LinkedIn Reports Strong Revs, Ups FY14 Rev Outlook - Analyst Blog

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LinkedIn Corporation ( LNKD ) reported adjusted loss per share of 8 cents as better-than-expected revenue was offset by significantly higher investments and a higher share count. As a result, comparisons with both the Zacks Consensus Estimate (earnings of a cent) and the year-ago earnings (22 cents) were unfavorable.

The investments were related to the launching of a Chinese website, product development for the Marketing Solutions segment, a publishing platform in mobile and for infrastructure development in general. Though these investments are impacting operational performance in the short run, they are necessary for member growth and user engagement in the long term.

Top-line numbers were encouraging, with LinkedIn seeing strong performance across all its business segments.

Revenues for the quarter not only increased 45.7% on a year-over-year basis to $473.2 million but also came ahead of the Zacks Consensus Estimate of $468.0 million. Reported revenues also surpassed management's forecasted range of $455 to $460 million.

Segment-wise, revenues from Talent Solutions were up 49.7% from the year-ago quarter to $275.9 million. Revenues from Marketing Solutions increased 36.1% on a year-over-year basis to $101.8 million. LinkedIn garnered $95.5 million revenues from Premium Subscriptions which increased 45.6% on a year-over-year basis.

LinkedIn's cumulative members increased 36% year over year to 296 million at the end of the first quarter. The company witnessed 26% increase in Unique visiting members and 43% year-over-year increase in member page views. The company crossed 300 million members in Apr 2014.

International expansion remains a focal point for LinkedIn. During the quarter, the company launched a Chinese language website to expand its presence in the leading Internet market of China. Considering the growth potential of the country which has a huge Internet surfing population, LinkedIn's expansion in the country bodes well.

The company's mobile engagement was noteworthy as mobile represented 42% of its traffic. During the quarter, the company introduced Recruiter Solutions for Android-based devices and an updated version of the same for Apple 's ( AAPL ) iPhones.

LinkedIn has also expanded its Sponsored Updates, part of the Marketing Solutions segment, through the launch of two Certified Marketing Partner programs - Sponsored Updates Partners and Content Partners. The company is reported to have 3,000 active customers for the Sponsored Update campaigns. With these initiatives the company is expected to witness not only customer growth but also bring in repeat business from account renewals.

Geographically, LinkedIn's revenues from the Americas increased 40.4% on a year-over-year basis. Revenues from the Europe, Middle East & Africa region grew 56.9%. Asia-Pacific recorded revenue growth of 60.8% on a year-over-year basis.

Operating expenses (excluding amortization but including stock-based compensation expense) increased 57.3% year over year. As a percentage of revenues, operating expenses increased from 91.9% to 99.1% with operating margins shrinking from 8.1% to 0.9% from last year.

LinkedIn's adjusted net loss (excluding amortization, accretion of redeemable non-controlling interest but including stock-based compensation) on proportionate tax basis came in at $9.4 million or 8 cents per share compared with a net profit of $24.9 million or 22 cents per share reported in the year-ago quarter.

Balance Sheet & Cash Flow

LinkedIn ended the quarter with cash and cash equivalents of $508.9 million versus $803.1 billion in the previous quarter. Total deferred revenue in the quarter was $479.6 million, up from $392.2 million in the previous quarter. The company generated $128.9 million in cash flow from operation compared to $82.5 million reported in the previous quarter.

Guidance

LinkedIn provided its second-quarter and upped its fiscal 2014 outlook. For the second quarter, the company expects its revenues to range between $500 million and $505 million (mid-point $502.5 million). Although lower than the Zacks Consensus Estimate of $507 million, the mid-point of the revenue guidance is 38% higher than the year-ago quarter revenues. LinkedIn expects adjusted EBITDA in the range of $118 to $120 million.

For fiscal 2014, LinkedIn expects now revenues in the range of $2.06 to $2.08 billion (previous forecast $2.02 to $2.05 billion). The Zacks Consensus Estimate is pegged at $2.11 billion. Adjusted EBITDA is expected in the range of $500 to $510 million, up from the previous forecast of $490 million.

Our Take

LinkedIn remains a leader in the emerging online professional networking segment with increasing worldwide popularity and steady growth in the recent past. The company's traction in the mobile segment is also encouraging. Synergies from the acquisitions are also expected to positively impact results in the long run.

We believe that LinkedIn's initiatives to increase advertising revenues through product launches and partnership programs are praiseworthy. Advertisers are also taking a note of the company's growing user base, in our view.

We believe the investments in strategic products are necessary for LinkedIn as other companies like Facebook ( FB ) and Twitter ( TWTR ) are looking for a position in the professional space.

Thus, investors should not read much into the bottom-line miss and should rather be encouraged by nearly 45% to 50% top-line growth recorded by LinkedIn in the past few quarters.



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AAPL , FB , LNKD , TWTR

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