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LinkedIn Announces Second Quarter 2014 Results

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MOUNTAIN VIEW, Calif., July 31, 2014 (GLOBE NEWSWIRE) -- LinkedIn Corporation (NYSE:LNKD), the world's largest professional network on the Internet, with over 300 million members, reported its quarterly results for the second quarter of 2014:

  • Revenue for the second quarter was $534 million, an increase of 47% compared to $364 million in the second quarter of 2013.
  • Net loss attributable to common stockholders for the second quarter was $1.0 million, compared to net income of $3.7 million for the second quarter of 2013. Non-GAAP net income for the second quarter was $63 million, compared to $44 million for the second 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 second quarter was $145 million, or 27% of revenue, compared to $89 million for the second quarter of 2013, or 24% of revenue.
  • GAAP diluted EPS for the second quarter was $(0.01), compared to GAAP diluted EPS of $0.03 for the second quarter 2013; non-GAAP diluted EPS for the second quarter was $0.51, compared to non-GAAP diluted EPS of $0.38 for the second quarter of 2013.

"LinkedIn delivered strong financial results in the second quarter while maintaining investment in our member and customer offerings," said Jeff Weiner, CEO of LinkedIn. "We made significant progress against several key strategic priorities including increasing the scale of job opportunities on LinkedIn; expanding our professional publishing platform; and continuing the strategic shift towards content marketing through Sponsored Updates."

Second Quarter Operating Summary

Please note, in the second quarter of 2014, we reclassified recruitment media products from Marketing Solutions to Talent Solutions. Accordingly, prior period amounts have been recast to conform to the current period presentation. See our "Selected Company Metrics and Financials" table on the quarterly earnings section of the investor relations website for additional information.

  • Talent Solutions(1): Revenue from Talent Solutions products totaled $322 million, an increase of 49% compared to the second quarter of 2013. Talent Solutions revenue represented 60% of total revenue in the second quarter of 2014 and 2013.
  • Marketing Solutions(1): Revenue from Marketing Solutions products totaled $106 million, an increase of 44% compared to the second quarter of 2013. Marketing Solutions revenue represented 20% of total revenue in the second quarter of 2014 and 2013.
  • Premium Subscriptions: Revenue from Premium Subscriptions products totaled $105 million, an increase of 44% compared to the second quarter of 2013. Premium Subscriptions represented 20% of total revenue in the second quarter of 2014 and 2013.

(1) Recruitment media revenue was $18 million and $12 million in the second quarter of 2014 and 2013, respectively.

Revenue from the U.S. totaled $318 million, and represented 60% of total revenue in the second quarter of 2014. Revenue from international markets totaled $216 million, and represented 40% of total revenue in the second quarter of 2014.

Revenue from the field sales channel totaled $319 million, and represented 60% of total revenue in the second quarter of 2014. Revenue from the online, direct sales channel totaled $215 million, and represented 40% of total revenue in the second quarter of 2014.

Second Quarter Highlights and Strategic Announcements

In the second quarter of 2014:

  • LinkedIn launched "Limited Listings" to grow dramatically the number of job opportunities made available on LinkedIn for active job searchers. This initiative was accelerated by the Bright acquisition in February, and there are now one million jobs on LinkedIn.
  • LinkedIn continued to gain traction with its professional publishing platform, now generating over 30,000 weekly long-form posts after ramping posting capability to 15 million LinkedIn members. Since launching in February, traffic to publisher and Influencer posts has risen more than 100%.
  • LinkedIn added to its growing multi-app mobile portfolio with the launch of several new mobile experiences including: Connected; the LinkedIn Job Search App for iPhone; and a new SlideShare app for Android.

Additionally, this afternoon, LinkedIn announced the launch of the all-new Sales Navigator, enabling buyers to build relationships with the most relevant sales professionals through an enterprise focused SaaS product. Also, Last week LinkedIn announced the acquisition of Bizo with the goal of creating a comprehensive B2B marketing platform.

"LinkedIn achieved strong results across the business," said Steve Sordello, CFO of LinkedIn. "The success of Sponsored Updates, scaling jobs, and the launch of the new Sales Navigator underscore the positive impact of recent strategic investments, and we will continue to invest aggressively in our member and customer platforms."

Business Outlook

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

  • Q3 2014 Guidance: Revenue is expected to range between $543 million and $547 million. Adjusted EBITDA is expected to range between $134 million and $136 million. Non-GAAP EPS is expected to be approximately $0.44. The company expects depreciation of approximately $50 million, amortization of approximately $8.0 million, stock-based compensation of approximately $80 million, and 126 million fully-diluted weighted shares.
  • Full Year 2014 Guidance: Revenue is expected to range between $2.14 billion and $2.15 billion. Adjusted EBITDA is expected to range between $545 and $550 million. Non-GAAP EPS is expected to be approximately $1.80. The company expects depreciation of approximately $202 million, amortization of approximately $28 million, stock-based compensation of approximately $305 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 second 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 September 3, 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

Founded in 2003, LinkedIn connects the world's professionals to make them more productive and successful. With over 300 million members worldwide, including executives from every Fortune 500 company, LinkedIn is the world's largest professional network on the Internet. The company has a diversified business model with revenue coming from Talent Solutions, Marketing Solutions and Premium Subscriptions products. Headquartered in Silicon Valley, LinkedIn has offices across the globe.

Non-GAAP Financial Measures

To supplement its 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 internal 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 internal 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 long-term non-GAAP tax rate for evaluating its operating performance as well as for planning and forecasting purposes. This projected long-term 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 long-term 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 and stock-based compensation for the third 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 in the United States, Europe, Asia and elsewhere, 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 June 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 at http://investors.linkedin.com/. All information provided in this release and in the attachments is as of July 31, 2014, and LinkedIn undertakes no duty to update this information.

LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
As of
June 30, September 30, December 31, March 31, June 30,
2013 2013 2013 2014 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 262,670 $ 1,396,292 $ 803,089 $ 508,850 $ 645,092
Marketable securities 610,728 875,993 1,526,212 1,797,373 1,721,847
Accounts receivable 203,585 208,956 302,168 328,661 347,152
Deferred commissions 29,710 28,507 47,496 46,575 45,941
Prepaid expenses 26,785 33,831 32,114 47,513 49,503
Other current assets 30,672 28,259 44,391 50,933 61,042
Total current assets 1,164,150 2,571,838 2,755,470 2,779,905 2,870,577
Property and equipment, net 292,715 336,656 361,741 406,543 476,058
Goodwill 150,831 150,831 150,871 228,893 228,943
Intangible assets, net 38,284 43,209 43,046 101,597 99,175
Other assets 41,980 41,744 41,665 44,931 46,133
TOTAL ASSETS $ 1,687,960 $ 3,144,278 $ 3,352,793 $ 3,561,869 $ 3,720,886
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 74,605 $ 70,340 $ 66,744 $ 79,711 $ 90,728
Accrued liabilities 106,118 139,898 183,004 142,141 164,051
Deferred revenue 331,187 335,700 392,243 479,576 481,450
Total current liabilities 511,910 545,938 641,991 701,428 736,229
DEFERRED TAX LIABILITIES 22,905 15,861 14,879 23,900 24,088
OTHER LONG TERM LIABILITIES 42,128 51,347 61,529 70,226 80,298
Total liabilities 576,943 613,146 718,399 795,554 840,615
COMMITMENTS AND CONTINGENCIES
REDEEMABLE NONCONTROLLING INTEREST 5,000 5,126 5,226
STOCKHOLDERS' EQUITY:
Class A and Class B common stock 11 12 12 12 12
Additional paid-in capital 1,055,870 2,478,813 2,573,449 2,718,321 2,833,030
Accumulated other comprehensive income (loss) (64) 470 314 682 863
Accumulated earnings 55,200 51,837 55,619 42,174 41,140
Total stockholders' equity 1,111,017 2,531,132 2,629,394 2,761,189 2,875,045
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY $ 1,687,960 $ 3,144,278 $ 3,352,793 $ 3,561,869 $ 3,720,886
LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30, September 30, December 31, March 31, June 30,
2013 2013 2013 2014 2014
Net revenue $ 363,661 $ 392,960 $ 447,219 $ 473,193 $ 533,877
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) 49,264 53,395 57,865 62,455 69,536
Sales and marketing 122,276 133,172 157,235 166,522 184,494
Product development 95,608 106,223 113,140 120,622 128,731
General and administrative 56,225 61,767 64,790 74,618 80,688
Depreciation and amortization 32,193 33,767 42,750 49,740 56,306
Total costs and expenses 355,566 388,324 435,780 473,957 519,755
Income (loss) from operations 8,095 4,636 11,439 (764) 14,122
Other income (expense), net (252) 156 1,820 1,026 1,197
Income before income taxes 7,843 4,792 13,259 262 15,319
Provision for income taxes 4,109 8,155 9,477 13,581 16,253
Net income (loss) 3,734 (3,363) 3,782 (13,319) (934)
Accretion of redeemable noncontrolling interest (126) (100)
Net income (loss) attributable to common stockholders 3,734 (3,363) 3,782 (13,445) (1,034)
Net income (loss) per share attributable to common stockholders:
Basic 111,214 113,940 119,849 120,967 122,170
Diluted 116,627 113,940 124,438 120,967 122,170
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic $ 0.03 $ (0.03) $ 0.03 $ (0.11) $ (0.01)
Diluted $ 0.03 $ (0.03) $ 0.03 $ (0.11) $ (0.01)
LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
June 30, September 30, December 31, March 31, June 30,
2013 2013 2013 2014 2014
OPERATING ACTIVITIES:
Net income (loss) $ 3,734 $ (3,363) $ 3,782 $ (13,319) $ (934)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 32,193 33,767 42,750 49,740 56,306
Provision for doubtful accounts and sales returns 1,639 568 1,254 1,207 4,118
Stock-based compensation 48,354 54,445 57,177 67,769 74,828
Excess income tax benefit from stock-based compensation (5,003) (10,188) (16,008) (15,982) (18,639)
Changes in operating assets and liabilities:
Accounts receivable 8,577 (7,719) (94,627) (26,764) (23,462)
Deferred commissions 1,185 1,236 (20,028) 1,116 712
Prepaid expenses and other assets (8,448) 3,707 2,926 (11,742) (4,455)
Accounts payable and other liabilities 24,313 49,591 44,307 (18,428) 24,726
Income taxes, net 3,522 (531) 4,377 7,928 13,362
Deferred revenue 14,099 4,513 56,543 87,333 1,874
Net cash provided by operating activities 124,165 126,026 82,453 128,858 128,436
INVESTING ACTIVITIES:
Purchases of property and equipment (93,184) (83,158) (57,394) (88,871) (96,430)
Purchases of investments (98,715) (385,517) (851,312) (737,739) (649,803)
Sales of investments 17,389 34,937 68,547 72,239 117,359
Maturities of investments 33,897 83,652 129,646 393,044 604,231
Payments for intangible assets and acquisitions, net of cash acquired (6,321) (8,756) (3,894) (85,061) (4,800)
Changes in deposits and restricted cash (3,488) (1,355) (6) (1,404) (3,357)
Net cash used in investing activities (150,422) (360,197) (714,413) (447,792) (32,800)
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 7,681 7,408 5,678 8,147 4,759
Proceeds from issuance of common stock from employee stock purchase plan 11,500 13,089 16,324
Excess income tax benefit from stock-based compensation 5,003 10,188 16,008 15,982 18,639
Other financing activities 797 (2) (419) (7) 31
Net cash provided by financing activities 24,981 1,366,013 38,596 24,122 39,753
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (993) 1,780 161 573 853
CHANGE IN CASH AND CASH EQUIVALENTS (2,269) 1,133,622 (593,203) (294,239) 136,242
CASH AND CASH EQUIVALENTS—Beginning of period 264,939 262,670 1,396,292 803,089 508,850
CASH AND CASH EQUIVALENTS—End of period $ 262,670 $ 1,396,292 $ 803,089 $ 508,850 $ 645,092
LINKEDIN CORPORATION
TRENDED SUPPLEMENTAL REVENUE INFORMATION
(In thousands)
(Unaudited)
Three Months Ended
June 30, September 30, December 31, March 31, June 30,
2013 2013 2013 2014 2014
Revenue by product:
Talent Solutions (1) $ 216,938 $ 237,668 $ 261,359 $ 291,594 $ 322,227
Marketing Solutions (1) 73,747 75,510 97,732 86,064 106,476
Premium Subscriptions 72,976 79,782 88,128 95,535 105,174
Total $ 363,661 $ 392,960 $ 447,219 $ 473,193 $ 533,877
Revenue by geographic region:
United States $ 224,277 $ 245,302 $ 271,140 $ 284,878 $ 317,774
International
Other Americas (2) 26,857 27,027 31,612 31,904 35,527
EMEA (3) 84,691 90,087 108,309 117,871 134,930
APAC (4) 27,836 30,544 36,158 38,540 45,646
Total International revenue 139,384 147,658 176,079 188,315 216,103
Total revenue $ 363,661 $ 392,960 $ 447,219 $ 473,193 $ 533,877
Revenue by geography, by product:
United States
Talent Solutions (1) $ 140,420 $ 152,371 $ 164,207 $ 180,403 $ 197,852
Marketing Solutions (1) 41,259 45,789 55,269 49,038 59,383
Premium Subscriptions 42,598 47,142 51,664 55,437 60,539
Total United States revenue $ 224,277 $ 245,302 $ 271,140 $ 284,878 $ 317,774
International
Talent Solutions (1) 76,518 85,297 97,152 111,191 124,375
Marketing Solutions (1) 32,488 29,721 42,463 37,026 47,093
Premium Subscriptions 30,378 32,640 36,464 40,098 44,635
Total International revenue $ 139,384 $ 147,658 $ 176,079 $ 188,315 $ 216,103
Total revenue $ 363,661 $ 392,960 $ 447,219 $ 473,193 $ 533,877
Revenue by channel:
Field sales $ 209,227 $ 227,588 $ 270,672 $ 275,262 $ 318,984
Online sales 154,434 165,372 176,547 197,931 214,893
Total $ 363,661 $ 392,960 $ 447,219 $ 473,193 $ 533,877
(1) Prior period amounts have been recast to conform to the current year presentation.
(2) Canada, Latin America and South America
(3) Europe, the Middle East and Africa ("EMEA")
(4) Asia-Pacific ("APAC")
LINKEDIN CORPORATION
TRENDED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30, September 30, December 31, March 31, June 30,
2013 2013 2013 2014 2014
Non-GAAP net income and net income per share:
GAAP net income (loss) attributable to common stockholders $ 3,734 $ (3,363) $ 3,782 $ (13,445) $ (1,034)
Add back: accretion of redeemable noncontrolling interest 126 100
Add back: stock-based compensation 48,354 54,445 57,177 67,769 74,828
Add back: amortization of intangible assets 5,677 3,832 4,056 4,813 7,224
Income tax effects and adjustments (1) (13,307) (8,120) (16,776) (11,914) (17,827)
NON-GAAP NET INCOME $ 44,458 $ 46,794 $ 48,239 $ 47,349 $ 63,291
GAAP diluted shares 116,627 113,940 124,438 120,967 122,170
Add back: dilutive shares under the treasury stock method 5,248 3,884 3,087
NON-GAAP DILUTED SHARES 116,627 119,188 124,438 124,851 125,257
NON-GAAP DILUTED NET INCOME PER SHARE $ 0.38 $ 0.39 $ 0.39 $ 0.38 $ 0.51
Adjusted EBITDA:
Net income (loss) $ 3,734 $ (3,363) $ 3,782 $ (13,319) $ (934)
Provision for income taxes 4,109 8,155 9,477 13,581 16,253
Other (income) expense, net 252 (156) (1,820) (1,026) (1,197)
Depreciation and amortization 32,193 33,767 42,750 49,740 56,306
Stock-based compensation 48,354 54,445 57,177 67,769 74,828
ADJUSTED EBITDA $ 88,642 $ 92,848 $ 111,366 $ 116,745 $ 145,256
(1) Excludes accretion of redeemable noncontrolling interest

CONTACT: LinkedIn Corporate Communications Team press@linkedin.com

Source:LinkedIn