LinkedIn Earnings Out, Revenue up 34%

Chris CrumBusiness

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LinkedIn reported its financials for Q4 and full-year 2015 with revenue up 34% year-over-year at $862 million for the quarter. Earnings per share for the quarter were $0.94, which was better than Wall Street expectations.

Still, stock is plummeting after worse than expected Q1 projections like $820 million projected for Q1 revenue.

The reported 414 million members (up 19%).

Here's the full earnings release:

MOUNTAIN VIEW, Calif., February 4, 2016 - LinkedIn Corporation (NYSE: LNKD), the world's largest professional network on the Internet, reported results for the fourth quarter and full year 2015. The transcript with prepared remarks is contained within this press release. In addition, a supplemental presentation will be made available on the investor relations section of the LinkedIn website at http://investors.linkedin.com.

“Q4 was a strong quarter for LinkedIn, bringing to a close a successful year of growth and innovation against our long-term roadmap,” said Jeff Weiner, CEO of LinkedIn. “We enter 2016 with increased focus on core initiatives that will drive leverage across our portfolio of products.”

During the quarter, LinkedIn made solid progress against its long-term product strategy to create value for members by connecting them to opportunity. We launched our reimagined flagship app in December, created a more streamlined experience for members to follow personalized and relevant content in the feed, and continued to scale the number of jobs on the platform to now more than six million open listings.

Revenue increased 34% year-over-year in the fourth quarter to $862 million and increased 35% in 2015 to $2,991 million.

Talent Solutions revenue (inclusive of Learning & Development) increased 45% year-over-year in the fourth quarter to $535 million and increased 41% year-over-year to $1,877 million in 2015.

  • Hiring revenue contributed $487 million and $1,770 million in the fourth quarter and 2015, respectively, which represents increases of 32% and 33% compared to the same periods last year. These increases were driven by strength in new account performance within field sales and continued strength in online subscriptions.
  • Learning & Development revenue contributed $49 million and $107 million in the fourth quarter and 2015, respectively.

Marketing Solutions revenue increased 20% year-over-year in the fourth quarter to $183 million and increased 28% to $581 million in 2015.

  • Sponsored Updates performance was the primary driver of growth, surpassing 50% of total Marketing Solutions revenue for the first time, while premium display faced secular-driven headwinds similar to prior quarters.

Premium Subscriptions revenue increased 19% year-over-year in the fourth quarter to $144 million and increased 22% year-over-year to $532 million in 2015.

  • Sales Navigator remained the faster growing component of Premium Subscriptions with continued  improvement in customer satisfaction and product usage.

Adjusted EBITDA was $249 million in the fourth quarter, or 29% of revenue. Adjusted EBITDA was $780 million in 2015, or 26% of revenue.

GAAP net loss attributable to common stockholders was $8 million in the fourth quarter and $166 million in 2015. Non-GAAP net income was $126 million in the fourth quarter and $373 million in 2015.

GAAP diluted EPS was $(0.06) in the fourth quarter compared to $0.02 in the same period last year. GAAP diluted EPS was $(1.29) in 2015 compared to $(0.13) in 2014.

Non-GAAP diluted EPS was $0.94 in the fourth quarter compared to $0.61 in the same period last year. Non-GAAP diluted EPS was $2.84 in 2015 compared to $2.02 in 2014.

"LinkedIn delivered a strong end to 2015," said Steve Sordello, CFO of LinkedIn. "As we look towards 2016, our focus is on investing intelligently in our core member and customer value propositions to capture the large, addressable opportunity ahead of us."

Business Outlook

LinkedIn is providing guidance for the first quarter and full year 2016. Further details are in the transcript below and a supplemental presentation will be made available on the investor relations section of our website at http://investors.linkedin.com:

  • Q1 2016 Guidance: Revenue is expected to be approximately $820 million. Adjusted EBITDA is expected to be approximately $190 million. Non-GAAP EPS is expected to be approximately $0.55. The company expects depreciation of approximately $85 million, amortization of approximately $48 million, and stock-based compensation of approximately $153 million. The company also expects approximately 133 million GAAP fully-diluted weighted shares and 135 million non-GAAP fully-diluted weighted shares.
  • Full Year 2016 Guidance: Revenue is expected to range between $3.6 billion and $3.65 billion. Adjusted EBITDA is expected to be approximately $950 - 975 million. Non-GAAP EPS is expected to be approximately $3.05 - $3.20. The company expects depreciation of approximately $380 million, amortization of approximately $180 million, and stock-based compensation of approximately $630 million. The company also expects approximately 135 million GAAP fully-diluted weighted shares and 137 million non-GAAP fully-diluted weighted shares.

Quarterly Results Webcast and Conference Call

LinkedIn will host a webcast and conference call to discuss its fourth quarter 2015 financial results and business outlook today at 2:00 p.m. Pacific Time. Jeff Weiner and Steve Sordello will host the webcast, which can be viewed on the investor relations section of the LinkedIn website at http://investors.linkedin.com/. This call will contain forward-looking statements and other material information regarding the company's financial and operating results. Following completion of the call, a recorded replay of the webcast will be available on our website.

Upcoming Events

Management will participate in upcoming financial Q&A discussions at industry events on February 9th and 29th  of 2016. LinkedIn will post a link to these events on its investor relations website, http://investors.linkedin.com/ for both the live and archived webcasts.

About LinkedIn

LinkedIn connects the world’s professionals to make them more productive and successful and transforms the ways companies hire, market, and sell. Our vision is to create economic opportunity for every member of the global workforce through the ongoing development of the world’s first Economic Graph. LinkedIn has offices around the world.

Non-GAAP Financial Measures

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, the company uses the following non-GAAP financial measures: adjusted EBITDA, non-GAAP net income, and non-GAAP diluted EPS (collectively the “non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

The company excludes the following items from one or more of its non-GAAP measures:

Stock-based compensation. The company excludes stock-based compensation because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. The company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements and facilitates comparisons to peer operating results.

Non-cash interest expense related to convertible senior notes. In November 2014, the company issued $1.3 billion aggregate principal amount of 0.50% convertible senior notes. In accordance with GAAP, the company separately accounted for the value of the conversion feature as a debt discount, which is amortized in a manner that reflects the company’s non-convertible debt borrowing rate. Accordingly, the company recognizes imputed interest expense on its convertible senior notes of approximately 4.7% in its statement of operations. The company excludes the difference between the imputed interest expense and coupon interest expense, net of any capitalized interest, because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peer operating results.

Amortization of acquired intangible assets. The company excludes amortization of acquired intangible assets because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peer operating results.

Accretion of redeemable noncontrolling interest. The accretion of redeemable noncontrolling interest represents the accretion of the company's redeemable noncontrolling interest to its redemption value. The company excludes the accretion because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operating performance. In addition, excluding this item from the non-GAAP financial measures facilitates comparisons to historical operating results and comparisons to peer operating results.

Fair value adjustment on other derivative. These adjustments represent the changes in fair value of the cash settlement feature for the preferred shares in the company's joint venture. This non-GAAP adjustment is the result of the company's modified retrospective adoption in the fourth quarter of 2015 of authoritative guidance on derivatives and hedges. The company excludes these fair value adjustments because they are non-cash in nature and the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operating performance. In addition, excluding this item from the non-GAAP financial measures facilitates comparisons to historical operating results and comparisons to peer operating results.

Income tax effects and adjustments. The company adjusts non-GAAP net income by considering the income tax effects of excluding stock-based compensation and the amortization of acquired intangible assets. The company uses a static non-GAAP tax rate for evaluating its operating performance as well as for planning and forecasting purposes. This projected 10-year weighted average non-GAAP tax rate eliminates the effects of non-recurring and period specific items, which can vary in size and frequency and does not necessarily reflect the company's long-term operations. Based on the company's current forecast, a tax rate of 23% has been applied to its non-GAAP financial results for the current period. This rate will be adjusted annually, if necessary. The company believes that adjusting for these income tax effects and adjustments provides additional transparency to the overall or “after tax” effects of excluding these items from its non-GAAP net income.

Dilutive shares under the treasury stock method. During periods with a net loss, the company excludes certain potential common shares from its GAAP diluted shares because their effect would have been anti-dilutive. On a non-GAAP basis, these shares would have been dilutive. As a result, the company has included the impact of these shares in the calculation of its non-GAAP diluted net income per share under the treasury stock method.

For more information on the non-GAAP financial measures, please see the “Trended Reconciliation of GAAP to Non-GAAP Financial Measures” table in this press release. This accompanying table has more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. Additionally, the company has not reconciled adjusted EBITDA or non-GAAP EPS guidance to net loss or GAAP EPS guidance because it does not provide guidance for either other income (expense), net, or GAAP provision for income taxes, which are reconciling items between net loss and adjusted EBITDA and non-GAAP EPS. As items that impact net loss are out of the company's control and/or cannot be reasonably predicted, the company is unable to provide such guidance. Accordingly, a reconciliation to net loss is not available without unreasonable effort.

Safe Harbor Statement

“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release and the accompanying conference call contain forward-looking statements about our products, including our investments in products, technology and other key strategic areas, certain non-financial metrics, such as customer and member growth and engagement, and our expected financial metrics such as revenue, adjusted EBITDA, non-GAAP EPS, depreciation and amortization, stock-based compensation and fully-diluted weighted shares for the first quarter of 2016 and the full fiscal year 2016. The achievement of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any of these risks or uncertainties materialize or if any of the assumptions prove incorrect, the company’s results could differ materially from the results expressed or implied by the forward-looking statements the company makes.

The risks and uncertainties referred to above include - but are not limited to - risks associated with: our core value of putting members first, which may conflict with the short-term interests of the business; engagement of our members; the price volatility of our Class A common stock; general economic conditions; expectations regarding the return on our strategic investments; execution of our plans and strategies, including with respect to mobile products and features and expansion into new areas and businesses; security measures and the risk that they may not be sufficient to secure our member data adequately or that we are subject to attacks that degrade or deny the ability of members to access our solutions; expectations regarding our ability to timely and effectively scale and adapt existing technology and network infrastructure to ensure that our solutions are accessible at all times with short or no perceptible load times; our ability to maintain our rate of revenue growth and manage our expenses and investment plans; our ability to accurately track our key metrics internally; members and customers curtailing or ceasing to use our solutions; privacy, security and data transfer concerns, as well as changes in regulations, which could impact our ability to serve our members or curtail our monetization efforts; litigation and regulatory issues; increasing competition; our ability to manage our growth; our international operations; our ability to recruit and retain our employees; the application of U.S. and international tax laws on our tax structure and any changes to such tax laws; acquisitions we have made or may make in the future; and the dual class structure of our Class A common stock.

Further information on these and other factors that could affect the company’s financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section entitled “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2014,  as well as the company's most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, and additional information will also be set forth in our Form 10-K that will be filed for the year ended December 31, 2015, which should be read in conjunction with these financial results. These documents are or will be available on the SEC Filings section of the Investor Relations page of the company's website at http://investors.linkedin.com/. All information provided in this release and in the attachments is as of February 4, 2016, and LinkedIn undertakes no duty to update this information.

Image via Wikimedia Commons

Chris Crum
Chris Crum has been a part of the WebProNews team and the iEntry Network of B2B Publications since 2003. Follow Chris on Twitter, on StumbleUpon, on Pinterest and/or on Google: +Chris Crum.