Apr 28, 2016 - âSafe Harborâ statement under the Private Securities Litigation Reform Act of 1995: This presentation
Q1’16 Results April 2016
Safe harbor “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This presentation and the accompanying conference call contain forward-looking statements about our products, including our investments in products, technology and other key strategic areas, certain non-financial metrics, such as member growth and engagement, and our expected financial metrics such as revenue, adjusted EBITDA, non-GAAP EPS, depreciation and amortization, stock-based compensation and fully-diluted weighted shares for the second quarter of 2016 and the full fiscal year 2016. The achievement of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any of these risks or uncertainties materialize or if any of the assumptions prove incorrect, the company’s results could differ materially from the results expressed or implied by the forward-looking statements the company makes. The risks and uncertainties referred to above include - but are not limited to - our core value of putting members first, which may conflict with the short-term interests of the business; engagement of our members; the price volatility of our Class A common stock; general economic conditions; expectations regarding the return on our strategic investments; execution of our plans and strategies, including with respect to mobile products and features and expansion into new areas and businesses; security measures and the risk that they may not be sufficient to secure our member data adequately or that we are subject to attacks that degrade or deny the ability of members to access our solutions; expectations regarding our ability to timely and effectively scale and adapt existing technology and network infrastructure to ensure that our solutions are accessible at all times with short or no perceptible load times; our ability to maintain our rate of revenue growth and manage our expenses and investment plans; our ability to accurately track our key metrics internally; members and customers curtailing or ceasing to use our solutions; privacy, security and data transfer concerns, as well as changes in regulations, which could impact our ability to serve our members or curtail our monetization efforts; litigation and regulatory issues; increasing competition; our ability to manage our growth; our international operations; our ability to recruit and retain our employees; the application of U.S. and international tax laws on our tax structure and any changes to such tax laws; acquisitions we have made or may make in the future; and the dual class structure of our Class A common stock. Further information on these and other factors that could affect the company’s financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section entitled “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2015, and additional information will also be set forth in our Form 10-Q that will be filed for the quarter ended March 31, 2016, which should be read in conjunction with these financial results. These documents are or will be available on the SEC Filings section of the Investor Relations page of the company's website at http://investors.linkedin.com/. All information provided in this presentation is as of April 28, 2016, and LinkedIn undertakes no duty to update this information.
2
LinkedIn value propositions
Stay connected and informed
Advance my career
Work smarter
3
Member value metrics 45 106
97 97 90 82 75
78
100100
38
93
34
84
26 25
65 21
58 15
Unique visiting members (mn)2
Member page views (bn)3
4 1 as of quarter end | 2 monthly average during the quarter | 3 total during the quarter
Q1'16
Q4'15
Q3'15
Q2'15
Q1'15
Q4'14
Q3'14
Q2'14
Q1’14
Q4’13
Q3’13
Q2’13
Q1’13
Q4’12
12 13
Q3’12
Q1’12
Q1'16
Q4'15
Q3'15
Q2'15
Q1'15
Q4'14
Q3'14
Q2'14
Q1’14
Q4’13
Q3’13
Q2’13
Q1’13
Q4’12
Q3’12
Q2’12
22 22
18
50 51 52
Q1’12
Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16
35
28
76
11
Members (mn)1
37
30
Q2’12
433 414 396 380 364 347 332 313 296 277 259 238 218 202 187 174 161
Revenue $862 $861 $780
160%
140%
$712 120%
$643 $638 $534 $447 $364 $304 $228
$568
100%
$473 80%
$393
$325
60%
$252 40%
$188
Net revenue ($mn)
Q1'16
Q4'15
Q3'15
Q2'15
Q1'15
Q4'14
Q3'14
Q2’14
Q1’14
Q4’13
Q3’13
Q2’13
Q1’13
Q4’12
Q3’12
Q2’12
Q1’12
20%
0%
% Y/Y 5
Adjusted EBITDA
1
$249
40%
$222 $208 $179 $145 $111 $79 $83 $50
30%
$160 $163
$151
20%
$117
$89 $93
$56
10%
Adj EBITDA ($mn)
Q1'16
Q4'15
Q3'15
Q2'15
Q1'15
Q4'14
Q3'14
Q2'14
Q1’14
Q4’13
Q3’13
Q2’13
Q1’13
Q4’12
Q3’12
Q2’12
Q1’12
$38
0%
% of revenue
1 Adjusted EBITDA is a Non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to net income (loss) please see slide 7. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with US GAAP .
6
Non-GAAP adjusted EBITDA reconciliation
1
(In millions)
Q1’12
Q2’12
Q3’12
Q4’12
Q1’13
Q2’13
Q3’13
Q4’13
Q1’14
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
GAAP net income (loss)
$5
$3
$2
$12
$23
$4
($3)
$4
($13)
($1)
($4)
$3
($42)
($68)
($47)
($8)
($45)
Provision (benefit) for income taxes
6
10
4
15
1
4
8
9
14
16
13
4
11
(26)
(10)
(24)
(33)
Other (income) expense, net
(0)
1
(1)
(0)
0
0
(0)
(2)
(1)
(1)
(0)
7
15
12
21
16
12
Depreciation and amortization
15
18
23
24
26
32
34
43
50
56
60
71
74
99
118
130
142
Stock-based compensation
13
19
27
28
34
48
54
57
68
75
83
94
103
145
127
135
146
$38
$50
$56
$79
$83
$89
$93
$111
$117
$145
$151
$179
$160
$163
$208
$249
$222
Adjusted EBITDA
1 Adjusted EBITDA is a Non-GAAP financial measure. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with US GAAP | 2 As adjusted, refer to appendix, page 14
7
Guidance
1
Q2 2016
FY 2016
$885-890
$3,650—3,700
Adjusted EBITDA
$225-230
$985-1,005
Non-GAAP EPS
$0.74-0.77
$3.30-3.40
Revenue 2
1 All guidance figures are approximate values in millions except for non-GAAP EPS | 2 Q2’16 Adj EBITDA guidance assumes depreciation of ~$93m, amortization of ~$44m, stock-based comp of ~$150m & FY16 Adj EBITDA guidance assumes depreciation of ~$395m, amortization of ~$173m, and stock-based comp of ~$580m.
8
Appendix
s
9
FY 2014 COMPANY METRICS Members (MM) % y/y
Unique Visiting Members (MM) % y/y
Mobile Unique Visiting Members (MM) % y/y % of total unique visiting members
Member Page Views (BN) % y/y
REVENUE MIX BY PRODUCT Net Revenue ($MM) % y/y
Talent Solutions % y/y
Hiring % y/y
Learning & Development % y/y
Marketing Solutions % y/y
Premium Subscriptions % y/y
Percent of Total: Talent Solutions Marketing Solutions Premium Subscriptions REVENUE MIX BY GEOGRAPHY Net Revenue ($MM) % y/y
US
% y/y
EMEA
% y/y
APAC
% y/y
Other Americas % y/y
Percent of Total: US International EMEA APAC Other Americas
Q1'14 296
36%
Q2'14 313
32%
FY 2015 Q3'14 332
28%
Q4'14 347
25%
Q1'15 364
23%
Q2'15 380
21%
Q3'15 396
Q4'15 414
FY 2016 Q1'16 433
20%
19%
19%
FY13 277
37%
Full Year FY14 347
25%
FY15 414
19%
82
84
90
93
97
97
100
100
106
73
87
98
26%
13%
16%
23%
18%
16%
11%
7%
9%
38%
19%
13%
35
73% 43%
38
46% 45%
42
45% 47%
45
46% 49%
49
38% 50%
51
35% 52%
55
30% 55%
57
26% 57%
61
25% 58%
27
116% 36%
40
51% 46%
53
32% 54%
26
25
28
30
34
35
38
37
45
83
109
143
43%
22%
28%
34%
30%
37%
33%
26%
34%
63%
31%
31%
46%
473
47%
534
45%
568
44%
643
35%
638
33%
712
37%
780
34%
862
35%
861
1,529
2,219
2,991
292
322
345
369
396
443
502
535
558
910
1,328
1,877 1,770
57%
45% 46%
35%
50%
49%
45%
41%
36%
38%
46%
45%
41%
67%
292
322
345
369
396
426
461
487
502
910
1,328
41%
50%
49%
45%
41%
36%
32%
34%
32%
27%
67%
46%
33%
–
–
–
–
–
18
41
49
55
–
–
107
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
86
106
109
153
119
140
140
183
154
312
455
581
33%
44%
45%
56%
38%
32%
28%
20%
29%
33%
46%
96
105
114
121
122
128
138
144
149
307
437
28%
532
46%
44%
43%
38%
28%
22%
21%
19%
22%
61%
42%
22%
62% 18% 20%
60% 20% 20%
61% 19% 20%
57% 24% 19%
62% 19% 19%
62% 20% 18%
64% 18% 18%
62% 21% 17%
65% 18% 17%
60% 20% 20%
60% 20% 20%
63% 19% 18%
46%
473
47%
534
45%
568
44%
643
35%
638
33%
712
37%
780
34%
862
35%
861
1,529
2,219
2,991
285
318
343
388
389
445
484
528
526
942
1,334
1,846
555
57%
41%
42%
40%
43%
37%
40%
41%
36%
35%
52%
118
135
140
162
157
169
187
218
218
358
57%
39
61%
32
59%
46
64%
36
55%
49
60%
37
50%
54
49%
39
33%
54
40%
38
25%
59
28%
40
34%
65
32%
44
34%
70
30%
47
39%
71
32%
45
65%
119
71%
110
45% 42% 55%
187
58%
143
35% 38%
730
32%
247
32%
168
32%
32%
35%
24%
19%
12%
19%
19%
19%
66%
31%
17%
60% 40% 25% 8% 7%
60% 40% 25% 9% 7%
60% 40% 25% 9% 6%
60% 40% 25% 8% 6%
61% 39% 25% 8% 6%
62% 38% 24% 8% 6%
62% 38% 24% 8% 6%
61% 39% 25% 8% 5%
61% 39% 25% 8% 5%
62% 38% 23% 8% 7%
60% 40% 25% 8% 6%
62% 38% 24% 8% 6%
FY 2014 REVENUE MIX BY GEOGRAPHY, BY PRODUCT Net Revenue ($MM) % y/y
US Revenue Talent Solutions % y/y
Marketing Solutions % y/y
Premium Subscriptions % y/y
International Revenue Talent Solutions % y/y
Marketing Solutions % y/y
Premium Subscriptions % y/y
REVENUE MIX BY CHANNEL Net Revenue ($MM)
Q1'14 473
Q2'14 534
FY 2015 Q3'14 568
Q4'14 643
Q1'15 638
Q2'15 712
Q3'15 780
Q4'15 862
FY 2016 Q1'16
FY13
Full Year FY14
FY15
46%
47%
45%
44%
35%
33%
37%
34%
35%
861
1,529
2,219
2,991
285 180
318 198
343 209
388 223
389 241
445 278
484 310
528 329
526 342
942 583
1,334 810
1,846 1,157
272
57%
43%
41%
37%
36%
33%
40%
49%
48%
42%
58%
49
59
69
95
77
92
93
115
98
180
30%
55
44%
61
50%
66
72%
71
58%
71
55%
75
36%
81
21%
84
27%
87
30%
179
45%
39% 51%
252
35%
43%
377
39%
311
47%
42%
39%
37%
28%
24%
23%
19%
22%
60%
41%
23%
188 111
216 124
225 136
255 147
248 156
267 166
295 192
334 207
334 216
586 327
885 518
1,145 720
63%
63%
59%
51%
40%
33%
41%
41%
39%
85%
58%
37
47
40
58
42
48
46
68
56
132
182
37%
40
44%
45
47%
49
49%
51
39%
51
27%
638
3%
53
19%
712
14%
57
17%
780
17%
60
18%
862
34%
62
36%
127
38%
184
204
12%
221
22%
62%
45%
20%
45%
44%
35%
33%
37%
34%
35%
861
1,529
2,219
2,991
Field Sales
275
319
342
414
393
440
480
551
536
891
1,350
1,865
869
1,126
% y/y
643
13%
47%
Percent of Total: Field Sales Online Sales GAAP P&L ($MM) Net revenue Cost of revenue Sales & marketing Product development General & administrative Depreciation & amortization Income (loss) from operations Other income (expense), net Provision (benefit) for income taxes Net income (loss) Accretion of redeemable noncontrolling interest Net income (loss) attributable to common stockholders Basic shares outstanding (MM) Diluted shares outstanding (MM) Basic GAAP EPS attributable to common stockholders Diluted GAAP EPS attributable to common stockholders
568
36%
46%
% y/y
534
36%
% y/y
Online Sales
473
45%
39%
57%
50%
52%
50%
53%
43%
38%
40%
33%
36%
61%
198
215
227
230
244
271
300
311
325
637
45% 51%
35% 38%
41%
39%
37%
30%
23%
26%
32%
35%
33%
52%
36%
30%
58% 42%
60% 40%
60% 40%
64% 36%
62% 38%
62% 38%
62% 38%
64% 36%
62% 38%
58% 42%
61% 39%
62% 38%
473 62 167 121 75 50 (1) 1 14 (13) (0)
534 70 184 129 81 56 14 1 16 (1) (0)
568 75 199 137 89 60 9 0 13 (4) (0)
643 87 224 150 97 71 14 (7) 4 3 (0)
638 88 230 166 97 74 (17) (15) 11 (42) (0)
712 100 261 190 142 99 (81) (12) (26) (68) (0)
780 111 265 203 119 118 (37) (21) (10) (47) (1)
862 119 292 217 120 130 (16) (16) (24) (8) (1)
861 118 302 238 128 142 (66) (12) (33) (45) (1)
1,529 203 522 396 226 135 48 1 22 27 –
2,219 294 774 536 341 237 36 (5) 47 (15) (0)
2,991 419 1,048 776 479 420 (151) (64) (50) (165) (1)
(13)
(1)
(4)
3
(43)
(68)
(47)
(8)
(46)
27
(16)
(166)
121 121
122 122
123 123
125 127
125 125
128 128
131 131
132 132
133 133
114 119
123 123
129 129
($0.11)
($0.01)
($0.03)
$0.02
($0.34)
($0.53)
($0.36)
($0.06)
($0.35)
$0.24
($0.13)
($1.29)
($0.11)
($0.01)
($0.03)
$0.02
($0.34)
($0.53)
($0.36)
($0.06)
($0.35)
$0.23
($0.13)
($1.29)
FY 2014 GAAP TO NON-GAAP RECONCILIATIONS PRE-TAX RECONCILIATIONS ($MM) GAAP Cost of Revenue Stock-based compensation Non-GAAP Cost of Revenue % net revenue
GAAP Sales & Marketing Stock-based compensation Non-GAAP Sales & Marketing % net revenue
GAAP Product Development Stock-based compensation Non-GAAP Product Development % net revenue
GAAP General & Administrative Stock-based compensation Non-GAAP General & Administrative % net revenue
GAAP Income (Loss) from Operations Stock-based compensation Amortization of intangible assets Non-GAAP Operating Income % margin
Depreciation ADJUSTED EBITDA RECONCILIATION ($MM) GAAP Net Income (Loss) Provision (benefit) for income taxes Other (income) expense, net Depreciation & amortization Stock-based compensation Adjusted EBITDA % margin
Q1'14
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
FY 2016 Q1'16
FY13
Full Year FY14
FY15
62 6 57
70 7 63
75 7 68
87 9 78
88 10 79
100 12 88
111 13 98
119 14 105
118 14 103
203 16 187
294 29 265
419 49 370
12%
12%
12%
12%
12%
12%
13%
12%
12%
12%
12%
12%
167 12 154
184 14 171
199 15 184
224 19 206
230 19 210
261 23 238
265 27 239
292 27 265
302 28 273
522 36 486
774 60 714
1,048 96 952
33%
32%
32%
32%
33%
33%
31%
31%
32%
32%
32%
32%
121 33 87
129 38 91
137 40 97
150 44 106
166 50 116
190 60 130
203 58 144
217 65 152
238 70 167
396 99 297
536 155 381
776 233 543
18%
17%
17%
16%
18%
18%
19%
18%
19%
19%
17%
18%
75 17 58
81 16 64
89 20 69
97 22 75
97 24 73
142 50 92
119 29 90
120 29 91
128 33 95
226 43 182
341 75 266
479 133 346
12%
12%
12%
12%
11%
13%
12%
11%
11%
12%
12%
12%
(1) 68 5 72
14 75 7 96
9 83 10 101
14 94 13 120
(17) 103 12 98
(81) 145 29 94
(37) 127 46 137
(16) 135 47 166
(66) 146 47 127
48 194 16 258
36 319 35 390
(151) 510 135 494
15%
18%
18%
19%
15%
13%
18%
19%
15%
17%
18%
17%
45
49
50
59
62
70
71
83
95
118
202
286
(13) 14 (1) 50 68 117
(1) 16 (1) 56 75 145
(4) 13 (0) 60 83 151
3 4 7 71 94 179
(42) 11 15 74 103 160
(68) (26) 12 99 145 163
(47) (10) 21 118 127 208
(8) (24) 16 130 135 249
(45) (33) 12 142 146 222
27 22 (1) 135 194 376
(15) 47 5 237 319 592
(165) (50) 64 420 510 780
25%
27%
27%
28%
25%
23%
27%
29%
26%
25%
27%
26%
15 75 – 7 – 97
9 83 – 10 – 102
7 94 6 13 – 119
(32) 103 11 12 – 94
(94) 145 11 29 – 93
(57) 127 11 46 7 134
(32) 135 12 47 2 163
(78) 146 12 47 2 129
49 194 – 16 – 260
31 319 6 35 – 391
(215) 510 46 135 9 485
16 106% (18) 34 35%
13 148% (23) 36 35%
4 55% (38) 42 35%
11 (33%) (11) 22 23%
(26) 28% (47) 21 23%
(10) 18% (41) 31 23%
(24) 75% (62) 38 23%
(33) 42% (63) 30 23%
22 46% (45) 68 26%
47 149% (90) 137 35%
(50) 23% (161) 111 23%
NON-GAAP PRE TAX INCOME AND TAX RATE RECONCILIATION ($MM) GAAP Pre-Tax Income (Loss) 0 Stock-based compensation 68 Non-cash interest expense related to convertible notes – Amortization of intangible assets 5 Add back: fair value adjustment on other derivative – Non-GAAP Pre-Tax Income 73 Provision (Benefit) for Income Taxes, GAAP GAAP Income Tax Rate Income tax effect of non-GAAP adjustments Provision for Income Taxes, Non-GAAP Non-GAAP Income Tax Rate
14 5,184% (12) 25 35%
FY 2015
FY 2014 NON-GAAP NET INCOME RECONCILIATION ($MM) GAAP Net Income (Loss) Attributable to Common Stockholders Stock-based compensation Non-cash interest expense related to convertible notes Amortization of intangible assets Accretion of redeemable noncontrolling interest Fair value adjustment on other derivative Income tax effect of non-GAAP adjustments Non-GAAP Net Income % margin
NON-GAAP SHARE COUNT RECONCILIATION (MM) GAAP basic shares outstanding Non-GAAP basic shares outstanding GAAP diluted shares outstanding Dilutive shares under treasury stock method Non-GAAP diluted shares outstanding NON-GAAP EPS Basic Non-GAAP EPS Diluted Non-GAAP EPS BALANCE SHEET ($MM) Cash, cash equivalents & marketable securities Property and equipment, net Working capital Total assets Total deferred revenue (short-term and long-term) Total stockholder's equity CASH FLOW STATEMENT ($MM) Cash flows provided by operating activities Purchases of property and equipment Free Cash Flow Cash flows provided by (used in) investing activities Cash flows provided by financing activities TOTAL HEADCOUNT Total Headcount % y/y
Q1'14
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
FY 2016 Q1'16
FY13
Full Year FY14
FY15
(13) 68 – 5 0 – (12) 47
(1) 75 – 7 0 – (18) 63
(4) 83 – 10 0 – (23) 66
3 94 6 13 0 – (38) 77
(43) 103 11 12 0 – (11) 73
(68) 145 11 29 0 – (47) 71
(47) 127 11 46 1 7 (41) 103
(8) 135 12 47 1 2 (62) 126
(46) 146 12 47 1 2 (63) 99
27 194 – 16 – – (45) 192
(16) 319 6 35 0 – (90) 254
(166) 510 46 135 1 9 (161) 373
10%
12%
12%
12%
11%
10%
13%
15%
12%
13%
11%
12%
121 121
122 122
123 123
125 125
125 125
128 128
131 131
132 132
133 133
114 114
123 123
129 129
121 4 125
122 3 125
123 3 126
127 – 127
125 3 128
128 2 130
131 2 133
132 2 134
133 1 134
119 – 119
123 3 126
129 2 131
$0.39 $0.38
$0.52 $0.51
$0.54 $0.52
$0.62 $0.61
$0.58 $0.57
$0.56 $0.55
$0.79 $0.78
$0.96 $0.94
$0.75 $0.74
$1.69 $1.61
$2.07 $2.02
$2.89 $2.84
2,306 407 2,078 3,562 480 2,761
2,367 476 2,134 3,721 481 2,875
2,264 557 2,026 3,906 464 2,995
3,443 741 3,239 5,427 522 3,325
3,530 755 3,342 5,538 586 3,416
3,033 793 2,740 6,557 633 4,193
3,089 906 2,771 6,717 625 4,292
3,119 1,047 2,747 7,011 714 4,469
3,160 1,139 2,762 7,209 792 4,612
2,329 362 2,113 3,353 392 2,629
3,443 741 3,239 5,427 522 3,325
3,119 1,047 2,747 7,011 714 4,469
129 89 40
128 96 32
181 121 61
130 242 (111)
165 90 75
226 72 153
240 167 73
177 178 (1)
252 177 75
436 278 158
569 548 21
807 507 300
(448) 24
(33) 40
(320) 25
(1,493) 1,300
371 27
(799) 3
(57) 1
(307) 46
(41) 0
(1,358) 1,454
(2,293) 1,388
(792) 78
5,416
5,758
6,442
6,897
7,633
8,735
9,273
9,372
9,732
5,045
6,897
9,372
43%
36%
FY 2015
34%
37%
41%
52%
44%
36%
27%
46%
37%
36%
LinkedIn Corporation and its subsidiaries, (the “Company”), provides this supplement to assist investors in evaluating the Company’s financial and operating metrics. The Company suggests that the notes to this supplement be read in conjunction with the financial tables. The Company intends to update the financial supplement on a quarterly basis. Non-GAAP Financial Measures To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, the Company uses non-GAAP financial measures: adjusted EBITDA, non-GAAP net income, and non-GAAP diluted EPS (collectively the “non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with US GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The Company excludes the following items from one or more of its non-GAAP measures: Stock-based compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements and facilitates comparisons to peer operating results. Non-cash interest expense related to convertible senior notes. In November 2014, the Company issued $1.3 billion aggregate principal amount of 0.50% convertible senior notes. In accordance with GAAP, the Company separately accounted for the value of the conversion feature as a debt discount, which is amortized in a manner that reflects the Company’s non-convertible debt borrowing rate. Accordingly, the Company recognizes imputed interest expense on its convertible senior notes of approximately 4.7% in its statement of operations. The Company excludes the difference between the imputed interest expense and coupon interest expense, net of any capitalized interest, because it is non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peer operating results.
Amortization of acquired intangible assets. The Company excludes amortization of acquired intangible assets because it is non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peer operating results. Accretion of redeemable noncontrolling interest. The accretion of redeemable noncontrolling interest represents the accretion of the Company's redeemable noncontrolling interest to its redemption value. The Company excludes the accretion because it is non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operating performance. In addition, excluding this item from the non-GAAP financial measures facilitates comparisons to historical operating results and comparisons to peer operating results. Fair value adjustment on other derivative. These adjustments represent the changes in fair value of the cash settlement feature for the preferred shares in the Company's joint venture. The Company excludes these fair value adjustments because they are non-cash in nature and the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operating performance. In addition, excluding this item from the non-GAAP financial measures facilitates comparisons to historical operating results and comparisons to peer operating results. Income tax effects and adjustments. The Company adjusts non-GAAP net income by considering the income tax effects of excluding items such as stock-based compensation and the amortization of acquired intangible assets. Beginning in the first quarter of 2014, the Company has implemented a static non-GAAP tax rate for evaluating its operating performance as well as for planning and forecasting purposes. This projected 10-year weighted average non-GAAP tax rate eliminates the effects of non-recurring and period specific items, which can vary in size and frequency and does not necessarily reflect the company's long-term operations. Historically, the Company computed a non-GAAP tax rate based on non-GAAP pre-tax income on a quarterly basis. Based on the Company's current forecast, a tax rate of 23% has been applied to its non-GAAP financial results for the current period. This rate will be adjusted annually, if necessary. The Company believes that adjusting for these income tax effects and adjustments provides additional transparency to the overall or “after tax” effects of excluding these items from its non-GAAP net income. Dilutive shares under the treasury stock method. During periods with a net loss, the Company excluded certain potential common shares from its GAAP diluted shares because their effect would have been anti-dilutive. On a non-GAAP basis, these shares would have been dilutive. As a result, the Company has included the impact of these shares in the calculation of its non-GAAP diluted net income per share under the treasury stock method. For more information on the non-GAAP financial measures, please see the “GAAP to Non-GAAP Reconciliations” in the table above. These reconciliations have more details on the US GAAP financial measures that are most directly comparable to nonGAAP financial measures and the related reconciliations between these financial measures.
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