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LogMeIn Inc  (NASDAQ:LOGM)
Q2 2019 Earnings Call
Jul. 25, 20195:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to LogMeIn Second Quarter 2019 Financial Earnings Conference Call. [Operator Instructions]

And 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, Investor Relations

Thank you, and welcome to our second quarter 2019 earnings conference call. Today, I'm joined by our President and CEO, Bill Wagner; and our Chief Financial Officer, 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 Q&A session, please limit yourself to one question and one follow-up.

Before we begin, it is important to note that 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 the impact of acquired deferred revenue and fair value adjustments, 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 on our Investor Relations website.

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 second quarter results. I'm pleased to report strong financial results in Q2, with revenue, adjusted EBITDA and earnings per share all exceeding the high end of our guidance. Second quarter revenue was $313.4 million, up 2% year-over-year. Adjusted EBITDA was $95.6 million or 30.5% of revenue. And we delivered earnings per share of $1.17 and $74 million of free cash flow.

We've also made meaningful progress executing the strategic investment plan we outlined in February of this year, a plan designed to accelerate our long-term growth by asserting our leadership in three much larger, faster growing adjacent markets, specifically Unified Communications and Collaboration, Identity as a Service and Digital Engagement. Our growth products are a critical element of this strategy, and I'm very pleased to share that overall, these products performed exceptionally well in Q2 and accounted for 24% of revenue, up from 22% in Q1 and 19% last year.

Another important element of our strategy is to improve the health of our core meeting business. We have made significant investments to enhance product performance, test new pricing and packaging, simplify how customers can try and buy GoToMeeting and enhance our retention programs. Many of these initiatives, including the introduction of our new pricing lineup, are just being deployed and will take several quarters to show up in the company's financial results. So for now, we're not raising our full year guidance any further, something Ed will cover in a few minutes.

Nevertheless, we believe that we are in a stronger competitive position today than at any time since we acquired the GoTo assets. All of this, the strong performance of our growth products and the changes we've made in the core meeting business, give us confidence that our investment strategy is working and our investments will pay-off. And one proof point of this is that we are now on track to double the total company growth rate from 2% in Q2 to 4% in Q4.

So before turning to our financials, I wanted to provide additional color and share a bit more about the exciting early traction that has us even more excited in our longer-term strategy. I'll start in our UCC business, where our investments are solving for two distinct, but related things. First, investments that are focused on delivering best-in-class meetings for our core meeting business. And second, investments focused on the launch of our integrated UCC product to help accelerate our push into the much larger and faster growing Unified Communication and Collaboration opportunity.

On the meeting side, the GoToMeeting team has made some very impressive progress improving and simplifying our flagship offering and dramatically reduced the time it takes to join a meeting, introduced advanced audio capabilities and developed video and screen-sharing capabilities that are faster than [Technical Issues] in the market. Additionally, we've begun to deploy the next-generation of our video first user experience to select customers, an experience that we'll begin rolling out more broadly in the upcoming months. In addition to these product initiatives, we're also making it easy for people to try and buy the product and are rolling out new, simplified and competitive pricing. We believe the team has delivered many of the changes that are essential to improve this business, the benefits of which we expect to see over the next few quarters.

The second quarter also included a key milestone in our longer-term strategy with the release of our integrated UCC product, GoToConnect, a highly anticipated offering that became generally available in early April. Building off the success and momentum of our commercial bundle, GoToConnect brings together Jive and GoToMeeting into a simple to use, simple to deploy platform that provides integrated voice, video, meetings and messaging. Although sold by only a small portion of our sales force in Q2, this best of both combination is proving to be a powerful differentiator. Not only were we able to deliver a true best-in-class meeting experience fully integrated into a best-in-class voice offering, but we've been able to deliver a superior unified experience with much more favorable terms than our competitors.

In the quarter, we used our value proposition and unified offering to win new customers who are making a first time transition from on-premise telephony to a cloud PBX while also winning a significant number of rip and replace deals from customers of other UCAS players. And many of these deals highlight another key advantage, the credibility and reach that comes from our large installed base of GoToMeeting customers.

For example, a retail organization with more than 300 locations was using our GoTo collaboration products, meeting and webinar, for sales related use cases. Leveraging the relationship, our sales team successfully gained introductions to corporate IT, who are reevaluating an existing cloud PBX solution from a UC leader. We displaced the incumbent by delivering a better integrated experience and solving for more use cases, all at an attractive price point.

Another example was an existing GoToMeeting customer that had a mix of phone and voice providers, all UCC leaders serving both cloud and on-premise deployments. In this case, the customer wasn't actively reevaluating phone providers but found the idea of combining and ultimately reducing per-user phone and meeting costs for its more than 400 employees to be an appealing value proposition. The result was a six figure deal for combined voice and meeting services and a displacement of both collaboration and UC competitors.

Another element of our investment strategy was to expand LastPass beyond password management and disrupt the cloud identity market. We've long viewed Identity as a Service, or IDaaS, as a natural adjacency, and we believe that our leadership position in password management gives us the foundation to offer a broader suite of products to help companies protect their employees, their applications and their data. Earlier this year, we acquired a small company that had developed a unique single sign-on and multifactor authentication product.

In Q2, we rapidly integrated this cutting-edge technology into LastPass and by June, had unveiled the full LastPass identity suite, shifting LastPass from a point solution to a full business line. This new suite immediately creates an opportunity for broader customer conversations, conversations with existing customers around upsell and cross-sell, and conversations with a new crop of prospects that feel underserved or, in some cases, overwhelmed by the complexity of other solutions in the marketplace. It's early, but we're thrilled with the new product, and the feedback from both existing and prospective customers is encouraging.

Over the long term, we believe this could add meaningfully to the growth on top of the already impressive momentum we've seen from LastPass, especially among business buyers. Q2 also demonstrated how our freemium model is bringing us into companies of all sizes. In one case, a CEO who used LastPass for his personal use led to a site license across his entire organization. In another, various individuals using LastPass on their own opened the door for our sales team to sell a large site license. In fact, Q2 was our strongest quarter ever for new sales, including many 6-figure deals.

In our CES business, new investments helped launch an expansion of our AI enabled digital engagement offering, Bold360, from a point solution to a full suite that addresses three critical use cases. In June, we unveiled Bold360 Service and Bold360 Advise and provided customers with a preview of Bold360 Acquire. Bold360 Service brings together our signature hybrid AI and human engagement capabilities and builds on one of Bold's most popular use cases, customer service and engagement focused on web facing, post sale support.

Bold360 Advise takes on a new emerging opportunity, which is using AI and machine learning to help customer service agents better address customer questions and service issues. It can be used as a stand-alone app or integrated into existing customer service applications used by any one from call center agents to a hotel concierge to a brick and mortar customer service desk. Bold360 Acquire is a sales focused version of Bold360 and will be used in presale scenarios on websites to move prospective customers through the funnel and improve conversion rates.

Available later this year, Acquire has been very well received by the customers who have previewed it, and we believe that over time, they will significantly expand the use cases for Bold at companies of all sizes. And while the product teams are rolling out these new products, we also saw very strong commercial traction. Q2 proved to be one of the largest new sales quarters ever for Bold, including a seven figure deal, as we continue to be successful selling into our traditional support customer base, displacing large competitors and capturing greenfield opportunities with companies at the beginning of their digital transformation.

In summary, we're less than six months into the growth acceleration plan we laid out in February, and we are making meaningful progress. We successfully launched new product offerings indirectly at our UCC, IDaaS and Digital Engagement opportunities. We hired key employees, strengthened our sales organization and increased marketing investments to fuel accelerated growth. Our growth products are gaining momentum, and we expect them to account for 25% of total revenue exiting 2019. As a result of these and other efforts, we expect growth to at least double by the end of the year. It's still early, but we're encouraged by much of the progress and optimistic about the future and long-term opportunity.

With that, I'll now turn the call over to Ed to provide details on our Q2 financial results, as well as our outlook for Q3 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 report all 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. I'm pleased to report that our Q2 results surpassed our guidance for all metrics, and net revenue from our growth products accelerated during the quarter. Highlights in the quarter include: revenue of $313.4 million, which is $1.4 million above the high end of our guidance; adjusted EBITDA of $95.6 million or 30.5% of revenue, which is $600,000 above the high end of our guidance; earnings per share of $1.17, which is $0.03 above the high end of our guidance; free cash flow of $74 million or 24% of revenue, which is $4 million above our outlook; and deferred revenue that was $409 million, which is up $7 million from Q1 and 7% on a year-over-year basis.

In Q2, our UCC revenue was $172 million, down 2% year-over-year, which was in line with our expectations. We continue to sharpen our focus on this business and are pleased with the progress that we made in the quarter, which included improved product quality and performance, multiple product releases and accelerating marketing efforts supporting our new GoTo brand. Additionally, we continue to see strong performance with our combined offering of voice, video and collaboration. Our IAM business continued to perform well, driven primarily by LastPass, and grew 12% year-over-year to $98 million.

During the quarter, we extended LastPass's capabilities by broadening the offering with single sign-on and multifactor authentication capabilities, which we believe are a natural market fit and will help drive continued growth. Our CES business generated $43 million of revenue, which was roughly flat with the prior quarter and down 4% year-over-year. We signed numerous large deals for Bold360 AI during the quarter, including an exciting deal with a large consumer goods company and another with a global partner that, over time, we believe has the potential to significantly enhance our global distribution.

Turning to our growth products. We're pleased with continued strong performance in Q2, which, in aggregate, accounted for 24% of total company revenue. This was an increase from 22% in Q1 and 19% for fiscal year 2018. With regard to renewal rates, for the second quarter, our total company gross renewal rate across all products on an annualized dollar basis was approximately 80%, consistent with Q1.

Next, I'd like to review our Q2 expenses. In the quarter, gross margins were 81.4%, which are in line with our expectations. Sales and marketing expenses were $115 million or 37% of revenue. This represents a $5 million increase from the prior quarter primarily due to increases in marketing program spend associated with our growth acceleration plan. Research and development expenses were $35 million or 11% of revenue, which is consistent with the prior quarter. And G&A expenses were $26 million or 8% of revenue, which is also consistent with the prior quarter. Finally, in Q2, we returned approximately $82 million to our stockholders through a combination of stock buybacks and dividends. We repurchased approximately 840,000 shares of our stock for $66 million and paid $16 million in common stock dividends. Regarding our dividend, we'll pay a $0.325 per share dividend on August 23, 2019, to shareholders of record as of August 7, 2019.

With that, I'll now provide our outlook for the third quarter and full year 2019. For the third quarter, we expect revenue to be in the range of $314 million to $316 million. We are currently targeting adjusted EBITDA to be in the range of $108 million to $109 million and an adjusted EBITDA margin of approximately 34.5% of revenue. The increase in our Q3 margin relative to Q2 reflects the seasonality in our marketing program spend during the summer months. Net income per share is expected to be in the range of $1.35 to $1.37, and our GAAP net income per share is expected to be in the range of breakeven to $0.02. Net income assumes an effective tax rate of approximately 25%, and GAAP net income assumes a tax provision of approximately $1 million. Both net income per share and GAAP net income per share are based on 49.7 million fully diluted weighted average shares outstanding.

For the full year, we expect revenue to be in the range of $1.258 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 $5.05 to $5.11. GAAP net loss per share is expected to be in the range of $0.18 to $0.10. Net income assumes an effective tax rate of approximately 25%, and GAAP net loss assumes a tax provision of approximately $2 million. Net income per share is based on 50 million fully diluted weighted average shares outstanding. GAAP net loss per share is based on 49.6 million weighted average shares outstanding.

Finally, we expect Q3 free cash flow to be approximately $70 million and full year free cash flow to be between $340 million and $345 million. This updated cash flow outlook accounts for two factors. First, although we're only a few quarters into a multi-quarter strategic plan and have a lot of work ahead of us, we see strong performance and market validation from our growth products and believe that our overall strategy is working. Additionally, we believe that the investments we're making and starting to roll out into the market in our core meeting business will improve performance. However, it will take until later this year and into next year before we see the impact in our financial results.

That concludes my remarks. And now I'll turn the call back to our operator to take your questions.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] And first, from RBC Capital Markets, we have Matt Hedberg.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Hey. It's Dan Bergstrom for Matt Hedberg. Thanks for taking our questions. Really good quarter here. So you talked about simplifying and competitive pricing in meetings. Could you drill down into that a bit? What's changing? What's the rollout time line? What were customers, perhaps, looking for from a pricing perspective? And then, I'm assuming you've done some initial trials here that give you confidence in the changes.

William Wagner -- President and Chief Executive Officer

Yeah. Thanks, Dan. This is Bill. So yeah, I mean this is work look that we began last year, and you're seeing improvements that the team has delivered that we're really just now, for the most part, starting to roll into the marketplace. That includes introduction of the new audio and video sharing capabilities that we think are very strong relative to competitors, things as simple as dramatically reduced meeting join time, which is something that's very important to end users. Making it easy for people to try and buy our products, that's everything from the website changes to the new pricing lineup.

And as I said, also, we're very excited about the new video first user experience that we're rolling out here over the next quarter. From a pricing perspective, we did test pricing and packaging. We are in the market in Q2 and doing some testing. We took our time. We wanted to make sure that we had good data, good amount of data on pricing. And I think we're in a position now where we feel like we are very competitive not just from a product perspective but also from a packaging and pricing perspective across the board.

Dan Bergstrom -- RBC Capital Markets -- Analyst

That's great. And then on renewal rates, it's been consistent in the 80% range here for four quarters now for UCC with GoToMeeting trending higher, very impressive. Just curious, could that trend higher, perhaps, I know you've been deemphasizing some lower retention products. Could that potentially move that higher or is that 80% range, that's kind of a good consistency -- good, consistent range to look for here?

William Wagner -- President and Chief Executive Officer

Well, I think your word about consistency is the right one. I mean overall renewal rates, as you said, consistent with last quarter at around 80%. Collab was up slightly at 83% in Q2, up from 80% in Q1. But that's roughly in line with what we've seen over the last couple of quarters or last few quarters. We do think that some of the changes we make or that we're rolling out now could impact renewal rates going forward. And keep in mind that Jive as well renews at a much higher rate. So as we bundle our products together, as we've talked about on previous calls, that would be interesting to see if that provides some lift to our renewal rates.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Great. Thanks. Nice quarter, guys.

Ed Herdiech -- Chief Financial Officer

Thanks.

William Wagner -- President and Chief Executive Officer

Thanks, Dan.

Operator

And moving on, we have Tim Klasell with Northland Securities.

Tyler Wood -- Northland Securities -- Analyst

Hey. This is Tyler Wood for Tim. Now that GoTo has been sort of absorbed, could you talk a little bit about what you might be looking for in terms of future M&A, maybe like the financial profile or the growth versus profitability outlook?

William Wagner -- President and Chief Executive Officer

Yeah. Thanks for the question. I mean I think at this point, as we talked about in our February call, we are really focused on executing the plan and the strategy we laid out. I do think we're a company that has a good track record of delivering M&A and increasing performance of companies that we acquire. But for 2019, our focus is primarily on our organic growth and our focus on our plan.

Tyler Wood -- Northland Securities -- Analyst

All right. Thank you.

Operator

And next, we have Gregg Moskowitz with Mizuho Securities. Greg, you may have yourself muted, sir. Your line is open at our end, but we're unable to hear you.

Matthew Broome -- Mizuho Securities -- Analyst

Yeah. Sorry, I'm here. This is Matt Broome actually on for Gregg. So do you think you could grow service cloud revenue this year?

William Wagner -- President and Chief Executive Officer

I mean I think we had, we were really pleased -- Bold is clearly the driver there. I think we'll see some -- overall, some modestly better improvement in the second part of the year. But we'll have to wait and see, obviously, Bold being the big driver there.

Matthew Broome -- Mizuho Securities -- Analyst

Okay. And could I ask you, is GoToConnect on track to be GA in Europe in Q3 and Australia in Q4?

William Wagner -- President and Chief Executive Officer

Yeah. Right now, GoToConnect, it's starting maybe a month later. It will happen definitely in Q3, maybe push it out a month from what we initially thought, but it will definitely happen in the quarter. And then we expect in Australia in Q4. So overall, still on track.

Matthew Broome -- Mizuho Securities -- Analyst

Thanks very much.

Operator

Next question will come from Alex Kurtz with KeyBanc Capital Markets.

Steven Enders -- KeyBanc Capital Markets -- Analyst

Hi. This is Steve Enders on for Alex. I just wanted to touch on GoToConnect there. Just wondering if you've seen -- if you could comment about any early successes you've seen with the combined solution there and kind of early win rate for that solution versus Jive.

William Wagner -- President and Chief Executive Officer

Yeah. I think it's very consistent with the commercial bundle. And again, in the quarter, as I had thought, we sold a mix of GoToConnect and the commercial bundle. But both, really, we see the same thing. 90% now of Jive sales include the collaboration component. And keep in mind that it's only been available for a small portion of our sales team and only in the US. Both of those things are changing in Q3. And we continue to see it's bringing us -- making our [Indecipherable] I think a much more competitive offering than just Jive stand-alone. And I think that's reflected in the increased success of Jive and the growth that we're seeing out of that business.

Steven Enders -- KeyBanc Capital Markets -- Analyst

Okay. I just wanted to touch on the cash flow commentary, just get a better understanding of what the drivers are there that is leading to that.

Ed Herdiech -- Chief Financial Officer

Sure. Thanks. This is Ed. So the updated outlook is all about timing. Let me unpack that a little bit. All the improvements that Bill talked about that are being made in our [Indecipherable] on core collaboration, some of them are in place, and some are being rolled out across the year. And as Bill said, we expect to see impact from those kind of later in the year and into next year. And so that's really the driver here. It's simply about timing.

Steven Enders -- KeyBanc Capital Markets -- Analyst

Okay. Great. Thank you.

Ed Herdiech -- Chief Financial Officer

Yeah.

Operator

And next from JPMorgan, we'll hear from the line of Sterling Auty.

Sterling Auty -- JP Morgan -- Analyst

Thanks. Hi, guys. I wonder if you could just outline for us, within the UCC Jive, you talk about GoToConnect, you talk about, I think, Jive, commercial, etc. How are you differentiating the marketing message out to customers? So is it by different advertising channel, by different -- segmented by sales? What's the reach in? And how do you avoid kind of customer confusion around it?

William Wagner -- President and Chief Executive Officer

Sterling, thanks for the question. So really, it's partially driven by, let's say, an existing GoToMeeting customer, that they've already fully deployed GoToMeeting, so we can then just layer Jive right on top. And we combine, it has a single sign-on capability, so it makes it easy for people to use, to go back and forth. If it's a new customer who may not have GoToMeeting, that's usually where we'll start. We'll lead with the GoToConnect integrated offer.

Sterling Auty -- JP Morgan -- Analyst

Okay. All right. Great. And then on the gross margins, came in a little bit below what we were expecting. How should we think about the trend in gross margins from here? In other words, you're obviously making some price changes to be more proactive and aggressive in the marketplace. When do we kind of hit that point of stabilization or even inflection in the gross margins?

Ed Herdiech -- Chief Financial Officer

Hey, Sterling. This is Ed. So for the full year, there's really no change than what we talked about last quarter. So we're still modeling 82% gross margin for the full year. We're down about maybe $900,000 in margin from where we were last quarter, and that was just a function of some incremental hardware costs associated with Jive.

Sterling Auty -- JP Morgan -- Analyst

Okay. Thank you.

Operator

And next, from Needham & Company, we have Rich Valera.

Rich Valera -- Needham & Company -- Analyst

Thank you. So the UCC business was down about 2% this quarter, about the same as the first quarter. Can you remind us what you're expecting for the UCC business as we work through the year? I think you're expecting that to return to growth in the fourth quarter, but if you could lay that out for us. Thank you.

William Wagner -- President and Chief Executive Officer

Yeah. I think we're still expecting that, that will start to increase as we work through the second half of the year, as I talked about. Some of the initiatives that we rolled out, a lot of the changes are kind of just being deployed now. So to Ed's point about cash flow, some of that benefit will be pushed into later in the year and future quarters. But we do expect to see improvement in the second half of the year.

Rich Valera -- Needham & Company -- Analyst

Is that -- do we expect a return to growth? Or are we not sort of committing to that at this point?

William Wagner -- President and Chief Executive Officer

I think it's going to be really close to getting back to growth, and we'll see how we do in the second half of the year.

Rich Valera -- Needham & Company -- Analyst

Great. And then realizing it's very early for GoToConnect sort of competing as an integrated solution, Zoom, your arguably biggest competitor in the market, has also rolled out a kind of integrated telephony video product. Have you seen any impact in the market from Zoom Phone or is it just too early for that?

William Wagner -- President and Chief Executive Officer

I think we believe that the UCAS market is really large, and we really haven't seen -- competitively, I think you have some bigger players in there. And I think we feel like we have a much more mature and robust telephony offering.

Rich Valera -- Needham & Company -- Analyst

Got it. Okay. Thanks for taking my questions. Appreciate it.

Operator

And moving on, from Baird, we'll hear from Will Power.

Will Power -- Baird -- Analyst

Great. Thank you. Yeah. Just maybe one more question on GoToConnect. I think you noted that just a portion of your sales force is out pushing the product as it was launched over Q2. Where does that stand today? When will you have the broader effort, I guess, if you will, kind of behind the GoToConnect product?

William Wagner -- President and Chief Executive Officer

Yeah. Thanks for the question. That's now in place as we enter into Q3. As a matter of fact, I think it was last week, we opened it up to our kind of collaboration sales team. So now everyone, all of our sales team can sell that product.

Will Power -- Baird -- Analyst

Okay. Great. Okay. And then my second question, just on customer engagement. I mean it sounds like you're making some nice progress on Bold360 in terms of broadening the product portfolio. Maybe just talk about the underlying legacy pressures you're facing there given that broader segment was down year-over-year. How do we think about that, I guess, through the balance of this year?

William Wagner -- President and Chief Executive Officer

I think overall, I think that we'll continue to see similar performance in that part of the business, that legacy GoToAssist, GoToAssist corporate, Rescue business. Again, there is some product consolidation going on in the background there that I won't get into, but that's obviously playing a role here. But the growth, obviously, will continue to be driven by Bold.

Will Power -- Baird -- Analyst

Okay. Thank you.

Operator

And next, we have Shaul Eyal from Oppenheimer.

Shaul Eyal -- Oppenheimer -- Analyst

Thank you. Good afternoon, guys. Congrats on the good execution in the quarter. I had a question about LastPass and as we continue to invest and build your IDaaS capabilities. So as the platform continues to expand, are you running into a new list of competitors in that regard?

William Wagner -- President and Chief Executive Officer

Shaul, look, I think it's pretty early before we've just launched the MFA and SSO capabilities of -- and integrated into LastPass. So that literally was a few weeks in the marketplace. So it's probably a question I'd be better able to answer a quarter or so from now. So we will see. We think we're serving in a very large underserved market though, so I think there's plenty of room for us to be successful.

Shaul Eyal -- Oppenheimer -- Analyst

Got it. That's fair. And any additional training from Phase 4 from a channel perspective which would require a pretty much straightforward to what you have been in the past in that respect?

William Wagner -- President and Chief Executive Officer

No, it is a little bit different. I mean if there is a little bit -- these are definitely new products. And a matter of fact, I was just talking to the product manager a few moments before the call. So I think that work is largely done, but we have the product team. Matter of fact, this week, the product team was on the sales force, sitting with the sales reps, listening to their messaging and helping coaching them. So again, kind of early days, and we'll have probably more to talk about next quarter.

Shaul Eyal -- Oppenheimer -- Analyst

Thank you. Congrats.

William Wagner -- President and Chief Executive Officer

Thank you.

Ed Herdiech -- Chief Financial Officer

Thanks.

Operator

And ladies and gentlemen, it looks like that does conclude our question-and-answer session. I'll turn the floor back to Bill Wagner for any additional or closing remarks.

William Wagner -- President and Chief Executive Officer

Thank you for your questions tonight. In closing, we're making meaningful progress against our growth acceleration plan and our longer-term strategy. Our growth products are gaining momentum, and we are well on track to account for 25% of total revenue exiting 2019. And we expect total growth to at least double by the end of the year. So it's still early, but we're encouraged by much of the progress and optimistic about the future and long-term opportunity. Thanks again for your time this evening, and we look forward to updating you on our progress when we report our Q3 results in October.

Operator

[Operator Closing Remarks]

Duration: 35 minutes

Call participants:

Rob Bradley -- Vice President, Investor Relations

William Wagner -- President and Chief Executive Officer

Ed Herdiech -- Chief Financial Officer

Dan Bergstrom -- RBC Capital Markets -- Analyst

Tyler Wood -- Northland Securities -- Analyst

Matthew Broome -- Mizuho Securities -- Analyst

Steven Enders -- KeyBanc Capital Markets -- Analyst

Sterling Auty -- JP Morgan -- Analyst

Rich Valera -- Needham & Company -- Analyst

Will Power -- Baird -- Analyst

Shaul Eyal -- Oppenheimer -- Analyst

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