LIVEPERSON INCLPSN
LIVEPERSON INC Fair Value Disclosure
Fair Value Measurements
The Company measures its cash equivalents at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:
•Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2: Inputs reflect: quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
Financial Assets and Liabilities
The carrying amount of cash, accounts receivable, and accounts payable approximate their fair value due to their short-term nature. The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of December 31, 2025 and 2024, are summarized as follows:
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents - money market funds | $ | 43,000 | $ | — | $ | — | $ | 43,000 | |||||||||||||||
| Total assets | $ | 43,000 | $ | — | $ | — | $ | 43,000 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Warrants liability | $ | — | $ | — | $ | 2,999 | $ | 2,999 | |||||||||||||||
| Total liabilities | $ | — | $ | — | $ | 2,999 | $ | 2,999 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents - money market funds | $ | 105,772 | $ | — | $ | — | $ | 105,772 | |||||||||||||||
| Total assets | $ | 105,772 | $ | — | $ | — | $ | 105,772 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Warrants liability | $ | — | $ | — | $ | 17,498 | $ | 17,498 | |||||||||||||||
| Total liabilities | $ | — | $ | — | $ | 17,498 | $ | 17,498 | |||||||||||||||
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions based on the best information available.
The Company’s money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as Level 1 within the fair value hierarchy. The Company’s Warrants liability was measured at fair value on a recurring basis and was classified as Level 3 within the fair value hierarchy. Significant changes in unobservable inputs could result in significantly lower or higher fair value measurements.
On a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. Estimated fair values are Level 3 measures in the fair value hierarchy.
The estimated fair value of outstanding balances of the Notes as of the dates presented are as follows:
Level of Hierarchy | Fair Value | Principal Balance | Unamortized Debt Discount | Unamortized Debt Issuance Costs | Net Carrying Value | ||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| 2026 Notes | 2 | $ | 8,175 | $ | 20,125 | $ | — | $ | (73) | $ | 20,052 | ||||||||||||||||||||||||
| 2029 Notes | 3 | $ | 200,601 | $ | 221,877 | $ | (25,955) | $ | (6,142) | $ | 189,780 | ||||||||||||||||||||||||
| Second Lien Notes | 3 | $ | 61,497 | $ | 181,952 | $ | — | $ | — | $ | 181,952 | ||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| 2026 Notes | 2 | $ | 164,348 | $ | 361,204 | $ | — | $ | (2,757) | $ | 358,447 | ||||||||||||||||||||||||
| 2029 Notes | 3 | $ | 180,360 | $ | 207,125 | $ | (31,137) | $ | (7,365) | $ | 168,623 | ||||||||||||||||||||||||
Management determined the fair value of 2026 Notes by using Level 2 inputs based on observable market prices for the instrument and similar instruments. Management determined the fair value of the 2029 Notes as of December 31, 2025 by using Level 3 inputs, including the volatility of 15%, yield of 16%, risk-free rate of 3.59% and credit spread of 12.81%. Management determined the fair value of the Second Lien Notes as of December 31, 2025 by using Level 3 inputs, including volatility of 15.00%, yield of 30.00%, risk-free rate of 3.64% and credit spread of 24.60%. A change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. Management determined the fair value of the 2029 Notes and Delayed Draw Notes as of December 31, 2024 by using Level 3 inputs, including the yield of 16%, risk-free rate of 4.35%, and credit spread of 11.42%.
Warrants
The Company recorded the fair value of the Warrants upon issuance using the Black-Scholes valuation model and is required to revalue these Warrants at each reporting date with any changes in fair value recorded on the Company’s consolidated
statements of operations. The valuation of the Warrants was classified as Level 3 within the fair value hierarchy and is influenced by the fair value of the underlying, or notional amount of, common stock of the Company. A summary of the Black-Scholes pricing model assumptions used to record the fair value of the Warrants as of December 31, 2025 and 2024 is as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Stock price | $3.87 | $1.52 | |||||||||
| Risk free rate | 4.05% | 4.56% | |||||||||
| Expected life (in years) | 8.43 | 9.43 | |||||||||
| Expected volatility | 85.00% | 76.00% | |||||||||
Any significant changes in the inputs may result in significantly higher or lower fair value measurements. Refer to Note 8 – Senior Notes, Capped Call Transactions, Warrants and Preferred Stock for additional information.
The changes in fair value of the Level 3 Warrants as of the dates presented are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Balance, beginning of year | $ | 17,498 | $ | — | |||||||
| Issuance of Warrants | — | 5,266 | |||||||||
| Settlement of Warrants | (1,297) | — | |||||||||
| Change in fair value of Warrants | (13,202) | 12,232 | |||||||||
| Balance, end of year | $ | 2,999 | $ | 17,498 | |||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 14, 2025 | |
| 2023 | Mar 4, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 8, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Mar 15, 2018 | |
| 2016 | Mar 10, 2017 | |
| 2015 | Mar 15, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.