Takeaway: Towards the estimate cut we called for

Revenue reported slightly ahead but guidance is squishy

LOGM reported 4Q17 non-GAAP revenue of $279.9m versus Street of $277.6m. The company is guiding 1Q18 revenue of $277m-$278m, which compares to Street estimates of $279m. For the full year, the company is guiding revenue to a $1,142m midpoint, versus Street at $1,148m.

EPS good and bad, has some extra juice in it

LOGM reported 4Q17 non-GAAP EPS of $1.20 versus the Street at $1.17. LOGM is guiding 1Q18 non-GAAP EPS of $1.17-1.18, versus Street at $1.10. The 1Q18 non-GAAP net income includes the impact of a 25% tax rate whereas the Street was modeling 30%. Holding all other elements equal, the change in tax rate drives a $0.07-$0.08 improvement on Street 1Q18 EPS.

LOGM is guiding full year EPS to a midpoint of $5.48 versus Street at $4.87. The change in tax rate alone would have implied Street EPS of $5.25-$5.30 in 2018 EPS.

Cash Flow

LOGM reported GAAP OCF of $32.9m and adjusted OCF of $54m versus Street at $76m.  The company reported GAAP FCF of ~$12m and $41m pro forma (including adjusted OCF and excluding capitalized software spending) versus Street at $34m. Street has typically modeled FCF including GAAP OCF but excluding capitalized software, which would equate to ~$20m of FCF on a like for like comparison.

Relief

We have been positively biased on LOGM thanks to valuation and a good management team. Twice now we have done a deep dive on the company trying to get fully long the stock, and twice we have failed, signaling earlier this week in our BB (HERE) that topline estimates needed another cut. Hence we avoided going long. Tonight's squishy print validates that research, and seems to continue a process of scrubbing the topline down towards where we think it needed to go.

More after the call.