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LinkedIn Announces Third Quarter 2016 Results

October 27, 2016

MOUNTAIN VIEW, Calif., Oct. 27, 2016 (GLOBE NEWSWIRE) -- LinkedIn Corporation (NYSE:LNKD), the world's largest professional network on the Internet, today reported results for the third quarter of 2016. Detailed financial information on the quarter will be available within the company's Form 10-Q filing with the SEC.

“In Q3, continued product investments across our platform drove another quarter of strong engagement and financial performance,” said Jeff Weiner, CEO of LinkedIn. “As we look forward, our combination with Microsoft creates the opportunity for us to dramatically increase the impact and scale with which we deliver value to our members and customers.”

During the quarter, LinkedIn’s platform continued to show strong engagement, powered by investments across mobile, messaging, content and jobs. Cumulative members grew 18% year-over-year to 467 million, and unique visiting members grew 6% to an average of 106 million members a month. Member page views grew 27% in the quarter, yielding 20% year-over-year growth in page views per unique visiting member. Mobile continues to grow at more than double the rate of overall member activity, surpassing 60% of all traffic to LinkedIn.

Total revenue increased 23% year-over-year to $960 million.
 
Talent Solutions revenue increased 24% year-over-year to $623 million.

  • Hiring contributed $556 million in revenue, up 21% year-over-year.
  • Learning & Development contributed $67 million in revenue.

Marketing Solutions revenue increased 26% year-over-year to $175 million.

  • Sponsored Content remained the primary driver of growth and is now approaching two-thirds of total Marketing Solutions revenue.

Premium Subscriptions revenue increased 17% year-over-year to $162 million.

  • Sales Navigator remained the faster growing component of Premium Subscriptions, across both the field and online channels.

GAAP net income attributable to common stockholders was $9 million. GAAP diluted EPS was $0.06, compared to $(0.36) last year.

Non-GAAP net income was $163 million, excluding $2.0 million of merger-related transaction costs. Non-GAAP diluted EPS was $1.18, compared to $0.78 last year.

Adjusted EBITDA was $304 million, or 32% of revenue.

"During the quarter, LinkedIn demonstrated strong top and bottom-line performance," said Steve Sordello, CFO of LinkedIn. "Focused investments generated solid growth across our product lines as well as greater leverage across the business, resulting in record high levels of Adjusted EBITDA margin, non-GAAP EPS, and operating cash flow."

As previously announced 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. On August 19, 2016, LinkedIn stockholders voted to approve the merger agreement. LinkedIn continues to expect the transaction to close prior to the end of 2016. 

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 third quarter 2016 business results.

 
LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 As of
 September 30,
2015
 December 31,
2015
 March 31,
2016
 June 30,
2016
 September 30,
2016
ASSETS         
CURRENT ASSETS:         
Cash and cash equivalents$631,725  $546,237  $759,451  $719,807  $697,113 
Marketable securities2,457,607  2,573,145  2,400,187  2,591,709  2,667,883 
Accounts receivable457,975  603,060  582,726  560,440  541,325 
Deferred commissions56,453  87,706  80,783  78,353  72,290 
Prepaid expenses72,752  62,992  76,414  76,478  79,104 
Other current assets136,225  61,949  68,835  78,046  45,298 
Total current assets3,812,737  3,935,089  3,968,396  4,104,833  4,103,013 
Property and equipment, net906,189  1,047,005  1,139,032  1,228,402  1,508,480 
Goodwill1,508,946  1,507,093  1,597,268  1,597,423  1,609,492 
Intangible assets, net418,050  373,087  334,048  295,942  262,986 
Other assets70,788  148,925  170,623  84,840  72,441 
TOTAL ASSETS$6,716,710  $7,011,199  $7,209,367  $7,311,440  $7,556,412 
          
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY         
CURRENT LIABILITIES:         
Accounts payable$123,329  $162,176  $161,523  $147,934  $189,073 
Accrued liabilities296,794  316,792  257,371  253,778  321,507 
Deferred revenue621,411  709,116  787,621  785,680  749,491 
Total current liabilities1,041,534  1,188,084  1,206,515  1,187,392  1,260,071 
CONVERTIBLE SENIOR NOTES, NET1,115,439  1,126,534  1,138,264  1,150,132  1,162,141 
OTHER LONG-TERM LIABILITIES241,532  201,128  225,023  228,434  231,981 
Total liabilities2,398,505  2,515,746  2,569,802  2,565,958  2,654,193 
COMMITMENTS AND CONTINGENCIES         
REDEEMABLE NONCONTROLLING INTEREST26,296  26,810  27,321  27,846  28,400 
STOCKHOLDERS’ EQUITY:         
Class A and Class B common stock13  13  13  13  14 
Additional paid-in capital4,405,911  4,588,578  4,779,628  4,989,710  5,141,257 
               
Accumulated other comprehensive income6,632  9,124  7,502  22,077  18,153 
Accumulated deficit(120,647) (129,072) (174,899) (294,164) (285,605)
Total stockholders’ equity4,291,909  4,468,643  4,612,244  4,717,636  4,873,819 
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY  $6,716,710  $7,011,199  $7,209,367  $7,311,440  $7,556,412 
                    


 
LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
 September 30,
2015
 December 31,
2015
 March 31,
2016
 June 30,
2016
 September 30,
2016
          
Net revenue$779,595  $861,894  $860,650  $932,714  $959,787 
Costs and expenses:         
Cost of revenue (exclusive of depreciation and amortization shown separately below)111,368  118,998  117,528  120,526  119,772 
Sales and marketing265,454  291,768  301,786  308,466  311,222 
Product development202,682  217,265  237,620  235,932  246,423 
General and administrative118,871  120,161  127,650  133,940  121,391 
Depreciation and amortization117,901  129,595  142,285  139,401  137,934 
Total costs and expenses816,276  877,787  926,869  938,265  936,742 
Income (loss) from operations(36,681) (15,893) (66,219) (5,551) 23,045 
Other expense, net:         
Interest income2,798  3,771  4,973  5,974  6,422 
Interest expense(12,773) (12,818) (12,841) (12,916) (13,110)
Other, net(10,684) (7,035) (4,190) (5,601) (3,550)
Other expense, net(20,659) (16,082) (12,058) (12,543) (10,238)
Income (loss) before income taxes(57,340) (31,975) (78,277) (18,094) 12,807 
Provision (benefit) for income taxes(10,429) (24,064) (32,961) 100,646  3,694 
Net income (loss)(46,911) (7,911) (45,316) (118,740) 9,113 
Accretion of redeemable noncontrolling interest(512) (514) (511) (525) (554)
Net income (loss) attributable to common stockholders$(47,423) $(8,425) $(45,827) $(119,265) $8,559 
Net income (loss) per share attributable to common stockholders:         
Basic$(0.36) $(0.06) $(0.35) $(0.89) $0.06 
Diluted$(0.36) $(0.06) $(0.35) $(0.89) $0.06 
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:           
Basic130,716  131,583  132,779  134,132  135,141 
Diluted130,716  131,583  132,779  134,132  138,200 
               


 
LINKEDIN CORPORATION
TRENDED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 Three Months Ended
 September 30,
2015
 December 31,
2015
 March 31,
2016
 June 30,
2016
 September 30,
2016
          
OPERATING ACTIVITIES:         
Net income (loss)$(46,911) $(7,911) $(45,316) $(118,740) $9,113 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:           
 Depreciation and amortization117,901  129,595  142,285  139,401  137,934 
 Provision for doubtful accounts and sales returns3,373  4,269  7,746  3,608  1,232 
 Amortization of investment premiums, net5,362  4,457  4,160  3,647  2,909 
 Amortization of debt discount and transaction costs11,456  11,592  11,730  10,721  13,156 
 Stock-based compensation126,874  134,800  146,104  144,943  140,967 
 Excess income tax benefit from stock-based compensation1,726  (13,965) (1,698) 1,618  (157)
 Changes in operating assets and liabilities:         
  Accounts receivable(9,168) (147,895) 11,932  20,321  18,211 
  Deferred commissions3,094  (38,204) 8,844  2,927  7,330 
  Prepaid expenses and other assets(9,568) (11,865) (29,495) (2,113) 22,405 
  Accounts payable and other liabilities58,854  26,838  (45,086) 33,599  55,931 
  Income taxes, net(15,659) (3,373) (34,998) 95,077  (222)
  Deferred revenue(7,739) 88,268  75,979  (2,586) (35,532)
   Net cash provided by operating activities239,595  176,606  252,187  332,423  373,277 
INVESTING ACTIVITIES:         
Purchases of property and equipment(166,653) (178,010) (177,480) (208,479) (300,617)
Purchases of investments(809,448) (915,977) (465,424) (951,735) (681,436)
Sales of investments391,914  268,727  168,434  226,526  160,672 
Maturities of investments536,891  521,548  470,456  532,613  439,176 
Payments for intangible assets and acquisitions, net of cash acquired(20,030) (2,975) (40,430) (6,654) (15,782)
Changes in deposits and restricted cash10,461  (602) 3,025  (451) (182)
   Net cash used in investing activities(56,865) (307,289) (41,419) (408,180) (398,169)
FINANCING ACTIVITIES:         
   Net cash provided by financing activities1,255  46,456  125  37,475  2,406 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS(3,251) (1,261) 2,321  (1,362) (208)
CHANGE IN CASH AND CASH EQUIVALENTS180,734  (85,488) 213,214  (39,644) (22,694)
CASH AND CASH EQUIVALENTS—Beginning of period450,991  631,725  546,237  759,451  719,807 
CASH AND CASH EQUIVALENTS—End of period$631,725  $546,237  $759,451  $719,807  $697,113 
                    


 
LINKEDIN CORPORATION
TRENDED SUPPLEMENTAL REVENUE INFORMATION
(In thousands)
(Unaudited)
 
 Three Months Ended
 September 30,
2015
 December 31,
2015
  March 31,
2016
 June 30,
2016
 September 30,
2016
          
Revenue by product:         
Talent Solutions         
Hiring$460,838  $486,746  $502,391  $534,569  $556,009 
Learning & Development41,273  48,593  55,256  62,105  66,684 
  Total Talent Solutions502,111  535,339  557,647  596,674  622,693 
Marketing Solutions139,549  182,550  154,147  181,119  175,477 
Premium Subscriptions137,935  144,005  148,856  154,921  161,617 
Total$779,595  $861,894  $860,650  $932,714  $959,787 
          
Revenue by geographic region:         
United States$484,300  $527,719  $526,416  $568,157  $588,165 
International         
Other Americas (1)43,505  46,500  45,362  47,631  50,598 
EMEA (2)187,286  217,624  217,601  239,267  235,230 
APAC (3)64,504  70,051  71,271  77,659  85,794 
Total International revenue295,295  334,175  334,234  364,557  371,622 
          
     Total revenue$779,595  $861,894  $860,650  $932,714  $959,787 
          
Revenue by geography, by product:           
United States         
Talent Solutions$309,935  $328,772  $341,534  $364,948  $380,906 
Marketing Solutions93,362  114,955  98,361  113,904  113,346 
Premium Subscriptions81,003  83,992  86,521  89,305  93,913 
  Total United States revenue$484,300  $527,719  $526,416  $568,157  $588,165 
International         
Talent Solutions192,176  206,567  216,113  231,726  241,787 
Marketing Solutions46,187  67,595  55,786  67,215  62,131 
Premium Subscriptions56,932  60,013  62,335  65,616  67,704 
  Total International revenue$295,295  $334,175  $334,234  $364,557  $371,622 
          
     Total revenue$779,595  $861,894  $860,650  $932,714  $959,787 
          
Revenue by channel:         
Field sales$479,547  $551,279  $535,957  $591,571  $614,478 
Online sales300,048  310,615  324,693  341,143  345,309 
Total$779,595  $861,894  $860,650  $932,714  $959,787 
______________         
(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,
2015
 December 31,
2015
 March 31,
2016
 June 30,
2016
 September 30,
2016
          
Non-GAAP net income and net income per share:         
GAAP net income (loss) attributable to common stockholders$(47,423) $(8,425) $(45,827) $(119,265) $8,559 
Add back: stock-based compensation126,874  134,800  146,104  144,943  140,967 
Add back: non-cash interest expense related to convertible senior notes  11,456  11,592  11,730  11,868  12,009 
Add back: amortization of intangible assets46,466  46,989  47,323  44,433  41,233 
Add back: accretion of redeemable noncontrolling interest512  514  511  525  554 
Add back: fair value adjustment on other derivative6,900  1,900  2,300  2,200  3,100 
Add back: merger-related transaction costs (1)      13,502  1,951 
Income tax effects and adjustments (2)(41,331) (61,624) (62,672) 54,910  (45,082)
NON-GAAP NET INCOME$103,454  $125,746  $99,469  $153,116  $163,291 
          
GAAP diluted shares130,716  131,583  132,779  134,132  138,200 
Add back: dilutive shares under the treasury stock method1,825  2,020  1,259  1,405   
NON-GAAP DILUTED SHARES132,541  133,603  134,038  135,537  138,200 
          
NON-GAAP DILUTED NET INCOME PER SHARE$0.78  $0.94  $0.74  $1.13  $1.18 
          
Adjusted EBITDA:         
Net income (loss)$(46,911) $(7,911) $(45,316) $(118,740) $9,113 
Provision (benefit) for income taxes(10,429) (24,064) (32,961) 100,646  3,694 
Other expense, net20,659  16,082  12,058  12,543  10,238 
Depreciation and amortization117,901  129,595  142,285  139,401  137,934 
Stock-based compensation126,874  134,800  146,104  144,943  140,967 
Merger-related transaction costs      13,502  1,951 
ADJUSTED EBITDA$208,094  $248,502  $222,170  $292,295  $303,897 
______________         
(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. These adjustments represent 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 September 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 October 27, 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

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Source: LinkedIn Corporation

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