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LogMeIn (NASDAQ:LOGM)

Q1 2013 Earnings Call

April 25, 2013 5:00 pm ET

Executives

Rob Bradley - Director of Investor Relations

Michael K. Simon - Chairman, Chief Executive Officer, President and Secretary

James F. Kelliher - Chief Financial Officer, Principal Accounting Officer and Treasurer

Analysts

Darren R. Jue - JP Morgan Chase & Co, Research Division

Matthew Broome

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Tim Klasell - Northland Capital Markets, Research Division

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Scott Zeller - Needham & Company, LLC, Research Division

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the LogMeIn First Quarter 2013 Earnings Conference Call. [Operator Instructions] I'd now like to turn the conference over to Rob Bradley, Director of Investor Relations. Please go ahead, sir.

Rob Bradley

Thank you and good afternoon from Boston's Innovation District. We're pleased that you can join us on our earnings conference call to discuss the results of our quarter ended March 31, 2013.

Before we get into the results, let me remind you that some of the statements made during this call may be considered forward-looking statements. These statements include the company's financial guidance for the second quarter of 2013 and full year 2013.

The company's security filings, including its 10-Q, identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made on this call.

Any forward-looking statements are made as of the date hereof and are based on current expectations, estimates, forecasts and projections, as well as the beliefs and assumptions of management. The company does not undertake to update any forward-looking statements as a result of new information or future events or developments. The company's filings are available through the company or online.

During the call, non-GAAP financial measures will be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to the most comparable GAAP measures are available in the press release or on our website at www.logmein.com.

Now, I will turn the call over to our CEO, Michael Simon.

Michael K. Simon

Good afternoon and thank you for joining us today as we report on LogMeIn's first quarter 2013 results.

In Q1, we reported strong financial results, delivering revenue and earnings per share that exceeded the high end of our guidance. Total revenue for the quarter was $37.4 million, up 15% year-over-year, from $32.7 million reported in Q1 2012.

Growth in deferred revenue outpaced revenue growth. Deferred revenue increased 21% year-over-year. We also added approximately 37,000 new premium subscribers while attracting 2.7 million first-time users in the quarter, both record highs.

In addition, new and renewal sales during the quarter exceeded our expectations, providing the foundation for what we believe will be a strong 2013. As a result, we are raising our revenue and earnings outlook for the year, which Jim Kelleher, our CFO, will provide in detail.

The most significant driver of growth in Q1 was our Access and Collaboration business. Strong demand and new product introduction helped deliver year-over-year revenue growth in excess of 25%. join.me in particular continued to perform exceptionally well and once again, delivered triple-digit percentage revenue growth during the quarter as compared to Q1 2012.

We also released Cubby, our latest Access and Collaboration app and the first LogMeIn product to take advantage of the Gravity data cloud. An enterprise file sync and sharing service, Cubby, is designed to win over today's multidevice mobile worker while delivering the security and management capabilities IT departments need. And we see this balance as a key to winning in the cloud app era. Our strategy is to bring together our strengths in building highly popular cloud apps with our deep IT management experience to develop apps that win over users and IT alike.

We believe our large IT customer base will play a key role in the longer-term growth of these offerings. Early sales of Cubby in Q1 helped to validate such an approach, with a large number of early buyers coming directly from LogMeIn's IT base and many citing trust of LogMeIn as key factor in their purchasing decision.

And efforts are already underway to deliver new enterprise versions of Cubby and join.me. Versions that provide IT professionals with additional capabilities for securing, managing and provisioning company-wide rollouts.

Turning to our IT management portfolio. Our next-generation remote monitoring and management or next-gen RMM business also performed well during the quarter, exceeding our expectations. This strength was due in part to a business model change related to our Central product line. One that also had the benefit of converting many of our -- many IT professionals in our base into first time premium subscribers. We believe this influential customer base of IT decision-makers and LogMeIn's long-time focus on IT departments 2 creates key advantages. First, it provides a great low-cost opportunity for selling our future IT management solutions. Second, it provides a key opportunity for the broader adoption of our Access and Collaboration apps.

In Q2, we plan to introduce a new product designed to help IT and businesses embrace and managing the growing use of cloud applications in the workplace. In short, giving IT professionals an opportunity to reinvent and reestablish their strategic role in a modern BYO environment. Applications like join.me, Cubby and LogMeIn, as well as a growing number of third-party apps, epitomize a trend known as BYOA or Bring Your Own App. These cloud applications are typically introduced into the workplace by employees themselves, often independent of IT of involvement, and then quickly spread via word of mouth and grassroots adoption. The goal of our new product will be to help IT professionals embrace BYOA by delivering key management features including app discovery, policy and user management and cost analytics. We believe the result will be an offering that gives IT professionals new management and control over employee-introduced cloud apps, while introducing distinct opportunities to differentiate join.me and Cubby through better IT management benefits. As a result, we expect this influential, high-value IT audience to become a new complimentary channel for selling larger join.me and Cubby deals in the second half of 2013 and beyond.

Turning to our Customer Care business, our BoldChat product line performed well as expected, with key wins at AutoZone, Brother [ph] and Cardinal Health. In addition, our Rescue product line, LogMeIn Rescue product line, delivered better-than-expected results during the quarter, due in large part to a key 7-figure win at Hewlett-Packard, one of our largest deals in the history of the company.

While our expectations for customer care growth in 2013 are more modest than our other 2 businesses, we believe it is important to note that business continues to grow even as the products in the business category are being adapted to new opportunities in the marketplace, opportunities that, we believe, have the potential to accelerate growth in the medium term. And perhaps, more importantly, this business is very profitable and generates strong positive cash flow for LogMeIn.

Overall, it was a very good first quarter, with revenue that exceeded our guidance and strong across the business sales growth. Perhaps more importantly, we believe we've set the company up for an exciting new chapter of growth. join.me's continued success and the introduction of Cubby led to great year-over-year growth in our Access and Collaboration business, while providing a growing portfolio of essential business cloud applications. We continue to build an incredibly large base of high-value IT decision-makers, attracting 2.7 million first-time users in Q1 alone. We've assembled a strong management team to address the next phase of growth for LogMeIn and today, announced a key addition to our executive team with the hiring of our new COO, Bill Wagner. We've strengthened our infrastructure with the addition of new data centers in Singapore and Sydney, and the opening of a new European headquarters in Dublin and our new worldwide headquarters in Boston. And we cleared up near-term litigation concerns, as a jury recently ruled that we do not infringe on 01 Communique's patent.

These foundational developments will be critical as LogMeIn looks to unveil a new generation of cloud services in Q2, including a new product aimed at empowering IT in the cloud app era and the industry's first Internet of Things-focused Platform as a Service. A new public cloud offering built on the Gravity platform and using our experience with Cosm! as a foundation. This Platform as a Service is designed to help accelerate the introduction of commercial IOT or Internet of Things applications, while giving LogMeIn a distinct first-mover advantage in what many predict to be the next big Internet wave.

We believe these new offerings, combined with continued strong demand for LogMeIn's core offerings, will put us in a favorable position for growing the business in 2013 and beyond.

Now, at this time, I will turn the call over to Jim Kelliher, our CFO, for more details about our Q1 financial results and outlook for Q2.

James F. Kelliher

Thanks, Michael. And thanks to all of you for joining us today as we report our first quarter 2013 financial results. As Michael discussed, we are pleased to report a strong quarter of financial results which exceeded the outlook we provided last quarter.

Total revenue for the quarter was $37.4 million, $900,000 greater than the high end of our outlook of $36.5 million. Non-GAAP operating margins were 15% of revenue, in line with the operating margins in our outlook. Non-GAAP net income for the first quarter of 2013 was $3.1 million, exceeding the high end of our outlook of $2.6 million. And non-GAAP net income per share was $0.12, $0.02 greater than the high end of our guidance. On a cash flow basis, non-GAAP operating cash flow was $6 million or 16% of revenue, which includes $2.3 million of cash payments associated with our new Boston office. After adjusting for these payments, non-GAAP operating cash flow was $8.3 million or 22% of revenue.

GAAP net loss for the quarter was $5.8 million or $0.24 per share. This compares to our guidance of a GAAP net loss of $0.20 to $0.22 per share. The GAAP net loss includes $5.2 million of stock compensation expense, $6.1 million of patent litigation-related expense and $1.1 million of acquisition-related cost and amortization. The $6.1 million of patent litigation expense includes $4.9 million of legal fees associated with our successful defense of 01 Communique's patent infringement claim and a onetime $1.2 million expense associated with the [indiscernible] license agreement. The $0.02 GAAP EPS variance from our guidance is due to higher-than-forecast patent litigation expenses, offset by a lower GAAP tax expense.

Overall, it was a very strong first quarter and a great beginning to fiscal year 2013.

Further reviewing our performance in the quarter, total revenue in the quarter increased by 15% over the first quarter of 2012 to $37.4 million from $32.7 million. The majority of the revenue increase was due to an increase in revenue from new subscribers. Our total subscribers increased by a record 37,000 subscribers, up more than 10,000 net subscribers from what we had the last quarter and a 47% increase from the first quarter last year. The major increase in subscriber count was driven by sales of our join.me, Cubby and Central products. Central in particular was very strong, driven by the business model change in our next-gen RMM business. And we ended the quarter with 0.5 million premium subscribers.

Renewal rates continue to be very strong at approximately 80% on an annualized dollar basis.

On a product line basis, Access and Collaboration revenue was 21% of total revenue in the quarter. Revenue from RMM business was 32% of total revenue and Customer Care was 47%. Our Access and Collaboration business continue to be our fastest-growing service with revenue growing in excess of 25% year-over-year. RMM and Customer Care revenue grew at 10% to 15% year-over-year.

By geography, total international revenue was 34% of total revenue, slightly down from the 35% reported last quarter. However, international sales had a very good quarter. Growth year-over-year was consistent with U.S. sales growth, with strength coming from Latin America and Europe.

Hereafter, I will discuss our performance on a non-GAAP basis, which excludes stock compensation expense, patent litigation-related expense and acquisition-related cost and amortization. These non-GAAP results are more representative of how we internally measure the business and are reconciled in the tables attached to our press release.

Our non-GAAP net income was $3.1 million or $0.12 per share, up $0.02 from the high end of our outlook. $0.01 was due to exceeding our revenue guidance and $0.01 was due to nonoperating income associated with foreign exchange. Our non-GAAP gross margin in the first quarter was 90%. Our non-GAAP operating margins in the first quarter were 15%, in line with the outlook we provided. Non-GAAP sales and marketing expenses were as expected, $18.4 million or 49% of revenue, an increase of $1.6 million from the $16.8 million reported in the fourth quarter of 2012. The increase from the fourth quarter was primarily due to increased marketing spend to drive growth initiatives related to our Access and Collaboration product group, our annual sales kick off meeting and higher commission expense associated with sales over performance in the quarter.

Non-GAAP research and development expenses in the first quarter were $5.9 million or 16% of revenue, an increase of $600,000 from the prior quarter. The increase in expense was primarily due to increased headcount expense associated with the Access and Collaboration product group as well as with the new products Michael mentioned that will be launched in the second half of this year.

Non-GAAP G&A expenses were at $3.6 million or 10% of revenue in the first quarter, consistent with the previous quarter.

Turning to the balance sheet. We closed the quarter with cash, cash equivalents and marketable securities of $205.2 million. This is a decrease of $6.9 million from the prior quarter, primarily due to the execution of a previously announced $25 million share repurchase program. In the quarter, we spent approximately $9 million repurchasing 500,000 shares at an average price of $18 per share.

Non-GAAP operating cash flow for the first quarter was $6 million. Excluding $2.3 million of cash expenditures associated with our move to Boston, non-GAAP operating cash flow was $8.3 million or 22% of revenue. Total capital expenditures in the first quarter were $2.7 million, and included capital expenditures associated with the expansion of our data centers and costs associated with our Boston office.

Total accounts receivable decreased to $11.9 million from $13.2 million due to collection in the quarter of several large invoices from year end and due to a larger percentage of the current quarter's sales coming via credit card than the previous quarter.

Accounts receivable and days sales outstanding were 29 days versus the 33 days reported last quarter.

Total deferred revenue in the first quarter was $74.1 million, an increase of $4.5 million over the prior quarter and an increase of 21% over Q1 of last year.

Now turning to our outlook for the second quarter and the full year 2013. For the second quarter of 2013, we expect total revenue to be in the range of $39 million to $39.5 million. Non-GAAP net income for the second quarter is expected to be in the range of $2.7 million to $3.0 million or $0.11 to $0.12 per diluted share. Non-GAAP net income excludes $5.2 million of stock compensation expense, $500,000 of estimated patent litigation expenses and an estimated $1 million in acquisition-related costs and amortization. Non-GAAP net income for the second quarter assumes an effective tax rate of 50%.

The GAAP net loss for the second quarter, which includes stock compensation expense, patent-related litigation expense and acquisition-related cost and amortization, is expected to be in the range of $2.3 million to $2.6 million or $0.09 to $0.10 per diluted share. The GAAP net loss for the second quarter assumes GAAP income tax expense of $1.3 million to $1.6 million.

For the full year of fiscal year -- for the full fiscal year 2013, we expect total revenue to be in the range of $157 million to $160 million, up $3 million to $4 million from our previous guidance. Non-GAAP net income for the full year of 2013 is expected to be in the range of $11.7 million to $12.7 million or $0.46 to $0.50 per diluted share. Non-GAAP net income excludes an estimated $20.7 million of stock compensation expense, $7.6 million in patent litigation-related expense and $3.4 million in acquisition-related cost and amortization. Non-GAAP net income for the full fiscal year also assumes an effective tax rate of 50%.

The GAAP net loss for the full year, which includes stock compensation expense, patent-related litigation expenses and acquisition-related cost and amortization, is expected to be in the range of $11 million to $12.5 million or $0.44 to $0.50 per diluted share. And the GAAP net loss for the full year assumes an income tax expense of $4.2 million to $4.7 million.

Non-GAAP net income and the GAAP net loss per diluted share for the second quarter of 2013 and the full year 2013 is based on an estimated $25.2 million fully diluted weighted average shares outstanding.

With that, I will turn the call back to the operator now to take any of your questions.

Question-and-Answer Session

Operator

[Operator Instructions] First question comes from the line of John DiFucci with JPMorgan.

Darren R. Jue - JP Morgan Chase & Co, Research Division

It's actually Darren Jue filling in for John. I guess this question is for Michael. Michael, you guys did a really nice job exceeding the guidance that you set for the quarter, growing top line about 15% versus the 11% guide. Just wondering, the longer-term, given that you've got a lot of newer products like join.me and Cubby and the new product that you mentioned you're going to release in Q2, and given that you're still at a relatively smaller scale, do you think there's an opportunity, longer-term, to get back to 20% top line growth? Or should we think of LogMeIn as more of a mid-teens grower going forward?

Michael K. Simon

Well, our sales in Q1 grew north of 20%. And certainly, the guidance for the year is in the high teens, and this is on sales, not revenue. The high end of the guidance on revenue is a little bit of -- above 15%, I believe. But our sales is actually -- to hit those numbers, requires book sales to be greater than that, and that tends to be a leading indicator. So certainly, at this time, we feel that there is an opportunity to have better momentum as we go to the year in terms of revenue growth. And if you look -- in addition to our Cubby and join.me product, a new product in Q2 related to app management for IT professionals and then our also announced Internet of Things platform, we believe as we go into next year, there's certainly the potential to exceed 20% growth. And our goal is to grow as much as possible and to beat that. That much said, at this stage, it's still early on in 2013. And this year, we're trying to build it quarter by quarter.

Darren R. Jue - JP Morgan Chase & Co, Research Division

Okay. And when you say sales, are you referring to bookings?

Michael K. Simon

Yes.

James F. Kelliher

That's right. Yes.

Darren R. Jue - JP Morgan Chase & Co, Research Division

Okay. So that -- and that's different from the calculated billings growth, which was about 18% because that bookings number has some off balance sheet?

James F. Kelliher

That's exactly right, Darren. You see the deferred revenue of 21% on a year-over-year basis, but your calculated number will always exclude the so-called off-books that's associated with annual credit card bookings that were taken. And then particularly, this quarter, with the sales in the RMM space, our percentage of business coming from e- com and in that way, was a little greater than previously.

Operator

Our next question is from the line of Gregg Moskowitz with Cowen & Company.

Matthew Broome

This is actually Matt on for Gregg. So I guess firstly, the business model change related to the RMM offering. Just wondering if you could give me a bit more detail around that and sort of how that led to the Hewlett-Packard win and just a bit more color on that would be appreciated.

James F. Kelliher

Yes. There's 2 separate things. So the change in our RMM business related to when you would be strongly encouraged, or almost required, to buy Central. Essentially, there is 1 interface for a mobile professional and then we have our Central interface, which is designed for people that are IT professionals to manage a large number of computers. And we changed the business model to try and increase our ability to monetize IT professionals, and it worked better and continues to work better than we had expected at the time we did our last earnings call. HP and Rescue, HP, Hewlett-Packard, purchased a very large deal, one of our largest deals in the company's history, for a LogMeIn Rescue, and it was unrelated to that business model change. But it was a traditional competitive win in the customer care remote support space with LogMeIn Rescue. And we're really pleased to have them as a customer.

Matthew Broome

Great. And so I guess, I mean, it sounds like Cubby has been doing pretty well so far. Where has that been getting most traction?

Michael K. Simon

Well, we feel like -- first of all, for people that don't know much about Cubby, it's our enterprise file sync-and-share product and we introduced it in February. And we're really happy with the response it's receiving. It basically has security. It has differentiation in the user experience in terms of sync and plays and direct peer-to-peer sync. And reliability that has really been very much appreciated by our customers. So we feel like we're off to a great start. But in Q2, Cubby will play a more important role, really, as it becomes intertwined with our strategy to deliver best-of-breed collaboration products -- in sort of that exact data collaboration products, but best-of-breed collaboration products into our base of SMBs and coupled with our cloud service management capabilities that we're bringing out for SMB IT professionals.

Matthew Broome

Okay, great. And if I could just squeeze one more in. Do you sort of expect join.me to grow bookings or revenue triple digits this year, or...

Michael K. Simon

We do. It had, I think, a very, very good first quarter. I think the product is continuing to get better and better both as a free product and in particular, the premium version. And we continue to be very enthusiastic, fantastic and optimistic on that product

Operator

Our next question is from the line of Gene Munster with Piper Jaffray.

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Just one quick question. Is there any additional color you could give us on sort of the breakdown of those 2.7 million new users by product line?

Michael K. Simon

Well, it's fairly similar to the way it's been. We haven't disclosed too much. But I think we've consistently said the vast majority -- substantial majority come from join.me, which is, somewhat by design, we think it's very good. So it's roughly 2/3 are coming from join.me, the other 1/3 are principally coming from LogMeIn in terms of numbers because of our mobile, our free LogMeIn for iOS app as well as our desktop application.

Charles Eugene Munster - Piper Jaffray Companies, Research Division

And then just one quick follow-up to that. How would you think about Cubby sort of in that picture, the 2/3 and 1/3? Where would that one fit in there?

Michael K. Simon

It's in the third under -- because it's a brand-new product, it's very much in the early stages. So it helped, but still, the bulk of our free users -- new users are still coming from join.me. And we would expect that to be the case for the next few quarters.

Operator

Our next question is from the line of Tim Klasell with Northland Capital Markets.

Tim Klasell - Northland Capital Markets, Research Division

So a real quick question on -- last night Citrix mentioned that their go-to PC market was weak. I sort of have -- but the file share product was strong. And the markets sort of of the ilk that some of these sharing capabilities are displacing or grabbing wallet share from the access products. As you're rolling out Cubby, do you sort of expect to see that? Or how do you think about that?

Michael K. Simon

Well, we've seen -- I mean, we have designed our Access and Collaboration product to really cover the whole spectrum from whether the data access, application or desktop access, as well as access to other people. And to a certain degree, they're all trying to achieve the same end, which is enabling workforce mobility. And so as long as we can play an important role in that, we're trying to maximize the number of people we touch and maximize the average revenue per person that we touch. And together -- there may be some shifting. I'm pleased to say that our LogMeIn Pro product, which is something that you would -- which does compete against, for example, GoToMyPC, actually performed -- it had pretty substantial growth, quite good growth, pushing 20%-type growth. So it was not a situation where it's contracting. But at the end of the day, our -- and I should say that's on bookings. I'm going to be a little careful on that. But overall, our Access and Collaboration products are growing in excess of 25% year-over-year. And I think together, those will be a very effective suite that solves whatever types of remote access they need. And we think they will continue to be -- certainly, our guidance this year and our more qualitative feedback and guidance on this year is that we'll lead the growth among our 3 business units.

Tim Klasell - Northland Capital Markets, Research Division

Okay, good. And are you still expecting Cubby to be sort of an e-commerce, LogMeIn Pro-type distribution? Or are you discovering that maybe you need a little higher touch [indiscernible] those effort?

Michael K. Simon

Well, I think it will continue to have a very strong e-commerce component. But what we discussed today is that we in particular have a very, very strong relationship with IT decision-makers in SMB, in particular. And so, there's a -- seems to be a tremendous unmet need for that market to have not just a file sync-and-share product that works for individuals, but one that can be managed and is secure that can be used for either compliance, meeting compliance requirements. Or just for security and cost management, et cetera. And so, if you look at what we have, which is very good, best-of-breed apps for individuals, coupled with 2 other assets: the technology asset, which is confidence around managing large-scale deployments of highly-distributed endpoints; and another asset, which isn't necessarily a technology but an effective channel. For example, we have roughly 12,000 to 15,000 outsourced service providers as customers. And there's an opportunity to use those customers as not just sell to opportunities, but sell through opportunities, meaning a channel partnership. And I think that will continue to play a very important role in our Access and Collaboration products. And certainly, our intention and goal to make our products very channel friendly as we go through the year.

Operator

Our next question is from the line of Raghavan Sarathy from Dougherty & Company.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

First question is for Mike. Mike, you talked about this last deal at HP. Can you give us some color around whether you're replacing a competitor vendor or how they're planning to use this product? And then, when you talk about 7-figure deal, is it an annual contract value or hard to get a look at that?

Michael K. Simon

Yes. So the 7-figure deal is on an annual basis. It is a fast deal which is recurring,, so it's -- that is for each of the single year as opposed to a multiyear added up. And so it is being used by HP's customer care. In particular, it was important for the rollout of Windows 8 among other things. But I'm pleased to say, they're using some of our newer technology, which is known as Click2Fix, which is a support technology that is useful for a broader range of both mobile and desktop access --item -- devices. And it was a competitive process to win that. And I'm was pleased to say we were selected in one.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

And then, so to follow-up that for Jim. So in terms of revenue recognition, should we think about this more as a radical revenue recognition that maybe some level of front end loading on that deal?

James F. Kelliher

No, it is a normal service deal charge. So there is no -- there is nothing unusual about the revenue recognition associated with that.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Okay. And Jim, maybe you gave the time, I might have missed it. You mentioned that Customer Care represented 47% of revenue. What was the growth rate of that business?

James F. Kelliher

So we didn't give specific growth rates in Customer Care. We talked about our Customer Care and RMM business grew in the 10% to 15% range, which was slightly ahead of where we had been forecasting and guiding.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

And both grew 10% to 15% range?

James F. Kelliher

In that range, yes. Both grew in that range.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

And then sort of one final question. When I looked at the guidance and if I look at the first quarter, you exceeded the midpoint of your guidance by roughly $1 million. And when I look at the guidance increase, you increased it by roughly $3 million at the midpoint. So if you annualize the beat that itself should be a $4 million increase. And I was wondering, are you being conservative or maybe you had some sort of revenue lump here in the first quarter?

James F. Kelliher

Well, I think as you know, we've always over exceeded our own forecast of our guidance. We would have never built into the way we build our guidance model. Two things that a unique and sort of a very large HP deal. Would not have been put into any guidance that we would've given. And then, two, the success of the business model change in the RMM business. We anticipated some of that was really very, very well received in the marketplace. So both of those are what led to the upside in our Q1 performance against guidance. We always gear ourselves, not against the midpoint, but against the high point estimate as we charge-in ourselves. So I think if you roll that out, you will see that revenue growth does accelerate in the future quarters as it goes out slightly from 15% in Q1.

Operator

Our next question is from the line of Scott Zeller from Needham & Company.

Scott Zeller - Needham & Company, LLC, Research Division

Could you talk about the change that you made in RMM regarding Central and what you see going forward? Could this quarter have been an outsized quarter in its impact? Or do you believe that you'll see a similar run rate, going forward, of premium apps?

Michael K. Simon

Yes. It was probably -- so it's actually [ph] the change. I would not say Q1 would be an outsized quarter in ads. Certainly, the change doesn't come to -- and we'll continue to roll-through. We would expect a pretty quarter, again, this quarter from ads. And similar, it rolls-through next year. But the change probably had the biggest impact in Q1 and Q2, and in Q3 and Q4, so it's slightly more modest. So again, relatively new change. That's why you did see a fairly substantial or at least an unusual over delivery or unusually large bip compared to what we've ever done in the past. And it was because it has been performing better than we anticipated, which we're pleased to say. And we're optimistic it will continue to perform well as we go through the year.

Scott Zeller - Needham & Company, LLC, Research Division

Okay. And that -- and just to be clear, a change was made and the only impact is shown in the completed March quarter, correct?

Michael K. Simon

Right. Yes. The change happened in early March -- or excuse me, in late February and will continue on to the remainder of the year, and thereafter as well.

Scott Zeller - Needham & Company, LLC, Research Division

Okay. And then regarding the guidance and the uppage [ph] of the forecast, we're -- I guess we're assuming then that costs will continue to grow as revenue. The EPS was raised a bit for the year, but should we also assume the costs are rising along with revenues?

Michael K. Simon

Well, I think the most important thing that -- the take away is, we feel we can increase our growth rates since -- in very simplistic terms, we're acquiring recurring revenue streams basically at about 1/4 of their lifetime value. And as long as we can do that, we feel we -- it's the right thing and should continue to invest in that aggressively, in customer acquisition. And specifically, we have, for this year, really, 4 new rapidly growing opportunities in what we feel, are large markets. So it's just join.me and now, Cubby, but we announced the addition of 2 new offerings we will unveil this quarter, quarter Q2. A new cloud app management solution designed for IT professionals, really, our RMM customer base. And then as well as we will release our Internet of Things Platform as a Service, which really builds on Gravity and a lot of the experience we learned in Cosm!. So with 4 new opportunities that we hope to accelerate growth with -- continue to accelerate growth with, we think it's the right investment to really sacrifice a little bit of operating margin in order to invest in, hopefully, top line growth acceleration.

Operator

At this time, there are no further questions in the queue. I'd like to pass the call back to management for closing remarks.

Michael K. Simon

Well, thank you for your questions tonight. We are extremely pleased with our Q1 results. And we believe that this success has provided a foundation for solid growth in 2013. Demand for our core Access and Collaboration next-gen RMM and Customer Care products will continue to help us engage with a large number of high-value IT decision-makers and create distinct advantages and inroads for selling our cloud apps. Meanwhile, the introduction of our new generation of cloud services will provide new opportunities with our base while helping us to capitalize on what we believe are some of the most transformative opportunities in all of technology. Thank you for your time this evening.

Operator

Ladies and gentlemen, this concludes the LogMeIn First Quarter 2013 Earnings Conference Call. Thank you for participation today. You may now disconnect.

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