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LinkedIn Beats Q2 Earnings, Rev Up Y/Y

Zacks Equity Research

LinkedIn Corporation (LNKD) reported adjusted net earnings of 7 cents per share in the second quarter of 2013, beating the Zacks Consensus Estimate of 4 cents.


Total revenue for the reported quarter was $363.7 million, up 59.4% from $228.2 million in the year-ago quarter. LinkedIn witnessed strong performance across all its business segments. Segment-wise, revenues from the Talent Solutions (previously named Hiring Solutions) products were $205.1 million, up 68.7% from the year-ago quarter.

Revenues from the Marketing Solutions were $85.6 million, up 35.7% from the year-ago quarter. This segment contributed 23.5% to the revenues in the second quarter of 2013, as against 27.6% in the year-ago period.

Premium Subscriptions recorded revenues of $72.9 million, up 67.7% from the year-ago period. As a percentage of total revenue, the segment contributed 20.0% of the total revenue during the second quarter, up from 19.1% in the year-ago period.

In America, LinkedIn generated revenues of $251.1 million, approximately 69.1% of the total revenue in the reported quarter. Revenues from the Europe, Middle East & Africa (:EMEA) region was $84.7 million and constituted 23.3% of the total revenue, while APAC revenues totaled $27.8 million, which constituted around 7.7% of total revenue in the second quarter of 2013.

Operating Results

LinkedIn incurred higher sales & marketing, product development and administrative expenses of 75.4% of total revenue compared with 74.0% in the year-ago period. Moreover, the company reported operating income of $8.1 million, down 40.0% from the year-ago level of $13.5 million.

Net profit on a GAAP basis was $3.73 million or 3 cents per share versus a profit of $2.81 million or 3 cents in the second quarter of 2012. Excluding special items like amortization of intangibles but including stock-based compensation, non-GAAP earnings came at $8.0 million or 7 cents per share compared with $16.4 million or 15 cents per in the year-ago quarter.

Balance Sheet & Cash Flow

LinkedIn ended the quarter with cash and cash equivalents of $262.7 million versus $264.9 million in the prior quarter. Accounts receivable in the quarter were $203.6 million down from $212.6 million in the previous quarter. Total deferred revenues in the quarter were $331.2 million, up from $317.1 million in the previous quarter. The company generated $124.2 million in cash flow from operation, up from $103.8 million reported in the year-ago quarter.


The company expects third-quarter 2013 revenues in the range of $367.0 to $373.0. Whereas, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) is expected to range between $81.0 million and $83.0 million. Depreciation and amortization is expected in the range of $38.0 million to $40.0 million.

For full year 2013, totalrevenue is expected to range between $1.455 billion and $1.475 billion. Adjusted EBITDA is expected between $340.0 million and $355.0 million. Moreover, depreciation and amortization is expected between $135.0 million and $140.0 million.

Our Take

LinkedIn reported decent 2Q13 results, which exceeded our expectation. LinkedIn has benefited the most from its Talent Solution and Premium Subscription businesses, which continues to grow substantially. The company, which is a leader in the emerging online professional networking segment, has gained popularity across the globe and grown steadily over the recent past.

Although the operating performance of the company deteriorated as the company was unable to control the significant increase in the operating cost in the quarter. As a result, operating profits declined.

In the current scenario, the company faces stiff competition in the professional networking space from companies like Facebook Inc. (FB) and Google Inc. (GOOG). Moreover, the emergence of companies likes ValueClick Inc. (VCLK) could change the scenario rapidly over the next few years, by introducing new services at regular interval.

Currently, LinkedIn carries a Zacks Rank #3 (Hold).

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