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LinkedIn Announces Second Quarter 2016 Results

MOUNTAIN VIEW, Calif., Aug. 04, 2016 (GLOBE NEWSWIRE) -- LinkedIn Corporation (NYSE:LNKD), the world's largest professional network on the Internet, today reported results for the second quarter of 2016. Supplemental financials will be available on the investor relations section of the LinkedIn website at http://investors.linkedin.com.

On June 11, 2016, LinkedIn entered into a merger agreement with Microsoft Corporation ("Microsoft") under which Microsoft will acquire LinkedIn for $196.00 per share in an all-cash transaction valued at approximately $26.2 billion, inclusive of LinkedIn's net cash.

“In Q2, we demonstrated good momentum with our member and customers, and delivered strong financial results,” said Jeff Weiner, CEO of LinkedIn. “Continued product innovation drove increased levels of engagement, and strengthened our enterprise offerings. We believe joining forces with Microsoft enables us to further accelerate and scale our ability to deliver value and create economic opportunity for every member of the global workforce."

In the quarter, our core member operating metrics reflected continued strength. Cumulative members grew 18% year-over-year to 450 million, unique visiting members grew 9% to an average of 106 million members a month, and member page views grew 32%. This yielded 21% year-over-year growth in page views per unique visiting member, continuing a pattern of strong engagement growth over the past several quarters.

Total revenue increased 31% year-over-year to $933 million.

Talent Solutions revenue increased 35% year-over-year to $597 million.

  • Hiring contributed $535 million in revenue, up 26% year-over-year.
  • Learning & Development contributed $62 million in revenue.

Marketing Solutions revenue increased 29% year-over-year to $181 million.

  • Sponsored Content surpassed 60% of total Marketing Solutions revenue and was the primary driver of growth, driven largely by increase in customer demand.

Premium Subscriptions revenue increased 21% year-over-year to $155 million.

  • Sales Navigator remained the faster growing component of Premium Subscriptions, with growth in the field channel continuing to outpace growth in individual online subscriptions.

GAAP net loss attributable to common stockholders was $119 million, primarily driven by a non-cash charge of $101 million as a result of recording a valuation allowance for a significant portion of our tax assets. GAAP diluted EPS was $(0.89), compared to last year's performance of $(0.53).

Non-GAAP net income was $153 million, excluding $14 million of merger-related transaction costs. Non-GAAP diluted EPS was $1.13, compared to $0.55 last year.

Adjusted EBITDA was $292 million, or 31% of revenue.

"LinkedIn delivered another quarter of strong growth," said Steve Sordello, CFO of LinkedIn. "We achieved record levels of operating cash flow, while continuing to invest heavily across our core member and customer value propositions."

In light of the pending merger, LinkedIn will not be updating its outlook for fiscal 2016 and will not be hosting a conference call for its second quarter 2016 business results.

LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
As of
June 30,
2015
September 30,
2015
December 31,
2015
March 31,
2016
June 30,
2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$450,991 $631,725 $546,237 $759,451 $719,807
Marketable securities2,582,435 2,457,607 2,573,145 2,400,187 2,591,709
Accounts receivable449,500 457,975 603,060 582,726 560,440
Deferred commissions58,585 56,453 87,706 80,783 78,353
Prepaid expenses75,669 72,752 62,992 76,414 76,478
Other current assets118,718 136,225 61,949 68,835 78,046
Total current assets3,735,898 3,812,737 3,935,089 3,968,396 4,104,833
Property and equipment, net793,034 906,189 1,047,005 1,139,032 1,228,402
Goodwill1,492,972 1,508,946 1,507,093 1,597,268 1,597,423
Intangible assets, net456,233 418,050 373,087 334,048 295,942
Other assets78,645 70,788 148,925 170,623 84,840
TOTAL ASSETS$6,556,782 $6,716,710 $7,011,199 $7,209,367 $7,311,440
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$109,715 $123,329 $162,176 $161,523 $147,934
Accrued liabilities256,958 296,794 316,792 257,371 253,778
Deferred revenue629,671 621,411 709,116 787,621 785,680
Total current liabilities996,344 1,041,534 1,188,084 1,206,515 1,187,392
CONVERTIBLE SENIOR NOTES, NET1,104,010 1,115,439 1,126,534 1,138,264 1,150,132
OTHER LONG-TERM LIABILITIES238,001 241,532 201,128 225,023 228,434
Total liabilities2,338,355 2,398,505 2,515,746 2,569,802 2,565,958
COMMITMENTS AND CONTINGENCIES
REDEEMABLE NONCONTROLLING INTEREST25,784 26,296 26,810 27,321 27,846
STOCKHOLDERS’ EQUITY:
Class A and Class B common stock13 13 13 13 13
Additional paid-in capital4,268,731 4,405,911 4,588,578 4,779,628 4,989,710
Accumulated other comprehensive income (loss)(2,877) 6,632 9,124 7,502 22,077
Accumulated deficit(73,224) (120,647) (129,072) (174,899) (294,164)
Total stockholders’ equity4,192,643 4,291,909 4,468,643 4,612,244 4,717,636
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY$6,556,782 $6,716,710 $7,011,199 $7,209,367 $7,311,440


LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,
2015
September 30,
2015
December 31,
2015
March 31,
2016
June 30,
2016
Net revenue$711,735 $779,595 $861,894 $860,650 $932,714
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)100,086 111,368 118,998 117,528 120,526
Sales and marketing261,271 265,454 291,768 301,786 308,466
Product development190,133 202,682 217,265 237,620 235,932
General and administrative142,389 118,871 120,161 127,650 133,940
Depreciation and amortization99,004 117,901 129,595 142,285 139,401
Total costs and expenses792,883 816,276 877,787 926,869 938,265
Loss from operations(81,148) (36,681) (15,893) (66,219) (5,551)
Other expense, net:
Interest income2,017 2,798 3,771 4,973 5,974
Interest expense(12,694) (12,773) (12,818) (12,841) (12,916)
Other, net(1,723) (10,684) (7,035) (4,190) (5,601)
Other expense, net(12,400) (20,659) (16,082) (12,058) (12,543)
Loss before income taxes(93,548) (57,340) (31,975) (78,277) (18,094)
Provision (benefit) for income taxes(26,048) (10,429) (24,064) (32,961) 100,646
Net loss(67,500) (46,911) (7,911) (45,316) (118,740)
Accretion of redeemable noncontrolling interest(248) (512) (514) (511) (525)
Net loss attributable to common stockholders$(67,748) $(47,423) $(8,425) $(45,827) $(119,265)
Net loss per share attributable to common stockholders:
Basic$(0.53) $(0.36) $(0.06) $(0.35) $(0.89)
Diluted$(0.53) $(0.36) $(0.06) $(0.35) $(0.89)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic128,241 130,716 131,583 132,779 134,132
Diluted128,241 130,716 131,583 132,779 134,132


LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2015
September 30,
2015
December 31,
2015
March 31,
2016
June 30,
2016
OPERATING ACTIVITIES:
Net loss$(67,500) $(46,911) $(7,911) $(45,316) $(118,740)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization99,004 117,901 129,595 142,285 139,401
Provision for doubtful accounts and sales returns3,280 3,373 4,269 7,746 3,608
Amortization of investment premiums, net5,001 5,362 4,457 4,160 3,647
Amortization of debt discount and transaction costs11,322 11,456 11,592 11,730 10,721
Stock-based compensation145,491 126,874 134,800 146,104 144,943
Excess income tax benefit from stock-based compensation18,198 1,726 (13,965) (1,698) 1,618
Changes in operating assets and liabilities:
Accounts receivable(21,887) (9,168) (147,895) 11,932 20,321
Deferred commissions1,535 3,094 (38,204) 8,844 2,927
Prepaid expenses and other assets(1,957) (9,568) (11,865) (29,495) (2,113)
Accounts payable and other liabilities55,959 58,854 26,838 (45,086) 33,599
Income taxes, net(22,876) (15,659) (3,373) (34,998) 95,077
Deferred revenue72 (7,739) 88,268 75,979 (2,586)
Net cash provided by operating activities225,642 239,595 176,606 252,187 332,423
INVESTING ACTIVITIES:
Purchases of property and equipment(72,462) (166,653) (178,010) (177,480) (208,479)
Purchases of investments(632,774) (809,448) (915,977) (465,424) (951,735)
Sales of investments141,452 391,914 268,727 168,434 226,526
Maturities of investments417,115 536,891 521,548 470,456 532,613
Payments for intangible assets and acquisitions, net of cash acquired(650,681) (20,030) (2,975) (40,430) (6,654)
Changes in deposits and restricted cash(1,877) 10,461 (602) 3,025 (451)
Net cash used in investing activities(799,227) (56,865) (307,289) (41,419) (408,180)
FINANCING ACTIVITIES:
Net cash provided by financing activities3,364 1,255 46,456 125 37,475
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS3,925 (3,251) (1,261) 2,321 (1,362)
CHANGE IN CASH AND CASH EQUIVALENTS(566,296) 180,734 (85,488) 213,214 (39,644)
CASH AND CASH EQUIVALENTS—Beginning of period1,017,287 450,991 631,725 546,237 759,451
CASH AND CASH EQUIVALENTS—End of period$450,991 $631,725 $546,237 $759,451 $719,807


LINKEDIN CORPORATION
TRENDED SUPPLEMENTAL REVENUE INFORMATION
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2015
September 30,
2015
December 31,
2015
March 31,
2016
June 30,
2016
Revenue by product:
Talent Solutions
Hiring$425,812 $460,838 $486,746 $502,391 $534,569
Learning & Development17,558 41,273 48,593 55,256 62,105
Total Talent Solutions443,370 502,111 535,339 557,647 596,674
Marketing Solutions140,037 139,549 182,550 154,147 181,119
Premium Subscriptions128,328 137,935 144,005 148,856 154,921
Total$711,735 $779,595 $861,894 $860,650 $932,714
Revenue by geographic region:
United States$444,531 $484,300 $527,719 $526,416 $568,157
International
Other Americas (1)39,904 43,505 46,500 45,362 47,631
EMEA (2)168,771 187,286 217,624 217,601 239,267
APAC (3)58,529 64,504 70,051 71,271 77,659
Total International revenue267,204 295,295 334,175 334,234 364,557
Total revenue$711,735 $779,595 $861,894 $860,650 $932,714
Revenue by geography, by product:
United States
Talent Solutions$277,772 $309,935 $328,772 $341,534 $364,948
Marketing Solutions91,761 93,362 114,955 98,361 113,904
Premium Subscriptions74,998 81,003 83,992 86,521 89,305
Total United States revenue$444,531 $484,300 $527,719 $526,416 $568,157
International
Talent Solutions165,598 192,176 206,567 216,113 231,726
Marketing Solutions48,276 46,187 67,595 55,786 67,215
Premium Subscriptions53,330 56,932 60,013 62,335 65,616
Total International revenue$267,204 $295,295 $334,175 $334,234 $364,557
Total revenue$711,735 $779,595 $861,894 $860,650 $932,714
Revenue by channel:
Field sales$440,476 $479,547 $551,279 $535,957 $591,571
Online sales271,259 300,048 310,615 324,693 341,143
Total$711,735 $779,595 $861,894 $860,650 $932,714
______________
(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
June 30,
2015
September 30,
2015
December 31,
2015
March 31,
2016
June 30,
2016
Non-GAAP net income and net income per share:
GAAP net loss attributable to common stockholders$(67,748) $(47,423) $(8,425) $(45,827) $(119,265)
Add back: stock-based compensation145,491 126,874 134,800 146,104 144,943
Add back: non-cash interest expense related to convertible senior notes11,322 11,456 11,592 11,730 11,868
Add back: amortization of intangible assets29,474 46,466 46,989 47,323 44,433
Add back: accretion of redeemable noncontrolling interest248 512 514 511 525
Add back: fair value adjustment on other derivative 6,900 1,900 2,300 2,200
Add back: merger-related transaction costs (1) 13,502
Income tax effects and adjustments (2)(47,378) (41,331) (61,624) (62,672) 54,910
NON-GAAP NET INCOME$71,409 $103,454 $125,746 $99,469 $153,116
GAAP diluted shares128,241 130,716 131,583 132,779 134,132
Add back: dilutive shares under the treasury stock method2,224 1,825 2,020 1,259 1,405
NON-GAAP DILUTED SHARES130,465 132,541 133,603 134,038 135,537
NON-GAAP DILUTED NET INCOME PER SHARE$0.55 $0.78 $0.94 $0.74 $1.13
Adjusted EBITDA:
Net loss$(67,500) $(46,911) $(7,911) $(45,316) $(118,740)
Provision (benefit) for income taxes(26,048) (10,429) (24,064) (32,961) 100,646
Other expense, net12,400 20,659 16,082 12,058 12,543
Depreciation and amortization99,004 117,901 129,595 142,285 139,401
Stock-based compensation145,491 126,874 134,800 146,104 144,943
Merger-related transaction costs 13,502
ADJUSTED EBITDA$163,347 $208,094 $248,502 $222,170 $292,295
______________
(1) Represents transaction costs associated with our merger agreement with Microsoft entered into on June 11, 2016.
(2) Excludes accretion of redeemable noncontrolling interest.

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 US 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 US 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. 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.

Merger-related transaction costs. This adjustment represents the transaction costs associated with the Company's merger agreement with Microsoft Corporation. The company excludes the merger-related transaction costs as they are non-recurring 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.

Income tax effects and adjustments. The company adjusts non-GAAP net income by considering the income tax effects of excluding stock-based compensation, the amortization of acquired intangible assets and merger-related transaction costs. 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, such as tax charges or benefits that are a result of a change in the valuation allowance, 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 items such as 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 may contain forward-looking statements about our products, including our investments in products, technology and other key strategic areas. 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 related to our pending merger with Microsoft Corporation; 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, 2015, and additional information will also be set forth in our Form 10-Q that will be filed for the quarter ended June 30, 2016, 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 August 4, 2016, and LinkedIn undertakes no duty to update this information.

Additional Information and Where to Find It

In connection with the transaction with Microsoft described above, on July 22, 2016, LinkedIn filed with the SEC and sent to its stockholders a definitive proxy statement. INVESTORS AND SECURITY HOLDERS OF LINKEDIN ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE. Investors and security holders may obtain a free copy of the definitive proxy statement and other documents filed with the SEC.

LinkedIn and its directors and executive officers are participants in the solicitation of proxies from the LinkedIn’s stockholders with respect to the transaction. Information about LinkedIn’s directors and executive officers and their ownership of LinkedIn’s common stock is set forth in LinkedIn’s annual proxy statement on Schedule 14A filed with the SEC on April 22, 2016, as well as the definitive proxy statement filed on July 22, 2016.


CONTACT

Press:
press@linkedin.com


Investor:
IErequests@linkedin.com

Source:LinkedIn Corporation