Source: Seeking Alpha
Q2 2014 Earnings Conference Call
July 31, 2013 5:00 PM ET
Matt Sonefeldt – IR
Jeff Weiner – CEO
Steve Sordello – CFO
Mark Mahaney – RBC Capital Markets
Heath Terry – Goldman Sachs
Eric Sheridan – UBS
Gene Munster – Piper Jaffray
Mark May – Citigroup
Robert Peck – SunTrust
Kerry Rice – Needham
Brian Pitz – Jefferies
Andrew McNellis – Evercore
Doug Anmuth – JP Morgan
Aaron Kessler – Raymond James
Dan Salmon – BMO Capital Markets
Good afternoon. My name is Hope, and I will be your conference operator today. At this time, I would like to welcome everyone to the LinkedIn Second Quarter 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions).
Thank you. Mr. Mr. Matt Sonefeldt, you may begin your conference.
Matt Sonefeldt – IR
Good afternoon. Welcome to LinkedIn’s second quarter of 2014 earnings call. Joining me today to discuss our results are CEO Jeff Weiner, and CFO Steve Sordello.
Before we begin, I would like to remind you that during the course of this conference call, management will make forward-looking statements which are subject to various risks and uncertainties. These include statements relating to expected member growth and engagement, our product offerings including mobile and our product deployment process, the results of our R&D efforts, revenue including revenue growth rates of our three product lines Talent Solutions, Marketing Solutions, and Premium Subscriptions, adjusted EBITDA, depreciation and amortization, stock based compensation, earnings per share, share dilution, taxes, the product mix between online and field sales, and other drivers of our business. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. A discussion of risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission, in particular the section entitled Risk Factors in our quarterly and annual reports, and we refer you to these filings.
Also, I would like to remind you that during the course of this call, we may discuss some non-GAAP measures in talking about the company’s performance. Reconciliations to the most directly comparable GAAP financial measures are provided in tables in our earnings release. This conference call is also being broadcast on the internet and is available through the Investor Relations section of the LinkedIn web site.
Lastly, this quarter on our Investor Relations web site, we have included supplemental slides discussing our Talent Solutions market opportunity and go-to-market. We have also included in our selected company metrics and financials table, history of our internally measured member metrics, the recasted history of Talent and Marketing Solutions revenue, and a field versus online revenue breakout for Talent Solutions.
With that, I will turn the call over to our CEO, Jeff Weiner.
Thank you, Matt, and welcome to today’s conference call. I’ll start by summarizing the operating results for the second quarter of 2014, and I’ll recap some of the key milestones that highlight the success of our strategy. I’ll then turn it over to Steve for a more detailed look at the numbers and outlook.
LinkedIn delivered strong financial results in the second quarter, while maintaining continued investment in our member and customer offerings. We made significant progress against several key strategic priorities, including increasing the scale of job opportunities on LinkedIn; expanding our professional publishing platform; adding to our growing portfolio of mobile apps; and successfully positioning our Marketing Solutions business for the future through the growth of Sponsored Updates.
We are also excited about today’s launch of the all new Sales Navigator and last week’s acquisition of Bizo. Both underscore the opportunities we have to continue building a scalable, diverse business, that adds value for our members and customers based on the critical mass of the LinkedIn network.
For Q2, overall revenues grew 47% to $534 million. We delivered adjusted EBITDA of $145 million, and non-GAAP EPS of $0.51. We continue to see healthy member engagement dynamics across LinkedIn, especially in light of the challenging year-over-year comparison that we discussed last quarter.
During Q2, cumulative members grew 32% to 313 million. Internally-measured unique visiting members to LinkedIn grew 13% to an average of 84 million per month, and internal member pageviews grew 22% percent to 25 billion for the quarter, well ahead of unique member growth.
Organic engagement is one area of particular strength, driven by our mobile and content efforts. Homepage traffic, as measured by unique visiting members, continues to outpace overall site traffic growth, increasing approximately 40% faster over the past year.
Mobile also continues to drive a growing share of engagement, growing more than three times as fast as overall uniques. Mobile now accounts for 45% of total traffic to LinkedIn. The value we deliver to members remains consistent. We enable professionals to build and manage their identities; create and leverage their professional networks; and gain the knowledge they need to be more successful in their careers, across multiple screens and devices.
We want to highlight a few of our efforts since the start of the year that deliver across these value propositions. Within identity, in June, we revamped the design of profiles on LinkedIn’s desktop site to make them more visually distinctive and personalized; and earlier this week we launched a major redesign of the LinkedIn profile. The new profile, first introduced on our flagship mobile app, helps members define their professional identities more quickly and effectively. It adds important contextual information, including Recent Activity such as updates and long-form posts, and makes it easier for members to ensure their profiles are up-to-date.
Changes to LinkedIn Profiles help members better showcase their professional brands and get more value out of their LinkedIn networks; and now they can be found more effectively through Galene, our new search architecture rolled out in June. Pageviews to content driven by search have since accelerated.
Specific to network, earlier this month, we unveiled Connected on iOS, the newest mobile app in our growing multi app portfolio. Connected enables LinkedIn members to strengthen their professional relationships by delivering timely updates and opportunities to engage with the people in their networks. Connected has quickly become a top app in the App store business category. Early data shows that active users of the app are using it on average more than four days per week, suggesting that Connected has already become an integral part of each work day.
We also continue to grow the network through international expansion; 67% percent of LinkedIn members come from outside the United States. After launching our Simplified Chinese site in February, China has now become our fastest growing major market for new members over the past several months.
On knowledge, we continue to see LinkedIn members embrace the idea of creating and consuming long-form content through the publishing platform. Thus far, we’ve ramped the functionality to over 15 million members, on our way to opening up publishing to every member on LinkedIn. We’re encouraged by the early trends, recently surpassing 30,000 weekly long-form posts. Since launching in February, traffic to publisher and Influencer posts is up more than 100%.
Finally, two weeks ago, we announced the acquisition of Newsle to accelerate our ability to deliver relevant content to our members. Newsle’s technology finds blogs and articles that mention people who may be professionally relevant to you and notifies you seconds after publication. While we are currently maintaining Newsle’s standalone site and app, we are already beginning to integrate the functionality into our existing offerings, including the new Sales Navigator launched today.
Creating value for our members enables us to deliver useful offerings to customers of our Talent Solutions, Marketing Solutions, and Premium Subscriptions products. These product lines transform the way our customers hire, market, and sell on a global basis.
In Q2, Talent Solutions grew 49% to $322 million; Marketing Solutions was up 44% to $106 million; and Premium Subscriptions increased 44% to $105 million. For Talent Solutions, our goal is to power the world’s hires. In order to achieve this goal, we are investing in our existing portfolio of recruiting products, as well as increasing our focus on members actively looking for work opportunities.
In May, we began testing ‘limited listings’, an initiative that dramatically grows the number of job opportunities made available on LinkedIn for active job searchers. There are now more than one million jobs on LinkedIn, compared to only 300,000 plus jobs just a few months ago. We expect this number to continue to ramp through Q3 and beyond.
In addition, in June we launched the LinkedIn Job Search App for iPhone. The app addresses the growing level of mobile job interaction on LinkedIn, which at the end of Q2 accounted for more than 40% of all job views versus approximately 25% a year ago. Engaged users of the new app are using it to view an average of 15 jobs per week.