Vous êtes sur la page 1sur 13

OUTPERFORM

US$89.09

Rating

LinkedIn Corporation
NYSE: LNKD
LinkedIn delivers a disruptive method of
uniting recruiters with talent by
incorporating passive job seekers and the
sociability of a network. With the recent
launch of LinkedIn Today and Apply with
LinkedIn, the company aspires to be the one
destination for all things professional, as
well as the international standard for
identification exchange. The future looks
bright for LinkedIn on both these fronts

Price target
Shr Price, close (Jan 13, 2012)
Mkt cap, curr ($MM)
52-Week range

US$70.30
6,858
55.98 - 122.70

Earnings Summary:
Fiscal Year ending
Revenue, net ($MM)
EBITDA ($MM)
Diluted EPS
EV / EBITDA

12/11E 12/12E 12/13E


519
93
$0.08
92.5x

920
168
$0.47
51.4x

1,187
243
$0.88
35.5x

Share Price Performance:

3Q2011 Highlights
LinkedIn grew revenue +126% Y/Y to $139MM in
3Q2011, with Hiring Solutions experiencing the most
growth at 160% Y/Y. Hiring Solutions remains the
greatest potential for LinkedIn and now constitutes 51%
of total revenue. EBITDA margin dropped 409 basis
points Q/Q due to another round of investments in
technology infrastructure and international presence.

Key Risks
1. Inability to grow from engineering focus to sales
2. Recruiters fail to see sustainable benefits from Hiring
Solutions
3. Professional adaptations by existing social networks
(Facebook, Twitter, Google+)

Source: Google Finance

Valuation
The $89 price target was arrived at using DCF analysis
with a WACC of 11.05% and assumed perpetual growth
of 6%. The key drivers for this analysis include a 10-year
revenue CAGR of 23% with adjusted EBITDA margins
increasing to 31%. This gives LinkedIn a market cap of
$9.1B and a resulting FY2012E EV/EBITDA multiple of
51x. While optimistic, the 137% premium to peer
companies is appropriate to account for LinkedIns large
addressable market, disruptive business model and
competitive positioning.

SUNIL ACHARYA
SACHARYA.MBA2010@IVEY.CA
1.613.823.8468

(source: comScore). While the seeming advantage of Xing


was European appeal, LinkedIn has already encroached
into that region with Netherlands and Ireland now
experiencing higher LinkedIn penetration rates than even
that of the US (source: comScore).

Financial Outlook
Revenue
LinkedIn earns revenue along three product lines: Hiring
Solutions, Marketing Solutions, and Premium
Subscriptions. Hiring Solutions is going after the
estimated $85B market in Worldwide Talent Recruiting,
and Marketing Solutions is seeking to capture a share of
the $69B market in Online Advertising. Premium
Subscriptions is a smaller market at $2B focused on
providing increased network capabilities to registered
professionals.
Hiring Solutions is the fastest growing and largest
business line; it grew 160% Y/Y to $71MM in 3Q2011 and
constitutes 51% of total revenue, as shown in Exhibit 1.

For LinkedIn, International revenue now constitutes 33%


of total revenue and has grown 185% Y/Y in 3Q2011.
International has the potential to overshadow domestic
revenue, and LinkedIn has been aggressive on this front
by expanding the field sales team and establishing
remote sales offices.
The increased focus on field sales and the network effect
(as increased member count in turn attracts other new
members) will allow LinkedIn to penetrate 18% of
enterprise-level companies by FY2016. This results in a 5year CAGR growth of 33% for corporate customers, as
shown in Exhibit 2.

Exhibit 1. Revenue Composition by Product Groups


Exhibit 2. Key Drivers for Hiring Solutions

20%
29%

2016E

5-YR CAGR

8,866

36,342

33%

Hiring Solutions

Num of Corporate Customers

129%

18%

Marketing Solutions

Licenses Per Customer

4.2

5.4

5%

Revenue from HS ($MM)

261

1,381

40%

Growth Y/Y

51%

2011E

Premium Subscriptions

Hiring Solutions
The key drivers for Hiring Solutions are 1) number of
corporate customers and 2) number of licenses per
customer.
Recruiters (corporate customers) follow the talent, and it
comes as no surprise that their presence on LinkedIn
skyrocketed by 91% in the first 3 quarters of 2011 just as
the number of registered professionals increased 45%
during the same period. However, at 7.4K corporate
customers, Hiring Solutions has only penetrated 3.7% of
the 200K enterprise-level companies, leaving much room
for growth.

Recruiters access Hiring Solutions by paying ~$7K per


license. In FY2011, LinkedIn is expected to have sold 4.2
licenses per corporate customer, leaving much room for
growth in reaching the target rate of 10. In FY2012-13,
an increase in the license count per domestic customer
will help steady the overall count as new international
clients ease into the product, but the overall count
should grow to 5.4 licenses by FY2016.
Exhibit 3 depicts that the expected $1.4B of sales from
Hiring Solutions in FY2016 results in a CAGR of 68% from
FY2009 to FY2016. Although seemingly aggressive, this is
nonetheless modest compared to the 156% growth Y/Y
experienced in FY2011.

The upside is that LinkedIn is leaps ahead of the closest


competitor, German-based Xing, with 21 times as many
unique visitors during the month of November 2011
2

Exhibit 4. LinkedIn has potential to increase its unique visitors

1,381

CAGR 68%

1,140
898

616
474
261

2016E

2015E

2014E

2013E

2012E

2011E

36 102
2010

1,600
1,400
1,200
1,000
800
600
400
200
0

2009

$MM

Exhibit 3. Revenue from Hiring Solutions

Furthermore, 89% of all US companies used social


recruiting of some form in FY2011 (source: JobVite). As
companies continue experimenting in this field, Hiring
Solutions is a proven product that recruiters will have to
embrace just to remain competitive amongst their peers.

Marketing Solutions
The key drivers for Marketing Solutions are 1) member
count, 2) page views per member and 3) revenue per
thousand impressions, or RPM.

At 131 MM registered members, LinkedIn has already


captured 22% of the estimated 640 MM professionals
worldwide. By benefiting from network effects and rising
to the level of an international standard, LinkedIn will
capture 70% of all professionals or 419 MM by FY2016.
This results in a 5-year CAGR of 23% for registered
members, as shown in Exhibit 5.

Exhibit 5. Key Drivers for Marketing Solutions

Member Count (MM)

LinkedIn has benefited from this trend to become one of


the top three global social networks. Among the three,
LinkedIn is unique as the only network designed for
professionals. This is critical because users have shown
the desire to keep their personal and professional
networks separate.
So while there is some degree of competition for
viewership between all networks, LinkedIns unique
value proposition places it on a trajectory all its own.
Therefore, the lag in unique visitors as shown in Exhibit 4
should not be viewed as a loss but rather as potential for
growing the LinkedIn network.

2016E

5-YR CAGR

148

419

64%

5%

Page Views per Member

205

300

RPM ($)

5.06

6.00

3%

Revenue from MS ($MM)

154

754

37%

Growth Y/Y

Social networking sites now reach 82% of the worlds


online population of 1.2 billion users (source: comScore).
As the reach has proliferated, so has engagement. Since
March 2007 when only 6% of the time online was spent
on social networking sites, the participation level
increased 230% to nearly 1 in every 5 minutes in October
2011 (source: comScore).

2011E

23%

8%

The ultimate source of revenue for Marketing Solutions


is through page views. As a social network, LinkedIns
page views per member dwarfs in comparison to
Facebook at 20x less (source: comScore). LinkedIn has
taken steps to remedy this issue with LinkedIn Today, a
news aggregator, and other products still in the pipeline
which are targeted to college students. As members
begin treating LinkedIn as a destination for professional
development and not simply networking, the page view
per user will naturally grow, modeled here at a CAGR of
8% from FY2011 to FY2016.
Even by assuming a conservative CAGR of 3% for RPM,
revenue from Marketing Solutions will grow at a CAGR of
53% from FY2009 to FY2016, reaching $754 MM or 31%
of FY2016 revenue (Exhibit 6).

Expenses

653

CAGR 53%

718 754

453
279
154

2016E

2015E

2014E

2013E

2012E

79
2011E

38

2010

800
700
600
500
400
300
200
100
-

2009

$MM

Exhibit 6. Revenue from Marketing Solutions

Gross Margin: The companys target gross margin is 8486%, reaching these levels in the last two quarters. I
expect that infrastructure investments will stabilize in
FY2012, and gross margin will stabilize at 85% for the
foreseeable future.
Sales and Marketing: In FY2011, this expense overtook
Product Development as the most dominant expense,
and will continue to rise as LinkedIn transitions into a
sales company expanding its field sales into international
markets. The Sales and Marketing expense will grow to a
peak of 36% in FY2013, before declining to the
companys target rate of 25% in FY2018, largely due to
repeat sales and widespread acceptance of the Hiring
Solutions product.

Premium Subscriptions
The key drivers for Premium Subscriptions are 1)
member count and 2) subscription revenue per member.
Premium Subscriptions will grow largely due to the
forecast growth in the member count. The growth,
however, will be somewhat offset by the decreasing
revenue per member as new international users are less
accustomed to paying for such a service. Exhibit 7
highlights the growth in revenue from Premium
Subscriptions at a CAGR of 28% from FY2009 to FY2016.

300

CAGR 28%

250

50

General & Administration: This expense has been floating


at 14-15% for the last two years, and is above the
companys target rate of 9-10%. I attribute this to the
initial overhead of establishing the footprint for an
international company, and expect a drop to 10% by
FY2015 as LinkedIn is able to reap the benefits of early
organizational investments.

247 260

Management

151

150
100

225
187

200
103
46

62

2016E

2015E

2014E

2013E

2012E

2011E

2010

2009

$MM

Exhibit 7. Revenue from Premium Subscriptions

Product Development: This expense peaked at 28% of


revenue in 3Q2010 and has since declined 271 basis
points Y/Y. While continuing to innovate is critical,
LinkedIn has grown sufficiently in terms of engineers to
meet this condition, and this expense will continue to
decrease as % of revenue, leveling off to 20% in FY2014.

The management team at LinkedIn has found the perfect


balance between developing products that cater to
Enterprises and products that enliven the interests of
non-paying members. They have succeeded where the
likes of Facebook and Twitter continue to struggle by
growing a social network into prominence in parallel to
generating a sizable profit. Adopting this profit mindset
early has allowed management to build an organization
with the right filters in place to detect and capitalize on
other potential products.
Management seems to be steady and resilient. There
have been no major shakeups and the current CEO Jeff
Weiner has held that title since December 2008. Since
4

joining, Mr. Weiner has guided LinkedIn to a revenueCAGR of 87% and increased the workforce by 432%. He
has proven capable of managing an engineering-sales
company and seems well suited to grow the
international presence of LinkedIn.
The management also oversaw a successful transition
into public markets, learning to set expectations and
manage investor relations. The stock price reflects this
ability as it trades at a 56% premium to the offering
price.

Exhibit 9. DCF Price Target and Multiples Analysis

Weighted Average Cost of Capital %

11.05%

Assumed Perpetual Growth %

6%

Undiscounted Terminal Value ($MM)

17,896

Net Present Value of Free Cash Flow to Enterprise

8,627

Plus: Cash and cash equivalents

514

Less: Net Debt

Less: Minority Interest

Implied Equity Value ($MM)

9,141

Fully Diluted Shares Outstanding (MM)

102.6

FAIR VALUE per Share

$ 89.09

Valuation
The $89 price target was arrived at using a DCF model
with a discount rate of 11.05% and a terminal growth
rate of 6%. Revenue grew at a CAGR of 23% from FY2011
to FY2021, with 71% of the FY2021 revenue being
attributable to Hiring Solutions. EBITDA margins also
increased to 31% by FY2021, mainly from sales leverage
and stabilizing investment in Product Development.

EV / EBITDA

2012E

2013E

2014E

51.4x

35.5x

21.6x

EV / Sales

9.5x

6.9x

4.9x

P/E

190x

101x

50x

At a market cap of $9.1B, LinkedIn would trade at 36x


FY2013 EV/EBITDA and at a price-to-earnings multiple of
101x on FY2013 EPS estimates.
Exhibit 8 highlights segments of the DCF analysis, and
Exhibit 9 shows the calculation of the price target along
with the resulting multiples.

Exhibit 8. DCF Analysis

FY2011E

FY2016E

FY2021E

518
113%

2,394
14%

4,137
10%

23%

Adj EBITDA
EBITDA - % of Revenue

93
18%

647
27%

1,291
31%

30%

Cash taxes

(11)

(150)

(328)

(116)
88

(158)
79

(224)
113

7%
3%

54.6

417.2

852.6

32%

Revenue : $MM
Y/Y growth rate

Capital Expenditures
Change in Net WC
FCFF ($MM)

10Y-CAGR

Exhibit 10:

LinkedIn - Quarterly Income Statement


Q1A
Q2A
Mar-09 Jun-09
Net Revenue
Sequential Change
Growth Y/Y
Costs and expenses:
Cost of revenue

$23

$28
19%

Q3A
Sep-09

Q4A
Dec-09

$30
7%

$39
32%

FYA
Q1A
Q2A
2009 Mar-10 Jun-10
$120

$45
14%

$55
23%

Q3A
Sep-10

Q4A
Dec-10

$62
13%

$82
32%

52%

FYA
Q1A
2010 Mar-11
$243

$94
15%

Q2A
Jun-11

Q3A
Sep-11

Q4E
Dec-11

$121
29%

$139
15%

$164
17%

102%

FYE
Q1E
2011 Mar-12
$518

$184
13%

Q2E
Jun-12

Q3E
Sep-12

Q4E
Dec-12

FYE
2012

$210
14%

$241
15%

$269
12%

$905

113%

75%

5.6

6.0

6.4

7.8

25.9

8.3

9.8

11.8

14.8

44.8

16.8

18.4

22.1

26.2

83.4

29.5

33.6

36.1

40.4

139.6

17.6
76%

21.7
78%

23.4
79%

31.5
80%

94.3
78%

36.4
81%

45.1
82%

50.0
81%

66.9
82%

198.3
82%

77.1
82%

102.6
85%

117.4
84%

137.4
84%

434.5
84%

154.9
84%

176.4
84%

204.8
85%

228.9
85%

765.0
85%

5.3
8.5
3.9
2.5

5.9
8.7
4.0
2.8

6.3
10.0
4.9
3.1

9.3
12.1
6.6
3.5

26.8
39.4
19.5
11.9

10.5
12.1
6.7
3.9

13.1
14.8
7.7
4.2

14.8
17.2
9.1
4.8

20.6
21.0
11.6
6.6

59.0
65.1
35.1
19.6

29.4
24.7
13.6
8.2

36.0
30.4
16.7
9.6

46.1
35.0
20.1
11.6

55.6
40.9
22.9
14.0

167.1
131.1
73.3
43.3

62.7
42.4
25.8
14.0

71.4
48.3
29.4
14.0

84.3
53.0
31.3
14.5

94.2
59.2
35.0
14.5

312.7
203.0
121.5
57.0

20

22

24

32

98

33

40

46

60

179

76

92.7

112.8

133.4

414.7

144.9

163.1

183.2

203.0

694.2

Income (loss) from operations


Add: Dep and ammort
Add: Stock based comp

(2.6)
2.5
1.4

0.2
2.8
1.4

(0.9)
3.1
1.5

(0.0)
3.5
1.8

(3.4)
11.9
6.2

3.2
3.9
1.9

5.3
4.2
2.0

4.0
4.8
2.2

7.1
6.6
2.7

19.6
19.6
8.8

1.3
8.2
3.8

9.9
9.6
6.8

4.6
11.6
8.5

4.0
14.0
11.0

19.8
43.3
30.2

10.0
14.0
10.0

13.3
14.0
10.0

21.6
14.5
10.0

25.9
14.5
10.0

70.8
57.0
40.0

Adjusted EBITDA
Adjusted EBITDA Margins
Inc EBITDA Margins YOY
Other income (expense), net

1
6%

4
16%

4
12%

5
13%

9
20%
36%
(0.3)

11
21%
26%
(0.4)

11
18%
23%
0.4

16
20%
26%
(0.3)

48
20%
27%
(0.6)

13
14%
9%
0.4

26
22%
22%
0.0

25
18%
17%
(1.8)

29
18%
15%
-

93
18%
16%
(1.33)

34
18%
23%
-

37
18%
12%
-

46
19%
21%
-

50
19%
20%
-

168
19%
19%
-

Gross Profits
Goss Margin
Sales and marketing
Product development
G&A
Depreciation and amort.
Operating costs

0.1

0.3

(0.0)

(0.1)

15
12%
22%
0.2

Income before income taxes


Provision for income taxes

(2.6)
0.4

0.5
(0.1)

(1.0)
0.1

(0.1)
0.4

(3.1)
0.8

2.9
1.0

5.0
0.7

4.4
0.5

6.7
1.4

19.0
3.6

1.7
(0.3)

9.9
5.4

2.8
4.4

4.0
1.2

18.5
10.7

10.0
3.0

13.3
4.0

21.6
6.5

25.9
7.8

70.8
21.2

Net income (loss)

(2.9)

0.6

(1.1)

(0.6)

(4.0)

1.8

4.3

4.0

5.3

15.4

2.1

4.5

(1.6)

2.8

7.8

7.0

9.3

15.2

18.1

49.6

Basic EPS
Diluted EPS
Basic share count
Diluted share count

$ (0.02)
$ (0.02)
96.3
96.3

$ 0.08
$ 0.08
97.6
102.6

$ 0.47
104.9

Exhibit 11:

LinkedIn - Annual Income Statement

Net Revenue
Sequential Change
Growth Y/Y
Costs and expenses:
Cost of revenue

FYA
2008

FYA
2009

FYA
2010

FYE
2011

FYE
2012

FYE
2013

FYE
2014

FYE
2015

FYE
2016

FYE
2017

FYE
2018

FYE
2019

FYE
2020

FYE
2021

$79

$120

$243

$518

$905

$1,256

$1,776

$2,105

$2,394

$2,712

$3,058

$3,444

$3,772

$4,137

52%

102%

113%

75%

39%

41%

19%

14%

13%

13%

13%

10%

10%

18.6

25.9

44.8

83.4

139.6

188.5

266.4

315.7

359.2

406.8

458.8

516.6

565.8

620.6

Gross Profits
Goss Margin

60
76%

94.3
78%

198.3
82%

434.5
84%

765.0
85%

1,068.0
85%

1,509.3
85%

1,789.0
85%

2,035.2
85%

2,305.4
85%

2,599.7
85%

2,927.2
85%

3,206.4
85%

3,516.8
85%

Sales and marketing


Product development
General and administrative
Depreciation and amort.

17.0
29.4
13.0
6.4

26.8
39.4
19.5
11.9

59.0
65.1
35.1
19.6

167.1
131.1
73.3
43.3

312.7
203.0
121.5
57.0

452.3
263.9
150.8
67.0

603.7
355.1
195.3
77.0

673.5
420.9
210.5
87.0

718.3
478.9
239.4
97.0

759.4
542.4
271.2
107.0

764.6
611.7
305.8
117.0

860.9
688.7
344.4
127.0

943.1
754.4
377.2
137.0

1,034.4
827.5
413.7
147.0

66

98

179

414.7

694.2

934.0

1,231.2

1,391.9

1,533.6

1,680.1

1,799.2

2,021.0

2,211.7

2,422.6

(5.5)
6.4
4.6

(3.4)
11.9
6.2

19.6
19.6
8.8

19.8
43.3
30.2

70.8
57.0
40.0

134.0
67.0
42.0

278.1
77.0
44.0

397.1
87.0
46.0

501.6
97.0
48.0

625.3
107.0
50.0

800.5
117.0
50.0

906.1
127.0
50.0

994.7
137.0
50.0

1,094.2
147.0
50.0

5
7%

48
20%
27%
(0.6)

93
18%
16%
(1.33)

168
19%
19%
-

1,083
31%
30%
-

1,182
31%
30%
-

Operating costs
Income (loss) from operations
Add: Dep and ammort
Add: Stock based comp
Adjusted EBITDA
Adjusted EBITDA Margins
Inc EBITDA Margins YOY
Other income (expense), net

1.3

15
12%
22%
0.2

Income before income taxes


Provision for income taxes

(4.2)
0.3

(3.1)
0.8

19.0
3.6

18.5
10.7

70.8
21.2

134.0
40.2

278.1
83.4

397.1
119.1

501.6
150.5

625.3
187.6

800.5
240.2

906.1
271.8

994.7
298.4

1,094.2
328.3

Net income (loss)

(4.5)

(4.0)

15.4

7.8

49.6

93.8

194.7

278.0

351.1

437.7

560.4

634.3

696.3

766.0

Basic EPS
Diluted EPS
Basic share count
Diluted share count

$
$

0.08
0.08 $ 0.47 $
97.6
102.6
104.9

243
19%
21%
-

0.88 $
107.2

399
22%
30%
-

1.78 $
109.5

530
25%
40%
-

2.49 $
111.8

647
27%
40%
-

3.08 $
114.1

782
29%
43%
-

3.76 $
116.4

968
32%
53%
-

4.72 $
118.7

5.24 $
121.0

5.65 $
123.3

1,291
31%
30%
-

6.10
125.6

Exhibit 12:

LinkedIn - Key Drivers (Quarterly)


Q1A
Mar-10

Q2A
Jun-10

Q3A
Sep-10

Q4A
Dec-10

FYA
2010

Q1A
Mar-11

Q2A
Jun-11

Q3A
Sep-11

Q4E
Dec-11

FYE
2011E

Q1E
Mar-12

Q2E
Jun-12

Q3E
Sep-12

Q4E
Dec-12

FYE
2012E

16,929
170%
1,827
242
81%
9.3

21,723
168%
2,306
479
107%
9.4

27,274
191%
2,849
543
126%
9.6

35,958
190%
3,865
1,016
144%
9.3

101,884
182%
3,865

46,333
174%
4,774
909
161%
9.7

58,619
170%
6,072
1,298
163%
9.7

70,995
160%
7,366
1,294
159%
9.6

85,114
137%
8,866
1,500
175%
9.6

261,061
156%
8,866

97,440

111,540

126,027

139,327

10,366
1,500
117%
9.4

11,866
1,500
95%
9.4

13,266
1,400
80%
9.5

14,666
1,400
65%
9.5

474,335
82%
14,666

Rev from marketing solutions (thousands)


Growth Y/Y
Page views (MM)
Sequential change in page views (MM)
Revenue per thousand page views $
Page views per member

14,226
133%
3,611

18,836
110%
5,031
1,091
3.74
62

27,939
93%
5,500
469
5.08
61

79,309
107%
18,082

27,683
95%
7,085
1,585
3.91
70

38,571
111%
7,093
8
5.44
61

40,072
113%
7,607
514
5.27
58

47,289
69%
8,598
991
5.50
58

153,615
94%
30,383
5.06
205

53,436
93%
9,716
1,118
5.50
58

62,465
62%
11,357
1,642
5.50
60

76,468
91%
13,903
2,546
5.50
65

86,408
83%
15,711
1,807
5.50
65

278,777
81%
50,687

3.94
56

18,308
110%
3,940
329
4.65
55

Rev from prem subscriptions (thousands)


Growth Y/Y
Num of members (in thousands)
Sequential Add
Growth Q/Q
Growth Y/Y
Prem subscription rev per member $

13,561
25%
64,177
9,066
16%

14,864
36%
71,825
7,648
12%

15,682
37%
80,553
8,728
12%

17,799
42%
90,437
9,884
12%

61,906
35%
90,437

19,916
47%
101,528
11,091
12%

23,850
60%
115,808
14,280
14%

28,409
81%
131,186
15,378
13%

31,130
75%
148,240
17,054
13%

103,305
67%
148,240

33,502
68%
167,511

35,965
51%
189,288

38,501
36%
213,895

43,506
40%
241,702

151,474
47%
241,702

Key Revenue Drivers


Rev from Hiring Solutions (thousands)
Growth Y/Y
Num of Corporate Solutions customers
Growth Q/Q
Growth Y/Y
Rev per corp customer $ (thousands)

144%
26.4

4.39
200

0.21

0.21

0.19

0.20

64%
0.68

81%
551

82%
378

81%
232

82%
175

82%
309

Sales and marketing $ (thousands)


Sales and marketing as % of Sales
YOY change in bps

10,454
23%
44

13,055
24%
239

14,831
24%
283

20,638
25%
169

Product development $ (thousands)


Prod dev as % of Sales
YOY change in bps

12,141
27%
(962)

14,822
27%
(452)

17,188
28%
(579)

6,672
15%
(189)

7,667
14%
(60)

36%

13%

Key Cost Drivers


Gross Margin
YOY Chg in bps

G&A $ (thousands)
G&A % of Sales
YOY change in bps
Tax Rate

129%
29.4

65%
32.3

5.50
210

13%

13%

13%

13%

0.20

0.19

0.18

0.18

63%
0.63

0.21

0.22

0.21

64%
0.70

82%
71

85%
272

84%
331

84%
217

84%
233

84%
187

84%
(80)

85%
84

85%
100

85%
67

58,978
24%
191

29,361
31%
788

36,019
30%
598

46,074
33%
903

55,601
34%
874

167,055
32%
799

62,689
34%
274

71,390
34%
424

84,349
35%
197

94,235
35%
100

312,662
35%
231

20,953
26%
(521)

65,104
27%
(605)

24,735
26%
(82)

30,414
25%
(187)

35,022
25%
(271)

40,883
25%
(65)

131,054
25%
(148)

42,407
23%
(333)

48,293
23%
(213)

53,019
22%
(311)

59,233
22%
(300)

202,952
22%
(287)

9,092
15%
(167)

11,633
14%
(267)

35,064
14%
(179)

13,614
14%
(43)

16,673
14%
(19)

20,121
14%
(29)

22,895
14%
(24)

73,303
14%
(27)

25,813
14%
(49)

29,396
14%
23

31,329
13%
(143)

35,001
13%
(100)

121,540
13%
(72)

11%

21%

19%

-20%

55%

157%

30%

58%

30%

30%

30%

30%

30%

0.20

Exhibit 13:

LinkedIn - Key Drivers (Annual)


Key Revenue Drivers
Revenue from Hiring Solutions (thousands)
Growth Y/Y
Num of Corporate Solutions customers
Num of Corp Solutions customers % Chg YOY
Revenue per corp customer $ (thousands)

FYA
2009

FYA
2010

FYE
2011

FYE
2012

FYE
2013

FYE
2014

FYE
2015

FYE
2016

FYE
2017

FYE
2018

FYE
2019

FYE
2020

FYE
2021

36,136
108%
1,585

101,884
182%
3,865
144%
26.4

261,061
156%
8,866
129%
29.4

474,335
82%
14,666
65%
32.3

615,972
30%
20,532
40%
30.0

898,293
46%
25,666
25%
35.0

1,139,548
27%
30,799
20%
37.0

1,381,009
21%
36,342
18%
38.0

1,658,301
20%
42,521
17%
39.0

1,972,953
19%
49,324
16%
40.0

2,325,619
18%
56,722
15%
41.0

2,620,575
13%
62,395
10%
42.0

2,951,267
13%
68,634
10%
43.0

22.8

Rev from marketing solutions (thousands)


Growth Y/Y
Page views (MM)
Revenue per thousand page views $
Page views per member

38,278
47%

79,309
107%
18,082
4.39
200

153,615
94%
30,383
5.06
205

278,777
81%
50,687
5.50
210

453,191
63%
75,532
6.00
250

652,595
44%
108,766
6.00
300

717,854
10%
119,642
6.00
300

753,747
5%
125,624
6.00
300

783,897
4%
130,649
6.00
300

807,414
3%
134,569
6.00
300

831,636
3%
138,606
6.00
300

856,585
3%
142,764
6.00
300

882,283
3%
147,047
6.00
300

Rev from prem subscriptions (thousands)


Growth Y/Y
Num of members (in thousands)
Growth Y/Y
Prem subscription rev per member $

45,713
29%
55,111

61,906
35%
90,437
64%
0.68

103,305
67%
148,240
64%
0.70

151,474
47%
241,702
63%
0.63

187,319
24%
302,127
25%
0.62

224,783
20%
362,553
20%
0.62

247,261
10%
398,808
10%
0.62

259,624
5%
418,748
5%
0.62

270,009
4%
435,498
4%
0.62

278,109
3%
448,563
3%
0.62

286,452
3%
462,020
3%
0.62

295,046
3%
475,881
3%
0.62

303,897
3%
490,157
3%
0.62

78%
207

82%
309

84%
233

85%
67

85%
44

85%
-

85%
-

85%
-

85%
-

85%
-

85%
-

85%
-

85%
-

Sales and marketing $ (thousands)


Sales and marketing as % of Sales
YOY change in bps

26,847
22%
79

58,978
24%
191

167,055
32%
799

312,662
35%
231

452,333
36%
144

603,728
34%
(200)

673,492
32%
(200)

718,314
30%
(200)

759,418
28%
(200)

764,619
25%
(300)

860,927
25%
-

943,052
25%
-

1,034,362
25%
-

Product development $ (thousands)


Prod dev as % of Sales
YOY change in bps

39,444
33%
(444)

65,104
27%
(605)

131,054
25%
(148)

202,952
22%
(287)

263,861
21%
(144)

355,134
20%
(100)

420,933
20%
0

478,876
20%
0

542,441
20%
0

611,695
20%
0

688,741
20%
0

754,441
20%
0

827,489
20%
0

General and administrative $ (thousands)


G&A % of Sales
YOY change in bps

19,480
16%
(26)

35,064
14%
(179)

73,303
14%
(27)

121,540
13%
(72)

150,778
12%
(144)

195,324
11%
(100)

210,466
10%
-100

239,438
10%
0

271,221
10%
0

305,848
10%
0

344,371
10%
0

377,221
10%
0

413,745
10%
0

19%

58%

30%

30%

30%

30%

30%

30%

30%

30%

30%

30%

Key Cost Drivers


Gross Margin
YOY Chg in bps

Tax Rate

0.83

Exhibit 14:

LinkedIn - Annual Balance Sheet


FYA
2008

FYA
2009

FYA
2010

FYE
2011

FYE
2012

81
15.0
2.7
0.1
0.7

90
24.3
3.0
2.2
1.7

93
58.3
8.7
5.8
3.1
3.5

514
106
12.9
13.6
3.1
3.5

606
186
22.6
23.3
3.1
3.5

706
258.2
31.4
31.7
3.1
3.5

947
364.9
44.4
42.6
3.1
3.5

1,280
432.5
52.6
48.6
3.1
3.5

1,697
492.0
59.9
53.9
3.1
3.5

2,208
557.3
67.8
59.4
3.1
3.5

2,842
628.5
76.5
64.2
3.1
3.5

3,566
707.6
86.1
72.3
3.1
3.5

4,345
775.1
94.3
79.2
3.1
3.5

5,197
850.2
103.4
86.9
3.1
3.5

99.3
21.7
0.5
0.6
122.1

121.2
25.7
0.3
1.4
148.6

172.2
56.7
5.2
4.0
238.2

653.2
129.5
1.6
3.0
5.2
792.5

844.8
208.1
1.6
0.5
5.2
1,060.2

1,033.6
289.0
1.6
0.2
5.2
1,329.6

1,405.3
372.9
1.6
0.1
5.2
1,785.0

1,820.4
442.0
1.6
5.2
2,269.2

2,309.6
502.8
1.6
5.2
2,819.2

2,899.0
569.6
1.6
5.2
3,475.4

3,617.7
642.3
1.6
5.2
4,266.8

4,438.9
723.2
1.6
5.2
5,168.9

5,299.9
792.2
1.6
5.2
6,098.8

6,244.3
868.9
1.6
5.2
7,120.0

Liabilities and Stockholder's equity


Current liabilities :
Accounts Payable
Accrued liabilities
Deferred revenue
Income tax payable

2.5
10.2
15
0.0

4.9
18.4
25
0.6

2.1
38.0
65
0.4

8.0
77.3
168
0.7

13.4
132.1
288
0.7

18.1
179.4
370
0.7

25.5
241.5
518
0.7

30.3
275.5
639
0.7

34.4
305.3
756
0.7

39.0
336.6
889
0.7

44.0
364.0
1,037
0.7

49.5
409.8
1,204
0.7

54.3
448.9
1,344
0.7

59.5
492.4
1,500
0.7

Total Current Liabilities


Long term liabilities
Deferred tax liabilities

27.7
0.4
0.7

49.3
0.5
1.7

105.5
1.9
6.6

253.9
2.0
41.3

434.5
2.0
78.8

568.4
2.0
120.5

785.3
2.0
164.4

945.6
2.0
210.3

1,096.5
2.0
258.3

1,264.9
2.0
308.3

1,446.0
2.0
358.3

1,663.8
2.0
408.3

1,847.5
2.0
458.3

2,052.6
2.0
508.3

Total Liabilities
Redeemable conv pref stock
Stockholders' Equity
Convertible preferred stock
Class A and Class B common stock
Additional paid-in capital
Accumulated OCI
Accumulated earnings (deficit)

28.8
88.0

51.5
88.0

114.0
88.0

297.2
-

515.3
-

690.9
-

951.7
-

1,157.9
-

1,356.8
-

1,575.2
-

1,806.3
-

2,074.1
-

2,307.8
-

2,562.9
-

15.4
5.8
(0.0)
(15.9)

15.4
0.00
13.7
(0.0)
(20.1)

15.8
0.00
25.1
(0.0)
(4.7)

0.01
492.2
(0.0)
3.1

0.01
492.2
(0.0)
52.7

0.01
492.2
(0.0)
146.5

0.01
492.2
(0.0)
341.2

0.01
492.2
(0.0)
619.1

0.01
492.2
(0.0)
970.3

0.01
492.2
(0.0)
1,408.0

0.01
492.2
(0.0)
1,968.3

0.01
492.2
(0.0)
2,602.6

0.01
492.2
(0.0)
3,298.9

0.01
492.2
(0.0)
4,064.9

Total Stockholders' Equity


Total Liabilities and Stockholders' Equity

5.2
122.1

9.1
148.6

36.2
238.2

495.3
792.5

544.9
1,060.2

638.7
1,329.6

833.4
1,785.0

1,111.3
2,269.2

1,462.4
2,819.2

1,900.1
3,475.4

2,460.5
4,266.8

3,094.8
5,168.9

3,791.1
6,098.8

4,557.0
7,120.0

Balance Sheet Metrics


Days Sales in Receivables
Deferred commission as % of revenue
Prepaid Expenses as % of Total Expenses
PP&E as % of revenue
Days COGS in Payables
Accrued Liabilities as % of Total Expenses
Deferred revenue as ratio of HS+PS rev.
Deferred tax liabilities as ratio of Income Tax

70
3.5%
28%
49
13.1%
3.55x
0.4x

74
2.5%
2.0%
21%
69
16.4%
3.22x
0.5x

87
3.6%
2.8%
23%
17
18.6%
2.52x
0.5x

75
2.5%
3%
23%
35
17%
2.17x
0.3x

75
2.5%
3%
23%
35
17%
2.17x
0.3x

75
2.5%
3%
21%
35
17%
2.17x
0.5x

75
2.5%
3%
21%
35
17%
2.17x
0.6x

75
2.5%
3%
21%
35
17%
2.17x
0.6x

75
2.5%
3%
21%
35
17%
2.17x
0.6x

75
2.5%
3%
21%
35
17%
2.17x
0.7x

75
2.5%
3%
21%
35
17%
2.17x
0.7x

75
2.5%
3%
21%
35
17%
2.17x
0.7x

75
2.5%
3%
21%
35
17%
2.17x
0.6x

Assets
Current Assets :
Cash and cash equivalents
Accounts receivable
Deferred commissions
Prepaid expenses
Income tax receivable
Deferred income taxes
Total Current Assets
Property and equipment, net
Goodwill
Intangible assets, net
Other assets
Total Assets

75
2.5%
3%
25%
35
17%
2.17x
0.3x

FYE
2013

FYE
2014

FYE
2015

FYE
2016

FYE
2017

FYE
2018

FYE
2019

FYE
2020

FYE
2021

10

Exhibit 15:

LinkedIn - Annual Statement of Cash Flows

Net income (loss)


Depreciation and amortization
Provision for doubtful accounts
Stock-based compensation
Loss on disposal of assets
Excess income tax benefit
Funds from Operations
Changes in operating assets and liabilties:
Accounts receivable
Deferred commissions
Prepaid expenses and other assets
Income Tax Receivable
Deferred income taxes
Accounts payable and other liabilities
Accrued Liabilities
Income Tax Payable
Deferred revenue
Net Cash provided by operating activities
Purchases of property and equipment
Change in Intangible Assets
(Increase) decrease in restricted cash and deposits
Net Cash used in investing activities
Proceeds from issuance of redeemable conv preferred stock
Issuance costs
Proceeds from exercise of warrant
Proceeds from issuance of common stock
Proceeds from early exercise of employee stock options
Repurchase of common stock
Repurchase of founders' stock
Payments for deferred offering costs
Excess income tax benefit from the exercise of stock options
Net cash provided by financing activities
Effect of exchange rate changes
Change in Cash and Cash Equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period

FYA
2009

FYA
2010

FYE
2011

FYE
2012

FYE
2013

FYE
2014

FYE
2015

FYE
2016

FYE
2017

FYE
2018

FYE
2019

FYE
2020

FYE
2021

(4.0)
11.9
0.4
6.2
0.0
14.5

15.4
19.6
1.8
8.8
0.3
(0.1)
45.8

7.8
43.3
0.4
30.2
81.7

49.6
57.0
40.0
146.6

93.8
67.0
42.0
202.8

194.7
77.0
44.0
315.7

278.0
87.0
46.0
411.0

351.1
97.0
48.0
496.1

437.7
107.0
50.0
594.7

560.4
117.0
50.0
727.4

634.3
127.0
50.0
811.3

696.3
137.0
50.0
883.3

766.0
147.0
50.0
963.0

(9.3)
(3.0)
0.5
0.1
(1.0)
2.4
8.1
0.6
10.6
21.0
(13.3)
0.0
0.2
(13.0)
1.1
0.7
(0.7)
1.0
0.1
9.2
80.7
90.0

(35.7)
(5.8)
(4.6)
15.6
(0.5)
39.5
54.4
(50.0)
(4.5)
(1.1)
(55.6)
0.0
1.3
3.4
(0.2)
(0.4)
0.1
4.3
(0.1)
3.0
90.0
93.0

(48.2)
(4.3)
(7.9)
(0.0)
(0.0)
5.9
39.3
0.3
102.9
169.7
(116.1)
(1.6)
(117.7)
363.3
5.0
(0.0)
0.3
368.5
420.6
93.0
513.6

(79.4)
(9.7)
(9.7)
5.4
54.7
120.5
228.4
(135.6)
(135.6)
92.8
513.6
606.4

(72.3)
(8.8)
(8.4)
4.7
47.4
81.8
247.2
(147.9)
(147.9)
99.3
606.4
705.7

(106.7)
(13.0)
(11.0)
7.5
62.1
147.4
402.0
(160.9)
(160.9)
241.1
705.7
946.8

(67.6)
(8.2)
(6.0)
4.7
34.0
121.5
489.4
(156.1)
(156.1)
333.3
946.8
1,280.1

(59.5)
(7.2)
(5.3)
4.2
29.8
117.0
575.0
(157.8)
(157.8)
417.2
1,280.1
1,697.3

(65.3)
(7.9)
(5.5)
4.6
31.3
132.6
684.4
(173.7)
(173.7)
510.6
1,697.3
2,207.9

(71.2)
(8.7)
(4.8)
5.0
27.4
148.7
823.8
(189.7)
(189.7)
634.1
2,207.9
2,842.0

(79.2)
(9.6)
(8.1)
5.5
45.8
166.4
932.1
(207.9)
(207.9)
724.2
2,842.0
3,566.3

(67.5)
(8.2)
(6.9)
4.7
39.1
139.9
984.4
(206.0)
(206.0)
778.4
3,566.3
4,344.6

(75.0)
(9.1)
(7.7)
5.3
43.5
156.5
1,076.3
(223.7)
(223.7)
852.6
4,344.6
5,197.2

11

Exhibit 16:

LinkedIn - Comparables

Company
Internet Companies
AMZN
Amazon.com
EBAY
eBay Inc.
ACOM Ancestry.com
GOOG
Google
700-HK Tencent
Average

Mkt Cap ($MM)


1/7/2012
83,043
39,541
1,204
210,534
284,559

$
$
$
$
$

Price
1/7/2012
182.61
30.63
27.33
650.02
154.80

2011

P/E
2012 2013

EV to EBITDA
2011 2012 2013

EV to Sales
2011 2012 2013

EBITDA Margins
2011 2012 2013

Revenue Growth
2011 2012 2013

159x
16x
19x
17x
22x

95x
14x
16x
14x
17x

52x
12x
13x
12x
14x

37x
11x
8x
13x
16x

27x
9x
7x
11x
12x

19x
8x
6x
9x
10x

1.7x
3.4x
2.7x
7.1x
7.4x

1.3x
2.9x
2.4x
5.8x
5.7x

1.0x
2.6x
2.1x
4.9x
4.5x

5%
32%
36%
55%
47%

5%
32%
36%
54%
46%

5%
33%
36%
54%
47%

43%
27%
33%
33%
49%

34%
18%
15%
23%
30%

29%
13%
12%
18%
25%

123,776 $

209.08

47x

31x

21x

17x

13x

10x

4.5x

3.6x

3.0x

35%

35%

35%

37%

24%

19%

1,077 $
549 $

8.35
8.26

30x
28x

16x
21x

12x
16x

8x
12x

5x
9x

3x
6x

1.5x
4.9x

1.1x
3.6x

0.8x
2.7x

na
na

na
na

na
na

na
na

na
na

na
na

813 $

8.31

29x

18x

14x

10x

7x

5x

3.2x

2.4x

1.8x

na

na

na

na

na

na

Recent Internet IPOs


GRPN
Groupon
ZNGA
Zynga

11,227 $
6,161 $

17.81
8.81

-40x
92x

115x
46x

45x
28x

-128x
14x

105x
11x

42x
8x

8.3x
3.7x

5.6x
3.1x

4.6x
2.6x

-7%
27%

5%
29%

11%
33%

411%
37%

49%
20%

22%
17%

Average

8,694 $

13.31

26x

80x

36x

-57x

58x

25x

6.0x

4.3x

3.6x

10%

17%

22%

224%

35%

20%

153.14

38x

39x

23x

-1x

22x

12x

4.5x

3.5x

2.9x

28%

30%

31%

90%

27%

19%

Online Recruitment Companies


MWW Monster Worldwide Inc.
DHX
Dice Holdings, Inc.
Average

Overall Average

90,896

source: FactSet estimates

12

Exhibit 17:

LinkedIn - Discounted Cash Flow Analysis ($MM)


Projected Calendar Year ending December 31,

Revenue
Sequential Growth rate
CAGR
Adj EBITDA
EBITDA as % of Net Revenue
Cash taxes
Capital Expenditures
Change in Net Working Capital

FYA
2010
243

FYE
2011
518
113%

48
20%
(4)
(50)
9
3.0

Unlevered Free Cash Flow

93
18%
(11)
(116)
88

FYE
2012
905
75%
75%
168
19%
(21)
(136)
82

FYE
2013
1,256
39%
56%
243
19%
(40)
(148)
44

FYE
2014
1,776
41%
51%
399
22%
(83)
(161)
86

FYE
2015
2,105
19%
42%
530
25%
(119)
(156)
78

FYE
2016
2,394
14%
36%
647
27%
(150)
(158)
79

FYE
2017
2,712
13%
32%
782
29%
(188)
(174)
90

FYE
2018
3,058
13%
29%
968
32%
(240)
(190)
96

FYE
2019
3,444
13%
27%
1,083
31%
(272)
(208)
121

FYE
2020
3,772
10%
25%
1,182
31%
(298)
(206)
101

FYE
2021
4,137
10%
23%
1,291
31%
(328)
(224)
113

54.6

92.8

99.3

241.1

333.3

417.2

510.6

634.1

724.2

778.4

852.6

DCF Valuation
Perpetuity Growth Rate / Terminal Value at 11.05% WACC

(in $MM)
11.1%

5.0%

5.5%

6.0%

6.5%

7.0%

Assumed Perpetual Growth %

6%

14,797

16,207

17,896

19,956

22,526

Undiscounted Terminal Value

17,896

Weighted Average Cost of Capital %

Net Present Value of Free Cash Flow to Enterprise

8,627

Plus: Cash and cash equivalents

514

10.75%

$82.99

$88.49

$95.13

$103.34

$113.74

10.90%

80.69

85.83

92.02

99.61

109.16

Less: Net Debt

11.05%

78.50

83.32

89.09

96.13

104.91

9,141

11.20%

76.42

80.94

86.34

92.88

100.97

102.6

11.35%

74.44

78.69

83.74

89.82

97.31

Less: Minority Interest


Implied Equity Value
Fully Diluted Shares Outstanding (MM)
Implied Equity Value per Share

EV/EBITDA

Equity Value Per Share

WACC

89.09

2011

2012

2013

2014

92.5x

51.4x

35.5x

21.6x

13