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LogMeIn (LOGM) Beats Q3 Earnings Estimates, Raises Guidance

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LogMeIn (LOGM - Free Report) reported better-than-expected results for third-quarter 2018.

The company reported non-GAAP earnings of $1.40 per share, which came ahead of the Zacks Consensus Estimate of $1.34 and marked a year-over-year improvement of 20.7%.

The company’s non-GAAP revenues for the quarter came in at $309.6 million, beating the Zacks Consensus Estimate of $302.9 million and growing approximately 15% year over year, driven by Jive, Bold360 ai and LastPass.

The company’s efforts to address renewal headwinds in Communications & Collaboration business are showing positive returns. Moreover, the initial traction for the company’s GoToMeeting and Jive bundle is also a positive. Buoyed by the encouraging results, the company raised its guidance for 2018.

Quarter Detail

Collaboration Cloud business, accounting for 57% of total revenues, grew 2% year over year to $175 million. Jive revenues of $27 million grew more than 30% year over year in the quarter.  Collaboration revenues, excluding Jive, declined 2% on a year-over-year basis.

Identity and Access Management Cloud revenues of $90 million rose 14% from the year-ago quarter, generating 29% of total revenues, driven by LastPass, which continues to show great momentum. Revenues for LastPass grew 70% year over year in the quarter.

Service Cloud business, excluding Xively, remained flat on a year-over-year basis at $44 million, representing 14% of revenues.  The segment is driven by Bold360 which, given the customer interest and competitive position, demonstrates solid growth opportunity in the large and strategic customer engagement market.

International revenues contributed 22% to total revenues.

The company’s gross renewal rate across all products was nearly 80% driven by strong renewals in Collaboration business.  Excluding Jive, renewal rates for Collaboration were 83% in the quarter, approximately 550 basis points (bps) higher sequentially.

During the quarter, the company’s non-GAAP operating income increased 12% year over year to $99.3 million. However, operating margin contracted 110 bps to 32.1%.

LogMein, Inc. Price, Consensus and EPS Surprise

LogMein, Inc. Price, Consensus and EPS Surprise | LogMein, Inc. Quote

Balance Sheet and Other Financial Details

LogMeIn ended the third quarter with cash and cash equivalents of $252.4 million compared with $198.9 million in the previous quarter.

The company generated $73.7 million of cash flow from operational activities.

Guidance

For the fourth quarter of 2018, the company expects revenues in the range of $306-$307 million. The company has taken a conservative approach with revenue guidance as it believes improvement of renewals and revenue performance to be a multi-quarter effort.

However, the company believes the addition of features in Bold360 ai in the fourth quarter will help in expanding “use cases into sales and e-commerce-focused digital engagement.”

Adjusted EBITDA is projected to be between $115 million and 116 million. Adjusted EBITDA margin is anticipated to be 38%.

The company expects earnings per share to be in the range of $1.41 to $1.42.

For 2018, the company increased revenue and earnings guidance. Revenues are projected to be in the range of $1.203 billion to $1.204 billion compared with $1.185 billion to $1.195 billion projected earlier.  Free cash flow is anticipated to be approximately $370 million.

The company expects earnings per share to be in the range of $5.33 to $5.34, up from the earlier guidance of $5.17 to $5.26.

Zacks Rank and Stocks to Consider

LogMeIn currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader technology sector are Vishay Intertechnology, Inc. (VSH - Free Report) , Cadence Design Systems, Inc. (CDNS - Free Report) and CyberArk Software Ltd. (CYBR - Free Report) all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Vishay, Cadence and CyberArk is projected to be 9.2%, 12% and 19.8%, respectively.

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