LinkedIn Q1 Beats On Sales Of $638M, EPS Of $0.57, Shares Tank On Weak Outlook

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The Worst Business Mantra Is ‘Spend The Company’s Money Like It’s Your Own’

After Facebook and Twitter reported mixed results this week, LinkedIn today was the latest of the social networks to report its Q1 earnings. The company, which has over 350 million users globally, posted sales of $638 million, up 35% year on year, with non-GAAP earnings per share of $0.57. Both beat analyst expectations but the stock is taking a big hit in after-hours trading, down more than 27%, because of its weak outlook for the quarter ahead that is falling well short of analyst expectations. After the earnings call, shares stabilized at around 20% drop.

In Q2, the company says it will see revenues of between $670 million and $675 million, with EBITDA expected to be approximately $120 million and non-GAAP EPS coming right down to $0.28. These numbers are significantly lower than what analysts had been anticipating ($718 million in revenues; $0.74 EPS).

“The company expects depreciation of approximately $68 million, amortization of approximately $24 million, and stock-based compensation of approximately $144 million. The company also expects approximately 129 million fully-diluted weighted shares,” it notes.

It also says that it expects Lynda.com to contribute about between $20 million and  $25 million in 2015 revenue, with only $3 million in Q2. Lynda.com generated revenues of $150 million in 2014 but CEO Jeff Weiner said in the call that the amount that the company could recognise was “seriously diluted.”

For the current quarter, analysts had been expecting adjusted earnings per share of $0.56 per share, on revenues of $636.5 million, numbers that the company beat. LinkedIn also beat its own guidance of  $618-622 million in revenues and non-GAAP EPS of $0.53.

LinkedIn has actually beaten earnings expectations in every quarter since it went public in May, 2011, and analysts were again bullish going into today’s report.

Still, perhaps because of the overall pounding that stocks for other social companies like Twitter are facing, LinkedIn’s shares were trading down a couple of percentage points as market close approached today.

In addition to the forecast for Q2, another number to point out is that LinkedIn is not updating its user numbers in this quarter, continuing to state that it has “over 350 million” users. User and revenue growth are two metrics that have been scrutinised by analysts when it comes to social networks — one reason why LinkedIn is making significant acquisitions to further its own revenue growth (more on that below).

It also, however, posted a widened net loss attributable to common stockholders of $43 million, versus $13 million a year ago. Non-GAAP net income for the first quarter was $73 million, versus $47 million for the quarter a year ago. (LinkedIn notes that non-GAAP net income excludes tax affected non-cash items, such as stock-based compensation and amortization of acquired intangible assets.)

Adjusted Ebitda remained at a constant proportion of revenues: $160 million, or 25% of revenue, versus $117 million for Q1 2014, also 25% of revenue.

“Q1 was a solid quarter in which we made meaningful progress against our multi-year strategic roadmap,” said Jeff Weiner, CEO of LinkedIn in a statement. “During the quarter, we maintained steady growth in member engagement while achieving strong financial results.” We’ll have more LinkedIn comments from the earnings call later.

LinkedIn’s biggest news of the last several months was its acquisition of Lynda.com for $1.5 billion, spearheading the company’s move into a whole new business category, online learning. The transaction is expected to close some time in the current quarter, and LinkedIn may talk a bit more about its plans in today’s call. (We’ll update as and when they do.)

Forging a new business in online education makes a lot of sense for LinkedIn, as it builds on its existing community of users who come to the site to network with other professionals, and look for jobs. LinkedIn continues to monetize in both of those areas — by way of paid job listings and searches; paid premium accounts for better access; and advertising — but online learning will help the company develop another reason for people to visit, stay and pay to be on LinkedIn.

Other recent big moves include the launch of a new product, Elevate, a paid tool for employees to share links to stories across social media networks (think: Hootsuite); the acquisition of Refresh.io to add more predictive analytics and social insights to its mobile app and other services; and the purchase of Careerify to enhance its online recruitment tools.

Breaking out individual operating categories, LinkedIn says that Talent Solutions — recruitment and job-finding services — remains its biggest revenue generator at 62% of total revenue (level with a year ago). It posted sales of $396 million, up 36% on a year ago.

Marketing solutions (its ad business) accounted for $119 million of revenues, up 38% on a year ago. Marketing Solutions were 19% of total revenue.

Premium subscriptions was $122 million, up 28% compared on last year and 19% of total revenue.

While LinkedIn continues to push into markets like China, the U.S. remains its biggest market, accounting for $389 million of revenues in Q1, or 61% of the total.

As a point of comparison, last quarter LinkedIn reported $643 million in revenues and EPS of $0.61.

More to come.