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LinkedIn's EPS Exceeds, Revs Jump

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LinkedIn Corporation reported adjusted net earnings of 4 cents per share in the third quarter of 2012, well above the Zacks Consensus Estimate of loss of 5 cents.


Revenues in the reported quarter were $252.0 million, up 80.6% from the year-ago quarter. The company performed well in all its business segments, which helped the revenue to improve substantially.

As far as business segments are concerned, Revenue from Talent Solutions (previously named Hiring Solutions) products was $138.4 million, up 95% from the-year ago quarter. Talent Solutions contributed 55.0% to the revenues during the quarter as compared with 51.0% in the third quarter of 2011.

Marketing Solutions segment revenue was $64.0 million, increasing 60.0% from the year-ago quarter. This segment contributed 25.0% to the revenues in the third quarter of 2012, as against 29.0% in the year-ago period.

Premium Subscriptions segment revenue was $49.6 million, increasing 74.0% from the year-ago period. This segment contributed 19.7% of total revenue in the third quarter of 2012 compared to 20.4% in the year ago quarter..

Geographically, the company generated revenues of $162.4 million from the U.S. The segment generated 64.4% of total revenue in the third quarter of 2012. Total revenue from the international market was $89.7 million, contributing 35.6% of total revenue in the third quarter of 2012.

Operating Results

The company witnessed higher R&D expense, which was 23.0% of revenue compared to 22.0% last year. G&A expense as a percentage of revenue declined to 11.0% versus 13.0% last year. Moreover, the company reported operating income of $6.0 million, up from the year-ago level of $4.6 million. Operating income increased as the company was able to control its cost and expenses.

Net profit on a GAAP basis in the third quarter was $2.3 million or 2 cents versus a loss of $1.6 million or 2 cents in the third quarter of 2011. Excluding special items like amortization of intangibles but including stock based compensation, non-GAAP earnings per share came at 4 cents, up from a loss of 1 cent in the year-ago quarter.

Balance Sheet

LinkedIn ended the quarter with cash and cash equivalents of $676.6 million versus $617.1 million in the prior quarter. Accounts receivable in the quarter was $156.4 million compared with $136.5 million in the previous quarter. Total deferred revenue in the quarter was $209.0 million, up from $191.9 million in the previous quarter.


The company expects revenue for the fourth quarter within $270 million and $275 million. Adjusted EBITDA is expected to be in the range of $58 million to $60 million.

For fiscal 2012, the company upped its revenue estimates to the range of $939 to $944 million from the prior range of $915 million to $925 million. Adjusted EBITDA is now expected to be $202 million to $204 million, up from the prior range of $185 to $190 million.


The third quarter numbers were encouraging and revenues were considerably higher across segments. Also, earnings exceeded our expectation. 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 Talent Solutions and Premium Subscription segments were particularly strong. Cost-control measures were implemented effectively to improve its bottom line.

LinkedIn’s current competitive pressure is not severe in the professional networking space. However, competition is picking up as companies such as 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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