Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2011	Feb. 28, 2012	Jun. 30, 2011
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Trading Symbol	LPSN
Entity Registrant Name	LIVEPERSON INC
Entity Central Index Key	0001102993
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		54,543,837
Entity Public Float			$ 679,426,321

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 93,278	$ 61,336
Accounts receivable, net of allowance for doubtful accounts of $688 and $561, in 2011 and 2010, respectively	20,999	16,491
Prepaid expenses and other current assets	5,390	6,341
Deferred tax assets, net	2,342	1,529
Total current assets	122,009	85,697
Property and equipment, net	13,879	12,762
Intangibles, net	1,095	2,124
Goodwill	24,090	24,015
Deferred tax assets, net	2,829	3,876
Deferred implementation costs, net of current	247	164
Security deposits	356	499
Other assets	1,546	2,006
Total assets	166,051	131,143
Current liabilities:
Accounts payable	8,258	6,416
Accrued expenses	12,019	12,111
Deferred revenue	5,378	5,570
Total current liabilities	25,655	24,097
Deferred revenue, net of current	1,152	513
Other liabilities	1,546	1,890
Total liabilities	28,353	26,500
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value per share; 5,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2011 and 2010
Common stock, $.001 par value per share; 100,000,000 shares authorized, 54,090,344 shares issued and outstanding at December 31, 2011; 51,753,842 shares issued and outstanding at December 31, 2010	54	52
Additional paid-in capital	226,113	205,063
Accumulated deficit	(88,135)	(100,173)
Accumulated other comprehensive loss	(334)	(299)
Total stockholders' equity	137,698	104,643
Total liabilities and stockholders' equity	$ 166,051	$ 131,143

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2011	Dec. 31, 2010
Accounts receivable, allowance for doubtful accounts	$ 688	$ 561
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	54,090,344	51,753,842
Common stock, shares outstanding	54,090,344	51,753,842

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	12 Months Ended
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Revenue	$ 133,089	$ 109,862	$ 87,490
Operating expenses:
Cost of revenue	33,195	29,640	21,076
Product development	20,222	15,711	12,111
Sales and marketing	38,884	32,835	27,355
General and administrative	21,044	17,077	13,417
Amortization of intangibles	109	259	745
Total operating expenses	113,454	95,522	74,704
Income from operations	19,635	14,340	12,786
Other (expense) income:
Financial expense	(548)	(106)	(80)
Interest income	63	99	94
Total other (expense) income, net	(485)	(7)	14
Income before provision for income taxes	19,150	14,333	12,800
Provision for income taxes	7,112	5,074	5,037
Net income	$ 12,038	$ 9,259	$ 7,763
Basic net income per common share	$ 0.23	$ 0.18	$ 0.16
Diluted net income per common share	$ 0.22	$ 0.18	$ 0.16
Weighted average shares outstanding used in basic net income per common share calculation	52,876,999	50,721,880	47,962,688
Weighted average shares outstanding used in diluted net income per common share calculation	55,008,742	52,907,541	49,008,440

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Net income	$ 12,038	$ 9,259	$ 7,763
Foreign currency translation adjustment	(35)	(127)	(34)
Comprehensive income	$ 12,003	$ 9,132	$ 7,729

- Definition

The change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the reporting entity. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, but excludes any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.

+ References

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- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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- Definition

Adjustment that results from the process of translating subsidiary financial statements and foreign equity investments into the reporting currency of the reporting entity, net of tax.

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+ Details

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Beginning Balance (in shares) at Dec. 31, 2008		47,357,017
Beginning Balance at Dec. 31, 2008	$ 63,583	$ 47	$ 180,869	$ (117,195)	$ (138)
Repurchase of common stock (in shares)		(16,223)
Repurchase of common stock	(28)		(28)
Common stock issued upon exercise of stock options (in shares)		2,094,888
Common stock issued upon exercise of stock options	4,191	$ 2	4,189
Stock-based compensation	4,726		4,726
Tax benefit from exercise of employee stock options	936		936
Net income	7,763			7,763
Other comprehensive loss	(34)				(34)
Ending Balance (in shares) at Dec. 31, 2009		49,435,682
Ending Balance at Dec. 31, 2009	81,137	$ 49	190,692	(109,432)	(172)
Repurchase of common stock (in shares)		(534,496)
Repurchase of common stock	(3,649)		(3,649)
Common stock issued upon exercise of stock options (in shares)		2,843,547
Common stock issued upon exercise of stock options	11,410	$ 3	11,407
Stock-based compensation	5,142		5,142
Common stock issued under Employee Stock Purchase Plan (in shares)		9,109
Common stock issued under Employee Stock Purchase Plan	74		74
Tax benefit from exercise of employee stock options	1,397		1,397
Net income	9,259			9,259
Other comprehensive loss	(127)				(127)
Ending Balance (in shares) at Dec. 31, 2010		51,753,842
Ending Balance at Dec. 31, 2010	104,643	$ 52	205,063	(100,173)	(299)
Common stock issued upon exercise of stock options (in shares)		2,278,451
Common stock issued upon exercise of stock options	9,708	$ 2	9,706
Stock-based compensation	6,771		6,771
Common stock issued under Employee Stock Purchase Plan (in shares)		58,051
Common stock issued under Employee Stock Purchase Plan	572		572
Tax benefit from exercise of employee stock options	4,001		4,001
Net income	12,038			12,038
Other comprehensive loss	(35)				(35)
Ending Balance (in shares) at Dec. 31, 2011		54,090,344
Ending Balance at Dec. 31, 2011	$ 137,698	$ 54	$ 226,113	$ (88,135)	$ (334)

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flows from operating activities:
Net income	$ 12,038	$ 9,259	$ 7,763
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	6,771	5,142	4,726
Depreciation	6,563	5,791	3,347
Amortization of intangibles	1,029	1,486	1,973
Provision for doubtful accounts, net	290	166	68
Deferred income taxes	229	832	2,865
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable	(4,798)	(6,391)	(2,760)
Prepaid expenses and other current assets	665	(2,687)	(1,948)
Deferred implementation costs	(84)	(28)	12
Security deposits	146	(174)	23
Other assets	116		(116)
Accounts payable	1,451	45	1,836
Accrued expenses	211	1,224	2,367
Deferred revenue	447	884	866
Net cash provided by operating activities	25,074	15,549	21,022
Cash flows from investing activities:
Purchases of property and equipment, including capitalized software	(7,268)	(8,002)	(5,442)
Acquisition of NuConomy, net of cash acquired		(789)
Acquisition of Proficient	(75)	(95)	(98)
Acquisition of patents			(475)
Net cash used in investing activities	(7,343)	(8,886)	(6,015)
Cash flows from financing activities:
Repurchase of common stock		(3,649)	(28)
Excess tax benefit from the exercise of employee stock options and warrants	4,001	1,397	936
Proceeds from issuance of common stock in connection with the exercise of options and warrants	10,280	11,484	4,191
Net cash provided by financing activities	14,281	9,232	5,099
Effect of foreign exchange rate changes on cash and cash equivalents	(70)	(131)	(34)
Net increase in cash and cash equivalents	31,942	15,764	20,072
Cash and cash equivalents at the beginning of the year	61,336	45,572	25,500
Cash and cash equivalents at the end of the year	$ 93,278	$ 61,336	$ 45,572

CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Supplemental disclosure of non-cash investing and financing activities:
Capitalized equipment related to the Company's collocation facility	$ 1,631	$ 1,259	$ 259
Net cash paid for income taxes	$ 2,579	$ 3,800	2,000
Pre-acquisition contingency resulting in a decrease in accrued expenses			$ 566

Summary of Operations and Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Summary of Operations and Significant Accounting Policies

(1) Summary of Operations and Significant Accounting Policies

(a) Summary of Operations

LivePerson, Inc. (the “Company” or “LivePerson”) provides online engagement solutions that facilitate real-time assistance and expert advice. Connecting businesses and independent service providers with individual consumers seeking help on the Web, the Company’s hosted software platform creates more relevant, compelling and personalized online experiences. The Company was incorporated in 1995 and commenced operations in 1996.

The Company’s primary revenue source is from the sale of LivePerson services to businesses of all sizes. The Company also facilitates online transactions between independent service providers (“Experts”) who provide online advice to individual consumers (“Users”). Headquartered in New York City, the Company’s product development staff, help desk, and online sales support are located in Israel. The Company also maintains sales and professional services offices in Atlanta, London, San Francisco and Melbourne.

(b) Principles of Consolidation

The consolidated financial statements reflect the operations of LivePerson and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

(c) Use of Estimates

The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the U.S. requires the Company’s management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of goodwill, intangibles, stock-based compensation, valuation allowances for deferred income tax assets, accounts receivable, the expected term of a customer relationship, and accruals. Actual results could differ from those estimates.

(d) Cash and Cash Equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash equivalents, which primarily consist of money market funds, are recorded at cost, which approximates fair value.

(e) Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, generally three to five years for equipment and software. Leasehold improvements are depreciated using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Total depreciation for the years ended December 31, 2011, 2010 and 2009 was $6,563, $5,791, and $3,347, respectively.

(f) Impairment of Long-Lived Assets

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10, “Accounting for the Impairment or Disposal of Long-lived Assets,” long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying value of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying value of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying value or the fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

(g) Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers.

(h) Revenue Recognition

The majority of the Company’s revenue is generated from monthly service revenues and related professional services from the sale of the LivePerson services. Because the Company provides its application as a service, the Company follows the provisions of FASB ASC 605-10-S99, “Revenue Recognition” and ASC 605-25, “Revenue Recognition with Multiple-Element Arrangements.” The Company charges a monthly fee, which varies by type of service, the level of customer usage and website traffic, and in some cases, the number of orders placed via the Company’s online engagement solutions.

For certain of the Company’s larger customers, the Company may provide call center labor through an arrangement with one or more of several qualified vendors. For most of these customers, the Company passes the fee it incurs with the labor provider and its fee for the hosted services through to its customers in the form of a fixed fee for each order placed via the Company’s online engagement solutions. For these Pay for Performance (“PFP”) arrangements, the Company recognizes revenue net of the labor provider’s fee in accordance with ASC 605-45, “Principal Agent Considerations,” due primarily to the fact that the call center labor vendor is the primary obligor with respect to the labor services provided. Additionally, the Company performs as an agent without risk of loss for collection and does not bear inventory risk with respect to the outsourced labor services. Finally, the Company does not provide any part of the labor services, has no latitude in establishing prices for the labor services and generally does not have discretion in selecting the vendor.

The majority of the Company’s larger customers also pay a professional services fee related to implementation. The Company defers these implementation fees and associated direct costs and recognizes them ratably over the expected term of the customer relationship upon commencement of the hosting services. The Company may also charge professional service fees related to additional training, business consulting and analysis in support of the LivePerson services.

The Company also sells certain of the LivePerson services directly via Internet download. These services are marketed as LivePerson Pro and LivePerson Contact Center for small and mid-sized businesses (“SMBs”), and are paid for almost exclusively by credit card. Credit card payments accelerate cash flow and reduce the Company’s collection risk, subject to the merchant bank’s right to hold back cash pending settlement of the transactions. Sales of LivePerson Pro and LivePerson Contact Center may occur with or without the assistance of an online sales representative, rather than through face-to-face or telephone contact that is typically required for traditional direct sales.

The Company recognizes monthly service revenue based upon the fee charged for the LivePerson services, provided that there is persuasive evidence of an arrangement, no significant Company obligations remain, collection of the resulting receivable is probable and the amount of fees to be paid is fixed or determinable. The Company’s service agreements typically have twelve month terms and, in some cases, are terminable or may terminate upon 30 to 90 days’ notice without penalty. When professional service fees add value to the customer on a standalone basis, the Company recognizes professional service fees upon completion and customer acceptance in accordance with FASB Accounting Standards Update 2009-13. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimates. If a professional services arrangement does not qualify for separate accounting, the Company recognizes the fees, and the related labor costs, ratably over a period of 48 months, representing the Company’s current estimate of the term of the customer relationship.

For revenue generated from online transactions between Experts and Users, the Company recognizes revenue net of the Expert fees in accordance with ASC 605-45, “Principal Agent Considerations,” due primarily to the fact that the Expert is the primary obligor. Additionally, the Company performs as an agent without any risk of loss for collection, and is not involved in selecting the Expert or establishing the Expert’s fee. The Company collects a fee from the User and retains a portion of the fee, and then remits the balance to the Expert. Revenue from these transactions is recognized when there is persuasive evidence of an arrangement, no significant Company obligations remain, collection of the resulting receivable is probable and the amount of fees to be paid is fixed or determinable.

(i) Income Taxes

(j) Advertising Costs

The Company expenses the cost of advertising and promoting its services as incurred. Such costs totaled approximately $6,310 $6,132, and $6,098 for the years ended December 31, 2011, 2010 and 2009, respectively.

(k) Financial Instruments and Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable which approximate fair value at December 31, 2011 because of the short-term nature of these instruments. The Company invests its cash and cash equivalents with financial institutions that it believes are of high quality, and performs periodic evaluations of these instruments and the relative credit standings of the institutions with which it invests. At certain times, the Company’s cash balances with any one financial institution may exceed Federal Deposit Insurance Corporation insurance limits. The Company believes it mitigates its risk by depositing its cash balances with high credit, quality financial institutions.

The Company’s customers are located primarily in the United States. The Company performs ongoing credit evaluations of its customers’ financial condition (except for customers who purchase the LivePerson services by credit card via Internet download) and has established an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information. Concentration of credit risk is limited due to the Company’s large number of customers. No single customer accounted for or exceeded 10% of revenue in 2011, 2010 or 2009. One customer accounted for approximately 18% and 22% of accounts receivable at December 31, 2011 and 2010, respectively.

(l) Stock-based Compensation

The Company follows FASB ASC 718-10, “Stock Compensation,” which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.

The following table summarizes stock-based compensation expense related to employee stock options under ASC 718-10 included in Company’s Statement of Income for the years ended December 31, 2011, 2010 and 2009:


	December 31,
	2011		2010		2009
Cost of revenue	$	1,023	$	866	$	790
Product development expense		1,703		1,329		1,402
Sales and marketing expense		1,668		1,371		1,337
General and administrative expense		2,377		1,576		1,197
Total stock based compensation included in operating expenses	$	6,771	$	5,142	$	4,726

The per share weighted average fair value of stock options granted during the years ended December 31, 2011, 2010 and 2009 was $6.47, $3.89 and $1.53, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31, 2011, 2010 and 2009:


	December 31,
	2011			2010			2009
Dividend yield		0.0	%		0.0	%		0.0	%
Risk-free interest rate		0.9% – 3.7	%		2.6% – 3.8	%		2.8% – 3.9	%
Expected life (in years)		5.0			5.0			5.0
Historical volatility		60.1% – 61.5	%		60.3% – 61.9	%		61.3% – 68.2	%

(m) Basic and Diluted Net Income per Share

The Company calculates earnings per share (“EPS”) in accordance with the provisions of ASC 260-10 and the guidance of SEC Staff Accounting Bulletin (“SAB”) No. 98. Under ASC 260-10, basic EPS excludes dilution for common stock equivalents and is computed by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. All options, warrants or other potentially dilutive instruments issued for nominal consideration are required to be included in the calculation of basic and diluted net income attributable to common stockholders. Diluted EPS is calculated using the treasury stock method and reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and resulted in the issuance of common stock.

Diluted net income per common share for the year ended December 31, 2011 includes the effect of options to purchase 5,235,305 shares of common stock with a weighted average exercise price of $4.94. Diluted net income per common share for the year ended December 31, 2011 does not include the effect of options to purchase 3,608,110 shares of common stock as the effect of their inclusion is anti-dilutive. Diluted net income per common share for the year ended December 31, 2010 includes the effect of options to purchase 5,294,867 shares of common stock with a weighted average exercise price of $3.61. Diluted net income per common share for the year ended December 31, 2010 does not include the effect of options to purchase 3,524,395 shares of common stock as the effect of their inclusion is anti-dilutive. Diluted net income per common share for the year ended December 31, 2009 includes the effect of options to purchase 3,358,569 shares of common stock with a weighted average exercise price of $2.04. Diluted net income per common share for the year ended December 31, 2009 does not include the effect of options to purchase 5,353,242 shares of common stock as the effect of their inclusion is anti-dilutive.

A reconciliation of shares used in calculating basic and diluted earnings per share follows:


	Year Ended December 31,
	2011		2010		2009
Basic		52,876,999		50,721,880		47,962,688
Effect of assumed exercised options		2,131,743		2,185,661		1,045,752
Diluted		55,008,742		52,907,541		49,008,440

(n) Segment Reporting

The Company accounts for its segment information in accordance with the provisions of ASC 280-10, “Segment Reporting.” ASC 280-10 establishes annual and interim reporting standards for operating segments of a company. ASC 280-10 requires disclosures of selected segment-related financial information about products, major customers, and geographic areas based on the Company’s internal accounting methods. The Company is organized into two operating segments for purposes of making operating decisions and assessing performance. The Business segment supports and manages real-time online interactions — chat, voice/click-to-call, email and self-service/knowledgebase and sells its products and services to global corporations of all sizes. The Consumer segment facilitates online transactions between Experts and Users and sells its services to consumers. Both segments currently generate their revenue primarily in the U.S. The chief operating decision-makers evaluate performance, make operating decisions, and allocate resources based on the operating income of each segment. The reporting segments follow the same accounting polices used in the preparation of the Company’s consolidated financial statements which are described in the summary of significant accounting policies. The Company allocates cost of revenue, sales and marketing and amortization of purchased intangibles to the segments, but it does not allocate product development expenses, general and administrative expenses and income tax expense because management does not use this information to measure performance of the operating segments. There are currently no intersegment sales.

Summarized financial information by segment for the year ended December 31, 2011, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision makers, follows:


	Consolidated		Corporate			Business		Consumer
Revenue:
Hosted services – Business	$	111,934	$	—		$	111,934	$	—
Hosted services – Consumer		14,522		—			—		14,522
Professional services		6,633		—			6,633		—
Total revenue		133,089		—			118,567		14,522
Cost of revenue		33,195		—			29,793		3,402
Sales and marketing		38,884		—			32,690		6,194
Amortization of intangibles		109		—			109		—
Unallocated corporate expenses		41,266		41,266			—		—
Operating income (loss)	$	19,635	$	(41,266	)	$	55,975	$	4,926

Summarized financial information by segment for the year ended December 31, 2010, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision makers, follows:


	Consolidated		Corporate			Business		Consumer
Revenue:
Hosted services – Business	$	91,262	$	—		$	91,262	$	—
Hosted services – Consumer		14,195		—			—		14,195
Professional services		4,405		—			4,405		—
Total revenue		109,862		—			95,667		14,195
Cost of revenue		29,640		—			25,863		3,777
Sales and marketing		32,835		—			26,184		6,651
Amortization of intangibles		259		—			43		216
Unallocated corporate expenses		32,788		32,788			—		—
Operating income (loss)	$	14,340	$	(32,788	)	$	43,577	$	3,551

Summarized financial information by segment for the year ended December 31, 2009, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision makers, follows:


	Consolidated		Corporate			Business		Consumer
Revenue:
Hosted services – Business	$	72,372	$	—		$	72,372	$	—
Hosted services – Consumer		11,942		—			—		11,942
Professional services		3,176		—			3,176		—
Total revenue		87,490		—			75,548		11,942
Cost of revenue		21,076		—			17,522		3,554
Sales and marketing		27,355		—			20,350		7,005
Amortization of intangibles		745		—			457		288
Unallocated corporate expenses		25,528		25,528			—		—
Operating income (loss)	$	12,786	$	(25,528	)	$	37,219	$	1,095

Revenues attributable to domestic and foreign operations follows:


	December 31,
	2011		2010		2009
United States	$	101,519	$	84,725	$	67,244
United Kingdom		18,250		14,110		9,650
Other Countries		13,320		11,027		10,596
Total revenue	$	133,089	$	109,862	$	87,490

Long-lived assets by geographic region follows:


	December 31,
	2011		2010
United States	$	28,626	$	29,319
Israel		13,167		13,736
United Kingdom		2,249		2,391
Total long-lived assets	$	44,042	$	45,446

(o) Comprehensive Loss

ASC 220-10, “Reporting Comprehensive Income,” requires the Company to report in its consolidated financial statements, in addition to its net income, comprehensive loss, which includes all changes in equity during a period from non-owner sources including, as applicable, foreign currency items, minimum pension liability adjustments and unrealized gains and losses on certain investments in debt and equity securities. The Company’s comprehensive loss for all periods presented is related to the effect of foreign translation losses.

(p) Computer Software

The Company follows the provisions of ASC 350-40, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” ASC 350-40 provides guidance for determining whether computer software is internal-use software and on accounting for the proceeds of computer software originally developed or obtained for internal use and then subsequently sold to the public. It also provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company capitalized $1,086 as of December 31, 2011 and $536 as of December 31, 2010. Software costs are included in “Property and equipment, net” on the Company’s balance sheet and are depreciated using the straight-line method over their estimated useful life, generally three years.

(q) Goodwill and Intangible Assets

In accordance with ASC 350, Goodwill and Other Intangible Assets, goodwill and indefinite-lived intangible assets are not amortized, but reviewed for impairment upon the occurrence of events or changes in circumstances that would reduce the fair value below its carrying amount. Goodwill is required to be tested for impairment at least annually. In September 2011, the FASB issued ASU No. 2011-08, Intangibles — Goodwill and Other (Topic 350). ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. If it is determined that the fair value of a reporting unit is more likely than not to be less than its carrying value (including unrecognized intangible assets) then it is necessary to perform the second step of the goodwill impairment test. The second step of the goodwill impairment test is judgmental in nature and often involves the use of significant estimates and assumptions. Similarly, estimates and assumptions are used in determining the fair value of other intangible assets. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and also the magnitude of any such charge. The Company performs internal valuation analyses and considers other market information that is publicly available. Estimates of fair value are primarily determined using discounted cash flows and market comparisons. These approaches use significant estimates and assumptions including projected future cash flows (including timing), discount rates reflecting the risk inherent in future cash flows, perpetual growth rates, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. ASC 350-10 also requires that intangible assets with estimatable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with ASC 360-10-35, “Accounting for Impairment or Disposal of Long-Lived Assets.”

(r) Deferred Rent

The Company records rent expense on a straight-line basis over the term of the related lease. The difference between the rent expense recognized for financial reporting purposes and the actual payments made in accordance with the lease agreement is recognized as deferred rent liability on the Company’s balance sheet.

(s) Foreign Currency Translation

Assets and liabilities in foreign functional currencies are translated at the exchange rate as of the balance sheet date. Translation adjustments are recorded as a separate component of stockholders’ equity. Revenue, costs and expenses denominated in foreign functional currencies are translated at the weighted average exchange rate for the period. The translation adjustment of $35, $127 and $34 for the years ended December 31, 2011, 2010 and 2009, respectively, is related to the Company’s wholly-owned United Kingdom subsidiary. The functional currency of the Company’s wholly-owned Israeli subsidiaries is the U.S. dollar.

(t) Recently Issued Accounting Standards

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. This ASU is intended to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45. An entity is required to apply this amendment for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. ASU No. 2011-11 relates specifically to disclosures, it will not have an impact on the Company’s consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment. This ASU is intended to simplify how entities, test goodwill for impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. This update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Company elected early adoption of this update and it had no impact on its consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments to the FASB Accounting Standards Codification (Codification) in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company is currently assessing the impact of this update on its consolidated financial statements.

(u) Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. Cash and cash equivalents, accounts receivable, security deposits and accounts payable carrying amounts approximate fair value because of the short maturity of these instruments.

(v) Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the year ended December 31, 2011 are as follows:


	Total		Business		Consumer
Balance as of December 31, 2010	$	24,015	$	15,991	$	8,024
Adjustments to goodwill:
Contingent earnout payments		75		75		—
Balance as of December 31, 2011	$	24,090	$	16,066	$	8,024

The changes in the carrying amount of goodwill for the year ended December 31, 2010 are as follows:


	Total		Business		Consumer
Balance as of December 31, 2009	$	23,920	$	15,896	$	8,024
Adjustments to goodwill:
Contingent earnout payments		95		95		—
Balance as of December 31, 2010	$	24,015	$	15,991	$	8,024

Intangible assets are summarized as follows (see Note 2):

Acquired Intangible Assets


	As of December 31, 2011
	Gross Carrying Amount		Weighted Average Amortization Period		Accumulated Amortization
Amortizing intangible assets:
Technology	$	6,199		3.8 years	$	5,474
Customer contracts		2,400		3.0 years		2,400
Trade names		630		3.0 years		630
Non-compete agreements		410		1.2 years		410
Patents		475		11.0 years		105
Other		235		3.0 years		235
Total	$	10,349			$	9,254


	As of December 31, 2010
	Gross Carrying Amount		Weighted Average Amortization Period		Accumulated Amortization
Amortizing intangible assets:
Technology	$	6,199		3.8 years	$	4,489
Customer contracts		2,400		3.0 years		2,400
Trade names		630		3.0 years		630
Non-compete agreements		410		1.2 years		410
Patents		475		11.0 years		61
Other		235		3.0 years		235
Total	$	10,349			$	8,225

Amortization expense is calculated on a straight-line basis over the estimated useful life of the asset. Aggregate amortization expense for intangible assets was $1,029, $1,486 and $1,973 for the years ended December 31, 2011, 2010 and 2009, respectively. For the years ended December 31, 2011 and 2010, a portion of this amortization is included in cost of revenue. Estimated amortization expense for the next five years is: $306 in 2012, $306 in 2013, $240 in 2014, $43 in 2015, $43 in 2016 and $157 thereafter.

Acquisitions

12 Months Ended

Dec. 31, 2011

Acquisitions

(2) Acquisitions

Proficient Systems

On July 18, 2006, the Company acquired Proficient Systems, Inc. (“Proficient”), a provider of hosted proactive chat solutions that help companies generate revenue on their web sites. This transaction was accounted for under the purchase method of accounting and, accordingly, the operating results of Proficient were included in the Company’s consolidated results of operations from the date of acquisition. The acquisition added several U.K. based financial services customers and provided an innovative product marketing team. During the twelve months ended December 31, 2011, 2010 and 2009, the Company incurred additional costs related to the earn-out litigation in the amount of $75, $95, $98, respectively, resulting in an increase in goodwill. See “Legal Proceedings” and Note 9 of our consolidated financial statements for additional information regarding the Proficient litigation.

Based on the achievement of certain revenue targets as of March 31, 2007, LivePerson was contingently required to issue up to an additional 2,050,000 shares of common stock. Based on these targets, the Company issued 1,127,985 shares of common stock valued at $8,894, based on the quoted market price of the Company’s common stock on the date the contingency was resolved, and made a cash payment of $20 related to this contingency. At March 31, 2007, the value of these shares has been allocated to goodwill with a corresponding increase in equity. In accordance with the purchase agreement, the earn-out consideration was subject to review by Proficient’s Shareholders’ Representative. On July 31, 2007, the Company was served with a complaint filed in the United States District Court for the Southern District of New York by the Shareholders’ Representative of Proficient (“Plaintiff”). The complaint filed by the Shareholders’ Representative sought certain documentation relating to calculation of the earn-out consideration, and demanded payment of damages on the grounds that substantially all of the remaining contingently issuable earn-out shares should have been paid. The Company believes the claims are without merit. The case proceeded to trial, which ended on November 4, 2010. Post-trial filings were made on November 19, 2010. The Court has still not issued its ruling in this case. In the event that the Court finds in whole or in part for Plaintiff, the Company would be required to pay monetary damages in the amount held by the Court to have been underpaid in the earn-out. The Company is presently unable to reasonably estimate the amount of actual damages, if any, that will be awarded by the Court. If the Court were to find in favor of Plaintiff on every claim at issue in the litigation, the maximum potential damages award would be approximately $6,000. Should the Company be required to pay any damages award, the associated expense would be allocated to goodwill in connection with Proficient acquisition.

NuConomy Ltd.

On April 13, 2010, the Company acquired all of the outstanding shares of NuConomy Ltd. (“NuConomy”), an Israeli-based development-stage company whose web analytics and optimization platform is intended to help companies better assess and understand website and social marketing performance, in exchange for aggregate cash consideration of $800. This transaction was accounted for as an asset purchase. The net asset was allocated to “Intangibles, net.”

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 88-16
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141
-Paragraph 51, 52
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Appendix F
-Paragraph F4
-Subparagraph e

Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Statement of Financial Accounting Standard (FAS)
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-Paragraph 67-73
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 1
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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Reference 11: http://www.xbrl.org/2003/role/presentationRef
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Reference 12: http://www.xbrl.org/2003/role/presentationRef
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+ Details

Balance Sheet Components

12 Months Ended

Dec. 31, 2011

Balance Sheet Components

(3) Balance Sheet Components

Property and Equipment

Property and equipment is summarized as follows:


	December 31,
	2011		2010
Computer equipment and software	$	30,182	$	25,002
Furniture, equipment and building improvements		4,356		1,856
		34,538		26,858
Less accumulated depreciation		20,659		14,096
Total	$	13,879	$	12,762

Accrued Expenses

Accrued expenses consist of the following:


	December 31,
	2011		2010
Payroll and other employee related costs	$	6,435	$	6,973
Professional services, consulting and other vendor fees		4,686		4,211
Sales commissions		446		565
Other		452		362
Total	$	12,019	$	12,111

Capitalization

12 Months Ended

Dec. 31, 2011

Capitalization

(4) Capitalization

On May 14, 2010, our Board of Directors approved a stock repurchase program through June 30, 2012.

Under the stock repurchase program, the Company is authorized to repurchase shares of its common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by the Board of Directors depending upon prevailing market conditions and other corporate considerations, up to an aggregate purchase price of $10,000. As of December 31, 2010, the Company had repurchased 534,496 shares of its common stock for an aggregate cost of approximately $3,600. No shares were repurchased under this program during 2011.

Stock Options and Employee Stock Purchase Plan

12 Months Ended

Dec. 31, 2011

Stock Options and Employee Stock Purchase Plan

(5) Stock Options and Employee Stock Purchase Plan

During 1998, the Company established the Stock Option and Restricted Stock Purchase Plan (the “1998 Plan”). Under the 1998 Plan, the Board of Directors could issue incentive stock options or nonqualified stock options to purchase up to 5,850,000 shares of common stock. The 2000 Stock Incentive Plan (the “2000 Plan”) succeeded the 1998 Plan. Under the 2000 Plan, the options which had been outstanding under the 1998 Plan were incorporated in the 2000 Plan increasing the number of shares available for issuance under the plan by approximately 4,150,000, thereby reserving for issuance 10,000,000 shares of common stock in the aggregate.

The Company established the 2009 Stock Incentive Plan (as amended and restated, the “2009 Plan”) as a successor to the 2000 Plan. Under the 2009 Plan, the options which had been outstanding under the 2000 Plan were incorporated into the 2009 Plan and the Company increased the number of shares available for issuance under the plan by 6,000,000, thereby reserving for issuance 19,567,744 shares of common stock in the aggregate. Options to acquire common stock granted thereunder have ten-year terms. As of December 31, 2011, approximately 12,810,000 shares of common stock were reserved for issuance under the 2009 Plan (taking into account all option exercises through December 31, 2011). As of December 31, 2011, there was approximately $26,491 of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of approximately 2.2 years.

In March 2000, the Company adopted the 2000 Employee Stock Purchase Plan with 450,000 shares of common stock initially reserved for issuance (the “2000 ESPP”). The 2000 ESPP expired on its terms on the last day of April 2010.

In June 2010, our stockholders approved the 2010 Employee Stock Purchase Plan with 1,000,000 shares of common stock initially reserved for issuance. As of December 31, 2011, approximately 933,000 shares of common stock were reserved for issuance under the Employee Stock Purchase Plan (taking into account all share purchases through December 31, 2011).

A summary of the Company’s stock option activity and weighted average exercise prices follows:


	Options			Weighted Average Exercise Price
Options outstanding at December 31, 2008		9,939,045		$	3.67
Options granted		1,960,500			2.66
Options exercised		(2,094,888	)		2.06
Options cancelled		(1,092,849	)		3.65
Options outstanding at December 31, 2009		8,711,808			3.82
Options granted		3,809,380			7.13
Options exercised		(2,843,547	)		4.10
Options cancelled		(860,881	)		5.09
Options outstanding at December 31, 2010		8,816,760			5.04
Options granted		3,642,600			12.24
Options exercised		(2,278,451	)		4.28
Options cancelled		(1,337,496	)		7.03
Options outstanding at December 31, 2011		8,843,413		$	7.91
Options exercisable at December 31, 2009		4,463,915		$	4.03
Options exercisable at December 31, 2010		3,097,748		$	3.93
Options exercisable at December 31, 2011		2,805,399		$	4.63

The total value of stock options exercised during the years ended December 31, 2011, 2010 and 2009 was approximately $17,174, $11,050 and $6,204, respectively. The total intrinsic value of options exercisable at December 31, 2011, 2010 and 2009 was approximately $21,890, $22,491 and $12,799, respectively. The total intrinsic value of nonvested options at December 31, 2011, 2010 and 2009 was approximately $19,839, $32,420 and $14,318, respectively. The total intrinsic value of all outstanding options at December 31, 2011, 2010 and 2009 was approximately $41,729, $54,911 and $27,117, respectively.

A summary of the status of the Company’s nonvested options as of December 31, 2009, and changes during the years ended December 31, 2010 and 2011 is as follows:


	Shares			Weighted Average Grant-Date Fair Value
Nonvested Shares at January 1, 2010		4,247,893		$	2.13
Granted		3,809,380			3.89
Vested		(1,521,951	)		2.41
Cancelled		(816,310	)		2.83
Nonvested Shares at December 31, 2010		5,719,012		$	3.13

Nonvested Shares at January 1, 2011		5,719,012		$	3.13
Granted		3,642,600			6.47
Vested		(1,967,639	)		3.00
Cancelled		(1,355,959	)		3.83
Nonvested Shares at December 31, 2011		6,038,014		$	5.04

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
-Paragraph 64, 65, A240
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 93-6
-Paragraph 53
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 50
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 40
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

+ Details

Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2011

Valuation and Qualifying Accounts

(6) Valuation and Qualifying Accounts


	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Deductions / Write-Offs			Balance at End of Period
For the year ended December 31, 2011 Allowance for doubtful accounts	$	561	$	290	$	(163	)	$	688
For the year ended December 31, 2010 Allowance for doubtful accounts	$	395	$	166	$	—		$	561
For the year ended December 31, 2009 Allowance for doubtful accounts	$	340	$	68	$	(13	)	$	395

Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

(7) Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are expected to become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company includes interest accrued on the underpayment of income taxes in interest expense and penalties, if any, related to unrecognized tax benefits in general and administrative expenses.

Under Section 382 of the Internal Revenue Code of 1986, as amended, the Company’s use of its federal net operating loss (“NOL”) carryforwards may be limited if the Company experiences an ownership change, as defined in Section 382. Such an annual limitation could result in the expiration of the net operating loss carryforwards before utilization. As of December 31, 2011, the Company had approximately $7,279 of federal NOL carryforwards available to offset future taxable income. Included in this amount is $6,124 of federal NOL carryovers from the Company’s acquisition of Proficient. These carryforwards expire in various years through 2027.

The domestic and foreign components of income before provision for income taxes consist of the following:


	Year Ended December 31,
	2011		2010		2009
United States	$	16,495	$	12,478	$	10,972
Foreign		2,655		1,855		1,828
	$	19,150	$	14,333	$	12,800

No additional provision has been made for U.S. income taxes on the undistributed earnings of its Israeli subsidiary, LivePerson Ltd (formerly HumanClick Ltd.), as such earnings have been taxed in the U.S. and accumulated earnings of the Company’s other foreign subsidiaries are immaterial through December 31, 2011.

The provision for income taxes consists of the following:


	Year Ended December 31,
	2011			2010			2009
Current income taxes:
U.S. Federal	$	5,839		$	3,554		$	1,418
State and local		600			473			516
Foreign		444			215			238
Total current income taxes		6,883			4,242			2,172
Deferred income taxes:
U.S. Federal		232			694			2,719
State and local		(38	)		(60	)		21
Foreign		35			198			125
Total deferred income taxes		229			832			2,865
Total income taxes	$	7,112		$	5,074		$	5,037

The difference between the total income taxes computed at the federal statutory rate and the benefit from income taxes consists of the following:


	Year Ended December 31,
	2011			2010			2009
Federal Statutory Rate		34.48	%		34.30	%		34.00	%
State taxes, net of federal benefit		2.56	%		2.27	%		2.80	%
Non-deductible expenses – ISO		0.47	%		(0.88	)%		2.19	%
Non-deductible expenses – Other		0.51	%		0.43	%		0.26	%
Foreign taxes		(0.13	)%		(0.08	)%		(0.44	)%
Other		(0.76	)%		(0.64	)%		0.54	%
Total provision		37.13	%		35.40	%		39.35	%

The effects of temporary differences and tax loss carryforwards that give rise to significant portions of federal deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010 are presented below:


	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	2,504		$	2,720
Accounts payable and accrued expenses		424			317
Non-cash compensation		2,582			2,177
Goodwill and intangibles amortization		1,462			1,632
Allowance for doubtful accounts		260			208
Net deferred tax assets		7,232			7,054
Deferred tax liabilities:
Plant and equipment		(2,061	)		(1,443	)
Intangibles related to the Kasamba acquisition		—			(206	)
Total deferred tax liabilities		(2,061	)		(1,649	)
Net deferred assets	$	5,171		$	5,405

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 43, 44, 45, 46, 47, 48, 49
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(h))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

+ Details

Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies

(8) Commitments and Contingencies

The Company leases facilities and certain equipment under agreements accounted for as operating leases. These leases generally require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases for the years ended December 31, 2011, 2010 and 2009 was approximately $6,615, $6,428 and $4,855, respectively.

Future minimum lease payments under non-cancelable operating leases (with an initial or remaining lease terms in excess of one year) are as follows:


Year ending December 31,	Operating Leases
2012	$	7,126
2013		4,427
2014		2,766
2015		2,205
2016		570
Thereafter		2,002
Total minimum lease payments	$	19,096

Capital Expenditures

During 2007, the Company began to build a collocation facility in the eastern U.S. to host the LivePerson and Consumer services. During 2010, the Company began to build additional collocation facilities in Europe to host the LivePerson and Consumer services. Through December 31, 2011, the Company spent approximately $21,350 for servers, network components and related hardware and software. This amount is included in “Assets — Property and equipment, net” on our December 31, 2011 balance sheet. Though the Company expects to incur additional costs in 2012 related to the continued build-out of our collocation facilities and similar backup facilities to support disaster recovery capabilities in the U.S. and U.K., its total capital expenditures are not currently expected to exceed $10,000 in 2012. The Company anticipates that our current cash and cash equivalents and cash from operations will be sufficient to complete the build-out.

Employee Benefit Plans

The Company has a 401(k) defined contribution plan covering all eligible employees. The Company provides for employer matching contributions equal to 50% of employee contributions, up to the lesser of 5% of eligible compensation or $6. Matching contributions are deposited in to the employees 401(k) account and are subject to 5 year graded vesting. Salaries and related expenses include $545 and $436 of employer matching contributions for the years ended December 31, 2011 and 2010, respectively.

Indemnifications

The Company enters into service and license agreements in its ordinary course of business. Pursuant to some of these agreements, the Company agrees to indemnify certain customers from and against certain types of claims and losses suffered or incurred by them as a result of using the Company’s products.

The Company also has agreements whereby its executive officers and directors are indemnified for certain events or occurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a directors and officers insurance policy that reduces its exposure and enables the Company to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. Currently, the Company has no liabilities recorded for these agreements as of December 31, 2011.

- Definition

The entire disclosure for commitments and contingencies.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Interpretation (FIN)
-Number 14
-Paragraph 3
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 5
-Paragraph 9, 10, 11, 12
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.25)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 450
-SubTopic 20
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6952336&loc=d3e14435-108349

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 460
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=6398077&loc=d3e12565-110249

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 440
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6394976&loc=d3e25287-109308

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6449706&loc=d3e16207-108621

+ Details

Legal Matters

12 Months Ended

Dec. 31, 2011

Legal Matters

(9) Legal Matters

On July 31, 2007, the Company was served with a complaint filed in the United States District Court for the Southern District of New York by the Shareholders’ Representative of Proficient Systems, Inc. In connection with the July 2006 acquisition of Proficient, the Company was contingently required to issue up to 2,050,000 shares of common stock based on the terms of an earn-out provision in the merger agreement. In accordance with the terms of the earn-out provision, the Company issued 1,127,985 shares of LivePerson common stock in the second quarter of 2007 to the former shareholders of Proficient. The amended complaint filed by the Shareholders’ Representative, or Plaintiff, on May 12, 2009 alleges that the Company breached the merger agreement by failing to properly account for net annualized revenue, and demands payment of damages on the grounds that substantially all of the remaining contingently issuable earn-out shares should have been paid. The Company believes the claims are without merit. The case proceeded to trial, which ended on November 4, 2010. Post-trial filings were made on November 19, 2010. The Court has still not issued its ruling in this case. In the event that the Court finds in whole or in part for Plaintiff, the Company would be required to pay monetary damages in the amount held by the Court to have been underpaid in the earn-out. The Company is presently unable to reasonably estimate the amount of actual damages, if any, that will be awarded by the Court. If the Court were to find in favor of Plaintiff on every claim at issue in the litigation, the maximum potential damages award would be approximately $6,000. Should the Company be required to pay any damages award, the associated payment would be allocated to goodwill in connection with Proficient acquisition.

On November 3, 2010, Gemini IP LLC filed an amended complaint in a suit pending in the United States District Court for the Eastern District of Texas, adding patent infringement allegations against the Company and various other defendants, including LANDesk Software, Inc., Saba Software, Inc., Genesys S.A. d/b/a Genesys Conferencing, Genesys Conferencing, Inc., Avaya Inc., Best Buy Co., Inc., Bomgar Corporation, ConnectWise, Inc., Elsinore Technologies Inc., GFI Software Ltd., GFI USA, Inc., GFI Software Development, Ltd., LogMeIn, Inc., N-able Technologies Incorporated, NTR Global, Venti Solutions, LLC, Zoho Corporation, Zenith Infotech Ltd., International Business Machines Corp., Samsung Electronics America, Inc., Samsung Electronics Co., Ltd., Samsung Telecommunications America, LLC, AT&T, Inc., Sony Corporation, and Sony Corporation of America. On August 26, 2011, Gemini and LivePerson jointly filed a motion asking the Court to dismiss all claims with prejudice. The Court has not yet ruled on that motion.

On June 15, 2011, the Company filed suit against Lodsys, LLC, in the United States District Court for the Northern District of Illinois, seeking a declaratory judgment that the Company’s products do not infringe four patents which Lodsys had previously asserted were infringed by the Company’s customers, as well as a declaratory judgment that those four patents are invalid. On July 5, 2011, Lodsys moved to dismiss the Illinois case based on lacking personal jurisdiction, and also countersued the Company and other plaintiffs in similarly-situated declaratory judgment actions, including DriveTime Automotive Group, Inc., ESET, LLC, ForeSee Results, LLC, OpinionLab, Inc., and The New York Times Company, in the United States District Court for the Eastern District of Texas. In the Texas case, Lodsys alleges that the Company infringes one of the patents involved in the co-pending Illinois case, and seeks damages for past infringement, and an injunction against future infringement. The Company believes Lodsys’s claims are without merit. On October 25, 2011 the Court granted the parties’ joint motion to transfer the cases from Illinois to the Eastern District of Wisconsin, and all pending motions were withdrawn, including Lodsys’s pending motion to dismiss. On January 6, 2012 Lodsys filed a motion to dismiss the Wisconsin case, or, in the alternative, for a more definite statement. On January 27, 2012 the Company filed an amended complaint in the Wisconsin case. On February 10, 2012 Lodsys filed a motion to dismiss the Wisconsin case, or, in the alternative, to transfer or stay. On January 23, 2012, the Company moved to dismiss the Texas case in favor of the first-filed Wisconsin case. On February 9, 2012 Lodsys filed its opposition to the Company’s motion, and the Company filed its reply on February 21, 2012. This motion is fully briefed.

On February 7, 2012, the Company filed suit against Pragmatus Telecom LLC in the District of Delaware, seeking a declaratory judgment that the Company’s products do not infringe three patents owned by Pragmatus which Pragmatus had previously asserted were infringed by certain of the Company’s customers, as well as a declaratory judgment that those four patents are invalid.

Although the Company currently does not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of operations, litigation is inherently unpredictable. Therefore, judgments could be rendered or settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable.

From time to time, the Company is involved in other legal proceedings arising in the ordinary course of its business, which may arise from direct legal claims brought by or against the Company, or from claims brought against the Company’s customers for which the Company has a contractual indemnification obligation.

Unaudited Supplementary Financial Information - Quarterly Results of Operations

12 Months Ended

Dec. 31, 2011

Unaudited Supplementary Financial Information - Quarterly Results of Operations

(10) Unaudited Supplementary Financial Information — Quarterly Results of Operations

The following table sets forth, for the periods indicated, the Company’s financial information for the eight most recent quarters ended December 31, 2011. In the Company’s opinion, this unaudited information has been prepared on a basis consistent with the annual consolidated financial statements and includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the unaudited information for the periods presented. This information should be read in conjunction with the consolidated financial statements, including the related notes, included herein.



	Quarter Ended
	Dec. 31, 2011			Sept. 30, 2011			June 30, 2011		Mar. 31, 2011		Dec. 31, 2010			Sept. 30, 2010		June 30, 2010			Mar. 31, 2010
Revenue	$	36,509		$	34,347		$	31,851	$	30,382	$	29,935		$	28,221	$	26,398		$	25,308
Operating expenses:
Cost of revenue		8,047			8,368			8,685		8,095		8,235			7,595		7,178			6,632
Product development		5,563			5,266			5,016		4,377		4,257			3,940		3,908			3,606
Sales and marketing		10,738			9,907			9,379		8,860		8,404			8,289		8,452			7,690
General and administrative		6,009			5,689			5,386		3,960		4,932			4,178		4,175			3,792
Amortization of intangibles		76			11			11		11		10			83		83			83
Total operating expenses		30,433			29,241			28,477		25,303		25,838			24,085		23,796			21,803
Income from operations		6,076			5,106			3,374		5,079		4,097			4,136		2,602			3,505
Other (expense) income:
Financial (expense) income		(132	)		(780	)		208		156		(59	)		43		(41	)		(49	)
Interest income		15			18			16		14		16			30		30			23
Total other (expense) income, net		(117	)		(762	)		224		170		(43	)		73		(11	)		(26	)
Income before provision for income taxes		5,959			4,344			3,598		5,249		4,054			4,209		2,591			3,479
Provision for income taxes		2,083			1,609			1,402		2,018		1,312			1,444		975			1,343
Net income	$	3,876		$	2,735		$	2,196	$	3,231	$	2,742		$	2,765	$	1,616		$	2,136
Basic net income per common share	$	0.07		$	0.05		$	0.04	$	0.06	$	0.05		$	0.05	$	0.03		$	0.04
Diluted net income per common share	$	0.07		$	0.05		$	0.04	$	0.06	$	0.05		$	0.05	$	0.03		$	0.04
Weighted average shares outstanding used in basic net income per common share calculation		53,563,396			53,109,824			52,735,556		52,080,363		51,133,917			50,976,468		50,921,609			49,838,491
Weighted average shares outstanding used in diluted net income per common share calculation		55,756,350			55,736,089			55,553,247		54,805,222		53,831,339			53,302,655		53,416,706			52,193,862

- Definition

The entire disclosure for the quarterly financial data in the annual financial statements. The disclosure may include a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income or loss before extraordinary items and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished.

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