LinkedIn Conference Call Highlights

LinkedIn LNKD reported its first quarter earnings on May 2, 2014. Shares of the company are down 7.30 percent or $11.77 per share to $149.40. Below are some key takeaways from its conference call:

Chief Executive Officer, Jeff Weiner:

LinkedIn profiles have become the standard way for hundreds of millions of people to build and maintain their professional identities, not merely a digital resume, but a rich portfolio of their experience, skills, and knowledge. We know that the more complete a profile is, the more useful it becomes to that member. For example, profiles with photos generate 14 times more views than those without.

Profile completeness is an ongoing priority for LinkedIn. To that end, in February, LinkedIn launched a new version of Who's Viewed My Profile, an analytics dashboard that gives members actionable intelligence on how they can build their professional brands.

Chief Financial Officer, Steve Sordello:

The balance sheet remains healthy with $2.3 billion of cash and marketable securities.

For taxes, GAAP expense totaled $14 million, higher than our $10 million to $12 million expectation, as GAAP tax remains an area of limited visibility. Our non-GAAP tax expense was $26 million, resulting in a 35% rate. Beginning this quarter, we have updated our non-GAAP tax forecasting to reflect a static tax rate, allowing us to have better visibility and we expect a 35% non-GAAP rate for the remainder of 2014.

GAAP net loss in the quarter was $13 million, resulting in a loss per share of $0.11 on 121 million fully diluted shares compared to a gain of $23 million and $0.20 of EPS last year. On a non-GAAP basis, net income was $47 million for EPS of $0.38 on 125 million fully diluted shares compared with $52 million and $0.45 last year.

Turning to first quarter results, member metrics were healthy. Cumulative members grew 36% year-over-year, unique visitors increased 26%, and total page views, including mobile, grew 43%. Desktop-only page views increased 13%, consistent with the approximately 10% growth range we expect for the full year.

With regard to monetization, growth was strong across all three product lines, leading to $473 million in revenue, an increase of 46% year-over-year. Talent Solutions continued to perform well as our largest and fastest growing revenue line. Revenue increased 50% year-over-year to $276 million, representing 58% of our overall business compared to 57% last year.

The underlying fundamentals of the business remain strong. Within the field sales channel, roughly 75% of Talent Solutions revenue, the sales force executed well, generating growth in excess of 50% year-over-year. The self-serve portion of Talent Solutions, approximately 25% of the product line, also performed well, with growth similar to Q4. Growth from online job listings was strong, partially driven by price increases in select markets, and we also saw strength in job seeker subscription growth.

Going forward, we will maintain this long-term focus by investing in the strategic priorities outlined last quarter, including newer initiatives such as expanding our publishing platform, scaling our jobs initiative, and making progress in our nascent sales business. We are excited for the rest of 2014, and believe our investments will continue to create a more engaging member experience while transforming the way our customers hire, market, and sell. Thank you for your time and we will now take questions.

Users:

Weiner: Q1 was a strong quarter for LinkedIn across both member engagement and financial results. We made significant progress against several key strategic priorities, such as international expansion via China, professional publishing, and the shift to content marketing.

Weiner: For Q1, overall revenues grew 46% to $473 million. We delivered adjusted EBITDA of $117 million, and non-GAAP EPS of $0.38. At the end of Q1,cumulative members grew 36% year over year to 296 million, and in April, we crossed the 300 million member threshold, including 100 million in the United States.

Weiner: As measured by comScore, which excludes mobile, LinkedIn and SlideShare combined for an average of 186 million monthly unique visitors in Q1. When excluding SlideShare, we averaged 142 million monthly unique visitors and totaled 11.5 billion page views during Q1.

Weiner: When measuring these metrics internally, which include mobile, we remain encouraged by strong member engagement. Internally measured unique visiting members grew approximately 26% year over year, and total member page view grew 43% in Q1.

Weiner: Going back two years to Q1 2012, when we began a period of accelerated product innovation, engagement per visiting member has increased more than 40%.

Weiner: Mobile continues to be the fastest growing channel for member engagement, growing nearly 3x the rate of overall member uniques to represent 43% of our monthly unique visitors in Q1. In anticipation of our expectation that mobile will exceed half of total traffic later this year, mobilizing our technology infrastructure, engineering team, and products remains one of LinkedIn's most important priorities.

Weiner: In Q1, we also took significant steps toward our mission to connect the world's professionals with the launch of our beta site in simplified Chinese. This localized site aims to broaden the member base from four million English language members today, and to appeal to the 140 million professionals and students in China.

Weiner: Long-form publishing is available to several hundred thousand members now, and will grow throughout the year. Early indications are positive. So far, we've seen greater than six times projected uptake of the functionality, more than four times the number of page views per post, and more than twice the number of posts per author than we had initially projected.

Sordello: First quarter member results reflect the successful long-term investments made in mobile, content, and the underlying technology platform, which have led to an all-time high level of page views per unique member. In the short-term over the next few quarters, we expect some year-on-year compression in engagement comps.

Weiner: These product lines transform the way our customers hire, market, and sell on a global basis. In Q1, Talent Solutions grew 50% to $276 million; Marketing Solutions was up 36% to $102 million; and Premium Subscriptions increased 46% to $96 million.

Mobile:

Weiner: On the mobile front, we launched Recruiter on Android and released an enhanced version of Recruiter for iPhone. We believe that LinkedIn is still in the early days of fundamentally transforming the talent industry and in the coming years, are focused on growing the business to the point where LinkedIn powers half of all of our customers' hires.

Weiner: In Marketing Solutions, Q1 saw accelerating momentum of our shift toward content marketing. Sponsored Updates now represents 19% of revenue for Marketing Solutions, an increase from 13% last quarter. We recently surpassed 3,000 active customers running Sponsored Update campaigns, many of which are renewals from last year.

Sordello: First quarter member results reflect the successful long-term investments made in mobile, content, and the underlying technology platform, which have led to an all-time high level of page views per unique member.

Sordello: Turning to first quarter results, member metrics were healthy. Cumulative members grew 36% year-over-year, unique visitors increased 26%, and total page views, including mobile, grew 43%. Desktop-only page views increased 13%, consistent with the approximately 10% growth range we expect for the full year.