LinkedIn’s Q3 2014 Earnings
October 30, 2014
Editor’s Note: We’d like to share with you the announcement related to our 2014 third quarter earnings. We’ll also be providing updates from the earnings call on StockTwits starting at 2pm Pacific Time today.
Today, we reported our financial results for the third quarter 2014. LinkedIn demonstrated strength in the third quarter, leveraging the scale created by our member network to deliver growth across all three product lines.
- Revenue for the third quarter was $568 million, an increase of 45% compared to $393 million in the third quarter of 2013.
- Net loss attributable to common stockholders for the third quarter was $(4.3) million, compared to net loss of $(3.4) million for the third quarter of 2013. Non-GAAP net income for the third quarter was $66 million, compared to $47 million for the third quarter of 2013. 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 $151 million, or 27% of revenue, compared to $93 million for the third quarter of 2013, or 24% of revenue.
- GAAP diluted EPS for the third quarter was $(0.03), compared to GAAP diluted EPS of $(0.03) for the third quarter 2013; non-GAAP diluted EPS for the third quarter was $0.52, compared to non-GAAP diluted EPS of $0.39 for the third quarter of 2013.
We continue to make aggressive investments in our member and customer platforms in order to realize our long-term potential.
- Talent Solutions: Revenue from Talent Solutions products totaled $345 million, an increase of 45% compared to the third quarter of 2013. Talent Solutions revenue represented 61% of total revenue in the third quarter of 2014, compared to 60% of total revenue in the third quarter of 2013.
- Marketing Solutions: Revenue from Marketing Solutions products totaled $109 million, an increase of 45% compared to the third quarter of 2013. Marketing Solutions revenue represented 19% of total revenue in the third quarter of 2014 and 2013.
- Premium Subscriptions: Revenue from Premium Subscriptions products totaled $114 million, an increase of 43% compared to the third quarter of 2013. Premium Subscriptions represented 20% of total revenue in the third quarter of 2014 and 2013.
I highly encourage you to review associated materials, including our GAAP and non-GAAP reconciliation. 
I will co-host a webcast/conference call with our CEO Jeff Weiner to discuss our financial results for the third quarter 2014 and business outlook today at 2:00PM Pacific Time. The full transcript of the webcast/conference call can be downloaded from our press center.
See slides below.
 Safe Harbor
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 customer and member growth and engagement, and our expected financial metrics such as revenue, adjusted EBITDA, non-GAAP EPS, depreciation and amortization, stock-based compensation and fully-diluted weighted shares for the fourth quarter of 2014 and the full fiscal year 2014. 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, 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 international operations; our ability to recruit and retain our employees; the application of U.S. 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 for the year ended December 31, 2013, and additional information will also be set forth in our Form 10-Q that will be filed for the quarter ended September 30, 2014, 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 post is as of October 30, 2014, and LinkedIn undertakes no duty to update this information.
Non-GAAP Financial Measures
To supplement its condensed 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 peer 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 the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peer operating results.
Accretion of redeemable noncontrolling interest. The accretion of redeemable noncontrolling interest represents the accretion of the company's redeemable noncontrolling interest to its redemption value. The company excludes the accretion 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 operating performance. In addition, excluding this item from the non-GAAP financial measures facilitates comparisons to historical operating results and comparisons to peer operating results.
Income tax effects and adjustments. The company adjusts non-GAAP net income by considering the income tax effects of excluding stock-based compensation and the amortization of acquired intangible assets. Beginning in the first quarter of 2014, the company has implemented a non-GAAP tax rate for evaluating its operating performance as well as for planning and forecasting purposes. This projected non-GAAP tax rate eliminates the effects of non-recurring and period specific items, which can vary in size and frequency and does not necessarily reflect our long-term operations. Historically, the company computed a non-GAAP tax rate based on non-GAAP pre-tax income on a quarterly basis. Based on our current forecast, a non-GAAP tax rate of 35% has been applied to our non-GAAP financial results for the current period. The company believes that adjusting for these income tax effects and adjustments 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 periods with a net loss, 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 or non-GAAP EPS guidance to net income (loss) or GAAP EPS guidance because it does not provide guidance for either other income (expense), net, or GAAP provision for income taxes, which are reconciling items between net income (loss) and adjusted EBITDA and non-GAAP EPS. 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.