LinkedIn: Improving Results Indicate Better Times

Though LinkedIn (LNKD) shares have dropped to the tune of 15% this year, the company’s quarterly results indicate otherwise. LinkedIn has recorded tremendous growth in its latest results as the revenue had increased 33% to $712 million. This was driven by solid growth in the company’s business serving recruiters.

Revenue is growing at an impressive pace

On the other hand, its talent solutions revenue grew by 38% to $443 million, while marketing solutions revenue grew 32% to $140 million. Further, growth seen in U.S revenue was 40% to $445 million from last year’s second quarter of $318 million.
But, apart from an increase in revenue, LinkedIn also saw a rapid rise in costs.

Its total expenses increased to $792.8 million from $519.7 million last year, driven by an increase of 76% in depreciation and amortization, an increase of 78% in general and administrative expenses, and a 41% hike in sales and marketing expenses. At the same time, its product development expenses also rose 48%.

However, from an overall perspective, LinkedIn’s financial performance was positive as its net income had increased to $71 million from $63 million last year. Meanwhile, adjusted EBITDA increased to $163 million from $145 million.

The impressive growth in LinkedIn’s financial performance was a result of its increasing user base, which grew to 380 million for the quarter as compared to 313 million in the prior-year period. In addition, the count of unique visiting members increased to 97 million from 84 million for the same quarter last year. Moreover, page views by members also increased to 35 billion from 25 billion in the year-ago period.

What next?

Going forward, I think that LinkedIn will be able to sustain this momentum as the company has taken steps to increase its user base. For example, LinkedIn has acquired lynda.com for $1.5 billion. Through this acquisition, LinkedIn’s members will have access to quality courses offered in different languages. Also, Lynda.com serves various organizations through its Lynda Enterprise, Lynda Pro, Lynda Campus, Lynda Library, and Lynda Kiosk products.

Moving ahead, by launching an Arabic version, LinkedIn has increased its target audience. This step will help it in strengthening its Arabic media centre and help it develop local content and nurture Arabic talent.

Conclusion

As we saw above, LinkedIn is growing at an impressive pace. In addition, LinkedIn’s valuation further indicates that it will get better going forward. Looking ahead to third quarter, the company expects revenue to be in a range of $745 million and $750 million, along with adjusted EBITDA in the range of $146 million-$148 million. Hence, it is clear that LinkedIn anticipates more growth going forward, which makes the stock a good buy for the long run.
Published on Sep 24, 2015
By Harsh Singh Chauhan

Copyrighted 2016. Content published with author's permission.

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