LogMeIn Management Discusses Q3 2013 Results - Earnings Call Transcript

Oct.24.13 | About: LogMein, Inc. (LOGM)

LogMeIn (NASDAQ:LOGM)

Q3 2013 Earnings Call

October 24, 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

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

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Albert Chi - JP Morgan Chase & Co, Research Division

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Tim Klasell - Northland Capital Markets, Research Division

Bradley H. Sills - Maxim Group LLC, Research Division

Robert Scott Zeller - Needham & Company, LLC, Research Division

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the LogMeIn Third Quarter 2013 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Thursday, October 24, 2013. And I would now like to turn the conference over to Rob Bradley, Director of IR. 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 September 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 fourth 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. With that, I will turn the call over to our CEO, Michael Simon. Michael?

Michael K. Simon

Good afternoon, and thank you for joining us today as we report on LogMeIn's third quarter 2013 results. In Q3, 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 $43 million, up 21% year-over-year from $35.4 million reported in Q3 2012.

Non-GAAP operating margins also increased to 18%, up from 16% last quarter, and we reported $0.14 non-GAAP earnings per share, $0.01 above the high end of our guidance. As a result, we are raising our revenue and earnings guidance for the full year. Jim Kelliher, our CFO, will provide our detailed guidance when he speaks in a few minutes.

Our collaboration cloud continues to be one of the biggest drivers of our growth. The cloud is made up of our join.me online meeting product; Cubby, our cloud file sync and share product; and our LogMeIn Pro remote access product. Overall, our collaboration cloud saw year-over-year percentage revenue growth of approximately 30% and remains our fastest growing business. The bulk of this growth is attributable to the strong demand for and the increasing contribution of join.me. In the third quarter, join.me once again delivered year-over-year percentage revenue growth in the triple digits.

During the quarter, we also took key steps to build additional value into join.me's premium offering, steps we believe will help us improve join.me's conversion rate from free to paid usage. These steps include the introduction of new capabilities that we believe position join.me favorably against legacy competitors while providing us with new ways to introduce our complementary collaboration products. As we've discussed in the past, we see Cubby, our cloud file sync and share offering, as a natural counterpart to join.me.

And in the third quarter, we unveiled the initial phase of integration between the product line by introducing cloud-based recording and sharing of join.me meeting. It is a unique and differentiated way of delivering one of the most requested features for join.me, and it creates upsell and cross-sell opportunities for Cubby within join.me's large and rapidly growing customer base. Another key contributor to the growth was the continued strength in our IT management cloud, which includes our Central product as well as our LogMeIn Pro for RMM product.

Our IT management cloud delivered year-over-year percentage revenue growth in the high 20s. Central delivered particularly strong growth and continued to benefit from the business model changes introduced earlier in the year. Our continued success in this important market points to the value of our well-established base of IT decision-makers. This base is more than 80,000 strong, and we believe provides a distinct advantage as we bring new complementary IT management offerings to market. We believe these solutions are well suited to address the evolving needs of IT professionals in the post-PC era.

Throughout the third quarter, we also made significant progress on the next generation of LogMeIn products, products aimed at exciting growth opportunities for our business. One of LogMeIn's key strengths has always been our focus on innovation, and we continue to make investments to advance our core offering and to meet the evolving need of our customers. At the same time, we have unveiled new offerings this year, aimed at addressing some of the most transformative opportunities in all of technology.

Among the most visible of these opportunities is the Internet of Things and our early efforts with our Xively Platform as a Service offering. Xively was released in the second quarter and is already receiving positive early interest from commercial developers and partners alike. In the past months, inquiries into our IOT Platform as a Service have changed from exploratory pilots and developer experiments to projects with specific commercial goals. In the third quarter, we secured our initial Xively wins including Turbid, electron and the U.K.'s Internet of Schools.

We also introduced Xively's partner program and have started to build what we believe will be a valuable ecosystem of partners in this burgeoning market. During the quarter, we also continued to hit important development milestones for AppGuru, our key new IT management offering. AppGuru is a product designed to help IT professionals first, embrace the growing use of cloud applications in the workplace and second, make the transition from PC and network-centric management to user and cloud-centric management.

We see AppGuru as a natural extension of our proven IT portfolio, one we believe will open up both cross-sell and new business opportunities with our high-value IT customer base. In addition to these new offerings, we also took steps during the quarter to enhance the value of our service cloud offering. Mobile product features have long helped us attract many of the world's premier customer care organizations, and we remain focused on strengthening our lead in most mobile customer engagements.

Just this week, we started to roll out new mobile capabilities in BoldChat, our live chat multichannel customer engagement offering. These new capabilities are designed to help businesses address the rapidly growing number of customers accessing websites via mobile devices. With mobile webpage usage predicted to surpass desktop web usage by 2015, we believe demand for next-generation mobile customer engagement solutions will grow, and we see our deep mobile experience and large customer base of marquee clients as a distinct advantage when it comes to addressing this growing need.

As we look ahead to next year and beyond, we believe that these investments in both our core and new offerings will position us to increase wallet share within our established base while opening up new growth opportunities in the post-PC era. Overall, it was a great third quarter with revenue growth and margins that exceeded our guidance. Our collaboration cloud business continues to be our biggest growth driver with year-over-year revenue growth of approximately 30%. Our IT management cloud business was once again strong, highlighting the longer-term potential of this high-value business.

Meanwhile, we believe ongoing investments in both our service cloud product and our next-generation offering have put us in a favorable position to address some of the most pressing business challenges in the post-PC era. At this time, I will turn the call over to Jim Kelliher, our CFO, for more details about our Q3 financial results as well as our Q4 outlook.

James F. Kelliher

Thanks, Michael, and thanks to all of you for joining us today as we report our third quarter 2013 financial results. We are pleased to report another good quarter of financial results, which exceeded the outlook we provided last quarter. Total revenue for the quarter was $43 million, $600,000 greater than the high end of our outlook of $42.4 million.

Non-GAAP operating margins were 18% of revenue, which also exceeded the operating margin in our outlook. Non-GAAP EBITDA margins were 21% of revenue. Non-GAAP net income was $3.5 million, exceeding the high end of our outlook of $3.3 million, and non-GAAP net income per share was $0.14, $0.01 greater than the high end of our guidance. Non-GAAP operating cash flow was $8.8 million or 20% of revenue.

On a GAAP basis, the GAAP net loss for the third quarter was $56,000 or $0.00 per share and includes $4.6 million of stock compensation expense, $100,000 of patent litigation related expense and $700,000 of acquisition related cost and amortization.

Further reviewing our strong performance in the third quarter, total revenue increased by 21% over the third quarter of 2012 to $43 million from $35.4 million. Revenue in all of our product lines year -- increased year-over-year and quarter-over-quarter. Increased revenue in our collaboration cloud was led by continued success of join.me. Increased revenue on our IT management cloud was driven by our Central product while increased sales of Bold drove our service cloud increase. Our total number of net premium subscribers increased by 21,000, and we closed the quarter with approximately 558,000 premium subscribers. Renewal rates continue to be strong at approximately 80% on an annualized dollar basis.

Consistent with last quarter -- on a product line basis, consistent with last quarter the collaboration cloud revenue was 21% of total revenue in the quarter. Revenue from the IT management cloud was 34%, up 1 percentage point from last quarter, and service cloud revenue was 45%, down 1 percentage point from last quarter. By geography, international revenue was 34% of total revenue, consistent with the prior quarter. Hereafter, I will discuss our performance on a 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. On a non-GAAP -- our non-GAAP net income was $3.5 million, or $0.14 per share, up $0.01 from the high end of our outlook. The over-delivery was due to exceeding our revenue guidance and higher operating margins. Our non-GAAP gross margin in the third quarter was 90%, consistent with the prior quarter.

Our non-GAAP operating margin was 17.7%, more than 1 percentage point greater than the 16.5% we reported last quarter. Non-GAAP sales and marketing expenses were $20.7 million or 48% of revenue, an increase of $300,000 from the $20.4 million reported in the second quarter of 2013. Non-GAAP research and development expenses in the third quarter were $6.7 million or 16% of revenue, an increase of $1.3 million from the prior quarter. The increase was due to increased headcount to support our various product initiatives and our annual development off-site. Non-GAAP G&A expenses were $3.8 million or 9% of revenue in the third quarter.

Turning to the balance sheet. We closed the quarter with cash, cash equivalents and marketable securities of $199.4 million. This is a decrease of $2 million from the prior quarter. The decrease was primarily due to our share repurchase program. In the quarter, we spent approximately $5.7 million, repurchasing 190,000 shares. And year-to-date, we have spent $20 million to repurchase nearly 1 million shares.

Non-GAAP operating cash flow for the third quarter was $8.8 million or 20% of revenue and includes approximately $1.3 million of onetime cost associated with the buildout of our Boston office. Non-GAAP free cash flow for the third quarter was $5.4 million or 13% of revenue. Total capital expenditures in the third quarter were $3.4 million, including $1.2 million of expenditures associated with our move to Boston.

Total accounts receivable increased to $11.3 million from $9.6 million due to increased sales, and our accounts receivable days sales outstanding increased to 24 days versus the 21 days reported last quarter. Total deferred revenue in the third quarter was $80.3 million, an increase of $2.6 million over the prior quarter and an increase of 23% over the third quarter of last year.

Now turning to our outlook for the fourth quarter and the full year 2013. For the fourth quarter of 2013, we expect total revenue to be in the range of $43.7 million to $44.2 million. Non-GAAP net income for the fourth quarter is expected to be in the range of $3.5 million to $3.8 million or $0.14 to $0.15 per diluted share. Non-GAAP net income excludes $5.4 million of stock compensation expense, $600,000 of patent litigation related expenses and $600,000 in acquisition related cost and amortization. Our non-GAAP net income for the fourth quarter assumes an effective tax rate of approximately 50% and is based on an estimated 25.2 million fully diluted weighted average shares outstanding.

The GAAP net loss for the fourth quarter, which includes stock compensation expense, patent related litigation expense and acquisition related cost and amortization is expected to be in the range of $1.5 million to $1.8 million or $0.06 to $0.07 per diluted share. The GAAP net loss for the fourth quarter assumes income tax expense of $2.2 million to $2.5 million and is based on an estimated 24.3 million weighted average shares outstanding.

For the full fiscal year 2013, we expect total revenue to be in the range of $164.8 million to $165.3 million, an increase on the high end of $1.1 million from our previous guidance.

Non-GAAP net income for the full year is expected to be in the range of $13.4 million to $15.7 million, or $0.53 to $0.54 per diluted share. Non-GAAP net income excludes an estimated $20.3 million of stock compensation expense, $7.3 million in patent litigation related expenses and $3.5 million in acquisition related cost and amortization. Non-GAAP net income for the full fiscal year assumes an effective tax rate of approximately 50% and is based an estimated 25.2 million fully diluted weighted average shares outstanding.

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 the range of $8.7 million to $9 million or $0.36 to $0.37 per diluted share. The GAAP net loss for the year assumes an income tax expense of $5.6 million to $5.9 million and is based on an estimated 24.4 million weighted average shares outstanding.

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

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Robert Breza with RBC.

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

First of all, congratulations on the quarter. Michael, I was wondering if you could talk a little bit about the integration between Cubby and join.me with the voice recording and then how you're able to see -- or if that's helping with the upgrades here in terms of moving people from free to pay because that looks like it was up nicely?

Michael K. Simon

Yes. So in the summer, we introduced a feature in join.me that allows participants and meeting hosts to record sessions. And unlike some of the competitive offers that are out on the market, if you record session from join.me, it actually is recorded in the cloud and stored in the cloud, which -- and specifically, it's stored in our Cubby product, our Cubby sync and file share product, which gives you several advantages: one, you can record from an iPad if you're hosting a meeting, for example, rather than just from a PC. But equally important, as soon as the session is completed, because it is already in a file sync and share product, Cubby, you can readily distribute, share, publish and consume the recorded session right after the meeting is over. And so in of itself, session recording was an important premium feature to differentiate a join.me pay product versus a join.me free and at the same time, it gives a natural way for people to expand into our other collaboration product, join -- Cubby, which is really a data collaboration product.

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

Perfect. When you look at the kind of the next-generation product side, the AppGuru, et cetera, maybe, Jim, for you, when should we start to see those really start to fall in line in terms of driving product revenues or are we still maybe 3 to 6 months away?

Michael K. Simon

Yes. I think because there is a bit of a lag between revenue and bookings and particularly Xively does have a ramp-up because they're built into connected products. But that much said, we feel like we're getting real traction with it. We've announced a number of wins, the Xively platform has won multiple awards and has great partners. And so our outlook, our preliminary outlook for next year, we feel that Xively and AppGuru have the potential to drive maybe 5% of our bookings next year, which would be in the neighborhood of $10 million, combined $10 million in bookings next year. However, at this stage, let's say our forecast would be more modest than that because of risk. We feel like they have the potential energy to generate that type of contribution next year.

Operator

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

Charles Eugene Munster - Piper Jaffray Companies, Research Division

I'll add my congratulations. A couple of questions, first, just if we look back, this is the third consecutive quarter that you've met and raised and that's very different than the business was maybe a year or so ago. And maybe, can you just go back and talk about the visibility in that core business that had a little bit more volatility into it, how that visibility is today versus what it was maybe 1.5 years ago? And then a couple of follow-up questions.

Michael K. Simon

Sure. So the main -- when we have steady state, I think our visible -- our business has great visibility. It's one of the beauties of a SaaS product, high transaction volume, inside sales as opposed to being an enterprise-focused business. However, in 2012, people that have been following the LogMeIn story may remember that we really had a rather abrupt decline in our European-based customer care service cloud offerings. Rescue in Europe went from a very rapid growth, roughly 30% year-over-year growth in 2011, to single digits or so in Europe that year. And that was sort of, if you will, a shift but we have worked through that shift so we feel we're back in something of a steady state and hopefully, can continue to have guidance based on good visibility as we've had really, the vast majority of the quarters that we've been a public company.

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Okay. And then just a follow-up to Rob's question on Xively. That's kind of a long-term part of the story that is probably undeniable, the Internet of Things. And I guess, the question would be is how much of that is LogMeIn going to participate in? So maybe can you give a little bit of context? I think most people who are listening to this call realize that connected devices are going to be -- just have some wicked growth to it? But maybe give us some context about why it's important that -- or why you think that you're going to benefit from that?

Michael K. Simon

So essentially, the Internet of Things or IOT, we operate on the premise that, that market is for real and it's coming quickly and is enormous. And I think both, we're starting to see in the marketplace as well as intuitively, most people would understand the benefit of connected objects from home automation, to smart cities, to entertainment and games, and that having things that are connected to the Internet gives you all kinds of new features for end-users, as well as lower potentially, cost of fairly pedestrian things like delivering physical goods and logistics. So it's an opportunity that really cuts across the entire economy. And I don't think many people particularly would disagree with that. The next question is, why LogMeIn? And LogMeIn is -- we feel that we have digital assets, technical assets, intellectual property and a service delivery platform known as Gravity, that are uniquely suited to the challenges of this market. When you think about the Internet of Things, you have enormous need for scalability, security and a lot of control and management functions that we've long done in the PC world and then subsequently did in the mobile world. But if you look across all the companies in the Internet space, there's very few that actually actively control tens of millions of devices in a 24-hour period, which is what LogMeIn does. And we think we have an architecture that allows us to scale from tens of millions to hundreds of millions and even billions of devices over time. And for our partners, they're companies that you see every day in the real world. They make physical goods that go into your home.

They're creating industrial control systems. And these are real products, part of the real economy today. By partnering with LogMeIn in general and Xively, specifically, we give them the ability to have smart connected products, very, very rapidly reducing both the cost and time to market and perhaps equally importantly, reducing, let's say, the risk that they've architected incorrectly or that the manageability isn't there. So we're really pleased with the response that we're getting to the Xively platform.

Charles Eugene Munster - Piper Jaffray Companies, Research Division

So then my, I guess, final question for Jim. So deferred revenue grew 23% year-over-year, that's correct, right?

James F. Kelliher

That's right. Yes.

Charles Eugene Munster - Piper Jaffray Companies, Research Division

And generally, should we just think about that continuing to outpace the revenue growth or any just kind of thoughts on how to think about deferred versus regular revenue growth?

James F. Kelliher

Deferred is a reflection of our sales and bookings growth, right? And so the second half of this year is certainly getting some of the benefit from a revenue growth perspective of the accelerated bookings we had in the first half of the year around both join.me and our Central business model chain. So we would expect deferred revenue to slightly grow a little bit less than this 23% and grow a little bit less than our revenue as we look out certainly over the next quarter anyway.

Operator

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

Albert Chi - JP Morgan Chase & Co, Research Division

This is Albert Chi on for John DiFucci. Great job on the quarter but I just had a question on the IT management cloud, saw some strong growth there and some of that I guess, was from the Central pricing change. It seems that there's more to that growth than just the pricing change. So any color that you guys can provide around that business?

Michael K. Simon

Yes, so our IT management cloud, we feel like it's a really nice strategic asset of the company. So we actually mentioned in our prepared remarks, we have over 80,000 -- billing relationships with over 80,000 IT decision-makers. Think of them as sort of small and medium business IT departments. And we've been pleased at our ability to monetize them a little bit more effectively through some packaging and pricing optimization. As we go into next year, these are the exact same people that we feel are the key target market for AppGuru because their job traditionally was managing network, setting up servers, making sure desktops were working, then that people could work mobile-ly. And now increasingly they're responsible for bring-your-own-device, for smartphones and tablets and for ensuring that the way their organizations interact with third-party cloud apps, think NetSuite, Salesforce, things of that nature that the policies are put in properly so that users have proper credentials, strong passwords, new users are added efficiently, old employees are removed quickly from those third-party apps. So we feel you'll continue to see some improvements in pricing and packaging in let's say our core desktop management business that these people still have to worry about but they're also the foundation for really, the next generation of types of IT management products that we are generating, in particular AppGuru.

Albert Chi - JP Morgan Chase & Co, Research Division

Okay, just one follow-up, actually. So guidance for the next quarter implies that it looks like the operating margins are declining sequentially. But it looks like going back in history, you see a bit of a bump going from the third quarter to the fourth quarter. Is that just conservatism or is there anything else going on?

James F. Kelliher

Yes, it's a little bit -- we'll have some increased sales and -- 2 things happen in Q4 for us. We will have some increased sales and marketing spend, particularly as we bring some of these new products to market. And then too it's typically the quarter where we line up our heads for the next fiscal year or so. We'll have some increased sales and marketing headcount spend also in the quarter. But in total, the guidance would imply margins of roughly 17%, 18%, that EPS guidance, which we think is a good place where we want to run the business. And again, we're focused around continuing to invest in things that are going to increase that revenue line both on a sales and marketing perspective and a dev perspective. So we feel pretty comfortable where the margins are right now in the business.

Operator

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

Raghavan Sarathy - Dougherty & Company LLC, Research Division

First off, I want to kind of delve into this collaboration cloud business. So Michael, if I heard you right, you said the year-on-year growth was 30%. If I recall last call, you said it was high 20%. So there seems to be slighter, maybe modest acceleration in that business. So first, can you talk about the market growth rate of sort of the collaboration cloud and how you're growing faster than the market and then whether this sort of growth is sustainable? And I have a follow-up.

Michael K. Simon

The engine for our collaboration cloud is join.me and I'll call out what we said in our prepared remarks. Join.me had yet another quarter of triple digit growth. And so in particular, that product is dramatically outpacing just the overall market. And I think you can -- any of our investors or customers that are listening to the call would know that join.me is often is doing 2 things: one is taking some share away from traditional online meeting providers; but more importantly, it's dramatically expanding the number of people that can rely on online meetings as part of their daily workflow. When we got into this space, only about 4% of information workers worldwide regularly used online meetings products. And if you look at the tens of millions of people that will use join.me this year, obviously we're dramatically exceeding that number. So I think to answer your question, yes, we are growing more rapidly than the market overall for collaboration products and specifically, it is join.me that is driving that growth.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Okay, and then on the net premium adds, I know that this was not a good -- you had to take this with a grain of salt but I think the last couple of quarters, you had the boost from Central but if you think about it I think historically, the net sub adds have been in the 25,000 a quarter. So this quarter is a little lighter than that. But again because revenue growth was strong. So Jim, can you talk about the mix? Was the mix most due to BoldChat and service as opposed to IT as opposed to Pro? Can you give us some color around that?

Michael K. Simon

Sure. So net adds in the quarter were 21,000 and this is really consistent both with our expectation for this quarter and for the next couple of quarters. And if you were to really try and dissect, if you were look at Q3 versus Q2 for example, the gross add excluding the Central business model change were fairly similar. The reason net adds are adjusted is we've -- the onetime Central business model change, it doesn't impact Q3 as much. But more importantly, in 2012, we introduced a program where you could purchase LogMeIn Pro in app in LogMeIn for iOS, for iPads and for iPhones. And that particular purchase program does not include evergreen. It cannot automatically renew. And so our expectation is -- and that was introduced in the second half of 2012. So these low value, roughly $49 price point users will have a higher churn. But as you saw -- which will have a little bit of an impact on the net churn. However, we're pleased that we're basically replacing those low value customers at $49 with really $149 to $200 join.me users, and that's why you see a little bit of a disconnect between bookings growth versus customer adds.

James F. Kelliher

Yes, and you saw -- Rag, this is Jim. You saw it had no impact on the renewal rates on a dollarized basis, right? So it was true these low dollar customers that churned out that again are not impacting us financially and have no impact on a dollar basis to us.

Operator

Our next question comes from the line of Tim Klasell with Northland Securities.

Tim Klasell - Northland Capital Markets, Research Division

First question, on the core business, on the Rescue product, how are you feeling about that as we start looking out into 2014? Is that a -- you made some comments that Bold, which is in that product group, grew well, but how are you feeling about sort of the core Rescue business? And then I have some follow-ons on maybe some of the higher growth block.

Michael K. Simon

Yes, so essentially, if you look at our service cloud, which includes both BoldChat and Rescue, that the lines between those are blurring rather rapidly. And so if you think of -- our service cloud is responsible for customer engagement or customer care. What we've really invested in and just rolled out, literally, this week, is the start of new mobile platforms that really allow our customer care customers, this great customer list we have for customer care organizations, to be effective not simply in fixing a broken device, but maybe providing support when someone's browsing the web online or equally importantly, interacting with the service inside an app. And if you -- the focus in our Rescue businesses or service cloud is increasingly less about how can we fix a broken PC and more importantly, how can we get the right agent to interact with the right customer at the right time. So it's 1 part support and traditional customer care but it's also conversion and sales enablement. So our service cloud, I think, is evolving quite rapidly and it's really the tale of 2 cities. Our rescue business had some great wins. We'll continue to generate a ton of cash as we've often disclosed in our investor deck. But the higher growth has really tends to be in the nonsupport side of the service, BoldChat, which is growing very, very rapidly on just off a smaller base for now.

Tim Klasell - Northland Capital Markets, Research Division

Okay, great. And then just a quick follow-up. On the Xively business, you mentioned I think an answer to an earlier question around $10 million. You have a couple of different pricing models there. Some of it's around I would call it sort of the apps development and then there's some that it's a transactional base. Of that $10 million, how much of that is transactional, how much of it is into the dev cloud?

Michael K. Simon

Just to clarify, the $10 million is combined between AppGuru and Xively. It's what we believe is our -- I would say, an outlook. There's some -- we would discount that in our forecast but I would say, a preliminary outlook. And in 2014, that's a little bit heavier weighted with the transactional side because the way we interact with a partner is there's a certain amount of activity to get them onto the platform. This is a highly considered purchase, this is a strategic decision for a company, and they're really looking to adopt a platform for a multiyear lifecycle of a product. But then, once we get a customer on a platform, we have a very, very long tail of recurring revenue on a per device basis. So in 2014, a lot of the bookings will be related to getting people on the platform, if you will, the onetime fees that are getting them on board or the annual minimums as well, because it's really not just a service fee as much as there's an annual minimum to be on the platform. But we think as we go beyond 2014, increasingly, the value will be these streams from many, many devices that are connected to the platform.

Operator

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

Bradley H. Sills - Maxim Group LLC, Research Division

A question on AppGuru. Now that you've had some context here for the beta release, are there certain applications that you're finding good traction with in terms of management, are there certain cloud applications that you're seeing there or even some scenarios in different verticals where you're seeing traction so far?

Michael K. Simon

We are but we should say in the early beta, they really have a fixed set, a relatively small set of apps that they can use, and they were picked because they were so popular. As you would guess, there's roughly 25 to 40 highly used apps in the workplace and then there are thousands of rarely used apps. And since we are focusing on the core app, they're exactly what you'd expect, so things like the Google apps, Salesforce, NetSuite and then some things that a certain company or things that are specific for worker productivity. But at this early stage, what we're seeing is that people are using all the apps we offer and it's probably too early to say what the top 100 would be.

Bradley H. Sills - Maxim Group LLC, Research Division

And then on the new premium feature, session recording for join.me. Is that doing anything to change kind of the installed base customer profile? Are you seeing that product, Cubby moving -- sorry, join.me moving further up into kind of from the low end of the small business spectrum to the higher end or have you seen any change there just in terms of customer profile?

Michael K. Simon

Yes, that's a great question. It actually allows us to be more effective into organizations where the purchase is centralized. Again, this is often the centralized IT purchasing, our decision-making is done by our IT management core base. But for most people, join.me has always been great for an online meeting. But if you're trying to cover every use case in an organization, you have a certain need for session recording for maybe training purposes or company meetings where people are going to consume that meeting asynchronously, and it allows us to actually go into slightly larger accounts in a more effective way.

Operator

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

Robert Scott Zeller - Needham & Company, LLC, Research Division

A lot of questions around join.me. Could you offer us some more metrics though, perhaps even like a broad generalization of bookings for this year versus last as a high-level goal as you finish calendar '13?

James F. Kelliher

Yes, Scott, we talked about join.me being triple digit revenue growth and we really don't talk about bookings and we particularly don't talk about bookings on a product perspective. But needless to say, it's growing very, very fast, right? And not only on a sales perspective, but that's referring to -- it is -- that's reflecting back to a revenue perspective but also on a customer count perspective.

Operator

Our next question is a follow-up from Raghavan Sarathy with Dougherty & Company.

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Just a quick one on IT management cloud. Mike, you mentioned that IT management cloud grew in the high 20% and also you mentioned that Central continues to benefit from the model change. So can you give us some color around how to think about the organic growth you feel x this business model change of this business and sort of also the percent of the growth rate of this segment?

Michael K. Simon

I'm sorry, Rag, it was a bit fuzzy on the call. I think what you asked is how we should think about the business model change in organic growth rates next year? Assuming that's the right question, so our expect -- because the Central business model changed, which is sort of a simplistic term for a multiyear program, was really trying to take a large swath of professional grade users of our free products and establish a billing relationship with them and then march steadily up the value chain with them. And step one has been very, very successful. And to remind everyone, the Central business model change actually had sort of a multiyear rollout because they were given initial discounts in order to sort of ease people from free into premium. So Central, our expectation, will continue next year, to have quite a solid growth rate in of itself just because of the way the program was structured. But on top of that, it's the absolute bull's eye target for us to sell AppGuru.

Operator

And I'm showing no further questions at this time. I'd like to turn the call back over to Mr. Simon for closing remarks.

Michael K. Simon

Well, thank you for your questions tonight. We're extremely pleased with our Q3 results and we believe we are well positioned for solid growth in Q4 and beyond. So thank you again for your time this evening.

Operator

Ladies and gentlemen, this does conclude our conference for today. If you would like to listen to a replay of today's call, please dial 303 1 (800) -- sorry, (303) 590-3030 with access code 4644868. Thank you for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

LogMeIn (LOGM): Q3 EPS of $0.14 beats by $0.01. Revenue of $43M (+21% Y/Y) beats by $0.88M. (PR)