LinkedIn's Q3 2013 Earnings Call
October 29, 2013
Editor’s Note: We’d like to share with you the announcement related to our 2013 third quarter earnings. We’ll also be providing live updates from the earnings call on StockTwits starting at 2pm Pacific Time today.
Today, we reported our financial results for the third quarter of 2013. Increased member growth and engagement helped drive strong financial results in the third quarter.
- Revenue for the third quarter was $393.0 million, an increase of 56% compared to $252.0 million in the third quarter of 2012.
- Net loss for the third quarter was $3.4 million, compared to net income of $2.3 million for the third quarter of 2012. Non-GAAP net income for the third quarter was $46.8 million, compared to $25.1 million for the third quarter of 2012. Non-GAAP measures exclude tax-affected stock-based compensation expense and tax-affected amortization of acquired intangible assets.
- Adjusted EBITDA for the third quarter was $92.8 million, or 24% of revenue, compared to $56.0 million for the third quarter of 2012, or 22% of revenue.
- GAAP diluted EPS for the third quarter was $(0.03); Non-GAAP diluted EPS for the third quarter was $0.39.
We continue to deliver value to professionals through investment in core products and strategic initiatives such as mobile, students, and the professional publishing platform.
- Talent Solutions: Revenue from Talent Solutions products totaled $224.7 million, an increase of 62% compared to the third quarter of 2012. Talent Solutions revenue represented 57% of total revenue in the third quarter of 2013, compared to 55% in the third quarter of 2012.
- Marketing Solutions: Revenue from Marketing Solutions products totaled $88.5 million, an increase of 38% compared to the third quarter of 2012. Marketing Solutions revenue represented 23% of total revenue in the third quarter of 2013, compared to 25% in the third quarter of 2012.
- Premium Subscriptions: Revenue from Premium Subscriptions products totaled $79.8 million, an increase of 61% compared to the third quarter of 2012. Premium Subscriptions represented 20% of total revenue in the third quarter of 2013 and 2012.
I highly encourage you to review associated materials, including our GAAP and non-GAAP reconciliation. 
See slides below.
 Safe Harbor Statement
This post contains non-GAAP financials measures relating to the company's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures at http://investors.linkedin.com/ and additional details regarding the use of non-GAAP measures below. This presentation also contains forward-looking statements about our products, including our investments in products, technology and other key strategic areas, certain non-financial metrics, such as member growth and engagement, and our expected financial metrics such as revenue, adjusted EBITDA, depreciation and amortization and stock-based compensation for the fourth quarter of 2013 and the full fiscal year 2013. 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 associated with: our limited operating history in a new and unproven market; 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; 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; our core value of putting members first, which may conflict with the short-term interests of the business; privacy and changes in regulations in the United States, Europe or elsewhere, 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 ability to recruit and retain our employees; the application of US 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 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 that was filed for the year ended December 31, 2012, and additional information will also be set forth in our Form 10-Q that will be filed for the quarter ended September 30, 2013, 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 29, 2013, and LinkedIn undertakes no duty to update this information.
Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with 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 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 competitors' 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 various non-GAAP measures facilitates internal comparisons to historical operating results and comparisons to competitors' operating results.
Income tax effect of non-GAAP adjustments. The company adjusts non-GAAP net income by including the income tax effects of excluding stock-based compensation and the amortization of acquired intangible assets. The company believes that the inclusion of the income tax effects provides additional transparency to the overall or “after tax” effects of excluding these items from non-GAAP net income.
Dilutive shares under the treasury stock method. During the third quarter of 2013, the company excluded 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 “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 guidance to net income (loss) guidance because it does not provide guidance for either other income (expense), net, or provision for income taxes, which are reconciling items between net income (loss) and adjusted EBITDA. As items that impact net income (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 income (loss) is not available without unreasonable effort.