LogMein (LOGM) Down 14.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for LogMein (LOGM). Shares have lost about 14.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is LogMein due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

LogMein Reports Q4 Results

LogMeIn delivered fourth-quarter 2018 non-GAAP earnings of $1.47 per share, which came ahead of the Zacks Consensus Estimate of $1.41 and also marked a year-over-year improvement of 22.5%.

The company’s non-GAAP revenues for the reported quarter summed $311 million, beating the Zacks Consensus Estimate of $307 million and also growing approximately 11% year over year, driven by Jive, Bold360 ai and LastPass.

Quarter in Detail

Unified Communication and Collaboration (UCC) business, accounting for 56% of total revenues, inched up 1% year over year. Jive revenues surged more than 35% year over year in the quarter under review. UCC excluding Jive declined 4% on a year-over-year basis.

Identity and Access Management Cloud revenues rose 12% from the year-ago quarter, generating 30% of total revenues, aided by LastPass, which consistently shows a great momentum. LastPass closed five large enterprise deals in December alone.

Customer Engagement and Support business excluding Xively was down 2% on a year-over-year basis at $44 million, representing 14% of revenues. The segment is favored by Bold360, which considering the customer interest and competitive position, demonstrates a solid growth opportunity in the large and strategic customer engagement market.

During the quarter under consideration, Bold360 ai led the company to snap up eight six-figure deals, equaling the figure achieved during 2017.

International revenues contributed to 22% of the total revenue base.

The company’s gross renewal rate across all products was nearly 80%. Excluding Jive, renewal rates for Collaboration were 82% in the quarter under discussion, approximately 100 basis points (bps) lower, sequentially.

Margins

During the fourth quarter, the company’s non-GAAP operating income increased 10.5% year over year to $102.3 million. However, operating margin contracted 20 bps to 32.9%.

Adjusted EBITDA increased 9% year over year to $118.7 million. Adjusted EBITDA margin contracted 70 bps to 38.2%.

Balance Sheet and Other Financial Details

LogMeIn ended the fourth quarter with cash and cash equivalents of $252.4 million, which was flat sequentially.

The company generated $32.9 million of cash flow from operational activities compared with $73.7 million of cash flow generated in the previous reported quarter.

Guidance

For the first quarter of 2019, the company expects revenues in the range of $304-$306 million.

Adjusted EBITDA is projected between $94 million and $96 million. Adjusted EBITDA margin is anticipated to be 31%. The company forecasts earnings per share in the range of $1.12-$1.15.

For 2019, revenues are envisioned in the band of $1.25-$1.26 billion. Adjusted EBITDA is predicted between $407 million and $412 million. Adjusted EBITDA margin is assumed to be 33%. The company’s earnings per share are likely to be within $4.90-$4.97.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -20.18% due to these changes.

VGM Scores

At this time, LogMein has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

LogMein has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.