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Linkedln

(LNKD-NYSE)
Stock Rating:
Outperform
Industry Rating: Market Perform

The Market Sizing Report


Event
In this report, we lay out a framework for investors to evaluate five current and
potential revenue opportunities: 1) Talent Solutions, 2) the upcoming standalone
Sales Solutions, 3) Marketing Solutions, 4) potential long-term Student
Solutions, and 5) China. We break down each opportunity into several basic
views: 1) an estimate of LinkedIns operations today, 2) the total addressable
market (TAM), and 3) a bear-base-bull assessment of where LinkedIns revenue
could be in five years. These 2019 figures are then applied to a set of bear-basebull DCFs to derive a range of stock values.

June 10, 2014


Daniel Salmon / Jeffrey M. Silber
BMO Capital Markets Corp.
212-885-4029 / 212-885-4063
dan.salmon@bmo.com / jeff.silber@bmo.com
Nirav Modi / Henry Sou Chien
BMO Capital Markets Corp.
212-885-4035 / 212-885-4138
nirav.modi@bmo.com / henry.chien@bmo.com
Price (9-Jun)
Target Price

$156.39
$250.00

Valuation & Recommendation


Our price target remains $250 and implies 1.9x 2015 non-GAAP PEG ratio and
37.3x 2015 adjusted EBITDA.

Earnings/Share(US$)

2.0

250
1.5
200
1.0

150

0.5

100
50

0.0
Volume (mln)

200

200

100

100

0
LNKD Relative to S&P 500

400

200

Positive. The bear-base-bull revenue scenarios arrive at LNKD share values of

$76, $250, and $425 when input into our expanded DCF model and having
EBITDA margin and FCF conversion estimates applied to them. Our analysis
suggests a total addressable market of approximately $9 billion in emerging
sales/student/China opportunities, while we estimate global B2B marketing
spending of ~$59 billion; this is all incremental to the $27 billion market
opportunity the company has identified for Talent Solutions. Our five-year/2019
bear-base-bull cases offer the following ranges for LinkedIn: 1) total registered
members of 571/684/791 million 2) global LinkedIn corporate solutions (LCS)
customer counts of 50,600/64,218/94,000; 3) Talent Solutions revenue of
$3.8/$5.8/$11.3 billion; 4) potential Sales Solutions revenue of $400
million/$1.1 billion/$1.3 billion; 5) Marketing Solutions revenue of $890
million/$1.5 billion/$3.6 billion (using a B2B marketing focus; we also present a
view based on native advertising); 6) potential Student Solutions revenue of
$465 million/$885 million/$1.5 billion, and; 7) potential Chinese revenue of
$445 million/$1.3 billion/$3.0 billion five years from now.

$257.56
$136.02

LINKEDIN CORP (LNKD)


Price: High,Low,Close(US$)

400

Impact & Analysis

52-Week High
52-Week Low

200

2011

2012

2013

2014

Last Data Point: June 6, 2014

(FY-Dec.)
EPS
P/E
CFPS
P/CFPS
Rev. ($mm)
EV ($mm)
EBITDA ($mm)
EV/EBITDA
Quarterly EPS
2012A
2013A
2014E
Dividend
Book Value
Shares O/S (mm)
Float O/S (mm)
Wkly Vol (000s)
Net Debt ($mm)

2012A
$0.89

2013A
$1.62

2014E
$1.74
89.9x

2015E
$2.62
59.7x

$0.88

$1.02

$1.22
nm

$2.61
59.9x

$972
$11,017
$223
49.4x

$1,529
$19,826
$376
52.7x

$2,084
$19,043
$514
37.0x

$2,821
$19,085
$806
23.7x

Q2
$0.16
$0.38
$0.40

Q3
$0.22
$0.39
$0.42

Q4
$0.35
$0.39
$0.54

Q1
$0.15
$0.45
$0.38a
$0.00
$21.22
124.9
100.5
12,038
-$509

Yield
Price/Book
Mkt. Cap (mm)
Float Cap (mm)
Wkly $ Vol (mm)
Next Rep. Date

0.0%
7.4x
$19,533
$15,714
$2,424
na

Notes: All values in US$


Major Shareholders:
First Call Mean Estimates: LINKEDIN CORP (US$) 2014E: $1.65;
2015E: $2.50

Please refer to pages 24 to 27 for Important Disclosures, including the Analyst's Certification.

BMO Capital Markets

Linkedln

Introduction
Although most investors remain focused on LinkedIns slowing corporate customer
growth, we continue to see new stories emerging. These are primarily focused on:

a) The launch of the standalone Sales Solutions platform in 2H14.


b) The new operation in China, and;
c) And a nascent opportunity in the student market.
In this report, we attempt quantity these opportunities as well as Talent Solutions and
Marketing Solutions. We offer investors a framework with five different views of LinkedIns

opportunities:
1)

An estimate of LinkedIns operations at year-end 2014. For some opportunities (like the
student market or China) there is essentially zero revenue at the moment. For others like
Talent Solutions we lay out a more detailed derivation than what is normally in our model.

2)

An estimate of LinkedIns total addressable market (TAM) today. LinkedIn management has

laid out a market size estimate for Talent Solutions (~$27 billion) and there are various
industry estimates available to help gauge the Marketing Solutions opportunity. We break
down these market sizes in more detail and also take a shot at the opportunity for Sales
Solutions, as well as the nascent China and student market opportunities.
3)

Bear, base, and bull cases for a five year outlook. We offer a range of potential outcomes for
where these revenues could be in five years (i.e. roughly 2019), but note that particularly for
China and the student market, precise timelines remain unclear as LinkedIn is just initially
exploring opportunities in both areas.

Before tackling the revenue opportunities we first scope out the basic components of
LinkedIns business: its total registered members and corporate solutions clients. This is

followed by the five revenue analyses and we complete the report by applying our five-year bear,
base, and bull revenue cases to our expanded DCF analysis in order to determine our $76-$250$425 set of share prices.

A) Total Registered Members


New member growth should come from expansion into international markets and students. At

100 million registered users in the US, LinkedIn is approaching full penetration of the knowledge
workers in this country, with incremental growth coming from semi-skilled workers. We do not
expect LinkedIn to reach the scale of more broad social media properties like Facebook, due its
professional orientation, but we do see untapped potential for growth internationally (especially
China) and with both high school and post-secondary students.

Page 2 June 10, 2014

BMO Capital Markets

Linkedln

Exhibit 1. Current and Potential Registered Users


YE2014
figures in millions
Global population

5 Year Outlook

LNKD Ests.

TAM

Bear

Base

Bull

7,163

7,163

7,306

7,414

7,521

Global workforce

3,300

3,300

3,288

3,559

3,761

Workforce as % of total population

46.1%

46.1%

45.0%

48.0%

50.0%

313

600

511

593

677

Knowledge workforce as % of total population

Knowledge workers

4.4%

8.4%

7.0%

8.0%

9.0%

Estimated Higher Ed students


Students as % of total population

46
0.6%

180
2.5%

60
0.8%

91
1.2%

114
1.5%

Estimated Global Knowledge Workers + Students


LinkedIn addressable market % of total population

360

780

571

684

791

5.0%

10.9%

7.8%

9.2%

10.5%

YE2014

5 Year Outlook

figures in millions

LNKD Ests.

TAM

Bear

Base

Bull

U.S. population

318

318

321

325

330

U.S. workforce

155

155

154

159

165

48.9%

48.9%

48.0%

49.0%

50.0%

Workforce as % of total population


Knowledge workers
Knowledge workforce as % of total population

89

105

93

101

112

28.1%

33.0%

29.0%

31.0%

34.0%

Estimated Higher Ed students

19

22

19

20

21

Students as % of total population

5.9%

6.8%

6.0%

6.2%

6.3%

Estimated US Knowledge Workers + Students


LinkedIn addressable market % of total population

108

127

112

121

133

33.9%

39.8%

35.0%

37.2%

40.3%

Source: U.S. Census Bureau (http://www.census.gov/population/international/index.html), RI Department of Labor


and Training (http://www.dlt.ri.gov/lmi/laus/us/usadj.htm), Bureau of Labor Statistics
(http://www.bls.gov/oes/2012/may/oes_research_estimates_2012.htm), company reports and BMO Capital Markets
estimates.

B) LinkedIn Corporate Solutions Clients


Herein lies where so much investor concern is focused today. LinkedIns primary target is
large companies with over 500 employees, and it also has small and midsize businesses (SMBs)
with less than 500 employees on its radar screen too. Ascertaining the total number of businesses
across the globe is as much art as science as consistent records of registered businesses outside
the United States are challenging. But LinkedIn management has noted that they see 50,000100,000 businesses to target globally with over 500 employees (including around 20,000 in the
US) and roughly 100,000-150,000 globally with less than 500 employees (including 50,000 in the
US). Wed note that these estimates are very conservative relative to International Finance
Corporations 2005 estimate for ~42 million registered businesses worldwide, though obviously a
great many of these are outside of LinkedIns sweet spot for white-collar businesses.

Page 3 June 10, 2014

BMO Capital Markets

Linkedln

Exhibit 2. Current and Potential Corporate Solutions Customers


YE2014

5 Year Outlook

LinkedIn Corporate Solutions (LCS) Customers

LNKD Ests.

TAM

Bear

Base

Bull

Number of global registered businesses (in millions)

46.2

46.2

44.0

46.2

47.0

% penetration

0.06%

0.43%

0.12%

0.14%

0.20%

Global LCS customers

29,071

198,464

50,600

64,218

94,000

Number of US registered businesses (in millions)


% penetration

5.7

5.7

5.5

5.7

5.8

0.2%

1.1%

0.3%

0.4%

0.7%

Estimated US LCS customers

11,312

59,954

13,750

22,800

40,600

Estimated Rest of World LCS customers

17,759

138,510

36,850

41,418

53,400

Source: International Finance Corporation's micro small and medium-size enterprises database
(http://www.econstats.com/wdi/wdiv_494.htm), company reports and BMO Capital Markets estimates.

Revenue Opportunities
1) Talent Solutions
Recruiter is the flagship product for Talent Solutions generating about half of segment
revenue today. Recruiter provides HR professionals and recruiters access to LinkedIns

professional database and the ability to sort through candidates based on multiple attributes such
as industry, job function, education, past experience, and geography. LinkedIn Recruiter is sold
on a monthly, quarterly or annual subscription basis while volume discounts were available to
very large clients initially, this practice has largely ceased and most new clients are on boarded at
the full price. The remaining 50% of Talent Solutions revenue is split roughly evenly between
Recruitment Media (generally job openings that are listed on a companys LinkedIn company
page or its related Careers page) and Paid Jobs (job openings listed elsewhere on the site,
including in the feed). Management has stated that there are currently around 1.5 million
recruiters and four million HR professionals on the site and that if all were monetized properly,
the company would be looking at around a $7-$10 billion opportunity. Our five-year base case
remains more conservative than this at just less than $6 billion.

Page 4 June 10, 2014

BMO Capital Markets

Linkedln

Exhibit 3. Current and Potential Revenue for Talent Solutions


YE2014
Talent Solutions
Estimated US LCS customers
x estimated # of Recruiter licences per LCS customer

5 Year Outlook

LNKD Ests.

TAM

Bear

Base

Bull

11,312

59,954

13,750

22,800

40,600

4.0

5.0

4.0

4.5

5.0

Total estimated US Recruiter licences

45,248

299,768

55,000

102,600

203,000

Estimated US Recruiter ARPU

$600

$790

$675

$725

$750

326

2,842

446

893

1,827

50.0%

38.0%

50.0%

45.0%

40.0%

652

7,478

891

1,984

4,568

17,759

138,510

36,850

41,418

53,400

3.0

5.5

4.0

5.0

5.5

Total estimated ROW Recruiter licences

53,277

761,805

147,400

207,090

293,700

Estimated ROW Recruiter ARPU

$423

$750

$600

$700

$725

271

6,856

1,061

1,740

2,555

50.0%

36.0%

50.0%

45.0%

38.0%

541

19,045

2,123

3,866

6,724

Total Estimated US Recruiter revenue ($ in mm)


Recruiter as % of US Talent Solutions revenue
Estimated US Talent Solutions revenue ($ in mm)
Estimated Rest of World LCS customers
x estimated # of Recruiter licences per LCS customer

Total Estimated ROW Recruiter revenue ($ in mm)


Recruiter as % of ROW Talent Solutions revenue
Estimated ROW Talent Solutions revenue ($ in mm)
Estimated Global Recruiter revenue ($ in mm)

596

9,698

1,507

2,632

4,382

Est. Global Paid Jobs/Recruitment Media revenue ($ in mm)

596

16,826

1,507

3,217

6,909

1,193

26,524

3,014

5,849

11,292

Global Talent Solutions revenue

Source: International Finance Corporation's micro small and medium-size enterprises database
(http://www.econstats.com/wdi/wdiv_494.htm), company reports and BMO Capital Markets estimates.

Our Talent Solutions mini-model naturally begins with the LCS customer count. From here
we estimate a total number of Recruiter licenses per customer to arrive at total licences. Then a
monthly average revenue per user (ARPU) is applied to derive total estimated Recruiter revenue.
Finally, we estimate Recruiters percentage of estimated Talent Solutions revenue to arrive at our
totals. Because this mini-model (and most of those that follow) is built bottoms-up based on
LinkedIns key metrics, the total addressable market functionally acts like a super-duper bull
case as we stretch individual metrics to reach our TAM.

2) Sales Solutions
The standalone Sales Solutions platform is expected to launch in 2H14. We believe the
increased focus on this end-market will provide a strong growth driver, as we believe most
companies spend more on sales and marketing each year than they do on recruiting talent. We
expect the new product would be priced as an individual subscription as part of a broader
enterprise sale made to appropriate LinkedIn Corporate Solutions clients (i.e., a second product
for this important customer group). LinkedIn estimates that there are 5x as many salespeople on
its platform as HR professionals and recruiters. The new standalone Sales Solution is expected to
have additional features and tools to the existing Sales Navigator subscription product.

Page 5 June 10, 2014

BMO Capital Markets

Linkedln

Exhibit 4. Current and Potential Revenue for Sales Solutions


YE2014
Sales Solutions

5 Year Outlook

LNKD Ests.

TAM

Bear

Base

Estimated # of Sales professionals in US (in mm)

13.8

13.8

13.0

14.0

15.0

LinkedIn's addressable opportunity as % of total

51%

51%

54%

57%

60%

LinkedIn's addressable opportunity


% penetration

Bull

7.0

7.0

7.0

8.0

9.0

0.0%

30.0%

5.0%

10.0%

20.0%

Estimated # of subscribers to Sales Solution (in mm)

0.0

2.1

0.4

0.8

1.8

Estimated US Sales Solutions Monthly ARPU

$0

$75

$30

$40

$60

1,892

126

384

1,296

Estimated US Sales Solutions revenue ($ in mm)


Estimated # of Sales professionals in ROW (in mm)
LinkedIn's addressable opportunity as % of total

90.0

90.0

90.0

100.0

110.0

20.0%

20.0%

22.3%

26.3%

35.0%

LinkedIn's addressable opportunity

18.0

18.0

20.0

26.3

38.5

% penetration

0.0%

30.0%

6.0%

8.0%

10.0%

Estimated # of subscribers to Sales Solution (in mm)

0.0

5.4

1.2

2.1

3.9

Estimated ROW Sales Solutions Monthly ARPU

$0

$50

$20

$30

$40

Estimated ROW Sales Soutions revenue ($ in mm)

3,240

288

756

1,848

Estimated Global Sales Solutions revenue ($ in mm)

5,132

414

1,140

3,144

Source: One*Net OnLine (http://www.onetonline.org/find/quick?s=Professional+Sales+and+Marketing), Direct


Selling Association (https://www.dsa.org/about-dsa/faqs), company reports and BMO Capital Markets estimates.

Our theoretical Sales Solutions mini-model begins with an estimate for total salespeople.

We felt this was more appropriate than starting with the LCS customer count and estimating the
average number of salespeople per LCS customer, as the Sales Solutions product is unlikely to be
applicable to all LCS customers. From here we estimate the number of salespeople for which the
standalone Sales Solutions is likely to be applicable (i.e., removing retail salespeople, etc.) to
arrive at an estimate of total subscribers. Finally, a monthly average revenue per user (ARPU) is
applied to derive total estimated Sales Solutions revenue.

3) Marketing Solutions: Two Views of LinkedIns Opportunity


We examine this opportunity in two ways: one focused on the currently preferred ad format
(native) and one focused on the target end market (B2B advertisers). Our preference is for

the latter as it better lays out the available dollars from advertisers for whom LinkedIn should be
particularly effective rather than a narrow view of ad formats. However, seeing as native ads are
the preferred unit at the moment on the LinkedIn (i.e. Sponsored Updates) and as well as its most
direct comparables (Facebook, Twitter) and the legacy powers in online advertising (Google
search, Yahoo! Stream and search), we felt a supplemental view would help as well.

a) B2B Marketing
B2B marketing targets major budget delegators at large and medium businesses rather than
general market consumers. Typically B2B marketing aims to drive a smaller number of

transactions, but with much larger prices, like company-wide software/technology packages or
insurance programs. Therefore B2B marketing typically supports a lot of buyer research and
purchase consideration and has a much longer sales cycle than the average consumer good like a
quick-serve restaurant meal, tube of toothpaste or even a family SUV. While B2B advertising can
appear in spots often used for B2C (e.g. airport signage), it has some more specific venues to
itself like trade magazines narrowly focused on specific industries and trade shows and conferences

Page 6 June 10, 2014

BMO Capital Markets

Linkedln

where those buyers can learn more in person. B2B online marketing also tends be more helpful in
moving buyers along long purchase consideration processes. So for example, email is a more
common tactic, and delivering white papers or highlighting an education webinar is common in
B2B, but rarely seen in B2C.
The total addressable market for B2B marketing is approximately $29 billion dollars in the
US per our analysis. Approximately 28% of those dollars are spent online today, roughly in line

with the share of online consumer advertising. As is our general rule of thumb with most
advertising estimates, we assume the US represents half in order to derive our global figures.
Today, LinkedIn can legitimately target the estimated $14 billion spent on US B2B magazines
and digital advertising (or an estimated $28 billion globally); we believe trade show spending
remains something for which LinkedIn is not an appropriate substitute, but wed see virtual
conferences and webinars as possible areas of product innovation that would make sense for
LinkedIn in the years to come. Note that because our two views of Marketing Solutions are
derived from established industry revenue estimates, we do not need to apply any super-duper
Bull LinkedIn share to derive TAM.

Exhibit 5. Revenue Potential for Marketing Solutions: B2B View


YE2014
United States ($ in millions)

5 Year Outlook

LNKD Ests.

TAM

Bear

Base

Bull

Live and virtual events

14,887

14,887

15,185

15,631

15,929

B2B magazines

7,785

7,785

7,941

8,174

8,330

Less: B2B magazines subscription estimate

(1,946)

(1,946)

(1,985)

(1,880)

(1,833)

B2B mag subscription est. as a % of B2B mag rev.

22.0%

25.0%

25.0%

25.0%

23.0%

Estimated B2B magazine advertising

5,839

5,839

5,956

6,294

6,497

Digital advertising

8,201

8,201

8,365

8,611

8,775

Total B2B marketing spending

28,927

28,927

29,505

30,537

31,202

Potential Linkedin market share

1.0%

na

1.3%

3.0%

6.0%

282

na

379

916

1,872

LNKD Ests.

TAM

Bear

Base

Bull

29,774

29,774

30,369

31,263

31,858

LinkedIn US Marketing Solutions revenue

YE2014
Global
Live and virtual events
B2B magazines
Less: B2B magazines subscription estimate
B2B mag subscription est. as a % of B2B mag rev.

5 Year Outlook

15,570

15,570

15,881

16,349

16,660

(3,893)

(3,114)

(3,970)

(3,760)

(3,499)
21.0%

25.0%

20.0%

25.0%

23.0%

Estimated B2B magazine advertising

11,678

12,456

11,911

12,588

13,161

Digital advertising

16,402

16,402

16,730

17,222

17,550

Total B2B marketing spending

57,854

58,632

59,011

61,073

62,570

Potential Linkedin market share

0.8%

na

1.5%

2.5%

5.8%

470

na

890

1,527

3,629

LinkedIn Global Marketing Solutions revenue


th

Source: Veronis Suhler Stevenson 26 edition, GroupM, company reports and BMO Capital Markets estimates.

b) Native Online Advertising


Native ads are those which are embedded within and look similar to the content on a given
property. LinkedIn launched its own version -- Sponsored Updates -- in June 2013 and they now

represent 19% of Marketing Solutions revenue as of 1Q14. In our framework, we use global
display ad spending from WPPs GroupM and then apply an estimated percentage which we

Page 7 June 10, 2014

BMO Capital Markets

Linkedln

believe has/will transition to these more customized style of formats rather than traditional banner
ad units.
Like other native ad sellers (e.g., Facebook, Twitter, and Yahoo!), LinkedIn is seeing higher
click-through rates on Sponsored Updates, roughly 4x-10x that of its display ads. While we

dont expect this to last (all new ad formats tend to perform better at first, then ease off as users get
used to them), these formats do seem to have cracked the code for mobile marketing, as they work
well in feed-style content presentation that is browsed through easily on smartphones.

Exhibit 6. Revenue Potential for Marketing Solutions: Native View


YE2014

5 Year Outlook

United States ($ in millions)

LNKD Ests.

US display advertising market

14,990

14,990

15,140

15,440

15,740

% estimated native ad format

10.0%

50.0%

40.0%

50.0%

60.0%

Estimated native advertising market

1,499

7,495

6,056

7,720

9,444

Potential Linkedin market share

3.6%

na

1.3%

4.0%

11.7%

54

na

76

309

1,102

19.0%

na

20.0%

33.7%

58.9%

282

na

379

916

1,872

LNKD Ests.

TAM

Bear

Base

Bull

Global display advertising market

29,360

29,360

29,653

30,241

30,828

% estimated native ad format

10.0%

50.0%

40.0%

50.0%

60.0%

Estimated native advertising market

2,936

14,680

11,861

15,120

18,497

Potential Linkedin market share

3.0%

na

1.5%

5.0%

11.7%

LinkedIn global native ad revenue

88

na

178

756

2,158

native as a % of total markting revenue

18.7%

na

20.0%

49.5%

59.5%

470

na

890

1,527

3,629

LinkedIn US native ad revenue


native as a % of total markting revenue
LinkedIn US Marketing Solutions revenue

TAM

Bear

YE2014
Global ($ in millions)

LinkedIn Global Marketing Solutions revenue

Base

Bull

5 Year Outlook

Source: GroupM, company reports and BMO Capital Markets estimates.

4) Student Services
This is a long term opportunity in which LinkedIn is only just beginning to make a presence.

The company has begun bringing schools onto the platform through University Pages to help
build visibility among both high school and college student user bases. LinkedIn already has an
estimated 39 million student members and around 24,000 University Pages. Competition for
students social media attention is fierce and LinkedIn is not the place they will spend most of
their social media time. However, LinkedIns economic graph and professional focus makes it a
vital resource for those beginning their careers, arguably more valuable than it is for current
professionals who have networking opportunities outside of LinkedIn. For high school students
entering the post-secondary portion of their educations, LinkedIn is not as immediately useful as
it is for those looking for their first full-time job, but University Pages could eventually serve as a
base for a multitude of services to help prospective students learn about and apply to a postsecondary school.

Page 8 June 10, 2014

BMO Capital Markets

Linkedln

Exhibit 7. Current and Potential Student User Base


YE2014
Student Membership (in millions)

5 Year Outlook

LNKD Ests.

TAM

Bear

Base

Bull

Number of Higher Education Institutions (HEIs) globally

26,500

40,000

30,000

33,000

35,000

Average number of students per school estimate

1,750

4,500

2,000

2,750

3,250

46

180

60

91

114

Number of Higher Education Institutions (HEIs) in US

6,650

7,250

6,800

6,900

7,000

Average number of students per school estimate

2,800

3,000

2,850

2,900

2,950

19

22

19

20

21

Global student members (in millions)

US Student members (in millions)

Source: Webometrics (http://www.webometrics.info/en/node/24 ), U.S. Dept. of Education National Center for


Education Services (NCES 2012-174rev), company reports and BMO Capital Markets estimates.

For student-oriented revenue opportunities, we see a similar framework as Talent


Solutions. One could imagine LinkedIn offering a tool to post-secondary schools career services

departments (to help graduating seniors find new jobs) or to high schools university guidance
departments (to help graduating seniors find a post-secondary school). These products could be
offered on a subscription basis like Recruiter. Also similar to Talent Solutions Paid Jobs ad
products, LinkedIn could create opportunities for post-secondary schools to use LinkedIn to
recruit students. There is competition waiting for all of these revenues most notably Chegg
(CHGG, $6.77; Market Perform), the college textbook rental service that is building its own
student-focused social network -- but particularly in post-secondary career services, we believe
LinkedIn has a unique positioning. For example, there should be a natural synergy with Talent
Solutions, where HR departments are waiting for the new graduates. Although, no specific
monetization products are planned for students yet, the push into this market will increase the user
base and activity on LinkedIn and help drive Marketing Solutions revenue in the interim.

Exhibit 8. Current and Potential Revenue for Student Services


YE2014
Student Solutions
Estimated number of Schools in US
x estimated # of Career Services licences per US school
US Student Career Services licences
Average Monthly US Recruiter ARPU
Esimated US Student Career Services revenue ($ in mm)
Career Services as % of US Student Solutions revenue
Estimated US Student Solutions revenue ($ in mm)
Estimated number of ROW Schools
x estimated # of Career Services licences per school
ROW Student Career Services licences
Average Monthly ROW Career Services ARPU

5 Year Outlook

LNKD Ests.

TAM

Bear

Base

Bull

6,650

7,250

6,800

6,900

7,000

0.0

10.0

4.0

6.0

8.0

72,500

27,200

41,400

56,000

$0

$300

$200

$250

$275

261

65

124

185

50.0%

38.0%

50.0%

45.0%

40.0%

687

131

276

462

19,850

32,750

23,200

26,100

28,000

0.0

12.0

4.0

5.0

6.0

393,000

92,800

130,500

168,000
$200

$0

$250

$150

$175

ROW Student Career Services revenue ($ in mm)

1,179

167

274

403

Career Services as % of ROW Student Solutions revenue

50.0%

38.0%

50.0%

45.0%

40.0%

Estimated ROW Student Solutions revenue ($ in mm)

3,103

334

609

1,008

Estimated Global Student Solutions revenue ($ in mm)

3,789

465

885

1,470

Source: Webometrics (http://www.webometrics.info/en/node/24 ), U.S. Dept. of Education National Center for


Education Services (NCES 2012-174rev), company reports and BMO Capital Markets estimates.

5) China
The final analysis considers not the end-users targeted by LinkedIns products, but rather
those that inhabit an enormous and unique geography: China. Functionally, were pulling our

Page 9 June 10, 2014

BMO Capital Markets

Linkedln

estimates for various business lines out separately to highlight this unique opportunity (i.e., this is
not incremental to the prior market sizes). To state the obvious, how LinkedIns business evolves
and grows in the worlds largest internet market remains an open-ended question. Government
regulation and local characteristics make it difficult to predict the potential user and corporate
customer bases, as well as the business models that may gain traction. Today, building the user
base remains the priority, supported by the recent launch of the Simplified Chinese language
website.

Exhibit 9. LinkedIn Chinese Website Screenshot

Source: Company website.

Prior to the February 2014 launch of the site, LinkedIn had about three million users in
China; that figure has already topped five million. China has about 600 million internet users

and a workforce of around 788 million (per The World Bank) but initially only a small segment of
highly skilled knowledge workers will represent the target market. LinkedIn estimates a total
addressable user base of about 140 million which includes both professionals and students.

Page 10 June 10, 2014

BMO Capital Markets

Linkedln

Exhibit 10 Current and Potential for China Users


YE2014
China membership (in millions)

5 Year Outlook

LNKD Ests.

TAM

Bear

Base

Bull

Chinese population

1,356

1,356

1,369

1,376

1,383

% of population in workforce

58.1%

58.1%

58.1%

58.1%

58.1%

788

788

796

800

804

0.5%

8.1%

1.0%

3.0%

5.0%

Chinese knowledge workers

109

14

41

69

Chinese student population

31

14

21

0.1%

2.3%

0.5%

1.0%

1.5%

140

21

55

90

0.6%

10.4%

1.5%

4.0%

6.5%

Chinese workforce
% of knowledge workers in workforce

% of total population
Total Chinese membership opportunity
% of total population

Source: The World Bank (http://data.worldbank.org/indicator/SL.TLF.TOTL.IN and


http://data.un.org/Data.aspx?q=china+enrolment&d=UNESCO&f=series%3aE_56%3bref_area%3aCHN%2cHKG%2
cMAC), company reports and BMO Capital Markets estimates.

Details of LinkedIns business strategy in China have yet to emerge. The company has no

revenue generating products specific to its China operations and the modest revenues generated
from the current Chinese user base are through the Hong Kong operations. Certainly the company
will face local competition, like Zhaopin Limited, which already has over 77 million registered
users and 11.4 million job postings (from nearly 275,000 unique customers) per its IPO
prospectus.
We have built a framework similar to LinkedIns current business segments for revenue
potential from China, namely Talent Solutions, Marketing Solutions, and the upcoming Sales

Solutions and Student Solutions opportunity. We would not be surprised if LinkedIn chooses to
develop a customised product set specific to the Chinese market. But again, LinkedIns focus
currently lies in growing the user base in China and we may not see any material revenue
contribution from these efforts until beyond 2015.

Page 11 June 10, 2014

BMO Capital Markets

Linkedln

Exhibit 11. Current and Potential Revenue from China


YE2014
Chinese revenue opportunity
Number of businesses (in millions)
Estimated % of businesses as LCS customers
Estimated Chinese LCS customers
x estimated # of Recruiter licences per LCS customer
Estimated China Recruiter licences
Estimated China Recruiter Monthly ARPU
Estimated China Recruiter revenue ($ in mm)
Recruiter as % of total Talene Solutions revenue
Est. Chinese Talent Solutions revenue ($ in mm)

LNKD Ests.

5 Year Outlook
TAM

Bear

Base

Bull

10.6

10.6

11.0

11.5

12.0

0.00%

0.51%

0.03%

0.10%

0.20%
24,033

54,144

2,754

11,517

2.0

5.0

2.0

3.0

4.0

270,722

5,508

34,550

96,132

$400

$500

$350

$400

$450

1,624

23

166

519

40.0%

40.0%

40.0%

40.0%

40.0%

4,061

58

415

1,298

Estimated # of Sales professionals in China (in mm)

15.8

15.8

15.9

16.8

17.7

LinkedIn's addressable opportunity as % of total

15%

50%

20%

30%

40%

LinkedIn's addressable opportunity estimate


% penetration

2.4

7.9

3.2

5.0

7.1

0.0%

15.0%

5.0%

8.0%

10.0%

Estimated # of subscribers to Sales Solution (in mm)

0.0

1.2

0.2

0.4

0.7

Estimated China Sales Solutions Monthly ARPU

$0

$50

$20

$30

$40

709

38

145

340

Estimated China Sales Solutions revenue ($ in mm)


Estimated registered members
Estimated Marketing Solutions Monthly ARPU
Est. China Marketing Solutions revenue ($ in mm)
Chinese Schools
x estimated # of Career licences per school
China Career Services licences
Average Monthly China Career Services ARPU

140

21

55

90

$0.01

$1.00

$0.20

$0.50

$0.75

1,685

49

330

809

2,484

2,484

1,750

2,000

2,250

0.0

12.0

4.0

6.0

8.0

29,808

7,000

12,000

18,000

$0

$250

$150

$200

$225

Career Services as % of ROW Student Solutions revenue

50.0%

38.0%

50.0%

45.0%

40.0%

Est. China Student Solutions revenue ($ in mm)

658

300

444

563

Total China revenue opportunity ($ in mm)

7,113

445

1,334

3,009

Source: The World Bank (http://data.worldbank.org/country/china), National Bureau of Statistics of the Peoples
Republic of China (http://www.stats.gov.cn/tjsj/ndsj/2013), Ministry of Education of the Peoples Republic of China
(http://www.moe.edu.cn/publicfiles/business/htmlfiles/moe/s4971/201012/113595.html), company reports and BMO
Capital Markets estimates.

Page 12 June 10, 2014

BMO Capital Markets

Linkedln

Valuation: Bear, Base, and Bull DCF Models


If we apply our various bear, base, and bull case assumptions to our expanded DCF model, we
derive potential values of $76, $250, and $425 for LNKD shares. Our expanded DCF model

reflects our actual published estimates through 2016 for the Base case and then the appropriate
bear-base-bull estimates derived in the above analyses are applied five years out (i.e. 2019).
Beyond 2019, we apply some simple revenue growth assumptions out to 2024 in order reach a 10year revenue model for each of the three scenarios. The revenue model includes each of the
current revenue segments and we have inserted Sales Solutions and Student Solutions lines as well
(we assume Chinese revenues are included in each of their respective operating segments). For the
Premium Subscription line, we have removed an estimate for Sales Navigator and included it in the
Sales Solutions line. Like revenue, our base EBITDA and FCF estimates out to 2016 are our
official, published estimates. From 2017 onward, we apply a straightforward margin assumption
to derive EBITDA and then a simple EBITDA-to-FCF conversion to reach annual FCF estimates
beyond 2017. Each of these three scenarios is for informational purposes only and our formal model,
estimates and valuation for LNKD are detailed in Exhibits 16-20.

Exhibit 12. Base Case Expanded LinkedIn DCF Analysis ($ millions, except per-share data)
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Revenue
Registered Members (in millions)
% yoy growth

90

145

202

277

360

517

597

624

653

684

698

711

726

740

755

60.4%

39.2%

37.1%

30.0%

43.7%

15.4%

4.6%

4.6%

4.6%

2.0%

2.0%

2.0%

2.0%

2.0%

Enterprise (LCS) Customers


% yoy growth

3,865

9,236

16,409

24,444

29,071

34,271

40,092

46,908

54,882

64,218

71,924

80,555

90,222

101,048

113,174

143.8%

139.0%

77.7%

49.0%

18.9%

17.9%

17.0%

17.0%

17.0%

17.0%

12.0%

12.0%

12.0%

12.0%

12.0%

Talent Solutions
% yoy growth

101.9

260.9

523.6

859.7

1,192.6

1,558.8

2,061.7

2,918.7

4,132.0

5,849.3

7,136.1

8,706.1

10,621.4 12,958.1

15,808.9

181.9%

156.1%

100.7%

64.2%

38.7%

30.7%

32.3%

41.6%

41.6%

41.6%

22.0%

22.0%

22.0%

22.0%

22.0%

79.3

155.8

258.3

362.4

469.9

641.6

811.8

1,002.0

1,236.9

1,526.8

1,832.2

2,198.6

2,638.4

3,166.0

3,799.2

107.2%

96.5%

65.7%

40.3%

29.7%

36.5%

26.5%

23.4%

23.4%

23.4%

20.0%

20.0%

20.0%

20.0%

20.0%

15.0

60.0

120.0

240.0

403.4

678.2

1,140.0

1,459.2

1,867.8

2,390.8

3,060.2

3,917.0

300.0%

100.0%

100.0%

68.1%

68.1%

68.1%

28.0%

28.0%

28.0%

28.0%

28.0%
1,418.0

Marketing Solutions
% yoy growth
Sales Solutions incl Navigator
% yoy growth
Premium Subs ex Navigator
% yoy growth

61.9

105.5

190.4

291.5

361.1

500.6

626.7

701.9

786.1

880.5

968.5

1,065.4

1,171.9

1,289.1

35.4%

70.3%

80.6%

53.1%

23.9%

38.6%

25.2%

12.0%

12.0%

12.0%

10.0%

10.0%

10.0%

10.0%

10.0%

TOTAL REVENUE

243.1

522.2

972.3

1,528.5

2,083.6

2,821.1

3,740.2

5,026.1

6,833.3

9,396.6

16,822.4 20,473.4

24,943.2

102.4%

114.8%

86.2%

57.2%

36.3%

35.4%

32.6%

34.4%

36.0%

37.5%

21.3%

21.4%

21.6%

21.7%

21.8%

55.0

98.7

223.0

376.2

514.1

805.6

1,149.9

1,543.0

2,094.4

2,880.1

3,555.6

4,331.2

5,282.2

6,449.1

7,882.0

% yoy growth
Adjusted EBITDA

22.6%

18.9%

22.9%

24.6%

24.7%

28.6%

30.7%

30.7%

30.7%

30.7%

31.2%

31.3%

31.4%

31.5%

31.6%

- Interest expense/other income

(2.9)

0.3

1.4

1.0

0.0

0.0

0.0

nm

nm

nm

nm

nm

nm

nm

nm

- Cash taxes

(3.5)

(9.4)

0.3

21.3

(22.1)

(143.3)

(247.7)

nm

nm

nm

nm

nm

nm

nm

nm

- Capital expenditures

(50.0)

(89.0)

(125.4)

(278.0)

(343.9)

(340.0)

(340.0)

nm

nm

nm

nm

nm

nm

nm

nm

+ Adjustment
Adj. EBITDA-to-FCF Conversion

0.0
-2.5%

0.0
0.6%

0.0
44.5%

0.0
32.0%

0.0
28.8%

0.0
40.0%

0.0
48.9%

nm
48.8%

nm
48.2%

nm
47.0%

nm
51.0%

nm
50.2%

nm
49.4%

nm
48.6%

nm
47.7%

(1.4)

0.6

99.4

120.5

148.1

322.3

562.3

753.4

1,009.6

1,352.9

-544.8%

141.1%

nm

21.3%

22.9%

117.6%

74.4%

34.0%

34.0%

34.0%

Free Cash Flow


% growth
Terminal Value Calculation

WACC Calculation
Value

Net debt

Sensitivity Analysis
803.1

FCF in Terminal Year

3,759.1

Equity value

18,391.6

FCF Multiple
Terminal Value

10.0x
$37,591

Total capital

17,588.5

10-year rate

2.6%

Equity Value Calculation


Value
PV of FCF '14-23
Net (Debt)
PV of Terminal Value
Total Equity Value

10,054.4
803.1
18,597.6
29,455.1

Beta
Per Sh. Equity premium

4.0%

$85.50

Cost of equity

7.0%

$6.83

Cost of debt

$158.14 Tax rate


$250.47 WACC

Source: Company reports and BMO Capital Markets estimates.

Page 13 June 10, 2014

1.1x

3.0%
79.0%
7.3%

5.3%
Discount Rate

% margin

11,396.0 13,837.8

1,812.8

2,610.5

3,132.6

3,759.1

34.0%
20.0%
20.0%
Terminal Multiple of FCF

2,175.4

20.0%

20.0%

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

$239.49

$258.58

$277.66

$296.75

$315.84

$334.93

$354.02

5.8%

$229.68

$247.89

$266.09

$284.30

$302.50

$320.71

$338.91

6.3%

$220.35

$237.72

$255.09

$272.45

$289.82

$307.19

$324.55

6.8%

$211.48

$228.05

$244.62

$294.33

$310.90

$203.02

$218.84

$234.65

$261.19
$250.47

$277.76

7.3%

$266.28

$282.10

$297.91

7.8%

$194.98

$210.07

$225.17

$240.26

$255.36

$270.46

$285.55

8.3%

$187.31

$201.72

$216.14

$230.55

$244.96

$259.38

$273.79

8.8%

$180.01

$193.77

$207.53

$221.30

$235.06

$248.83

$262.59

9.3%

$173.05

$186.19

$199.34

$212.49

$225.63

$238.78

$251.93

BMO Capital Markets

Linkedln

Exhibit 13. Bull Case Expanded LinkedIn DCF Analysis ($ millions, except per-share data)
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Revenue
Registered Members (in millions)
% yoy growth
Enterprise (LCS) Customers
% yoy growth

90

145

202

277

379

520

597

669

736

791

806

823

839

856

873

60.4%

39.2%

37.1%

37.0%

37.0%

15.0%

12.0%

10.0%

7.4%

2.0%

2.0%

2.0%

2.0%

2.0%
165,660

3,865

9,236

16,409

24,444

32,511

42,264

52,830

64,019

77,578

94,000

105,280

117,914

132,063

147,911

143.8%

139.0%

77.7%

49.0%

33.0%

30.0%

25.0%

21.2%

21.2%

21.2%

12.0%

12.0%

12.0%

12.0%

12.0%

15,442.9 17,141.6

19,027.1

Talent Solutions
% yoy growth

101.9

260.9

523.6

859.7

1,461.4

2,455.2

4,051.1

6,076.7

181.9%

156.1%

100.7%

64.2%

70.0%

68.0%

65.0%

50.0%

45.0%

28.2%

11.0%

11.0%

11.0%

11.0%

11.0%

Marketing Solutions
% yoy growth

79.3

155.8

258.3

362.4

579.8

916.0

1,392.4

2,144.3

2,959.1

3,629.0

4,137.1

4,716.3

5,376.6

6,129.3

6,987.4

107.2%

96.5%

65.7%

40.3%

60.0%

58.0%

52.0%

54.0%

38.0%

22.6%

14.0%

14.0%

14.0%

14.0%

14.0%

15.0

60.0

210.0

630.0

1,575.0

2,520.0

3,144.0

3,427.0

3,735.4

4,071.6

4,438.0

4,837.4

300.0%

250.0%

200.0%

150.0%

60.0%

24.8%

9.0%

9.0%

9.0%

9.0%

9.0%

413.9

538.1

672.7

793.7

904.9

1,013.4

1,099.6

1,193.1

1,294.5

1,404.5

1,523.9

14.0%

12.0%

8.5%

8.5%

8.5%

8.5%

8.5%

26,185.5 29,113.4

32,375.9

Sales Solutions incl Navigator


% yoy growth

12,533.8 13,912.5

Premium Subs ex Navigator


% yoy growth

61.9

105.5

190.4

35.4%

70.3%

80.6%

53.1%

42.0%

30.0%

25.0%

18.0%

TOTAL REVENUE

243.1

522.2

972.3

1,528.5

2,515.2

4,119.4

6,746.2

10,589.7

102.4%

114.8%

86.2%

57.2%

64.5%

63.8%

63.8%

57.0%

43.5%

25.6%

11.1%

11.1%

11.2%

11.2%

11.2%

55.0

98.7

223.0

376.2

641.4

1,112.2

2,023.9

3,282.8

4,786.5

6,105.0

6,889.2

7,773.9

8,772.1

9,898.6

11,169.7
34.5%

% yoy growth
Adjusted EBITDA

15,195.2 19,078.2

21,197.4 23,557.2

22.6%

18.9%

22.9%

24.6%

25.5%

27.0%

30.0%

31.0%

31.5%

32.0%

32.5%

33.0%

33.5%

34.0%

- Interest expense/other income

(2.9)

0.3

1.4

1.0

0.0

0.0

0.0

nm

nm

nm

nm

nm

nm

nm

nm

- Cash taxes

(3.5)

(9.4)

0.3

21.3

(22.1)

(143.5)

(247.7)

nm

nm

nm

nm

nm

nm

nm

nm

- Capital expenditures

(50.0)

(89.0)

(125.4)

(278.0)

(343.9)

(340.0)

(340.0)

nm

nm

nm

nm

nm

nm

nm

nm

+ Adjustment
Adj. EBITDA-to-FCF Conversion

0.0
-2.5%

0.0
0.6%

0.0
44.5%

0.0
32.0%

0.0
42.9%

0.0
56.5%

0.0
71.0%

nm
50.0%

nm
51.0%

nm
51.5%

nm
52.0%

nm
52.5%

nm
53.0%

nm
53.5%

nm
54.0%

(1.4)

0.6

99.4

120.5

275.4

628.8

1,436.2

1,641.4

2,441.1

3,144.1

-544.8%

141.1%

nm

21.3%

128.4%

128.3%

128.4%

14.3%

48.7%

28.8%

Free Cash Flow


% growth
Terminal Value Calculation

WACC Calculation
Value

Net debt

Sensitivity Analysis
803.1

FCF in Terminal Year

6,031.6

Equity value

18,391.6

FCF Multiple
Terminal Value

10.0x
$60,316

Total capital

17,588.5

10-year rate

2.6%

Beta

1.1x

Equity Value Calculation


Value
PV of FCF '14-23
Net (Debt)
PV of Terminal Value
Total Equity Value

19,365.0
803.1
29,840.6
50,008.6

Per Sh. Equity premium

4.0%

$164.67 Cost of equity

7.0%

$6.83

Cost of debt

$253.74 Tax rate


$425.24 WACC

Source: Company reports and BMO Capital Markets estimates.

Page 14 June 10, 2014

3.0%
79.0%
7.3%

5.3%
Discount Rate

% margin

291.5

8,811.2 11,291.7

3,582.4

4,649.2

5,295.7

6,031.6

13.9%
13.9%
13.9%
Terminal Multiple of FCF

4,081.3

13.9%

13.9%

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

$410.80

$441.43

$472.05

$502.68

$533.31

$563.94

$594.57

5.8%

$394.23

$423.44

$452.65

$481.86

$511.07

$540.28

$569.50

6.3%

$378.46

$406.32

$434.19

$462.05

$489.92

$517.78

$545.65

6.8%

$363.43

$390.02

$416.61

$469.78

$496.37

$522.96

7.3%

$349.12

$374.49

$399.87

$443.19
$425.24

$450.62

$475.99

$501.36

7.8%

$335.48

$359.70

$383.92

$408.14

$432.36

$456.59

$480.81

8.3%

$322.48

$345.60

$368.73

$391.85

$414.98

$438.11

$461.23

8.8%

$310.08

$332.16

$354.25

$376.33

$398.42

$420.50

$442.59

9.3%

$298.25

$319.35

$340.44

$361.54

$382.64

$403.73

$424.83

BMO Capital Markets

Linkedln

Exhibit 14. Bear Case Expanded LinkedIn DCF Analysis ($ millions, except per-share data)
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Revenue
Registered Members (in millions)
% yoy growth
Enterprise (LCS) Customers
% yoy growth
Talent Solutions
% yoy growth
Marketing Solutions
% yoy growth

90

145

202

277

360

432

484

522

548

571

577

583

589

595

601

60.4%

39.2%

37.1%

30.0%

20.0%

12.0%

8.0%

5.0%

4.2%

1.0%

1.0%

1.0%

1.0%

1.0%
64,580

3,865

9,236

16,409

24,444

28,599

33,175

37,820

42,358

46,594

50,600

53,130

55,787

58,576

61,505

143.8%

139.0%

77.7%

49.0%

17.0%

16.0%

14.0%

12.0%

10.0%

8.6%

5.0%

5.0%

5.0%

5.0%

5.0%

101.9

260.9

523.6

859.7

1,186.4

1,542.3

1,974.1

2,368.9

2,724.2

3,013.6

3,254.6

3,515.0

3,796.2

4,099.9

4,427.9

181.9%

156.1%

100.7%

64.2%

38.0%

30.0%

28.0%

20.0%

15.0%

10.6%

8.0%

8.0%

8.0%

8.0%

8.0%

79.3

155.8

258.3

362.4

463.8

579.8

695.7

793.1

852.6

889.9

916.6

944.1

972.4

1,001.6

1,031.6

107.2%

96.5%

65.7%

40.3%

28.0%

25.0%

20.0%

14.0%

7.5%

4.4%

3.0%

3.0%

3.0%

3.0%

3.0%

15.0

52.5

105.0

183.8

275.6

358.3

414.4

459.9

510.5

566.7

629.0

698.2

Sales Solutions incl Navigator


% yoy growth

250.0%

100.0%

75.0%

50.0%

30.0%

15.6%

11.0%

11.0%

11.0%

11.0%

11.0%

Premium Subs ex Navigator


% yoy growth

61.9

105.5

190.4

291.5

349.8

412.8

478.8

545.9

611.4

660.3

696.6

734.9

775.3

818.0

862.9

35.4%

70.3%

80.6%

53.1%

20.0%

18.0%

16.0%

14.0%

12.0%

8.0%

5.5%

5.5%

5.5%

5.5%

5.5%

TOTAL REVENUE

243.1

522.2

972.3

1,528.5

2,052.5

2,639.8

3,332.4

3,983.5

4,546.5

4,978.1

5,327.7

5,704.5

6,110.6

6,548.5

7,020.7

102.4%

114.8%

86.2%

57.2%

34.3%

28.6%

26.2%

19.5%

14.1%

9.5%

7.0%

7.1%

7.1%

7.2%

7.2%

55.0

98.7

223.0

376.2

513.1

686.4

883.1

1,075.6

1,250.3

1,393.9

1,518.4

1,654.3

1,802.6

1,964.5

2,141.3

% yoy growth
Adjusted EBITDA
% margin

22.6%

18.9%

22.9%

24.6%

25.0%

26.0%

26.5%

27.0%

27.5%

28.0%

28.5%

29.0%

29.5%

30.0%

30.5%

- Interest expense/other income

(2.9)

0.3

1.4

1.0

0.0

0.0

0.0

nm

nm

nm

nm

nm

nm

nm

nm

- Cash taxes

(3.5)

(9.4)

0.3

21.3

(22.1)

(143.3)

(247.6)

nm

nm

nm

nm

nm

nm

nm

nm

- Capital expenditures

(50.0)

(89.0)

(125.4)

(278.0)

(343.9)

(340.0)

(340.0)

nm

nm

nm

nm

nm

nm

nm

nm

+ Adjustment
Adj. EBITDA-to-FCF Conversion

0.0
-2.5%

0.0
0.6%

0.0
44.5%

0.0
32.0%

0.0
28.7%

0.0
29.6%

0.0
33.5%

nm
35.0%

nm
38.0%

nm
40.0%

nm
41.0%

nm
41.5%

nm
42.0%

nm
42.5%

nm
42.9%

(1.4)

0.6

99.4

120.5

147.1

203.1

295.5

376.4

475.1

557.5

622.5

686.5

757.1

834.9

917.8

-544.8%

141.1%

nm

21.3%

22.0%

38.0%

45.5%

27.4%

26.2%

17.3%

11.7%
10.3%
10.3%
Terminal Multiple of FCF

10.3%

9.9%

Free Cash Flow


% growth
Terminal Value Calculation

WACC Calculation

Sensitivity Analysis

Value

Net debt

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

FCF in Terminal Year

917.8

Equity value

18,391.6

5.3%

$73.82

$78.48

$83.14

$87.81

$92.47

$97.13

$101.79

FCF Multiple
Terminal Value

10.0x
$9,178

Total capital

17,588.5

5.8%

$71.19

$75.64

$80.08

$84.52

$88.97

$93.41

$97.86

10-year rate

2.6%

6.3%

$68.68

$72.92

$77.16

$81.40

$85.64

$89.88

$94.12

Beta

1.1x

6.8%

$66.29

$70.34

$74.38

$82.47

$86.52

$90.56

7.3%

$64.01

$67.87

$71.73

$78.43
$75.59

$79.45

$83.31

$87.17

7.8%

$61.83

$65.52

$69.21

$72.89

$76.58

$80.26

$83.95

8.3%

$59.76

$63.28

$66.80

$70.32

$73.84

$77.35

$80.87

8.8%

$57.78

$61.14

$64.50

$67.86

$71.22

$74.58

$77.94

9.3%

$55.89

$59.10

$62.31

$65.52

$68.73

$71.94

$75.15

Value
PV of FCF '14-23
Net (Debt)
PV of Terminal Value
Total Equity Value

Per Sh. Equity premium

4.0%

3,546.1

$30.15

Cost of equity

7.0%

803.1

$6.83

Cost of debt

3.0%

4,540.5
8,889.7

$38.61
$75.59

Tax rate
WACC

79.0%
7.3%

Source: Company reports and BMO Capital Markets estimates.

Page 15 June 10, 2014

Discount Rate

Equity Value Calculation

803.1

BMO Capital Markets

Linkedln

Standard Valuation: Comparable Multiples


We maintain our $250 price target, which implies a 1.9x 2015E non-GAAP PEG ratio and a 37.3x
2015E adjusted EBITDA.

Exhibit 15. Comparable Multiple Valuation Analysis


6/9/2014

Shares

Market

Price

Target

Google

GOOGL

$570.73

$525

Mkt

688

$392,797

FB

$62.88

$60

Mkt

2,744

$172,528

Twitter

TWTR

$34.47

$42

Mkt

690

$23,786

18.5x

11.7x 118.3x 56.2x

LinkedIn

LNKD

$156.39

$250

OP

122

$19,035

8.9x

6.4x

35.9x

Zynga

ZNGA

$3.00

$4.50

Mkt

888

$2,663

3.1x

2.3x

JIVE

$7.63

$9

Mkt

70

$537

2.9x

2.5x

Mean

8.9x

Median

Jive Software
Social
Comps

2014

EV/EBITDA

Ticker

Facebook

Rating Out (mm) Cap (mm)

EV/Rev.

Company

P/E

2014

2014

FCF Yield

2015

2014

2015

2014

2015

PEG vs S&P

2014

2015

5.0x

3.9x

13.0x

10.1x

22.7x

18.9x

1.6x

1.4x

4.2%

5.9%

15.1x

12.1x

26.1x

20.1x

48.7x

41.9x

1.0x

2.9x

2.3%

2.9%

nm

116.1x

nm

nm

0.1%

0.6%

22.6x

89.9x

59.6x

11.7x

5.4x

0.8%

1.7%

26.2x

14.4x

150.0x

46.9x

1.1x

9.0x

4.0%

7.3%

nm

nm

nm

nm

nm

nm

nm

nm

6.5x

43.9x

24.7x

77.8x

56.7x

3.8x

4.7x

2.3%

3.7%

6.9x

5.2x

26.2x

20.1x

69.3x

46.9x

1.3x

4.2x

2.3%

2.9%

LNKD

$156.39

$250

OP

122

$19,035

8.9x

6.4x

35.9x

22.6x

89.9x

59.6x

11.7x

5.4x

0.8%

1.7%

51 Jobs

JOBS

$60.87

NR

NR

30

$1,810

4.3x

3.4x

13.1x

10.2x

22.7x

19.8x

-8.6x

1.4x

5.9%

7.1%

Monster Worldwide

MWW

$6.21

$8

OP

91

$565

0.8x

0.8x

5.4x

5.0x

16.6x

13.1x

-1.0x

1.0x

1.9%

8.5%

DHX

$7.12

$8

Mkt

54

$387

1.9x

1.6x

6.2x

5.3x

22.7x

17.2x

-0.5x

1.4x

9.7%

10.8%

O1BC-XE

95.90

NR

NR

536

5.3x

4.6x

17.5x

14.0x

39.0x

29.7x

0.8x

2.3x

4.6%

5.3%

4.2x

3.4x

15.6x

11.4x

38.2x

27.9x

0.5x

2.3x

4.6%

6.7%

LinkedIn

Dice Holdings
Xing AG
Online Employment

Mean

Comps

Median

4.3x

3.4x

13.1x

10.2x

22.7x

19.8x

-0.5x

1.4x

4.6%

7.1%

5.0x

3.9x

13.0x

10.1x

22.7x

18.9x

1.6x

1.4x

4.2%

5.9%

1.9x

1.9x

6.1x

6.2x

23.1x

20.5x

7.7x

1.4x

2.2%

2.3%

18.5x

11.7x 118.3x 56.2x

nm

116.1x

nm

nm

0.1%

0.6%

22.6x

89.9x

59.6x

11.7x

5.4x

0.8%

1.7%

11.1x

6.6x

55.7x

23.9x

nm

3.4x

5.9%

9.1%

5.5x

4.7x

17.5x

14.5x

27.9x

1.0x

12.0%

13.1%

Google

GOOGL

$570.73

$525

Mkt

688

$392,797

Yahoo!

YHOO

$36.04

$36

Mkt

1,005

$36,217

Twitter

TWTR

$34.47

$42

Mkt

690

$23,786

LinkedIn

LNKD

$156.39

$250

OP

122

$19,035

8.9x

6.4x

35.9x

Groupon

GRPN

$6.13

NR

NR

682

$4,182

1.0x

0.7x

Aol

AOL

$36.53

NR

NR

80

$2,920

1.1x

0.9x

CNVR

$24.68

$22

Mkt

68

$1,679

Conversant
Digital Marketing
Comps

2.6x

2.2x

7.4x

6.2x

14.1x

12.6x

2.6x

0.8x

8.3%

9.2%

Mean

5.6x

4.0x

28.2x

16.1x

37.2x

38.0x

10.3x

2.2x

4.8%

6.0%

Median

2.6x

2.2x

11.1x

6.6x

22.9x

20.5x

7.7x

1.4x

4.2%

5.9%

LinkedIn

LNKD

$156.39

$250

OP

122

$19,035

8.9x

6.4x

35.9x

22.6x

89.9x

59.6x

11.7x

5.4x

0.8%

1.7%

Netflix

NFLX

$423.09

$400

Mkt

60

$25,363

4.6x

3.7x

46.5x

27.3x

94.7x

60.9x

0.6x

5.7x

1.6%

2.5%

Mean

6.7x

5.1x

41.2x

24.9x

92.3x

60.3x

6.2x

5.5x

1.2%

2.1%

Median

6.7x

5.1x

41.2x

24.9x

92.3x

60.3x

6.2x

5.5x

1.2%

2.1%

Digital Subscriptions
Comps

OP-Outperform, Mkt-Market Perform, Und-Underperform, NR-Not Rated ZNGA, NFLX covered by Ed Williams; DHX, MMW covered by Jeff Silber; GOOG,
FB, YHOO, VCLK covered by Dan Salmon.
Source: Company reports and BMO Capital Markets estimates; Thomson Reuters for Not Rated companies.

Investment Thesis
We rate LNKD shares Outperform. We believe there are several new stories emerging that will
raise long-term growth expectations. In particular, LinkedIns formal roll-out in China and new
standalone product for salespeople (of which LinkedIn believes there are five times as many on
the platform as human resources personnel), highlighted by an expected stand-alone product that
should launch in 2H14. And the new focus on adding more students to the platform is sensible;
while we dont expect any monetization products aimed specifically at this group yet, embedding
itself in career services departments would be a positive for LinkedIn.

Page 16 June 10, 2014

BMO Capital Markets

Linkedln

Risks
Downside risks to LNKD shares include the emergence of competing professional social
networks, deceleration in user engagement and consumer privacy legislation; risk is heightened
owing to the stock's high valuation. Also, any delay in our assumed catalysts especially the new
stand-alone product for salespeople would have a negative impact on our thesis.

Company Description
LinkedIn is a social professional network. Through its platform, members can create, manage, and
share their professional identity online, while finding business opportunities, building their
professional networks, connecting with business contacts, and finding potential
employees/employers. The company reports in three segments:
1) Talent Solutions (56% of revenue), includes the largely self-service LinkedIn Job Slots
and the LinkedIn Corporate Solutions suite, which includes the Talent Pro and Job
Seeker subscription products. The solutions are built to be an effective way for
enterprises and professionals to find, contact, and hire the best qualified candidates.
2) Marketing Solutions (24% of revenue) enables advertising agencies and direct
marketers to use display and text ads on LinkedIn to reach a targeted audience. LinkedIn
Ads is a self-service platform that allows marketers to directly create and place ads, while
LinkedIn Ads for Enterprise provides dedicated account management and additional
marketing solutions.
3) Premium Subscriptions (20% of revenue) targets small and medium-sized businesses,
professional organizations, individual members, and business groups in larger
enterprises. Subscriptions products include the Business/Business Plus/Executive suite of
products, as well as the Sales Navigator product.
LinkedIn was founded in 2003 and employs more than 5,000 people. The company went public
on May 19, 2011, at $83, and its headquarters is located in Mountain View, California.

Page 17 June 10, 2014

BMO Capital Markets

Linkedln

Recent & Upcoming Events

Page 18 June 10, 2014

September 4, 2013:

LinkedIn announces $1.2 billion follow-on offering.

January 13, 2014:

Hires Pablo Chavez as VP of Public Policy. Mr. Chavez was previously


Director of Public Policy at Google.

January 16, 2014:

Hires Derek Shen to lead LinkedIn China operations. Mr. Shen was
founder and CEO of Nuomi. He was previously head of business
development for Google in China.

February 6, 2014:

Acquires Bright, a data insights and matching technology company that


helps connect prospects to employers through machine-learning
algorithms, for $120 million, 73% in stock and 27% in cash.

February 24, 2014:

Announced launch of LinkedIn beta site in simplified Chinese.

April 24, 2014:

Launched Sponsored Updates API and content partners program.

May 1, 2014:

Reported 1Q14 revenue of $473 million, which was higher than our
$460 million and the Streets $466.9 million estimate; all segments
came in better than expectations. Adjusted EBITDA of $116.7 million
beat our $108 million and $112.1 million consensus. Full-year 2014
revenue guidance was raised to $2.06-$2.08 billion (from $2.02$2.05 billion previously) and adjusted EBITDA guidance increased to
$505-510 million (from $490 million).

May 8, 2014:

Announces partnership with Evernote, to scan business cards and


directly connect with contacts on LinkedIn.

August 2014:

Expected 2Q14 results.

BMO Capital Markets

Linkedln

Exhibit 16. Valuation and Forecasts Summary ($ millions, except per-share data)
Market Capitalization

2011A

Current LNKD Price


Diluted shares
Market capitalization
Net cash (debt), projected
Enterprise value

2012A

2013A

2014E

2015E

2016E

$156.39
89.9
14,054.6

$156.39
112.8
17,646.3

$156.39
117.6
18,391.6

$156.39
121.7
19,035.3

$156.39
123.7
19,348.1

$156.39
124.5
19,465.4

339.0
13,715.6

270.4
17,375.9

803.1
17,588.5

580.1
18,455.3

860.7
18,487.4

1,353.9
18,111.5

Estimates

2011A

2012A

2013A

2014E

Net revenue
Net revenue consensus
Net revenue guidance
Adjusted EBITDA
Adjusted EBITDA consensus
Adjusted EBITDA guidance
EBIT

522.2

972.3

1,528.5

98.7

223.0

376.2

25.8

56.9

47.8

Non-GAAP EPS

$0.35

$0.89

$1.62

$1.74

Reported GAAP EPS

$0.11

$0.19

$0.23

Free cash flow per share

$0.01

$0.88

$1.03

Margins

2011A

2012A

Gross
Adjusted EBITDA
EBIT
Recurring net income

84.4%
18.9%
4.9%
0.0%

Growth rates

2015E

2016E % CAGR '11-16

2,821.1
2,819.5

3,740.2
3,675.1

48.3%
47.7%

805.6
757.5

1,149.9
1,083.0

63.4%
61.5%

190.3

510.4

81.6%

$2.62

$3.87

61.9%

$1.65

$2.50

$3.79

61.2%

($0.54)

$0.32

$2.05

79.7%

$1.22

$2.61

$4.52

273.7%

2013A

2014E

2015E

2016E

87.1%
22.9%
5.8%
2.2%

86.7%
24.6%
3.1%
0.8%

86.3%
24.7%
-0.8%
-3.1%

86.5%
28.6%
6.7%
1.4%

87.7%
30.7%
13.6%
6.8%

2011A

2012A

2013A

2014E

2015E

2016E

114.8%
79.4%
32.0%
46.6%
-121.3%

86.2%
125.9%
120.0%
154.6%
nm

57.2%
68.7%
-15.9%
82.2%
16.4%

36.3%
36.7%
-134.4%
7.7%
18.7%

35.4%
56.7%
-1255.9%
50.8%
114.1%

32.6%
42.7%
168.2%
47.6%
73.4%

Current Trading Multiples

2011A

2012A

2013A

2014E

2015E

2016E

EV/Revenue
EV/EBITDA
EV/EBIT
Non-GAAP P/E
P/FCF

26.3x
138.9x
530.7x
449.2x
nm

17.9x
77.9x
305.6x
176.4x
nm

11.5x
46.7x
367.9x
96.8x
152.6x

8.9x
35.9x
-1120.9x
89.9x
128.5x

6.6x
22.9x
97.1x
59.6x
60.0x

4.8x
15.7x
35.5x
40.4x
34.6x

2,083.6
2,126.3
2,060 - 2,080
514.1
520.9
505 - 510
(16.5)

Consensus

Net revemue
Adjusted EBITDA
EBIT
Non-GAAP EPS
Free cash flow per share

Valuation on 2015E

EV/EBITDA

Adjusted EBITDA
Target Multiple
Enterprise Value
Net cash (debt), projected
Equity value

805.6
37.0x
29,808.2
860.7
30,668.9

Price target
% potential appreciation

$247.90
58.5%

Target stress test (P/E)


105.3x
100.3x
95.3x
90.3x
85.3x

40.8%
$257.96
$245.71
$233.47
$221.22
$208.98

Non-GAAP P/E
Non-GAAP EPS
Target Mult.

$2.62
96.0x

DCF Summary
Terminal Mult.
Discount Rate
'17-'20 FCF grth
'21-'24 FCF grth

$251.79
61.0%
45.8%
$267.12
$254.44
$241.76
$229.08
$216.40

50.8%
$276.28
$263.17
$250.05
$236.94
$223.82

55.8%
$285.44
$271.89
$258.34
$244.79
$231.24

Source: Company reports, BMO Capital Markets estimates and Thomson Reuters for consensus.

Page 19 June 10, 2014

Triangulated

10.0x
7.3%
34.0%
20.0%

Implied Tgt. Multiples


EV/EBITDA
37.3x
FCF Yield
1.0%
Non-GAAP P/E
95.3x
Non-GAAP PEG
1.9x

$250.47
60.2%

$250.05
59.9%

60.8%
$294.60
$280.62
$266.63
$252.65
$238.67

<--- 2014 EPS growth


Mean
High
Low

131.6x
199.9x
77.8x

BMO Capital Markets

Linkedln

Exhibit 17. LinkedIn Income Statement ($ millions, except per-share data)


$ in millions, except per share figures Fiscal Year
December fiscal year
2013A
Revenue
Talent Solutions
Marketing Solutions
Premium Subscriptions
Gross revenue
% yoy growth
% sequential growth
Cost of revenue (ex D&A)
Net revenue
% yoy growth
% sequential growth
% gross margin
Operating expenses
Sales and marketing
Product development
General and administrative
Depreciation and amortization
One-time operating expense
Total operating costs
Pro forma operating income (i.e. ex one-time items)
% growth
% margin
GAAP operating income
Other (expenses)/income
Other recurring income (expense)
Other one-time, pre-tax expense
Pro forma pre-tax income
GAAP pre-tax income
Cash taxes
Non-cash taxes
Reported taxes
Effective reported tax rate
Other one-time, after-tax expense
Accretion of redeemable noncontrolling interest
Pro forma net income to common shareholders
% growth
% margin
Reported GAAP net income to common shareholders
Basic shares outstanding
Diluted shares outstanding
Add back: dilutive shares under treasury stock method
Non-GAAP diluted shares
Pro forma GAAP EPS ex one-time items
% growth
Reported GAAP diluted EPS
Non-GAAP EPS calculation
Reported net income
Accretion of redeemable noncontrolling interest
Undistributed earnings allocated to preferred stockholders
Add back: stock based compensation
Add back: amortization of intangible assets
Income tax effect of non-GAAP adjustments
Non-GAAP net income
% margin
Non-GAAP diluted EPS
% yoy growth
% sequential growth
Adjusted EBITDA calculation
Reported net income to common shareholders
Provision for income taxes
Other (income) expense, net
Depreciation and amortization
EBITDA
% yoy growth
% sequential growth
% margin
Total stock-based compensation
Adjusted EBITDA
% yoy growth
% sequential growth
% margin

1QA

3QE

4QE

Fiscal Year
2014E

1QE

2015E
2QE

3QE

4QE

Fiscal Year Fiscal Year


2015E
2016E

859.7
362.4
306.5

275.9
101.8
95.5

290.7
113.1
101.3

305.3
120.4
108.4

320.7
134.6
115.9

1,192.6
469.9
421.1

343.0
142.4
129.9

372.4
153.7
145.4

404.4
166.1
162.9

439.0
179.4
182.4

1,558.8
641.6
620.6

2,061.7
811.8
866.7

1,528.5
57.2%

473.2
45.7%
5.8%

505.0
38.9%
6.7%

534.1
35.9%
5.8%

571.3
27.7%
7.0%

2,083.6
36.3%

615.3
30.0%
7.7%

671.6
33.0%
9.1%

733.3
37.3%
9.2%

800.8
40.2%
9.2%

2,821.1
35.4%

3,740.2
32.6%

(202.9)

(62.5)

(70.0)

(73.0)

(80.0)

(285.5)

(90.1)

(90.6)

(99.0)

(101.1)

(380.8)

(461.9)

1,325.6
56.5%

435.0
38.4%
5.9%
86.1%

461.1
35.8%
6.0%
86.3%

491.3
26.2%
6.5%
86.0%

1,798.1
35.6%

581.0
33.5%
10.6%
86.5%

634.3
37.6%
9.2%
86.5%

699.7
42.4%
10.3%
87.4%

3,278.3
34.3%

86.3%

525.2
27.9%
6.9%
85.4%

2,440.2
35.7%

86.7%

410.7
45.5%
5.5%
86.8%

86.5%

87.7%

(522.1)
(395.6)
(225.6)
(134.5)
0.0
(1,277.8)

(166.5)
(120.6)
(74.6)
(49.7)
0.0
(411.5)

(172.0)
(138.0)
(80.0)
(53.0)
0.0
(443.0)

(174.8)
(150.0)
(85.0)
(60.3)
0.0
(470.1)

(178.0)
(160.0)
(90.0)
(62.0)
0.0
(490.0)

(691.3)
(568.6)
(329.6)
(225.0)
0.0
(1,814.6)

(180.0)
(175.7)
(87.3)
(66.7)
0.0
(509.7)

(212.0)
(164.6)
(100.7)
(66.7)
0.0
(543.9)

(231.0)
(179.6)
(110.0)
(64.8)
0.0
(585.4)

(251.5)
(171.2)
(125.1)
(63.0)
0.0
(610.9)

(874.5)
(691.1)
(423.1)
(261.2)
0.0
(2,249.9)

(1,047.0)
(897.6)
(561.0)
(262.2)
0.0
(2,767.8)

47.8
-15.9%
3.1%
47.8

(0.8)
-103.2%
-0.2%
(0.8)

(8.0)
-198.5%
-1.6%
(8.0)

(9.0)
-293.8%
-1.7%
(9.0)

1.3
nm
0.2%
1.3

(16.5)
-134.4%
-0.8%
(16.5)

15.5
2132.6%
2.5%
15.5

37.0
564.3%
5.5%
37.0

48.9
643.8%
6.7%
48.9

88.9
6950.5%
11.1%
88.9

190.3
1255.9%
6.7%
190.3

510.4
168.2%
13.6%
510.4

1.4
0.0

1.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

1.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

49.2
49.2

0.3
0.3

(8.0)
(8.0)

(9.0)
(9.0)

1.3
1.3

(15.4)
(15.4)

15.5
15.5

37.0
37.0

48.9
48.9

88.9
88.9

190.3
190.3

510.4
510.4

2.4
(16.0)
(13.6)
5183.6%

(6.3)
(3.8)
(10.0)
-125.4%

(9.2)
(3.9)
(13.0)
-145.0%

(9.1)
(4.3)
(13.4)
1060.0%

(22.1)
(27.8)
(50.0)
-323.7%

(10.4)
(1.8)
(12.3)
79.0%

(27.5)
(1.8)
(29.3)
79.0%

(36.9)
(1.7)
(38.6)
79.0%

(68.5)
(1.7)
(70.2)
79.0%

(143.3)
(7.1)
(150.3)
79.0%

(247.7)
(7.5)
(255.2)
50.0%

0.0

0.0
(0.1)

0.0
(0.2)

0.0
(0.2)

0.0
(0.2)

0.0
(0.7)

0.0
(0.3)

0.0
(0.3)

0.0
(0.3)

0.0
(0.3)

0.0
(1.0)

0.0
(1.0)

12.8
-40.9%
0.8%
26.8

(13.4)
-256.0%
-2.8%
(13.4)

(18.0)
nm
-3.6%
(18.0)

(22.0)
nm
-4.1%
(22.0)

(12.1)
nm
-2.1%
(12.1)

(65.5)
-613.3%
-3.1%
(65.5)

3.3
124.3%
0.5%
3.3

7.8
143.3%
1.2%
7.8

10.3
146.6%
1.4%
10.3

18.7
254.2%
2.3%
18.7

40.0
161.0%
1.4%
40.0

255.2
538.6%
6.8%
255.2

121.5
121.5
3.9
125.4

122.0
122.0
3.9
125.9

122.5
122.5
3.9
126.4

123.0
123.0
3.9
126.9

123.5
123.5
3.9
127.4

124.0
124.0
3.9
127.9

124.5
124.5
3.9
128.4

123.7
123.7
3.9
127.6

124.5
124.5
15.5
140.0

21.3
(43.8)
(22.5)
45.6%

113.5
117.6
1.3
118.9

121.0
121.0
3.9
124.9

121.7
121.7
3.9
125.6

$0.11
-43.3%
$0.23

($0.11)
-248.9%
($0.11)

($0.15)
nm
($0.15)

($0.18)
nm
($0.18)

($0.10)
nm
($0.10)

($0.54)
-595.9%
($0.54)

$0.03
123.9%
$0.03

$0.06
142.6%
$0.06

$0.08
145.9%
$0.08

$0.15
251.8%
$0.15

$0.32
160.0%
$0.32

$2.05
534.7%
$2.05

26.8

(13.4)
0.1
0.0
67.8
4.8
(11.9)

(18.0)
0.2
0.0
75.0
5.0
(11.5)

(22.0)
0.2
0.0
77.2
7.0
(10.0)

(12.1)
0.2
0.0
85.0
8.0
(13.0)

(65.5)
0.7
0.0
305.0
24.8
(46.4)

3.3
0.3
0.0
91.4
6.2
(21.0)

7.8
0.3
0.0
88.5
7.3
(21.6)

10.3
0.3
0.0
86.9
7.5
(21.8)

18.7
0.3
0.0
86.3
7.5
(23.4)

40.0
1.0
0.0
353.1
28.5
(87.8)

255.2
1.0
0.0
376.4
28.7
(164.5)

191.9
12.6%
$1.62
82.2%

47.3
10.0%
$0.38
-16.5%
-2.2%

50.7
10.0%
$0.40
6.1%
6.7%

52.4
9.8%
$0.42
6.1%
2.9%

68.1
11.9%
$0.54
39.1%
29.5%

218.6
10.5%
$1.74
7.7%

80.1
13.0%
$0.63
66.4%
17%

82.3
12.3%
$0.65
59.7%
2%

83.1
11.3%
$0.65
56.2%
1%

89.3
11.1%
$0.70
29.0%
7%

334.7
11.9%
$2.62
50.8%

496.8
13.3%
$3.87
47.6%

26.8
22.5
(1.4)
134.5
182.3
33.4%

(13.4)
13.6
(0.9)
49.7
49.0
-1.0%
-9.6%
10.4%

(18.0)
10.0
0.2
53.0
45.2
12.3%
-7.7%
9.0%

(22.0)
13.0
0.2
60.3
51.5
34.1%
13.9%
9.6%

(12.1)
13.4
0.2
62.0
63.5
17.1%
23.2%
11.1%

(65.5)
50.0
(0.3)
225.0
209.2
14.7%

3.3
12.3
0.3
66.7
82.5
68.4%
29.9%
13.4%

7.8
29.3
0.3
66.7
104.0
129.9%
26.1%
15.5%

10.3
38.6
0.3
64.8
114.0
121.2%
9.6%
15.5%

18.7
70.2
0.3
63.0
152.2
139.8%
33.5%
19.0%

40.0
150.3
1.0
261.2
452.5
116.3%

255.2
255.2
1.0
262.2
773.6
70.9%

16.0%

20.7%

67.8
116.7
40.0%
4.8%
24.7%

75.0
120.2
35.6%
3.0%
23.8%

77.2
128.7
38.6%
7.1%
24.1%

85.0
148.5
33.3%
15.3%
26.0%

91.4
173.8
48.9%
17.1%
28.2%

88.5
192.5
60.1%
10.8%
28.7%

86.9
200.9
56.1%
4.4%
27.4%

86.3
238.4
60.6%
18.7%
29.8%

353.1
805.6
56.7%

376.4
1,149.9
42.7%

28.6%

30.7%

0.0
193.9
16.4
(45.2)

11.9%
193.9
376.2
68.7%
24.6%

Source: Company reports and BMO Capital Markets estimates.

Page 20 June 10, 2014

2014E
2QE

10.0%
305.0
514.1
36.7%
24.7%

BMO Capital Markets

Linkedln

Exhibit 18. LinkedIn Segment Revenue Model ($ millions, except per-share data)
$ in millions, except per share figures Fiscal Year
December fiscal year
2013A
Revenue by segment
LinkedIn Corporate Solutions (LCS) Customers
% yoy growth

Monthly ARPU % yoy growth

3QE

4QE

Fiscal Year
2014E

1QE

2015E
2QE

3QE

4QE

Fiscal Year Fiscal Year


2015E
2016E

24,444

25,844

26,878

27,953

29,071

29,071

30,234

31,594

32,858

34,271

34,271

40,092

49.0%

42.5%

32.7%

27.1%

18.9%

18.9%

17.0%

17.5%

17.5%

17.9%

17.9%

17.0%

5.7%

4.0%

4.0%

4.0%

4.0%

4.5%

4.0%

4.3%

% sequential growth
Talent Solutions Monthly ARPU

2014E
2QE

1QA

$350.7

$366

$368

$371

$375

$371.4

$386

$402

$418

$436

$410.2

$462.1

3.1%

2.8%

3.2%

4.7%

6.3%

5.9%

5.4%

9.3%

12.7%

16.3%

10.4%

12.7%

3.7%

0.5%

1.0%

1.0%

2.8%

4.1%

4.2%

4.2%

290.7
41.7%
5.4%
57.6%

305.3
35.9%
5.0%
57.2%

320.7
30.6%
5.0%
56.1%

$372.4
28.1%
8.6%
55.5%

$404.4
32.4%
8.6%
55.1%

$439.0
36.9%
8.6%
54.8%

1,558.8
30.7%

2,061.7
32.3%

Monthly ARPU % sequential growth


Talent Solutions
% yoy growth
% sequential growth
% of total

859.7
64.2%
56.2%

275.9
49.7%
12.3%
58.3%

57.2%

$343.0
24.3%
7.0%
55.7%

55.3%

55%

Registered Members (MM)

276.8

296.5

314.2

336.2

359.7

359.7

388.5

423.5

465.8

517.1

517.1

596.8

% yoy growth

37.1%

35.8%

32.0%

29.7%

30.0%

30.0%

31.0%

34.8%

38.6%

43.7%

43.7%

15.4%

7.1%

6.0%

7.0%

7.0%

8.0%

9.0%

10.0%

11.0%

$1.51
1.7%

$0.36
-0.3%
-16.1%

$0.37
-1.3%
4.3%

$0.37
4.1%
0.0%

$0.39
-8.6%
4.5%

$1.48
-2.5%

$0.38
7.2%
-1.6%

$0.38
2.3%
-0.5%

$0.37
0.9%
-1.4%

$0.36
-5.7%
-2.3%

$1.46
-0.9%

$1.46
-0.4%

Marketing Solutions
% yoy growth
% sequential growth
% of total

362.4
40.3%

101.8
36.1%
-10.3%
21.5%

113.1
32.1%
11.1%
22.4%

120.4
36.1%
6.5%
22.5%

134.6
18.6%
11.8%
23.6%

469.9
29.7%

142.4
39.9%
5.8%
23.1%

153.7
36.0%
7.9%
22.9%

166.1
37.9%
8.0%
22.6%

179.4
33.3%
8.0%
22.4%

641.6
36.5%

811.8
26.5%

22.7%

22%

Premium Subscriptions
% yoy growth
% sequential growth
% of total

306.5
60.9%

95.5
45.6%
8.4%
20.2%

101.3
38.8%
6.0%
20.1%

108.4
35.8%
7.0%
20.3%

115.9
31.6%
7.0%
20.3%

421.1
37.4%

129.9
35.9%
12.0%
21.1%

145.4
43.6%
12.0%
21.7%

162.9
50.3%
12.0%
22.2%

182.4
57.4%
12.0%
22.8%

620.6
47.4%

866.7
39.7%

22.0%

23%

1,528.5
57.2%

473.2
45.7%
5.8%

505.0
38.9%
6.7%

534.1
35.9%
5.8%

571.3
27.7%
7.0%

2,083.6
36.3%

615.3
30.0%
7.7%

671.6
33.0%
9.1%

733.3
37.3%
9.2%

800.8
40.2%
9.2%

2,821.1
35.4%

3,740.2
32.6%

US
% yoy growth
% sequential growth
% of total

942.1
52.1%

284.9
41.4%
5.1%
60.2%

310.6
38.5%
9.0%
61.5%

325.8
32.8%
4.9%
61.0%

348.5
28.5%
7.0%
61.0%

1,269.7
34.8%

366.1
28.5%
5.1%
59.5%

399.6
28.7%
9.1%
59.5%

436.3
33.9%
9.2%
59.5%

476.5
36.7%
9.2%
59.5%

1,678.5
32.2%

2,206.7
31.5%

59.5%

59.0%

Other Americas
% yoy growth
% sequential growth
% of total

109.7
65.9%

31.9
32.0%
0.9%
6.7%

38.9
44.8%
21.9%
7.7%

41.7
54.1%
7.1%
7.8%

45.7
44.6%
9.7%
8.0%

158.2
44.2%

52.3
63.9%
14.4%
8.5%

57.1
46.8%
9.1%
8.5%

62.3
49.6%
9.2%
8.5%

68.1
48.9%
9.2%
8.5%

239.8
51.6%

243.1
1.4%

8.5%

6.5%

EMEA
% yoy growth
% sequential growth
% of total

358.2
64.8%

117.9
56.8%
8.8%
24.9%

116.2
37.2%
-1.5%
23.0%

122.8
36.4%
5.8%
23.0%

131.4
21.3%
7.0%
23.0%

488.3
36.3%

141.5
20.1%
7.7%
23.0%

154.5
33.0%
9.1%
23.0%

168.7
37.3%
9.2%
23.0%

184.2
40.2%
9.2%
23.0%

648.8
32.9%

822.8
26.8%

23.0%

22.0%

APAC
% yoy growth
% sequential growth
% of total

118.5
70.8%

39.4
41.5%
2.2%
7.8%

43.8
43.4%
11.2%
8.2%

45.7
26.4%
4.3%
8.0%

167.4
41.3%

60.4
53.4%
-63.9%
9.0%

66.0
50.7%
19.2%
9.0%

72.1
57.7%
19.2%
9.0%

467.5
84.1%

8.0%

55.4
43.7%
21.2%
9.0%

253.9
51.6%

7.8%

38.5
60.8%
6.6%
8.1%

9.0%

12.5%

1,528.5

473.2

505.0

534.1

571.3

2,083.6

615.3

671.6

733.3

800.8

2,821.1

3,740.2

Field sales
% yoy growth
% sequential growth
% of total

891.5
61.4%

275.3
49.6%
1.7%
58.2%

287.9
37.6%
4.6%
57.0%

304.4
33.8%
5.8%
57.0%

325.6
20.3%
7.0%
57.0%

1,193.2
33.8%

338.4
22.9%
3.9%
55.0%

369.4
28.3%
9.1%
55.0%

403.3
32.5%
9.2%
55.0%

440.5
35.3%
9.2%
55.0%

1,551.6
30.0%

2,019.7
30.2%

55.0%

54.0%

Online sales/self-service
% yoy growth
% sequential growth
% of total

637.1
51.7%

217.2
40.6%
9.7%
43.0%

229.7
38.9%
5.8%
43.0%

245.6
39.1%
7.0%
43.0%

890.4
39.8%

302.2
39.2%
9.1%
45.0%

330.0
43.7%
9.2%
45.0%

360.4
46.7%
9.2%
45.0%

1,720.5
35.5%

42.7%

276.9
39.9%
12.7%
45.0%

1,269.5
42.6%

41.7%

197.9
40.6%
12.1%
41.8%

45.0%

46.0%

1,528.5

473.2

505.0

534.1

571.3

2,083.6

615.3

671.6

733.3

800.8

2,821.1

3,740.2

Unique Visitors (LinkedIn via comScore, MM)

139.2

142.1

144.9

147.8

150.8

150.8

158.3

166.3

174.6

183.3

183.3

222.8

% yoy growth

19.7%

7.8%

1.6%

3.9%

8.3%

8.3%

11.4%

14.7%

18.1%

21.6%

21.6%

21.6%

2.1%

2.0%

2.0%

2.0%

5.0%

5.0%

5.0%

5.0%

% sequential growth
Marketing Solutions Period ARPU
Period ARPU % yoy growth
Period ARPU % sequential growth

TOTAL REVENUE
% growth
% sequential growth

23.7%

20.1%

1,192.6
38.7%

22.6%

20.2%

Revenue by geography

TOTAL REVENUE

61.6%

7.2%

23.4%

60.9%

7.6%

23.4%

Revenue by channel

TOTAL REVENUE

58.3%

57.3%

User metrics

% sequential growth
Page views (Linked via comScore, in BN)

10.6

11.5

11.6

11.7

11.8

11.8

12.1

12.3

12.6

12.8

12.8

13.9

% yoy growth

8.2%

3.6%

-0.7%

1.1%

11.8%

11.8%

5.1%

6.1%

7.2%

8.2%

8.2%

8.2%

8.5%

1.0%

1.0%

1.0%

2.0%

2.0%

2.0%

2.0%

5,045

5,416

5,655

5,894

6,000

6,000

6,239

6,478

6,716

6,500

6,500

7,000

% sequential growth
Employees

Source: Company reports and BMO Capital Markets estimates.

Page 21 June 10, 2014

BMO Capital Markets

Linkedln

Exhibit 19. LinkedIn Balance Sheet ($ millions, except per-share data)


$ in millions, except per share figures Fiscal Year
December fiscal year
2013A
Assets
Cash
Short-term investments
Receivables
Deferred commissions
Prepaid expenses and other current assets
Current assets
Plant & equipment, net
Goodwill
Other intangibles
Other assets
Assets
Liabilities
Payables
Accrued liabilities
Deferred revenue
Income tax payable
Other
Current liabilities
Non-convertible long term debt
Convertible debt/preferred
Preferred equity
Deferred tax liabilities
Other liabilities
Minority interest

2014E
2QE

1QA

3QE

4QE

Fiscal Year
2014E

1QE

2015E
2QE

3QE

4QE

Fiscal Year Fiscal Year


2015E
2016E

803.1
1,526.2
302.2
47.5
76.5
2,755.5

508.9
1,797.4
328.7
46.6
98.4
2,779.9

565.3
1,797.4
300.0
46.6
100.9
2,810.2

514.0
1,797.4
325.0
46.6
103.4
2,786.3

580.1
1,797.4
305.0
46.6
106.0
2,835.0

580.1
1,797.4
305.0
46.6
106.0
2,835.0

587.6
1,797.4
284.6
46.6
110.0
2,826.1

748.1
1,797.4
301.5
46.6
114.1
3,007.6

786.1
1,797.4
320.0
46.6
118.4
3,068.4

860.7
1,797.4
350.0
46.6
122.8
3,177.5

860.7
1,797.4
350.0
46.6
122.8
3,177.5

1,353.9
1,797.4
305.4
46.6
135.6
3,638.8

361.7
150.9
43.0
41.7

406.5
228.9
101.6
44.9

443.5
228.9
100.6
44.9

475.2
228.9
99.2
44.9

506.2
228.9
97.6
44.9

506.2
228.9
97.6
44.9

530.8
228.9
96.4
44.9

556.4
228.9
94.9
44.9

584.0
228.9
93.4
44.9

613.5
228.9
91.9
44.9

613.5
228.9
91.9
44.9

720.1
228.9
63.2
44.9

3,352.8

3,561.9

3,628.1

3,634.6

3,712.7

3,712.7

3,727.1

3,932.7

4,019.7

4,156.7

4,156.7

4,695.9

66.7
183.0
392.2
0.0
0.0
642.0

79.7
142.1
479.6
0.0
0.0
701.4

80.0
227.3
454.5
0.0
0.0
761.8

72.0
240.4
454.0
0.0
0.0
766.3

90.0
257.1
485.6
0.0
0.0
832.6

90.0
257.1
485.6
0.0
0.0
832.6

81.5
276.9
461.5
0.0
0.0
819.9

87.2
302.2
604.4
0.0
0.0
993.9

93.3
330.0
623.3
0.0
0.0
1,046.6

100.0
360.4
680.7
0.0
0.0
1,141.1

100.0
360.4
680.7
0.0
0.0
1,141.1

101.8
458.1
865.2
0.0
0.0
1,425.1

0.0
0.0
0.0
14.9
61.5

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

0.0
0.0
0.0
23.9
70.2

5.0

5.1

5.1

5.1

5.1

5.1

5.1

5.1

5.1

Common & paid-in capital


Treasury stock, at cost
Retained earnings (deficit)

2,573.8
0.0
55.6

2,719.0
0.0
42.2

2,742.9
0.0
24.2

2,766.8
0.0
2.2

2,790.7
0.0
(9.9)

5.1

2,790.7
0.0
(9.9)

5.1

2,814.6
0.0
(6.7)

5.1

2,838.5
0.0
1.1

2,862.4
0.0
11.4

2,886.3
0.0
30.0

2,886.3
0.0
30.0

2,886.3
0.0
285.3

Liabilities & Equity

3,352.8

3,561.9

3,628.1

3,634.6

3,712.7

3,712.7

3,727.1

3,932.7

4,019.7

4,156.7

4,156.7

4,695.9

1,353.9

Net cash (debt) calculation


Cash

803.1

508.9

565.3

514.0

580.1

580.1

587.6

748.1

786.1

860.7

860.7

Off-balance sheet & equity interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debt, excluding convertibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Convertible debt

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Preferred equity, excluding convertibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

803.1

508.9

565.3

514.0

580.1

580.1

587.6

748.1

786.1

860.7

860.7

1,353.9

Net cash (debt)


Leverage and Return Analysis
Leverage (Net debt/EBITDA)

-2.1x

-1.1x

-1.1x

Return on Assets

0.5%

-1.9%

1.0%

5.8%

Return on Equity

0.7%

-2.4%

1.4%

8.4%

Return on Invested Capital

8.8%

1.0%

6.1%

15.7%

Source: Company reports and BMO Capital Markets estimates.

Page 22 June 10, 2014

-1.2x

BMO Capital Markets

Linkedln

Exhibit 20. LinkedIn Cash Flow Statement ($ millions, except per-share data)
$ in millions, except per share figures Fiscal Year
December fiscal year
2013A

1QA

2014E
2QE

3QE

4QE

Fiscal Year
2014E

1QE

2015E
2QE

3QE

4QE

Fiscal Year Fiscal Year


2015E
2016E

Cash from operations


Reported GAAP net income
Undistributed earnings allocated to preferred stockholders
Depreciation
Intangible amortization
Depreciation & amortization
Provision for doubtful accounts
Amortization of stock comp
Excess tax benefit of stock comp
Changes in working capital

26.8
0.0
118.1
16.4
134.5
4.8
193.9
(43.8)

(13.4)
0.0
44.9
4.8
49.7
1.2
67.8
(16.0)

(18.0)
0.0
48.0
5.0
53.0
2.5
75.0
(3.8)

(22.0)
0.0
53.3
7.0
60.3
2.7
77.2
(3.9)

(12.1)
0.0
54.0
8.0
62.0
2.9
85.0
(4.3)

(65.5)
0.0
200.2
24.8
225.0
9.3
305.0
(27.8)

3.3
0.0
60.5
6.2
66.7
3.1
91.4
(1.8)

7.8
0.0
59.4
7.3
66.7
3.4
88.5
(1.8)

10.3
0.0
57.3
7.5
64.8
3.7
86.9
(1.7)

18.7
0.0
55.5
7.5
63.0
4.0
86.3
(1.7)

40.0
0.0
232.7
28.5
261.2
14.1
353.1
(7.1)

255.2
0.0
233.4
28.7
262.2
18.7
376.4
(7.5)

Receivables
Deferred commissions
Prepaid expenses and other assets
Payables and other liabilities
Income taxes, net
Deferred revenue
Other

(102.6)
(18.2)
(11.2)
114.7
3.1
134.5
(0.0)

(26.8)
1.1
(11.7)
(18.4)
7.9
87.3
0.1

28.7
1.1
(2.5)
0.3
10.1
25.3
(57.9)

(25.0)
1.1
(2.5)
(8.0)
10.7
26.7
(111.4)

20.0
1.1
(2.6)
18.0
11.4
28.6
(87.1)

(3.1)
4.5
(19.3)
(8.1)
40.1
167.9
(256.3)

20.4
1.1
(4.0)
(8.5)
12.3
23.4
(140.5)

(16.9)
1.1
(4.1)
5.7
13.4
25.5
30.5

(18.5)
1.1
(4.3)
6.1
14.7
27.9
(93.6)

(30.0)
1.1
(4.4)
6.7
16.0
30.4
(56.1)

(45.0)
4.5
(16.8)
10.0
56.4
107.2
(259.6)

44.6
4.5
(12.8)
1.8
74.8
112.2
(304.3)

436.5

128.9

113.8

5.9

123.0

371.5

66.8

219.8

97.4

134.0

517.9

825.7

Cash from operating activities


Cash from investments
Capital expenditures
Net proceeds from marketable securities
Net acquisitions/other investing

(278.0)
(1,055.4)
(24.1)

(88.9)
(272.5)
(86.5)

(85.0)
0.0
0.0

(85.0)
0.0
0.0

(85.0)
0.0
0.0

(343.9)
(272.5)
(86.5)

(85.0)
0.0
0.0

(85.0)
0.0
0.0

(85.0)
0.0
0.0

(85.0)
0.0
0.0

(340.0)
0.0
0.0

(340.0)
0.0
0.0

Cash from investments

(1,357.5)

(447.8)

(85.0)

(85.0)

(85.0)

(702.8)

(85.0)

(85.0)

(85.0)

(85.0)

(340.0)

(340.0)

Cash from financing


Debt
Convertible debt
Preferred/other financing
Proceeds from IPO, net of offering cost
Proceeds from follow-on offering, net of offering costs
Proceeds from early exercise of employee stock options
Proceeds from exercise of warrant
Excess tax benefit on stock comp
Dividends
Common equity

0.0
0.0
4.2
0.0
1,348.1
26.3
0.0
43.8
0.0
32.0

0.0
0.0
0.0
0.0
0.0
8.1
0.0
16.0
0.0
(0.0)

0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.8
0.0
23.9

0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.9
0.0
23.9

0.0
0.0
0.0
0.0
0.0
0.0
0.0
4.3
0.0
23.9

0.0
0.0
0.0
0.0
0.0
8.1
0.0
27.8
0.0
71.7

0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.8
0.0
23.9

0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.8
0.0
23.9

0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.7
0.0
23.9

0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.7
0.0
23.9

0.0
0.0
0.0
0.0
0.0
0.0
0.0
7.1
0.0
95.6

0.0
0.0
7.5
0.0
0.0

Financing cash flow

1,454.2

24.1

27.7

27.8

28.2

107.7

25.7

25.7

25.6

25.6

102.7

7.5

0.6
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.6
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

Currency effect
Cash flow from discontinued operations

(0.5)
0.0

0.0
0.0
0.0
0.0

Net change in cash


Cash, beginning of period

532.7
270.4

(294.2)
803.1

56.5
508.9

(51.4)
565.3

66.1
514.0

(223.0)
803.1

7.5
580.1

160.5
587.6

38.0
748.1

74.6
786.1

280.6
580.1

493.2
860.7

Cash, end of period

803.1

508.9

565.3

514.0

580.1

580.1

587.6

748.1

786.1

860.7

860.7

1,353.9

Bottom Up Free Cash Flow


Reported GAAP net income
+ Undistributed earnings allocated to preferred stockholders
+ Depreciation & amortization
+ Stock compensation
+ Non-cash taxes
- Captial expenditures
+ Adjustment
Free Cash Flow
FCF/diluted share
FCF/diluted share growth

26.8
0.0
134.5
193.9
43.8
(278.0)
0.0
120.9
$1.03
18.2%

(65.5)
0.0
225.0
305.0
27.8
(343.9)
0.0
148.4
$1.22
18.6%

40.0
0.0
261.2
353.1
7.1
(340.0)
0.0
321.3
$2.60
113.0%

255.2
0.0
262.2
376.4
7.5
(340.0)
0.0
561.3
$4.51
73.6%

Top Down Free Cash Flow (BMO method)


Adjusted EBITDA
- Interest expense/other income
- Cash taxes
- Capital expenditures
+ Adjustment
Free Cash Flow
FCF/diluted share
FCF/diluted share growth

376.2
1.0
21.3
(278.0)
0.0
120.5
$1.03
16.4%

514.1
0.0
(22.1)
(343.9)
0.0
148.1
$1.22
18.7%

805.6
0.0
(143.3)
(340.0)
0.0
322.3
$2.61
114.1%

1,149.9
0.0
(247.7)
(340.0)
0.0
562.3
$4.52
73.4%

Source: Company reports and BMO Capital Markets estimates.

Page 23 June 10, 2014

BMO Capital Markets

Linkedln

LINKEDIN CORP (LNKD)


Target Price(US$)
Share Price(US$)

Quarterly Price (US$)


250

250

200

200

300

300

250

250

200

200
2) OP

150

150

100

100

150

150

100

100

50

50
1) Mkt

0
LNKD Relative to S&P 500
LNKD Relative to Internet Software & Svcs.

200

150

150

100

100
2000

2005

10
EPS (4 Qtr Trailing) - (US$)
Price / Earnings

2000

2005

2010

FYE
(Dec.)

EPS
US$

P/E
Hi - Lo

DPS
US$

Yield%
Hi - Lo

2011
2012
2013

0.35
0.89
1.62

>100 >100
>100 67.7
>100 64.9

0.00
0.00
0.00

0.0
0.0
0.0

0.0
0.0
0.0

0.0

0.0

Range*:
Current*

>100
1.54

64.9

104.0

0.00

0.0

200

200

150

150

100

100
2012

Payout
%

50

2013

BMO 2014FY EPS ( May 14 = 1.74 US$)


First Call 2014FY Cons.EPS ( May 14 = 1.65 US$)

2.0

1.5

2.0
1.5
BMO 2015FY EPS ( May 14 = 2.62 US$)
First Call 2015FY Cons.EPS ( May 14 = 2.51 US$)

400

1
1995

250

10

20

300

250

50
2011

2010

Revenue / Share - (US$)


Price / Revenue

30

LNKD Relative to S&P 500


LNKD Relative to Internet Software & Svcs.

300

200

1995

200

2
2011

2012

BV
US$

P/B
Hi - Lo

ROE
%

0
0
0

8.4
21.9
7.7

14.7 6.7
5.7 2.8
>15 13.6

6
11

21.2

>15

2.8

7.5

2013

LNKD - Rating as of 23-Jun-11 = NR

1
2

Date
28-Feb-12
5-Dec-13

Rating Change
NR to Mkt
Mkt to OP

Share Price
$86.95
$226.44

* Current EPS is the 4 Quarter Trailing to Q1/2014.


* Valuation metrics are based on high and low for the fiscal year.
* Range indicates the valuation range for the period presented above.

Last Price ( June 4, 2014): $156.40


Sources: IHS Global Insight, Thomson Reuters, BMO Capital Markets.

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IMPORTANT DISCLOSURES
Analyst's Certification
I, Daniel Salmon / Jeffrey M. Silber, hereby certify that the views expressed in this report accurately reflect my personal views about the subject
securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts
may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472
restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
A redacted draft of this report was previously shown to the issuer (for fact checking purposes) and changes were made to the report before publication
Methodology and Risks to Price Target/Valuation
Methodology: We derive our target price for LNKD shares by triangulating the values derived by our discounted cash flow model and comparable
multiple analysis on an EV/EBITDA and non-GAAP P/E basis.
Risks: Risks include sustained levels of membership and usership growth, pending privacy legislation in both the US and European Union, and
weakened revenue trends in the event of continued weak economic recovery and high unemployment.
Distribution of Ratings (March 31, 2014)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
42.0%
21.5%
60.7%
40.8%
53.6%
53.6%
Hold
Market Perform
52.8%
10.8%
38.2%
52.8%
43.8%
40.8%
Sell
Underperform
5.2%
3.2%
1.1%
6.3%
2.7%
5.6%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as
percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Rating and Sector Key (as of April 5, 2013):
We use the following ratings system definitions:
OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis
Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis
Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis on a total return basis
(S) = speculative investment;
NR = No rating at this time;
R = Restricted Dissemination of research is currently restricted.
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US
Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
Prior BMO Capital Markets Ratings System (January 4, 2010April 4, 2013):
http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Other Important Disclosures
For
Other
Important
Disclosures
on
the
stocks
discussed
in
this
report,
please
go
to
http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3
Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.

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Dissemination of Research
BMO
Capital
Markets
Equity
Research
is
available
via
our
website
https://researchca.bmocapitalmarkets.com/Public/Secure/Login.aspx?ReturnUrl=/Member/Home/ResearchHome.aspx. Institutional clients may also receive our
research via Thomson Reuters, Bloomberg, FactSet, and Capital IQ. Research reports and other commentary are required to be simultaneously
disseminated internally and externally to our clients.
General Disclaimer
BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its
subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc.,
BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending
arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections
contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets
endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions
that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no
responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this
report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this
report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as
advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the
solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned
in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the
securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO
Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell
securities of issuers discussed herein.
Additional Matters
To Canadian Residents: BMO Nesbitt Burns Inc. furnishes this report to Canadian residents and accepts responsibility for the contents herein subject to
the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO
Nesbitt Burns Inc.
The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Iain Reid, Tony Robson, David Round, Edward Sterck
or Brendan Warn: This research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets
Limited and subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing
research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer.
Canadian regulations require that a firm providing research disclose its ownership interest in the issuer that is the subject of the research if it and its
affiliates own 1% or more of the equity of the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its
and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer.
To U.S. Residents: BMO Capital Markets Corp. furnishes this report to U.S. residents and accepts responsibility for the contents herein, except to the
extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so
through BMO Capital Markets Corp.
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial
Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional
experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order
2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant
persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
Unauthorized reproduction, distribution, transmission or publication without the prior written consent of BMO Capital Markets is strictly prohibited.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.

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ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST


BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and
corporate banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and
commercial banking clients are served by BMO Harris Bank N.A. (Member FDIC). Investment and corporate banking services are provided in Canada and the US
through BMO Capital Markets.
BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A. (Member
FDIC), BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC) and
BMO Capital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian Investor Protection Fund) in Canada, Europe and Asia,
BMO Capital Markets Limited in Europe and Australia, and BMO Advisors Private Limited in India.
Nesbitt Burns is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. BMO Capital Markets is a trademark of Bank of Montreal,
used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license.
Registered trademark of Bank of Montreal in the United States, Canada and elsewhere.
TM Trademark Bank of Montreal

COPYRIGHT 2014 BMO CAPITAL MARKETS CORP


A member of BMO

Page 27 June 10, 2014

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