LinkedIn Earnings Released, Revenue Up 45%

Chris CrumBusiness

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LinkedIn just released its earnings report for the third quarter, posting revenue of $568 million, up 45% year-over-year. Revenue from the U.S. totaled $343 million, and represented 60% of total revenue

Net loss was $4.3 million, compared to $3.4 million for the third quarter of 2013.

The company beat analysts' expectations on EPS of $0.52.

CEO Jeff Weiner said, "LinkedIn made significant progress against several long-term strategic investments we began this year. During the third quarter, we took meaningful steps in increasing the scale and relevance of job listings, growing the professional publishing platform, and expanding our member network in new geographies and demographics."

Here's the release in its entirety:

MOUNTAIN VIEW, Calif., Oct. 30, 2014 (GLOBE NEWSWIRE) -- LinkedIn Corporation (NYSE:LNKD), the world's largest professional network on the Internet, with more than 300 million members, reported its quarterly results for the third quarter of 2014:

  • Revenue for the third quarter was $568 million, an increase of 45% compared to $393 million in the third quarter of 2013.
  • Net loss attributable to common stockholders for the third quarter was $(4.3) million, compared to net loss of $(3.4) million for the third quarter of 2013. Non-GAAP net income for the third quarter was $66 million, compared to $47 million for the third quarter of 2013. Non-GAAP measures exclude tax-affected stock-based compensation expense and tax-affected amortization of acquired intangible assets.
  • Adjusted EBITDA for the third quarter was $151 million, or 27% of revenue, compared to $93 million for the third quarter of 2013, or 24% of revenue.
  • GAAP diluted EPS for the third quarter was $(0.03), compared to GAAP diluted EPS of $(0.03) for the third quarter 2013; non-GAAP diluted EPS for the third quarter was $0.52, compared to non-GAAP diluted EPS of $0.39 for the third quarter of 2013.

"LinkedIn made significant progress against several long-term strategic investments we began this year," said Jeff Weiner, CEO of LinkedIn. "During the third quarter, we took meaningful steps in increasing the scale and relevance of job listings, growing the professional publishing platform, and expanding our member network in new geographies and demographics."

Third Quarter Operating Summary

  • Talent Solutions: Revenue from Talent Solutions products totaled $345 million, an increase of 45% compared to the third quarter of 2013. Talent Solutions revenue represented 61% of total revenue in the third quarter of 2014, compared to 60% of total revenue in the third quarter of 2013.
  • Marketing Solutions: Revenue from Marketing Solutions products totaled $109 million, an increase of 45% compared to the third quarter of 2013. Marketing Solutions revenue represented 19% of total revenue in the third quarter of 2014 and 2013.
  • Premium Subscriptions: Revenue from Premium Subscriptions products totaled $114 million, an increase of 43% compared to the third quarter of 2013. Premium Subscriptions represented 20% of total revenue in the third quarter of 2014 and 2013.

Revenue from the U.S. totaled $343 million, and represented 60% of total revenue in the third quarter of 2014. Revenue from international markets totaled $225 million, and represented 40% of total revenue in the third quarter of 2014.

Revenue from the field sales channel totaled $342 million, and represented 60% of total revenue in the third quarter of 2014. Revenue from the online, direct sales channel totaled $227 million, and represented 40% of total revenue in the third quarter of 2014.

Third Quarter Highlights and Strategic Announcements

In the third quarter of 2014:

  • LinkedIn increased the scale and relevance of job listings by expanding "Limited Listings" offerings to a broad base of US and global companies. Jobs seekers now have access to nearly two million job listings on LinkedIn, driving strong momentum for the Job Search mobile app.
  • LinkedIn officially launched the all new Sales Navigator to empower sales professionals to establish and grow relationships with prospects and customers. This new stand-alone product experience allows sales professionals to stay updated about key accounts, focus on the right people, and build trusted relationships.
  • LinkedIn announced the acquisition of Bizo, accelerating the ability to develop an end-to-end B2B marketing platform. Building on the success of Sponsored Updates, Bizo's team and technology will expand LinkedIn's ability to leverage current content marketing products and offer a wider range of solutions to meet our customers' marketing objectives.

"LinkedIn demonstrated strength in the third quarter, leveraging the scale created by our member network to deliver growth across all three product lines," said Steve Sordello, CFO of LinkedIn. "We continue to make aggressive investments in our member and customer platforms in order to realize our long-term potential."

Business Outlook

LinkedIn is providing guidance for the fourth quarter and full year of 2014:

  • Q4 2014 Guidance: Revenue is expected to range between $600 million and $605 million. Adjusted EBITDA is expected to range between $153 million and $155 million. Non-GAAP EPS is expected to be approximately $0.49. The company expects depreciation of approximately $59 million, amortization of approximately $12 million, stock-based compensation of approximately $96 million, and 127 million fully-diluted weighted shares.
  • Full Year 2014 Guidance: Revenue is expected to range between $2.175 billion and $2.180 billion. Adjusted EBITDA is expected to range between $566 and $568 million. Non-GAAP EPS is expected to be approximately $1.89. The company expects depreciation of approximately $203 million, amortization of approximately $34 million, stock-based compensation of approximately $321 million, and 126 million fully-diluted weighted shares.

Quarterly Results Webcast and Conference Call

LinkedIn will host a webcast and conference call to discuss its third quarter 2014 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 the website.

Upcoming Events

Management will participate in upcoming financial Q&A discussions at industry events on November 18th and December 2nd, 2014. LinkedIn will furnish 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 more than 300 million members and 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.

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.

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. Beginning in the first quarter of 2014, the company has implemented a non-GAAP tax rate for evaluating its operating performance as well as for planning and forecasting purposes. This projected 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 our long-term operations. Historically, the company computed a non-GAAP tax rate based on non-GAAP pre-tax income on a quarterly basis. Based on our current forecast, a non-GAAP tax rate of 35% has been applied to our non-GAAP financial results for the current period. 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 non-GAAP net income.

Dilutive shares under the treasury stock method. During periods with a net loss, the company excluded 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 "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 income (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 income (loss) and adjusted EBITDA and non-GAAP EPS. As items that impact net income (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 income (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 fourth quarter of 2014 and the full fiscal year 2014. 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 limited operating history in a new and unproven market; 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; 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; our core value of putting members first, which may conflict with the short-term interests of the business; privacy and 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 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, 2013, and additional information will also be set forth in our Form 10-Q that will be filed for the quarter ended September 30, 2014, 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 athttp://investors.linkedin.com/. All information provided in this release and in the attachments is as of October 30, 2014, and LinkedIn undertakes no duty to update this information.

LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
As of
September 30,
2013
December 31,
2013
March 31,
2014
June 30,
2014
September 30,
2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents  $ 1,396,292  $ 803,089  $ 508,850  $ 645,092  $ 526,837
Marketable securities 875,993 1,526,212 1,797,373 1,721,847 1,736,958
Accounts receivable 208,956 302,168 328,661 347,152 344,773
Deferred commissions 28,507 47,496 46,575 45,941 40,810
Prepaid expenses 33,831 32,114 47,513 49,503 55,571
Other current assets 28,259 44,391 50,933 61,042 79,795
Total current assets 2,571,838 2,755,470 2,779,905 2,870,577 2,784,744
Property and equipment, net 336,656 361,741 406,543 476,058 557,017
Goodwill 150,831 150,871 228,893 228,943 356,369
Intangible assets, net 43,209 43,046 101,597 99,175 140,802
Other assets 41,744 41,665 44,931 46,133 67,080
TOTAL ASSETS  $ 3,144,278  $ 3,352,793  $ 3,561,869  $ 3,720,886  $ 3,906,012
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable  $ 70,340  $ 66,744  $ 79,711  $ 90,728  $ 106,658
Accrued liabilities 139,898 183,004 142,141 164,051 188,983
Deferred revenue 335,700 392,243 479,576 481,450 463,576
Total current liabilities 545,938 641,991 701,428 736,229 759,217
DEFERRED TAX LIABILITIES 15,861 14,879 23,900 24,088 41,327
OTHER LONG TERM LIABILITIES 51,347 61,529 70,226 80,298 105,043
Total liabilities 613,146 718,399 795,554 840,615 905,587
COMMITMENTS AND CONTINGENCIES
REDEEMABLE NONCONTROLLING INTEREST 5,000 5,126 5,226 5,327
STOCKHOLDERS' EQUITY:
Class A and Class B common stock 12 12 12 12 12
Additional paid-in capital 2,478,813 2,573,449 2,718,321 2,833,030 2,957,524
Accumulated other comprehensive income (loss) 470 314 682 863 685
Accumulated earnings 51,837 55,619 42,174 41,140 36,877
Total stockholders' equity 2,531,132 2,629,394 2,761,189 2,875,045 2,995,098
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY  $ 3,144,278  $ 3,352,793  $ 3,561,869  $ 3,720,886  $ 3,906,012
LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
September 30,
2013
December 31,
2013
March 31,
2014
June 30,
2014
September 30,
2014
Net revenue  $ 392,960  $ 447,219  $ 473,193  $ 533,877  $ 568,265
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) 53,395 57,865 62,455 69,536 74,904
Sales and marketing 133,172 157,235 166,522 184,494 199,168
Product development 106,223 113,140 120,622 128,731 136,542
General and administrative 61,767 64,790 74,618 80,688 89,266
Depreciation and amortization 33,767 42,750 49,740 56,306 59,782
Total costs and expenses 388,324 435,780 473,957 519,755 559,662
Income (loss) from operations 4,636 11,439 (764) 14,122 8,603
Other income, net 156 1,820 1,026 1,197 152
Income before income taxes 4,792 13,259 262 15,319 8,755
Provision for income taxes 8,155 9,477 13,581 16,253 12,917
Net income (loss) (3,363) 3,782 (13,319) (934) (4,162)
Accretion of redeemable noncontrolling interest (126) (100) (101)
Net income (loss) attributable to common stockholders (3,363) 3,782 (13,445) (1,034) (4,263)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic  $ (0.03)  $ 0.03  $ (0.11)  $ (0.01)  $ (0.03)
Diluted  $ (0.03)  $ 0.03  $ (0.11)  $ (0.01)  $ (0.03)
Net income (loss) per share attributable to common stockholders:
Basic 113,940 119,849 120,967 122,170 123,427
Diluted 113,940 124,438 120,967 122,170 123,427
LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
September 30,
2013
December 31,
2013
March 31,
2014
June 30,
2014
September 30,
2014
OPERATING ACTIVITIES:
Net income (loss)  $ (3,363)  $ 3,782  $ (13,319)  $ (934)  $ (4,162)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 33,767 42,750 49,740 56,306 59,782
Provision for doubtful accounts and sales returns 568 1,254 1,207 4,118 3,805
Stock-based compensation 54,445 57,177 67,769 74,828 82,910
Excess income tax benefit from stock-based compensation (10,188) (16,008) (15,982) (18,639) (13,114)
Changes in operating assets and liabilities:
Accounts receivable (7,719) (94,627) (26,764) (23,462) 15,657
Deferred commissions 1,236 (20,028) 1,116 712 4,836
Prepaid expenses and other assets 3,707 2,926 (11,742) (4,455) (12,148)
Accounts payable and other liabilities 49,591 44,307 (18,428) 24,726 54,017
Income taxes, net (531) 4,377 7,928 13,362 8,248
Deferred revenue 4,513 56,543 87,333 1,874 (18,605)
Net cash provided by operating activities 126,026 82,453 128,858 128,436 181,226
INVESTING ACTIVITIES:
Purchases of property and equipment (83,158) (57,394) (88,871) (96,430) (120,721)
Purchases of investments (385,517) (851,312) (737,739) (649,803) (501,074)
Sales of investments 34,937 68,547 72,239 117,359 53,511
Maturities of investments 83,652 129,646 393,044 604,231 429,641
Payments for intangible assets and acquisitions, net of cash acquired (8,756) (3,894) (85,061) (4,800) (160,894)
Changes in deposits and restricted cash (1,355) (6) (1,404) (3,357) (20,504)
Net cash used in investing activities (360,197) (714,413) (447,792) (32,800) (320,041)
FINANCING ACTIVITIES:
Proceeds from follow-on offering, net of issuance costs 1,348,419 (360)
Proceeds from issuance of preferred shares in joint venture 4,600
Proceeds from issuance of common stock from employee stock options 7,408 5,678 8,147 4,759 13,649
Proceeds from issuance of common stock from employee stock purchase plan 13,089 16,324
Excess income tax benefit from stock-based compensation 10,188 16,008 15,982 18,639 13,114
Other financing activities (2) (419) (7) 31 (1,899)
Net cash provided by financing activities 1,366,013 38,596 24,122 39,753 24,864
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 1,780 161 573 853 (4,304)
CHANGE IN CASH AND CASH EQUIVALENTS 1,133,622 (593,203) (294,239) 136,242 (118,255)
CASH AND CASH EQUIVALENTS—Beginning of period 262,670 1,396,292 803,089 508,850 645,092
CASH AND CASH EQUIVALENTS—End of period  $ 1,396,292  $ 803,089  $ 508,850  $ 645,092  $ 526,837
LINKEDIN CORPORATION
TRENDED SUPPLEMENTAL REVENUE INFORMATION
(In thousands)
(Unaudited)
Three Months Ended
September 30,
2013
December 31,
2013
March 31,
2014
June 30,
2014
September 30,
2014
Revenue by product:
Talent Solutions  $ 237,668  $ 261,359  $ 291,594  $ 322,227  $ 344,568
Marketing Solutions 75,510 97,732 86,064 106,476 109,231
Premium Subscriptions 79,782 88,128 95,535 105,174 114,466
Total  $ 392,960  $ 447,219  $ 473,193  $ 533,877  $ 568,265
Revenue by geographic region:
United States  $ 245,302  $ 271,140  $ 284,878  $ 317,774  $ 343,132
International
Other Americas (1) 27,027 31,612 31,904 35,527 36,538
EMEA (2) 90,087 108,309 117,871 134,930 139,702
APAC (3) 30,544 36,158 38,540 45,646 48,893
Total International revenue 147,658 176,079 188,315 216,103 225,133
Total revenue  $ 392,960  $ 447,219  $ 473,193  $ 533,877  $ 568,265
Revenue by geography, by product:
United States
Talent Solutions  $ 152,371  $ 164,207  $ 180,403  $ 197,852  $ 208,635
Marketing Solutions 45,789 55,269 49,038 59,383 68,767
Premium Subscriptions 47,142 51,664 55,437 60,539 65,730
Total United States revenue  $ 245,302  $ 271,140  $ 284,878  $ 317,774  $ 343,132
International
Talent Solutions 85,297 97,152 111,191 124,375 135,933
Marketing Solutions 29,721 42,463 37,026 47,093 40,464
Premium Subscriptions 32,640 36,464 40,098 44,635 48,736
Total International revenue  $ 147,658  $ 176,079  $ 188,315  $ 216,103  $ 225,133
Total revenue  $ 392,960  $ 447,219  $ 473,193  $ 533,877  $ 568,265
Revenue by channel:
Field sales  $ 227,588  $ 270,672  $ 275,262  $ 318,984  $ 341,691
Online sales 165,372 176,547 197,931 214,893 226,574
Total  $ 392,960  $ 447,219  $ 473,193  $ 533,877  $ 568,265
______________
(1) Canada, Latin America and South America
(2) Europe, the Middle East and Africa ("EMEA")
(3) Asia-Pacific ("APAC")
LINKEDIN CORPORATION
TRENDED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
Three Months Ended
September 30,
2013
December 31,
2013
March 31,
2014
June 30,
2014
September 30,
2014
Non-GAAP net income and net income per share:
GAAP net income (loss) attributable to common stockholders  $ (3,363)  $ 3,782  $ (13,445)  $ (1,034)  $ (4,263)
Add back: accretion of redeemable noncontrolling interest 126 100 101
Add back: stock-based compensation 54,445 57,177 67,769 74,828 82,910
Add back: amortization of intangible assets 3,832 4,056 4,813 7,224 9,986
Income tax effects and adjustments (1) (8,120) (16,776) (11,914) (17,827) (22,661)
NON-GAAP NET INCOME  $ 46,794  $ 48,239  $ 47,349  $ 63,291  $ 66,073
GAAP diluted shares 113,940 124,438 120,967 122,170 123,427
Add back: dilutive shares under the treasury stock method 5,248 3,884 3,087 3,046
NON-GAAP DILUTED SHARES 119,188 124,438 124,851 125,257 126,473
NON-GAAP DILUTED NET INCOME PER SHARE  $ 0.39  $ 0.39  $ 0.38  $ 0.51  $ 0.52
Adjusted EBITDA:
Net income (loss)  $ (3,363)  $ 3,782  $ (13,319)  $ (934)  $ (4,162)
Provision for income taxes 8,155 9,477 13,581 16,253 12,917
Other (income) expense, net (156) (1,820) (1,026) (1,197) (152)
Depreciation and amortization 33,767 42,750 49,740 56,306 59,782
Stock-based compensation 54,445 57,177 67,769 74,828 82,910
ADJUSTED EBITDA  $ 92,848  $ 111,366  $ 116,745  $ 145,256  $ 151,295
______________
(1) Excludes accretion of redeemable noncontrolling interest

 
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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.