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LinkedIn (NYSE:LNKD)

Q1 2013 Earnings Conference Call

May 2, 2013 05:00 PM ET

Executives

Jeffrey Weiner - CEO

Steven Sordello - SVP, CFO

Matt Sonefeldt - Senior Manager, Investor Relations

Analysts

Douglas Anmuth - JP Morgan

Eric Sheridan - UBS

Scott Devitt - Morgan Stanley

Youssef Squali - Cantor Fitzgerald & Co.

Timothy Mchugh - William Blair & Company

Arvind Bhatia - Sterne Agee

Tom White - Macquarie

Justin Post - Merrill Lynch

Thomas Forte - Telsey Advisory Group

Brian Fitzgerald - Jefferies & Company, Inc.

Operator

Ladies and gentlemen on behalf of NASDAQ I would like to apologize for delay in getting today’s conference started. We will now begin. (Operator Instructions) As a reminder this conference is being recorded.

I will now introduce your host for today Mr. Matt Sonefeldt, Senior Manager of Investor Relations. Sir, please go ahead.

Matt Sonefeldt

Good afternoon. Welcome to LinkedIn's first quarter of 2013 earnings call. Joining me today to discuss our results are CEO, Jeff Weiner and CFO, Steve Sordello.

Before we begin, I’d like to remind you that during the course of this conference call, management will make forward-looking statements which are subject to various risks and uncertainties. These include statements relating to expected member growth and engagement, our product offerings including mobile; results of our R&D efforts, in our product deployment process; revenue, including revenue growth rates of our three product lines, Talent Solutions, Marketing Solutions and Premium subscriptions, adjusted EBITDA, depreciation and amortization, stock-based compensation, share dilution, taxes, the product mix between online and field sales, churn rate and expenses.

Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. A discussion of risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission, in particular, the section entitled Risk Factors in our quarterly and annual reports, and we refer you to these filings.

Also, I would like to remind you that during the course of this conference call we may discuss some non-GAAP measures in talking about the Company's performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release. This conference call is also being broadcast on the Internet and is available through the Investor Relations section of our LinkedIn website.

With that, I’ll turn the call over to our CEO, Jeff Weiner.

Jeff Weiner

Thank you, Matt, and welcome to today's conference call. I will start by summarizing the operating results for the first quarter of 2013 and I will recap some of the highlights and key milestones since our last call. I will then turn it over to Steve for a more detailed look at the numbers and outlook.

Q1 was a strong quarter for LinkedIn as we sustained in built upon the moment of the transformative 2012. We continue to deliver great products that increasingly make LinkedIn the essential daily resource for professionals and we exited the first quarter with member engagement and financial results at record levels.

Our focus throughout 2013 is maintaining our accelerated pace of innovation, but also scaling the value we offer to our members and customers globally. For Q1, overall we have an increase of 72% to a record $325 million. We delivered adjusted EBITDA of $83 million translating to non-GAAP EPS of $0.45. At the end of Q1, cumulative membership grew 36% year-over-year to more than 218 million members.

Professionals outside the United States now make up more than 64% of LinkedIn consistent with the fourth quarter. As the first quarter progressed, we saw accelerated member growth which we attribute part to new growth optimization efforts. We are announcing new signups at a rate of more than two per second and as of today have surpassed 225 million members.

With regard to engagement, as measured by comScore, LinkedIn and SlideShare combine for an average of 170 million unique visitors in Q1 and in March we were collectively the 22nd most visited web property in the world. When excluding SlideShare, we averaged 132 million monthly unique visitors during Q1, growing 29% year-over-year, an acceleration of over Q4s growth rate. Additionally, we generated over 11 billion page views excluding mobile, growing 18% year-over-year.

Our internal engagement metrics, which include mobile, also showed strong growth. Unique visiting members grew approximately 29% year-over-year. More importantly, member page views grew approximately 63% in Q1, a continuation of the strong engagement trend we’ve seen as a result of recent product releases.

Since our last quarterly update, we launched several new and revamp products aligned around our key value proposition of professional Identity, Insights and Everywhere. In March we introduced the new version of Search on LinkedIn. This more relevant in streamline search unifies the experience across people, companies and jobs. We are still in the initial stage of introducing new search to all members, but early indication suggest increases in search utilization.

Last week we launched LinkedIn contacts, a new contact management system that enables members to integrate their e-mail, address books and calendars with their LinkedIn network. It allows members to track relevant conversations and be alerted to opportunities to stay in touch with their network. Contacts built using technology from Connected, which we acquired in October 2011, is the first LinkedIn product to launch simultaneously on the desktop and mobile.

And just this week we began rolling out the ability for members to add rich media content to their LinkedIn profiles. The addition of rich media allows members to build professional brands through the visual language of business such as presentations, videos and pictures. This new functionality was developed by leveraging SlideShare which saw unique visitors in page views roughly doubled in the last year. We believe the ability to include rich media will further solidify LinkedIn’s position as the professional profile record.

In Q1, members updated their profiles that doubled the rate of total unique member growth. In addition to providing members more opportunities to build their professional identities, we’re also giving them more ways to access relevant professional insights. We are continuing to take steps to become the definitive professional publishing platform, where professionals come to consume relevant content and publishers come to share it.

Since our last call, our LinkedIn influencer program added several notable professional luminaries, including Mayor Bloomberg, Meg Whitman, Jack Welch, Jeff Immelt, and Martha Stewart. Additionally, we are now regularly publishing themed editorial packages such as Best Advice I Ever Got. On the daily packaged launched, LinkedIn Today page view increased more than 50% week-over-week.

We're also making this content simple to find with the introduction of channels on LinkedIn. Channels are a more engaging way to discover, share and gauge with high quality influencer posts, top news sources and slide share content, all in one place. Members can now follow more than 20 different channels covering a range of professional topics, with content from these channels appearing in their LinkedIn feed.

Finally, just a few weeks ago, we announced that LinkedIn acquired Pulse, a leading mobile news reader and the content distribution platform. The existing Pulse apps with more than 30 million activations to-date will continue to be supported as our teams work to build new professional content products.

In order to best help our members build their professional identities and gain valuable professional insights, we strive to work every where they work. Two weeks ago, we introduced our newest iPhone and Android apps. The redesign and the addition of personalization features make it easier for our members to quickly discover and assess relevant professional content.

While it's still early, members are enthusiastic about the new apps getting it a 4 star rating. Subsequently, we are seeing significant lift and engagement concluding an increase of more than 40% in Likes and Comments per unique user. Mobile remains our fastest growing consumer service. In Q1 we averaged 30% of unique visiting numbers coming to our mobile apps versus 19% a year ago.

The value we create for members allows us to deliver useful offerings to customers of our Talent Solutions, Marketing Solutions and Premium Subscriptions products. These product lines are designed to transform the way our customers hire, market and sell on a global basis.

In Q1 our three diverse revenue streams all performed well. Talent Solutions grew 80% to $184 million. Marketing Solutions was up 56% to $75 million. And Premium Subscriptions increased 73% to $66 million. In Talent Solutions, last month we introduced the new simplified version of our flagship recruiter platform. Look and feel of recruiter now more closely resembles the new LinkedIn.com homepage introduced last year.

We also added new search functionality to make it easier to find the right candidate, a customizable activity feed and a people you may want to hire module which leverages data at the surface relevant passive candidates.

In Marketing Solutions, we continue to remain focused on providing marketers the ability to reach the right professional audience through targeted display advertising. We also recognized that brands increasingly want to engage with their audiences through content marketing, distributed their accumulated repositories of compelling professional content from white papers to presentations to videos.

As we continue to evolve as a professional publishing platform, LinkedIn is increasingly the place where professionals go to access relevant content. And we have the data and tools to allow companies to use our content to target and engage the right audience at the right time.

We have been ramping our efforts in this area through products such as Sponsored Updates, which allow companies to promote relevant content in the LinkedIn feed that appears on our member’s homepages. Sponsored Updates will be our first content marketing revenue stream to be offered at scale.

Since our last call, we've expanded the number of advertisers in the Sponsored Updates pilot program to include more than 20 high profile brands including Shell, Intuit, Xerox, (indiscernible), Telstra and American Express. We've also recently extended the program to include our smartphone applications as well.

In previous subscriptions, we continue to focus on packaging the optimal products and services for the relevant member segments. Within Sales Navigator developed for outbound professionals, we launched TeamLink in February. TeamLink helps members leverage the LinkedIn networks of their teams to find the best connection to a prospect. We are seeing positive traction for our sales solutions offerings to both our self-service channel and more nascent field sales effort, including a growing roster of customers from some of the largest Fortune 100 companies in the world.

Lastly, a few words about Talent, our top operating priority. We now have more than 3,700 employees in 26 cities around the world and we continue to scale effectively due in part to our unique culture and values, which remains one of the company's most important competitive advantages.

Now, I'll turn it over to Steve for a deeper dive into our operating metrics and financials.

Steve Sordello

Thanks, Jeff. Before discussing the results, let me remind you that I will discuss growth rates on a year-over-year basis unless indicated otherwise and that non-GAAP financial measures excludes stock-based compensation expenses, amortization of intangibles and the tax impacts of these adjustments.

Continued investment against our operating priorities yielded strong results in the first quarter. As our engineering and development infrastructure scale, the value and speed at which we deliver products increases. The result is healthy number of growth and rising engagement which in turn help drive online growth across our product line. The first quarters results reflect our progress. As we reach highs in member additions and engagement as well as record levels of revenue, profit and cash flow.

Turning first to members, we added a record number of new members in the first quarter and members engaged at record levels. As Jeff, shared we were pleased with consequent results and using our internal growth metrics, unique visiting members to LinkedIn sustained growth at 29% year-on-year. The number of pages including mobile grew approximately 63% year-over-year while desktop pages grew 31%, both exceeding the growth rate of unique visitors.

In addition to positive engagement trends, we achieved strong growth across our three product lines leading to overall revenues of $325 million up 72% year-over-year. Talent solutions displayed sustained performance with 80% year-over-year growth to $184 million representing 57% of total revenue compared to 54% last year. Traction with corporate clients remain strong. We added over 1700 new customers under contract in the first quarter and saw net customer growth accelerate versus the past two quarters. We now have over 18,000 corporate talent solutions customers.

With existing customers the number of recruiter seats per customers remain stable and the amount spent on job spots and recruitment media led to increased revenue per customer. Churn improved and as expected our add-on and renewal rate decreased slightly versus last year as we expanded our business to an increasingly larger scale. One note, while our announced price increase will begin in the second quarter the impact will be gradual and affect renewals more towards the end of 2013, and in 2014.

The online channel also performed well, remaining stable as a percentage of overall talent solutions revenue mix. Job Seekers specifically performed well due to improved options for job searchers including our new jobs page, jobs on mobile devices, and a general increase in jobs liquidity. Marketing solutions generated $75 million in revenue, growth of 56% compared to last year. This represented 23% of total revenue down from 25% a year ago.

As with last quarter, strong engagement helped drive a healthy expansion of marketing inventory, and similar to recent quarters we also benefited from positive pricing trends in our field sales channel to greater focus on a price yield management. Our self-served LinkedIn Ads product also delivered growth in excess of underlying pages and we’ve seen a gradual uptick in click-through rates versus last year.

Premium subscriptions again showed strong performance increasing 73% year-over-year to $66 million flat at 20% of revenue compared to last year. Subscriptions benefited from overall positive engagement trends as well as improved new customer acquisition products and campaigns. Premium remains an integral part of overall business, both as a profit stream that allows us to reinvest in the platform and served as a signal as to where we deliver outside value to certain groups of members. For example we learned from subscribers in the 2007 to 2008 timeframe that LinkedIn could help recruiters recruit passively in a way never before possible. Now several years later, recruiter has helped drive talent solutions to become the largest and fastest growing part of our business.

Today sales navigator is a premium subscription owned product that remains a relatively small portion of the overall subscriptions line. While growing quickly the majority of sales subscribers are self-served. Although we are having early success selling the premium product in initial pilot rounds with corporate customers. As compared to how recruiter evolved within talent solutions we believe we maybe at a similarly early stage in pursuing the sales opportunity with sales navigator, but this will be a gradual evolution over the next several years.

International growth continued to outpace the U.S. at 82% year-over-year representing 38% of revenue up from 36% last year. In terms of channel mix, talents solutions continues to drive field sales as a larger portion of our business growing 81% year-over-year and representing 57% of overall revenue versus 54% last year. Despite this trend online performed well due to the relative strength from subscriptions and online ads growing 62% versus last year and representing 43% of total revenue.

Turning to the non-GAAP income statement, strong engagement once again helped drive online revenue performance and profitability that exceeded our expectations, resulting in adjusted EBITDA of $83 million or 26% margin compared to 20% last year. Margin expansion was primarily a result of higher than expected revenues and to a lesser extent the timing in R&D recruiting where a large amount of first quarter recruiting efforts resulted in second quarter hires. As a result R&D as a percent of revenues was lower than expected in the first quarter at 19% versus 22% last year.

Our other expense line item remained consistent with past quarters. Gross margin, excluding depreciation and amortization, was 88% of revenue versus 87% last year. Sales and marketing ended at 32% of revenue compared with 33% a year ago. And G&A improved 11% of revenue versus 12% last year.

Depreciation and amortization ended the quarter at 26 million and stock-based compensation totaled 34 million, both consistent with our guided ranges. On taxes, I want to remind you that in the first quarter, we received a benefit from both the 2013 R&D tax credit and it retroactively applied 2012 credit.

The combined benefit was 14 million, slightly higher than our prior 11 million forecast. Our GAAP rate at 3% would have been in the mid 60% range without the credit, while our non-GAAP rate of 13% would have been approximately 36%.

Strong adjusted EBITDA led the positive bottom-line results. On a GAAP basis, net income was 23 million resulting in $0.20 of EPS on 115 million fully diluted weighted shares compared to $0.04 last year. On a non-GAAP basis, net income was 52 million leading to $0.45 of EPS versus $0.15 last year.

Exiting the quarter, we remain encouraged by our strong financial position with 830 million in net cash, cash equivalents and short-term investments. Q1 was the first quarter where we generated greater than 100 million in operating cash flow, benefiting from a high level of billings across the seasonally strong fourth quarter for Talent Solutions. CapEx was 44 million in the quarter, resulting in record high free cash flow of 60 million from 41 million a year ago.

I will close the call with guidance for the second quarter and an updated outlook for the full year of 2013. For the second quarter, we expect revenue between 342 million and 347 million, a range of 50% to 53% growth year-over-year. For the full year, we have revised upward or annual guidance by 20 million to between a range of 1.43 billion to 1.46 billion, growth of 47% to 50% year-over-year.

We expect second quarter adjusted EBITDA of between 77 million to 79 million, a 22% margin at the midpoint. And for the full year, we have revised upward our expectations by 15 million for a range between 330 million to 345 million, also a 22% margin at the midpoint.

I want to take a moment to share additional color on our revenue and adjusted EBITDA expectations for the remainder of 2013. On the revenue side, we expect continued Talent Solutions momentum across our customer segments and geographies.

In 2013 we are focused on continuing to scale globally by strengthening our core products and go-to-market operations. In terms of financial results, (indiscernible) remain healthy as our business continues to expand.

In our two product lines more impacted by engagement, we believe premium will continue to outpace underlying member and desktop engagement growth with a growing but still relatively small impact from Sales Solutions.

For Marketing Solutions, we expect a more moderate growth based in part by lapping large one-time deals signed during the second quarter of last year. And we are on our strategy to include content marketing, we are working towards building a more scalable and sustainable Marketing Solutions business model.

Sponsored Updates in the LinkedIn feed is our first content marketing product we will start to scale. We expect a gradual transition as this will be the first time our sales force will sell both into multiple channels on desktop and mobile as well as offer self-serve products to CPM-based customers. I want to emphasize that the ramp will be gradual during this transition period, especially given our focus on member experience.

On adjusted EBITDA, we will continue to invest aggressively throughout 2013. While hiring team in slightly below our expectations for the first quarter, we have actually accelerated investment in hiring plans for the rest of the year, especially around engineering and product development on a strategic engagement and monetization initiatives.

I also want to share some additional details on a decision to embark on a multiyear project to self-manage our data center infrastructure. This project will allow us to more effectively scale over the longer term and create a better experience for our members. But we realized meaningful long-term OpEx savings, there will be several million dollars of incremental operating expenses this year as we transition to the new facility.

This investment is included in our CapEx estimate for a mid-teens percent of revenue in 2013, but we expect to see the bulk of the equipment investment fall in the second quarter. We expect second quarter CapEx spend to be roughly double the first quarter and then moderate in the second half of the year.

Finally, as we noted last quarter, we also had aggressive facility expansion plans this year to grow our footprint over 60%.

On the remaining cost lines, depreciation and amortization guidance for the second quarter is $30 million to $32 million and the full-year is unchanged at $130 million to $135 million. We expect stock compensation for the second quarter to be between $49 million to $51 million and increased our full-year expectation to between $190 million and $195 million. The increase in our full-year expectations includes approximately $4 million per quarter and retention costs from the recent Pulse acquisition as well as the impact from the recent share price on our existing stock compensation plans.

On taxes our visibility remains limited, but we expect our GAAP rate to approximately or slightly exceed pre-tax profit. On a non-GAAP basis, we expect the rate in the mid 30% range.

To conclude, we performed well in the first quarter across many fronts. Members are engaging with LinkedIn at record levels and all three product lines generated continued impressive growth. We remain encouraged by the diversity across our business lines and the size of our market opportunities. We will continue to invest aggressively for long-term success to realize the full potential of our platform. Thank you for your time and we will now take questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Douglas Anmuth from JP Morgan.

Douglas Anmuth - JP Morgan

Thanks for taking the question. I just have two things. The first just if you could comment on whether you – how yourselves thought as the exchange develop just into your price increases here heading into 2Q? And then secondly can you just …

Operator

One moment while we reestablish the connection.

Douglas Anmuth - JP Morgan

Hello?

Steven Sordello

Yes. Hey, Doug.

Douglas Anmuth - JP Morgan

Okay. Sorry, I don’t know what happened there guys. So the sales – whether the sales process had changed at all as you’re heading into the price increases and just how you’re seeing the benefits of rich media in profile?

Steven Sordello

So Doug, this is Steve. So not a major change in terms of the sales process, we just started to rollout the price increase in April. As I mentioned in the last quarter, it’s going to be a very gradual impact in terms of most of the bookings we have in the fourth quarter. So it mainly impact 2013 and 2014. But so far so good with the rollout.

Jeffrey Weiner

This is Jeff. With regard to Rich media in profile, this is a part of the continued evolution of the refresh and redesign of new offerings for our color products. This started somewhere around the third quarter of last year. We overhaul the profile in Q4 and this new rich media offering really takes the profile from more of a traditional kind of resume to provide information and through rich media PowerPoint presentations, videos, etcetera it really creates a portfolio to represent the professional. And thus far the response has been very favorable, very positive. It gives people more tools to build their professional brand and we think as a result it’s going to make it easier for people to provide the right kind of information and data that can then be leveraged to create more opportunities, more relevancy, and better matches.

Douglas Anmuth - JP Morgan

Okay. Thanks, guys.

Operator

Thank you. And our next question comes from the line of Eric Sheridan from UBS.

Eric Sheridan - UBS

Two quick questions. One on the marketing – actually both are on the marketing piece. One, longer term issue, can you just sort of lay out for us your vision for the marketing piece of the advertising dollars over the next couple of years in terms of the targeting opportunities you guys see and the amount of time and effort you’re spending around product development? And then the second question around marketing would be more new launch, you highlighted there might be some headwinds that might moderate the growth based on some deals from the year-ago periods. Is there any way you can quantify that headwind for us? Thanks.

Jeffrey Weiner

This is Jeff. I will start with the vision, deal time and some of the transition that we’re seeing. With regards to our product roadmap in our investment, one of the things that we’re excited about right now is introducing the ability for marketers to sponsor updates in our feed and this is very consistent with the roadmap and the strategy we set out over the last several quarters, I'm trying to take a thoughtful approach in terms of how we're going to introduce Marketing Solutions into the more limited real estate of smartphones. And so that started with a pilot program where we were working from Blue Chip marketers to introduce their content, PowerPoint presentations, white papers, information, news into our desktop feed and we've got some good transaction with that. And so recently with the launch of our new outgoing app, we started to introduce that capability into our mobile monetization capabilities. And thus far, we're encouraged by what we've seen in terms of the quality of the marketers, in terms of the quality of their content and most importantly in terms of the overall engagement we've seen particularly through that mobile channel. And I think that bodes well as we continue to evolve as a professional publishing platform. And so Sponsored Updates within our feed combined with things like rich targeting that's made possible through our profile capabilities and our profile information in terms of display. We've introduced some new formats with regard to display. Recently, we've added video capabilities both Self-Serve and Full-Serve. We also have a new slide share based module, so people can create their action and presentations within that display capability. And so we're going to continue to evolve this over time. It's also worth noting our sales force now, our field sales force for the first-time ever is going to have the ability to sell both desktop and mobile. And they're also going to be leveraging our self-service capability for the first time. So we're excited about the potential there and we're going to continue to invest.

Steve Sordello

Eric, this is Steve. So in terms of the numbers, so we had a very good Q1 in terms of Marketing Solutions. As I mentioned earlier, we had some larger customized deals in Q2 of last year that was starting to comp against. And as Jeff mentioned, we're transitioning to content marketing Sponsored Update within the feed. And our R&D marketing investment is going against that. We've actually learnt a lot from our LinkedIn app platform. We're investing aggressively against that. As Jeff mentioned, we're seeing some encouraging early signs but it's of a very small scale right now. And with our members first orientation, we're going to take a very gradual approach to how we role this out and I want to emphasize that, that gradual approach. So that's what's probably factoring in terms of the guidance on Marketing Solutions.

Eric Sheridan - UBS

All right. Thanks so much.

Operator

Thank you. Our next question comes from Scott Devitt from Morgan Stanley.

Scott Devitt - Morgan Stanley

Thanks. Jeff, you may have addressed some of this already, but you mentioned the new Recruiter 2 which was rolled out broadly last month and I was wondering if you can just talk about some of the feedback from broad clients so far and how this better tool could potential impact LinkedIn Recruiter sales pitch in the future? And then secondly, the launch of LinkedIn Contacts app, how that fits into your strategies? Is it just simply something that fixes the address book and makes numbers more productive or is there something broader there? Thanks.

Jeff Weiner

Thanks, Scott. So with regard to Recruiter 2 out of feedback, thus far has been very positive. This is part of our visual refresh of the entire site. And Recruiter now is consistent with the changes and the evolution of the homepage. So it's a richer, more visually appealing experience. We've made it more intuitive. We've made it more seamless and thus far, we're hearing a lot of good things. In addition to the look and feel, we've also added some new capabilities including people you may want to hire and that's leveraging the same kind of recommendation technology from a more algorithmic capability that powers things like people you may know, which you may like, getting the right content in front of our members at the right time. And we've also had very positive feedback with regard to that as well. Moving on to the second part of your question with regard to contact and how that fits into the strategy, this is very consistent with our core value proposition. So first and foremost, professional identity in sites and everywhere with regard to professional identity, we think the professional address book is ripe for innovation and true disruption by virtue of adding social fabric to that. And the feedback there has also been very positive. A number of folks have described that as a game changer particularly from the outbound professionals that use their address book, that are using their Rolodexes to do business. And to make sure they're touching base and reaching out to their network, their prospects and this provides really valuable, highly relevant information that you just can't find anywhere else. And by virtue of the updates people are providing when they're changing jobs and companies, that information starts flowing through our address book automatically. So, it's a powerful tool, and we just rolled that out. And our early staging there, we’ll take that up to roughly half a million users of the app, who will also have access to contacts – the new contacts version on the desktop and that’s the first time we’ve been able to rollout desktop and a standalone mobile application simultaneously.

Scott Devitt - Morgan Stanley

Thanks, Jeff.

Operator

Thank you. And our next question comes from the line of Youssef Squali from Cantor Fitzgerald.

Youssef Squali - Cantor Fitzgerald & Co.

Thank you very much. Two quick questions please; first, as consumption moves to mobile, what kind of an impact are you already seeing on CPMs within your marketing services segment. Is that part of the headwind maybe that caused you guys to talk about maybe a little more moderate growth in marketing services throughout the year? And then, your revenue and EBITDA guidance for 2013 really only reflects the Q1 beats, so I’m just wondering why wouldn’t the Q1 out performance carryout through the year, what's in it that was maybe more of a one time in nature? Thanks.

Jeffrey Weiner

Hi, Youssef. Yeah, on the CPM question we actually continue to see very high levels of CPMs, and I think that’s a combination of some work we’ve done with price yield management as well as just obviously a very strong demographic off that somewhat by a lower less healthy rate because we’ve had a lot more impressions coming through the system. So, it's less tough on kind of the direct CPM basis. It's more on, as we’re talking about this transition to the sponsored feed where we see that as a much more efficient and predictable model going forward and scalable model, so it's that transition. And as I mentioned we’re going to take a very gradual approach focusing our sales force on selling through that channel as well.

In terms of the guidance, yeah we over-delivered again in Q1. The EBITDA beat was primarily driven by the top-line. We had about almost 90% flow through against our guidance to EBITDA from the incremental revenue, and we really actually we modestly increased the remainder of the year guidance not changing anything. There is some incremental investments that we have. I talked about headcount, earlier we had about 320 employees in Q1 and for the month of April we’ve added 220. So you can see the run rate, we’ve decelerated hiring mainly in R&D and sales and marketing. We also had the false acquisition which added about $4 million per quarter of additional expenses mostly stock based expenses but from cash based as well. And then we’re moving to a self managed data center which is also adding about $5 million per quarter in incremental cost this year partially due to the fact that we’re building out our own self managed data center and we have some redundancies this year long-term they’ll be nice savings. So there’s some incremental investments coming into play, but we’re looking at our full-year and not what changed, actually pleased to be able to raise the guidance.

Youssef Squali - Cantor Fitzgerald & Co.

Okay, great. Thank you.

Operator

Thank you. And our next question comes from the line of Tim Mchugh from William Blair & Company.

Timothy Mchugh - William Blair & Company

Hi. Yes, thanks. First I want to ask just about the accelerated pace of member growth relative to, I guess, what you’ve been seeing before. Is there any difference in the type of professionals that you’re seeing or, I guess, any change in the demographics that has helped to accelerate that?

Jeffrey Weiner

It's a great question and it was one of those first things we ask when we started to see the uptick, and just provide some additional context. Our growth team did a really nice job with some recent optimization work and the byproduct of that was this pleasant surprise in terms of the member growth. It's interesting to note that it's across the board geographically. So, regardless of whether it's in developed economies, developing economies, some of our fastest growing countries just accelerated. Some of the countries that were not growing as quickly also showed nice growth as well. So, with regard to the breakdown, it's very consistent with the composition that we’ve seen thus far to date. There is almost no material differences whatsoever. Students continue to be one of our fastest growing demographics, and we continue to see good breadth across the board.

Timothy Mchugh - William Blair & Company

Okay, great. And then just sales and marketing I think, Steve you started to touch on it, but the year-over-year pace that you’re growing that at has decelerated a little bit over the last year. Is that – are you reaching a point where you've built out your sales force and you will see – be able to kind of I guess monetize that a little bit more over time or do you kind of continue growth just as rapidly and just kind of timing of hiring?

Jeff Weiner

So we do continue to invest. We took it up about 100 basis points year-on-year this last quarter. I think obviously international, right, the different type of expansion right now, we're still hiring relatively more countries internationally, relatively more kind of pharma type sales folks domestically. I think over time as you look at the sales and marketing lines that will continue to dip over time. Our target on the long-term basis was a mid 20% range which is the [hybrid] between the fast and the web model. And there are other areas like the sale area that are still very early days that over time, we will continue to invest more on the sales front that will play a part in that outlook as well.

Timothy Mchugh - William Blair & Company

Okay, thanks.

Operator

Thank you. Our next question comes from the line of Arvind Bhatia from Sterne Agee.

Arvind Bhatia - Sterne Agee

All right, great. Thanks for taking my question. I was wondering if you can comment on SlideShare. I noticed that the unique visitors were somewhat flattish. Was there anything unique going on there? And then secondly, can you provide some color on the average revenue per corporate solutions customer? (Indiscernible) that's going to fluctuate but can you provide some color for the balance of the year? Thank you.

Jeff Weiner

This is Jeff, I'll start with SlideShare and then I'll turn it over to Steve. On SlideShare just to make a correction there. SlideShare actually saw a doubling in both unique users and page views on a year-over-year basis. So we were very pleased to see that kind of growth continues and especially as the platform continues to gain scale, so good stuff happening on that front. And not just SlideShare as a standalone destination but also our ability to increasingly leverage that team and that infrastructure to accelerate part of the roadmap on LinkedIn.com and which media was able to be launched the way that it was by virtue of leveraging from a SlideShare infrastructure. So we're very pleased with the integration thus far to-date and are looking forward to more positive things going forward there.

Steve Sordello

Arvind, it's Steve. So on your ARPU question, we were yet again able to maintain very high ARPU levels on our Talent Solutions business at record levels, despite adding 1,700 customers many of which are more towards the SMB. So our SMB percentage continues to grow about 27% business now relative to 24% last year. So we've been able to offset that small potential size deal a couple of ways. We continue to sell deeper relationships with the Recruiter product with our existing customers and on top of that, we've been broadening the product portfolio that we've been selling, so (indiscernible) improvement media have been coming a larger portion of deals, increasing the deal size, again counteracting the broader SMB penetration. And then on renewals and add-ons, we continue to have a high net ratio which is a ratio that would set (indiscernible) net churns. As I mentioned, churns slightly decreased in the quarter which is a good thing. And overall the sales productivity actually increased about 10% from the first quarter of last year. So ARPU I think is still very healthy, despite the fact that we're growing more at the tail in terms of SMB.

Arvind Bhatia - Sterne Agee

Great. Thank you, guys.

Operator

Thank you. And our next question comes from the line of Tom White from Macquarie.

Tom White - Macquarie

Thanks for taking my question. There's a pretty significant deceleration in your area of growth for the EMEA and APAC regions. Can you talk a bit about what's driving that agents? We see those markets may reaccelerate this year with the recent investments in field sales, gain traction. And then I just wanted to clarify on this sort of focus on content marketing. Is this kind of coming at the expense of the other display adds across the site where you're sort of deemphasized sort of the traditional display add units in favor of adds and the fees or am I mishearing that? Thanks.

Jeff Weiner

So we had a solid quarter globally in terms of growth. We had on a relative basis Q4 was very strong in EMEA and in APAC and in Q1 the U.S. was relatively stronger. So still very solid growth. EMEA was up 75%, APAC 88%, Latin America over 100%. I would say that some of the softness in APAC region was due to some changes in leadership that we’re working through, but beyond that we’ll be able to get back on good growth rate. So, overall strong growth, I don’t think anything is fundamental there.

Jeffrey Weiner

And this is Jeff on your second question, sponsored updates in the field is actually going to be a really nice complement to our existing display capability and our target display capability. And we think it's going to be a very nice fit with regard to our content efforts as a whole as a publishing platform, so if you look at slide sharing some of the things we’re capable of doing there in terms of integrating that media into display units, I mentioned earlier we recently introduced video as part of display. We’ve got our managed groups capability. So we see this coming together nicely as an integrated effort and so it's a strong complement to the existing business.

Tom White - Macquarie

Okay. Thanks for clarifying.

Operator

Thank you. And our next question comes from the line of Justin Post from Merrill Lynch.

Justin Post - Merrill Lynch

Could you talk about sales navigator the traction you’re seeing with new clients and what kind of adoption you’re getting, and also how you think about of kind of protecting the user experience related to that. And then just on the 2Q guidance, you’ve got about a $20 million ramp up at the midpoint versus Q, I think last year it was $40 million. Maybe if you could just help us reconcile that, was last year really aided in the marketing solutions line by an extra $10 million or so due to those big sales. Just kind of help us reconcile the difference there. Thank you.

Steven Sordello

Good afternoon, this is Steve. On sales navigator it's growing quickly, still overall small percentage of overall business. Still mostly online as I mentioned we’ve been testing a pilot program with a small set of customers and we continue to get great feedback learning a lot. The product itself continues to improve, we introduced TeamLink and getting a lot of good feedback on that feature and functionality. So this is something that we’re looking at, just like our recruiter business that, with the subscription business initially that gradually grew over years as we launched in the marketplace, and once we look at the sales solutions category with sales navigator we see philosophically a similar trajectory not necessarily in terms of the size but a trajectory in terms of a large market opportunity to build into. So, the feedback is encouraging and we’re learning a lot on the product. So that’s kind of all we have to say right now on sales navigator. In terms of the guidance on the numbers, so a lot of it is the large customized mob deals in Q2 of last year we had a very strong Q2 in marketing solutions last year probably due to those deals. And again in concert with a strategic transition to including sponsored updates in the feed. Again this is the model that we see us being the most scalable and predictable over time and it's something like I mentioned that we’re going to slowly move into in terms of doing it the right way.

Justin Post - Merrill Lynch

Thank you. I appreciate it.

Operator

Thank you. And our next question comes from the line of Tom Forte from Telsey Advisory Group.

Thomas Forte - Telsey Advisory Group

Great, thank you. I want to talk a little about engagement. You significantly upgraded the user interface for your iOS App during the quarter, I want to see what you’re seeing as a result of that? Thank you.

Jeffrey Weiner

Yeah, we mentioned earlier social gestures commenting, liking, that kind of stuff is up about 40% and I think directionally that’s indicative of the response that we’re seeing in the marketplace. This is the highest rated standalone application that we’ve offered thus far today at about four stars and we’re seeing a very positive response there, and its early days. We just launched in the last couple of weeks. It's also worth noting that it's not just on the engagement but also the performance of the app in terms of speed and we’ve seen material improvements there across the board, the stream, the inbox, our search capability. So it's really just improved across the board and we’ve been very pleased with the markets response thus far.

Thomas Forte - Telsey Advisory Group

Thank you.

Operator

Thank you. And our next question comes from the line of Brian Fitzgerald from Jefferies.

Brian Fitzgerald - Jefferies & Company, Inc.

Thanks. Jeff, you mentioned I think 30% of visits were from mobile. What percentage of revenue would you generally associate with mobile if you look at it that way, i.e. on the marketing services side how does mobile monetization compare with desktop? And then a real quick follow on, do you see any unique trends in terms of engagement or product usage or monetization across different form factors or mobile operating systems? Thanks.

Jeffrey Weiner

Yeah, sure. With regard to mobile monetization, its not something we broken out to-date. Its still very, very early days, that’s the nascent part of our business. We have been thinking about all three of our business lines across mobile in terms of Talent Solutions, Marketing Solutions, through the Sponsored Updates, and Premium Subscriptions. But its early days across all three. In terms of shifts in user behavior or different trends that we’re seeing, we continue to think stronger engagement via mobile, certainly in terms of frequency of visits. And we would expect that to evolve over time as we continue to see more and more of our audience visiting the site through mobile and I think the teams are also doing a nice job of leveraging and taking full advantage of the channel. Creating like desktop experience, creating the right mobile experiences and not just trying to translate one on top of the other. So we’re encouraged by what we’re seeing thus far and look forward to continuing that going forward.

Brian Fitzgerald - Jefferies & Company, Inc.

Great. Thanks.

Operator

Thank you. And that concludes our question-and-answer session for today. I’d like to turn the conference back to LinkedIn for any concluding remarks.

Jeff Weiner

Thanks everyone for joining us today. And we look forward to talking with you again next quarter. Take care.

Operator

Ladies and gentlemen thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a good day.

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