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LogMeIn (LOGM) Q1 Earnings and Revenues Surpass Estimates

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LogMeIn (LOGM - Free Report) delivered first-quarter 2019 non-GAAP earnings of $1.17 per share, which came ahead of the Zacks Consensus Estimate of $1.14. However, the metric fell 3% year over year.

The company’s non-GAAP revenues for the reported quarter summed $308 million, beating the Zacks Consensus Estimate of $305 million and also growing approximately 11% year over year, driven by Jive, Bold360 ai and LastPass.

However, lower gross margin profile of Jive and increasing expenses on sales and marketing are an overhang on the stock.

Quarter in Detail

Unified Communication and Collaboration (UCC) business declined 2% year over year to $170 million. Jive revenues surged more than 33% year over year in the quarter under review to $30 million, banking on connect bundle.

Identity and Access Management Cloud revenues rose 11% from the year-ago quarter to $94 million, aided by LastPass. Good renewal performance in the company’s remote access space, which includes Pro, Central and GoToMyPC, is also a positive.

Customer Engagement and Support business was flat on a year-over-year basis at $44 million. The segment is favored by Bold360 AI, which is further driven by the digital evolution and the companies’ adoption of artificial intelligence-based solutions to deliver a better customer experience.

The company’s gross renewal rate across all products was nearly 80%.  Excluding Jive, renewal rates for Collaboration were 80% in the quarter under discussion.

Margins

During the first quarter, the company’s non-GAAP operating income decreased 5.5% year over year to $81.3 million. However, operating margin contracted 410 bps to 26.6%.

Increase in spending on the marketing programs to support launching GoTo brand and GoToConnect offerings as well as on the company’s annual event in January was a headwind.

Adjusted EBITDA was down 5.2% year over year to $96.8 million. Adjusted EBITDA margin contracted 500 bps to 31.4%.

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 first quarter with cash and cash equivalents of $145.1 million compared with $148.7 million, sequentially.

The company generated $119.7 million of cash flow from operational activities compared with $73.2 million of cash flow generated in the earlier reported quarter.

In the first quarter, the company repurchased 714,000 shares worth $58 million and paid $17 million as dividends.

Guidance

For the second quarter of 2019, the company expects revenues in the range of $310-$312 million.

Adjusted EBITDA is projected between $94 million and $95 million. Adjusted EBITDA margin is anticipated to be 30%. The company forecasts earnings per share in the band of $1.12-$1.14.

The company expects UCC performance to improve during the second half of the year. It is likely to benefit from the newly launched GoToConnect and GoToRoom products.

Management believes that these new products coupled with investments in the GoTo brand as well as in boosting sales capacity will boost the company’s future performance.

For 2019, revenues are still envisioned within $1.25-$1.26 billion. Adjusted EBITDA is predicted to be $409-$413 million as compared to the past projection of $407-$412 million. Adjusted EBITDA margin is assumed to be 33%. The company’s earnings per share are likely to be in the $4.96-$5.02 bracket compared with the earlier outlook of $4.90-$4.97.

Zacks Rank and Stocks to Consider

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

A few better-ranked stocks in the broader Computer and Technology sector are MeetMe, Inc. (MEET - Free Report) , Paycom Software (PAYC - Free Report) and Alteryx, Inc. (AYX - 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 rate for MeetMe, Paycom and Alteryx is projected at 20%, 25% and 15.4%, respectively.

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