Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: Shares of LivePerson (LPSN -0.80%) were down 12.4% as of 11:30 a.m. Tuesday after the cloud-based customer service specialist announced mixed first-quarter results and lowered its full-year guidance.
Quarterly revenue rose 25% year over year (28% on a constant-currency basis) to $59.8 million, including $56.1 million from business operations and $3.7 million from consumer operations. LivePerson also signed 147 deals during the quarter, adding 30 new customers in the process. Revenue per enterprise and mid-market customer (of which LivePerson now counts more than 100 total) averaged $174,000 over the trailing 12 months, or a 3% sequential increase over last quarter. Meanwhile, this translated to adjusted net income of $2.4 million, or $0.04 per share, compared to $0.05 per share in the year-ago period.
Analysts, on average, were expecting roughly the same per-share earnings, but on slightly higher revenue of $60.8 million.
But what really provoked the market's ire was LivePerson's 2015 guidance. Now, LivePerson expects full-year sales of $243 million to $247 million, with adjusted net income per share of $0.10 to $0.15. Three months ago, LivePerson told investors to expect 2015 sales and EPS in the ranges of $263 million to $269 million, and $0.27 to $0.32, respectively. Analysts were modeling 2015 revenue of $264.6 million, and earnings of $0.28 per share.
Why it's happening: The primary cause for those reductions is a combination of "the impact of one larger customer contract that ended, an increase in foreign exchange headwinds, and a slightly slower start to the year than expected as the company intensified its focus on bringing LiveEngage to the market," according to the company. As such, LivePerson adjusted its expense plan to mitigate the impact of these headwinds and to focus on areas with the highest potential growth. That should result in a charge of roughly $2.5 million in the current quarter, but should also drive roughly $13 million in expense savings this year.
In any case, it's hard to blame the market for taking a step back given LivePerson's changes to guidance and slow start to the year. That doesn't mean LivePerson's efforts won't pay off in the long run once LiveEngage hits the market, but investors would be wise to watch its progress closely in the coming quarters.