s historical salary levels. The officer’s annual incentive
compensation is calculated based on the Company’s revenue growth and profit,
with most of the weighting on revenue growth. The officer’s incentive
equity is determined based on peer group data, historical equity grants
(including the amount, exercise prices and vesting status of previous grants)
and the Company’s performance in the previous year as compared to the financial
and operating plan, particularly in those areas under the general
direction of the officer . The actual amount of incentive equity
granted is recommended by the Chief Executive Officer and President/Chief
Financial Officer in their discretion, and approved by the Compensation
Committee in its discretion.”
Annual Incentive
Compensation, page 14
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4.
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We
note your response to comment 12 from our letter dated September 21, 2009.
For each area of corporate performance selected, please disclose the goals
necessary for target payout, how those goals are weighted, your actual
results under those goals, and how the amount paid to each executive
officer was ultimately determined. Your response to comment eight
indicates that you take into account the "Company's performance against
objectives, in particular related to revenue, EBITDA per share, employee
compensation cost as compared to revenue," with respect to your CEO and
President/Chief Financial Officer, and "revenue growth and profit," with
respect to your Senior Vice President of Enterprise Sales and Services.
And your response to comment 15 indicates that "each executive has a
target bonus level set at the beginning of each year...." However, if your
Compensation Committee considers the factors you identified and then makes
a subjective determination as to what each executive will receive, please
clearly state that fact.
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Response: In
future filings, the Company intends to include disclosure substantially similar
to what is included below.
“Chief Executive Officer and
President/Chief Financial Officer. Each officer’s annual
incentive compensation is determined based on peer group data as well as the
Company’s performance against objectives, in the following four areas: actual
revenue as compared to target revenue; actual EBITDA per share as compared to
target EBITDA per share; actual revenue-to-payroll ratio as compared to target
revenue-to-payroll ratio; and consumer division actual revenue as compared to
consumer division target revenue. Each of these metrics is weighted
equally when calculating the officer’s target bonus amount. The
Compensation Committee can then adjust upward or downward the actual bonus
amount paid to each officer, in its discretion. The Committee
typically relies primarily on the calculated bonus recommendation, and applies
only limited adjustments in applying discretion to the final incentive
payout.
Securities
and Exchange Commission
November
25, 2009
Page
7
Executive Vice President of
Marketing, Executive Vice President and GM Technology Operations. While the size of the
bonus pool for all executives is based on the Company’s profits as compared to
the financial and operating plan, as discussed under “—Role of the Compensation
Committee and Executive Officers in Determining Executive Compensation,” the
Chief Executive Officer and the President/Chief Financial Officer recommend the
actual bonus amounts for each of these officers based on qualitative assessments
of how the company is performing, particularly in the parts of the overall
business that fall within the responsibility of the respective
officer. The Compensation Committee can then adjust upward or
downward the actual bonus amount paid to each officer, in its
discretion. The Committee typically relies primarily on the bonus
recommendation made by the Chief Executive Officer and the President/Chief
Financial Officer, and applies only limited adjustments in applying discretion
to the final incentive payout.
Senior Vice President of Enterprise
Sales and Services. The officer’s annual
incentive compensation is calculated based on the Company’s performance against
objectives, in the following three areas: actual revenue for the enterprise
portion of the business as compared to target revenue for the enterprise portion
of the business; actual revenue for the small business and consumer portions of
the business as against target revenue for the small business and consumer
portions of the business; and actual revenue-to-payroll ratio for the enterprise
portion of the business as compared to target revenue-to-payroll ratio for the
enterprise portion of the business. These metrics are given different
weight when calculating the officer’s target bonus amount – specifically, the
first metric is given 70% weight, the second metric is given 15% weight and the
third metric is also given 15% weight. The Compensation Committee can
then adjust upward or downward the actual bonus amount paid to each officer, in
its discretion. The Committee typically relies primarily on the
calculated bonus recommendation, and applies only limited adjustments in
applying discretion to the final incentive payout.”
Securities
and Exchange Commission
November
25, 2009
Page
8
Long-term Incentives -
Equity-Based Awards, page 14
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5.
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We
note your response to comment 13 from our letter dated September 21, 2009.
We note that in your disclosure in response to comment eight that your
long-term equity awards are determined based on several factors. Please
disclose how the Compensation Committee assesses each factor, including
"the Company's performance in the previous year as compared to the
financial plan." If the Compensation Committee considers the factors you
identified and makes a subjective determination of the amount to award
each named executive please indicate
this.
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Response: In
future filings, the Company intends to include disclosure substantially similar
to what is included below.
“The
Compensation Committee approves a total pool of equity awards available to grant
in a given year, after considering the following factors, in its discretion:
potential dilution impact of the equity grants; stock-compensation expense
related to the equity grants; and the equity grant history and total outstanding
equity amounts of similarly situated companies, to the extent
available. Management considers similarly situated companies to be
those with similar market capitalization, revenue levels, and to a lesser
extent, similar industry presence and product offerings.
Following
the determination by the Compensation Committee of the size of the total pool of
equity available for grant in a given year, the Chief Executive Officer and
President/Chief Financial Officer make recommendations to the Compensation
Committee concerning the allocation of the available pool of equity among
specific employees and executive officers, after considering the following
factors, in their discretion: existing equity holdings, including vesting
status, strike price and quantity; responsibility level of employee;
compensation (salary and incentive) structure of the employee; and the desire to
allocate equity to those individuals who, by their retention, are expected to
drive long term value for the Company.
The
Compensation Committee reviews and approves the allocation of individual grants
from the approved pool, with heavy reliance on the recommendations of management
based on these factors, and then may grant approval or make adjustments in its
discretion based on the factors enumerated above, along with more generalized or
subjective factors such as employment market conditions and employee retention
goals, market norms and general climate for shareholder relations and
expectations, dilution and other factors that the Committee may deem
appropriate.”
Securities
and Exchange Commission
November
25, 2009
Page
9
* * * * *
* * *
The
Company hereby acknowledges that:
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(i)
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it
is responsible for the adequacy and accuracy of the disclosure in the
10-K;
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(ii)
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Staff
comments or changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the 10-K;
and
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(iii)
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the
Company may not assert the Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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If you
require additional information, please telephone the undersigned at (212)
937-7239. Thank you.
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Very
truly yours,
/s/
Brian B. Margolis
Brian
B. Margolis
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Enclosures
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cc:
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Robert
P. LoCascio (LivePerson, Inc.)
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Monica L. Greenberg, Esq. (LivePerson,
Inc.)