LinkedIn's CEO Discusses Q2 2012 Results - Earnings Call Transcript

 |  About: LinkedIn (LNKD)
by: SA Transcripts


Good day, ladies and gentlemen, and welcome to the LinkedIn Second Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I’d now like to introduce our first speaker for today Matt Sonefeldt, Senior Manager of Investor Relations. Sir, please go ahead.

Matt Sonefeldt

Good afternoon. Welcome to LinkedIn’s second quarter of 2012 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 number of growth in engagements, our product initiatives include mobile, student, international and enterprise, impact of acquisitions on our business , results of our R&D efforts including the acceleration of our product deployment process, our security measures, revenue including revenue growth rate, adjusted EBITDA, depreciation and amortization, stock-based compensation, share dilution, taxes, he product mix between online field sales, churn rate and expenses.

Actual results may differ materially from the results predicted and reporting 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 titled Risk Factors in our quarterly and annual reports, and we refer you to these filings.

Also, I’d like to remind you that during the course of this conference call we may discuss 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 the 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 second quarter and I will recap some of the highlights and key milestones since our last call. I’ll then turn it over to Steve for more detailed look at the numbers and outlook.

The second quarter of 2012 was a strong one and all of our key operating and financial metrics exhibited solid momentum. Continued investment in product innovation drove healthy engagement as measured by unique visiting members and member page views, and our three revenue streams all experienced significant growth.

For Q2 overall revenues grew 89% to a record $228 million. We delivered adjusted EBITDA of $50 million translating to non-GAAP EPS of $0.16. Cumulative membership grew 50% year-over-year to 174 million members at the end of the second quarter as we continue to add approximately two member signup per second. Of the more than 13 million new members added during Q2 more than 70% came from outside the U.S. underscoring LinkedIn’s global reach. Today 62% of LinkedIn members are from international markets.

With regard to engagement as measured by comScore, LinkedIn totaled 131 million unique visitors in June when including SlideShare, making us the 26th most visited web property in the world. When excluding SlideShare, we averaged 106 million monthly unique visitors during Q2 growing 30% year-over-year and generated 9.3 billion page views growing 31% year-over-year.

Our internal engagement metrics which include mobile also sustained momentum with unique visiting members up approximately 38% and member page views increasing more than 60%. Page view growth in excess of our overall member growth is a strong sign of continued healthy member engagement. Improvements in our underlying technology are enabling accelerated product innovation at LinkedIn built around the themes of simplify, grow and every day.

Simplify is all about making it easier for our members to unlock value from the core products and services we already offer. Last month we began rolling out a significant redesign to LinkedIn’s homepage. The goal of the redesign is to enable our members to discover, share and discuss the professional information that is most important to them. As a result of the launch we have already seen a positive impact to a number of our key engagement metrics.

For example, shares originating on LinkedIn such as status updates are now at all time highs. This redesign is just the beginning of wave of improvements coming to the homepage as well as other pillar products later this year. Additionally, in May we simplified the design of LinkedIn Today, our flagship social news product. Since then we have added deeper integration into the new homepage making it easier for members to take social actions on stories, subsequently engagement on LinkedIn today continues to increase and is now more than 150% since we introduced these features. These improvements to the homepage and LinkedIn today are do impart to the introduction of a new backend content platform that is accelerating our rate of development in these areas.

Our second theme is grow, which has two connotations for us; first is continuing to grow our global membership and second it means growing our monetization efforts and ways to benefit both members and customers. In Q2, we optimized our registration flow on mobile devices to make it easier for professionals to join LinkedIn, as a result today more than 15% of new member registrations are now originating on mobile, up from approximately 10% to prior quarter.

Product localization also continues to be a strong driver of member growth. The additions of Polish and Norwegian, bring the total number of LinkedIn languages to 18 with more plan for later this year. Additionally, LinkedIn is now operating in 25 cities around the world.

With regard to monetization, we completed the rollout of Talent pipeline to our entire universe of LinkedIn recruiter customers. And less than three months those customers have already uploaded more than a million perspective candidates into the product. We also made our Targeted Status updates and follower statistics features available to all of the more than 2 million company profiles. Phillips, which began using Targeted Status updates as part of the early release program saw engagement more than double when using a product in their daily communications with their LinkedIn followers.

Lastly, we said that we are going to deliver value to our members every day. Mobile products are essential to decipher. We exited Q2 with 23% of unique visiting members coming to mobile apps versus just 10% year ago, and that number reaches 27% when including mobile visits to the website.

Q2 marked the launch of our first app design for the iPad which has been extremely well received. Thus far we are seeing encouraging signs of engagement as more than half of page views on the app are being generated by content focus products, such as updates, news and groups.

Also on mobile, we are in the early stages of testing various forms of monetization. Our strategy is to develop opportunities for mobile monetization that add value to members and customers across all three of our product lines, hiring, marketing and subscriptions.

We launched our first mobile monetization test at the end of June, when blue chip brands including Shell began running display ads within the LinkedIn iPad app. Early indications are positive and we will continue to explore relevant ways to monetize our mobile offerings.

An additional element of delivering value every day is to provide services to members wherever they work. Since our last call, we eclipsed 1 million unique publishers that enable readers to share content through the LinkedIn platform. Also more than 75,000 third-party developers now use our APIs to build innovative services off of LinkedIn, up from 60,000 in February, furthering our ability to power the professional web.

Part of adding value to our members every day means ensuring that their experience on LinkedIn is safe and secure. In June, we reported the theft of 6.5 million LinkedIn member passwords that were published on an unauthorized website. Though no member login information was published, we disabled the passwords of the accounts that we deem to be at risk. Since then, we have redoubled our efforts to ensure the safety of member account on LinkedIn by further improving password strengthening measures and enhancing the security of our infrastructure and data. The health of our network as measured by number of growth and engagement remains as strong as it was prior to the incident.

The value we create for members allows us to deliver useful offerings to customers of our Hiring Solutions, Marketing Solutions and Premium Subscriptions products. And in Q2 these three diverse revenue streams all performed well.

Hiring Solutions grew 107% to $122 million as industry leaders continue to turn to LinkedIn to engage prospective talent for their organizations and reach the right business audiences. Microsoft recently signed one of the largest deals in LinkedIn’s history, a multiyear renewal that includes the full spectrum of our Hiring Solutions product portfolio, including listings for all their open jobs.

Marketing Solutions was up 64% to $63 million as larger brands turn to LinkedIn to engage with their most relevant audiences. In April as part of its campaign to reach and engage with professional women, Citi partnered with LinkedIn launched a branded LinkedIn group featuring special curated content and moderated discussions. In just three months, this group has materially outperformed expectations with more than 30,000 members, and one the highest engagement rates of any LinkedIn group.

Premium Subscriptions increased 82% to $44 million as we continue to focus on delivering the right offerings to the right professionals at the right time. Though it is still early, our Sales Navigator subscription is beginning to gain traction amongst sales professionals in Fortune 500 companies and small organizations alike.

Lastly, an update on our Talent which is our top operating priority; we added 414 new employees in Q2 and we plan to continue to invest going forward, particularly in R&D and sales to realize the full potential of our platform. We now have more than 2800 employees around the world; all of them are dedicated to fostering long-term health of the LinkedIn ecosystem by putting our members first.

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

Steve Sordello

Thanks Jeff. Before I discuss the results, I want to remind you that my comments on growth rates will refer the year-over-year changes unless I indicate otherwise. Also non-GAAP financial measures exclude stock-based compensation expenses, amortization of intangibles and tax impacts of these adjustments. Please refer to our press release for the GAAP to non-GAAP reconciliations.

We saw continued progress across our key operating and financial metrics in the second quarter. As always we start with our members; despite the difficult comparisons in the second quarter of last year due to a lift from address book import optimization and the IPO, members grew to 174 million in the second quarter, up 50% year-on-year.

Engagement remained solid with steady growth in comScore unique visitors increasing 30% and page views increasing 31%. When including SlideShare, we had nearly 131 million unique visitors in June.

In addition to comScore, we remain encouraged by our internal metrics where we are achieving positive results. Unique visiting members grew 38% year-over-year and during the quarter we had an increase in frequency of visits as we hit an all-time high in average days visited by unique members. Internal pages views echoed this strength, increasing greater than 60%. This reflects strength from the upgrade to PYMK and the launch of the mobile tablet app.

Tuning to our financial results; total revenue increased 89% to 228 million. Hiring Solutions revenues continues to perform well, growing 107% over the prior year. Hiring Solutions represented 53% of revenue versus 48% last year. As we strengthen our Hiring Solutions product portfolio from recruiter to pipeline to jobs to recruitment media, LinkedIn is impacting an increasing percent of total customer hiring. This trend and continued strong sales force execution contributed to an increase in average revenue per enterprise customer, both year-on-year and quarter-on-quarter. This growth was especially noteworthy relative to the economic headwinds in Europe.

Total corporate solutions customers now stand at 12,053 advancing nearly 100% versus last year. New deal size increased with both enterprise and SMB customers and dollar churn with existing customers decreed across all regions versus the first quarter and stands at the lowest level since this time last year.

During the quarter, open jobs listings growth on LinkedIn accelerated to the highest point in three quarters and growth was nicely over 100%. We continue to have success increasing the attach rate of job spots to Corporate Solutions customers and jobs posted through the self-serve online channel continue to outperform. Our Job Seeker and Talent Finder subscriptions also showed strong results, hitting an all time high as a percent of overall Hiring Solutions revenue.

Marketing Solutions grew 64% year-on-year to 63 million representing 28% of total revenue, compared to 32% in the year-ago quarter. Field sales outperformed our expectations, as growth accelerated year-on-year compared to the past two quarters and outpaced typical seasonality trends. Larger deals with blue chip customers and new types of campaigns are contributing to the renewed momentum. North America and APAC were strong in the quarter offset somewhat by weaker performance in EMEA.

Our self-serve LinkedIn ad platform continued to outpace overall site page views, although revenue declined slightly versus the first quarter as field sales absorbed more of the available inventory. Click-through rates and CPCs steadily improved versus last year and in addition to working to drive further engagement on the site, we continue to look for new ways to add inventory for our self-serve channel.

Premium Subscriptions revenues grew 82% year-on-year to 43.5 million. Subscriber growth continued to outpace overall member growth and churn is now at record lows. When we include our Hiring Solutions premium products, total premium growth sits at nearly 100% year-on-year, and lastly, while still small, Sales Navigator traction has been strong and continues to build.

In terms of sales channel, field sales growth outpaced online sales for the first time since, the second quarter of last year, given our sustained investment in Hiring Solutions, larger deals and Marketing Solutions and general seasonality. Field sales stood at 57% of revenues during the quarter versus 43% for online. In the year-ago quarter, online revenues represented 45%.

As for geography, investments in sales offices abroad continue to drive international growth in excess of U.S. International increased 111% year-on-year, to 35% of total revenues versus 32% last year. U.S. based business grew 78% year-on-year to 65% of revenues, versus 68% last year. I wanted to note that EMEA declined as a percentage of revenue from the first quarter highlighting some of the macroeconomic challenges in that region.

Turning to the non-GAAP income statement, we once again surpassed our own margin expectations despite heavy investment in both our engagement and monetization platforms. Benefiting from greater revenue scale and passing sales tax through the customers, gross margin excluding depreciation and amortization was 87% during the quarter up from 85% last year.

Sales and marketing increased to 31% of revenue from 28% last year reflecting a continued focus on expanding our global field sales force in Marketing Solutions and outside the U.S. in Hiring Solutions.

Investment in engineering and product developments remains a top priority. R&D was 22% of revenue down from 23% last year and flat versus last quarter. And G&A as a percentage of revenue was 12% compared to 13% last year.

Driven by top line outperformance, adjusted EBITDA was a record 50 million in the second quarter a 22% margin. This is nearly double the adjusted EBITDA of 26 million in the second quarter of last year. Depreciation and amortization totaled 17.5 million slightly less than expected while stock-based compensation was 19.2 million just above the guided range. As expected taxes on a GAAP basis were high relative to pre-tax income with an effective tax rate of 78% and somewhat higher than expected on a non-GAAP basis at 47% effective rate.

I want to spend a moment providing greater transparency on two factors driving our current tax rates. First, over the long-term, our international tax structure will results in a lower long-term effective tax rate, however, in the short-term, tax expense and the effective tax rate will increase as we ramped up our investments internationally. Second, the non-deductibility of acquisition related costs primarily related to retention decreases our pre-tax income, thereby increasing our effective tax rate.

Moving onto the bottom-line, we generated 2.8 million in GAAP net income and $0.03 of fully diluted GAAP EPS versus 4.5 million and $0.04 in the second quarter of last year. On a non-GAAP basis, earnings were 18.1 million and $0.16 of fully diluted earnings per share, nice growth versus 10.8 million and $0.10 of EPS last year. Our fully diluted weighted share count was 112.3 million. The tax impact from international and acquisition related items impacted non-GAAP earnings by about $0.03 per share. Non-GAAP earnings and our guided tax rate would have been $0.19 per share.

The balance sheet remains well positioned with 617 million in cash, cash equivalents and short-term investments against zero debt. Despite 40 million in acquisition related outflows, cash on the balance sheet is nearly identical to last quarter. Operating cash flow increased nicely year-on-year to 47 million from 36 million last year. CapEx was higher at 38 million versus last quarter and sum-up Q1 investments was delayed into Q2. We continue to focus on spending towards expanding our technology and global facilities footprint and during the quarter we generated 9 million in free cash flow.

I will close the call with guidance for the third quarter and full-year 2012. In the third quarter we expect revenues between 235 and 240 million, a range of 68 to 72% year-on-year. We’re also increasing our full-year guidance midpoint by $30 million to between 915 and 925 million, a range of 75 to 77% year-on-year growth.

Revenue guidance incorporates a strong performance in Hiring Solutions and the new momentum in Marketing Solutions field sales balanced by the impact of European headwinds as well as the advertising inventory constraint within LinkedIn ads.

For adjusted EBITDA, we expect the range of 42 to 45 million in the third quarter and 18% margin at the midpoint, consistent with our original plan for the year. For the full-year, we are raising our EBITDA guidance by 15 million to 185 to 190 million, a 20% margin at the midpoint versus prior guidance of 170 to 175 million and a 19% margin at midpoint.

EBITDA guidance incorporates expectations for sustained investments and expansion of our technology team, global facilities footprint and greater relative contribution from our field sales products versus our online products. I also wanted to provide additional granularity around EBITDA on three dimensions; first, cash retention related to acquisition will adversely impact EBITDA by roughly 6 million in the back half of the year split evenly between Q3 and Q4. Specific to SlideShare, in the shorter term, we are placing more emphasis on engagement products rather than monetization. Second, in taking proactive steps to update security post the June password theft, we are assuming an additional 2 to 3 million in second half expenses, more weighted towards the third quarter. And finally, we’ve taken steps to further strengthen R&D recruiting throughput and subsequently hired and on-board record levels of engineering talent in Q2 and continuing into Q3 resulting in higher R&D expenses. This allows us to both accelerate and scale our current roadmap and invest in longer-term strategic initiatives including mobile, students, international product with focus in Asia-Pacific and creating additional value for our members within the enterprise.

Below the EBITDA line we expect depreciation and amortization of 20 to 22 million this quarter and now estimate 75 to 80 million for the annual guidance range.

For stock compensation, we expect 27 to 28 million in the third quarter and now expect a range of 85 to 95 million for the full-year, an increase, primarily due to continued hiring acquisitions and refresher brands. We continue to believe our income taxes on a GAAP will at least approximate and could potential exceed pre-tax earnings in the second half as a result of acquisitions and investment in international markets. While visibility on a non-GAAP rate remains limited, we believe that could increase in the second half for the same reasons.

For fully diluted weighted shares, we expect just north of 113 million shares in the third quarter and approximately 114 million in the fourth quarter. We also continue to expect CapEx to be in the mid teens as a percentage of revenues for the third quarter and full-year.

To conclude we performed well in the second 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. And we will continue to invest aggressively for long-term successful to realize full potential of our platform.

Thank you for your time and we'll now take questions.

Question-and-Answer Session


(Operator Instructions) Our first question comes from the line of Scott Devitt from Morgan Stanley.

Scott Devitt - Morgan Stanley

I had a question and then a follow-up related to it. Maybe for Steve, since most of your major consumer products have been refreshed in 2012 and a few that come to mind, mobile apps, groups, people you may know LinkedIn Today and the homepage. I was just wondering is it related to product development expenses, should we expect the dollar growth in that line to start to decelerate in the back half of ‘12, and then a follow-up?

Steve Sordello

Yes, thanks, Scott. This is Steve. So, we actually, I mentioned in the prepared remarks, have seen great success in terms of bringing on engineering talent since last quarter. Our throughput has quite dramatically increased and we’re actually taking that as an opportunity to continue to invest, to both accelerate the current roadmap as well as invest in some new strategic initiatives that are outlined around student mobile, international and enterprise. So, what we’re expecting is actually to continue roughly at the same percentage of revenue in the back half of the year, at least in Q3, but we do expect to start to see more leverage going into next year. We felt like we're reaching a stage now we’re at critical map and are feeling pretty good about that.

Scott Devitt - Morgan Stanley

And if you normalize for the two items that you highlighted affecting margin in the second half, is it fair to think normalized for that that you should exit the year in the mid-20s, that's kind of what's implied in your guidance on an EBITDA margin basis?

Steve Sordello

Yes, currently our guidance in the fourth quarter exiting news is roughly 21% and I think if you were to exclude some of those acquisition related charges and some of the others, insight from there, I think that we are really planning more entering next year and continuing to show leverage, so it is part of our plan to go into next year.


And our next question comes from the line of Mark Zgutowicz from Piper Jaffray.

Mark Zgutowicz - Piper Jaffray

Just a couple questions, I was hoping you can maybe talk just about the emerging Marketing Solutions growth drivers and maybe talk about what initiatives are driving the strongest engagement and also if you could talk about specifically the iPad and what kind of engagement you’re seeing there?

Jeff Weiner

I’ll start with the engagement drivers. We’re very pleased with the results thus far, the new homepage introduction, not only in terms of material increase in pages, on the homepage itself but the downstream impact on LinkedIn products and services that benefit from traffic that source from the homepage. So that’s been a nice win for us. We’re excited about the roadmap over the remaining second half of this year in terms of simplify grow and every day, and speaking of everyday as you mentioned, we’re also pleased with the results of our iPad introduction. In particular, we mentioned this on the prepared remarks. We’re seeing a nice trend on iPad engagement around our content offerings, so new sharing LinkedIn today, group’s content, which has been very nice to see.

Mark Zgutowicz - Piper Jaffray

Jeff, could you also talk a little bit about the growth that you’ve been seeing in custom groups and sort of if you are starting to see some more short-tail economics there relative to the long-tail. Meaning it looks to me like I think you’ve talked about Citi, come success you had at Citi they set up, but it seems me to that there is more and more of these customer groups being set up and I’m just wondering how that might be driving a higher CPM or it’s too early to sort of talk about that?

Jeff Weiner

It is a bit early, but we couldn’t be happier with the results that we’ve seen with the Citi examples in particular. It was something that the Citi team and their Head of North American Digital Marketing has been very supportive about and they put the right kind of resources behind it. And not surprisingly, we’ve seen as high levels of engagement as we’ve seen in any LinkedIn group and now its north of 30,000 members. You look at the quality of the engagement there, the quality of the discussion. I just heard yesterday, there was actually an offline meet up of members of this group in New York City and that’s going to be expanding elsewhere. As we talked about the Citi and other prospective customers in this regard, it’s essentially a network within the network. And there is a whole host of direction that those behind these custom groups and responsible for developing these custom groups can take them. So, we’re very excited about the opportunity and the potential there and hopefully we’ll see much more to come.

Mark Zgutowicz - Piper Jaffray

Steve, just a couple real quick ones, was there incremental cost relating to the security breach in Q2? I know you talked Q3 I must have missed that and then any currency related headwinds in Q3?

Steve Sordello

Sure. In the second quarter, I’d say there was roughly 0.5 million to 1 million related to it primarily for forensic work and other elements of that. What was the second question? Yes, we really from a P&L perspective, FX impact has been relatively immaterial and have to deal with how we book an invoice relative to a subscription based model. We do hedge on the balance sheet and this last quarter for example we had roughly a $700,000 loss as the swings in currencies have been pretty dramatic. That was hedged down from what would have been a $2.5 million. We don't fully hedge. So we feel like we’re in pretty good shape relative to FX impact.


And our next question comes from the line of Michael Graham from Canaccord.

Michael Graham - Canaccord Genuity

I wanted to ask a question related to your largest customers and the question is, can you give us a feel for your very largest customers, whether it's Fortune 100 or 500 where you are in penetrating those guys you and how much further potential there is and as a related question, can you give us a feel for, you talked a lot about engagement, which seems to be heading in the right direction. Can you give us some color about how that helps, with the sales process and what particular points resonate with your potential customers, when you talk about the increased engagement from the members?

Steve Sordello

Michael, this is Steve and in terms of headroom, we actually feel really, really good. We currently have about 85% of the Fortune 100, we figure about 25% penetrated there and when you look at in the U.S., when we look at the white space that we have in our current existing account, we have about in excess of 3x whitespace that we anticipate and on a global basis, it's actually even larger than that. So, when we look at it from a whitespace perspective, we feel good. We also feel that we're still in the early stages. There's about 20,000 companies in the U.S. with over 500 employers, that's about a fourth of the global. So, there's 70 to 80,000 companies to penetrate and we're at 12,000 today. So we feel like we're in a good space from a penetration perspective and still have some good headroom in front of us.

Jeff Weiner

With regard to the second part of the question, how does engagement flow into modernization from a customer value proposition, with regard to hiring solutions, the more engaged our members, the more likely they are to keep their profiles fresh and updated, which means that our customers for Hiring Solutions products have access to a more relevant pool of candidates, of course, the more engaged our members, the healthier our growth and that leads to even more critical mass on a global basis, which provides a more comprehensive index from which people can search and then of course, with regard to marketing solutions, the more engaged our members, the more inventory that we're generating that we can in turn sell and again with regard to relevant data, the better the match and the higher the return on investment.


And our next question comes from the line of Douglas Anmuth from JP Morgan.

Douglas Anmuth - JP Morgan

I just wanted to ask about Talent Pipeline, looks like now it's rolled out to all of your recruited customers, and it's at no extra charge. So I was hoping you could talk a little about how you're thinking about pricing power as you look into next year and also about what kind of demand you're currently seeing for Talent Pipeline only seats?

Steve Sordello

In terms of pricing, we've very much taken the approach of focusing on expanding our global footprint and continuing to develop relationships with our customers. You see now that Talent Pipeline as we've been offering it free of charge. So, that's our strategy at this point and as we continue to take market share, it will leave us pricing flexibility down the road.


Our next question comes from the line of Mark Mahaney from Citi.

Mark Mahaney - Citi Investment Research

Steve, you kind of called out the pump up in monthly revenue per customer in Hiring Solutions segment. Could you spend a little bit more time on that, because it's something that's a little bit noisy, its jumped around a little bit, your belief in the sustainability of that increase and other factors that could cause that to rise going over the next two years?

Steve Sordello

Mark, I think probably what’s happening right now. We did see a record level of ARPU this last quarter. As we had a lot more success selling larger deals, I just mentioned that we we’ve chosen not to increase pricing. So this is a function of being able to sign larger deals upfront which is also a function of selling a broader portfolio of products. And so when you think about our Recruiter product for example, a year ago that represented 60% roughly of revenue, that is just down to about mid 50% range now and so we’re selling more jobs slots for some Recruitment Media, we’re selling more additional products that are expanding that deal size. At the same time, I think it’s important to note that we’ve also been successful on reducing churn. We’ve been at the lowest levels this last quarter since Q2 of last year. We put a lot of investment in the product, in customer relations and renewal rates have also maintained at Q1 levels, so from both kind of a new customers perspective as well as kind of an existing customers things have been relatively strong.


And our next question comes from the line of Jim Janesky from Avondale Partners.

Jim Janesky - Avondale Partners

To what extent would you attribute the increase in corporate solutions customers and revenue per customers to a tougher employment environment where your product is good alternative versus having increased sales people calling on customers?

Jeff Weiner

I think it’s a combination of the two. Our brand is stronger in the marketplace I believe than it was a year ago and having more success going in with customers and we also have as I mentioned continue to broaden out the portfolio. Another thing I’d highlight relative to kind of ROI is of our existing customers that we continue to take share of the overall hiring. And so for example we’re about 2x where we were last year in terms of hiring happening through LinkedIn products within our customers and another interesting note given European weakness where job growth has been slower, that rate is even higher, so just like we saw in U.S. back in 2009, we’re seeing (inaudible) and so that they’re may be shrinking by this in certain areas, we’re taking a larger and larger share within those budgets.

Jim Janesky - Avondale Partners

G&A increased quite a bit sequentially, is part of the reasons just some of the investment that you were talking about or is there another reason behind that?

Jeff Weiner

There has been a lot of investments in general infrastructure including facilities, facilities is an area that as we’ve expanded our headcount; for example we just opened an office this week in Sunnyvale here in the Bay Area as well as we continue to expand globally outside the U.S., so that’s a major area in terms of the G&A increase.


And our next question comes from Herman Leung, Susquehanna.

Herman Leung - Susquehanna Financial Group

Two quick questions. First is can you may be talk about I think, one number that really stood out in the quarter as was the 1,600 customer adds in the quarter and its much higher than what we expected but you talked about some productivity on the field sales front. I was wondering if that number is sustainable as we kind of look forward into the third quarter timeframe. Then the second question I have is just wanted to touch upon the Marketing Solutions line. I know that line actually be just as much as the Hiring Solutions been relative to our numbers and you talked about some of the Citigroup deal with some of the groups and you've also mentioned new ways to add inventory, I was wondering if you could maybe talk to us a little bit about and how we should think about that as we progress into the second half ?

Steve Sordello

In terms of the customer additions, it was a very strong quarter, I would note that we had a very strong Q4 and some of the Q1 deals were pulled into Q4 so Q1 might have been a little less representative and so Q2 is showing relative strength there. I would say that we continue to have very solid sales force productivity. We talked about the payback on sales and marketing investments that remains high relative to other [backed] companies. When we look at things like attainment rates and quotas the payback in terms of cash and P&L is roughly the same on a Hiring Solution side. We’re excited about going forward, we don’t give the specific guidance on customer count but we feel like we still have good momentum. And I think lastly, I want to always highlight in terms of productivity, we put a lot in terms of leveraging the technology that we have across the lines of business. We have data a lot of data that we use to arm our sales teams with SAP linked accounts to go after and that has a very high payback and we’re not saying that to the other lines of business as well.


And our next question comes from the line of Ken Sena from Evercore Partners.

Ken Sena - Evercore Partners

Just going back to the homepage changes that you made around social moves, you mentioned a 150% in engagement for LinkedIn Today, but is there any metric you can give in terms of the engagement there maybe as a percentage of total time spent on the site and how that’s trending and anything else you can indicate in terms of people's adoption of the social new services that you're providing?

Jeff Weiner

We don't breakdown time spent on a per service basis actually. It's not about time spent for us because LinkedIn's really a productivity play. So it's more about enabling our members to save time, versus pass the time. That said, I think the deeper integration of LinkedIn Today into the new redesigned homepage, is certainly part of the reason for the increase that we're seeing in LinkedIn Today engagement, along with continued improvements in LinkedIn Today, not only the look and feel, but the relevancy of the site and as we mentioned in our previous opening remarks, we are seeing record levels of social gestures related to the sharing of content, LinkedIn Status Updates, for example and so, we've been pleased with the results in that regard.


And our next question comes from the line of Thomas Forte from Telsey Advisory Group.

Thomas Forte - Telsey Advisory Group

The two ones I had were, how should we think about the relationship between member growth and premier member growth and what the initiatives are underway to get premium member growth to grow at a faster rate? Then, second, I know you're at a very early age in mobile monetization, but I guess, what are the next steps and what are the initial reads and how that's performing so far?

Steve Sordello

Thomas, this is Steve. So, on Premium Subscriptions, there is a linkage between member growth and unique visitor growth and Premium Subscriptions. One of the reasons why that business started to accelerate last year and we tied it to IPO and addressed booking for a number of other things that enhanced our metric. So that is a driver of that business, that's closely linked, I would say equally is important, one of the drivers behind that business that we had success in, is again using our data, the better target perspective purchases and improve conversion rates. We’ve had success in that and we're continuing to double downing that area to continue to drive job growth in that business line.

Jeff Weiner

It’s Jeff. On the mobile monetization front, I think first it's important to recognize that when we talk about mobile monetization, it goes well beyond the advertising, which I know continues to be a hot topic with regard to digital models and digital media models. Our mobile monetization efforts cut across all three of our business line Hiring Solutions, Marketing Solutions and Premium Subscriptions and we continue to believe that there is an opportunity for it to be accretive with regard to Hiring Solutions and Premium Subscriptions. By virtue of the fact we're going to be able to extend the current value proposition to those paying customers beyond the desktop. With regard to Marketing Solutions, we're really optimizing for two different environments, the tablets environment and the phone environments.

With regard to the tablet environment, we recently announced establishing a pilot program for advertising within our iPad applications and we're very pleased with the initial response among our blue chip marketing partners in that regard and we continue to see healthy demand for the pilot program. With regard to the phone, we're going to continue to ensure that we get that offering right and that starts with the member experience for us. So, we've been testing some various implementations and we want to make sure that if we're going to be introducing advertising into the feed itself that is going to be creating value for the entire ecosystem.


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

Justin Post - Merrill Lynch

Most of my questions have been asked, but just two quick ones, Jeff, when you look at your product pipeline, I think there is an anticipation of the Company really taking advantage of your huge member base and monetizing it well. How is the product pipeline and do you have some things that are really starting to get traction on the revenue side recently or as you look forward you suggest some ideas on how to really take advantage of that membership base for the company? Then secondly may be Steve on engagement how do you measure it internally or you’re simply taking the page views, the 60% page views over the 50% membership growth? Is that probably the best way to measure it or there are other ways you’re really measuring engagement.

Jeff Weiner

On the first part of your question, with regard to the product roadmap as it relates to monetization efforts, we continue to invest in our Hiring Solutions offering and that now extends well beyond that initial flagship product of Recruiter which is our search capability within the enterprise, and of course we recently introduced Talent Pipeline. We’ve got some really nice improvements that have been made to our job offering and the ability for companies to be able to offer all of their jobs on LinkedIn to be able to match those jobs with the ideal candidates and some relevancy algorithms and then lastly within Hiring Solutions, our efforts with regard to Talent branding and Recruitment Media some really interesting stuff on the roadmap there.

With regard to Marketing Solutions, we covered earlier on the call, the progress that we’ve been making on customs groups, company follow our ecosystem as we really started to gain attraction by virtue of the ability of companies to targets. Their status updates to the right audience and for them to be able to leverage our analytics packages so they can constantly be iterating and improving our return on investment and then lastly it’s about Premium Subscription, one of the things that we’re excited about, I think has significant opportunity and potential is our sales solutions offering our Sales Navigator product which enable companies and people business development Folks to convert cold calls into one prospect.

So we’re excited about the road map and we continue to make solid progress Justin, in terms of engagement, the external growth mix and page views are kind of aggregated measures of how we measure internally, which is obviously at a much more granular level and so we look at things like page views by product, how those are performing over time. We look at different actions that are taken on the site, such as social gestures, how much sharing is going on. We look at frequency. It's all the metrics we look at internally roll up into those three over encompassing metrics, but there's a lot more granularity obviously.

Justin Post - Merrill Lynch

Steve would you say that engagement is growing and can you quantify that like 10%, 20%, any way to help us with that?

Steve Sordello

Well I think one takeaway from engagement is you just look at those top metrics, I mean numbers are growing 50%, uniques are growing over 30% and page views are growing 65% year-on-year. The latter one is I think really telling obviously mobile is a big piece of that. So we continue to show strong growth in engagement.


And our next question comes from the line of So Young Lee from SunTrust.

So Young Lee - SunTrust Robinson Humphrey

Can you discuss your efforts in reaching SMBs and how you're able to cater to their specific needs and given the higher churn these SMBs generally have, can you talk about the ways you’re managing churn and work on retaining these customers?

Steve Sordello

So, I think I heard the question correctly. So, yeah SMB is becoming a larger percent of our overall corporate solution customers. About a year ago, it was 20%, it's up to 30% now of total bookings. We've actually seen some positive results in terms of reducing churn within that customer set over the last couple of quarters here. There is a customer that has more limited up-sell potential and a higher propensity to churn and one of the reasons why our churn came down was we started to be able to address the SMB space. We're also looking for ways to – from a leverage perspective to be able to sell more directly online and so we're testing in that space.


And our next question comes from the line of Dan Salmon from BMO Capital Markets.

Dan Salmon - BMO Capital Markets

Could you give us a little bit of color around the methodology for measuring your users?

Steve Sordello

Could you be a little more specific, are you referring to engagement or demographics, value added, lifetime value??

Dan Salmon - BMO Capital Markets

Just the actual number, I know some other competitors have been talking a little bit about, looking for things like fraudulent accounts and what not and trying to read those out and I'm just interested to hear how you guys handle those sort of issues?

Steve Sordello

So we report on member base for example, on a net basis. So, we believe there's a certain percentage that could be duplicative accounts. We try to strip those out. Now, naturally it's not always a 100% accurate, but we feel we're fairly close and just a highlight on some of the other metrics such as unique visitors and page views, we've been doing a lot of work, working directly with external sources like comScore to reconcile differences and over the last couple of quarters they've been fairly close. That's another objective view of kind of measurement of data.

Jeff Weiner

Great, so that's going to wrap it up for today. Thank you so much for your time and for joining us. And we'll talk to you soon.


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

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