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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

Gregg S. Moskowitz - Cowen and Company, LLC, Research Division

Robert P. Breza - RBC Capital Markets, LLC, Research Division

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Tim Klasell - Northland Capital Markets, Research Division

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

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Bradley H. Sills - Maxim Group LLC, Research Division

Chris Hogan - Barclays Capital, Research Division

LogMeIn Inc (LOGM) Q2 2013 Earnings Call July 25, 2013 5:00 PM ET

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the LogMeIn Second Quarter 2013 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, July 25, 2013, and I would 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 in our earnings conference call to discuss the results of our quarter ended June 30, 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 third 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.

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 second quarter 2013 results.

In Q2, we reported strong financial result, delivering revenue and earnings per share that exceeded the high end of our guidance. Total revenue for the quarter was $40.7 million, up 20% year-over-year from $33.8 million reported in Q2 2012.

Cash flow was particularly strong during the quarter, with non-GAAP cash flow of $14.7 million or 36% of revenue. As a result of strong new and renewal sales during the quarter, we are raising our revenue and earnings guidance for the year, which Jim Kelliher, our CFO, will provide in detail.

One of the primary drivers of this growth is our collaboration cloud business, which is made up of our LogMeIn Pro remote access product, our join.me collaboration and online meeting product and Cubby, our cloud file sync and share product. Our collaboration cloud business saw year-over-year percentage revenue growth in the high 20s. This growth is accelerating, and we now expect our collaboration cloud business to deliver full year revenue growth of approximately 30%.

This growth is due, in large part, to the increasing demand for and contribution of join.me. When it comes to revenue and sales growth, join.me continues to deliver year-over-year percentage growth in the triple digits.

Meanwhile, Cubby offers what we believe to be a natural complement to our highly popular LogMeIn access and join.me product offerings. During the second quarter, we took initial steps to integrate Cubby into our other collaboration offerings. These steps open up the option of tapping into these very large user bases to cross-promote and cross-sell Cubby. And they also help us to extend the benefits and value of our collaboration offerings. We believe Cubby is well positioned to play an important role in our overall collaboration strategy, and we intend to extend these integrations throughout the second half of the year and beyond.

Our IT management cloud business, which includes our Central remote monitoring and management, our RMM product, as well as our LogMeIn Pro for RMM product, also exceeded our expectations. In the second quarter, our IT management cloud business delivered year-over-year revenue growth in excess of 20%. This was largely due to the impact of the first quarter business model change relating to Central, a change that helped to deliver strong sales results in both the first and second quarter.

We expect that these strong first half results will help our IT management cloud business to deliver full year growth of approximately 20%.

Meanwhile, our service cloud business, which includes our Rescue remote support product and our BoldChat customer engagement product, delivered year-over-year revenue growth in the mid-teens. Continued strong demand for BoldChat, as well as solid add-on and renewal business for Rescue, will help us to maintain this level of growth in the second half. And we continue to forecast full year growth of our service cloud business in the 10% to 15% range.

During the second quarter, we also introduced 2 significant offerings that we see as potential drivers for long-term business growth. In May, we announced a preview of AppGuru, an offering that we believe will help us to expand our footprint in our core IT market. AppGuru is designed to help IT professionals embrace the growing use of cloud applications in the workplace. AppGuru does this by giving IT professionals new abilities to discover employee-introduced apps being used in the workplace, centrally manage users across cloud apps, and set and enforce security policies.

We believe that it will provide a natural extension of our proven IT portfolio, one that opens up both cross-sell and new business opportunities.

In a related development, yesterday, we announced a new IT channel program called LogMeIn Elevate. This program will focus on helping outsourced IT providers deliver new management services focused on cloud apps. And we intend to expand this program later this year to help channel partners to resell join.me and Cubby to their small and medium business clients.

Today, LogMeIn counts thousands of outsourced IT professionals as loyal customers, and we see this new channel program as a natural next step to build on these longstanding relationships. During the second quarter, we also introduced Xively, a Platform as a Service for commercial Internet of Things offerings. Aimed at helping companies quickly bring new generation Internet-connected products to market, Xively offers emerging device companies and existing manufacturers the ability to reduce costs and time-to-market, ensure scalability and security and deliver interoperability with third-party connected devices.

Xively is the first offering of its type to be designed for commercial applications, and we believe this gives us a distinctly early-mover advantage in this rapidly emerging market, a market that industry analyst firms predict could grow to become a $1 trillion-plus opportunity.

Xively has already attracted the interest of businesses looking to capitalize on the transformative nature of this market. ARM Holdings, the semiconductor giant, entered into an early partnership with Xively, to give companies the hardware, software and cloud infrastructure needed to rapidly prototype new Internet of Things offerings.

Meanwhile, the unique capabilities of Xively have already helped us to attract thousands of registered developers into the Xively developer program.

We believe that these new offerings, combined with the high-growth collaboration cloud business and the continued demand for our core IT management and service cloud offerings, have positioned us to achieve sustained growth in the second half of 2013 and beyond.

Overall, it was a great second quarter and very good first half, with revenue growth and margins that exceeded our guidance, strong sales growth and cash flow that ranked among the best of all SaaS businesses. The year-over-year revenue growth in our collaboration cloud business has accelerated. Our IT management cloud business performed better than expected in the first half, setting up for strong year-over-year revenue growth. And our cloud -- our service cloud business continues to perform well while generating strong cash flow.

Meanwhile, the introduction of new offerings like Xively and AppGuru will provide nice complements to our current offerings. And we believe that they are poised to help us to deliver sustained growth in the future.

At this time, I will turn the call over to Jim Kelliher, our CFO, for more details about our Q2 financial results, as well as our Q3 and full year outlook.

James F. Kelliher

Thanks, Michael. Thanks to all of you for joining us today as we report our second quarter 2013 financial results. We are pleased to report an excellent quarter of financial results, which surpassed the outlook we provided last quarter.

Total revenue for the quarter was $40.7 million, $1.2 million greater than the high end of our outlook of $39.5 million. Non-GAAP operating margins were 16% of revenue, exceeding the operating margin in our outlook.

Non-GAAP EBITDA margins were 20% of revenue. Non-GAAP net income for the second quarter of 2013 was $3.3 million, exceeding the high end of our outlook of $3 million and non-GAAP net income per share was $0.13, $0.01 greater than the high end of our guidance. Non-GAAP operating cash flow was $14.7 million or 36% of revenue.

On a GAAP basis, GAAP net loss for the second quarter was $1.4 million or $0.06 per share. This compares to our guidance of a GAAP net loss of $0.09 to $0.10 per share. GAAP net loss includes $5.1 million of stock compensation expense, $600,000 of patent litigation-related expense and $1.1 million of acquisition-related cost and amortization.

Overall, it was a very good quarter and a very strong first half of 2013.

Further reviewing our performance in the second quarter, total revenue increased by 20% over the second quarter of 2012 to $40.7 million from $33.8 million, and it increased by more than $3.2 million from the $37.4 million reported last quarter.

Revenue increased in all of our product lines year-over-year and quarter-over-quarter, with the majority of the revenue increase coming from the continued success of join.me in our collaboration cloud, increased sales of Pro and Central, driven by the business model change in our IT management cloud, and increased sales of Rescue and Bold in our service cloud.

Our total number of net premium subscribers increased by 39,000, and we closed the quarter with approximately 530,000 premium subscribers. The major increase in premium subscribers was driven by sales of our Central and join.me products.

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

On a product line basis, the collaboration cloud revenue was 21% of total revenue in the quarter. Revenue from the IT management cloud was 33% of total revenue, and service cloud was 46% of total revenue.

By geography, international revenue was 34% of total revenue, consistent with the 34% reported last quarter. And sales in all major geographies grew by greater than 20% year-over-year.

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 $3.3 million or $0.13 per share, up $0.01 from the high end of our outlook. The over-delivery was due to exceeding our revenue guidance and the higher operating margins.

Our non-GAAP gross margin in the second quarter was 90%, consistent with the prior quarter. Our non-GAAP operating margin in the second quarter was 16%, 1 percentage point greater than last quarter and 1 percentage point above the outlook we've provided. Non-GAAP sales and marketing expenses were $20.4 million or 50% of revenue, an increase of $2 million from the $18.4 million reported in the first quarter of 2013. The increase was primarily due to increased marketing spend and increased headcount and recruiting costs.

Non-GAAP research and development expenses in the second quarter were $5.4 million or 13% of revenue, a decrease of $500,000 from the prior quarter. The decrease was largely due to foreign exchange fluctuations as the U.S. dollar strengthened by approximately 4% against the Hungarian forint.

Non-GAAP G&A expenses were $3.9 million or 10% of revenue in the second quarter, consistent with the previous quarter.

Now turning to the balance sheet. We closed the quarter with cash, cash equivalents and marketable securities of $201.4 million. This is a decrease of $3.8 million from the prior quarter, and the decrease was primarily due to the payment of litigation expenses in Q2, which were incurred in Q1 and our share repurchase program.

In the quarter, we spent approximately $5.6 million repurchasing 260,000 shares.

Non-GAAP operating cash flow for the second quarter was $14.7 million or 36% of revenue, and includes approximately $1 million of costs associated with the build-out of our Boston space. The very strong non-GAAP operating cash flow was driven by higher-than-expected e-comm sales in the second quarter.

Non-GAAP free cash flow for the second quarter was $10.1 million or 25% of revenue. Total capital expenditures in the second quarter were $4.7 million and included approximately $1.4 million of capital costs associated with our move to Boston, and $2 million of costs associated with the expansion of our data centers, including our new data center in Dallas, Texas.

Total accounts receivable decreased to $9.6 million from $11.9 million, and accounts receivable days sales outstanding decreased to 21 days versus the 29 days reported last quarter.

Total deferred revenue in the second quarter was $77.7 million, an increase of $3.6 million over the prior quarter and an increase of 24% over the second quarter of last year.

Now turning to our outlook for the third quarter and the full year 2013. For the third quarter, we expect total revenue to be in the range of $41.9 million to $42.4 million. Non-GAAP net income for the third quarter is expected to be in the range of $3 million to $3.3 million, or $0.12 to $0.13 per diluted share.

Non-GAAP net income excludes $5.2 million of stock compensation expense, $600,000 of estimated patent litigation-related expenses and an estimated $700,000 in acquisition-related costs and amortization. Non-GAAP net income for the third quarter assumes an effective tax rate of approximately 50%.

Non-GAAP net income for the third quarter is based on an estimated 25.1 million fully diluted weighted average shares outstanding.

On a GAAP basis, the GAAP net loss for the third quarter, which includes stock compensation expense, patent-related litigation expense and acquisition-related cost and amortization, is expected to be in the range of $1.6 million to $1.9 million, or $0.07 to $0.08 per diluted share. The GAAP net loss for the third quarter assumes income tax expense of $1.4 million to $1.7 million, and the GAAP net loss per share for the third quarter is based on an estimated 24.3 million weighted average shares outstanding.

For the full fiscal year, we expect total revenue to be in the range of $162.7 million to $164.2 million, an increase on the high end of $4.2 million from our previous guidance. Non-GAAP net income for the full year 2013 is expected be in the range of $12.4 million to $13.1 million, or $0.49 to $0.52 per diluted share. And non-GAAP net income excludes an estimated $21.1 million of stock compensation expense, $7.9 million in patent litigation-related expense and $3.4 million in acquisition-related costs and in amortization.

Non-GAAP net income for the full fiscal year assumes an effective tax rate of 50%, and non-GAAP net income for the full year is based on an estimated 25.1 million fully diluted weighted average shares outstanding.

On a GAAP basis, the GAAP net loss for the full year, which includes stock compensation expense, patent litigation-related expenses and acquisition-related cost and amortization is expected to be in the range of $10.6 million to $11.4 million, or $0.43 to $0.47 per diluted share. And the GAAP net loss for the year assumes an income tax expense of $3.8 million to $4.4 million.

The GAAP net loss for the full year of 2013 is based on an estimated 24.4 million weighted average shares outstanding.

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

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of Gregg Moskowitz with Cowen and Company.

Gregg S. Moskowitz - Cowen and Company, LLC, Research Division

I apologize if this has been covered, just juggling on multiple calls, but Jim, I didn't actually catch the revenue growth by segment. And if you didn't review it, I was wondering if you wouldn't mind going through that.

James F. Kelliher

Yes. We didn't really talk about it specifically in the script. But on the growth by segment, remember, we have the 3 segments: the collaboration cloud, we said grew greater than 25% in the quarter on a year-over-year basis; the RMM cloud grew greater than 20%; and then our customer care cloud grew in a 10% to 15% range for the quarter.

Gregg S. Moskowitz - Cowen and Company, LLC, Research Division

Okay, that's very helpful. And do you still expect join.me to grow bookings and revenue north of 100% this year? Is it still tracking towards that?

Michael K. Simon

Yes, we do, Gregg.

James F. Kelliher

Yes.

Gregg S. Moskowitz - Cowen and Company, LLC, Research Division

Okay, fantastic. And Mike, relatively recently, you rolled out some enterprise versions of both Cubby and join.me. I was wondering if you could sort of talk about the early response that you've seen to both of those.

Michael K. Simon

Well, they're really part of a strategy that had another element come out just yesterday, which we also rolled out, a channel program called LogMeIn Elevate. And so essentially, what we're really trying to do is take advantage of those companies that are, what we'd call, sort of mid-market, let's say, 50 to 1,250 employees, where management is really important for their IT department, ranging from onboarding and offboarding of employees into the services, policy establishment/enforcement. So when you step back, you have Cubby for enterprise, join.me for enterprise, a channel program and AppGuru all being packaged up and being delivered right into what we believe is something of a captive customer base. And our IT professional user base, the subset of the 500-some-odd-thousand customers we have. So we feel like they're increasingly -- people who are only familiar with LogMeIn for maybe our access product, LogMeIn Free, sometimes forget that we have a really great franchise that is selling into SMB IT. And those enterprise-grade functionality, I think, are really important for them and are helping Cubby and, in particular, join.me get traction with businesses as opposed to just individual users.

Gregg S. Moskowitz - Cowen and Company, LLC, Research Division

Okay, great. And Mike, one of the hallmarks to think of LogMeIn's products is that, certainly, they are very easy to use and work very well. Wondering if you could just speak to though how you expect the training of the channel partners to proceed? And when you think you might be able to see some sort of realizable benefit from that?

Michael K. Simon

Thanks, Gregg. So I appreciate the kind sentiment towards our products. Certainly, I think most who follow LogMeIn do know that we try to put an enormous amount of effort into fit and finish. In terms of training our channel partners, because most -- historically, LogMeIn has sold to channel players, they haven't necessarily been a channel for us, they've been customers for us, they're usually quite familiar with both the architecture of our products, the security setup, and we're just trying to simplify the deployment, things like billing, onboarding customers, training, et cetera, collateral materials to help them build their own businesses. So for us, the Elevate program is less about training them how to use a product and more about helping build a successful business using our products as a key foundational element.

Operator

Our next question is from the line of Robert Breza with RBC Capital Markets.

Robert P. Breza - RBC Capital Markets, LLC, Research Division

Michael, as you look at the premium subscriber growth, 39,000, impressive number. Clearly, the ability to monetize both Central and join.me has paid off for you guys. And as you look at now join.me as part of that and Cubby, Xively, AppGuru, I mean, where do you think that number can go from just a sales capacity? And how should we think about that trend?

Michael K. Simon

Yes, I would -- that -- the Q2 number was particularly strong for us, and part of that was from the introduction of Cubby, part of that was from the continued rollout of some pricing and packaging changes in Central, which performed well for us. So we wouldn't expect the number for the second half of the year, on a quarter-by-quarter basis, necessarily to increase. What we're really now trying to do is focus on increasing the value we're getting per customer. And things like AppGuru and the enterprise versions of Cubby and join.me are really focused on increasing our wallet share rather than just the sheer plowing on, increasing the number of adds every quarter.

Robert P. Breza - RBC Capital Markets, LLC, Research Division

And maybe as just a follow-up, as you guys step back and look at the diverse universe you have, how do we think about the international revenue impact here going forward? And any color you have on how you see Europe kind of trending would be great.

James F. Kelliher

Yes, we said in the script, Rob, that all our geographies grew greater than 20%. Clearly, that includes Europe within that. So Europe had a good quarter. We continue to see our ability to expand market share and expand revenue growth in those geographies. Latin America had a particularly strong quarter for us, again, 2 quarters in a row. So I think we have a lot of growth, as we always said, outside of North America that we can take and capitalize. As we continue to expand the product sets, this gives us more opportunity out there.

Operator

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

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Michael, maybe we could start on the size of business. It feels very different than it did 3 quarters ago. Two quarters in a row, you've beat by 4%, raised by 4%. I think 3 quarters ago, we were talking about some kind of challenges with Rescue and you've touched on it at different points today. But is there kind of an easy way to think about what's changed in the business? And my second question is, can you -- I think you did say this, but can you remind us how much of the guidance includes Xively and AppGuru? And then I'll have a follow-up question.

Michael K. Simon

Yes. So thank you, Gene. So the year -- we feel like we've benefited from multiple factors. I think the most important for us is our success in the collaboration cloud, which of course, is join.me, Cubby and our LogMeIn access product. These are products that are used by mobile professionals. We've increased our growth outlook for that to approximately 30% for the full year. And that has been accelerating, the growth quarter-over-quarter is accelerating. And that's an important thing that maybe had a shorter-term impact. We've been pleased with the business model change, and pricing and packaging change we made for Central. It added, not just numbers to our customer count, but actually, what we believe is, fairly high value on typically IT professional service providers, if you will, or the IT decision-makers in SMB, to our paid customer ranks. And that's, we believe, an important piece of the puzzle for bringing AppGuru to the market, which is what you asked about. AppGuru, of course, being a management console for an environment where people are bringing third-party apps and cloud-based third-party apps into the business environment as opposed to just things that are on-premise, traditional software products. In our guidance, both Xively and AppGuru, at this stage, are fairly -- are very, very modest. I think there's upside in what we're doing based on Xively and AppGuru, particularly because AppGuru is not shipped and Xively just shipped a few weeks ago. That, I must say, we're really pleased with the way Xively is performing as an early product. What's interesting about Xively, as a platform and as a service for products, commercial products, aimed in the so-called connected world or Internet of Things world, it has what I think is somewhat of a unique blend of opportunity that includes not just sort of smarter world changing-the-planet, changing-your-home-type, new types of products, it also just dramatically plays an important role in the real economy today in turning traditional logistics and things like that into faster, better, cheaper solutions. So we did say that we have signed up thousands of developers into our development program. We are signing commercial customers, big and small, and we're quite excited about the Xively opportunity.

Charles Eugene Munster - Piper Jaffray Companies, Research Division

If you were going to look at Xively, I guess, kind of the long term here, is this something that you think could be as a standalone as big as your other 3 segments today, when you talk about down the road, 5 years from now? Or is this something that's going to be more kind of -- or a little bit smaller, I guess. How should we -- we know the Internet of Things is going to be real and exponential, but how do you kind of calibrate the long-term opportunity around Xively?

Michael K. Simon

Well, many believe, including me, that the Internet of Things represents the largest technology market of all time, potential market. We have an early, if not, first-mover advantage in that. And we benefit from a network effect. Xively is somewhat unique in its construction, in that it allows interoperability between -- our customers can add interoperability between their products and other people's products very easily in Xively. So our goal, and it's a goal at this stage, but our goal is to make it the largest part of our business. I think it certainly has the potential energy to be as large as any other LogMeIn business. Certainly, if you're looking at a 5-year time frame, it's a huge market that's coming quickly, we believe.

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Okay. And then, I guess, on that front, given the opportunity, is this something that we should think about on the expense side around Xively longer term. We don't have -- you talked about modest revenue in the guidance for AppGuru and Xively right now. I assume it's modest expenses, but is this something where we should just think about since it's such a big opportunity that there could be some kind of accelerated expenses at some period for the next year to accommodate that kind of growth?

Michael K. Simon

Well, we actually don't believe so. As many of our investors know, we actually took -- effectively lowered our margin by about 4%, which gave us, 2012 to 2013, which depending on how you count, gave us roughly an additional $10 million of investment expenses that we could invest into our new business opportunities. And of course, Xively has been a multiyear project for us. So it's fully funded from an R&D standpoint, even in 2012. So as we continue maintaining -- we don't expect to expand our margin particularly aggressively in the near term. But at the same time, we don't expect it to contract. In fact, our guidance largely holds it flat from our Q2 results.

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Okay. And one final question for Jim, in terms of the dollar renewals. I think you said it was at better than 80%. Can you remind me where that was last quarter?

James F. Kelliher

Yes. The same, Gene. So we've been pretty consistent at this 80% annualized dollar basis for a long time.

Operator

Next question is from the line of Tim Klasell with Northland Securities.

Tim Klasell - Northland Capital Markets, Research Division

Just diving a little bit on the spend on Xively. That strikes me as sort of a different sales process into the OEMs and what have you. Are you building out a direct sales effort for Xively? Or how should we think about that, go-to-market?

Michael K. Simon

Yes. The Xively opportunity for us, if you think about business opportunities being -- you can sort of group them into concentric rings around customers that you have or concentric rings around technology where you have a right to win or an unfair advantage compared to other competitors. And Xively is certainly a concentric ring. It's -- because we sell to other solution providers. It actually is a more consultative or hands-on sale typically. And we are -- not everyone knows, but LogMeIn does have a field sales organization. I think it's well managed and well run. And the larger Xively sales tend to follow more of that model, which is a little bit more of a hands-on sales model. But we have already started to build that out, and we'll continue to increase the size of the go-to-market team for Xively going forward.

Tim Klasell - Northland Capital Markets, Research Division

Okay. And then we've heard fairly good reviews on join.me, particularly after you added the recording functionality. Did you guys see an uptick in conversions with that feature? Or did I just get a few one-off data points?

Michael K. Simon

No, we are very excited about join.me, overall, both its just absolute growth and its improvements in, let's say, in the unit economics, conversion rates, things like that. The recording feature that is being added to join.me is, I think, uniquely interesting and a great opportunity for us because there are other competitors that have recording but it's often kept on the desktop of the person who made the recording. Join.me actually does a recording session into the cloud. And the question, where does it go? What happens? How do I share it? And it's, I think, very elegant and nice. If you record a session in join.me, it automatically puts it right into special meeting cubbies. And these meeting cubbies can be used to distribute other materials, both handouts, both bidirectional as a normal cubby works. So for us, it's not just a new feature in join.me, it's also part of a strategy to integrate, to create a genuine cloud of useful collaboration tools. And I'm pleased to hear that you heard good results, but we're very, very excited about it. I should say, it's still in beta, so we have not yet seen an uptick. It will -- we expect it to ship this quarter in GA. But as of today, it's still in beta and has not yet shipped. So the good results we had in Q2 were independent of that new feature that is still in beta today.

Tim Klasell - Northland Capital Markets, Research Division

Okay, great. And then one final one. Have you gotten any negative pushback from the Central customers? Or seen any, now that they've been under your belt for a full quarter? Or have the users been fairly benign about that change?

Michael K. Simon

We're really pleased with the response we got in the community. As you know, in the Internet, you can only -- you really can't control the message of a large community. And so the sentiments -- they are what they are. And we were extremely pleased to see a largely favorable response. And in particular, our users said, "Look, this is a high-value business that they offer, a high-value service. And that for the modest price of Central, it seems like a very reasonable proposition." And it's largely been received without any negative blowback.

Operator

Our next question is from the line of John DiFucci with JPMorgan.

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

It's actually Darren Jue, on for John. Just given the strong results and the guidance, I'm just wondering if you feel like you're taking share from Citrix and others in the core products. Or is it really just that the demand environment is getting better, your opinion?

Michael K. Simon

Yes, that's a great question. The place that you would most obviously expect us to be taking share from Citrix would be in the collaboration space. And if you were to look at Google Trends, you would start to see join.me closing in very quickly on things like WebEx and GoToMeeting in terms of search volume. However, what we tend to see is, when we created join.me, it was largely formulated to serve what was a poorly served market. The stat, at the time join.me was launched, was only about 4% of information workers regularly use online meetings. Clearly, with millions and tens -- many tens of millions of people using join.me because it has both a free and a paid offering, that is no longer the case at all. But our -- if you actually look at the growth numbers, it tends to be that we're either adding net new or more -- to the extent we're taking market share, I would characterize it tends to be more from the Cisco WebEx offering than GoToMeeting.

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

Okay. And maybe just an unrelated follow-up. Just a question about the use of cash because you obviously have a relatively large cash position. I'm just wondering if can give us an idea of what you're planning to do with it? Do you expect to be more acquisitive than you've been in the past? Or perhaps even accelerate the share repurchases? Any color there would be helpful.

Michael K. Simon

That's -- Darren, I think that's an interesting question that's on the mind of many shareholders. So if you look at LogMeIn, we're somewhat uniquely positioned, in the sense that we have 20% in the SaaS, we have 20% revenue growth, we have 20% EBITDA. And at the same time, on a full year basis, we would expect to generate about 25% non-GAAP operating cash flow. And we have over $200 million of cash on the balance sheet. So it does give us some opportunities. And I think it's safe to say that optimizing our capital allocation in a way that maximizes shareholder value is a very high priority for the company at this time. There -- as we, I think, have always said, there will be some acquisition in our business plans. But that was probably only a piece of the puzzle and not the primary use of cash going forward.

Operator

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

Raghavan Sarathy - Dougherty & Company LLC, Research Division

First off, the deferred revenue growth accelerated since the first quarter, coincident the strong results and guidance. Were there any larger deals in the quarter? Or the scent [ph] was broad based?

James F. Kelliher

We -- there were certainly not a large deal, like we had last quarter in the Rescue, but we always do a fair number of large deals. But there wasn't an unusually large deal. And it was a good, broad-based performance in bookings across all products and lines and like I said, right across all geographies.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Okay. And then, Mike, you talked about growth rate of collaboration business accelerating through the course of the year. Can you talk about what changes have you made for the products, or making for the products? Or changes you're making in sales to drive the -- so the accelerated growth that you're anticipating?

Michael K. Simon

Well, the -- essentially, with join.me, we feel it has a tremendous amount of potential energy in terms of adding premium features. So in earlier part of this year, we added annotation. We have had great response to the premium audio features. And we are very close to unveiling, or shipping, putting into general availability, the session recording feature of join.me, which right now is in beta. You can go and see it on the beta site and use it. It's getting very good results and reviews. So essentially, join.me as its premium feature set in the join.me enterprise version, as these premium feature sets continue to roll out, it becomes easier and easier for companies to adopt it as their primary online meeting tool. And that is -- we have some more sales resources on it, but it's really a combination of sales and marketing, coupled with product improvements that have made it, I think, an important part of our growth strategy.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Okay. And then, just one final question. On the IT management cloud you said the year-on-year growth was more than 20%. What was the growth rate for the first quarter? And then, are you assuming the effect of this business model change tapering off in the second half of the year?

James F. Kelliher

Yes. Our growth rate in the first quarter was 10% to 15%, right? Remember, we made that business model change in March, and so the majority of the impact of that was felt for revenue perspective after -- towards the end of Q1. So we're certainly starting -- we certainly, in Q2, felt a big part of that impact of that business model change in Q2.

Michael K. Simon

And it's, I think, important to restate that the business model change in Central actually does flow into next year as well. It is a multipart program and part of our strategy to really try and engage a new set of users in a commercial relationship, which we think are good candidates to sell other products, including AppGuru, too.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

So just so that I understand this right, so -- but you're still expecting 20% growth for the year, which would imply that there is an acceleration in the second quarter. But you're not still expecting any tapering off in the second half?

James F. Kelliher

From a revenue perspective, Rag, when we talked about those growth rates -- those revenue growth rates, so the revenue grew greater than 20% this quarter.

Operator

Our next question is from the line of Brad Sills with Maxim Group.

Bradley H. Sills - Maxim Group LLC, Research Division

Just first on Xively. Are you seeing any kind of pipeline build for any specific solutions there? Is there a vertical or, just in terms of early traction, I know it's very early, but are you seeing -- you just kind of -- early interest in a certain solution set?

Michael K. Simon

It's pretty -- and so, yes. Thanks for the question, Brad. The pipeline for Xively is very interesting in its breadth. It ranges from industrial applications to consumer-facing products to sort of pieces of logistics. So it really does seem to address the needs of a very, very broad type -- set of companies. They range from things you can read on our website, something like a Good Night Lamp, which is a multicity lamp system that allows families just to stay in touch and make sure people are healthy and well, which is sort of a small company that is trying to use technology to solve a simple problem in a new way. But in the pipeline, it includes all kinds of different industries. So ranging from energy to fast-moving consumer goods to sort of brave new world-type products that are really about smarter homes, smarter planet, quantified-self-type applications that, without this type of technology, wouldn't exist.

Bradley H. Sills - Maxim Group LLC, Research Division

Got you. Great, that's very helpful. And then on AppGuru, on the preview, are you seeing certain parts of the installed base that the reception has been stronger? You mentioned the potential for cross-sell here. It's significant, it seems like a logical fit to me. But are there any specific installed bases that you're seeing real interest in there?

Michael K. Simon

Well, so many -- we have such a great franchise in, what I would call, the managed server, managed service provider, MSP space. And their customers -- if you look at any one MSP, it'll typically have a pretty tight vertical customer base. It might be in financial -- their end customers might be financial services, they might be in retail, they might be in health care. However, from our perspective, aggregating them together, it seems to be a universal problem. The reason LogMeIn first got on the map is the access product we designed was useful for every IT person in the world. It just tended to be something that's a very handy tool to have in your toolkit. And now we're trying to address, all right, what are the future problems? We've had support and endpoint management, but in a world where the IT environment is changing very rapidly, the types of challenges people are having, which tend to be about provisioning users, identifying what types of applications people are using, consolidating, building, ensuring security and authentication policies are implemented in third-party apps and doing simple identity management, those problems are very, very different for IT people than what they saw a few years ago, even 2 years ago. And what we're finding is that they tend to be pretty common across all of our IT professional users, regardless of industry or sector.

Operator

[Operator Instructions] Our next question is from the line of Raimo Lenschow with Barclays Capital.

Chris Hogan - Barclays Capital, Research Division

It's actually Chris Hogan in for Raimo. The question I had was just around Cubby. I realize kind of from a strategy perspective, you guys are really going to market with a bundle of solutions to address the broader mobility problem. But with the go live of the enterprise version, I'm just wondering, do you get any feedback from customers on them not understanding exactly the differentiation of Cubby, just given how crowded the market has become for enterprise file-sharing sync. Or do they really kind of understand the package that you guys are going to market with?

Michael K. Simon

Well, we feel like they do understand. When we look at our customers who are IT gatekeepers, this is largely still an unsolved space. The difficulty of deploying solutions, the lack of management tools, when it comes to an individual using a cloud-based file and sync, it's safe to say, people really like it. There's good solution; I think Cubby's an outstanding solution. But when it comes to being able to ensure -- secure deployment and manage deployment, there's still a lot of work to be done in the industry. And so we're really trying to take our position with technology and our relationship with whether they're outsource service providers or internal service department, IT department, and parlay it into a strong position in enterprise file sync and share. And then we have this fairly unusual asset, which is our very popular end-user apps like LogMeIn for iOS, our free iPad app, join.me, of course, which has a huge footprint, and then our desktop solutions for LogMeIn, and use every one of those assets we have to try and make Cubby a standard in the business environment.

Chris Hogan - Barclays Capital, Research Division

Actually, that's helpful. And then, the last one I had was just on the customer care business. Obviously, pretty decent growth this quarter again. I'm just wondering, if you guys can talk a little bit about what you think the sustainability of that growth is going forward. I know the HP deal will kind of help this year as that's kind of rolling through. But how do you think the sustainability is there x that HP deal?

Michael K. Simon

So it's worth pointing out that our service cloud and customer care business has multiple components. So we have -- it has one of the best customer lists in the world. If you look at who uses the product, it's not just HP. It's HP, it's Microsoft, it's Symantec, General Electric, SAP, it's huge. And Best Buy's, Geek Squad, Toshiba, Sony, and really a 50 -- more than 50 telcos using it worldwide. So -- and then tens of thousands of small businesses. And what we're really working with them is to -- just like we're doing with AppGuru and Central, how do we solve next-generation problems. We're really working on that very much in our service cloud business. So we think these customers are here to stay. We see them having an increased need in terms of to serve different types of platforms and we'll be there with them. Plus, our service cloud has BoldChat, which is really more about sales enablement than it is about tech support or desktop break fix. And BoldChat continues to grow very well. So we feel comfortable with that growth rate for the near term and we are working to try and improve it as we go forward. We feel like we have a good strategy in place. We're still executing on it, but if you look at a world where there's more and more intelligent devices from, not just smartphones and tablets, but home automation systems, consumer electronic devices, things in the Internet of Things, we feel like the need for high-quality, efficient, low-cost remote support should increase and we want to be right there with it.

Operator

At this time, I'd like to turn the call back over to Mr. Simon for closing remarks.

Michael K. Simon

Well, thank you all for your questions tonight. We are extremely pleased with our Q2 and first half results, and we believe we are well positioned for solid growth in 2013 and beyond. So thank you, again, for your time this evening.

Operator

Thank you, ladies and gentlemen. That does conclude our conference for today. We'd like to thank you for your participation. If you would like to listen to a replay of today's conference, please dial (303) 590-3030 or (800) 406-7325 and enter the access code 4628572. Again, we'd like to thank you for your participation, and you may now disconnect.

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