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(LNKD-NYSE)
Stock Rating:
Outperform
Industry Rating: Market Perform
$156.39
$250.00
Earnings/Share(US$)
2.0
250
1.5
200
1.0
150
0.5
100
50
0.0
Volume (mln)
200
200
100
100
0
LNKD Relative to S&P 500
400
200
$76, $250, and $425 when input into our expanded DCF model and having
EBITDA margin and FCF conversion estimates applied to them. Our analysis
suggests a total addressable market of approximately $9 billion in emerging
sales/student/China opportunities, while we estimate global B2B marketing
spending of ~$59 billion; this is all incremental to the $27 billion market
opportunity the company has identified for Talent Solutions. Our five-year/2019
bear-base-bull cases offer the following ranges for LinkedIn: 1) total registered
members of 571/684/791 million 2) global LinkedIn corporate solutions (LCS)
customer counts of 50,600/64,218/94,000; 3) Talent Solutions revenue of
$3.8/$5.8/$11.3 billion; 4) potential Sales Solutions revenue of $400
million/$1.1 billion/$1.3 billion; 5) Marketing Solutions revenue of $890
million/$1.5 billion/$3.6 billion (using a B2B marketing focus; we also present a
view based on native advertising); 6) potential Student Solutions revenue of
$465 million/$885 million/$1.5 billion, and; 7) potential Chinese revenue of
$445 million/$1.3 billion/$3.0 billion five years from now.
$257.56
$136.02
400
52-Week High
52-Week Low
200
2011
2012
2013
2014
(FY-Dec.)
EPS
P/E
CFPS
P/CFPS
Rev. ($mm)
EV ($mm)
EBITDA ($mm)
EV/EBITDA
Quarterly EPS
2012A
2013A
2014E
Dividend
Book Value
Shares O/S (mm)
Float O/S (mm)
Wkly Vol (000s)
Net Debt ($mm)
2012A
$0.89
2013A
$1.62
2014E
$1.74
89.9x
2015E
$2.62
59.7x
$0.88
$1.02
$1.22
nm
$2.61
59.9x
$972
$11,017
$223
49.4x
$1,529
$19,826
$376
52.7x
$2,084
$19,043
$514
37.0x
$2,821
$19,085
$806
23.7x
Q2
$0.16
$0.38
$0.40
Q3
$0.22
$0.39
$0.42
Q4
$0.35
$0.39
$0.54
Q1
$0.15
$0.45
$0.38a
$0.00
$21.22
124.9
100.5
12,038
-$509
Yield
Price/Book
Mkt. Cap (mm)
Float Cap (mm)
Wkly $ Vol (mm)
Next Rep. Date
0.0%
7.4x
$19,533
$15,714
$2,424
na
Please refer to pages 24 to 27 for Important Disclosures, including the Analyst's Certification.
Linkedln
Introduction
Although most investors remain focused on LinkedIns slowing corporate customer
growth, we continue to see new stories emerging. These are primarily focused on:
opportunities:
1)
An estimate of LinkedIns operations at year-end 2014. For some opportunities (like the
student market or China) there is essentially zero revenue at the moment. For others like
Talent Solutions we lay out a more detailed derivation than what is normally in our model.
2)
An estimate of LinkedIns total addressable market (TAM) today. LinkedIn management has
laid out a market size estimate for Talent Solutions (~$27 billion) and there are various
industry estimates available to help gauge the Marketing Solutions opportunity. We break
down these market sizes in more detail and also take a shot at the opportunity for Sales
Solutions, as well as the nascent China and student market opportunities.
3)
Bear, base, and bull cases for a five year outlook. We offer a range of potential outcomes for
where these revenues could be in five years (i.e. roughly 2019), but note that particularly for
China and the student market, precise timelines remain unclear as LinkedIn is just initially
exploring opportunities in both areas.
Before tackling the revenue opportunities we first scope out the basic components of
LinkedIns business: its total registered members and corporate solutions clients. This is
followed by the five revenue analyses and we complete the report by applying our five-year bear,
base, and bull revenue cases to our expanded DCF analysis in order to determine our $76-$250$425 set of share prices.
100 million registered users in the US, LinkedIn is approaching full penetration of the knowledge
workers in this country, with incremental growth coming from semi-skilled workers. We do not
expect LinkedIn to reach the scale of more broad social media properties like Facebook, due its
professional orientation, but we do see untapped potential for growth internationally (especially
China) and with both high school and post-secondary students.
Linkedln
5 Year Outlook
LNKD Ests.
TAM
Bear
Base
Bull
7,163
7,163
7,306
7,414
7,521
Global workforce
3,300
3,300
3,288
3,559
3,761
46.1%
46.1%
45.0%
48.0%
50.0%
313
600
511
593
677
Knowledge workers
4.4%
8.4%
7.0%
8.0%
9.0%
46
0.6%
180
2.5%
60
0.8%
91
1.2%
114
1.5%
360
780
571
684
791
5.0%
10.9%
7.8%
9.2%
10.5%
YE2014
5 Year Outlook
figures in millions
LNKD Ests.
TAM
Bear
Base
Bull
U.S. population
318
318
321
325
330
U.S. workforce
155
155
154
159
165
48.9%
48.9%
48.0%
49.0%
50.0%
89
105
93
101
112
28.1%
33.0%
29.0%
31.0%
34.0%
19
22
19
20
21
5.9%
6.8%
6.0%
6.2%
6.3%
108
127
112
121
133
33.9%
39.8%
35.0%
37.2%
40.3%
Linkedln
5 Year Outlook
LNKD Ests.
TAM
Bear
Base
Bull
46.2
46.2
44.0
46.2
47.0
% penetration
0.06%
0.43%
0.12%
0.14%
0.20%
29,071
198,464
50,600
64,218
94,000
5.7
5.7
5.5
5.7
5.8
0.2%
1.1%
0.3%
0.4%
0.7%
11,312
59,954
13,750
22,800
40,600
17,759
138,510
36,850
41,418
53,400
Source: International Finance Corporation's micro small and medium-size enterprises database
(http://www.econstats.com/wdi/wdiv_494.htm), company reports and BMO Capital Markets estimates.
Revenue Opportunities
1) Talent Solutions
Recruiter is the flagship product for Talent Solutions generating about half of segment
revenue today. Recruiter provides HR professionals and recruiters access to LinkedIns
professional database and the ability to sort through candidates based on multiple attributes such
as industry, job function, education, past experience, and geography. LinkedIn Recruiter is sold
on a monthly, quarterly or annual subscription basis while volume discounts were available to
very large clients initially, this practice has largely ceased and most new clients are on boarded at
the full price. The remaining 50% of Talent Solutions revenue is split roughly evenly between
Recruitment Media (generally job openings that are listed on a companys LinkedIn company
page or its related Careers page) and Paid Jobs (job openings listed elsewhere on the site,
including in the feed). Management has stated that there are currently around 1.5 million
recruiters and four million HR professionals on the site and that if all were monetized properly,
the company would be looking at around a $7-$10 billion opportunity. Our five-year base case
remains more conservative than this at just less than $6 billion.
Linkedln
5 Year Outlook
LNKD Ests.
TAM
Bear
Base
Bull
11,312
59,954
13,750
22,800
40,600
4.0
5.0
4.0
4.5
5.0
45,248
299,768
55,000
102,600
203,000
$600
$790
$675
$725
$750
326
2,842
446
893
1,827
50.0%
38.0%
50.0%
45.0%
40.0%
652
7,478
891
1,984
4,568
17,759
138,510
36,850
41,418
53,400
3.0
5.5
4.0
5.0
5.5
53,277
761,805
147,400
207,090
293,700
$423
$750
$600
$700
$725
271
6,856
1,061
1,740
2,555
50.0%
36.0%
50.0%
45.0%
38.0%
541
19,045
2,123
3,866
6,724
596
9,698
1,507
2,632
4,382
596
16,826
1,507
3,217
6,909
1,193
26,524
3,014
5,849
11,292
Source: International Finance Corporation's micro small and medium-size enterprises database
(http://www.econstats.com/wdi/wdiv_494.htm), company reports and BMO Capital Markets estimates.
Our Talent Solutions mini-model naturally begins with the LCS customer count. From here
we estimate a total number of Recruiter licenses per customer to arrive at total licences. Then a
monthly average revenue per user (ARPU) is applied to derive total estimated Recruiter revenue.
Finally, we estimate Recruiters percentage of estimated Talent Solutions revenue to arrive at our
totals. Because this mini-model (and most of those that follow) is built bottoms-up based on
LinkedIns key metrics, the total addressable market functionally acts like a super-duper bull
case as we stretch individual metrics to reach our TAM.
2) Sales Solutions
The standalone Sales Solutions platform is expected to launch in 2H14. We believe the
increased focus on this end-market will provide a strong growth driver, as we believe most
companies spend more on sales and marketing each year than they do on recruiting talent. We
expect the new product would be priced as an individual subscription as part of a broader
enterprise sale made to appropriate LinkedIn Corporate Solutions clients (i.e., a second product
for this important customer group). LinkedIn estimates that there are 5x as many salespeople on
its platform as HR professionals and recruiters. The new standalone Sales Solution is expected to
have additional features and tools to the existing Sales Navigator subscription product.
Linkedln
5 Year Outlook
LNKD Ests.
TAM
Bear
Base
13.8
13.8
13.0
14.0
15.0
51%
51%
54%
57%
60%
Bull
7.0
7.0
7.0
8.0
9.0
0.0%
30.0%
5.0%
10.0%
20.0%
0.0
2.1
0.4
0.8
1.8
$0
$75
$30
$40
$60
1,892
126
384
1,296
90.0
90.0
90.0
100.0
110.0
20.0%
20.0%
22.3%
26.3%
35.0%
18.0
18.0
20.0
26.3
38.5
% penetration
0.0%
30.0%
6.0%
8.0%
10.0%
0.0
5.4
1.2
2.1
3.9
$0
$50
$20
$30
$40
3,240
288
756
1,848
5,132
414
1,140
3,144
Our theoretical Sales Solutions mini-model begins with an estimate for total salespeople.
We felt this was more appropriate than starting with the LCS customer count and estimating the
average number of salespeople per LCS customer, as the Sales Solutions product is unlikely to be
applicable to all LCS customers. From here we estimate the number of salespeople for which the
standalone Sales Solutions is likely to be applicable (i.e., removing retail salespeople, etc.) to
arrive at an estimate of total subscribers. Finally, a monthly average revenue per user (ARPU) is
applied to derive total estimated Sales Solutions revenue.
the latter as it better lays out the available dollars from advertisers for whom LinkedIn should be
particularly effective rather than a narrow view of ad formats. However, seeing as native ads are
the preferred unit at the moment on the LinkedIn (i.e. Sponsored Updates) and as well as its most
direct comparables (Facebook, Twitter) and the legacy powers in online advertising (Google
search, Yahoo! Stream and search), we felt a supplemental view would help as well.
a) B2B Marketing
B2B marketing targets major budget delegators at large and medium businesses rather than
general market consumers. Typically B2B marketing aims to drive a smaller number of
transactions, but with much larger prices, like company-wide software/technology packages or
insurance programs. Therefore B2B marketing typically supports a lot of buyer research and
purchase consideration and has a much longer sales cycle than the average consumer good like a
quick-serve restaurant meal, tube of toothpaste or even a family SUV. While B2B advertising can
appear in spots often used for B2C (e.g. airport signage), it has some more specific venues to
itself like trade magazines narrowly focused on specific industries and trade shows and conferences
Linkedln
where those buyers can learn more in person. B2B online marketing also tends be more helpful in
moving buyers along long purchase consideration processes. So for example, email is a more
common tactic, and delivering white papers or highlighting an education webinar is common in
B2B, but rarely seen in B2C.
The total addressable market for B2B marketing is approximately $29 billion dollars in the
US per our analysis. Approximately 28% of those dollars are spent online today, roughly in line
with the share of online consumer advertising. As is our general rule of thumb with most
advertising estimates, we assume the US represents half in order to derive our global figures.
Today, LinkedIn can legitimately target the estimated $14 billion spent on US B2B magazines
and digital advertising (or an estimated $28 billion globally); we believe trade show spending
remains something for which LinkedIn is not an appropriate substitute, but wed see virtual
conferences and webinars as possible areas of product innovation that would make sense for
LinkedIn in the years to come. Note that because our two views of Marketing Solutions are
derived from established industry revenue estimates, we do not need to apply any super-duper
Bull LinkedIn share to derive TAM.
5 Year Outlook
LNKD Ests.
TAM
Bear
Base
Bull
14,887
14,887
15,185
15,631
15,929
B2B magazines
7,785
7,785
7,941
8,174
8,330
(1,946)
(1,946)
(1,985)
(1,880)
(1,833)
22.0%
25.0%
25.0%
25.0%
23.0%
5,839
5,839
5,956
6,294
6,497
Digital advertising
8,201
8,201
8,365
8,611
8,775
28,927
28,927
29,505
30,537
31,202
1.0%
na
1.3%
3.0%
6.0%
282
na
379
916
1,872
LNKD Ests.
TAM
Bear
Base
Bull
29,774
29,774
30,369
31,263
31,858
YE2014
Global
Live and virtual events
B2B magazines
Less: B2B magazines subscription estimate
B2B mag subscription est. as a % of B2B mag rev.
5 Year Outlook
15,570
15,570
15,881
16,349
16,660
(3,893)
(3,114)
(3,970)
(3,760)
(3,499)
21.0%
25.0%
20.0%
25.0%
23.0%
11,678
12,456
11,911
12,588
13,161
Digital advertising
16,402
16,402
16,730
17,222
17,550
57,854
58,632
59,011
61,073
62,570
0.8%
na
1.5%
2.5%
5.8%
470
na
890
1,527
3,629
Source: Veronis Suhler Stevenson 26 edition, GroupM, company reports and BMO Capital Markets estimates.
represent 19% of Marketing Solutions revenue as of 1Q14. In our framework, we use global
display ad spending from WPPs GroupM and then apply an estimated percentage which we
Linkedln
believe has/will transition to these more customized style of formats rather than traditional banner
ad units.
Like other native ad sellers (e.g., Facebook, Twitter, and Yahoo!), LinkedIn is seeing higher
click-through rates on Sponsored Updates, roughly 4x-10x that of its display ads. While we
dont expect this to last (all new ad formats tend to perform better at first, then ease off as users get
used to them), these formats do seem to have cracked the code for mobile marketing, as they work
well in feed-style content presentation that is browsed through easily on smartphones.
5 Year Outlook
LNKD Ests.
14,990
14,990
15,140
15,440
15,740
10.0%
50.0%
40.0%
50.0%
60.0%
1,499
7,495
6,056
7,720
9,444
3.6%
na
1.3%
4.0%
11.7%
54
na
76
309
1,102
19.0%
na
20.0%
33.7%
58.9%
282
na
379
916
1,872
LNKD Ests.
TAM
Bear
Base
Bull
29,360
29,360
29,653
30,241
30,828
10.0%
50.0%
40.0%
50.0%
60.0%
2,936
14,680
11,861
15,120
18,497
3.0%
na
1.5%
5.0%
11.7%
88
na
178
756
2,158
18.7%
na
20.0%
49.5%
59.5%
470
na
890
1,527
3,629
TAM
Bear
YE2014
Global ($ in millions)
Base
Bull
5 Year Outlook
4) Student Services
This is a long term opportunity in which LinkedIn is only just beginning to make a presence.
The company has begun bringing schools onto the platform through University Pages to help
build visibility among both high school and college student user bases. LinkedIn already has an
estimated 39 million student members and around 24,000 University Pages. Competition for
students social media attention is fierce and LinkedIn is not the place they will spend most of
their social media time. However, LinkedIns economic graph and professional focus makes it a
vital resource for those beginning their careers, arguably more valuable than it is for current
professionals who have networking opportunities outside of LinkedIn. For high school students
entering the post-secondary portion of their educations, LinkedIn is not as immediately useful as
it is for those looking for their first full-time job, but University Pages could eventually serve as a
base for a multitude of services to help prospective students learn about and apply to a postsecondary school.
Linkedln
5 Year Outlook
LNKD Ests.
TAM
Bear
Base
Bull
26,500
40,000
30,000
33,000
35,000
1,750
4,500
2,000
2,750
3,250
46
180
60
91
114
6,650
7,250
6,800
6,900
7,000
2,800
3,000
2,850
2,900
2,950
19
22
19
20
21
departments (to help graduating seniors find new jobs) or to high schools university guidance
departments (to help graduating seniors find a post-secondary school). These products could be
offered on a subscription basis like Recruiter. Also similar to Talent Solutions Paid Jobs ad
products, LinkedIn could create opportunities for post-secondary schools to use LinkedIn to
recruit students. There is competition waiting for all of these revenues most notably Chegg
(CHGG, $6.77; Market Perform), the college textbook rental service that is building its own
student-focused social network -- but particularly in post-secondary career services, we believe
LinkedIn has a unique positioning. For example, there should be a natural synergy with Talent
Solutions, where HR departments are waiting for the new graduates. Although, no specific
monetization products are planned for students yet, the push into this market will increase the user
base and activity on LinkedIn and help drive Marketing Solutions revenue in the interim.
5 Year Outlook
LNKD Ests.
TAM
Bear
Base
Bull
6,650
7,250
6,800
6,900
7,000
0.0
10.0
4.0
6.0
8.0
72,500
27,200
41,400
56,000
$0
$300
$200
$250
$275
261
65
124
185
50.0%
38.0%
50.0%
45.0%
40.0%
687
131
276
462
19,850
32,750
23,200
26,100
28,000
0.0
12.0
4.0
5.0
6.0
393,000
92,800
130,500
168,000
$200
$0
$250
$150
$175
1,179
167
274
403
50.0%
38.0%
50.0%
45.0%
40.0%
3,103
334
609
1,008
3,789
465
885
1,470
5) China
The final analysis considers not the end-users targeted by LinkedIns products, but rather
those that inhabit an enormous and unique geography: China. Functionally, were pulling our
Linkedln
estimates for various business lines out separately to highlight this unique opportunity (i.e., this is
not incremental to the prior market sizes). To state the obvious, how LinkedIns business evolves
and grows in the worlds largest internet market remains an open-ended question. Government
regulation and local characteristics make it difficult to predict the potential user and corporate
customer bases, as well as the business models that may gain traction. Today, building the user
base remains the priority, supported by the recent launch of the Simplified Chinese language
website.
Prior to the February 2014 launch of the site, LinkedIn had about three million users in
China; that figure has already topped five million. China has about 600 million internet users
and a workforce of around 788 million (per The World Bank) but initially only a small segment of
highly skilled knowledge workers will represent the target market. LinkedIn estimates a total
addressable user base of about 140 million which includes both professionals and students.
Linkedln
5 Year Outlook
LNKD Ests.
TAM
Bear
Base
Bull
Chinese population
1,356
1,356
1,369
1,376
1,383
% of population in workforce
58.1%
58.1%
58.1%
58.1%
58.1%
788
788
796
800
804
0.5%
8.1%
1.0%
3.0%
5.0%
109
14
41
69
31
14
21
0.1%
2.3%
0.5%
1.0%
1.5%
140
21
55
90
0.6%
10.4%
1.5%
4.0%
6.5%
Chinese workforce
% of knowledge workers in workforce
% of total population
Total Chinese membership opportunity
% of total population
Details of LinkedIns business strategy in China have yet to emerge. The company has no
revenue generating products specific to its China operations and the modest revenues generated
from the current Chinese user base are through the Hong Kong operations. Certainly the company
will face local competition, like Zhaopin Limited, which already has over 77 million registered
users and 11.4 million job postings (from nearly 275,000 unique customers) per its IPO
prospectus.
We have built a framework similar to LinkedIns current business segments for revenue
potential from China, namely Talent Solutions, Marketing Solutions, and the upcoming Sales
Solutions and Student Solutions opportunity. We would not be surprised if LinkedIn chooses to
develop a customised product set specific to the Chinese market. But again, LinkedIns focus
currently lies in growing the user base in China and we may not see any material revenue
contribution from these efforts until beyond 2015.
Linkedln
LNKD Ests.
5 Year Outlook
TAM
Bear
Base
Bull
10.6
10.6
11.0
11.5
12.0
0.00%
0.51%
0.03%
0.10%
0.20%
24,033
54,144
2,754
11,517
2.0
5.0
2.0
3.0
4.0
270,722
5,508
34,550
96,132
$400
$500
$350
$400
$450
1,624
23
166
519
40.0%
40.0%
40.0%
40.0%
40.0%
4,061
58
415
1,298
15.8
15.8
15.9
16.8
17.7
15%
50%
20%
30%
40%
2.4
7.9
3.2
5.0
7.1
0.0%
15.0%
5.0%
8.0%
10.0%
0.0
1.2
0.2
0.4
0.7
$0
$50
$20
$30
$40
709
38
145
340
140
21
55
90
$0.01
$1.00
$0.20
$0.50
$0.75
1,685
49
330
809
2,484
2,484
1,750
2,000
2,250
0.0
12.0
4.0
6.0
8.0
29,808
7,000
12,000
18,000
$0
$250
$150
$200
$225
50.0%
38.0%
50.0%
45.0%
40.0%
658
300
444
563
7,113
445
1,334
3,009
Source: The World Bank (http://data.worldbank.org/country/china), National Bureau of Statistics of the Peoples
Republic of China (http://www.stats.gov.cn/tjsj/ndsj/2013), Ministry of Education of the Peoples Republic of China
(http://www.moe.edu.cn/publicfiles/business/htmlfiles/moe/s4971/201012/113595.html), company reports and BMO
Capital Markets estimates.
Linkedln
reflects our actual published estimates through 2016 for the Base case and then the appropriate
bear-base-bull estimates derived in the above analyses are applied five years out (i.e. 2019).
Beyond 2019, we apply some simple revenue growth assumptions out to 2024 in order reach a 10year revenue model for each of the three scenarios. The revenue model includes each of the
current revenue segments and we have inserted Sales Solutions and Student Solutions lines as well
(we assume Chinese revenues are included in each of their respective operating segments). For the
Premium Subscription line, we have removed an estimate for Sales Navigator and included it in the
Sales Solutions line. Like revenue, our base EBITDA and FCF estimates out to 2016 are our
official, published estimates. From 2017 onward, we apply a straightforward margin assumption
to derive EBITDA and then a simple EBITDA-to-FCF conversion to reach annual FCF estimates
beyond 2017. Each of these three scenarios is for informational purposes only and our formal model,
estimates and valuation for LNKD are detailed in Exhibits 16-20.
Exhibit 12. Base Case Expanded LinkedIn DCF Analysis ($ millions, except per-share data)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Revenue
Registered Members (in millions)
% yoy growth
90
145
202
277
360
517
597
624
653
684
698
711
726
740
755
60.4%
39.2%
37.1%
30.0%
43.7%
15.4%
4.6%
4.6%
4.6%
2.0%
2.0%
2.0%
2.0%
2.0%
3,865
9,236
16,409
24,444
29,071
34,271
40,092
46,908
54,882
64,218
71,924
80,555
90,222
101,048
113,174
143.8%
139.0%
77.7%
49.0%
18.9%
17.9%
17.0%
17.0%
17.0%
17.0%
12.0%
12.0%
12.0%
12.0%
12.0%
Talent Solutions
% yoy growth
101.9
260.9
523.6
859.7
1,192.6
1,558.8
2,061.7
2,918.7
4,132.0
5,849.3
7,136.1
8,706.1
10,621.4 12,958.1
15,808.9
181.9%
156.1%
100.7%
64.2%
38.7%
30.7%
32.3%
41.6%
41.6%
41.6%
22.0%
22.0%
22.0%
22.0%
22.0%
79.3
155.8
258.3
362.4
469.9
641.6
811.8
1,002.0
1,236.9
1,526.8
1,832.2
2,198.6
2,638.4
3,166.0
3,799.2
107.2%
96.5%
65.7%
40.3%
29.7%
36.5%
26.5%
23.4%
23.4%
23.4%
20.0%
20.0%
20.0%
20.0%
20.0%
15.0
60.0
120.0
240.0
403.4
678.2
1,140.0
1,459.2
1,867.8
2,390.8
3,060.2
3,917.0
300.0%
100.0%
100.0%
68.1%
68.1%
68.1%
28.0%
28.0%
28.0%
28.0%
28.0%
1,418.0
Marketing Solutions
% yoy growth
Sales Solutions incl Navigator
% yoy growth
Premium Subs ex Navigator
% yoy growth
61.9
105.5
190.4
291.5
361.1
500.6
626.7
701.9
786.1
880.5
968.5
1,065.4
1,171.9
1,289.1
35.4%
70.3%
80.6%
53.1%
23.9%
38.6%
25.2%
12.0%
12.0%
12.0%
10.0%
10.0%
10.0%
10.0%
10.0%
TOTAL REVENUE
243.1
522.2
972.3
1,528.5
2,083.6
2,821.1
3,740.2
5,026.1
6,833.3
9,396.6
16,822.4 20,473.4
24,943.2
102.4%
114.8%
86.2%
57.2%
36.3%
35.4%
32.6%
34.4%
36.0%
37.5%
21.3%
21.4%
21.6%
21.7%
21.8%
55.0
98.7
223.0
376.2
514.1
805.6
1,149.9
1,543.0
2,094.4
2,880.1
3,555.6
4,331.2
5,282.2
6,449.1
7,882.0
% yoy growth
Adjusted EBITDA
22.6%
18.9%
22.9%
24.6%
24.7%
28.6%
30.7%
30.7%
30.7%
30.7%
31.2%
31.3%
31.4%
31.5%
31.6%
(2.9)
0.3
1.4
1.0
0.0
0.0
0.0
nm
nm
nm
nm
nm
nm
nm
nm
- Cash taxes
(3.5)
(9.4)
0.3
21.3
(22.1)
(143.3)
(247.7)
nm
nm
nm
nm
nm
nm
nm
nm
- Capital expenditures
(50.0)
(89.0)
(125.4)
(278.0)
(343.9)
(340.0)
(340.0)
nm
nm
nm
nm
nm
nm
nm
nm
+ Adjustment
Adj. EBITDA-to-FCF Conversion
0.0
-2.5%
0.0
0.6%
0.0
44.5%
0.0
32.0%
0.0
28.8%
0.0
40.0%
0.0
48.9%
nm
48.8%
nm
48.2%
nm
47.0%
nm
51.0%
nm
50.2%
nm
49.4%
nm
48.6%
nm
47.7%
(1.4)
0.6
99.4
120.5
148.1
322.3
562.3
753.4
1,009.6
1,352.9
-544.8%
141.1%
nm
21.3%
22.9%
117.6%
74.4%
34.0%
34.0%
34.0%
WACC Calculation
Value
Net debt
Sensitivity Analysis
803.1
3,759.1
Equity value
18,391.6
FCF Multiple
Terminal Value
10.0x
$37,591
Total capital
17,588.5
10-year rate
2.6%
10,054.4
803.1
18,597.6
29,455.1
Beta
Per Sh. Equity premium
4.0%
$85.50
Cost of equity
7.0%
$6.83
Cost of debt
1.1x
3.0%
79.0%
7.3%
5.3%
Discount Rate
% margin
11,396.0 13,837.8
1,812.8
2,610.5
3,132.6
3,759.1
34.0%
20.0%
20.0%
Terminal Multiple of FCF
2,175.4
20.0%
20.0%
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
$239.49
$258.58
$277.66
$296.75
$315.84
$334.93
$354.02
5.8%
$229.68
$247.89
$266.09
$284.30
$302.50
$320.71
$338.91
6.3%
$220.35
$237.72
$255.09
$272.45
$289.82
$307.19
$324.55
6.8%
$211.48
$228.05
$244.62
$294.33
$310.90
$203.02
$218.84
$234.65
$261.19
$250.47
$277.76
7.3%
$266.28
$282.10
$297.91
7.8%
$194.98
$210.07
$225.17
$240.26
$255.36
$270.46
$285.55
8.3%
$187.31
$201.72
$216.14
$230.55
$244.96
$259.38
$273.79
8.8%
$180.01
$193.77
$207.53
$221.30
$235.06
$248.83
$262.59
9.3%
$173.05
$186.19
$199.34
$212.49
$225.63
$238.78
$251.93
Linkedln
Exhibit 13. Bull Case Expanded LinkedIn DCF Analysis ($ millions, except per-share data)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Revenue
Registered Members (in millions)
% yoy growth
Enterprise (LCS) Customers
% yoy growth
90
145
202
277
379
520
597
669
736
791
806
823
839
856
873
60.4%
39.2%
37.1%
37.0%
37.0%
15.0%
12.0%
10.0%
7.4%
2.0%
2.0%
2.0%
2.0%
2.0%
165,660
3,865
9,236
16,409
24,444
32,511
42,264
52,830
64,019
77,578
94,000
105,280
117,914
132,063
147,911
143.8%
139.0%
77.7%
49.0%
33.0%
30.0%
25.0%
21.2%
21.2%
21.2%
12.0%
12.0%
12.0%
12.0%
12.0%
15,442.9 17,141.6
19,027.1
Talent Solutions
% yoy growth
101.9
260.9
523.6
859.7
1,461.4
2,455.2
4,051.1
6,076.7
181.9%
156.1%
100.7%
64.2%
70.0%
68.0%
65.0%
50.0%
45.0%
28.2%
11.0%
11.0%
11.0%
11.0%
11.0%
Marketing Solutions
% yoy growth
79.3
155.8
258.3
362.4
579.8
916.0
1,392.4
2,144.3
2,959.1
3,629.0
4,137.1
4,716.3
5,376.6
6,129.3
6,987.4
107.2%
96.5%
65.7%
40.3%
60.0%
58.0%
52.0%
54.0%
38.0%
22.6%
14.0%
14.0%
14.0%
14.0%
14.0%
15.0
60.0
210.0
630.0
1,575.0
2,520.0
3,144.0
3,427.0
3,735.4
4,071.6
4,438.0
4,837.4
300.0%
250.0%
200.0%
150.0%
60.0%
24.8%
9.0%
9.0%
9.0%
9.0%
9.0%
413.9
538.1
672.7
793.7
904.9
1,013.4
1,099.6
1,193.1
1,294.5
1,404.5
1,523.9
14.0%
12.0%
8.5%
8.5%
8.5%
8.5%
8.5%
26,185.5 29,113.4
32,375.9
12,533.8 13,912.5
61.9
105.5
190.4
35.4%
70.3%
80.6%
53.1%
42.0%
30.0%
25.0%
18.0%
TOTAL REVENUE
243.1
522.2
972.3
1,528.5
2,515.2
4,119.4
6,746.2
10,589.7
102.4%
114.8%
86.2%
57.2%
64.5%
63.8%
63.8%
57.0%
43.5%
25.6%
11.1%
11.1%
11.2%
11.2%
11.2%
55.0
98.7
223.0
376.2
641.4
1,112.2
2,023.9
3,282.8
4,786.5
6,105.0
6,889.2
7,773.9
8,772.1
9,898.6
11,169.7
34.5%
% yoy growth
Adjusted EBITDA
15,195.2 19,078.2
21,197.4 23,557.2
22.6%
18.9%
22.9%
24.6%
25.5%
27.0%
30.0%
31.0%
31.5%
32.0%
32.5%
33.0%
33.5%
34.0%
(2.9)
0.3
1.4
1.0
0.0
0.0
0.0
nm
nm
nm
nm
nm
nm
nm
nm
- Cash taxes
(3.5)
(9.4)
0.3
21.3
(22.1)
(143.5)
(247.7)
nm
nm
nm
nm
nm
nm
nm
nm
- Capital expenditures
(50.0)
(89.0)
(125.4)
(278.0)
(343.9)
(340.0)
(340.0)
nm
nm
nm
nm
nm
nm
nm
nm
+ Adjustment
Adj. EBITDA-to-FCF Conversion
0.0
-2.5%
0.0
0.6%
0.0
44.5%
0.0
32.0%
0.0
42.9%
0.0
56.5%
0.0
71.0%
nm
50.0%
nm
51.0%
nm
51.5%
nm
52.0%
nm
52.5%
nm
53.0%
nm
53.5%
nm
54.0%
(1.4)
0.6
99.4
120.5
275.4
628.8
1,436.2
1,641.4
2,441.1
3,144.1
-544.8%
141.1%
nm
21.3%
128.4%
128.3%
128.4%
14.3%
48.7%
28.8%
WACC Calculation
Value
Net debt
Sensitivity Analysis
803.1
6,031.6
Equity value
18,391.6
FCF Multiple
Terminal Value
10.0x
$60,316
Total capital
17,588.5
10-year rate
2.6%
Beta
1.1x
19,365.0
803.1
29,840.6
50,008.6
4.0%
7.0%
$6.83
Cost of debt
3.0%
79.0%
7.3%
5.3%
Discount Rate
% margin
291.5
8,811.2 11,291.7
3,582.4
4,649.2
5,295.7
6,031.6
13.9%
13.9%
13.9%
Terminal Multiple of FCF
4,081.3
13.9%
13.9%
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
$410.80
$441.43
$472.05
$502.68
$533.31
$563.94
$594.57
5.8%
$394.23
$423.44
$452.65
$481.86
$511.07
$540.28
$569.50
6.3%
$378.46
$406.32
$434.19
$462.05
$489.92
$517.78
$545.65
6.8%
$363.43
$390.02
$416.61
$469.78
$496.37
$522.96
7.3%
$349.12
$374.49
$399.87
$443.19
$425.24
$450.62
$475.99
$501.36
7.8%
$335.48
$359.70
$383.92
$408.14
$432.36
$456.59
$480.81
8.3%
$322.48
$345.60
$368.73
$391.85
$414.98
$438.11
$461.23
8.8%
$310.08
$332.16
$354.25
$376.33
$398.42
$420.50
$442.59
9.3%
$298.25
$319.35
$340.44
$361.54
$382.64
$403.73
$424.83
Linkedln
Exhibit 14. Bear Case Expanded LinkedIn DCF Analysis ($ millions, except per-share data)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Revenue
Registered Members (in millions)
% yoy growth
Enterprise (LCS) Customers
% yoy growth
Talent Solutions
% yoy growth
Marketing Solutions
% yoy growth
90
145
202
277
360
432
484
522
548
571
577
583
589
595
601
60.4%
39.2%
37.1%
30.0%
20.0%
12.0%
8.0%
5.0%
4.2%
1.0%
1.0%
1.0%
1.0%
1.0%
64,580
3,865
9,236
16,409
24,444
28,599
33,175
37,820
42,358
46,594
50,600
53,130
55,787
58,576
61,505
143.8%
139.0%
77.7%
49.0%
17.0%
16.0%
14.0%
12.0%
10.0%
8.6%
5.0%
5.0%
5.0%
5.0%
5.0%
101.9
260.9
523.6
859.7
1,186.4
1,542.3
1,974.1
2,368.9
2,724.2
3,013.6
3,254.6
3,515.0
3,796.2
4,099.9
4,427.9
181.9%
156.1%
100.7%
64.2%
38.0%
30.0%
28.0%
20.0%
15.0%
10.6%
8.0%
8.0%
8.0%
8.0%
8.0%
79.3
155.8
258.3
362.4
463.8
579.8
695.7
793.1
852.6
889.9
916.6
944.1
972.4
1,001.6
1,031.6
107.2%
96.5%
65.7%
40.3%
28.0%
25.0%
20.0%
14.0%
7.5%
4.4%
3.0%
3.0%
3.0%
3.0%
3.0%
15.0
52.5
105.0
183.8
275.6
358.3
414.4
459.9
510.5
566.7
629.0
698.2
250.0%
100.0%
75.0%
50.0%
30.0%
15.6%
11.0%
11.0%
11.0%
11.0%
11.0%
61.9
105.5
190.4
291.5
349.8
412.8
478.8
545.9
611.4
660.3
696.6
734.9
775.3
818.0
862.9
35.4%
70.3%
80.6%
53.1%
20.0%
18.0%
16.0%
14.0%
12.0%
8.0%
5.5%
5.5%
5.5%
5.5%
5.5%
TOTAL REVENUE
243.1
522.2
972.3
1,528.5
2,052.5
2,639.8
3,332.4
3,983.5
4,546.5
4,978.1
5,327.7
5,704.5
6,110.6
6,548.5
7,020.7
102.4%
114.8%
86.2%
57.2%
34.3%
28.6%
26.2%
19.5%
14.1%
9.5%
7.0%
7.1%
7.1%
7.2%
7.2%
55.0
98.7
223.0
376.2
513.1
686.4
883.1
1,075.6
1,250.3
1,393.9
1,518.4
1,654.3
1,802.6
1,964.5
2,141.3
% yoy growth
Adjusted EBITDA
% margin
22.6%
18.9%
22.9%
24.6%
25.0%
26.0%
26.5%
27.0%
27.5%
28.0%
28.5%
29.0%
29.5%
30.0%
30.5%
(2.9)
0.3
1.4
1.0
0.0
0.0
0.0
nm
nm
nm
nm
nm
nm
nm
nm
- Cash taxes
(3.5)
(9.4)
0.3
21.3
(22.1)
(143.3)
(247.6)
nm
nm
nm
nm
nm
nm
nm
nm
- Capital expenditures
(50.0)
(89.0)
(125.4)
(278.0)
(343.9)
(340.0)
(340.0)
nm
nm
nm
nm
nm
nm
nm
nm
+ Adjustment
Adj. EBITDA-to-FCF Conversion
0.0
-2.5%
0.0
0.6%
0.0
44.5%
0.0
32.0%
0.0
28.7%
0.0
29.6%
0.0
33.5%
nm
35.0%
nm
38.0%
nm
40.0%
nm
41.0%
nm
41.5%
nm
42.0%
nm
42.5%
nm
42.9%
(1.4)
0.6
99.4
120.5
147.1
203.1
295.5
376.4
475.1
557.5
622.5
686.5
757.1
834.9
917.8
-544.8%
141.1%
nm
21.3%
22.0%
38.0%
45.5%
27.4%
26.2%
17.3%
11.7%
10.3%
10.3%
Terminal Multiple of FCF
10.3%
9.9%
WACC Calculation
Sensitivity Analysis
Value
Net debt
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
917.8
Equity value
18,391.6
5.3%
$73.82
$78.48
$83.14
$87.81
$92.47
$97.13
$101.79
FCF Multiple
Terminal Value
10.0x
$9,178
Total capital
17,588.5
5.8%
$71.19
$75.64
$80.08
$84.52
$88.97
$93.41
$97.86
10-year rate
2.6%
6.3%
$68.68
$72.92
$77.16
$81.40
$85.64
$89.88
$94.12
Beta
1.1x
6.8%
$66.29
$70.34
$74.38
$82.47
$86.52
$90.56
7.3%
$64.01
$67.87
$71.73
$78.43
$75.59
$79.45
$83.31
$87.17
7.8%
$61.83
$65.52
$69.21
$72.89
$76.58
$80.26
$83.95
8.3%
$59.76
$63.28
$66.80
$70.32
$73.84
$77.35
$80.87
8.8%
$57.78
$61.14
$64.50
$67.86
$71.22
$74.58
$77.94
9.3%
$55.89
$59.10
$62.31
$65.52
$68.73
$71.94
$75.15
Value
PV of FCF '14-23
Net (Debt)
PV of Terminal Value
Total Equity Value
4.0%
3,546.1
$30.15
Cost of equity
7.0%
803.1
$6.83
Cost of debt
3.0%
4,540.5
8,889.7
$38.61
$75.59
Tax rate
WACC
79.0%
7.3%
Discount Rate
803.1
Linkedln
Shares
Market
Price
Target
GOOGL
$570.73
$525
Mkt
688
$392,797
FB
$62.88
$60
Mkt
2,744
$172,528
TWTR
$34.47
$42
Mkt
690
$23,786
18.5x
LNKD
$156.39
$250
OP
122
$19,035
8.9x
6.4x
35.9x
Zynga
ZNGA
$3.00
$4.50
Mkt
888
$2,663
3.1x
2.3x
JIVE
$7.63
$9
Mkt
70
$537
2.9x
2.5x
Mean
8.9x
Median
Jive Software
Social
Comps
2014
EV/EBITDA
Ticker
EV/Rev.
Company
P/E
2014
2014
FCF Yield
2015
2014
2015
2014
2015
PEG vs S&P
2014
2015
5.0x
3.9x
13.0x
10.1x
22.7x
18.9x
1.6x
1.4x
4.2%
5.9%
15.1x
12.1x
26.1x
20.1x
48.7x
41.9x
1.0x
2.9x
2.3%
2.9%
nm
116.1x
nm
nm
0.1%
0.6%
22.6x
89.9x
59.6x
11.7x
5.4x
0.8%
1.7%
26.2x
14.4x
150.0x
46.9x
1.1x
9.0x
4.0%
7.3%
nm
nm
nm
nm
nm
nm
nm
nm
6.5x
43.9x
24.7x
77.8x
56.7x
3.8x
4.7x
2.3%
3.7%
6.9x
5.2x
26.2x
20.1x
69.3x
46.9x
1.3x
4.2x
2.3%
2.9%
LNKD
$156.39
$250
OP
122
$19,035
8.9x
6.4x
35.9x
22.6x
89.9x
59.6x
11.7x
5.4x
0.8%
1.7%
51 Jobs
JOBS
$60.87
NR
NR
30
$1,810
4.3x
3.4x
13.1x
10.2x
22.7x
19.8x
-8.6x
1.4x
5.9%
7.1%
Monster Worldwide
MWW
$6.21
$8
OP
91
$565
0.8x
0.8x
5.4x
5.0x
16.6x
13.1x
-1.0x
1.0x
1.9%
8.5%
DHX
$7.12
$8
Mkt
54
$387
1.9x
1.6x
6.2x
5.3x
22.7x
17.2x
-0.5x
1.4x
9.7%
10.8%
O1BC-XE
95.90
NR
NR
536
5.3x
4.6x
17.5x
14.0x
39.0x
29.7x
0.8x
2.3x
4.6%
5.3%
4.2x
3.4x
15.6x
11.4x
38.2x
27.9x
0.5x
2.3x
4.6%
6.7%
Dice Holdings
Xing AG
Online Employment
Mean
Comps
Median
4.3x
3.4x
13.1x
10.2x
22.7x
19.8x
-0.5x
1.4x
4.6%
7.1%
5.0x
3.9x
13.0x
10.1x
22.7x
18.9x
1.6x
1.4x
4.2%
5.9%
1.9x
1.9x
6.1x
6.2x
23.1x
20.5x
7.7x
1.4x
2.2%
2.3%
18.5x
nm
116.1x
nm
nm
0.1%
0.6%
22.6x
89.9x
59.6x
11.7x
5.4x
0.8%
1.7%
11.1x
6.6x
55.7x
23.9x
nm
3.4x
5.9%
9.1%
5.5x
4.7x
17.5x
14.5x
27.9x
1.0x
12.0%
13.1%
GOOGL
$570.73
$525
Mkt
688
$392,797
Yahoo!
YHOO
$36.04
$36
Mkt
1,005
$36,217
TWTR
$34.47
$42
Mkt
690
$23,786
LNKD
$156.39
$250
OP
122
$19,035
8.9x
6.4x
35.9x
Groupon
GRPN
$6.13
NR
NR
682
$4,182
1.0x
0.7x
Aol
AOL
$36.53
NR
NR
80
$2,920
1.1x
0.9x
CNVR
$24.68
$22
Mkt
68
$1,679
Conversant
Digital Marketing
Comps
2.6x
2.2x
7.4x
6.2x
14.1x
12.6x
2.6x
0.8x
8.3%
9.2%
Mean
5.6x
4.0x
28.2x
16.1x
37.2x
38.0x
10.3x
2.2x
4.8%
6.0%
Median
2.6x
2.2x
11.1x
6.6x
22.9x
20.5x
7.7x
1.4x
4.2%
5.9%
LNKD
$156.39
$250
OP
122
$19,035
8.9x
6.4x
35.9x
22.6x
89.9x
59.6x
11.7x
5.4x
0.8%
1.7%
Netflix
NFLX
$423.09
$400
Mkt
60
$25,363
4.6x
3.7x
46.5x
27.3x
94.7x
60.9x
0.6x
5.7x
1.6%
2.5%
Mean
6.7x
5.1x
41.2x
24.9x
92.3x
60.3x
6.2x
5.5x
1.2%
2.1%
Median
6.7x
5.1x
41.2x
24.9x
92.3x
60.3x
6.2x
5.5x
1.2%
2.1%
Digital Subscriptions
Comps
OP-Outperform, Mkt-Market Perform, Und-Underperform, NR-Not Rated ZNGA, NFLX covered by Ed Williams; DHX, MMW covered by Jeff Silber; GOOG,
FB, YHOO, VCLK covered by Dan Salmon.
Source: Company reports and BMO Capital Markets estimates; Thomson Reuters for Not Rated companies.
Investment Thesis
We rate LNKD shares Outperform. We believe there are several new stories emerging that will
raise long-term growth expectations. In particular, LinkedIns formal roll-out in China and new
standalone product for salespeople (of which LinkedIn believes there are five times as many on
the platform as human resources personnel), highlighted by an expected stand-alone product that
should launch in 2H14. And the new focus on adding more students to the platform is sensible;
while we dont expect any monetization products aimed specifically at this group yet, embedding
itself in career services departments would be a positive for LinkedIn.
Linkedln
Risks
Downside risks to LNKD shares include the emergence of competing professional social
networks, deceleration in user engagement and consumer privacy legislation; risk is heightened
owing to the stock's high valuation. Also, any delay in our assumed catalysts especially the new
stand-alone product for salespeople would have a negative impact on our thesis.
Company Description
LinkedIn is a social professional network. Through its platform, members can create, manage, and
share their professional identity online, while finding business opportunities, building their
professional networks, connecting with business contacts, and finding potential
employees/employers. The company reports in three segments:
1) Talent Solutions (56% of revenue), includes the largely self-service LinkedIn Job Slots
and the LinkedIn Corporate Solutions suite, which includes the Talent Pro and Job
Seeker subscription products. The solutions are built to be an effective way for
enterprises and professionals to find, contact, and hire the best qualified candidates.
2) Marketing Solutions (24% of revenue) enables advertising agencies and direct
marketers to use display and text ads on LinkedIn to reach a targeted audience. LinkedIn
Ads is a self-service platform that allows marketers to directly create and place ads, while
LinkedIn Ads for Enterprise provides dedicated account management and additional
marketing solutions.
3) Premium Subscriptions (20% of revenue) targets small and medium-sized businesses,
professional organizations, individual members, and business groups in larger
enterprises. Subscriptions products include the Business/Business Plus/Executive suite of
products, as well as the Sales Navigator product.
LinkedIn was founded in 2003 and employs more than 5,000 people. The company went public
on May 19, 2011, at $83, and its headquarters is located in Mountain View, California.
Linkedln
September 4, 2013:
Hires Derek Shen to lead LinkedIn China operations. Mr. Shen was
founder and CEO of Nuomi. He was previously head of business
development for Google in China.
February 6, 2014:
May 1, 2014:
Reported 1Q14 revenue of $473 million, which was higher than our
$460 million and the Streets $466.9 million estimate; all segments
came in better than expectations. Adjusted EBITDA of $116.7 million
beat our $108 million and $112.1 million consensus. Full-year 2014
revenue guidance was raised to $2.06-$2.08 billion (from $2.02$2.05 billion previously) and adjusted EBITDA guidance increased to
$505-510 million (from $490 million).
May 8, 2014:
August 2014:
Linkedln
Exhibit 16. Valuation and Forecasts Summary ($ millions, except per-share data)
Market Capitalization
2011A
2012A
2013A
2014E
2015E
2016E
$156.39
89.9
14,054.6
$156.39
112.8
17,646.3
$156.39
117.6
18,391.6
$156.39
121.7
19,035.3
$156.39
123.7
19,348.1
$156.39
124.5
19,465.4
339.0
13,715.6
270.4
17,375.9
803.1
17,588.5
580.1
18,455.3
860.7
18,487.4
1,353.9
18,111.5
Estimates
2011A
2012A
2013A
2014E
Net revenue
Net revenue consensus
Net revenue guidance
Adjusted EBITDA
Adjusted EBITDA consensus
Adjusted EBITDA guidance
EBIT
522.2
972.3
1,528.5
98.7
223.0
376.2
25.8
56.9
47.8
Non-GAAP EPS
$0.35
$0.89
$1.62
$1.74
$0.11
$0.19
$0.23
$0.01
$0.88
$1.03
Margins
2011A
2012A
Gross
Adjusted EBITDA
EBIT
Recurring net income
84.4%
18.9%
4.9%
0.0%
Growth rates
2015E
2,821.1
2,819.5
3,740.2
3,675.1
48.3%
47.7%
805.6
757.5
1,149.9
1,083.0
63.4%
61.5%
190.3
510.4
81.6%
$2.62
$3.87
61.9%
$1.65
$2.50
$3.79
61.2%
($0.54)
$0.32
$2.05
79.7%
$1.22
$2.61
$4.52
273.7%
2013A
2014E
2015E
2016E
87.1%
22.9%
5.8%
2.2%
86.7%
24.6%
3.1%
0.8%
86.3%
24.7%
-0.8%
-3.1%
86.5%
28.6%
6.7%
1.4%
87.7%
30.7%
13.6%
6.8%
2011A
2012A
2013A
2014E
2015E
2016E
114.8%
79.4%
32.0%
46.6%
-121.3%
86.2%
125.9%
120.0%
154.6%
nm
57.2%
68.7%
-15.9%
82.2%
16.4%
36.3%
36.7%
-134.4%
7.7%
18.7%
35.4%
56.7%
-1255.9%
50.8%
114.1%
32.6%
42.7%
168.2%
47.6%
73.4%
2011A
2012A
2013A
2014E
2015E
2016E
EV/Revenue
EV/EBITDA
EV/EBIT
Non-GAAP P/E
P/FCF
26.3x
138.9x
530.7x
449.2x
nm
17.9x
77.9x
305.6x
176.4x
nm
11.5x
46.7x
367.9x
96.8x
152.6x
8.9x
35.9x
-1120.9x
89.9x
128.5x
6.6x
22.9x
97.1x
59.6x
60.0x
4.8x
15.7x
35.5x
40.4x
34.6x
2,083.6
2,126.3
2,060 - 2,080
514.1
520.9
505 - 510
(16.5)
Consensus
Net revemue
Adjusted EBITDA
EBIT
Non-GAAP EPS
Free cash flow per share
Valuation on 2015E
EV/EBITDA
Adjusted EBITDA
Target Multiple
Enterprise Value
Net cash (debt), projected
Equity value
805.6
37.0x
29,808.2
860.7
30,668.9
Price target
% potential appreciation
$247.90
58.5%
40.8%
$257.96
$245.71
$233.47
$221.22
$208.98
Non-GAAP P/E
Non-GAAP EPS
Target Mult.
$2.62
96.0x
DCF Summary
Terminal Mult.
Discount Rate
'17-'20 FCF grth
'21-'24 FCF grth
$251.79
61.0%
45.8%
$267.12
$254.44
$241.76
$229.08
$216.40
50.8%
$276.28
$263.17
$250.05
$236.94
$223.82
55.8%
$285.44
$271.89
$258.34
$244.79
$231.24
Source: Company reports, BMO Capital Markets estimates and Thomson Reuters for consensus.
Triangulated
10.0x
7.3%
34.0%
20.0%
$250.47
60.2%
$250.05
59.9%
60.8%
$294.60
$280.62
$266.63
$252.65
$238.67
131.6x
199.9x
77.8x
Linkedln
1QA
3QE
4QE
Fiscal Year
2014E
1QE
2015E
2QE
3QE
4QE
859.7
362.4
306.5
275.9
101.8
95.5
290.7
113.1
101.3
305.3
120.4
108.4
320.7
134.6
115.9
1,192.6
469.9
421.1
343.0
142.4
129.9
372.4
153.7
145.4
404.4
166.1
162.9
439.0
179.4
182.4
1,558.8
641.6
620.6
2,061.7
811.8
866.7
1,528.5
57.2%
473.2
45.7%
5.8%
505.0
38.9%
6.7%
534.1
35.9%
5.8%
571.3
27.7%
7.0%
2,083.6
36.3%
615.3
30.0%
7.7%
671.6
33.0%
9.1%
733.3
37.3%
9.2%
800.8
40.2%
9.2%
2,821.1
35.4%
3,740.2
32.6%
(202.9)
(62.5)
(70.0)
(73.0)
(80.0)
(285.5)
(90.1)
(90.6)
(99.0)
(101.1)
(380.8)
(461.9)
1,325.6
56.5%
435.0
38.4%
5.9%
86.1%
461.1
35.8%
6.0%
86.3%
491.3
26.2%
6.5%
86.0%
1,798.1
35.6%
581.0
33.5%
10.6%
86.5%
634.3
37.6%
9.2%
86.5%
699.7
42.4%
10.3%
87.4%
3,278.3
34.3%
86.3%
525.2
27.9%
6.9%
85.4%
2,440.2
35.7%
86.7%
410.7
45.5%
5.5%
86.8%
86.5%
87.7%
(522.1)
(395.6)
(225.6)
(134.5)
0.0
(1,277.8)
(166.5)
(120.6)
(74.6)
(49.7)
0.0
(411.5)
(172.0)
(138.0)
(80.0)
(53.0)
0.0
(443.0)
(174.8)
(150.0)
(85.0)
(60.3)
0.0
(470.1)
(178.0)
(160.0)
(90.0)
(62.0)
0.0
(490.0)
(691.3)
(568.6)
(329.6)
(225.0)
0.0
(1,814.6)
(180.0)
(175.7)
(87.3)
(66.7)
0.0
(509.7)
(212.0)
(164.6)
(100.7)
(66.7)
0.0
(543.9)
(231.0)
(179.6)
(110.0)
(64.8)
0.0
(585.4)
(251.5)
(171.2)
(125.1)
(63.0)
0.0
(610.9)
(874.5)
(691.1)
(423.1)
(261.2)
0.0
(2,249.9)
(1,047.0)
(897.6)
(561.0)
(262.2)
0.0
(2,767.8)
47.8
-15.9%
3.1%
47.8
(0.8)
-103.2%
-0.2%
(0.8)
(8.0)
-198.5%
-1.6%
(8.0)
(9.0)
-293.8%
-1.7%
(9.0)
1.3
nm
0.2%
1.3
(16.5)
-134.4%
-0.8%
(16.5)
15.5
2132.6%
2.5%
15.5
37.0
564.3%
5.5%
37.0
48.9
643.8%
6.7%
48.9
88.9
6950.5%
11.1%
88.9
190.3
1255.9%
6.7%
190.3
510.4
168.2%
13.6%
510.4
1.4
0.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
49.2
49.2
0.3
0.3
(8.0)
(8.0)
(9.0)
(9.0)
1.3
1.3
(15.4)
(15.4)
15.5
15.5
37.0
37.0
48.9
48.9
88.9
88.9
190.3
190.3
510.4
510.4
2.4
(16.0)
(13.6)
5183.6%
(6.3)
(3.8)
(10.0)
-125.4%
(9.2)
(3.9)
(13.0)
-145.0%
(9.1)
(4.3)
(13.4)
1060.0%
(22.1)
(27.8)
(50.0)
-323.7%
(10.4)
(1.8)
(12.3)
79.0%
(27.5)
(1.8)
(29.3)
79.0%
(36.9)
(1.7)
(38.6)
79.0%
(68.5)
(1.7)
(70.2)
79.0%
(143.3)
(7.1)
(150.3)
79.0%
(247.7)
(7.5)
(255.2)
50.0%
0.0
0.0
(0.1)
0.0
(0.2)
0.0
(0.2)
0.0
(0.2)
0.0
(0.7)
0.0
(0.3)
0.0
(0.3)
0.0
(0.3)
0.0
(0.3)
0.0
(1.0)
0.0
(1.0)
12.8
-40.9%
0.8%
26.8
(13.4)
-256.0%
-2.8%
(13.4)
(18.0)
nm
-3.6%
(18.0)
(22.0)
nm
-4.1%
(22.0)
(12.1)
nm
-2.1%
(12.1)
(65.5)
-613.3%
-3.1%
(65.5)
3.3
124.3%
0.5%
3.3
7.8
143.3%
1.2%
7.8
10.3
146.6%
1.4%
10.3
18.7
254.2%
2.3%
18.7
40.0
161.0%
1.4%
40.0
255.2
538.6%
6.8%
255.2
121.5
121.5
3.9
125.4
122.0
122.0
3.9
125.9
122.5
122.5
3.9
126.4
123.0
123.0
3.9
126.9
123.5
123.5
3.9
127.4
124.0
124.0
3.9
127.9
124.5
124.5
3.9
128.4
123.7
123.7
3.9
127.6
124.5
124.5
15.5
140.0
21.3
(43.8)
(22.5)
45.6%
113.5
117.6
1.3
118.9
121.0
121.0
3.9
124.9
121.7
121.7
3.9
125.6
$0.11
-43.3%
$0.23
($0.11)
-248.9%
($0.11)
($0.15)
nm
($0.15)
($0.18)
nm
($0.18)
($0.10)
nm
($0.10)
($0.54)
-595.9%
($0.54)
$0.03
123.9%
$0.03
$0.06
142.6%
$0.06
$0.08
145.9%
$0.08
$0.15
251.8%
$0.15
$0.32
160.0%
$0.32
$2.05
534.7%
$2.05
26.8
(13.4)
0.1
0.0
67.8
4.8
(11.9)
(18.0)
0.2
0.0
75.0
5.0
(11.5)
(22.0)
0.2
0.0
77.2
7.0
(10.0)
(12.1)
0.2
0.0
85.0
8.0
(13.0)
(65.5)
0.7
0.0
305.0
24.8
(46.4)
3.3
0.3
0.0
91.4
6.2
(21.0)
7.8
0.3
0.0
88.5
7.3
(21.6)
10.3
0.3
0.0
86.9
7.5
(21.8)
18.7
0.3
0.0
86.3
7.5
(23.4)
40.0
1.0
0.0
353.1
28.5
(87.8)
255.2
1.0
0.0
376.4
28.7
(164.5)
191.9
12.6%
$1.62
82.2%
47.3
10.0%
$0.38
-16.5%
-2.2%
50.7
10.0%
$0.40
6.1%
6.7%
52.4
9.8%
$0.42
6.1%
2.9%
68.1
11.9%
$0.54
39.1%
29.5%
218.6
10.5%
$1.74
7.7%
80.1
13.0%
$0.63
66.4%
17%
82.3
12.3%
$0.65
59.7%
2%
83.1
11.3%
$0.65
56.2%
1%
89.3
11.1%
$0.70
29.0%
7%
334.7
11.9%
$2.62
50.8%
496.8
13.3%
$3.87
47.6%
26.8
22.5
(1.4)
134.5
182.3
33.4%
(13.4)
13.6
(0.9)
49.7
49.0
-1.0%
-9.6%
10.4%
(18.0)
10.0
0.2
53.0
45.2
12.3%
-7.7%
9.0%
(22.0)
13.0
0.2
60.3
51.5
34.1%
13.9%
9.6%
(12.1)
13.4
0.2
62.0
63.5
17.1%
23.2%
11.1%
(65.5)
50.0
(0.3)
225.0
209.2
14.7%
3.3
12.3
0.3
66.7
82.5
68.4%
29.9%
13.4%
7.8
29.3
0.3
66.7
104.0
129.9%
26.1%
15.5%
10.3
38.6
0.3
64.8
114.0
121.2%
9.6%
15.5%
18.7
70.2
0.3
63.0
152.2
139.8%
33.5%
19.0%
40.0
150.3
1.0
261.2
452.5
116.3%
255.2
255.2
1.0
262.2
773.6
70.9%
16.0%
20.7%
67.8
116.7
40.0%
4.8%
24.7%
75.0
120.2
35.6%
3.0%
23.8%
77.2
128.7
38.6%
7.1%
24.1%
85.0
148.5
33.3%
15.3%
26.0%
91.4
173.8
48.9%
17.1%
28.2%
88.5
192.5
60.1%
10.8%
28.7%
86.9
200.9
56.1%
4.4%
27.4%
86.3
238.4
60.6%
18.7%
29.8%
353.1
805.6
56.7%
376.4
1,149.9
42.7%
28.6%
30.7%
0.0
193.9
16.4
(45.2)
11.9%
193.9
376.2
68.7%
24.6%
2014E
2QE
10.0%
305.0
514.1
36.7%
24.7%
Linkedln
Exhibit 18. LinkedIn Segment Revenue Model ($ millions, except per-share data)
$ in millions, except per share figures Fiscal Year
December fiscal year
2013A
Revenue by segment
LinkedIn Corporate Solutions (LCS) Customers
% yoy growth
3QE
4QE
Fiscal Year
2014E
1QE
2015E
2QE
3QE
4QE
24,444
25,844
26,878
27,953
29,071
29,071
30,234
31,594
32,858
34,271
34,271
40,092
49.0%
42.5%
32.7%
27.1%
18.9%
18.9%
17.0%
17.5%
17.5%
17.9%
17.9%
17.0%
5.7%
4.0%
4.0%
4.0%
4.0%
4.5%
4.0%
4.3%
% sequential growth
Talent Solutions Monthly ARPU
2014E
2QE
1QA
$350.7
$366
$368
$371
$375
$371.4
$386
$402
$418
$436
$410.2
$462.1
3.1%
2.8%
3.2%
4.7%
6.3%
5.9%
5.4%
9.3%
12.7%
16.3%
10.4%
12.7%
3.7%
0.5%
1.0%
1.0%
2.8%
4.1%
4.2%
4.2%
290.7
41.7%
5.4%
57.6%
305.3
35.9%
5.0%
57.2%
320.7
30.6%
5.0%
56.1%
$372.4
28.1%
8.6%
55.5%
$404.4
32.4%
8.6%
55.1%
$439.0
36.9%
8.6%
54.8%
1,558.8
30.7%
2,061.7
32.3%
859.7
64.2%
56.2%
275.9
49.7%
12.3%
58.3%
57.2%
$343.0
24.3%
7.0%
55.7%
55.3%
55%
276.8
296.5
314.2
336.2
359.7
359.7
388.5
423.5
465.8
517.1
517.1
596.8
% yoy growth
37.1%
35.8%
32.0%
29.7%
30.0%
30.0%
31.0%
34.8%
38.6%
43.7%
43.7%
15.4%
7.1%
6.0%
7.0%
7.0%
8.0%
9.0%
10.0%
11.0%
$1.51
1.7%
$0.36
-0.3%
-16.1%
$0.37
-1.3%
4.3%
$0.37
4.1%
0.0%
$0.39
-8.6%
4.5%
$1.48
-2.5%
$0.38
7.2%
-1.6%
$0.38
2.3%
-0.5%
$0.37
0.9%
-1.4%
$0.36
-5.7%
-2.3%
$1.46
-0.9%
$1.46
-0.4%
Marketing Solutions
% yoy growth
% sequential growth
% of total
362.4
40.3%
101.8
36.1%
-10.3%
21.5%
113.1
32.1%
11.1%
22.4%
120.4
36.1%
6.5%
22.5%
134.6
18.6%
11.8%
23.6%
469.9
29.7%
142.4
39.9%
5.8%
23.1%
153.7
36.0%
7.9%
22.9%
166.1
37.9%
8.0%
22.6%
179.4
33.3%
8.0%
22.4%
641.6
36.5%
811.8
26.5%
22.7%
22%
Premium Subscriptions
% yoy growth
% sequential growth
% of total
306.5
60.9%
95.5
45.6%
8.4%
20.2%
101.3
38.8%
6.0%
20.1%
108.4
35.8%
7.0%
20.3%
115.9
31.6%
7.0%
20.3%
421.1
37.4%
129.9
35.9%
12.0%
21.1%
145.4
43.6%
12.0%
21.7%
162.9
50.3%
12.0%
22.2%
182.4
57.4%
12.0%
22.8%
620.6
47.4%
866.7
39.7%
22.0%
23%
1,528.5
57.2%
473.2
45.7%
5.8%
505.0
38.9%
6.7%
534.1
35.9%
5.8%
571.3
27.7%
7.0%
2,083.6
36.3%
615.3
30.0%
7.7%
671.6
33.0%
9.1%
733.3
37.3%
9.2%
800.8
40.2%
9.2%
2,821.1
35.4%
3,740.2
32.6%
US
% yoy growth
% sequential growth
% of total
942.1
52.1%
284.9
41.4%
5.1%
60.2%
310.6
38.5%
9.0%
61.5%
325.8
32.8%
4.9%
61.0%
348.5
28.5%
7.0%
61.0%
1,269.7
34.8%
366.1
28.5%
5.1%
59.5%
399.6
28.7%
9.1%
59.5%
436.3
33.9%
9.2%
59.5%
476.5
36.7%
9.2%
59.5%
1,678.5
32.2%
2,206.7
31.5%
59.5%
59.0%
Other Americas
% yoy growth
% sequential growth
% of total
109.7
65.9%
31.9
32.0%
0.9%
6.7%
38.9
44.8%
21.9%
7.7%
41.7
54.1%
7.1%
7.8%
45.7
44.6%
9.7%
8.0%
158.2
44.2%
52.3
63.9%
14.4%
8.5%
57.1
46.8%
9.1%
8.5%
62.3
49.6%
9.2%
8.5%
68.1
48.9%
9.2%
8.5%
239.8
51.6%
243.1
1.4%
8.5%
6.5%
EMEA
% yoy growth
% sequential growth
% of total
358.2
64.8%
117.9
56.8%
8.8%
24.9%
116.2
37.2%
-1.5%
23.0%
122.8
36.4%
5.8%
23.0%
131.4
21.3%
7.0%
23.0%
488.3
36.3%
141.5
20.1%
7.7%
23.0%
154.5
33.0%
9.1%
23.0%
168.7
37.3%
9.2%
23.0%
184.2
40.2%
9.2%
23.0%
648.8
32.9%
822.8
26.8%
23.0%
22.0%
APAC
% yoy growth
% sequential growth
% of total
118.5
70.8%
39.4
41.5%
2.2%
7.8%
43.8
43.4%
11.2%
8.2%
45.7
26.4%
4.3%
8.0%
167.4
41.3%
60.4
53.4%
-63.9%
9.0%
66.0
50.7%
19.2%
9.0%
72.1
57.7%
19.2%
9.0%
467.5
84.1%
8.0%
55.4
43.7%
21.2%
9.0%
253.9
51.6%
7.8%
38.5
60.8%
6.6%
8.1%
9.0%
12.5%
1,528.5
473.2
505.0
534.1
571.3
2,083.6
615.3
671.6
733.3
800.8
2,821.1
3,740.2
Field sales
% yoy growth
% sequential growth
% of total
891.5
61.4%
275.3
49.6%
1.7%
58.2%
287.9
37.6%
4.6%
57.0%
304.4
33.8%
5.8%
57.0%
325.6
20.3%
7.0%
57.0%
1,193.2
33.8%
338.4
22.9%
3.9%
55.0%
369.4
28.3%
9.1%
55.0%
403.3
32.5%
9.2%
55.0%
440.5
35.3%
9.2%
55.0%
1,551.6
30.0%
2,019.7
30.2%
55.0%
54.0%
Online sales/self-service
% yoy growth
% sequential growth
% of total
637.1
51.7%
217.2
40.6%
9.7%
43.0%
229.7
38.9%
5.8%
43.0%
245.6
39.1%
7.0%
43.0%
890.4
39.8%
302.2
39.2%
9.1%
45.0%
330.0
43.7%
9.2%
45.0%
360.4
46.7%
9.2%
45.0%
1,720.5
35.5%
42.7%
276.9
39.9%
12.7%
45.0%
1,269.5
42.6%
41.7%
197.9
40.6%
12.1%
41.8%
45.0%
46.0%
1,528.5
473.2
505.0
534.1
571.3
2,083.6
615.3
671.6
733.3
800.8
2,821.1
3,740.2
139.2
142.1
144.9
147.8
150.8
150.8
158.3
166.3
174.6
183.3
183.3
222.8
% yoy growth
19.7%
7.8%
1.6%
3.9%
8.3%
8.3%
11.4%
14.7%
18.1%
21.6%
21.6%
21.6%
2.1%
2.0%
2.0%
2.0%
5.0%
5.0%
5.0%
5.0%
% sequential growth
Marketing Solutions Period ARPU
Period ARPU % yoy growth
Period ARPU % sequential growth
TOTAL REVENUE
% growth
% sequential growth
23.7%
20.1%
1,192.6
38.7%
22.6%
20.2%
Revenue by geography
TOTAL REVENUE
61.6%
7.2%
23.4%
60.9%
7.6%
23.4%
Revenue by channel
TOTAL REVENUE
58.3%
57.3%
User metrics
% sequential growth
Page views (Linked via comScore, in BN)
10.6
11.5
11.6
11.7
11.8
11.8
12.1
12.3
12.6
12.8
12.8
13.9
% yoy growth
8.2%
3.6%
-0.7%
1.1%
11.8%
11.8%
5.1%
6.1%
7.2%
8.2%
8.2%
8.2%
8.5%
1.0%
1.0%
1.0%
2.0%
2.0%
2.0%
2.0%
5,045
5,416
5,655
5,894
6,000
6,000
6,239
6,478
6,716
6,500
6,500
7,000
% sequential growth
Employees
Linkedln
2014E
2QE
1QA
3QE
4QE
Fiscal Year
2014E
1QE
2015E
2QE
3QE
4QE
803.1
1,526.2
302.2
47.5
76.5
2,755.5
508.9
1,797.4
328.7
46.6
98.4
2,779.9
565.3
1,797.4
300.0
46.6
100.9
2,810.2
514.0
1,797.4
325.0
46.6
103.4
2,786.3
580.1
1,797.4
305.0
46.6
106.0
2,835.0
580.1
1,797.4
305.0
46.6
106.0
2,835.0
587.6
1,797.4
284.6
46.6
110.0
2,826.1
748.1
1,797.4
301.5
46.6
114.1
3,007.6
786.1
1,797.4
320.0
46.6
118.4
3,068.4
860.7
1,797.4
350.0
46.6
122.8
3,177.5
860.7
1,797.4
350.0
46.6
122.8
3,177.5
1,353.9
1,797.4
305.4
46.6
135.6
3,638.8
361.7
150.9
43.0
41.7
406.5
228.9
101.6
44.9
443.5
228.9
100.6
44.9
475.2
228.9
99.2
44.9
506.2
228.9
97.6
44.9
506.2
228.9
97.6
44.9
530.8
228.9
96.4
44.9
556.4
228.9
94.9
44.9
584.0
228.9
93.4
44.9
613.5
228.9
91.9
44.9
613.5
228.9
91.9
44.9
720.1
228.9
63.2
44.9
3,352.8
3,561.9
3,628.1
3,634.6
3,712.7
3,712.7
3,727.1
3,932.7
4,019.7
4,156.7
4,156.7
4,695.9
66.7
183.0
392.2
0.0
0.0
642.0
79.7
142.1
479.6
0.0
0.0
701.4
80.0
227.3
454.5
0.0
0.0
761.8
72.0
240.4
454.0
0.0
0.0
766.3
90.0
257.1
485.6
0.0
0.0
832.6
90.0
257.1
485.6
0.0
0.0
832.6
81.5
276.9
461.5
0.0
0.0
819.9
87.2
302.2
604.4
0.0
0.0
993.9
93.3
330.0
623.3
0.0
0.0
1,046.6
100.0
360.4
680.7
0.0
0.0
1,141.1
100.0
360.4
680.7
0.0
0.0
1,141.1
101.8
458.1
865.2
0.0
0.0
1,425.1
0.0
0.0
0.0
14.9
61.5
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
0.0
0.0
0.0
23.9
70.2
5.0
5.1
5.1
5.1
5.1
5.1
5.1
5.1
5.1
2,573.8
0.0
55.6
2,719.0
0.0
42.2
2,742.9
0.0
24.2
2,766.8
0.0
2.2
2,790.7
0.0
(9.9)
5.1
2,790.7
0.0
(9.9)
5.1
2,814.6
0.0
(6.7)
5.1
2,838.5
0.0
1.1
2,862.4
0.0
11.4
2,886.3
0.0
30.0
2,886.3
0.0
30.0
2,886.3
0.0
285.3
3,352.8
3,561.9
3,628.1
3,634.6
3,712.7
3,712.7
3,727.1
3,932.7
4,019.7
4,156.7
4,156.7
4,695.9
1,353.9
803.1
508.9
565.3
514.0
580.1
580.1
587.6
748.1
786.1
860.7
860.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Convertible debt
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
803.1
508.9
565.3
514.0
580.1
580.1
587.6
748.1
786.1
860.7
860.7
1,353.9
-2.1x
-1.1x
-1.1x
Return on Assets
0.5%
-1.9%
1.0%
5.8%
Return on Equity
0.7%
-2.4%
1.4%
8.4%
8.8%
1.0%
6.1%
15.7%
-1.2x
Linkedln
Exhibit 20. LinkedIn Cash Flow Statement ($ millions, except per-share data)
$ in millions, except per share figures Fiscal Year
December fiscal year
2013A
1QA
2014E
2QE
3QE
4QE
Fiscal Year
2014E
1QE
2015E
2QE
3QE
4QE
26.8
0.0
118.1
16.4
134.5
4.8
193.9
(43.8)
(13.4)
0.0
44.9
4.8
49.7
1.2
67.8
(16.0)
(18.0)
0.0
48.0
5.0
53.0
2.5
75.0
(3.8)
(22.0)
0.0
53.3
7.0
60.3
2.7
77.2
(3.9)
(12.1)
0.0
54.0
8.0
62.0
2.9
85.0
(4.3)
(65.5)
0.0
200.2
24.8
225.0
9.3
305.0
(27.8)
3.3
0.0
60.5
6.2
66.7
3.1
91.4
(1.8)
7.8
0.0
59.4
7.3
66.7
3.4
88.5
(1.8)
10.3
0.0
57.3
7.5
64.8
3.7
86.9
(1.7)
18.7
0.0
55.5
7.5
63.0
4.0
86.3
(1.7)
40.0
0.0
232.7
28.5
261.2
14.1
353.1
(7.1)
255.2
0.0
233.4
28.7
262.2
18.7
376.4
(7.5)
Receivables
Deferred commissions
Prepaid expenses and other assets
Payables and other liabilities
Income taxes, net
Deferred revenue
Other
(102.6)
(18.2)
(11.2)
114.7
3.1
134.5
(0.0)
(26.8)
1.1
(11.7)
(18.4)
7.9
87.3
0.1
28.7
1.1
(2.5)
0.3
10.1
25.3
(57.9)
(25.0)
1.1
(2.5)
(8.0)
10.7
26.7
(111.4)
20.0
1.1
(2.6)
18.0
11.4
28.6
(87.1)
(3.1)
4.5
(19.3)
(8.1)
40.1
167.9
(256.3)
20.4
1.1
(4.0)
(8.5)
12.3
23.4
(140.5)
(16.9)
1.1
(4.1)
5.7
13.4
25.5
30.5
(18.5)
1.1
(4.3)
6.1
14.7
27.9
(93.6)
(30.0)
1.1
(4.4)
6.7
16.0
30.4
(56.1)
(45.0)
4.5
(16.8)
10.0
56.4
107.2
(259.6)
44.6
4.5
(12.8)
1.8
74.8
112.2
(304.3)
436.5
128.9
113.8
5.9
123.0
371.5
66.8
219.8
97.4
134.0
517.9
825.7
(278.0)
(1,055.4)
(24.1)
(88.9)
(272.5)
(86.5)
(85.0)
0.0
0.0
(85.0)
0.0
0.0
(85.0)
0.0
0.0
(343.9)
(272.5)
(86.5)
(85.0)
0.0
0.0
(85.0)
0.0
0.0
(85.0)
0.0
0.0
(85.0)
0.0
0.0
(340.0)
0.0
0.0
(340.0)
0.0
0.0
(1,357.5)
(447.8)
(85.0)
(85.0)
(85.0)
(702.8)
(85.0)
(85.0)
(85.0)
(85.0)
(340.0)
(340.0)
0.0
0.0
4.2
0.0
1,348.1
26.3
0.0
43.8
0.0
32.0
0.0
0.0
0.0
0.0
0.0
8.1
0.0
16.0
0.0
(0.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.8
0.0
23.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.9
0.0
23.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
4.3
0.0
23.9
0.0
0.0
0.0
0.0
0.0
8.1
0.0
27.8
0.0
71.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.8
0.0
23.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.8
0.0
23.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.7
0.0
23.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.7
0.0
23.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
7.1
0.0
95.6
0.0
0.0
7.5
0.0
0.0
1,454.2
24.1
27.7
27.8
28.2
107.7
25.7
25.7
25.6
25.6
102.7
7.5
0.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Currency effect
Cash flow from discontinued operations
(0.5)
0.0
0.0
0.0
0.0
0.0
532.7
270.4
(294.2)
803.1
56.5
508.9
(51.4)
565.3
66.1
514.0
(223.0)
803.1
7.5
580.1
160.5
587.6
38.0
748.1
74.6
786.1
280.6
580.1
493.2
860.7
803.1
508.9
565.3
514.0
580.1
580.1
587.6
748.1
786.1
860.7
860.7
1,353.9
26.8
0.0
134.5
193.9
43.8
(278.0)
0.0
120.9
$1.03
18.2%
(65.5)
0.0
225.0
305.0
27.8
(343.9)
0.0
148.4
$1.22
18.6%
40.0
0.0
261.2
353.1
7.1
(340.0)
0.0
321.3
$2.60
113.0%
255.2
0.0
262.2
376.4
7.5
(340.0)
0.0
561.3
$4.51
73.6%
376.2
1.0
21.3
(278.0)
0.0
120.5
$1.03
16.4%
514.1
0.0
(22.1)
(343.9)
0.0
148.1
$1.22
18.7%
805.6
0.0
(143.3)
(340.0)
0.0
322.3
$2.61
114.1%
1,149.9
0.0
(247.7)
(340.0)
0.0
562.3
$4.52
73.4%
Linkedln
250
200
200
300
300
250
250
200
200
2) OP
150
150
100
100
150
150
100
100
50
50
1) Mkt
0
LNKD Relative to S&P 500
LNKD Relative to Internet Software & Svcs.
200
150
150
100
100
2000
2005
10
EPS (4 Qtr Trailing) - (US$)
Price / Earnings
2000
2005
2010
FYE
(Dec.)
EPS
US$
P/E
Hi - Lo
DPS
US$
Yield%
Hi - Lo
2011
2012
2013
0.35
0.89
1.62
>100 >100
>100 67.7
>100 64.9
0.00
0.00
0.00
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Range*:
Current*
>100
1.54
64.9
104.0
0.00
0.0
200
200
150
150
100
100
2012
Payout
%
50
2013
2.0
1.5
2.0
1.5
BMO 2015FY EPS ( May 14 = 2.62 US$)
First Call 2015FY Cons.EPS ( May 14 = 2.51 US$)
400
1
1995
250
10
20
300
250
50
2011
2010
30
300
200
1995
200
2
2011
2012
BV
US$
P/B
Hi - Lo
ROE
%
0
0
0
8.4
21.9
7.7
14.7 6.7
5.7 2.8
>15 13.6
6
11
21.2
>15
2.8
7.5
2013
1
2
Date
28-Feb-12
5-Dec-13
Rating Change
NR to Mkt
Mkt to OP
Share Price
$86.95
$226.44
Linkedln
IMPORTANT DISCLOSURES
Analyst's Certification
I, Daniel Salmon / Jeffrey M. Silber, hereby certify that the views expressed in this report accurately reflect my personal views about the subject
securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts
may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472
restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
A redacted draft of this report was previously shown to the issuer (for fact checking purposes) and changes were made to the report before publication
Methodology and Risks to Price Target/Valuation
Methodology: We derive our target price for LNKD shares by triangulating the values derived by our discounted cash flow model and comparable
multiple analysis on an EV/EBITDA and non-GAAP P/E basis.
Risks: Risks include sustained levels of membership and usership growth, pending privacy legislation in both the US and European Union, and
weakened revenue trends in the event of continued weak economic recovery and high unemployment.
Distribution of Ratings (March 31, 2014)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
42.0%
21.5%
60.7%
40.8%
53.6%
53.6%
Hold
Market Perform
52.8%
10.8%
38.2%
52.8%
43.8%
40.8%
Sell
Underperform
5.2%
3.2%
1.1%
6.3%
2.7%
5.6%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as
percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Rating and Sector Key (as of April 5, 2013):
We use the following ratings system definitions:
OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis
Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis
Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis on a total return basis
(S) = speculative investment;
NR = No rating at this time;
R = Restricted Dissemination of research is currently restricted.
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US
Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
Prior BMO Capital Markets Ratings System (January 4, 2010April 4, 2013):
http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Other Important Disclosures
For
Other
Important
Disclosures
on
the
stocks
discussed
in
this
report,
please
go
to
http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3
Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.
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Dissemination of Research
BMO
Capital
Markets
Equity
Research
is
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via
our
website
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BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its
subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc.,
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arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections
contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets
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