Shares of LinkedIn (NYSE: LNKD) entered the week down roughly 8% year-to-date. Will the losses continue after the company reports third-quarter results Thursday, or are better days ahead? A lot depends on how well the business has performed. Here's a closer look at what LinkedIn has achieved over the trailing 12 months:
|LNKD||Q2 2015||Q1 2015||Q4 2014||Q3 2014|
|Revenue||$711.7 million||$637.7 million||$643.4 million||$568.3 million|
|Earnings From Continuing Operations||($67.5 million)||($42.4 million)||$3.1 million||($4.2 million)|
|Cash From Operations||$225.6 million||$165.1 million||$130.4 million||$181.2 million|
As you can see, LinkedIn has reported respectable sequential gains in revenue and cash from operations over the past year. The figures are reminiscent of those from Twitter (NYSE:TWTR), which reported $569 million in third-quarter revenue (up 58% year-over-year) and a massive reversal in cash from operations -- from $85.9 million used in last year's third quarter to $101.7 million generated in the current Q3. LinkedIn has enjoyed similar cash flow gains recently. Here's a closer look at how the key figures measure up year-over-year:
|LNKD Growth Rates||Q2 2015||Q1 2015||Q4 2014||Q3 2014|
|Earnings From Continuing Operations||Not material||Not material||(18.2%)||Not material|
|Adjusted EPS||Not material||Not material||(41.1%)||Not material|
|Cash From Operations||75.7%||28.2%||58.2%||43.8%|
Revenue and cash flow look strong, while profits -- at least on the basis of generally accepted accounting principles (GAAP) -- remain elusive. Looking at the overall business, I'm watching for improvements in each of these three areas:
1. Marketing solutions. Like Twitter with its TV-related promotions, LinkedIn has made much of newer services aimed at advertisers. On the second-quarter earnings call, Chief Financial Officer Steve Sordello said that native advertising and sponsored updates were growing "in excess of 100%" year-over-year. Publishers fuel that growth, adding what the company said were "130,000 new long-form posts" weekly in the second quarter. As a business unit, marketing solutions grew revenue 31.5% year-over-year to just over $140 million in revenue -- slightly lagging the company's overall growth rate in Q2. Look for LinkedIn to reverse that equation in the third quarter.
2. lynda.com as a contributor to growth. LinkedIn reports revenue from courses sold through lynda.com in its talent solutions group as "learning & development." In Q2, that amounted to $17.6 million in revenue. For the full year, LinkedIn in Q2 said it expects lynda.com to contribute $90 million to revenue, versus an earlier forecast of $40 million, due mostly to an earlier-than-expected close of the acquisition.
3. International markets. LinkedIn could do better in foreign markets. Even though 40% of total revenue is now produced overseas, at just 23.6%, growth in international business badly lagged overall Q2 revenue growth. For comparison's sake, Twitter reported a 65% increase in international revenue. About one-third of the microblogger's business is now done overseas.
LinkedIn has forecast third-quarter revenue in the $745 million to $750 million range, which would result in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the $146 million to $148 million range, and adjusted earnings of about $0.43 per share. Results will be released on Thursday after the market closes.