LivePerson's Q1 2024 earnings call [Transcript Link] painted a picture of a company in transition, grappling with the aftershocks of past strategic pivots and a renewed focus on reclaiming its position as a leader in the digital customer conversation space. While the headline numbers – a sequential revenue decline and a net revenue retention rate of 89% – sparked concerns, a deeper dive into the transcript reveals subtle, yet significant, whispers of a potential turnaround already taking root.

The dominant narrative surrounding LivePerson's performance centers around customer cancellations and the urgent need to rebuild its customer success motion. This is undeniably a crucial area for improvement. As CEO John Sabino aptly stated, customer success acts as an engine, driving renewals and expansion, allowing the sales team to focus on new business acquisition. However, the narrative often overlooks the crucial context surrounding these cancellations.

Firstly, a majority of these cancellations originated nine to twelve months prior, a period marked by corporate instability and a less-than-stellar financial profile for LivePerson. During that period, the company grappled with multiple strategic pivots, creating a climate of uncertainty that understandably led some customers to question LivePerson's long-term viability as a strategic partner.

Secondly, the very nature of LivePerson's platform played a role in these cancellations. Customers seeking basic messaging support found themselves vulnerable to the encroachment of voice providers extending their offerings into the digital space. These voice providers, armed with good-enough digital capabilities, capitalized on LivePerson's historical tendency to sell feature functionality rather than holistic solutions.

This brings us to the whispers of change. While the full impact of LivePerson's revamped customer success motion and simplified pricing and packaging strategy will take time to materialize, there are early indicators suggesting a shift in customer perception.

The most striking of these indicators lies in the divergence between new ARR and revenue trends. While revenue is expected to decline sequentially throughout the year due to the full-year impact of first-quarter cancellations, LivePerson anticipates positive new ARR growth, starting in Q4. This projected positive growth in new ARR, driven by a combination of new bookings and reduced churn, points to a growing confidence in LivePerson's future prospects.

Furthermore, the imminent strategic partnership with a major global CCaaS provider promises to significantly bolster LivePerson's offering, addressing the very customer demand that fueled some of the previous cancellations – a unified, AI-powered platform for both voice and digital customer service. This partnership, founded on robust technology integrations and shared economics, will grant LivePerson access to a vastly expanded contact center agent footprint and a network of over 5,000 channel partners.

Projected Revenue vs. New ARR Growth

The table above clearly illustrates the anticipated divergence between revenue and new ARR. While revenue is projected to decline sequentially throughout 2024, new ARR is expected to turn positive in Q4, signaling a potential inflection point for LivePerson.

New Logo Wins vs. Expansions & Renewals

As seen in the pie chart above, a significant portion of LivePerson's Q1 2024 deals were expansions and renewals, highlighting the company's efforts to retain its existing customer base.

It's no secret that LivePerson has endured a tumultuous period, marred by strategic missteps and customer churn. However, to simply fixate on these challenges is to miss the subtle whispers of change echoing through the Q1 earnings call. The company's renewed focus on customer success, simplified pricing and packaging, and a game-changing strategic partnership create a compelling narrative of a turnaround in motion.

"Hypothesis: The divergence between projected revenue decline and positive new ARR growth suggests a potential inflection point for LivePerson. This divergence indicates that while the company is still grappling with the revenue impact of past cancellations, new bookings and reduced churn are starting to paint a more optimistic picture of the future."

"Fun Fact: LivePerson holds over 18,000 patents related to conversational AI, underscoring their deep commitment to innovation in the space. This vast intellectual property portfolio positions LivePerson as a technological leader in the conversational AI landscape."

The whispers of change are becoming increasingly audible. It remains to be seen whether these whispers will crescendo into a full-blown turnaround, but the early signs are promising. Investors would be wise to tune in to these whispers, for they may be heralding a new era of profitable growth for LivePerson.