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LinkedIn Misses EPS, Revs Strong

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LinkedIn Corporation reported adjusted net earnings of 4 cents per share in the second quarter of 2012, an inch short of the Zacks Consensus Estimate of 5 cents. The miss could be attributed to higher expenses and tax.


Revenues in the quarter were $228.2 million, an increase of 88.5% compared with $121.0 million in the second quarter of 2011. The company witnessed terrific revenue growth across all three product segments.

Looking at the segments, Hiring Solutions’ revenue soared almost 107.0% over the prior-year quarter. This segment represented around 53% of the company’s total revenue compared with 48% reported last year.

The company continues to add new product to its Hiring Solutions product portfoliofrom recruiter to pipeline to jobs to recruitment media, This growth deserves special mention, especially as the segment was able to counter the European economic headwinds.

Marketing Solutions products increased 64.0% year over year to $63.1 million, representing 28.0% of the total revenue.

Premium Subscriptions products totaled $43.5 million, an increase of 82.0% year over year. Premium Subscriptions accounted for 19.0% of the total revenue in the reported quarter.

Geographically, U.S. revenues totaled $162.3 million, and represented 71.1% of the revenues in the reported quarter. Revenue from the international market amounted to $162.3 million, and represented 71.1% of the quarter’s total revenue.

Operating Results

Operating cost and expense grew by 90% this year, attributable to the increase in sales & marketing, product development and general & marketing expense. The company reported operating income of $13.5 million, up from the year-ago level of $9.9 million. Operating income increased as revenue grew at a higher rate than cost and expenses.

Net profit on a GAAP basis in the second quarter was $2.8 million or 3 cents versus $4.5 million or 4 cents in the second quarter of 2011. Excluding special items like amortization of intangibles, non-GAAP earnings per share came at 4 cents, flat with the second quarter of 2011.

Balance Sheet

LinkedIn Corporation ended the quarter with cash and cash equivalents of $617.1 million versus $342.3 million in the prior quarter. Accounts receivable in the quarter was $136.5 compared with $116.3 million in the previous quarter. Total deferred revenue in the quarter was $191.9 million, up from $174.8 million in the previous quarter.


For the third quarter of 2012, the company expects revenue in the range of $235 million to $240 million. The company expects adjusted EBITDA between $42.0 million and $45.0 million.

For 2012, the company expects revenue in the range of $915.0 million to $925.0 million, up from the prior range of $880.0 million to $900.0 million. The company upped the adjusted EBITDA range to $185.0 million to $190.0 million from the prior range of $170.0 million to $175.0 million.


LinkedIn commands a dominant position in the emerging online professional networking segment. The company has attained worldwide popularity and has grown steadily over the last few quarters. The second quarter numbers were encouraging and revenues were considerably higher across segments.

The Hiring solution segment was particularly strong Cost-control measures were implemented effectively to improve its bottom line. Moreover, LinkedIn’s current competitive pressure is not severe in the professional networking space.

However, IT majors like Facebook (FB - Free Report) , Google and Microsoft (MSFT - Free Report) are expected to enter the market soon. Hence, the competitive scenario could change rapidly over the next few years.

The company carries a Zacks #3 Rank, which translates into a short-term Hold rating.

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