Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation — The accompanying consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company has prepared the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). |
Use of Estimates | Use of Estimates — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates. |
Cash Equivalents | Cash Equivalents — Cash equivalents consist of highly liquid investments with an original or remaining maturity of less than three months at the date of purchase. Cash equivalents consist of investments in money market funds which primarily invest in U.S. Treasury obligations. Cash equivalents are stated at cost, which approximates fair value. |
Marketable Securities | Marketable Securities — The Company’s marketable securities are classified as available-for-sale and are carried at fair value with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in equity. Realized gains and losses and declines in value judged to be other than temporary are included as a component of earnings based on the specific identification method. Fair value is determined based on quoted market prices. At December 31, 2013 and 2014, marketable securities consisted of U.S. government agency securities and corporate bonds that have remaining maturities within two years and have an aggregate amortized cost of $100.3 million. The securities have an aggregate fair value of $100.3 million and $100.2 million, including $67,000 and $9,000 of unrealized gains and $28,000 and $138,000 of unrealized losses, at December 31, 2013 and 2014 respectively. |
Restricted Cash | Restricted Cash — In May 2013, $125,000 of restricted cash associated with the Company’s Woburn, Massachusetts office lease was returned to the Company in connection with the expiration of the lease. In April 2012, the Company entered into a lease for a new corporate headquarters located in Boston, Massachusetts. The lease required a security deposit of approximately $3.3 million in the form of an irrevocable standby letter of credit which is collateralized by a bank deposit in the amount of approximately $3.5 million or 105 percent of the security deposit. Such amounts are classified as restricted cash in the accompanying consolidated balance sheets. In addition, the Company has made security deposits for various other leased facilities, which are also classified as restricted cash. |
Accounts Receivable | Accounts Receivable — The Company reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. Estimates are used to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to its estimated net realizable value. The estimates are based on an analysis of past due receivables, historical bad debt trends, current economic conditions, and customer specific information. After the Company has exhausted all collection efforts, the outstanding receivable balance relating to services provided is written off against the allowance and the balance related to services not yet delivered is charged as an offset to deferred revenue. |
|
Activity in the allowance for doubtful accounts was as follows (in thousands): |
|
| | | | | | | | | | | | |
| | December 31, | |
| | 2012 | | | 2013 | | | 2014 | |
Balance, beginning | | $ | 109 | | | $ | 180 | | | $ | 269 | |
Provision for bad debt | | | 100 | | | | 116 | | | | 102 | |
Uncollectible accounts written off | | | 29 | | | | 27 | | | | 70 | |
| | | | | | | | | | | | |
Balance, ending | | $ | 180 | | | $ | 269 | | | $ | 301 | |
| | | | | | | | | | | | |
Property and Equipment | Property and Equipment — Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is reflected in the consolidated statements of operations. Expenditures for maintenance and repairs are charged to expense as incurred. |
Estimated useful lives of assets are as follows: |
|
| | | | | | | | | | | | |
Computer equipment and software | | | 2 —3 years | | | | | | | | | |
Office equipment | | | 3 years | | | | | | | | | |
Furniture and fixtures | | | 5 years | | | | | | | | | |
Leasehold Improvements | | | Shorter of lease term | | | | | | | | | |
or estimated useful life | | | | | | | | | |
Goodwill | Goodwill — Goodwill is the excess of the acquisition price over the fair value of the tangible and identifiable intangible net assets acquired. The Company does not amortize goodwill, but performs an impairment test of goodwill annually or whenever events and circumstances indicate that the carrying amount of goodwill may exceed its fair value. The Company operates as a single operating segment with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. As of December 31, 2014, the fair value of the Company as a whole significantly exceeds the carrying amount of the Company. Through December 31, 2014, no impairments have occurred. |
Long-Lived Assets and Intangible Assets | Long-Lived Assets and Intangible Assets — The Company records intangible assets at their respective estimated fair values at the date of acquisition. Intangible assets are being amortized based upon the pattern in which their economic benefit will be realized, or if this pattern cannot be reliably determined, using the straight-line method over their estimated useful lives, which range from four months to eight years. |
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including intangible assets, may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this comparison indicates that there is impairment, the amount of the impairment is calculated as the difference between the carrying value and fair value. Through December 31, 2014, the Company recorded no material impairments. |
Revenue Recognition | Revenue Recognition — The Company derives revenue primarily from subscription fees related to its LogMeIn premium services and to a lesser extent, the delivery of professional services, primarily related to its Xively business. |
Revenue from the Company’s LogMeIn premium services is recognized on a daily basis over the subscription term as the services are delivered, provided that there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured. Subscription periods range from monthly to five years, but are generally one year in duration. The Company’s software cannot be run on another entity’s hardware nor do customers have the right to take possession of the software and use it on their own or another entity’s hardware. |
The Company’s multi-element arrangements typically include subscription and professional services, which may include development services. The Company evaluates each element within the arrangement to determine if they can be accounted for as separate units of accounting. If the delivered item or items have value to the customer on a standalone basis, either because they are sold separately by any vendor or the customer could resell the delivered item or items on a standalone basis, the Company has determined that the deliverables within these arrangements qualify for treatment as separate units of accounting. Accordingly, the Company recognizes revenue for each delivered item or items as a separate earnings process commencing when all of the significant performance obligations have been performed and when all of the revenue recognition criteria have been met. Professional services revenue recognized as a separate earnings process under multi-element arrangements has been immaterial to date. In cases where the Company has determined that the delivered items within its multi-element arrangements do not have value to the customer on a stand-alone basis, the arrangement is accounted for as a single unit of accounting and the related consideration is recognized ratably over the estimated customer life, commencing when all of the significant performance obligations have been delivered and when all of the revenue recognition criteria have been met. |
The Company currently only offers free versions of its iPhone, iPad and Android software products. The Company had formerly sold these iPhone, iPad and Android software products as perpetually licensed software, the revenue from which was recognized when there was persuasive evidence of an arrangement, the product had been provided to the customer, the collection of the fee was probable, and the amount of fees to be paid by the customer was fixed or determinable. |
Revenues are reported net of applicable sales and use tax, value-added tax, and other transaction taxes imposed on the related transaction. |
Deferred Revenue | Deferred Revenue — Deferred revenue primarily consists of billings and payments received in advance of revenue recognition. The Company primarily bills and collects payments from customers for products and services in advance on a monthly and annual basis. Deferred revenue to be recognized in the next twelve months is included in current deferred revenue, and the remaining amounts are included in long-term deferred revenue in the consolidated balance sheets. |
Concentrations of Credit Risk and Significant Customers | Concentrations of Credit Risk and Significant Customers — The Company’s principal credit risk relates to its cash, cash equivalents, marketable securities, restricted cash, and accounts receivable. Cash, cash equivalents, and restricted cash are deposited primarily with financial institutions that management believes to be of high-credit quality and custody of its marketable securities is with an accredited financial institution. To manage accounts receivable credit risk, the Company regularly evaluates the creditworthiness of its customers and maintains allowances for potential credit losses. To date, losses resulting from uncollected receivables have not exceeded management’s expectations. |
As of December 31, 2013 no customers accounted for more than 10% of accounts receivable and there were no customers that represented 10% or more of revenue for the years ended December 31, 2012, 2013, or 2014. As of December 31, 2014, one customer accounted for 15% of accounts receivable. |
Legal Costs | Legal Costs — Legal expenditures are expensed as incurred. |
Research and Development | Research and Development — Research and development expenditures are expensed as incurred. |
Software Development Costs | Software Development Costs — The Company has determined that technological feasibility of its software products that are sold as a perpetual license is reached shortly before their introduction to the marketplace. |
The Company capitalizes certain direct costs to develop functionality as well as certain upgrades and enhancements of its on-demand products that are probable to result in additional functionality. The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized as part of intangible assets until the software is substantially complete and ready for its intended use. Internally developed software costs that are capitalized are classified as intangible assets and amortized over a three year period. |
Foreign Currency Translation | Foreign Currency Translation — The functional currency of operations outside the United States of America is deemed to be the currency of the local country, unless otherwise determined that the United States dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiaries are translated into United States dollars using the period-end exchange rate, and income and expense items are translated using the average exchange rate during the period. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction gains and losses are charged to operations. The Company had foreign currency losses of approximately $641,000, and $89,000 for the years ended December 31, 2012 and 2013, and Foreign currency gains of approximately $105,000 for the year ended December 31 2014 included in other (expense) income in the consolidated statements of operations. |
Stock-Based Compensation | Stock-Based Compensation — The Company values all stock-based compensation, including grants of stock options and restricted stock units, at fair value on the date of grant and recognizes the expense over the requisite service period, which is generally the vesting period of the award, for those awards expected to vest, on a straight-line basis. The Company uses the with-or-without method to determine when it will realize excess tax benefits from stock based compensation. Under this method, the Company will realize these excess tax benefits only after it realizes the tax benefits of net operating losses from operations. |
Income Taxes | Income Taxes — Deferred income taxes are provided for the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss carry-forwards and credits using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. At each balance sheet date, the Company assesses the likelihood that deferred tax assets will be realized, and recognizes a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction. |
The Company evaluates its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be realized. Potential interest and penalties associated with any uncertain tax positions are recorded as a component of income tax expense. As of December 31, 2014, the Company has provided a liability for approximately $652,000 for uncertain tax positions. These uncertain tax positions would impact the Company’s effective tax rate if recognized. |
Advertising Costs | Advertising Costs — The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2012, 2013, and 2014 was approximately $23.8 million, $27.8 million, and $36.8 million respectively, which consisted primarily of online paid searches, banner advertising, and other online marketing and is included in sales and marketing expense in the accompanying consolidated statements of operations. |
Comprehensive Income | Comprehensive Income (Loss) — Comprehensive income (loss) is the change in stockholders’ equity during a period relating to transactions and other events and circumstances from non-owner sources and currently consists of net income, foreign currency translation adjustments, and unrealized gains and losses, net of tax on available-for-sale securities. Accumulated comprehensive loss was approximately $1.2 million at December 31, 2013 and consisted of $1.2 million related to foreign currency translation adjustments offset by $25,000 of unrealized losses, net of tax on available-for sale securities. Accumulated comprehensive income was approximately $3.1 million at December 31, 2014 and consisted of $3.0 million related to foreign currency translation adjustments in addition to $82,000 in unrealized losses, net of tax on available-for sale securities. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments — The carrying value of the Company’s financial instruments, including cash equivalents, restricted cash, accounts receivable, and accounts payable, approximate their fair values due to their short maturities. |
Segment Data | Segment Data — Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision making group, in making decisions regarding resource allocation and assessing performance. The Company, which uses consolidated financial information in determining how to allocate resources and assess performance, has determined that it operates in one segment. |
|
The Company’s revenue (based on customer address) and long-lived assets by geography are as follows (in thousands): |
|
| | | | | | | | | | | | |
| | Years Ended December 31, | |
| | 2012 | | | 2013 | | | 2014 | |
Revenues: | | | | | | | | | | | | |
United States | | $ | 90,233 | | | $ | 109,444 | | | $ | 148,532 | |
United Kingdom | | | 12,846 | | | | 15,058 | | | | 19,452 | |
International — all other | | | 35,758 | | | | 41,756 | | | | 53,972 | |
| | | | | | | | | | | | |
Total revenue | | $ | 138,837 | | | $ | 166,258 | | | $ | 221,956 | |
| | | | | | | | | | | | |
Long-lived assets: | | | | | | | | | | | | |
United States | | $ | 4,129 | | | $ | 10,207 | | | $ | 9,731 | |
Hungary | | | 1,599 | | | | 1,224 | | | | 2,018 | |
Ireland | | | 234 | | | | 1,057 | | | | 1,139 | |
International — all other | | | 614 | | | | 710 | | | | 588 | |
| | | | | | | | | | | | |
Total long-lived assets | | $ | 6,576 | | | $ | 13,198 | | | $ | 13,476 | |
| | | | | | | | | | | | |
Net Income (Loss) Per Share | Net Income (Loss) Per Share — Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the sum of the weighted average number of common shares outstanding during the period and the weighted average number of potential common shares outstanding from the assumed exercise of stock options and the vesting of restricted stock units. For the year ended December 31, 2013, the Company incurred a net loss and therefore, the effect of the Company’s outstanding common stock equivalents were not included in the calculation of diluted loss per share as they were anti-dilutive. Accordingly, basic and dilutive net loss per share for each period were identical. |
|
The Company excluded the following options to purchase common shares and restricted stock units from the computation of diluted net income (loss) per share either because they had an anti-dilutive impact or because the Company had a net loss in the period (in thousands): |
|
|
| | | | | | | | | | | | |
| | Years Ended December 31, | |
| | 2012 | | | 2013 | | | 2014 | |
Options to purchase common shares | | | 1,679 | | | | 2,389 | | | | 57 | |
Restricted stock units | | | 147 | | | | 1,192 | | | | 18 | |
| | | | | | | | | | | | |
Total options and restricted stock units | | | 1,826 | | | | 3,581 | | | | 75 | |
| | | | | | | | | | | | |
|
|
|
Basic and diluted net income per share was calculated as follows (in thousands, except share and per share data): |
|
|
| | | | | | | | | | | | |
| | Year Ended | | | | | | | | | |
December 31, 2012 | | | | | | | | |
Basic: | | | | | | | | | | | | |
Net income | | $ | 3,566 | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average common shares outstanding, basic | | | 24,711,242 | | | | | | | | | |
| | | | | | | | | | | | |
Net income, basic | | $ | 0.14 | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | |
Diluted: | | | | | | | | | | | | |
Net income | | $ | 3,566 | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average common shares outstanding | | | 24,711,242 | | | | | | | | | |
Add: Options to purchase common shares and restricted stock units | | | 645,063 | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average common shares outstanding, diluted | | | 25,356,305 | | | | | | | | | |
| | | | | | | | | | | | |
Net income, diluted | | $ | 0.14 | | | | | | | | | |
| | | | | | | | | | | | |
|
|
| | | | | | | | | | | | |
| | Year Ended | | | | | | | | | |
December 31, 2013 | | | | | | | | |
Basic and Diluted Net Loss per Share: | | | | | | | | | | | | |
Net loss | | $ | (7,682 | ) | | | | | | | | |
| | | | | | | | | | | | |
Weighted average common shares outstanding | | | 24,350,913 | | | | | | | | | |
| | | | | | | | | | | | |
Basic and diluted net loss per share | | $ | (0.32 | ) | | | | | | | | |
| | | | | | | | | | | | |
|
|
| | | | | | | | | | | | |
| | Year Ended | | | | | | | | | |
December 31, 2014 | | | | | | | | |
Basic: | | | | | | | | | | | | |
Net income | | $ | 7,955 | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average common shares outstanding, basic | | | 24,385,297 | | | | | | | | | |
| | | | | | | | | | | | |
Net income, basic | | $ | 0.33 | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | |
Diluted: | | | | | | | | | | | | |
Net income | | $ | 7,955 | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average common shares outstanding | | | 24,385,297 | | | | | | | | | |
Add: Options to purchase common shares and restricted stock units | | | 1,000,902 | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average common shares outstanding, diluted | | | 25,386,199 | | | | | | | | | |
| | | | | | | | | | | | |
Net income, diluted | | $ | 0.31 | | | | | | | | | |
| | | | | | | | | | | | |
Guarantees and Indemnification Obligations | Guarantees and Indemnification Obligations — As permitted under Delaware law, the Company has agreements whereby the Company indemnifies certain of its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. As permitted under Delaware law, the Company also has similar indemnification obligations under its certificate of incorporation and by-laws. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director’s and officer’s insurance coverage that the Company believes limits its exposure and enables it to recover a portion of any future amounts paid. |
|
The Company has entered into agreements with certain customers that contractually obligate the Company to indemnify the customer from certain claims, including claims alleging that the Company’s products infringe third-party patents, copyrights, or trademarks. The term of these indemnification obligations is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited. Through December 31, 2014, the Company has not experienced any losses related to these indemnification obligations. |
In November 2012, the Company filed suit against Pragmatus Telecom LLC (“Pragmatus”), seeking declaratory judgment after certain of the Company’s customers received letters from Pragmatus claiming that their use of certain LogMeIn services infringed upon three patents allegedly owned by Pragmatus. On March 29, 2013, the Company and Pragmatus entered into a License Agreement, which granted the Company a fully-paid license covering the patents at issue. The Company paid Pragmatus a one-time licensing fee in April 2013, after a portion of the fee was reimbursed in March 2013 from a designated escrow arrangement associated with a prior acquisition. The Company recorded approximately $1.2 million of expense related to this matter in general and administrative expenses in March 2013. As a result, the Company’s declaratory judgment action against Pragmatus was dismissed by the court on May 3, 2013. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements — On May 28, 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), its final standard on revenue from contracts with customers. ASU 2014-9 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to the performance obligations in the contract and recognizes revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers that are within the scope of other topics in the FASB Accounting Standards Codification. Certain of ASU 2014-09’s provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities (i.e., property plant and equipment; real estate; or intangible assets). Existing accounting guidance applicable to these transfers has been amended or superseded. ASU 2014-09 also requires significantly expanded disclosures about revenue recognition. ASU 2014-09 is effective for the Company on January 1, 2017. The Company is currently assessing the potential impact of the adoption of ASU 2014-09 on its consolidated financial statements. |
|
On June 19, 2014, the FASB issued ASU 2014-12, Stock Compensation (“ASU 2014-12”), providing guidance on accounting for share-based payment awards when the terms of an award provide that a performance target could be achieved after the requisite service period. The update clarifies that performance targets that can be achieved after the requisite service period of a share-based payment award be treated as performance conditions that affect vesting. These awards should be accounted for under Accounting Standards Codification Topic 718, Compensation — Stock Compensation, and existing guidance should be applied as it relates to awards with performance conditions that affect vesting. The update is effective for the Company for the interim and annual periods beginning after December 15, 2015. The Company is currently evaluating the impact of the adoption of this standard, if any, on its consolidated financial statements. |
|
On August 27, 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The standard requires that the Company evaluates, at each interim and annual reporting period, whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date the financial statements are issued, and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual and interim periods thereafter, and early adoption is permitted. The Company does not expect to early adopt ASU 2014-15, which will be effective for its fiscal year ending December 31, 2016. The Company does not believe the standard will have a material impact on its financial statements. |
|
On January 9, 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”). The standard eliminates the requirement of Extraordinary Items to be separately classified on the income statement. ASU 2015-01 is effective for annual periods ending after December 15, 2015, and for annual and interim periods thereafter, and early adoption is permitted. The Company does not expect to early adopt ASU 2015-01, which will be effective for its fiscal year ending December 31, 2016. The Company does not believe the standard will have a material impact on its consolidated financial statements. |