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LinkedIn Profit, Sales Beat Estimates After Membership Swells

February 08, 2013

LinkedIn Profit, Sales Beat Estimates After Membership Swells

Advertisers flocked to LinkedIn's site as membership swelled 8 percent to 202 million, from 187 million in the prior quarter. Photographer: Tim Boyle/Bloomberg

LinkedIn Corp. (LKND:US), the biggest online professional-networking service, surged to a record after increased membership helped fourth-quarter profit and sales beat analysts’ estimates.

LinkedIn, based in Mountain View, California, advanced 21 percent to $150.48 at the close in New York, leaving the shares up 31 percent this year.

Revenue jumped 81 percent to $303.6 million, the company said in a statement yesterday. That topped the average analyst (LNKD:US) estimate of $279.7 million, according to data compiled by Bloomberg. Profit excluding some items was 35 cents a share, topping the average 19-cent projection.

Advertisers flocked to LinkedIn as its user base rose 8 percent to 202 million. As LinkedIn continues to establish itself as the most popular site for job seekers, the company is selling more subscriptions to help recruiters find the right people. Revenue (LNKD:US) from talent solutions, Web-based software that recruiters and employers use to fill jobs, climbed 90 percent to $161 million, accounting for 53 percent of total sales.

“Investors clearly like LinkedIn’s mix of advertising and fee revenue, both of which are experiencing exceptional growth,” said Paul Sweeney, a Bloomberg Industries analyst in New York, who follows media and Internet companies.

Subscription Model

LinkedIn’s shares have more than tripled since its initial public offering in May 2011, outperforming other consumer Web companies that have recently sold shares. Through yesterday, Facebook Inc. (FB:US) had dropped 25 percent since its IPO in May 2012, while Groupon Inc. and Zynga Inc. had lost more than 69 percent of their value since first selling shares in late 2011. Pandora Media Inc. had fallen 28 percent since going public in June of that year.

LinkedIn differs from each of those companies in that most of its revenue comes from subscriptions, rather than ads or one- time transactions. Its stock performance more closely resembles business-software companies Workday Inc. (WDAY:US) and ServiceNow Inc., which have surged since their IPOs last year.

Today’s surge in LinkedIn’s stock added about $442 million to Chairman and co-founder Reid Hoffman’s wealth. Hoffman, who helped start LinkedIn in 2003, owns 17.4 million Class B shares, worth $2.60 billion.

LinkedIn forecast first-quarter revenue of $305 million to $310 million, exceeding analysts’ $301.3 million prediction. For the full year, sales will be $1.41 billion to $1.44 billion.

Raising Prices

Starting in the second quarter, the company will raise subscription prices for products targeting recruiters and promoting job openings. The “mid-single digits” percentage increase will be in the U.S. and some other regions, LinkedIn Chief Financial Officer Steven Sordello said on a conference call yesterday.

In the past year, LinkedIn has revamped its profile pages and offered more features to keep users coming back even when not job hunting or recruiting, providing a more desirable place for marketers. The company said it’s adding about two members each second, and 64 percent now come from outside the U.S.

Advertising revenue in the fourth quarter rose 68 percent to $83.2 million, and sales from premium subscriptions with extra features for job seekers increased 79 percent to $59.4 million.

Fourth-quarter net income, which includes stock-based compensation costs and amortization of intangible assets, climbed to $11.5 million, or 10 cents a share, from $6.92 million, or 6 cents, a year earlier.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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Companies Mentioned

  • LNKD
    (LinkedIn Corp)
    • $198.52 USD
    • -6.86
    • -3.46%
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