LOGM 2017 Annual Report

ITEM 7. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview LogMeIn simplifies how people connect with each other and the world around them to drive meaningful inter- actions, deepen relationships, and create better outcomes for individuals and businesses. A market leader in communication and collaboration, identity and access, and customer engagement and support solutions, LogMeIn has millions of customers spanning virtually every country across the globe. LogMeIn is headquartered in Bos- ton, Massachusetts with additional locations around the world. We offer both free and fee-based, or premium, subscription software services. Sales of our premium subscription software services are generated through word-of-mouth referrals, web-based advertising, online search, off-line advertising, broadcast advertising, the conversion of free users and expiring free trials to paid subscriptions and direct marketing to new and existing customers. We derive our revenue principally from subscription fees from customers, who range from multi-national enterprises to small and medium businesses, or SMBs, and individual consumers and, to a lesser extent, from the delivery of professional services primarily related to our customer engagement and support business. Our customers typically subscribe to our services on a monthly or annual basis. Our revenue is driven primarily by the number and type of our premium subscription software services to which our paying customers subscribe. On January 31, 2017, we completed our Merger with a wholly-owned subsidiary of Citrix, pursuant to which we combined with Citrix’s GoTo family of service offerings known as the GoTo Business. Following the completion of the Merger, LogMeIn’s revenue has grown from $336.1 million in fiscal 2016 to over $1 billion on an annual- ized basis in fiscal 2017 and we added over 1,600 employees (2,760 as of December 31, 2017, compared to 1,124 as of December 31, 2016). In 2017, our focus has primarily been on integrating the GoTo Business in order to meet our longer-term financial goals. Operating Results For the year ended December 31, 2017, we generated revenues of $989.8 million and cash flows from operating activities of $316.2 million, and we ended the year with $252.4 million of cash and cash equivalents. During the year ended December 31, 2017, we repaid the remaining $30.0 million of borrowings outstanding under our credit facility, repurchased $69.2 million of our common stock pursuant to our share repurchase program, and paid cash dividends of $52.3 million to our stockholders. We recorded net income of $99.5 million in the year ended December 31, 2017, including amortization of acquired intangible assets of $183.0 million; acquisition- related transaction, transition and integration-related fees and expenses of $59.8 million, primarily related to the Merger; and a tax benefit of $111.5 million primarily related to the enactment of the Tax Cuts and Jobs Act of 2017 (the “U.S. Tax Act”). The tax benefit of $111.5 million includes $85.6 million related to the U.S. Tax Act, which is primarily comprised of a tax benefit of $105.1 million due to deferred tax asset and liability remeasure- ment partially offset by a one-time mandatory transition tax of $14.8 million on cumulative foreign subsidiary earnings. The tax benefit also includes $16.0 million of discrete tax benefits related to excess tax deductions on stock compensation now recorded as a tax benefit due to our adoption in 2017 of ASU 2016-09, Compensation— Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting , issued by the Financial Accounting Standards Board, or FASB, on March 30, 2016. 34