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February 13, 2014 | By

LogMeIn Announces Fourth Quarter and Fiscal Year 2013 Results

For the fourth quarter of 2013, total revenue increased 22 percent to $45.2 million from $37.0 million reported in the fourth quarter of 2012.

Non-GAAP net income for the fourth quarter of 2013 was $3.9 million, or $0.16 per diluted share.  Non-GAAP net income excludes $4.8 million in stock compensation expense, $738,000 in patent litigation related expense and $613,000 in acquisition related costs and amortization.  This compares to non-GAAP net income of $6.0 million, or $0.24 per diluted share, reported in the fourth quarter of 2012.

GAAP net loss for the fourth quarter of 2013 was $459,000, or $0.02 per diluted share, as compared to GAAP net income of $2.2 million, or $0.09 per diluted share, reported in the fourth quarter of 2012.

For fiscal year 2013, revenue increased 20 percent to $166.3 million from $138.8 million in 2012.

Non-GAAP net income for fiscal year 2013 was $13.9 million, or $0.55 per diluted share, as compared to $18.4 million, or $0.72 per diluted share, reported in fiscal year 2012.  Non-GAAP net income excludes $19.7 million in stock compensation expense, $7.5 million in patent litigation related expense and $3.5 million in acquisition related costs and amortization.

GAAP net loss for fiscal year 2013 was $7.7 million, or $0.32 per diluted share, as compared to GAAP net income of $3.6 million, or $0.14 per diluted share, reported in fiscal year 2012.

Non-GAAP cash flow from operations for the fourth quarter of 2013 was $12.8 million, or 28 percent of revenue.  The Company closed the quarter with cash, cash equivalents and short-term investments of $189.6 million.  During the quarter, the Company spent $10.2 million to repurchase approximately 320,000 shares under its share repurchase program.  Additionally, the Company reported total deferred revenue of $85.2 million, an increase of 22 percent from the $69.6 million reported in the fourth quarter of 2012.

A reconciliation of the comparable GAAP financial measures to non-GAAP measures used above is included in the attached tables.

“We’re happy to report another very good quarter and a very strong year with results that exceeded the high-end of our guidance, and helped us to deliver 20 percent year-over-year revenue growth,” said Michael Simon, CEO of LogMeIn.  “Growth in our collaboration business was especially strong, as join.me, in particular, delivered another quarter of triple digit year-over-year revenue growth.”

“We know that the demand for universal connectivity is growing exponentially as more and more business and IT professionals want to collaborate and connect with an ever growing array of Internet enabled products around them.  During the year, we invested to expand the capabilities of our proven Gravity platform in order to position LogMeIn to address the needs of our customers today, and help them take advantage of tomorrow’s next wave of connectivity opportunities.”

Simon continued, “As we look ahead to 2014, we believe sustained growth will be driven by a continued focus on helping people connect to each other across multiple devices and locations, helping IT departments manage and secure the growing numbers and types of devices and applications in the workplace, and enabling companies to transform the ways they are able to directly connect and interact with both their customers and the products they sell.”

Business Outlook   

Based on information available as of February 13, 2014, LogMeIn is issuing guidance for the first quarter 2014 and fiscal year 2014.

First Quarter 2014:  The Company expects first quarter revenue to be in the range of $46.8 million to $47.3 million.

Adjusted EBITDA is expected to be in the range of $9.5 million to $10.0 million representing an adjusted EBITDA margin of 21 percent, at the midpoint.

Non-GAAP net income is expected to be in the range of $5.0 million to $5.3 million, or $0.20 to $0.21 per diluted share.  Non-GAAP net income excludes an estimated $5.8 million of stock compensation expense, $400,000 in patent litigation related expense, and $1.1 million in acquisition related costs and amortization.

Non-GAAP net income for the first quarter assumes an effective tax rate of approximately 36 percent. Non-GAAP net income per diluted share for the first quarter of 2014 is based on an estimated 25.0 million fully-diluted weighted average shares outstanding.

Including stock compensation expense, patent litigation related expense, and acquisition related costs and amortization, we expect to report a GAAP net income in the range of $300,000 to $600,000, or $0.01 to $0.02 per share.

The GAAP net income for the first quarter assumes an effective tax rate of approximately 43 percent. GAAP net income per share for the first quarter of 2014 is based on an estimated 25.0 million weighted average shares outstanding.

Fiscal year 2014:  The Company expects full year 2014 revenue to be in the range of $198.0 million to $202.0 million.

Adjusted EBITDA is expected to be in the range of $41.0 million to $45.0 million, representing an adjusted EBITDA margin of 22 percent, at the midpoint.

Non-GAAP net income is expected to be in the range of $21.5 million to $24.0 million, or $0.86 to $0.96 per diluted share.  Non-GAAP net income excludes an estimated $23.3 million in stock compensation expense, $2.2 million in patent litigation related expense, and $5.1 million in acquisition related costs and amortization.

Non-GAAP net income for the full fiscal year 2014 assumes an effective tax rate of approximately 36 percent.  Non-GAAP net income per diluted share for 2014 is based on an estimated 25.0 million fully-diluted weighted average shares outstanding.

Including stock compensation expense, patent litigation related expense, and acquisition related costs and amortization, we expect to report a GAAP net income in the range of $1.7 million to $3.9 million, or $0.07 to $0.16 per share.

The GAAP net income for the full year assumes an effective tax rate of 43 percent.  GAAP net income per share for 2014 is based on an estimated 25.0 million weighted average shares outstanding.

Conference Call Information for Today, Thursday, February 13, 2014

The Company will host a corresponding conference call and live webcast at 5:00 p.m. Eastern Time today.  To access the conference call, dial 877-941-9205 (for the U.S. and Canada) or 480-629-9771 (for international callers).  A live webcast will be available on the Investor Relations section of the Company’s corporate website at www.LogMeIn.com and via replay beginning approximately two hours after the completion of the call until the Company’s announcement of its financial results for the next quarter.  An audio replay of the call will also be available to investors beginning at approximately 7:00 p.m. Eastern Time on February 13, 2014 until 11:59 p.m.  Eastern Time on February 27, 2014, by dialing 800-406-7325 (for the U.S. and Canada) or 303-590-3030 (for international callers) and entering passcode 4664143#.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures including adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP income before provision for income taxes, non-GAAP provision for income taxes, non-GAAP net income, non-GAAP net income per diluted share and non-GAAP cash flow from operations.

Adjusted EBITDA is GAAP net income (loss) excluding benefit from (provision for) income taxes, interest income, net, other expense, depreciation and amortization, acquisition related costs, stock-based compensation, and patent litigation related expense.  Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue.  Non-GAAP operating income excludes acquisition related costs and amortization, stock compensation expense, and patent litigation related expense. Non-GAAP provision for income taxes excludes the tax impact of acquisition related costs and amortization, stock compensation expense, and patent litigation related expense. Non-GAAP net income and non-GAAP net income per diluted share exclude acquisition related costs and amortization, stock compensation expense, and patent litigation related expense. Non-GAAP cash flow from operations excludes payments and receipts related to patent litigation related costs, and acquisition related payments.

The exclusion of certain expenses in the calculation of non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. We anticipate excluding these expenses in the future presentation of our non-GAAP financial measures. The Company believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. The Company’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods and uses these measures in financial reports prepared for management and the Company’s board of directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software-as-a-service companies, many of which present similar non-GAAP financial measures to investors. The Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant elements that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management in determining these non-GAAP financial measures. In order to compensate for these limitations, management of the Company presents its non-GAAP financial measures in connection with its GAAP results. The Company urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP measures used in this press release are included in this release.

LogMeIn, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2013 2012 2013
Cash flows from operating activities
Net income (loss)   $                    2,196   $                     (459)   $                      3,566   $                  (7,682)
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
   Depreciation and amortization                         1,665                         2,052                           6,112                         7,704
   Amortization of premiums on investments                              22                              59                                54                            198
   Provision for bad debts                              22                              44                              100                            116
   (Benefit from) provision for deferred income taxes                       (5,682)                            705                         (7,465)                            909
   Stock-based compensation                         4,385                         4,819                         14,792                       19,714
   Changes in assets and liabilities:
     Accounts receivable                       (2,666)                       (1,539)                         (4,471)                            302
     Prepaid expenses and other current assets                          (179)                         2,021                         (1,070)                       (2,986)
     Other assets                       (1,307)                       (1,694)                         (1,308)                       (3,764)
     Accounts payable                         1,550                            (52)                           1,552                       (2,233)
     Accrued liabilities                         1,529                         2,365                           5,853                         3,457
     Deferred revenue                         4,355                         3,870                         10,960                       14,493
     Other long-term liabilities                            180                              18                            (418)                          (208)
         Net cash provided by operating activities                         6,070                       12,209                         28,257                       30,020
Cash flows from investing activities
Purchases of marketable securities                     (14,986)                     (24,996)                     (135,085)                     (90,376)
Proceeds from sale or disposal of marketable securities                       15,000                       25,000                       130,000                       90,000
Purchases of property and equipment                       (1,090)                       (1,279)                         (5,277)                     (10,938)
Intangible asset additions                          (260)                     (11,942)                         (1,049)                     (13,061)
Cash paid for acquisition, net of cash acquired                               –                               –                       (14,831)                               –
(Increase) decrease in restricted cash and deposits                               –                          (118)                         (3,558)                                7
         Net cash used in investing activities                       (1,336)                     (13,335)                       (29,800)                     (24,368)
Cash flows from financing activities
Proceeds from issuance of common stock upon option exercises                              87                         1,268                           2,682                         3,798
Income tax benefit from the exercise of stock options                         1,991                          (626)                           6,635                              17
Payment of contingent consideration                               –                               –                              (89)                          (104)
Common stock withheld to satisfy income tax withholdings for restricted stock unit vesting                               –                          (288)                                  –                       (1,834)
Purchase of treasury stock                               –                     (10,233)                                  –                     (30,525)
         Net cash provided by (used in) financing activities                         2,078                       (9,879)                           9,228                     (28,648)
Effect of exchange rate changes on cash and
   cash equivalents and restricted cash                            117                         1,278                              643                            321
Net increase (decrease) in cash and cash equivalents                         6,929                       (9,727)                           8,328                     (22,675)
Cash and cash equivalents, beginning of period                     105,003                       98,984                       103,604                     111,932
Cash and cash equivalents, end of period   $                111,932   $                  89,257   $                  111,932   $                  89,257
Calculation of Non-GAAP Cash Flows from Operating Activities (unaudited)
(In thousands)
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2013 2012 2013
GAAP Cash flows from operating activities   $                    6,070   $                  12,209   $                    28,257   $                  30,020
Add Back:
Patent litigation related payments                              89                            568                              399                         8,390
Acquisition related payments                              28                              61                           1,969                         3,934
Non-GAAP Cash flows from operating activities   $                    6,187   $                  12,838   $                    30,625   $                  42,344

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