LinkedIn Corp. (LNKD, Financial) recently reported its first quarter results for fiscal 2015 on the heels of results from rival social network businesses Facebook (FB, Financial) and Twitter (TWTR, Financial). The company logged 35% year-over-year growth in sales to $638 million and non-GAAP earnings of $0.57 a share, beating the consensus earnings estimate of $0.56 a share on revenues of $636.5 million and the company’s own guidance of $0.53 a share on revenues of $618-$622 million. However, a weak guidance for the second quarter sent LinkedIn shares tumbling during the day’s trading. The company’s shares closed at $252.13 before plummeting more than 27% to $199.3 in after-hours trading.
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’.
