UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

For the quarterly period ended September 30, 20162017

OR

For the transition period from                    to                    

Commission file number:001-34391

LOGMEIN, INC.

(Exact name of registrant as specified in its charter)

781-638-9050

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of October 24, 2016,23, 2017, there were 25,486,89252,637,672 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

Table of Contents

LOGMEIN, INC.

INDEX

LogMeIn, Inc.

LogMeIn, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

See notes to condensed consolidated financial statements.

LogMeIn, Inc.

LogMeIn, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

See notes to condensed consolidated financial statements.

LogMeIn, Inc.

LogMeIn, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

See notes to condensed consolidated financial statements.

LogMeIn, Inc.

LogMeIn, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

See notes to condensed consolidated financial statements.

LogMeIn, Inc.

LogMeIn, Inc.

Notes to Condensed Consolidated Financial Statements

1. Nature of the Business

LogMeIn, Inc. (the “Company”) provides a portfolio of cloud-based service offerings which make it possiblecommunication and conferencing, identity and access, and customer engagement and support solutions designed to simplify how people connect with each other and the world around them to drive meaningful interactions, deepen relationships, and create better outcomes for peopleindividuals and businesses to simply and securely connect to their workplace, colleagues and customers. The Company’s product line includes AppGuru™, BoldChat®, Cubby™, join.me®, LastPass®, LogMeIn Pro®, LogMeIn® Central™, LogMeIn Rescue®, LogMeIn® Rescue+Mobile™, LogMeIn Backup®, LogMeIn for iOS, LogMeIn Hamachi®, Meldium™, Xively™ and RemotelyAnywhere®.businesses. The Company is headquartered in Boston, Massachusetts with wholly-owned subsidiaries located in Australia, Bermuda, Brazil, Hungary, India, Ireland, Japan, the NetherlandsNorth America, South America, Europe, Asia and the United Kingdom.Australia.

On July 26, 2016,January 31, 2017, the Company entered into an agreement and plan ofcompleted a merger (the “Merger Agreement”) with Citrix Systems, Inc., (“Citrix”), and GetGo, Inc., (“GetGo”), a wholly-owned subsidiary of Citrix Systems, Inc. (“Citrix), pursuant to which the Company will combinecombined with Citrix’s GoTo family of productsservice offerings known as the “GoTo Business” in a Reverse Morris Trust transaction which is referred to herein as the Merger. Following(the “Merger”). For additional information regarding the Merger, Citrix’s existing stockholders will own approximately 50.1% of the Company’s outstanding shares on a fully diluted basis, while the Company’s existing stockholders will own approximately 49.9% on a fully diluted basis. Based upon the reported closing price of the Company’s common stock on the NASDAQ Global Select Market of $65.31 per share on July 25, 2016, the last trading day before the signing of the Merger Agreement, the estimated total value of the shares to be issued by the Company to Citrix stockholders in the Merger would have been approximately $1.8 billion. Based upon the reported closing price of the Company’s common stock on the NASDAQ Global Select Market of $90.52 per share on September 6, 2016, the estimated total value of the shares to be issued by the Company to Citrix stockholders pursuant to the Merger would have been approximately $2.5 billion. The actual total value of the consideration to be paid by the Company in connection with the Merger will depend on the market price of shares of the Company common stock at the time of the closing of the Merger. The transaction, which has been unanimously approved by the Company’s Board of Directors and the Board of Directors of Citrix, is expected to be generally tax-free to Citrix and its stockholders for U.S. federal income tax purposes.

The consummation of the Merger and its related transactions remain subject to the Company’s stockholders approving the issuance of shares in connection with the Merger, the receipt of certain regulatory approvals and other customary closing conditions, including receipt of opinions of counsel with respect to the tax-free nature of the proposed transaction. On September 26, 2016, the Company announced the early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act for the proposed Merger. The transaction is expected to close in the first quarter of 2017. If the Merger Agreement is terminated under certain circumstances, the Company may be required to pay Citrix a termination fee of $62 million or may under other circumstances be required to reimburse Citrix up to $10 million for certain expenses in connection with the Merger.

The Company expects to incur significant one-time costs in connection with the Merger in 2016 and into 2017, including approximately $45 million to $50 million of transaction-related fees and expenses, including legal, accounting and other professional fees and transition and integration-related expenses. During the nine months ended September 30, 2016, the Company incurred $9.8 million of transaction-related and integration-related fees and expenses and expects to incur an additional $9 million of these expenses during the remainder of 2016.see Note 4 below.

2. Summary of Significant Accounting Policies

Principles of Consolidation— The accompanying condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company has prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Unaudited Interim Condensed Consolidated Financial Statements— The accompanying condensed consolidated financial statements and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited and have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read along with the Company’s audited financial statements included in the Company’s Annual Report on Form10-K, filed with the Securities and Exchange Commission on February 19, 2016.March 1, 2017. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management, reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The results for the interim periods presented are not necessarily indicative of future results. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

Use of Estimates— The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates.

Marketable Securities— The Company’s marketable securities are classified asavailable-for-sale and are carried at fair value with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in equity. Realized gains and losses and declines in value judged to be other than temporary are included as a component of earnings based on the specific identification method. Fair value is determined based on quoted market prices. At December 31, 20152016 and September 30, 2016,2017, marketable securities consisted of U.S. government agency securities and corporate bonds that have remaining maturities within two years and have an aggregate amortized cost of $85.3$55.7 million and $70.6$14.0 million, respectively. The securities have an aggregate fair value of $85.3$55.7 million and $70.6$14.0 million, including $10,000 and $74,000$17,000 of unrealized gains and $53,000at December 31, 2016 and $43,000 and $11,000 of unrealized losses, at December 31, 20152016 and September 30, 2016,2017, respectively.

Revenue Recognition — The Company derives revenue primarily from subscription fees related to its premium subscription software services, usage fees from its audio services and to a lesser extent, the delivery of professional services, primarily related to its Internet of Thingscustomer engagement and support business. Revenues are reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transaction.

Revenue from the Company’s premium services is recognized on a daily basis over the subscription term as the services are delivered, provided that there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured. Subscription periods range from monthly to ten years, but are generally one year in duration.years. The Company’s software cannot be run on another entity’s hardware and customers do not have the right to take possession of the software and use it on their own or another entity’s hardware. Revenue from the Company’s audio services is recognized upon actual usage of audio minutes or the expiration of audio minutes purchased in prepaid plans. Any unbilled audio revenue is accrued for in the period the usage occurs.

The Company’s multi-element arrangements typically include subscription and professional services, which may include development services. The Company evaluates each element within the arrangement to determine if they can be accounted for as separate units of accounting. If the

delivered item or items have value to the customer on a standalone basis, either because they are sold separately by any vendor or the customer could resell the delivered item or items on a standalone basis, the Company has determined that the deliverables within these arrangements qualify for treatment as separate units of accounting. Accordingly, the Company recognizes revenue for each delivered item or items as a separate earnings process commencing when all of the significant performance obligations have been performed and when all of the revenue recognition criteria have been met. Professional services revenue recognized as a separate earnings process under multi-element arrangements has been immaterial to date.

In cases where the Company has determined that the delivered items within its multi-element arrangements do not have value to the customer on a stand-alone basis, the arrangement is accounted for as a single unit of accounting and the related consideration is recognized ratably over the estimated customer life, commencing when all of the significant performance obligations have been delivered and when all of the revenue recognition criteria have been met. Revenue from these multi-element arrangements accounted for as a single unit of accounting which do not have value to the customer has been immaterial to date.

Concentrations of Credit Risk and Significant Customers— The Company’s principal credit risk relates to its cash, cash equivalents, marketable securities, restricted cash and accounts receivable. Cash, cash equivalents and restricted cash are deposited primarily with financial institutions that management believes to be of high-credit quality and custody of its marketable securities is with an accredited financial institution. To manage accounts receivable credit risk, the Company regularly evaluates the creditworthiness of its customers and maintains allowances for potential credit losses. To date, losses resulting from uncollected receivables have not exceeded management’s expectations.

For the three and nine months ended September 30, 20152016 and 2016,2017, no customers accounted for more than 10% of revenue. As of December 31, 20152016 and September 30, 2016,2017, no customers accounted for more than 10% of accounts receivable.

Goodwill— Goodwill is the excess of the acquisition price over the fair value of the tangible and identifiable intangible net assets acquired. The Company does not amortize goodwill, but performs an impairment test of goodwill annually or whenever events and circumstances indicate that the carrying amount of goodwill may exceed its fair value. The Company operates as a single operating segment with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. As of December 31, 2015,November 30, 2016, our measurement date, the fair value of the Company as a whole significantly exceeded the carrying amount of the Company. Through September 30, 2016,2017, no impairmentsevents have occurred.been identified indicating an impairment.

Long-Lived Assets and Intangible Assets— The Company records intangible assets at their respective estimated fair values at the date of acquisition. Intangible assets are being amortized based upon the pattern in which their economic benefit will be realized, or if this pattern cannot be reliably determined, using the straight-line method over their estimated useful lives, which range up to eleven years.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including intangible assets, may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this comparison indicates that there is impairment, the amount of the impairment is calculated as the difference between the carrying value and fair value. Through September 30, 2016,2017, the Company recorded no material impairments.

Foreign Currency Translation — The functional currency of operations outside the United States of America is deemed to be the currency of the local country, unless otherwise determined that the United States dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiaries are translated into United States dollars using theperiod-end exchange rate, and income and expense items are translated using the average exchange rate during the period. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction gains and losses are charged to operations.

Derivative Financial Instruments — The Company’s earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. The Company uses foreign currency forward contract to manage exposure to fluctuations in foreign exchange rates that arise from receivables and payables denominated in foreign currencies. The Company does not designate foreign currency forward contracts as hedges for accounting purposes, and changes in the fair value of these instruments are recognized immediately in earnings. Because the Company enters into forward contracts only as an economic hedge, any gain or loss on the underlying foreign-denominated balance would be offset by the loss or gain on the forward contract. Gains and losses on forward contracts and foreign denominated receivables and payables are included in foreign currency net gains and losses.

As of September 30, 2017, the Company had outstanding forward contracts with notional amounts equivalent to the following (in thousands):

The Company had foreign currency losses of $0.5 million and gains of $1.0 million for the three and nine months ended September 30, 2015, respectively, andnet foreign currency losses of $0.2 million and $0.7 million for the three and nine months ended September 30, 2016, respectively, a net foreign currency gain of $47,000 for the three months ended September 30, 2017 and a net foreign currency loss of $28,000 for the nine months ended September 30, 2017, which are included in other income (expense) income, net in the condensed consolidated statements of operations.

Stock-Based Compensation — The Company values all stock-based compensation, including grants of stock options and restricted stock units, at fair value on the date of grant and recognizes the expense over the requisite service period, which is generally the vesting period of the award, for those awards expected to vest, on a straight-line basis. The Company uses the with-or-without method to determine when it will realize excess tax benefits from stock-based compensation. Under this method, the Company will realize these excess tax benefits only after it realizes the tax benefits of net operating losses from operations.

Income Taxes— Deferred income taxes are provided for the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss carry-forwards and credits using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. At each balance sheet date, the Company assesses the likelihood that deferred tax assets will be realized and recognizes a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction.

The Company evaluates its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be realized. Potential interest and penalties associated with any uncertain tax positions are recorded as a component of income tax expense. As of December 31, 2015 and September 30, 2016, the Company has provided a liability for $0.9 million and $1.3 million, respectively, for uncertain tax positions. These uncertain tax positions would impact the Company’s effective tax rate if recognized.

Segment Data— Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker or decision making group when making decisions regarding resource allocation and assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company, whose management uses consolidated financial information in determining how to allocate resources and assess performance, has determined that it operates in one segment.

The Company’s revenue by geography (based on customer address) is as follows (in thousands):

TheAmounts for the three and nine months ended September 30, 2016 presented in the Company’s revenue by service cloud (product grouping) is as followstable below include reclassifications between product groups to conform to the current year classification of the Company’s products (in thousands):

Guarantees and Indemnification Obligations — As permitted under Delaware law, the Company has agreements whereby the Company indemnifies certain of its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. As permitted under Delaware law, the Company also has similar indemnification obligations under its certificate of incorporation andby-laws. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director’s and officer’s insurance coverage that the Company believes limits its exposure and enables it to recover a portion of any future amounts paid.

In the ordinary course of business, the Company enters into agreements with certain customers that contractually obligate the Company to provide indemnifications of varying scope and terms with respect to certain matters including, but not limited to, losses arising out of the breach of such agreements, from the services provided by the Company or claims alleging that the Company’s products infringe third-party patents, copyrights, or trademarks. The term of these indemnification obligations is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is, in many cases, unlimited. Through September 30, 2016,2017, the Company has not experienced any losses related to these indemnification obligations.

Net Income (Loss) Per Share — Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the sum of the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential common shares outstanding from the assumed exercise of stock options and the vesting of restricted stock units. For the three months ended September 30, 2016, the Company incurred a net loss and therefore, the effect of the Company’s outstanding common stock equivalents werewas not included in the calculation of diluted loss per share as they were anti-dilutive. Accordingly, basic and dilutive net loss per share for the period were identical.

The Company excluded the following options to purchase common shares and restricted stock units from the computation of diluted net income (loss)loss per share because they had an anti-dilutive impact (in thousands):

For the three months ended September 30, 2016, the Company recorded a net loss of $0.7 million and all outstanding options to purchase common shares and restricted stock units have been excluded from the computation of diluted net loss per share as they had an anti-dilutive impact.

Basic and diluted net income (loss) per share was calculated as follows (in thousands, except per share data):

Recently Adopted Accounting Pronouncements

On May 10, 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU2017-09”), which provides clarity on what changes to share-based payment awards are considered substantive and require modification accounting to be applied. The guidance is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years. The Company has elected to adopt ASU 2017-09 early beginning in second quarter of 2017 and will apply it prospectively to award modifications after the adoption date. The Company does not regularly modify the terms and conditions of share-based awards and does not believe this ASU2017-09 will have a material effect on its consolidated financial statements.

On January 1, 2017, the Company adopted ASU2016-09,Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU2016-09”) and recorded, using the modified retrospective approach, a cumulative-effect adjustment to accumulated deficit of a credit of $4.9 million to record $6.8 million of previously unrecognized windfall tax benefits, partially offset by $1.9 million for the accounting policy election to account for forfeitures in compensation cost when they occurred. The Company recorded $2.7 million to additionalpaid-in capital for the differential between the amount of compensation cost previously recorded and the amount that would have been recorded without assuming forfeitures, partially offset by its tax effect of $0.8 million recorded to deferred tax assets. Previously, excess tax benefits were recognized in additionalpaid-in capital on the condensed consolidated balance sheet to the extent they reduced income taxes payable.

Further, upon the adoption of ASU2016-09, the Company, on a prospective basis, records the recognition of excess tax benefits and deficits in benefit from income taxes in the condensed consolidated income statement and treats those amounts as discrete items in the period in which they occur. In the first quarter of 2017, the Company recognized a $2.3 million income tax benefit and a corresponding decrease in net loss during the period ($0.05 per weighted average shares outstanding).

On January 1, 2017, the Company early adopted ASU2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU2016-16”) which records the effect of intra-entity transfers of assets other than inventory when the transfer occurs, resulting in $0.1 million charged to accumulated deficit upon adoption in the first quarter of 2017.

Recently Issued Accounting Pronouncements— On

In May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU2014-09,Revenue from Contracts with Customers (“ASU 2014-09”and has since issued several additional amendments thereto (collectively referred to herein as “ASC 606”), its final standard which will become effective for the Company on revenue from contracts with customers. ASU 2014-09January 1, 2018. ASC 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principlenew standards require entities to apportion consideration from contracts to performance obligations on a relative standalone selling price basis, based on a five-step model. Under ASC 606, revenue is recognized when a customer obtains control of the revenue modela promised good or service and is that an entity recognizes revenue to depict the transfer of promised goods or services to customersrecognized in an amount that reflects the consideration to whichthat the entity expects to be entitledreceive in exchange for those goodsthe good or services.service. In addition, ASC 606 provides guidance on accounting for certain revenue related costs including costs associated with obtaining and fulfilling a contract.

The Company plans to adopt ASC 606 using the modified retrospective transition method which will result in an adjustment to retained earnings for the cumulative effect of applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to the performance obligations in the contract and recognizes revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 appliesstandard to all contracts with customers that are withinnot completed as of the scopeadoption date. As this adoption method does not result in a recast of other topics in the FASB Accounting Standards Codification. Certain of ASU 2014-09’s provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities (i.e., property plant and equipment, real estate or intangible assets). Existing accounting guidance applicable to these transfers has been amended or superseded. ASU 2014-09 alsoprior year financial statements, ASC 606 requires significantly expanded disclosures about revenue recognition. ASU 2014-09 is effective for the Company on January 1, 2018, with earlyto provide additional disclosures during the year of adoption permitted, but not earlier than January 1, 2017. of the amount by which each financial statement line item is affected by adoption of the new standard and explanation of the reasons for significant changes.

The Company is currently assessingevaluating the potential impact of the adoption of ASU 2014-09 onASC 606 to its consolidated financial statements.statements, accounting policies, IT systems and processes. The Company has allocated internal and external resources to assist in its implementation and evaluation of the impact of ASC 606 and has made enhancements to its financial information systems to assist in financial reporting under ASC 606. While the Company cannot reliably estimate the expected financial statement impact at this time, the Company expects the revenue recognition of its primary revenue streams to remain substantially unchanged and therefore, does not expect a material impact on its revenues upon adoption of ASC 606. The adoption of ASC 606 will have an impact on the Company’s consolidated financial statements with respect to its accounting for sales commissions related to customer arrangements. In making this determination the Company has also considered the impact of the guidance in ASC340-40,Other Assets and Deferred Costs; Contracts with Customers, under ASU2014-09 (“ASC340-40”). Under the Company’s current accounting policy, it recognizes the expense of incremental costs of obtaining a contract, such as sales commission costs, when they are incurred rather than capitalizing the costs. Under ASC340-40, the Company is required to capitalize and amortize incremental costs of obtaining a contract and certain sales commissions may require amortization over a period longer than the term of the associated customer contract. The Company is in process of determining the appropriate amortization period for these capitalized commissions.

On February 25, 2016, the FASB issued ASU2016-02,Leases (“ASU2016-02”), which will require lessees to recognize most leases on their balance sheet as aright-of-use asset and a lease liability. Leases will be classified as either operating or finance, and classification will be based on criteria similar to current lease accounting, but without explicit bright lines. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is permitted. TheAlthough the Company is currently assessing the impact of the adoption of ASU2016-02 on its consolidated financial statements.statements, the Company currently believes the most significant changes will be related to the recognition of newright-of-use assets and lease liabilities on the Company’s balance sheet for operating leases.

On March 30, 2016,January 26, 2017, the FASB issued ASU 2016-09,2017-04,Compensation—Stock CompensationIntangibles—Goodwill and Other (Topic 718)350): Improvements to Employee Share-Based Payment AccountingSimplifying the Test for Goodwill Impairment (“ASU 2016-09”2017-04”), which includes multiple provisions intended to simplify various aspects ofsimplifies the accounting for share-based payments,goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU2017-04 also clarifies the requirements for excluding and is expectedallocating foreign currency translation adjustments to impact netreporting units related to an entity’s testing of reporting units for goodwill impairment, clarifies that an entity should consider income EPS, andtax effects from any tax deductible goodwill on the statementcarrying amount of cash flows.the reporting unit when measuring the goodwill impairment loss, if applicable. The guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years, and early adoption is permitted. The Company is currently assessing the impact of the adoption of ASU 2016-09 on its consolidated financial statements.

On June 16, 2016, the FASB issued ASU 2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The purpose of ASU 2016-13 is to require a financial asset measured on the amortized cost basis to be presented at the net amount expected to be collected. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. The guidance is effective for annual reporting periods beginning after December 15, 2019January 1, 2020 and interim periods within those fiscal years. EarlyThe Company is currently assessing the potential impact of the adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. This guidance is not expected to have a material impactof ASU2017-04 on the Company’sits consolidated financial statements.

On August 26,November 17, 2016, the FASB issued ASU 2016-15,No. 2016-18,Statement of Cash Flows (Topic 230): ClassificationRestricted Cash (a consensus of Certain Cash Receipts and Cash Paymentsthe FASB’s EITF)(“ (“ASU 2016-15”2016-18”). The purpose of ASU 2016-15 is to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in2016-18 requires that the statement of cash flows.flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. The guidance is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years, and early adoption is permitted. The Company adopted this guidance in the third quarter of 2016 and there was no material impact on its consolidated financial statements.

On October 24, 2016, the FASB issued ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). The purpose of ASU 2016-16 is to simplify the income tax accounting of an intra-entity transfer of an asset other than inventory and to record its effect when the transfer occurs. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods and early adoption is permitted.years. The Company is currently assessing the potential impact of the adoption of ASU 2016-162016-18 on its consolidated financial statements.

3. Fair Value of Financial Instruments

The carrying value of the Company’s financial instruments, including cash equivalents, restricted cash, accounts receivable and accounts payable, approximate their fair values due to their short maturities. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

The following table summarizes the basis used to measure certain of the Company’s financial assets and contingent consideration liability that are carried at fair value (in thousands):

Bank deposits, corporate bonds and certain U.S. government agency securities are classified within the second level of the fair value hierarchy as the fair value of those assets are determined based upon quoted prices for similar assets.

The Company’s Level 3 liability at September 30, 2016 consists of contingent consideration payable in connection with the October 15, 2015 acquisition of Marvasol, Inc. (d/b/a “LastPass”), as described in Note 4 below. Up to $2.5 million of the LastPass contingent consideration is based on the achievement of certain bookings goals, the fair value of which was estimated at $2.0 million as of December 31, 2015. The fair value of contingent consideration was estimated by applying a probability based model, which utilizes inputs that are unobservable in the market. Changes in the fair value of the contingent consideration liability was reflected in acquisition-related costs in general and administrative expense. The fair value of the LastPass contingent consideration liability of $2.5 million was paid in October 2016. A reconciliation of the beginning and ending Level 3 liability is as follows:

4. Acquisitions

In the nine months ended September 30, 2015 and 2016, acquisition-relatedAcquisition-Related Costs

Acquisition-related costs were $3.8$16.9 million and $16.9$51.4 million respectively, including $3.4 million and $6.7 million, respectively, of contingent retention-based bonus expense related to the Company’s 2014 and 2015 acquisitions, which are typically earned over the first two years following the acquisition. The Company paid $6.0 million duringfor the nine months ended September 30, 2016 and 2017, respectively. Acquisition-related costs are associated with the acquisitions of businesses and intellectual property and include transaction, transition and integration-related charges (including legal, accounting and other professional fees, severance, and retention bonuses) and subsequent adjustments to our initial estimated amount of contingent consideration associated with acquisitions. Acquisition-related costs for contingent retention-basedthe nine months ended September 30, 2016 were primarily comprised of $9.8 million of acquisition-related costs associated with the Merger and $6.7 million of retention bonuses related to the Company’s 2014 and 2015 acquisitions. Included inAcquisition-related costs for the nine months ended September 30, 2016 is $9.82017 were primarily related to the Merger and consisted of $26.2 million in transaction, transition and integration-related expenses, $10.1 million in integration-related severance costs and $15.1 million of acquisition-related costs associated withretention-based bonuses, of which $9.7 million was related to the proposed Merger.

2017 Acquisitions

LastPassNanorep Technologies Ltd.

On October 15, 2015,July 31, 2017, the Company, through its wholly-owned Hungarian subsidiary, acquired all of the outstanding equity interests in LastPass, a Fairfax, Virginia-basedNanorep Technologies Ltd. (“Nanorep”), an Israeli provider of an identityartificial intelligence, chatbot and password management service,virtual assistant services, for $107.6$43.4 million, net of cash acquired, plus contingent payments totalingacquired. Additionally, the Company expects to pay up to $15.0$5 million which are expectedin cash in the future to be paidcertain employees of Nanorep contingent upon their continued service over a two yearthetwo-year period following the dateclosing of acquisition.the acquisition and, in some cases, the achievement of specified performance conditions. At the time of the acquisition, Nanorep had approximately 55 employees and annualized revenue of approximately $5 million. The operating results of LastPass,Nanorep, which arehave been included in the condensed consolidatedCompany’s results since the date of the acquisition are not material. Accordingly, pro forma financial statements beginninginformation for the business combination has not been presented.

The acquisition is being accounted for under the acquisition method of accounting. The acquisition method of accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The preliminary determination of the fair value of assets acquired and liabilities assumed has been recognized based on management’s estimates and assumptions using the information about facts and circumstances that existed at the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its estimates and assumptions are comprisedsubject to refinement. Fair value estimates are based on a complex series of $5.0 millionjudgments about future events and $13.2 million of revenueuncertainties and $6.9 millionrely heavily on estimates and $18.0 million of expenses forassumptions. The judgments used to determine the three and nine months ended September 30, 2016, including amortization of acquired intangible assets of $1.5 million and $4.7 million, contingent retention-based bonuses of $1.7 million and $5.2 million and a contingent considerationestimated fair value adjustmentassigned to each class of $0.5 million forassets acquired and liabilities assumed, as well as asset lives, can materially impact the nine months ended September 30, 2016, respectively.Company’s results of operations. The Company expects to finalize the allocation of purchase price in the fourth quarter of 2017.

The following table summarizes the fair valueCompany’s preliminary purchase price allocation (in thousands):

The useful lives of the identifiable intangible assets acquired and liabilities assumed at the daterange from 8 to 10 years with a weighted average useful life of acquisition:

The LastPass stock purchase agreement obligates the Company to make additional contingent and retention-based bonus payments totaling up to $12.5 million to employees and former LastPass stockholders now employed by the Company on the first and second anniversaries of the acquisition date, contingent upon their continued employment and, for the first anniversary payment only, the achievement of certain bookings goals. The Company has concluded that the contingent payment arrangement is a compensation arrangement and is accruing the maximum payout ratably over the performance period, as it believes it is probable that the criteria will be met. The stock purchase agreement also includes

non-retention based payments of $2.5 million to LastPass stockholders which are contingent on the achievement of certain bookings goals, which the Company has concluded is contingent consideration and is being accounted for as part of the purchase price. This contingent consideration liability was recorded at its fair value of $2.0 million at the acquisition date. The Company assessed the probability of the bookings goals being met and at what level each reporting period. As of September 30, 2016, the contingent consideration liability was $2.5 million and was paid in October 2016.

9.1 years. The goodwill recorded in connection with this transaction is primarily related to the expected synergies to be achieved related toas a result of the Company’s ability to leverage its IT management offerings, customer base, sales force and IT management business plan with LastPass’Nanorep’s product, technical expertise and customer base. All goodwill and intangible assets acquired are not deductible for income tax purposes.

The Company recorded a long-term deferred tax asset of $3.1$2.9 million primarily related to net operating losses that were acquired as a part of the acquisition. The Company recordedacquisition and a long-term deferred tax liability of $23.5$4.8 million primarily related to the amortization of intangible assets which cannot be deducted for tax purposes, resulting in a net long-term deferred tax liability of $2.0 million.

GetGo Merger

On January 31, 2017, the Company completed its Merger with GetGo, a wholly-owned subsidiary of Citrix, pursuant to which the Company acquired Citrix’s GoTo Business. In connection with the Merger, the Company issued 26.9 million shares of its common stock to Citrix stockholders and an additional 0.4 million of the Company’s restricted stock units in substitution for certain outstanding Citrix restricted stock units held by GetGo employees. Based on the Company’s closing stock price of $108.10 on January 31, 2017 as reported by the NASDAQ Global Select Market, the total value of the shares of LogMeIn common stock issued to Citrix stockholders in connection with the Merger was $2.9 billion. In the third quarter of 2017, pursuant to the terms of the merger agreement, the Company accrued $3.3 million of additional purchase price for final adjustments related to defined targets for cash and cash equivalents andnon-cash working capital, which was paid to Citrix in October 2017.

The Merger is being accounted for under the acquisition method of accounting with the operations of the GoTo Business included in the Company’s operating results since the date of acquisition. During the nine months ended September 30, 2017, the Company recorded revenue of $439.9 million, amortization of acquired intangibles of $119.8 million and acquisition-related transaction, transition and integration costs of $41.5 million directly attributable to the Merger within its condensed consolidated financial statements. Since the Merger, the operating costs of the GoTo Business have been integrated with the operating costs of the Company and therefore, the Company has not provided operating income for the GoTo Business.

The acquisition method of accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The preliminary determination of the fair value of assets acquired and liabilities assumed has been recognized based on management’s estimates and assumptions using the information about facts and circumstances that existed at the acquisition date.

While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its estimates and assumptions are subject to refinement. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. The finalization of the purchase accounting assessment will result in a change in the valuation of assets acquired and liabilities assumed and may have a material impact on the Company’s results of operations and financial position. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill to reflect additional information received about facts and circumstances that existed at the date of acquisition. The Company records these adjustments to the assets acquired and liabilities assumed subsequent to the purchase price allocation period in the Company’s operating results in the period in which the adjustments were determined. The size and breadth of the Merger necessitates the use of this measurement period to adequately analyze and assess a number of the factors used in establishing the fair value of certain tangible and intangible assets acquired and liabilities assumed as of the acquisition date and the related tax impacts of any changes made. Any potential adjustments made could be material in relation to the preliminary values presented below. The Company expects to record additional adjustments related to tax balances and tax attributes in the fourth quarter of 2017 as the GetGo entities finalize their tax returns for fiscal year 2016.

The following table summarizes the fair value (in thousands) of the assets acquired and liabilities assumed at the date of acquisition:

(2)

Represents the fair value of the 0.4 million restricted stock units issued by the Company in substitution for certain outstanding Citrix restricted stock units held by GetGo employees, pursuant to the terms of the Merger. These Company restricted stock units were issued on the same terms and conditions as were applicable to the outstanding Citrix restricted stock units held by the GetGo employees immediately prior to the Merger date (including the same vesting and forfeiture provisions). The aggregate fair value of those awards ($48.2 million) is based on the fair value per share of the Company’s common stock of $108.10 per share, which was the closing price of the Company’s common stock on the NASDAQ Global Select Market on January 31, 2017. Of that amount, $18.0 million was related topre-combination employee services and, after adjusting for known and estimated forfeitures, $16.7 million was allocated to purchase consideration and $30.2 million was allocated to future employee services and will be expensed as stock-based compensation on a straight-line basis over the remaining service periods of those awards.

(3)	Represents $3.3 million of additional purchase price paid by the Company to Citrix, pursuant to the terms of the merger agreement, for final adjustments related to defined targets for cash and cash equivalents andnon-cash working capital, resulting in an increase of $3.3 million to goodwill.

(4)

During the nine months ended September 30, 2017, the Company identified measurement period adjustments that impacted the estimated fair value of the assets and liabilities assumed as of the date of the acquisition. The table above, which summarizes the allocation of the purchase price for the entities acquired, has been updated to reflect these measurement period adjustments. The total measurement period adjustments resulted in a decrease in accounts receivable of $1.1 million, an increase in prepaid expense and other current assets of $1.2 million and a decrease in goodwill of $0.1 million. This change to the provisional fair value amounts of the assets and liabilities assumed had no impact on the Company’s results of operations for the nine months ended September 30, 2017.

(5)	The weighted average useful life of identifiable intangible assets acquired in the Merger is 8.4 years.

The completion of the Merger and the acquisition of the GoTo Business has resulted in a combined company with the scale, employees, products and customer base needed to lead large markets, support a more global customer base and compete against a variety of different solution providers of all sizes. Goodwill of $2.1 billion was recognized for the excess purchase consideration over the estimated fair value of the assets acquired. Goodwill and intangible assets recorded as part of the acquisition are not deductible for tax purposes.

The Company recorded a deferred tax liability, net of deferred tax assets, of $426.1 million, which was primarily related to the amortization of intangible assets which cannot be deducted for tax purposes and which was partially offset by deferred tax assets primarily related to thepre-combination services of the Company’s restricted stock units issued in substitution for the outstanding Citrix restricted stock units pursuant to the Merger agreement.

The Company and Citrix entered into a transition services agreement, pursuant to which each party will provide to the other party certain services on a transitional basis following the completion of the Merger to facilitate the transition of the GoTo Business to the Company. Among other services, the transition services generally relate to information technology and security operations, facilities, human resources support and accounting and finance support. As of September 30, 2017, the Company has incurred $4.9 million of costs related to the transition services agreement.

The unaudited financial information in the table below summarizes the combined results of operations offor the Company and LastPass,the GoTo Business, on a pro forma basis, as though the companies had been combined. The pro forma information for the period presented includes the effects of business combination accounting resulting from the acquisition as though the acquisitionMerger had been consummated as of the beginning of 2014,2016, including amortization charges from acquired intangible assets; interest expenseassets, the effect of acquisition accounting on borrowings and lower interest income in connection with the Company funding the acquisition with existing cash and investments and borrowings under its credit facility; the exclusionfair value of acquisition-related costs of the Company and LastPass;acquired deferred revenue, the inclusion of expense related to contingent and retention-based bonuses assuming full achievement of the financial metric and retention requirements, ($7.0 million in 2014 and $5.5 million in 2015), offsetthe reclassification of all acquisition-related costs incurred by the exclusionCompany and the GoTo Business as of LastPass historical bonuses paid to LastPass non-stockholder employees in 2015 in connection with the acquisition closebeginning of $6.1 million;2016 through the first quarter of 2017 (the quarter the Merger was completed), and the related tax effects. The second and third quarter of 2017 reported results of the Company have not been adjusted. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place at the beginning of 2014.2016.

Unaudited Pro Forma Financial Information

5. Goodwill and Intangible Assets

There was no changeThe changes in the carrying amountamounts of goodwill during the nine months ended September 30, 2017 are due to the addition of goodwill resulting from the Merger and the acquisition of Nanorep (see Note 4 for additional information).

Changes in goodwill for the nine months ended September 30, 2016.2017 are as follows (in thousands):

Intangible assets consist of the following (in thousands):