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LogMeIn Inc  (NASDAQ:LOGM)
Q3 2018 Earnings Conference Call
Oct. 25, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the LogMeIn Third Quarter Earnings Conference Call. Today's call is being recorded. At this time I would like to turn the conference over to Rob Bradley, Vice President of Investor Relations. Please go ahead, Rob.

Robert Bradley -- Vice President

Thank you and welcome to our third quarter 2018 earnings conference call. I'm joined today by our President and CEO Bill Wagner; and our CFO, Ed Herdiech.

During today's call, we will discuss our business outlook and make other forward-looking statements. These statements are made as of today, and are based on our current projections, estimates, forecasts and expectations. Actual events or results could differ, due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. The company does not undertake to update any forward-looking statements.

We will begin today's call with comments by Bill and Ed, followed by the question-and-answer session. During the question-and-answer session, please limit yourself to one question. As a reminder, we will use non-GAAP financial measures, as we believe they are more representative of how we internally measure the business. Non-GAAP financial measures include the GoTo and Jive deferred revenue acquisition fair value adjustment; the measures exclude stock-based compensation expense, acquisition and litigation-related costs, amortization, and the pre-tax gain associated with the divestiture of a non-core asset. All metrics on the call will be non-GAAP, unless otherwise specified. These numbers are reconciled on the tables attached to our press release.

With that, I will now turn the call over to our CEO, Bill Wagner. Bill?

William Raymond Wagner -- Chief Executive Officer & Director

Thanks, Rob. Good afternoon and thank you for joining us today as we share LogMeIn's third quarter 2018 results. I'm pleased to report that LogMeIn delivered strong financial results in Q3, with revenue, adjusted EBITDA, and earnings per share that all exceeded the high end of our guidance. Revenue was $309.6 million, $5.6 million above the high end of our guidance. Adjusted EBITDA was 37.2%, or $2 million above the high end of our guidance. And we delivered earnings per share of $1.40, or $0.05 ahead of the high end of our guidance. As a result, we're raising our full-year outlook, which our CFO, Ed Herdiech, will cover in more detail in a few minutes.

But before turning things over to Ed, I'd like to highlight what I see as the three most important takeaways for the quarter. First are some early, but encouraging, signs of improvement in renewals in our Communications & Collaboration business. Second, the positive initial traction of our GoToMeeting and Jive bundle, results that underscore the potential we see in the $25 billion UCC market. And third, the overall momentum we're seeing across the key growth drivers, which collectively represents $240 million in annualized revenue, growing at more than 35%.

Let me begin with the progress made addressing some of the headwinds we saw in Q2 in our Communications & Collaboration business. One of the first things we did in Q3 was to eliminate the friction we had introduced into the renewal process for many customers. During the quarter, we automated more of the renewal process, while increasing our focus on the success of our customers earlier in their life cycle.

We also changed the way we engage with accounts, using product health scores. This allowed our sales and customer success teams to get further ahead of the renewals. Additionally, we rolled out new packaging and pricing, introducing better entry-level packages, as well as more compelling site license options that help drive client retention and penetration.

And finally, in response to customer feedback, we introduced more flexible business terms. While we are making these changes on the go-to-market side, the engineering and product teams focused their efforts on improving the user experience of GoTo Meeting, working to make our market-leading product even better.

I'm happy to say that our focus on retention and user experience have had a positive effect. Not only are we seeing metrics tied to technical performance and our Net Promoter Score on the rise, but overall renewal rates for the Communications & Collaboration business increased to 83% versus the 77.5% we saw in Q2. While we still have work to do to further refine and optimize many of the initiatives we executed in the quarter, as we said on our Q2 call, we expect it will take several quarters before overall performance reaches our expectations. Nevertheless, we were pleased with the early progress we've made.

In another nice win for this business in Q3, and as a testament to our position in the market, we were named a leader in the 2019 Gartner Magic Quadrant for meeting solutions. In that report, Gartner cited scale and breadth of our portfolio as differentiators; something that speaks to our larger opportunity in unified Communications & Collaboration.

Finally, last quarter we mentioned we had made key leadership changes in our Communications & Collaboration business, and that we were planning to hire a new General Manager within the quarter. Earlier today we announced that Mark Strassman will be joining our team as Senior Vice President and General Manager of the Collaboration business. Mark come to us from BlueJeans Network, where he served as Chief Product Officer. At BlueJeans, Mark led the product strategy for a company known as a great disruptor in video first meetings, with a particular strength in conferencing solutions; areas where LogMeIn has historically not has been as strong. A customer-centric leader, Mark not only brings a deep understanding of the market, but an outside-in approach to innovation and product development, something we put an especially high value on during this search. For his part, Mark was really attracted to LogMeIn by the position in the market, the strength of our brands, and most importantly how the breadth of our portfolio sets us up for leadership in the large and growing UCC markets.

So again, while it's early, we're confident that the changes we made in this business are having a positive effect and we believe we have the right leaders in place to help not only continue this improvement but also to drive our expansion into a larger UCC opportunity. And speaking of that opportunity, the second area I'd like to focus on is our initial efforts to bundle and cross-sell Jive and GoToMeeting, which along with Grasshopper, form the foundation of our push into the UCC markets. A convergence of cloud-based video, voice, messaging and meetings has been accelerating across both communications and the collaboration landscape, and with the core of the long-term strategy we shared last year. GoToMeeting is one of the most well-known brands in the meeting space.

In February of this year, we announced we have reached an agreement to acquire Jive Communications, a disruptor and rising star in cloud-based telephony with state-of-the-art multi-tenant technology. And next year, we'll be releasing a new UCC product line that brings together the best of Jive with the best of GoToMeeting, a next-generation product line that will market both to the new customers and perhaps more importantly, to our large customer base. So while a fully integrated product is being developed, in June we began bundling these two products and selling this bundle to both new and existing customers.

Our goal is not only to validate the strategy but also to learn about the go-to-market motion and gauge customer reaction. While it's early and we only have one quarter of data, we couldn't be more pleased with the reception from the market and the implication for our long-term outlook for UCC. It's clear that there's a lot of demand for such an offering in the market and that we can successfully sell a combined offering to our customer base. So for today, I thought I'd share a few more details on those early results.

First, we're seeing higher win rates. In fact, the win rates we've seen for bundle deals is meaningfully higher than that of a single product deals. Second we're seeing higher account penetration. In sales where we sell a bundle, we are seeing the number of seats more than double. And finally, we're seeing a 125% increase in revenue from customers purchasing the bundle over those who just purchased a single product.

These initial results are very encouraging, but it's really the stories behind some of these deals that give us even greater confidence in the opportunity. One such success story is the small GoToMeeting customer. In fact, they only had a single seat of GoToMeeting that they were sharing across multiple users. Our sales reps sold a bundle that replaced their current voice solution and deployed leading software to their entire employee population. Today, their employees have a state-of-the-art telephony system and they're able to collaborate with all their colleagues, using video meetings. So we went from a single seat of GoToMeeting.

Another example is the company that was a subscriber of a web conferencing competitor and a uCast competitor. We were able to displace both in one fell swoop with a bundle, by offering greater value and a single-vendor solution. Based on this early success, we expect to continue the program and learn more as we work up to the release of our fully integrated product next year.

And finally, let me turn my attention to the other elements that make up our growth strategy, namely identity and digital engagement. On the identity side, LastPass continues to be one of the more exciting market expansion success stories within the LogMeIn portfolio, and is the tip of the spear when it comes to expanding into the larger and faster-growing intensity market. LastPass performed exceptionally well in the quarter, and continued to accelerate. In Q3, revenue for LastPass grew over 70% year over year, and we continue to innovate in ways we believe will expand this opportunity even further.

One such example is on the mobile side, where we have arguably our biggest app update in the product's history, with our iOS 12-related release. With iOS 12, Apple opened up a new native capability to developers like LogMeIn, a move that we championed, and LastPass is the first to market in capitalizing on these new capabilities. Since launching in September, we made a dramatic increase in mobile registrations, a move that strengthens our premium motion.

And we continue to see nice traction on the enterprise side as well. For example, one key win in the quarter was a public company interested in deploying password solutions for their 700 employees in a key part of their business. But given the broader value proposition, we were able to expand that to a sitewide opportunity to cover all the company's 5,000 global employees, winning the much larger deal in a sales cycle that lasted less than a month. Deals like this one and the premium motion that LastPass enjoys, support our confidence to broaden the value proposition of LastPass as we head into 2019.

On the digital engagement side, our strategy is to leverage our leadership and customer support, help companies transform the way they engage with their customers. A key element of this long-term strategy is Bold360 AI, which was our first implementation of the AI and natural language processing engine we acquired last year via our Nanorep acquisition. And since its introduction earlier this year, Bold360 AI has become one of the fastest-growing products in our portfolio. Tapping into a rapidly rising demand from companies trying to better serve their digital-savvy customer base, Bold360 AI is being adopted by an impressive list of clients that include both new companies as well as existing customers, all in support of advancing their digital engagement strategies.

In Q3, that list grew to key wins at companies like Johnson & Johnson, CIBC, Weight Watchers and Williams-Sonoma. To put Bold360 AI's value proposition in perspective, we had one customer in Q3 who saw a 50% increase in the number of customer engagements. And with the help of Bold360 AI, they were not only able to scale to meet this rising demand, but with our chat bot capabilities, they simultaneously reduced their customer service agent chat volume by 86%, freeing them up to focus on other, higher-value tasks. So we're confident that this momentum will continue as we introduce new features in Q4 that will help us expand use cases into sales and e-commerce-focused digital engagement.

So in summary, we're pleased with overall results in the quarter. While we still have work to do, we are encouraged by the headway we've made addressing the Q2 headwinds in our Communications & Collaboration business. Equally important, we're excited by the progress we're making against our longer-term strategy, leveraging our leadership position and scale to expand into larger, faster-growing adjacent markets. From the move into the UCC market, which includes the Jive-GoToMeeting bundle, to continued traction of LastPass in the identity markets, to our push into digital engagement with Bold360 AI.

With that, I'll now turn the call over to Ed who will provide more details on the results of the quarter, as well as our business outlook for Q4. Ed?

Edward K. Herdiech -- Chief Financial Officer

Thanks, Bill. Tonight I'll review our third quarter performance, including an update on each of our businesses. After that, I'll share our Q4 and full-year 2018 business outlook, and provide some preliminary thoughts on 2019, before opening our call to our question-and-answer session.

We had a good third quarter with revenue, adjusted EBITDA, EPS and free cash flow all above the high end of our guidance. And today, we're raising our full-year revenue guidance by $9 million. Additionally, we made good early progress implementing the corrective actions we discussed on last quarter's call, designed to improve the performance of our Collaboration renewals.

Total revenue in Q3 was $309.6 million, which exceeded the high end of our guidance by $5.6 million, and represents 4.5% year-over-year pro forma growth. Improved performance of our Collaboration renewals was the primary driver of our over-delivery against guidance.

Adjusted EBITDA was $115 million, or 37.2% of revenue, which surpassed the high end of our guidance by $2 million. EPS was $1.40 per share, or $0.05 above the high end of our guidance. Operating cash flow was $84 million, or 27% of revenue, and free cash flow was $67 million, or 22% of revenue, and was $2 million above the high end of guidance I provided in July.

Turning to our business level performance. Our Collaboration business grew 2% year-over-year on a pro forma basis to $175 million for the quarter, and accounted for 57% of total company revenue. Jive contributed $27 million of revenue in the quarter, and grew over 30% year over year, from $20 million in Q3 of 2017. Collaboration revenue, excluding Jive, declined 2% year over year, which is approximately 200 basis points better than our July guidance implied. This performance is primarily due to early progress with our initiatives to improve renewals in this business. For the full fiscal year, we expect Collaboration to grow approximately 3.5% on a pro forma basis. Excluding Jive, we expect Collaboration to be roughly flat for the full fiscal year, which is approximately 150 basis points better than our July guidance.

Our Identity and Access Management business grew 14% year over year to $90 million. This business represented 29% of total company revenue. The key strategic growth driver in our Identity and Access Management business is LastPass, which is our best-in-class, cloud-based, password management software. As Bill shared, LastPass continues to have great momentum, and we expect it to exit the year at an approximate $60 million annual revenue run rate.

Our service business revenue on a pro forma basis, excluding Xively, which is essentially flat year-over-year at $44 million, and represented 14% of total company revenue. Bold360 AI continues to be the strategic growth driver in this business. Bold's customer interest and competitive position is creating real traction in the large and strategic customer engagement market, and we're excited about the growth opportunity ahead.

For the total company, our growth renewal rate across all products on an annualized dollar basis improved to approximately 80%, driven by improved retention rates in our Collaboration business. Collaboration renewal rates, excluding Jive, were 83% in the quarter, approximately 550 basis points better than the Q2 rate. On a geographic basis, international revenue comprised approximately 22% of total revenue, down one percentage point from last quarter.

Next I'll provide additional details regarding our third-quarter expenses. Gross margins were 82.4%, up modestly in the quarter versus Q2. Our adjusted EBITDA margin improved to 37.2%, up from 35.9% last quarter.

Sales and marketing expenses were $91 million, or 29% of revenue, down two percentage points from Q2. This decrease is primarily due to seasonally adjusted marketing program spend. Research and development expenses were $36 million, or 12% of revenue, which was consistent with the previous quarter. G&A expenses were $28 million, or 9% of revenue, which was also a line with the prior quarter.

Our effective tax rate for the third quarter was approximately 25% consistent with last quarter and in line with our expectations. And we ended the quarter with 3,515 employees, up 119 in the quarter.

Turning to the balance sheet, we ended the quarter with total cash of $168 million, down $31 million as planned from last quarter. This decrease is primarily due to spending on our capital return plan, as we paid $75 of our stock, and $16 million in common stock dividends. We'll also pay a $0.30 dividend on November 30, 2018 to stockholders of record as of November 14, 2018.

Through the first nine months of 2018, we generated $308 million in free cash flow. And consistent with our capital return plan, we've returned approximately 78%, or $240 million, to our stockholders. Total accounts receivable was $88 million, up $6 million from last quarter, and accounts receivable days sales outstanding were 26 days, or two days above last quarter.

GAAP deferred revenue at the end of the quarter was in line with our expectations at $373 million, which represents 14% year-over-year growth. We expect year-end deferred revenue to be relatively flat to Q3 levels, given the seasonality that we have in our business that results in strong deferred revenues and cash flows in the first half of the year. We expect this trend to continue into 2019 as well.

With that, I'll now turn to our outlook for the fourth quarter and full year 2018. As a reminder, please refer to our press release, which includes a GAAP reconciliation of projected revenue, net income, and EBITDA, and identifies all the addbacks that are used to calculate these projections.

For the fourth quarter of 2018, we expect revenue to be in the range of $306 million to $307 million. While we've made early progress in the quarter with Collaboration retention rates, we continue to believe it is a multi-quarter effort to improve renewals and revenue performance. Accordingly, we will continue to take a conservative approach with revenue guidance. For adjusted EBITDA, we are currently targeting $115 million to $116 million, and an adjusted EBITDA margin of approximately 38% of revenue.

Both non-operating interest and expense net, and GAAP non-operating interest and expense net, are expected to be approximately $2 million of expense. Our net income per diluted share is expected to be in the range of $1.41 to $1.42. Our GAAP net income per share is expected to be in the range of $0.10 to $0.11. Net income assumes an effective tax rate of approximately 25%, and GAAP net income assumes a tax provision of approximately $8 million. Both net income per share and GAAP net income per share are based on an estimated 51.7 million fully diluted weighted average shares outstanding, which is approximately a 4% reduction from Q4 2017.

For the full year of 2018, we expect revenue to be in the range of $1.203 billion to $1.204 billion, or $9 million above our July guidance, at the high end of our range. We expect full-year adjusted EBITDA to be in the range of $442 million to $443 million, with adjusted EBITDA margins to be approximately 37% of revenue.

Both non-operating interest and expense net, and GAAP non-operating interest and expense net, are expected to be approximately $5 million of expense.

Our net income per diluted share is expected to be in the range of $5.33 to $5.34, which represents 25% year-over-year growth. Our GAAP net income per share is expected to be in the range of $1. 03 to $1.04. Net income assumes an effective tax rate of 25%, and GAAP net income assumes an effective tax rate of approximately 29%. Both net income per share and GAAP net income per share are based on an estimated 52.5 million fully diluted weighted average shares outstanding.

Finally, we expect full-year free cash flow to be approximately $370 million, or 31% of revenue, which is more than $7 on a per-share basis.

Before I conclude, I want to provide our initial thoughts on 2019. As we discussed, we're one quarter into a multi-quarter effort to improve renewals in our Collaboration business. And as such, we believe it is appropriate to continue to be conservative. At the same time, we're working to finalize our 2019 operating plan and will provide formal 2019 guidance in February on our next earnings call. Accordingly, we believe that current consensus Street revenue estimates for 2019 of $1.255 billion are appropriate at this time.

Lastly, we're excited and committed to our strategy of leveraging our leadership positions in our existing markets to expand into larger and faster-growing adjacent market opportunities, while delivering healthy margins, strong cash flow, and meaningful capital return.

That concludes my remarks, and I'll turn the call back to the operator to take your questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Raimo Lenschow of Barclays.

Mohit Gogia -- Barclays -- Analyst

This is Mohit Gogia on for Raimo. Congrats on the solid quarter, guys. It seems like a very solid turnaround in the Collaboration business. My first question is, it seems like the steps you guys outlined in the last quarter seem to at least be getting good traction, with better renewal rates and better organic growth than what you guys had guided for initially. But I'm just wondering as you look forward, you mentioned this is a multi-quarter turnaround. I'm wondering as to, when you talk about the sort of things that are working and the things that you sort of still need to bring together, I'm just wondering if you can outline as to what are still the priorities in terms of the turnaround as you look forward to Q4, and I guess early out next year. Thank you.

William Raymond Wagner -- Chief Executive Officer & Director

This is Bill. Thank you for the question. I really think we were encouraged in the quarter and what we saw. I think the changes we made in our business process I highlighted, the friction I think we were able to eliminate for our customers really paid off in the quarter. But for us, the key is we want to make sure that we sustain that over the next couple of quarters. So at this point, I think we want to be conservative. I think if we continue doing the things that we did in the quarter, we will continue to see improvement.

Mohit Gogia -- Barclays -- Analyst

Understood. And I guess as a follow up, last quarter you alluded to the competitive landscape as to some players like Zoom were getting a bit aggressive, going after your customer base. I was just wondering if you can provide any incremental color on what you saw this quarter? Have you seen some easing from the competitive dynamics there, given that the business practices that you have put in are much more flexible now? Thanks for taking my question.

William Raymond Wagner -- Chief Executive Officer & Director

Sure. No, I think the business changes we made ourselves had the biggest impact in helping our renewal rates go from 77.5 up to 83. From a competitive position, I think having spent a quarter with our heads down, I think we have our arms around the competitive challenges, and again, I think it was much more around relaxing business churns and processes, and making sure that we were investing appropriately in our customer success, and that's really what drove the improvement.

Operator

Thank you. Our next question comes from Alex Kurtz of KeyBanc Capital Markets.

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Yeah, thanks. I have a follow up and a question about next year. Just to clarify those last comments about competition, it seems like you're maybe deemphasizing them a bit relative to last quarter's comments around emerging competitors, and really about executing on the renewal practices. Is that right?

William Raymond Wagner -- Chief Executive Officer & Director

Yeah, hey Alex. Thank you for the question. It was really, as we said last quarter, really three things we saw as we dug in. It was really the business changes that we made that we expected would have the biggest impact, and that's the way it played out in the quarter. I think the other issues turned out to be less of a long-term driver. So we made those changes and we are pleased with the results, but again, we want to make sure that we continue to see that performance over the next couple of quarters.

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Okay, thanks. And then I appreciate the first look on the fiscal 2019 outlook. Can you give us a little bit of help on seasonality around free cash flow? I know that's always a little bit of a moving target with you guys, and how you think about first half and second half. So is it going to be any different than how it played out in 2018?

Edward K. Herdiech -- Chief Financial Officer

Yeah, hi. This is Ed. We can answer this question for deferred revenue and for free cash flow at the same time. We have the seasonality with our access base and the way it renews. It's heavily skewed toward Q1 and into Q2 renewals, so as a result of that, as we head into Q1 from Q4 every year, and this will be the same next year, we see a big step up in deferred revenue in the first half of the year. And then we see it kind of, in the second half of the year, kind of go flat from kind of where it ended in Q2. And that's all a result of this access renewal cycle, and that will continue into next year as well.

Operator

Our next question will come from Will Power of Baird.

Will Power -- Robert W. Baird -- Analyst

Great, thanks. Yeah, I guess two questions. First just kind of coming back to Collaboration, nice to see better results relative to the expectations. I know, Bill, you referenced improvement in the process, etc. I guess on the last call you had also referenced the need for some different product development, some features that had been slower to develop, some quality issues on the voice side, I think. Can you update us on where that stands? The cadence of some of those developments?

And then I guess the Part B of this question is, you have the new head coming in. What are the early thoughts in terms of focus for him and what that might mean as part of this process?

William Raymond Wagner -- Chief Executive Officer & Director

Thank you for the question, Will. So I think from my perspective, the product team really kind of kept their heads down in the quarter and delivered a lot of really positive changes and enhancements to the product. I think we saw, as I mentioned in my comments, we saw kind of all the technical measurements of the products, as well as customer satisfaction and NPS score creep up as we work through the quarter, and we release those. So actually, the releases were two. You know, we do small releases generally with that, we don't do big, bulky releases. So the team really focused on that and I think that played out well in the quarter.

As we look forward, and as Mark comes on board, obviously we're going to keep that momentum. As I said, we are one quarter in, we want to make sure we don't lose focus on that. At the same time, the success that we're seeing in the bundle, I think, really points to the long-term opportunity, and that is something that I know Mark is really excited about.

So those are the two things that I would call out, and we are pleased to see how the quarter played out. You should expect to continue to see new enhancements as we work through Q4.

Will Power -- Robert W. Baird -- Analyst

Okay. And then the second question is on Jive. It's great to see some of the early success on bundling that product. I guess I'm kind of curious as to what you've learned in terms of go-to-market. I guess what I'm getting after is, do you have the pieces in place you need? Are there further investments you need to make there, particularly as you think into next year of having a fully integrated product?

William Raymond Wagner -- Chief Executive Officer & Director

Yes, we were really excited with the success we had in the bundles. As a backdrop, audio/video, telephony, web conferencing coming together, we really do believe, as we sussed out last year, that we're uniquely positioned in this space. And the first step was really to acquire Jive. In June we began the second step, which was to launch these bundles. And again, very light integration at this point, but as I said, we really couldn't be more pleased with the results that we've seen. It's been a fairly limited set of sales reps selling the bundles. So as you move forward and into next year, and as we integrate the product, I would expect at this time next year we are going to have most of our Collaboration reps will be selling an integrated product across our customer base, and into new customers. So that's what we're working toward.

Operator

Our next question comes from Aleksandr Zukin from Piper Jaffray.

Taylor Reiners -- Piper Jaffray -- Analyst

Hi, this is Taylor Reiners on for Alex. I'm just wondering could you give us a sense on what you're seeing from a new bookings perspective? And maybe comment on any changes you are seeing on the cadence momentum related to some of the product and pricing updates that you rolled out this quarter.

William Raymond Wagner -- Chief Executive Officer & Director

Tyler thanks for the question. I think on the new side on the new side and add-site our hunters continue to do well getting new customers ripping out competitors. I think this speaks well to our competitive position. It is obviously nice to see Gartner validation from Gartner so it's good to get that kind of external validation of our product leadership. So I think overall it was really good to see the hunters continue what they've done all year continue to do well. As I've said next year I think we'll be selling a combined product that we think raises their average selling price raises the seat penetration and ultimately will also increase renewal rates.

Edward K. Herdiech -- Chief Financial Officer

Bill, the only other thing I would add is that I think as part of simplifying our business processes we relaxed the requirements to sell new businesses annual only as well the kind of tempered our renewal business as well. So I think that those that the business terms that we changed to help renewals also helped the new business as well.

Taylor Reiners -- Piper Jaffray -- Analyst

Got it. And then just as a follow-up wondering if you could get a little bit around the changes you made around renewals from a go-to-market perspective whether or not there are any changes in kind of the organization or the way you're approaching renewals outside of this given some of the friction?

William Raymond Wagner -- Chief Executive Officer & Director

Yes I mean I want to say I think it's how we applied our resources internally and focus on the customer earlier in the life cycle which I mentioned in my prepared remarks. I think that was a big part of it. And then as I had just disclosed and I talked about we are lapping some of those business tunes and some small things. But overall cumulatively it help us reduce that friction and reseller customers really respond positively.

Operator

Our next question comes from Tim Klasell from Northland Capital Securities.

Tyler Wood -- Northland Capital Securities -- Analyst

This is Tyler Wood on for Tim actually. So just on that LastPass side of the business How big do you guys see that market ultimately being? And then there's a lot of solutions out there for password management how do you guys see LastPass competitively position going forward to capture that market?

William Raymond Wagner -- Chief Executive Officer & Director

Yes we couldn't be more pleased with how LastPass has continued to perform and frankly accelerate since over the last couple of years. And as we talk about last year from a strategic perspective we think that this is a great foundation and a great brand that we can enter into on that but that's what I would expect for next year.

Operator

Our next question comes from Shaul Eyal.

Shaul Eyal -- Oppenheimer -- Analyst

Thank you, hi. Congratulations as well on the quarter preliminary 2019 direction. I want to start by asking how was the pricing environment during the quarter? Any unusual dynamics that you guys have seen?

William Raymond Wagner -- Chief Executive Officer & Director

Yeah, I just want to make sure I got your question right. Were you asking about the pricing dynamics in the quarter?

Shaul Eyal -- Oppenheimer -- Analyst

Yes, the pricing environment.

William Raymond Wagner -- Chief Executive Officer & Director

Got it, OK, thank you. Yeah, sure. Certainly I am happy to talk about it. We actually, we did make some pricing changes in the quarter, and they've yielded really positive results. One thing we did was to lower the entry-level price. Based on tests that we saw, we learned that lowering the entry-level price, the customers actually purchased more seats and that's exactly what we saw. This elasticity meant that despite the lower price, overall revenue actually increased.

The second thing we did was introduce site licenses that allowed us to preserve revenue, and revenue at current rates, really, while we increased account penetration at larger accounts. That was the second thing, and we were really pleased with the results.

And the third thing we did is, we didn't talk too much about Grasshopper yet, but we actually rolled out a new annual pricing option for Grasshopper customers. We've seen strong adoption. And over time, we think that should drive an increase in revenue.

So those are really the three pricing options or pricing maneuvers we took in the quarter, and I would say we are pleased with all three of them.

Shaul Eyal -- Oppenheimer -- Analyst

Got it. This is great. My follow-up question, as we think about the improvements we had in the quarter, I think also anticipating already the fourth quarter, can you talk maybe about the changing dynamics, if at all, that you're seeing between domestic markets and the international markets? Can you indicate whether improvements have been coming more from the US or from the international markets? Or was it even during the quarter? Thank you for that.

William Raymond Wagner -- Chief Executive Officer & Director

Certainly. It's been relatively stable international versus US business. We do see the international markets as a great opportunity for us. I think we've now built out the infrastructure that we need to, and we've seen really nice growth, including on the new side, for a lot of our products there. So it's still earlier days there for a lot of our products, products like LastPass, products like GoToMeeting, and others, so we certainly see opportunities there to accelerate.

Operator

Our next question comes from Matt Hedberg of RBC Capital Markets.

Matt Hedberg -- RBC Capital Markets -- Analyst

Hey guys, thanks for taking my questions. I don't know if you guys talked about Bold360, I know there were a lot of features added last year. I guess I'm thinking more broadly about video in particular, and how you guys think about leveraging video across more aspects of the platform?

William Raymond Wagner -- Chief Executive Officer & Director

Yeah, so I think the real success has really been built around the AI that we integrated into Bold. So Bold really has a lot of the capabilities, a lot of the channels, it's an omnichannel solution already. What really accelerated it was when we launched Bold360 AI this year, using the Nanorep capabilities. Actually, so I think we have video in the parts of our portfolio that we want to see video. I think it's the AI portion that you should expect to see us layer in to other parts of our business, including both the Collaboration business and our IT support business. So that's the next real move for us.

Matt Hedberg -- RBC Capital Markets -- Analyst

Got it. And then I think you guys have been investing in GoToWebinar. I think there was some redesign there, and it was rereleased maybe a month or so ago. Can you talk about what that might do to the product? It doesn't tend to get a lot of attention, relative to some of your products. But just wondering if there's anything to call out with that product.

William Raymond Wagner -- Chief Executive Officer & Director

Yes, no, I mean that was a release that was a couple of years in the works. It really modernized that product. That product, I think from a user experience, would have benefited from some upgrades and the team really delivered, and the product is really slick. It's really built for marketers, so it's really somewhat of a different buyer than some of our other Collaboration products that get either bought by the end users or get bought by IT departments. So too early to say what the commercial impact of that would be, but the team was pretty fired up that we got that out the door, and customer feedback has been very positive.

Operator

At this time we have no further questions in queue. I would like to turn it back to Mr. Bill Wagner for closing remarks.

William Raymond Wagner -- Chief Executive Officer & Director

Thank you. Thanks for the questions tonight. In closing, we had a strong Q3 with revenue-adjusted EBITDA and earnings per share all exceeding the high end of our guidance. Early efforts to address renewal headwinds in our Communications & Collaboration business are showing very promising returns. And perhaps most importantly, we made encouraging progress against our longer-term growth strategy, with key traction in UCC, identity and digital engagement. We look forward to updating you on our continued progress when we report our Q4 and full-year results early next year. Thanks again for the time this evening.

Operator

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.

Duration: 44 minutes

Call participants:

Robert Bradley -- Vice President

William Raymond Wagner -- Chief Executive Officer & Director

Edward K. Herdiech -- Chief Financial Officer

Mohit Gogia -- Barclays -- Analyst

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Will Power -- Robert W. Baird -- Analyst

Taylor Reiners -- Piper Jaffray -- Analyst

Tyler Wood -- Northland Capital Securities -- Analyst

Shaul Eyal -- Oppenheimer -- Analyst

Matt Hedberg -- RBC Capital Markets -- Analyst

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