LogMeIn's (LOGM) CEO Michael Simon on Q2 2014 Results - Earnings Call Transcript

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 |  About: LogMein, Inc. (LOGM)
by: SA Transcripts

Operator

Good day and welcome to the LogMeIn Q2 2014 Conference Call. Today's conference is being recorded.

At this time, I would 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 end June 30, 2014.

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 2014 and full year 2014. The company's securities filings 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 Web site at logmein.com.

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

Michael Simon

Good afternoon and thank you for joining us today as we report on LogMeIn second quarter 2014 results.

In Q2, we reported another quarter of very strong financial results with revenue and earnings per share that exceeded the high end of our guidance. Total revenue for the quarter was $55 million, up 35% year-over-year. And non-GAAP earnings per share were $0.29, $0.05 above the high end of our guidance.

We also continued to make significant progress on our three key growth drivers for 2014. First, fuel join.me's rise a collaboration leader, second, boosting our value to SMB IT and third, accelerating our IoT opportunity with Xively. As a result, we are raising our revenue guidance by $6 million for the full year and are now forecasting greater than 30% revenue growth in 2014. Jim Kelliher, our CFO will provide our detailed guidance in a few minutes.

Our popular collaboration product join.me continued to perform very well in Q2 with more than 100% year-over-year revenue growth. Few products have epitomized to bring around app trend better than join.me. Millions of mobile professionals have introduced join.me into the workplace. And this wide adoption seeds opportunities for us to convert individuals, teams, and even entire companies into join.me customers.

On our Q1 earnings call, we noted that we are making the investments we believe will help us better attract and grow larger join.me accounts. And in April, we introduced join.me Enterprise, a new version of join.me specifically designed for large companywide deployments.

Join.me Enterprise includes the same simple, fast user experience employees love, while giving IT professionals' additional value in the form of integration management and control. And in the process, it gives a new premium pricing tier to offer to our increasingly large base of join.me customers.

Another key area of growth during the quarter was our IT management business which delivered 35% year-over-year revenue growth. LogMeIn has more than 100,000 SMB IT customers and our relationship with IT professionals provides a great growth opportunity for our business. The shift to the cloud increasingly mobile workers and the consumerization of IT have fundamentally changed how company's manage and secure their IT environment. And these trends are changing the role and needs of the modern IT professional.

In Q2, we took a significant step to address these evolving needs by expanding our IT management portfolio with a launch of AppGuru. Our goal is to provide IT professionals visibility into which apps employees are using and across which devices; it then offers a centralized means of managing these apps by making it easy to provision apps and set policies to control how these apps are being used and by whom. As a result, IT professionals can better manage cloud centric environments while mitigating the inherent security risks of today's BYO work place.

During the second quarter, we also made significant progress on accelerating our IoT opportunity with Xively. As the Internet of Things developed, Xively represents what we consider to be the single most important strategic initiative of the company. While the IoT is still an emerging opportunity, we are already receiving strong customer interest and promising early traction. This interest is coming from a broad range of sectors from home automation to live sciences to light industrials.

One illustrative Xively win during the quarter was with Lutron Electronics. Lutron is a leading manufacture of lighting and electronics offerings for both residential and commercial market. And the company was an early player in home automation. But it moved to Internet enable its line of connected home products Lutron needed an IoT platform, one that could help them reduce the cost and time to market for such offerings and one that could scale with demand over time. Lutron saw Xively as a platform that could help them accelerate this effort. And in June, the first Lutron products that are Xively enabled began shipping through its distribution channel.

Early IoT customer interest in Q2 also provided what we see has a potentially favorable synergy with our service cloud business. One of those biggest early drivers of the IoT is the desire to deliver connected customer experiences. We believe that our service cloud expertise will play an important role in our IoT effort and will position us well to help companies realize their connected customer visions.

Perhaps the senseless way to look at this potential synergy is to think about how businesses were remotely support and configure this whole new generation of connected devices. And how businesses will leverage the IoT to change the way they engage their customers.

Many of the world's largest customer tier organizations rely on our service cloud products, rescuing both BYOA to engage and support millions of their customers. Today Rescue is used to remotely configure, diagnose and troubleshoot millions of PCs, smartphones and tablets.

Based on early IoT customer need, we see an emerging opportunity for the supportive things, in other words bringing the same remote support benefit to the whole new class of devices.

Our efforts there early but both our IoT and service cloud teams are already working with companies interested in pioneering such device support. While the Internet of Things opportunity is still emerging, we are very excited by the initial customer interest and early traction. And we will continue to make this investment and at accelerating this strategic opportunity.

Overall, with a great second quarter and a great first half of the year, I will now turn the call over Jim Kelliher, our CFO for more details about our results and outlook.

Jim Kelliher

Thanks Michael. And thanks to all of you for joining us.

I would discuss our performance on a GAAP and non-GAAP basis. Non-GAAP excludes stock compensation expense, patent litigation related expense and acquisition related cost and amortization. Our non-GAAP results are more representative of how we internally measure the business and are reconciled in the tables attached to our press release. All non-revenue metrics I will discuss will be non-GAAP unless I state the metric is GAAP.

We are pleased to report another quarter of financial results which were above the outlook we provided in April. Total revenue for the second quarter was $55 million, $2.3 million greater than the high-end of the outlook we provided last quarter. Adjusted EBITDA was $11.5 million or 21% of revenue, $600,000 greater than the high-end of our guidance.

Net income for the second quarter of 2014 was $7.3 million and net income per share for the second quarter was $0.29, $0.05 above the high-end of our guidance. Net income excludes $6.7 million of stock compensation expense, $181,000 of patent litigation related expense and $2 million of acquisition related costs and amortization.

Operating cash flow for the second quarter continued to be very strong at 38% of total revenue or $21.2 million during the quarter. GAAP net income for the second quarter was $1.3 million or $0.05 per share.

Turning for further details of our performance in the second quarter, total revenue increased 35% over the second quarter of 2013 to $55 million. This was primarily driven by 80% plus growth in our collaboration cloud and continued strong performance in our IT management cloud.

On a geography basis, for the second quarter international revenue was 34% of our total revenue consistent with previous quarters. As in previous quarters, all of our major geographies saw quarter-over-quarter and year-over-year growth. In North America and Europe, revenue growth was greater than 30% and Latin America continued to be our fastest growing region with over 40% growth.

On a product line basis, in the second quarter the collaboration cloud revenue was 28% of total revenue up from 26% of revenue in the first quarter and increased by more than 80% year-over-year. The increase was driven by another quarter of 100% plus growth in join.me and continued strong sales of LogMeIn Pro. IT management cloud revenue was 33% of revenue and increased by 35% year-over-year driven by continued success of our Central and Pro products.

Service cloud revenue was 38% revenue and increased by 10% year-over-year. Across all our product lines gross renewal rates were approximately 80% on an annualized dollar basis consistent with prior quarters.

Net income in the quarter was $7.3 million or $0.29 per share, $0.05 greater than the high-end of our guidance, $0.02 of this over delivery was due to higher revenue and margin and $0.03 was due to a lower effective tax rate.

The effective tax rate for the quarter was 27% versus 34% last quarter and in our guidance. The year-to-date and full year effective tax rate is expected to be approximately 30% and a decrease in the effective tax rate is being driven by increased performance in our international operations.

Gross margins in the second quarter were 90% consistent with prior quarters. Our operating margin in the quarter was 17.6% up from the 16.8% reported in the first quarter. And our adjusted EBITDA margin was 20.8% of total revenue an increase from the 20.1% reported last quarter.

With regard to operating expenses, sales and marketing expenses were $28.3 million or 51% of revenue. The increase in absolute dollars from the prior quarter was primarily due to an increase headcount and increased marketing program spend.

Resources and development expenses in the second quarter was $7 million or 13% of revenue and increase of $1 million from Q1. The increase in absolute dollars and percentage of revenue is mainly associated with increased headcount. During the quarter, we added more than 40 new employees to our development organization.

G&A expenses were $4.6 million or 8% of revenue in the second quarter. Quarter end headcount was 748 up 73 net new employees and in addition to the increased development headcount, the majority of the remaining headcount increases occurred in sales and marketing.

Turning to the balance sheet, operating cash flow continue to be very strong in the quarter at 38% on revenue, a $21.2 million. Free cash flow for the second quarter was $18.2 million up 33% of revenue. The over delivery in both operating cash flow and free cash flow was driven by our increased operating performance in the second quarter.

We ended the quarter with cash, cash equivalents and marketable securities of $221 million, an increase of $17 million from the prior quarter. Additionally, during the quarter, we repurchased approximately 46,000 shares under our share repurchase program at a cost of approximately $2 million.

Total accounts receivable were $10.6 million versus the $11.7 million reported in the prior quarter, accounts receivable days sales outstanding decreased to 17 days from 21 days. Total deferred revenue was $108.3 million, an increase of $3.8 million over the prior quarter and an increase of 39% over the prior year.

Now, I will finish with our outlook for the third quarter and the full year 2014. For the third quarter of 2014, we expect total revenue to be in the range of $56 million to $56.5 million.

We are currently targeting adjusted EBITDA for the third quarter in the range of $11.5 million to $12 million which represents an adjusted EBITDA margin of 20% to 21%. Our net income per diluted share was expected to be in the range of $0.27 to $0.28. And our GAAP net income per share was expected to be in the range of $0.03 to $0.04.

For the full fiscal year 2014, we are increasing our revenue guidance by $6 million. Accordingly, we expect total revenue to be in the range of $216.5 million to $218 million, which represents a greater than 30% growth for the full year.

We expect adjusted EBITDA for the full year to be in the range of $45 million to $48 million representing an adjusted EBITDA margin of 21% to 22%. Net income per diluted share was expected to be in the range of $1.05 to $1.12. And GAAP net income per share is expected to be in the range of $0.14 to $0.21.

For both the third quarter and the full fiscal year, net income assumes an effective tax rate of 30% and GAAP net income assumes an effective tax rate of approximately 28%. And all per share amount are based on an estimated 25 million fully diluted 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

Thank you. (Operator Instructions) And at this time, we will go to the first question from Gene Munster with Piper Jaffray. Please go ahead.

Gene Munster - Piper Jaffray

Good afternoon and congratulations. Couple of questions, one is the Enterprise side and Rescue. Can you talk a little bit about other visibility in that making sense? And my second question is, in terms of Xively when we should, how we should kind of think about the revenue ramp and build around Internet of Things? Thanks.

Michael Simon

Sure. On the Rescue side of our business, which is used for remote support of PCs, tablets and smartphones, we feel that the visibility is very good and it continue to be an important tool for a very large customer base. This year we don't believe it is a significant contributor to growth, but as we go into next year, I think it becomes an element in our overall IoT strategy. And we actually are seeing customers that are looking for Rescue like functionality to be integrated into our Xively IoT offerings.

And I think it's important to point that it has very, very strong renewal rates. So the business itself we see is performing well and it's an enormous generator of cash and earnings for the company. So short-term, it's probably most notable, it's performance as a bottom line performer, but it does become an overall strategic element to the company as we complete our IoT vision.

And so speaking of IoT vision, Xively we feel like this was a really important quarter for us. It started to contribute to revenue in the first quarter, excuse me in the second quarter and we continue to attract and sign customers. That seems to be valuing our differentiator, when you think you need approach to making them have successful connected businesses.

And one of the revenue is not, it's roughly 1% of our revenue and little over 1% of revenue in the quarter, it actually is probably the most important 1%, important revenue that the company is generating right now. So we continue to be very bullish on our Xively and IoT opportunity.

Gene Munster - Piper Jaffray

And I guess just in terms of when I think about that ramp as – like you said its fractional today, is it 2016 or 2017?

Michael Simon

Well, we expected to have triple digit growth next year and the year after, so I think it ramps up very rapidly. It will actually I think be something that starts to move the needle as we go into next year.

Gene Munster - Piper Jaffray

Okay, great. Thanks and congratulations.

Michael Simon

Thanks Gene.

Operator

At this time, we will take a question from Gregg Moskowitz from Cowen & Company.

Gregg Moskowitz - Cowen & Company

Thanks very much and congratulations as well. Jim, I was wondering if you could perhaps parse the increased $6 million…?

Jim Kelliher

There is three or four growth drivers to that Gregg. First, the join.me performance that we have talked about continues to be a growth driver for us. Second, the success of the products being sold in SMB IT, Central and Pro continue to do very, very well. And third, BoldChat is another avenue in which we are investing and we are seeing our revenue growth come from that.

And then finally, as Michael just talked about Xively, started to contribute to the revenue stream and you see some of that coming in through in the second half of the year.

Gregg Moskowitz - Cowen & Company

Okay, perfect. And then Mike, I know it's early of course, but how is the enterprise version of join.me doing so far even if anecdotally looking across some of your larger customers, if you could sort of talk to that.

Michael Simon

We are really pleased with the launch of join.me Enterprise. It actually has material increased average transaction size. And it is being the product of choice not just for enterprise but we would consider a mid-market sort of an inside -- classic inside sales. But, people seem to really be responding to integrations in fact it can be managed and centrally deployed, integrated into AppGuru. And we feel like it's been a very strong launch for us.

Gregg Moskowitz - Cowen & Company

Okay, great. And if I could ask one other question, I guess a bit more of a bigger picture question around IoT and kind of think back to when you guys acquired Pachube and it's been a few years now. And clearly were sort of ahead at the times when that happened. But obviously, a lot of things do have to come together and in terms of the cost of sensors and developers kind of coming on board and customers across pretty wide variety of verticals starting to kind of buy in.

And when sort of like I guess the question is, when you sort of look at where we are today, what if anything has been sort of the biggest surprise or surprises to you whether it would be positive or negative?

Michael Simon

Yes. I would say that in the last 12 months we have been really pleased that what I would call a market understanding of the benefit you can bring to their business. And just for everyone's benefit Xively and our overall IoT initiative, it is the number one strategic priority of this company.

And the reason is, we feel it's almost once in a lifetime opportunity. Its ability to transform products and transform businesses – businesses it's kind of hard to overstay. And interesting a lot of people in the popular press when they think about IoT, think of sensors and the smart planet and things that are sort of if you will next generation technology.

But, what we are seeing is, it's just going to simplify delivery in logistics. We announced Lutron on the call, who – they have been doing home automation for a while. But, they realized, if there is a need not just to have things work and one Wi-Fi hotspot but actually work wherever you are with the sort of – same sort of reliability it just works, feature set that you expect from LogMeIn and whether it's join.me or LogMeIn Pro and then they are quickly reading, wait a second, just I will make the product that is now engaging the customers in new ways.

And so – by far and away the most important change from this time last year is – it's no longer, I think, hey, this is something that's featurous which ought to be important. It's company today think they can make better products; they can have understanding of their customers; they can delight them in new ways so they can lose cost, that will have an impact in the near term rather than five years out. And I think that the market is developing very rapidly in a way that we think we can take advantage of.

Gregg Moskowitz - Cowen & Company

Okay. That's terrific. Thanks very much.

Operator

This time we will take a question from Tim Klasell with Northland Securities.

Tim Klasell - Northland Securities

Yes. Good afternoon congratulations on a great quarter. Unfortunately, I missed a part of the call, so I apologize if you run over this in the prepared remarks. But, how are the conversion rates with join.me trending?

Michael Simon

Yes. That's free to pay join.me rates have done very well this year and continue to be very solid. And I think the other thing that also adding to join.me, we talked about the fact that we have introduced join.me Enterprise during the quarter which has both larger deployments in terms of number of seat and a higher per price per seat price. So we are happy both in conversion rate and in terms of transaction size when it comes to join.me.

Tim Klasell - Northland Securities

Okay, great. And on AppGuru, who do you compete up against at that price point and target market?

Michael Simon

AppGuru as you know is a very forward leaning product. And there are various point solutions that do you drive and you maybe one thing that maybe overlapping pieces. But for our customers, we are getting feedback from them that it is truly transformative piece of technology for them. It's allows them to get visibility into what their – either their employees are doing with an internal IT, or in the case of an outsourced IT, the so called managed service providers. It's basically unveiling on the app that has a discovery tool. The discovery tool is giving them visibility into what people are doing that they really never had before.

And we were talking to a managed service provider just in the last few days with a gap between the number of employees they thought they had under management. And the number of employees that they were paying for cloud-based apps was about 40% greater. I mean, its enormous gap and just flipping a switch they could suddenly massively reduce the number of cloud-based subscription they were buying every month just for one app and that's the first one they looked at.

So when I look at the competitive landscape, there are various – there is solutions that sort of address some of the automation particularly maybe just for Google apps and other things. But in terms of a hand tailored solution that gives you visibility automation and management and identity management in one solution. At this stage it's something of a differentiated product.

Tim Klasell - Northland Securities

Great. Very helpful. Thank you.

Michael Simon

Thanks Tim.

Operator

At this time we will move to Charlie Anderson with Dougherty & Company.

Charlie Anderson - Dougherty & Company

Yes. Thanks for taking my question, and congrats from me as well. So you mentioned increase in transaction size on – bringing on enterprise and join.me, I wonder how much of that drove some of the upside. And then do you feel like that continues sort of where are we in that I don't know maybe the low hanging fruit that the people who will likely convert to it?

Michael Simon

We feel like – if you look at join.me, we still have massive and growing sort of literally day-by-day user base that we engage really millions of professionals and hundreds of thousands of organizations around the world. And we feel like our job is to increase the value of the professional feature set of the – whether it's join.me Enterprise or join.me Pro. And we feel like we have a very, very rich roadmap.

And it's interesting to note, it's not only are we going into net new customers, we are actually converting larger customers from other install. It's a fact that your replacement solution where some of the prominent online meeting tools that you see. So it's an important growth driver for us. And we feel like we are really just scratching the surface in that opportunity.

Charlie Anderson - Dougherty & Company

And then second question for me on Xively. I think the Lutron win is really interesting. They have really cool products, I wonder if you could maybe be specific on what products you are in and how exactly you are helping them and maybe heads to their reach across to other things you can do with Xively.

Michael Simon

Yes. So it will part of – what they haven't announced the specific product line publicly yet. But, it will be in some other product line and the main difference that if you are familiar with Lutron – very – this outstanding product and really had lead the way on some very, very good home automation perfect in lighting for example controls. We will help them do is deliver a more seamless solutions so that it's always worked wherever you are.

For example, just to take maybe I will illustrate the point, you maybe home in your living room and within Wi-Fi coverage, but your phone may actually be on AT&T or Verizon. And from a networking standpoint you certainly have the complexity, you have a general mobility. That's just one of many, many, many things that Xively overcomes and LogMeIn has done very well. And that's one other reasons that they wanted to work with us.

Charlie Anderson - Dougherty & Company

Great. Thanks so much.

Michael Simon

Thank you.

Operator

This time you will hear from Brad Sills with Maxim Group.

Brad Sills - Maxim Group

Hey, guys. Thanks for taking my question and congratulations. Just first one on AppGuru, you mentioned some progress there, obviously, you just launched it. But can you comment a little bit on early reception AppGuru?

Michael Simon

AppGuru, we are really pleased with the way that people are responding to its value proposition. And we feel like it saw was a need that almost little bit like the Internet of Things, it was very forward leaning when we started devicing it. A lot of IT management even a year ago particularly ours sort of SMB IT probably would not have identified that they have anything to do with product based applications or bring-your- own-device.

And now certainly it's been much more in the news in the last few months. Wait a second, this is – it provides a great opportunity to improve the security of their organizations, or improved the security and to fundamentally save money that's leaking out of companies. So with AppGuru, we had to invest and create technologies, some of which is very complex, particularly in the discovery part, the network management and including network monitoring side of AppGuru.

But we also have to educate a customer base about what they are facing and what's going on. And I think the fact that we are now getting our prospects and customers to play that back to us in a way that they get it, it resonates with them and it solves a pain point is very encouraging.

So we are – as you said it's early days with AppGuru, but I feel like that pain point is likely to dramatically increase within our – in our SMB IT customer base. And to the extent we keep and we are committed to trying to solve those problems for them whether it would be in visibility, automation, provisioning or identity management, I think it's going to be a very good opportunity. And part of our overall strategy of improving our value to SMB IT which is one of the three main things we are trying to do this year.

Brad Sills - Maxim Group

Great. Thanks Michael. And then one on the interplay between join.me Enterprise and Cubby maybe if you could just comment a little bit on what you are seeing in terms of pull through of Cubby into join.me Enterprise given the joint feature set there?

Michael Simon

Yes. In a sense it's really a bundle. So you get more join.me, excuse me Cubby for the listeners on the call, there is roughly almost a 50% premium for join.me Enterprise versus join.me standalone or join.me Pro and that if you will include a lot more Cubby storage. So whether you call it pull through or attach rate, it's specifically a bundle. So by definition it does very well and pulling that through.

Brad Sills - Maxim Group

Okay. Thanks Michael.

Michael Simon

Thank you.

Operator

This time we will take a question from Raimo Lenschow with Barclays.

Stefan Putyera - Barclays

Hey, guys, it's actually Stefan in for Raimo. Another quick question on AppGuru, could you guys talk about what the total addressable market whether you guys are assuming within that specific product and then I also have a follow-up.

Michael Simon

So essentially with AppGuru and the total addressable market it really comes down to what we would consider those organizations that are large enough to have dedicated IT budget whether it's internal or external. And there is technologically no reason it can't go up into large enterprises but as you know we have a great franchise in sort of SMB IT.

And so if you were to try and size the market, it starts to come into play for organizations that are roughly more than 25 employees up to about 1200 employees that's 600,000 companies in the U.S. alone. And those organization actually employee the majority of the work force.

So you have what we believe is a very, very large addressable market. What's particularly important for us is the 100,000 IT organizations that are actually paying customers for us. And that we are really in particular trying to convert them into AppGuru customers as we go over the next few quarters.

Stefan Putyera - Barclays

Got it. And then on some of the OpEx investments that you guys are making particularly in R&D, I think you guys mentioned that you hired 40 new resources. Could you talk a little bit about where kind of those investments are going and particularly what product sets these new hires will be focusing on?

And when can we actually expect any new additional products announcements going forward?

Michael Simon

One interesting data point we would disclose, about 20% of our open RACs are actually for Xively itself. If you look at where are we investing new heads particularly in R&D, Xively is a very, very important component of that.

And in terms of products, if you kind of step back and look at LogMeIn, we have been public now five years and in that five years we really went from a PC centric business that has two products. To now one that is really has massively transformed into – that's not about connecting people to PCs. But it's about connecting people to each other for collaborative purposes like join.me or now in the case Internet of Things connecting people – connecting everything businesses to their customers businesses to their products, customers to their products et cetera.

And so we feel like we have dramatically increased the size of markets that we are going after, the addressable market. And so I think for us our focus is more to deliver on that promise and to increase the depth and perfection of our products set rather than to necessarily expand the portfolio dramatically. You will continue to see some new things. But, right now there – we feel like our existing products have a very, very good opportunities in front of them from collaboration to IoT to the sort of ability to cross between our service cloud and our IoT cloud those are the connected object cloud. Those are I think really good opportunities that have products that we already have in place that we can take advantage of.

Stefan Putyera - Barclays

Got it. And congrats on the great quarter.

Michael Simon

Oh, thank you very much.

Operator

This time we will take your question from Scott Zeller with Needham & Company.

Scott Zeller - Needham & Company

Hi, good afternoon. Wanted to just go back to the join.me guidance that we received previously, is the product still on track to exit calendar 2014, a 10% of total revenue?

Michael Simon

So I don't know that we have actually specifically been that precise. The product though is doing very well, I think directionally that's right. But, beyond that if you look at – its part of our collaboration cloud which we specifically disclose and it has increased quite steadily to now being roughly 28% of our overall business.

So that collaboration cloud which is – it's growing at roughly a little bit north of 80% year-over-year and it's 84% and it's now 28% of our business.

Jim Kelliher

And we have said, join.me is going triple digit. So we expected to grow triple digits for the full fiscal year.

Scott Zeller - Needham & Company

Okay. And could you comment on any price increases that you have executed and what that may have offered in terms of performance in the quarter and what your tribute in the quarter to price increases?

Michael Simon

Yes. So essentially for some investors I think this is important question, I think that's very good news in the details of that story. So if you look at the high-end of our guidance, $218 million that represents 31% growth year-over-year. And if you then deconstruct that the question, how much has come from maybe a business model or price changes versus how much has gone from the business independent of the – for example sunsetting LogMeIn and it's free business.

And so of the 31% you would say roughly 8 percentage points is due to the business model change. But then the other 23 percentage points of growth are actually based on the standalone business independent of the sunsetting of LogMeIn free.

Scott Zeller - Needham & Company

That's very helpful. Thank you.

Michael Simon

You set me well.

Operator

And at this time we have no further questions in the queue. I will turn it back over to Michael Simon for closing remarks.

Michael Simon

Well, thank you all very much for your questions tonight. As I think you heard we are extremely pleased with our Q2 2014 results. And we continue to execute on our key growth drivers including building on join.me's rapid success, increasing our value to SMB IT and accelerating LogMeIn in IoT opportunity.

We look forward to sharing our progress on these fronts when we report our Q3 results in October. And thank you again for your time this evening.

Operator

This does conclude today's conference call. Thank you all for your participation. You may now disconnect.

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