Shares of LivePerson (NASDAQ: LPSN) have been one of this year's biggest surprises. The stock has more than doubled in 2018. A strong financial report shortly after Thursday's market close would seem to make sure that LivePerson continues to be a winner through the end of the year, but mixed guidance offers divergent fortunes for the two ends of the company's income statement.
Revenue rose 14% to hit a record $64.2 million in the third quarter. If 14% in top-line growth seems familiar, it's because that's exactly where the year-over-year growth clocked in for the second quarter three months ago and the first quarter three months before that. LivePerson's guidance back in August was calling for just 10% to 12% in revenue growth for the provider of high-tech customer support solutions.
Image source: LivePerson.
Keeping the streaks alive
LivePerson isn't faring so well on the bottom line. It continues to post reported widening deficits. LivePerson's net loss of $7 million, or $0.12 a share, for the third quarter finds it spilling more red ink than the $1.3 million hole it was in a year earlier. The adjusted profit of $0.02 a share is roughly half the $0.05 a share it posted in the prior year's third quarter -- and it's at the low end of the earnings guidance it initiated in August.
The business model is thriving on the top line. LivePerson continues to sign new deals, and existing customers are spending more on the platform. The bottom line is another story. One-time IP litigation costs weighed on LivePerson's margins this time around, but net margin was contracting anyway under the weight of surging product development and sales costs.
LivePerson's refreshed guidance reflects the ongoing trend, with revenue and earnings going in different directions. LivePerson now sees $248 million to $250 million in revenue for 2018, up from the $245.5 million to $247.5 million it was modeling three months ago. It now sees an adjusted profit-per-share between $0.05 and $0.07, half of its previous range.
This isn't new. LivePerson also boosted its revenue guidance at the expense of reducing its adjusted net income outlook last time out. Guidance initiated for the fourth quarter is calling for a profit of $0.01 to $0.03 a share on $63.9 million to $65.9 million in revenue -- or 11% to 15% growth for those cheering on a fourth consecutive quarter of a 14% increase on the top line.
LivePerson has historically been a steady grower without much in terms of quarter-to-quarter seasonality. It had a streak of 51 consecutive periods of sequential revenue growth that ended in 2015, and Thursday afternoon's report extends its latest run to six straight periods of quarter-over-quarter top-line growth. Thursday's guidance suggests that the streak of sequential revenue growth should stretch to seven quarters unless it lands at the low end of its range. Earnings growth is a problem, but if the costs needed to get its successful LiveEngage platform growing and new services coming are the price it has to pay to keep double-digit revenue growth coming, it's hard to complain.
The stock's been a rocket ship since bottoming out two years ago. LivePerson has more than doubled over the past year, and it's a six-bagger since bottoming out in the springtime of 2016. Mixed guidance following huge gains can often be the kiss of death, but stock gyrations aside, LivePerson is doing a solid job returning to form as a growth stock.
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