LinkedIn’s weak outlook overshadows Q4

(Image courtesy of LinkedIn)
(Image courtesy of LinkedIn)

Investors sent shares of LinkedIn Corp. — the professional networking site based in Mountain View, Calif. — down after the company reported earnings Thursday. While the company was down for the fourth quarter but up for the year, its long-term strategy meant projections for 2014 came in below what Wall Street expected.

The company reported net income of $3.8 million, or 39 cents per diluted share, compared to net income of $11.5 million, or 35 cents per diluted share, for the fourth quarter of 2012.

GAAP diluted EPS for the fourth quarter 2013 came in at 3 cents per share, compared to 10 cents per share for the same year-ago quarter. Excluding special charges for stock-based compensation expenses the company reported net income of $48.2 million, or 39 cents per share, compared to net income of $40.2 million, or 35 cents per share year over year.

Wall Street analysts had expected earnings per share of 39 cents per share.

Revenue for the quarter came in at $447.2 million, up 47 percent in year-over-year growth. Though in Q3 of this year, LinkedIn reported fourth quarter revenue guidance of $415 million to $420 million, final revenues fall closet to initial investor forecasts of around $20 million more.

For the year, LinkedIn reported net income of $26.8 million, or 23 cents per share, up from $21.6 million, or 29 cents per share, for 2012. Excluding charges, the company reported profits of $191.8 million, or $1.61 per share, compared to $100.3, or 89 cents per share, for 2012.

LinkedIn CEO Jeff Weiner said on Thursday’s call with analysts, “LinkedIn stands at an inflection point,” stating that the company is moving into a phase where it wants to realize its larger vision of creating “economic opportunity for every member of the global workforce.”

To do this, LinkedIn is investing heavily within the company and looking to more long-term horizons. Some of its key strategic, multi-year initiatives include building the first economic graph, expanding presence in China, the extension of LinkedIn as a publishing platform and the acquisition of Bright, leading to improved relevance of job suggestions and offerings.

One of LinkedIn’s greatest strengths continues to be its diversified revenue strategy.

Talent Solutions — the company’s largest revenue driver, which provides tools for corporate recruiters — reported revenue of $245.6 million, up 53 percent from the reported $161.0 million a year ago. Talent Solutions revenue represented 55 percent of total fourth quarter revenue in 2013 up from 53 percent for the same quarter 2012. The company said this segment has seen continued product innovation. This year, LinkedIn introduced a new version of the flagship recruiter platform as well as extensions to mobile devices to better integrate the recruitment process.

Weiner said on the Q4 earnings call that the “long-term goal for Talent Solutions is to power half of the customer’s hires.”

Marketing Solutions, which accounts for advertising and job listings, grew 36 percent to $113.5 million, up from $83.2 million last year. Marketing Solutions contribution to total Q4 revenue was 25 percent, down from 27 percent in Q4 2012.

Referring to the Marketing Solutions segment, Weiner said: “2013 began the transition to a more sustainable and scalable content marketing model anchored by sponsored updates.” LinkedIn is currently piloting and seeks to expand sponsored updates later in 2014.

Premium Subscriptions, which are sold to salespeople and job seekers to make connections, contributed $88.1 million in revenue as compared to $59.4 million a year ago, showing an increase of 48 percent over the previous year.

Premium Subscriptions represented 20 percent of total fourth quarter revenues for both 2013 and 2012. The focus on this segment is on using data to improve existing options.

The company said 2014 will also see the launch of a lower-price general consumer subscription offering.

In 2012, LinkedIn began a new Sales Solutions offering with the launch of Sales Navigator. Management says that 2014 will focus on turning this self-serve product into a scalable and strong business unit and fourth revenue stream.

The company now is seeking to expand overseas.

In 2013, total LinkedIn membership grew 37 percent to 277 million members, adding 75 million this year alone. Nearly 70 percent of new members were professionals outside of the U.S., which now comprises 66 percent of the company’s consumer base.

On Jan. 15, the company announced the hiring of Derek Shen as President of LinkedIn China to spearhead this growth effort. LinkedIn currently has 4 million members in China but nearly 1-in-5 of the world’s knowledge workers and students live there, which represents a massive opportunity for the company.

LinkedIn also announced the acquisition of Bright Inc., a company whose products it hopes will help make the Talent Solutions platform faster and more relevant for recruiters and job seekers. Bright was acquired for approximately $120 million, approximately 73 percent in stock and 27 percent cash.

Looking ahead, the company said it expected first quarter revenues to range between $455 million and $460 million. The company expects depreciation and amortization to be approximately $48 million, and stock-based compensation to be approximately $68 million.

For the full year 2014, the company said it expects revenue to range between $2.02 billion and $2,05 billion.

Following yesterday’s announcement, shares of Linked In dropped on the New York Stock Exchange to $207.80 in after hours trading, a decline of 6.76 percent from the $223.45 at the 4 p.m. close. Shares were up slightly today to $208.25 before the market close.

While LinkedIn’s non-GAAP net income for Q4 2013 met Wall Street’s expectations, revenue outlook for Q1 and full year 2014 were lower than analysts’ expectations.

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