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LogMeIn Inc  (NASDAQ:LOGM)
Q1 2019 Earnings Call
April 25, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the LogMeIn's First Quarter 2019 Financial Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Rob Bradley, Vice President of Investor Relations. Please go ahead, sir.

Rob Bradley -- Vice President of Investor Relations

Thank you, and welcome to our First Quarter 2019 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. And during the question-and-answer session, please limit yourself to one question and one follow-up. 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 exclude stock-based compensation expense, acquisition and litigation-related costs, amortization of acquired intangible assets and restructuring charges. All metrics on the call will be non-GAAP, unless otherwise specified and these numbers are reconciled in the tables attached to our press release and are also available in the accompanying presentation. With that, I'm now going to turn the call over to our CEO, Bill Wagner. Bill?

William Wagner -- President and Chief Executive Officer

Thanks, Rob. Good afternoon and thank you for joining us today, as we share LogMeIn's first quarter results. I'm pleased to report that LogMeIn executed well in Q1, delivering results that exceeded our guidance on every key financial metric, including revenue, adjusted EBITDA, and earnings per share. First quarter revenue was $308 million and adjusted EBITDA was $97 million or 31% of revenue. So we delivered earnings per share of $1.17 and $103 million of free cash flow.

During the quarter, our growth products continued to outpace the market while our core and legacy product lines continue to deliver enduring value for our customers and demonstrated strong renewal performance. More importantly, we made meaningful progress in Q1 executing our strategic plan to accelerate our growth and emerge as a leader in three of technology sectors most dynamic and promising markets. As a result of this performance and confidence in our outlook, we are raising full-year guidance.

Our CFO, Ed Herdiech, will cover the Q1 financials in more detail, while also providing our guidance for Q2 an updated numbers for the full year 2019. But before turning our call over, I'd like to provide some additional color on our growth acceleration strategy, including the performance of our growth products. In February, we announced a strategic plan designed to accelerate our growth by asserting our leadership in three much larger faster growing adjacent markets. Unified Communication and Collaboration or UCC, Customer Engagement and Support or CES and Identity as a Service or Ideas -- the investment supporting our plan are designed to build off the early success and momentum of the products in our portfolio that are squarely aimed at these opportunities. We exited last year with these growth products accounted for nearly 20% of company revenue.

I'm happy to report that in Q1, this contribution has grown to 22% of revenue and we started to activate the investments announced in February to multiple product launches, new branding and hiring. As a result, we believe that the contribution of these products is on track to grow to 25% of total company revenue by the end of 2019. The most significant progress was in our largest business and our biggest opportunity unified communication and collaboration, where we believe our modern best in class cloud telephony platform, our large customer base, and the breadth of our portfolio gives us an exciting opportunity to achieve leadership in a $50 billion market. During Q1, we took several steps that built off the success of our Jive and GoToMeeting Bundle and moved us closer to realizing our vision to deliver the best unified product experience in the market.

In March, we announced the introduction of the new go-to-suite of UCC offerings. Including complete and unified capabilities for voice, meetings, rooms, and webinars. And highlighting this launch were two new offerings. First, we announced GoToRoom, which leverages a new hardware partnership with Poly to deliver what we believe to be the simplest and fastest Conference Room solution on the market today. It's a sleek and modern offering at a disruptive price point that can be set up by anyone in mere minutes. In the first few weeks since its introduction, we've seen strong early sales and a rapidly developing pipeline. We also announced GoToConnect, which combines the power and reliability of Jive's cloud telephony platform with GoToMeeting's web audio and video conferencing capabilities. Result is what we believe is the best integrated full-featured cloud voice and collaboration product in the market.

GoToConnect is in essence the product size evolution of our highly successful GoToMeeting and Jive Bundle that help validate our advantage in UCC with expansive deals and higher win rates in the second half of last year, something that continued in Q1. In fact, in Q1 we closed the largest Jive deal ever on the back of the Bundle. We also saw success using Jive as a competitive lever for saving and expanding at-risk accounts. For example, we had one customer using LogMeIn purely for meetings, literally less than 30 seats that was potentially at risk with the Bundle advantage, our sales team turned that account from a potential loss of meeting revenue into a site wide license of hundreds of seats of Jive and GoToMeeting, representing a 7-fold increase in revenue.

Another example of rapid progress in activating our growth acceleration plan was in our CES business and the expansion of our AI efforts. Our strategy in CES is to leverage our historic leadership in customer support to help companies transform the way they engage with their customers. Central to this strategy is our Bold360 AI offering, LogMeIn's first product to feature AI and a product that has proved strong competitive differentiation. In Q1, Bold360 continued to gain traction in both net new wins and cross-selling into our installed base. And part of our strategic growth plan was to increase our channel partnerships for Bold360 AI and I'm pleased to share that in Q1, we landed our largest ever partner driven deal with a large global systems integrator.

We also announced our new Artificial Intelligence Center of Excellence in Israel, a key step in our plan to accelerate the use of AI in all key LogMeIn products. Building on the team that helped us build Bold360 AI, we will leverage our natural language processing and speech recognition expertise to deliver what we believe will be class-leading AI enabled experiences for customers across our portfolio.

Finally, in Q1, we took important steps in our plan to expand LastPass into a broader Identity as a service play. LastPass has long been LogMeIn's fastest growing product, a trend that continued in Q1. The blend of functionality, ease of use, and low price has made LastPass, a brand beloved by consumers and security professionals alike, helping us win over individuals, families, teams, and companies of all sizes. It is also a product that has strong cross sell capabilities in our customer base. For example, during the quarter, the security team at one of our GoToMeeting customers ran an internal penetration test, revealing significant vulnerabilities and how their 700 employees were storing, managing, and sharing passwords. With the LogMeIn relationship already in place, they turned to us as a valuable partner purchasing a site license for LastPass Enterprise and rolling it out company wide to provide users with secure password storage, password sharing, and vault for personal use.

While our success in the password management market continues, we believe our ultimate value to customers will be significantly higher as we expand LastPass into a suite that solves more and more identity needs. In Q1, we took another key step down that path acquiring complementary identity technology assets and expertise through a small tuck-in acquisition. A move that will help us evolve LastPass from the world's best password management into a full -- suite for SMBs that includes password management, single sign-on and multi-factor authentication.

In summary, we executed well in Q1, balancing our near-term priorities with our long-term growth investments. Our growth products continue to outpace the respective markets and we are on track with these products to make up 25% of overall company revenue by year's end. And our core product lines continue to win recognition and solidify their reputation as some of the best products in their respective markets. And while we're pleased with the start of the year, it's early and we remain heads down and focused on executing as we move through 2019. With that, I'll turn the call over to Ed, who will provide more detail on our Q1 results, as well as our updated business outlook for Q2 and the full year. Ed?

Ed Herdiech -- Chief Financial Officer

Thanks, Bill. Before I begin my remarks, I want to remind everyone that I'll be reporting our results on a non-GAAP basis unless otherwise specified. As always, a reconciliation of our non-GAAP to GAAP results can be found in our press release and on our Investor Relations website. Our first quarter marked a solid start to the year with results that exceeded the high end of our guidance for revenue, adjusted EBITDA, and earnings per share together with good free cash flow and deferred revenue growth.

Highlights include revenue of $308 million, which represents 2% growth on a pro forma basis. Adjusted EBITDA of $97 million or 31% of revenue. Earnings per share of $1.17. Free cash flow that was $103 million or 33% of revenue and deferred revenue that was $402 million, up $23 million from the prior quarter. We're pleased with our first quarter results and early progress executing our strategic growth and restructuring plans. As I'll discuss in a few minutes, these results give us the confidence to raise our full year revenue guidance.

Regarding our first quarter business results, our UCC business as expected declined 2% year-over-year on a pro forma basis to $170 million. As discussed on our Q4 call in February, we believe that our UCC performance will begin to improve in the second half of the year and sequentially thereafter, as it benefits from the newly launched GoToConnect and GoToRoom products. We believe that these new products, along with investments in the GoTo brand and sales capacity will drive improvements in future performance.

Within UCC, Jive, our leading cloud-based telephony product, grew 33% year-over-year to $30 million and benefited from our Connect Bundle, which brings together the best of online meetings and cloud telephony. Next, our IAM business grew 11% year-over-year in the first quarter. LastPass has continued strong growth combined with good renewal performance in a remote access base, which includes Pro, Central, and GoToMyPC helped deliver $94 million in revenue in the quarter. Finally, our CES business generated $44 million of revenue, which was flat year-over-year on a pro forma basis and in line with our expectations. We see meaningful opportunity for Bold360 AI as digital engagement evolves and companies adopt artificial intelligence based solutions to deliver better customer experience. In aggregate, our growth products accounted for 22% of total company revenue, up from approximately 20% in 2018. These products continue to build significant momentum and are all growing faster than the overall market. For the first quarter, our total company gross renewal rate across all products on an annualized dollar basis was approximately 80% consistent with the prior quarter. Our collaboration renewal rates, which exclude Jive were approximately 80%.

Next, I'd like to review our Q1 expenses. In the quarter, gross margins were 82%, which are in line with our expectations and full-year outlook and reflect the impact of Jive's lower gross margin profile, offset by continued gross margin improvements in other parts of the business. Sales and marketing expenses were $110 million or 36% of revenue. This represents a $15 million increase from the prior quarter and reflects the impact of increased marketing program spend to support the launch of our GoTo brand and GoToConnect offerings as well as the costs of our annual sales kickoff event that occurs every January.Research and development expenses were $35 million in the quarter or 11% of revenue, which is consistent with the prior quarter. G&A expenses were $26 million or 8% of revenue, which is also consistent with the prior quarter.

In the quarter, we made good progress and remain on track executing our restructuring plan, and expect to realize $16 million of savings in 2019 and annualized savings of $26 million. We anticipate the actions associated with the restructuring will be substantially complete by the end of the year. Finally, in the quarter we've returned approximately $75 million to our stockholders through a combination of stock buybacks and dividends. We repurchased 714,000 shares of our stock for $58 million and paid $17 million in common stock dividends. We'll also pay a $0.325 per share dividend on May 24, 2019 to stockholders of record as of May 8, 2019.

With that, I'll now provide our outlook for Q2 and FY2019. For the second quarter, we expect revenue to be in the range of $310 million to $312 million. We're currently targeting adjusted EBITDA to be in the range of $94 million to $95 million and adjusted EBITDA margin of approximately 30% of revenue. This margin outlook accounts for increased spending primarily in sales and marketing, as we make investments in our strategic growth initiatives. Our net income per diluted share is expected to be in the range of $1.12 to $1.14. GAAP net loss per share is expected to be in the range of $0.20 to $0.18. Net income assumes an effective tax rate of 25% and GAAP net loss assume a tax provision of approximately $1 million.

Net income per share is based on $50.4 million fully diluted weighted average shares outstanding. GAAP net loss per share is based on $49.8 million weighted average shares outstanding. For the full year, we expect revenue to be in the range of $1.253 billion to $1.263 billion. We expect full-year adjusted EBITDA to be in the range of $409 million to $413 million with full-year adjusted EBITDA margins to be approximately 33% of revenue.

Our net income per diluted share is expected to be in the range of $4.96 to $5.02. GAAP net loss per share is expected to be in the range of $0.35 to $0.27. Net income assumes an effective tax rate of approximately 25% and GAAP net loss assumes a tax provision of approximately $1 million. Net income per share is based on $50.3 million fully diluted weighted average shares outstanding and GAAP net loss per share is based on $49.6 million weighted average shares outstanding. And finally, we expect Q2 free cash flow to be approximately $70 million and full year free cash flow to be between approximately $350 and $355 million.

In closing, in the first quarter, we began executing our strategic growth plan and we've made good early progress on all deliverables to date. This progress is highlighted by the launch of GoTo, our new UCC brand, the introduction of GoToConnect our compelling integrated UCC offering and GoToRoom and exciting in-room video and meeting solution. Although we're in the early innings with significant work ahead of us, we remain on track and confident that we can deliver against our goals we highlighted on our February earnings call. That concludes my remarks and now I'll turn the call back to the operator to take your questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions). We'll now take our first questioner.

Alex -- -- Analyst

Hi guys. It's Alex, can you hear me, OK?

William Wagner -- President and Chief Executive Officer

Yes. Hi, Alex.

Alex -- -- Analyst

Sorry. Strange operator situation here, but anyway. Nice quarter. Just a quick question about retention rate and how you guys think about GoToConnect impact in the second half guide, but just at a high level, were you happy with retention rate in the GoTo business and kind of what were the trends through the quarter there?

William Wagner -- President and Chief Executive Officer

Well, the GoToMeeting, we gave the retention rates, overall, the UCC business at 80%. GoToMeeting renewal rates were actually higher than that, that's average, because as you know we're optimizing that portfolio, there are other products there that were de-emphasizing so they renewed at a lower rate as we expected. Yes, obviously, we're continuing to try to push renewal rates higher and overall renewal rates for the company are 80% now, so I think we would say that we're making progress and we think that there is more that we can do.

Alex -- -- Analyst

And just last, on the second half when you think about the impact from GoToConnect and really driving that into larger accounts. What are your assumptions? How does the pipeline look relative to where you want to get?

William Wagner -- President and Chief Executive Officer

Well, I think the best proof point has been the success we've seen so far on the Connect Bundle, which is the Jive and GoToMeeting Bundle and that product has performed really well for us, better close rates versus stand-alone, higher average sale price, higher seat penetration and as I said, we closed the largest deal the Jive has ever done by a large margin in the quarter on the heels of a Bundle. So we're very encouraged and obviously we got to wait and see, so we start selling the integrated product and we'll talk about that in future quarters and but we're excited. based on what we've seen so far.

Operator

We'll now take a question from Yu with Mizuho.

Gregg Moskowitz -- Mizuho -- Analyst

Hi guys. It's -- I think they got the name wrong. It's Gregg Moskowitz from Mizuho. Good to talk to you again. I guess first question is -- congrats on closing the largest Jive deal ever. I just love, Bill, if we can get, perhaps some more context was this an existing -- I mean customer was it sort of specifically GoToMeeting user. I guess, any more color on that would be helpful.

William Wagner -- President and Chief Executive Officer

Yeah. Hey, Gregg. Good to talk to you again. So it was a -- I think it was a new LogMeIn customer, if I'm not mistaken. I just think Jive overall, which is probably underlying your question. Jive had a really strong sales performance in the quarter and great momentum behind the Bundle. So it's terrific to see and I think on the product side, Jive has got some great industry recognition now and recognition from customers. So, I think what we're seeing is it's proving to be effective at going after new winning new business, and remember, we really haven't allowed our existing sales force to go into our GoToMeeting customer that's been much more restricted until now -- until we have the integrated product. Now that we have that, that's something we're looking forward to in future quarters as we roll through the second half of the year. So more to come for sure.

Gregg Moskowitz -- Mizuho Securities -- Analyst

Okay. That's really helpful. And then turning to sort of the Identity and Access side, I was hoping for a bit more clarification, you mentioned a small identity management acquisition. My prior understanding was that you guys thought you could probably build out through internal development complementary functionality to LastPass that might include SSO and MFA. So it would just be helpful to get a sense of as you kind of build toward this suite like product in that space. I mean what would be internally developed and kind of what would be augmented so to speak through M&A?

William Wagner -- President and Chief Executive Officer

Yeah. Thanks, Gregg. So, yeah, I think we're always on it saw a combination of build and buy there and again, I don't think we are -- this is a technology tuck-in. So there were some technology pieces that we wanted to go out and acquire that was obviously built something we contemplated in our plan for the year that we announced back in February. And I think that team is off and running. They're working with the LastPass team and I think, as we roll into the into Q3, we're pretty excited by starting to expand beyond just password management and really into IDAS with MFA and single sign-on.

We don't anticipate we need any other assets to go do that. So, we think with our internal team, the assets we have and the LastPass business we're ready to go.

Operator

We'll now take a question from Sterling Auty with JPMorgan.

Sterling Auty -- JP Morgan -- Analyst

Yeah, thanks. Hi guys. So just want to make sure I understand the 22% of revenue from the new growth areas. Can you give us what was the growth rate in those growth areas in the quarter? And which of the growth areas outperformed the most in the quarter relative to your expectation?

William Wagner -- President and Chief Executive Officer

Hey, Sterling. Thanks for the question. I think the growth products continue to do very well in the quarter. We said in February, a key metric was going to be that continuing to increase as a percentage of revenue and really that's the market we're going to provide as we work through the year. As you know, last year was 20%. We said success for us this year is getting to 25% and Q1, it was 22%. We're not going to break that down product level. Product level, I think overall, though, we were pretty pleased with the performance in the quarter and I think we feel like we're very well on track to getting to 25% by the end of the year.

Sterling Auty -- JP Morgan -- Analyst

Okay. Great and then one follow-up question on the margin side, you talked about the increased investment starting the second quarter around, sales, marketing, etc, but how gross margin play. So in other words, what should we be thinking about the trajectory of gross margins in the June quarter within the context of the guidance?

Ed Herdiech -- Chief Financial Officer

Yeah, sure. Hey, Sterling. This is Ed. Gross margins were about 82% in Q1, we expect those to kind of hold pretty steady throughout the year.

Operator

We'll now take a question from Will Power with Baird.

Will Power -- Robert W. Baird & Co. -- Analyst

Okay, great, thanks. Yeah, I guess a couple of questions. First, maybe just coming back to the GoToMeeting product. I know you all had a number of product enhancements under way for several quarters, I wonder if you just update us as to where those product enhancements sit and how much more there is to go, where do you think you have GoToMeeting, where you want it from a product standpoint more as a stand-alone as opposed to GoToConnect? That's the first question.

William Wagner -- President and Chief Executive Officer

Sure, Will. Thanks for the question. So yeah, I think we've been hard at work, improving the couple of things. First of all, the core product experience for customers and we've made some real improvements in terms of the ease of use of the product and that's just an ongoing journey, something we're really focused on. We did launch the Bundle last year as we talked about, but I'll leave that because you want to focus on just the core meeting space. We launched GoToRoom solution. It's an area that in the past, we felt like we had a gap, and now we feel like we have a real competitive advantage in terms of both simplicity and price.

And although it didn't impact Q1 in any meaningful way, we are seeing some really promising signs from new and existing customers and really good pipeline building. So hopefully, as we work through the year, we'll start to see more results and be able to talk about that, but that was great to close that gap and then we also launched GoToConnect. So the team has been working and delivering really well on the product side, I think there's some, some pretty significant things coming out over the next couple of quarters. And I think we'll talk about them as they get near to market readiness. But we're certainly not done and I feel like there's a lot more we can continue to do and invest in.

Will Power -- Robert W. Baird & Co. -- Analyst

Yeah. So I guess the second one just kind of following up on that, as you go to market with GoToConnect, are customers asking for contact center? How important is that I know that's one of the things on the development pipeline and maybe any update as to when do you think that they might have an integrated product on that front?

William Wagner -- President and Chief Executive Officer

Well, we're certainly not seeing any -- the performance we're seeing in our Jive and the team selling the Bundle are really doing very well. So I wouldn't say it's being impacted by call centers not a -- hasn't emerged as a feature that's impairing our ability to go execute on our plan. That said, we are building out a more robust call center capability as we, it's one of the investments, we do think over time, that's part of the marketplace and part of the product suite. And so that's an area that we're focused on strengthening as we work through the year.

Operator

Our next question will come from Matt Hedberg with RBC Capital Markets.

Matt Hedberg -- RBC Capital Markets -- Analyst

Yeah. Hey guys, thanks. On the investment side, I guess specifically, you guys talked about a 15% increase in quarter reps, could you give us an update, maybe on the progress there and maybe how we should expect some of these reps to come in through the year and kind of how we should think about getting up to full quarter capacity?

William Wagner -- President and Chief Executive Officer

Yeah. Thanks, Matt. So yeah, first of all, our investment plan -- I would say we're on track and pleased with the hiring we saw in Q1, a lot of the sales ramp really begins in Q2 and second part of the year and that's really where you start to see it impact. That's what we talked about in the prior call, Q3 and Q4 is really when we start to see bookings impacting then later revenue impact in the year. But right now, we are on track.

Matt Hedberg -- RBC Capital Markets -- Analyst

That's great. And then a question around Bold360 and I guess the AI platform there. And I guess when we think about AI, sometimes it's about replacing humans, but in this case, it's really not, it's more about leveraging the agent. Could you talk a little bit more about sort of what that AI aspect of Bold360 brings to really the customer experience?

William Wagner -- President and Chief Executive Officer

Yes. So, great question and you're absolutely right. And I think what makes Bold AI a little bit different from other so-called AI solutions in the market is it is -- the benefit to the agent is just as strong as the benefit to the end consumer and having the ability of the agent to be really kind of super-powered by the AI capabilities of Bold360, so the agent can work smarter, they can get the answers more quickly, they can seamlessly go back and forth from a consumer perspective that consumer experience, the consumer goes back and forth between an agent or the bot and obviously the self-learning that's available in the platform and we have launched some features in the quarter that really helped made it even better from an agent perspective, we think we have certainly among the best agent side AI going and we're certainly seeing that momentum in the sales side. So, we hope to keep that going and you'll see more coming from us in future quarters.

Operator

We'll now take a question from Rich Valera with Needham & Company.

Rich Valera -- Needham & Company -- Analyst

Thank you. I was hoping you could talk about your pricing strategy for GoToConnect. I understand you gave a pretty aggressive pricing strategy there. So, just wanted to understand how you're positioning in the market and if you think that will have any impact on the gross margins as that product ramps?

William Wagner -- President and Chief Executive Officer

Yeah. So, I would say we're very, very pleased with our strategy, our pricing strategy we think is to take advantage of some real structural advantage we think we have and we are purposely being disruptive in the market. I think the competitors are as you can see our public competitors are either scrambling to kind of build their own or partner or buy companies to strengthen their portfolio and because we're not relying on partnerships, we can afford to be more aggressive and disruptive on price without negatively impacting our gross margins.

So, it's one of the reasons why we expect the Connect Bundle and Jive's growth continue to outpace the market taking share away from competitors and the pricing strategy is already factored into our plan. This was what we had anticipated as we came through the year. We want to come out. We think we have an advantage. We're going to come out and be aggressive.

Rich Valera -- Needham & Company -- Analyst

Got it. And then, just wondering if you could comment on the overall competitive environment. And maybe in particular with respect to (inaudible) giving some problems in '18, but it sounds like maybe things have stabilized and if you've seen any traction with their phone product.

William Wagner -- President and Chief Executive Officer

Well, obviously they had a successful IPO, but I think from a competitive position, we feel like we've really enhance our competitive position from where we were a year ago, we launched GoToMeeting and Jive Bundle, we've obviously launched our new in-room solution, which I talked about last year and the success that the Bundle is seeing, we think we're feeling very optimistic about GoToConnect, as we launched the integrated products. So yeah, I think we're always working to get better, but I think competitively, we're in a stronger position than we were, say 12 months ago for sure.

Operator

Our next question will come from Scott Wilson with Piper Jaffray.

Scott Wilson -- Piper Jaffray -- Analyst

Hey, guys. I'm on for Alex today. Maybe piggybacking on the last question, it sounds like GoToConnect was a notable bright spot in the corner -- in the quarter. Can you kind of comment on what you view as your differentiation from competitors. And then, maybe also remind us where we stand on the combined GoTo market initiatives, where do we stand with go to reps selling Jive and vice versa as well today.

William Wagner -- President and Chief Executive Officer

Yes. And let me just be clear, GoToConnect is the integrated version of the Bundle. The Bundle is what we've been selling. We've just launched GoToConnect. So, the sales team really has just begun selling that product, that really didn't have any impact in the quarter. So, it's really the Bundle that that we saw a lot of success coming out of last year and again in Q1, we continue to see that accelerate.

In terms of the, the integrated sales team, as we said, as I said previously, the Jive team has primarily been the people selling that integrated bundle and now that we have the integrated products, we have some things to do on the back end to make sure that we can have enable everyone to sell it internally. But again, in that second half of the year is really when our entire collaboration sales force will be selling the integrated Bundle, our integrated product GoToConnect and that's something which we're very excited about. At the same time, we'll be rolling it out outside of the US, and again something which we hold -- we think holds great promise for us.

Scott Wilson -- Piper Jaffray -- Analyst

Great. Thanks.

Operator

We'll take our next question from Dmitry Netis with Stephens Inc.

Ryan Glenn -- Stephens Inc. -- Analyst

Hi guys. This is Ryan Glenn on for Dmitry. So just wondering, how has the channel reception been to the integrated GoToConnect product and what percentage of the collaboration sales today comes from the channel and where do you think this could go with the new Bundle?

William Wagner -- President and Chief Executive Officer

Yes. Again, specifically talking about GoToConnect. That's something, which we've just launched about a month ago, so I think the channel receptivity in terms of their their feedback has been very positive. But in terms of any impact, sales impact, that had really hasn't factored in the quarter. That's something we'll see over the next couple of quarters and we'll certainly talk about.

Overall, the channel makes up about 35% to 40% of Jive sales and we think with having an integrated product really gives us an opportunity with the channel partners to strengthen our relationship. So we're pretty pleased.

Ryan Glenn -- Stephens Inc. -- Analyst

And then on the call center investment side, the investments you're making. Would these be toward potential replacing Jive Contact Center Pro or this more focus on the lower end SMB?

William Wagner -- President and Chief Executive Officer

Well, I mean in general, I think the call center capabilities we have right now are sufficient for the lower end of that SMB market. I think some of the capabilities that we're talking about including integration with some of the things that Bold360 does will really put us in a very favorable position vis-a-vis competitors. So we have a lot of work to do and we'll go deliver that in the second part of this year as we've discussed.

Operator

We'll now take a question from Raimo Lenschow with Barclays.

Raimo Lenschow -- Barclays Capital -- Analyst

Hey, thanks for squeezing me in. First, Bill can you remind me on the combined product, like how did you do it on the back-end in terms of integrating Jive and and GoTo like one taken over -- is one getting integrated into the other, is it just the front end that is just kind of combines, can you just talk me through that, where you're now and what the plans are? And then, one for Ed, like how long is the typical ramp for the sales guys? If you're hiring in Q2 to Q3, is it like a six months ramp, is it a nine months ramp, 12 months, how do I have to think about it? Thank you.

William Wagner -- President and Chief Executive Officer

Yes. So, hey, Raimo. Your first question -- I'll start with the Bundle. On the Bundle side, there wasn't much integration at all. That was really just on the identity side, so you had a single login experience. Now that we launched GoToConnect, it's much more integrated and it's really built leveraging the micro services essentially that we -- as we've refactored GoToMeeting over the last couple of years and prepared for kind of its next run of growth. We did a lot of work on the technology stack and that is really where we've integrated with with the Jive team -- with the Jive product. So, any changes we make to GoToMeeting and enhancements that will show up in the integrated product, which we think will make it really efficient use of our resources.

Ed, you want to address Raimo's other question?

Ed Herdiech -- Chief Financial Officer

Yeah. So, ramp for sales reps, we typically see about -- takes about four months for inside sales rep to get ramped.

Raimo Lenschow -- Barclays Capital -- Analyst

Okay. Perfect, team. Thank you.

Operator

We'll now take a question from Shaul Eyal with Oppenheimer & Company.

Shaul Eyal -- Oppenheimer & Company -- Analyst

Thank you. Good afternoon, guys. So LastPass continues to do well in a very healthy environment. Do you believe that with the expanded identity as a service platform, whereby you're adding single sign-on and multi-factor authentication capabilities. Will you be running into a new set of competitors or do you expect to see the same usual suspect you've be seeing in the space so far?

William Wagner -- President and Chief Executive Officer

Thanks for the question, Shaul. We're really focused on the greenfield in SMB. We think at the SMB market is really under penetrated from a identity perspective, while they may have password management, a lot of those customers do not have single sign-on and they may have very simple multi-factor authentication. So that's really where we see as as our opportunity in the near term and we're really not focused on going upmarket into the enterprise space, where we think it is more crowded there from a competitive standpoint, what we see in the SMB space is a lot of greenfield opportunity.

Shaul Eyal -- Oppenheimer & Company -- Analyst

Understood. Thank you.

Operator

And it appears there are no further questions at this time, I'd like to turn the conference back to Mr. Bill Wagner for any additional or closing remarks.

William Wagner -- President and Chief Executive Officer

Yeah. Thank you for your questions tonight. In closing, we executed well in Q1 balancing our near-term priorities with our long-term growth investments. Our growth products continue to outpace the respective markets and we took key steps in Q1 to accelerate this growth, including multiple product launches, new branding, and hiring. As a result, we are on track for these products to make up 25% of overall revenue by year's end. Thanks again for your time this evening. We look forward to updating you on our progress when we report our Q2 results in July.

Operator

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

Duration: 40 minutes

Call participants:

Rob Bradley -- Vice President of Investor Relations

William Wagner -- President and Chief Executive Officer

Ed Herdiech -- Chief Financial Officer

Alex -- -- Analyst

Gregg Moskowitz -- Mizuho -- Analyst

Gregg Moskowitz -- Mizuho Securities -- Analyst

Sterling Auty -- JP Morgan -- Analyst

Will Power -- Robert W. Baird & Co. -- Analyst

Matt Hedberg -- RBC Capital Markets -- Analyst

Rich Valera -- Needham & Company -- Analyst

Scott Wilson -- Piper Jaffray -- Analyst

Ryan Glenn -- Stephens Inc. -- Analyst

Raimo Lenschow -- Barclays Capital -- Analyst

Shaul Eyal -- Oppenheimer & Company -- Analyst

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