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Revenues Grow Across Segments
LinkedIn, the largest global online professional network, reported
non-GAAP net income of $73 million for Q1 2015, compared to $47 million
in the prior-year quarter. However, the company logged a wider net loss
attributable to common stockholders of $43 million, compared to the
year-ago quarter’s net loss of $13 million. LinkedIn’s adjusted EBITDA
for the quarter stood relatively flat compared to the prior-year quarter
at 25% of net revenues or $160 million. However, the company, which is
believed to have a user base of more than 350 million, did not provide
an update for its user base for the quarter that is a crucial indicator
of performance when it comes to social networks. Experts had expected
the number of users to grow to at least 362 million during the quarter.
Segment wise, LinkedIn saw 36% year-over-year growth in revenues to
$396 million from its Talent Solutions division that continued to remain
the biggest contributor to the company’s revenues at 62% of total
revenue. The Marketing Solutions division logged 38% year-over-year
growth to $119 million, representing 19% of the company’s total
revenues, while the Premium Subscriptions division saw 28%
year-over-year growth to $122 million, accounting for another 19% of
total revenues. Although LinkedIn continues to penetrate other markets
such as China, the US remains the company’s largest market, contributing
nearly 61% of overall revenues at $389 million during the quarter.
During the quarter, LinkedIn continued to make substantial
acquisitions to boost revenue growth. The company announced the
acquisition of Lynda.com for $1.5 billion during the quarter in a bid to
capitalize on the growing online learning sector, and Refresh.io with
the aim of making social insights and analytics on its mobile app more
predictive. LinkedIn also purchased Career-ify to improve its tools for
online recruitments and announced the launch of Elevate, a new paid
product that allows employees to share story links across social media
networks.
Bleak Outlook for Q2 2015
Following the results, LinkedIn also provided its outlook for the
second quarter of fiscal 2015. The company said it expected to generate
revenues in the $670-$675 million range with EBITDA of around $120
million and non-GAAP earnings of 28 cents a share. While the numbers
compare poorly to the consensus estimate of 74 cents a share on revenues
of around $718 million for the quarter, LinkedIn attributed its
downbeat guidance to anticipated amortization, depreciation and
stock-based compensation costs to the tune of nearly $236 million during
the quarter. LinkedIn also projected a mere $3 million in revenues
generated through Lynda.com during the second quarter and around $20-$25
million during the full fiscal 2015. This again compares poorly to
revenues of $150 million that Lynda.com generated in fiscal 2014 prior
to its acquisition.
Final Thoughts
With the company’s earnings beating expectations in every quarter
since it went public, experts and investors alike were bullish going
into LinkedIn’s Q1 2015 report. The company reported
better-than-expected results for the quarter, with revenue growth across
all segments. However, LinkedIn offered a rather bleak guidance for the
second quarter citing an anticipated growth in expenses, which has not
gone down well with investors. LinkedIn shares crashed in after-hours
trading and the trading community is by and large bearish regarding the
company’s stock. However, experts are looking at an average annual
earnings growth rate of nearly 37% for LinkedIn over the next five
years, and expect the company’s recent acquisitions and launches to show
results by end of the fiscal, when the earnings is projected to peak.
Consequently, the LinkedIn stock currently carries a ‘buy’ guidance
although sceptics could consider a ‘hold’.
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