LogMeIn, the company behind a recent Webware 100-selected remote-desktop application that lets users access files and data on different computers, plans to go public.
According to documents LogMeIn filed with the Securities and Exchange Commission on Friday, the company plans to offer 6.6 million shares. It hopes to price those shares between $14 and $16.
Assuming that LogMeIn completes its filings and is eventually listed on the Nasdaq stock market, it will be faced with enhanced scrutiny. Not only will it be confronted with more, costly regulations at the hands of the Sarbanes-Oxley Act of 2002, it will also have a slew of new stakeholders that will require the company to operate at a high level. It's a tall order.
Regardless, LogMeIn ostensibly believes that it's up to the challenge. So now the question is whether its finances can match its desire. Is LogMeIn financially sound, now performing better than it has in the past? Let's take a look.
Revenue and profit
One of the first things investors look for after considering a stock's price is its financial health. In LogMeIn's case, it's a mixed bag. The company had been incurring a loss for years. Only recently has it been able to generate a profit.
According to its SEC filing, LogMeIn's revenue grew from $11.3 million in 2006 to $51.7 million by the end of 2008. It's currently on track to beat that figure this year, thanks to $17.2 million in generated revenue for the first quarter of 2009.
For the year ended December 31, 2006, LogMeIn incurred a net loss of $6.7 million. And for 2007, it incurred a net loss of $9 million. But by the end of 2008, the company had reduced its losses to $5.4 million. And during the first quarter of 2009, the company enjoyed a profit of $2.1 million.
The fact that LogMeIn finally turned a profit might be a sign of good things to come. During the same period last year, the company lost $3.6 million.
Is it financially healthy?
The balance sheet is an important financial instrument. It tells investors what a company owns and how much it owes to creditors. It does a fine job of giving investors a clear picture of the firm's financial health.
LogMeIn's balance sheet, which was compiled by independent auditors, reports that it currently has $27 million in cash on hand and total assets of $40.7 million.
Besides accounts payable of $1.8 million, long-term liabilities of $133,000, and expenses that haven't been paid of almost $5 million, LogMeIn's principal liability is deferred revenue--cash collected from customers that can't be called revenue until the company performs the action it was paid to complete. That account is valued at $29 million.
The balance of the difference between assets and liabilities is made up by the company's stockholders' equity, which is currently valued at $4.8 million.
LogMeIn seems to be in fine financial health. It has little debt, no major liabilities, and a hefty amount of cash.
This brings us to the cash flow statement, a good indicator of the short-term viability of investing in a company. Is it capable of paying its bills? Are executives managing the firm's cash well to ensure future success?
According to its filing, LogMeIn added $10.7 million to its coffers in 2007. For its 2008 calendar year, it added $4.2 million in cash to its books. During the first quarter of 2009, LogMeIn added $4.1 million in cash.
Perhaps more important to investors, the majority of that cash over the years has been added through operating activities. In other words, much of LogMeIn's cash is principally being generated from the sale of its services to customers.
For some investors, dividends matter. They show that a company is financially sound and can afford to give some money back. Dividends can also be used to increase awareness for a stock that's being ignored by investors. And since they provide a regular cash flow outside of selling shares, dividends are coveted by some.
According to LogMeIn's filing, it does not intend to issue dividends. The company instead wants to invest in its future growth. That's not uncommon. Most companies so young and new to the public markets do not offer dividends. In fact, Google has never issued a dividend. So LogMeIn looks to be following suit.
Since investing in a company is a long-term endeavor, most investors want to know what the company has planned. Investing in LogMeIn would be no different. That's why the company listed a variety of plans it has for the future.
"We intend to use the net proceeds to us from this offering for working capital and other general corporate purposes, including the development of new services, sales and marketing activities, and capital expenditures," LogMeIn wrote in its filing. "We may also use a portion of the net proceeds to us for the acquisition of, or investment in, companies, technologies, services, or assets that complement our business."
The bottom line
Is LogMeIn in sound financial health? Ultimately, it's up to the individual investors to decide. But a quick glance at its financial performance tells us that things are going relatively well for LogMeIn.