Shares of LivePerson Inc. endured a record one-day selloff on Thursday, heading to seven-year lows, after the provider of natural-language chat services dropped fourth-quarter after Medicare pulled payments and executives opted to pay bonuses. reported a surprise loss in the quarter. in cash rather than company stock. The company late Wednesday reported a net loss that fell to $41.7 million, or 55 cents per share, from $49.9 million, or 70 cents per share, in the same period a year earlier. Excluding non-recurring items, FactSet said the company’s per-share loss of 24 cents missed the average analyst estimate for earnings per share of 12 cents. Revenue fell to $122.5 million from $123.8 million, while the FactSet consensus was for growth of $127 million. Cost of revenue increased 4.3% to $46.4 million, as gross margin fell to 62.1% from 64.1%. The stock LPSN, -57.73% fell 57.7% to $4.13, its lowest close since Feb. 11, 2016, and its biggest one-day selloff since the company went public in April 2000. The previous record decline was 41.9% on October 4. , 2000. The company said results were hurt by two “unexpected” changes during the quarter. First, as disclosed last week, LivePerson said its WildHealth subsidiary was notified that Medicare was suspending reimbursement for the services “pending further government review.” The company stated that although it believes the services rendered were recognized, given the uncertainty surrounding the timing and amount of further reimbursement, the company decided not to recognize revenue for any reimbursement that has not yet been collected. “We currently believe that the services provided under the program in the fourth quarter of 2022 were valid and should ultimately be reimbursable,” Chief Financial Officer John Collins said in a post-earnings call with clients, according to a transcript provided by AlphaSense. Second, Collins said it has been decided that executive incentive bonuses will be paid in cash rather than company stock. “[I]In light of the remaining capacity under our 2019 stock incentive plan and to reduce dilution to our shareholders, particularly in light of current valuations and more generally, to improve earnings quality, we have decided to pay the 2022 employee bonus. Cash instead of stock,” Collins said. When incentive bonuses are paid in stock, the supply of shares increases, which in effect reduces each shareholder’s stake in the company. A higher share count with the same amount of earnings means lower earnings per share or higher loss per share. Unexpected cash payments, meanwhile, increase costs and reduce net income. For the first quarter, the company expects revenue of $106 million to $109 million, below the FactSet consensus of $125.9 million. For 2023, the company said it expects revenue of $422 million to $436 million, compared with the FactSet consensus as of the end of February of $550 million. On the bright side, Collins said the company has “rationalized” its costs over the past 12 months, leading to an expected $200 million, or 36%, reduction in annual expenses. He said the company has also reduced overhead costs in the current quarter. Part of the cost savings comes from having fewer employees. In the company’s 2022 annual report earlier Thursday, the company said it had 1,301 full-time employees as of Dec. 31. That’s 15.5% less than the 1,540 employees it had at the end of 2021. KeyBanc Capital analyst Thomas Blakey downgraded the stock to sector weight from September 2022 to overweight. While he believes LivePerson is well-positioned to benefit from emerging trends in digital engagement and conversational artificial intelligence, he said he is concerned about the outlook for growth and margins as well as increased implementation. Risks b. Riley’s Zack Cummins reiterated his neutral rating on the stock from February 2022 but lowered his price target to $7 from $12, saying that near-term upside for the stock could be limited by “significantly reset expectations.” The stock has fallen 83.2% in the past 12 months through Wednesday, while the S&P 500 SPX, +1.76% has fallen 10.2%.
