LinkedIn 2015 Annual Report Download

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10APR201419231192
April 2016
To Our Stockholders:
In 2015, we delivered a strong year of innovation focused on further connecting our members and
customers to opportunity.
For members, we made significant progress by focusing on two core value propositions: staying
connected and informed, and advancing members’ careers.
• In December, we launched our re-imagined flagship mobile application, the culmination of a
year-long focus to create a dramatically simplified core LinkedIn experience. Since launch, we
have seen meaningful increases in feed engagement, messages sent, and content interaction.
• With respect to careers, we spent much of the year working on fundamental building blocks
including doubling the number of jobs on LinkedIn to more than six million, improving jobs
relevance, and re-launching the jobs experience on the desktop. This work resulted in a
significant increase in overall engagement with jobs throughout 2015 compared to 2014.
For customers, we focused on innovating the core value drivers in each product line:
• Within Hiring, we announced the re-launch of Recruiter, the first full refresh of our flagship
product since its original launch. The new Recruiter will rollout to customers throughout 2016
alongside the new Referrals product. The goal is that these products will further strengthen and
extend our competitive position within the talent acquisition space in the coming years.
• Within Marketing Solutions, Sponsored Updates increasingly evolved into the core of our
advertising business, contributing approximately half of total ad revenue in 2015. Digital
marketing remains a fast-evolving and competitive landscape, evidenced by the significant
decline in our display ad revenue in 2015. To that end, we believe our primary focus on
Sponsored Updates will continue to make LinkedIn the most effective platform for marketers to
engage professionals.
• We also saw early progress in two of our more nascent initiatives, Sales Solutions and
Learning & Development.
• For Sales Solutions, 2015 was the first full year we sold the flagship Sales Navigator
product through a scaled salesforce. We’ve seen early success with large, sophisticated
customers like EY, SAP, and Microsoft, and we will continue improving our core product to
drive broad-based demand.
• In May, we acquired Lynda, signaling LinkedIn’s entry into the Learning & Development
market. This acquisition resulted from several years of evaluation in search of the right
asset to bring skills-based learning content to LinkedIn. Throughout 2015, we focused
primarily on integrating Lynda’s high quality team and content assets, setting the foundation
to deliver learning content at greater scale to members and enterprise customers.

Table of contents

  • Page 1
    ... ad revenue in 2015. To that end, we believe our primary focus on Sponsored Updates will continue to make LinkedIn the most effective platform for marketers to engage professionals. • We also saw early progress in two of our more nascent initiatives, Sales Solutions and Learning & Development...

  • Page 2
    ... excluding Lynda. Marketing Solutions grew 28% to $581 million, and Premium Subscriptions, which includes Sales Solutions, grew 22% to $532 million. In 2016, we plan to emphasize three key themes: a continued focus on core products; deepening the value exchanged between members and customers; and...

  • Page 3
    ... Mountain View, CA 94043 (Address of principal executive offices) (Zip Code) (650) 687-3600 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Class A Common Stock, par value $0.0001 per share Securities registered...

  • Page 4
    ... Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 5
    ... of our solutions by our members, enterprises and professional organizations; • our ability to develop effective solutions for mobile devices; • our ability to protect our users' information and adequately address privacy concerns; • our ability to maintain an adequate rate of revenue growth...

  • Page 6
    ... & Development, Marketing Solutions, and Premium Subscriptions. Our products are sold through two channels, an offline field sales organization that engages both large and small enterprise customers; and an online channel where enterprise customers, small business, and individual members purchase...

  • Page 7
    ...: Free Solutions Stay Connected & Informed Advance My Career LinkedIn Flagship: Feed, Me, Messaging, My Network & Search People You May Know Pulse Influencers Groups Slideshare LinkedIn Lookup Address Book Importer Publishing Platform Jobs Job Search App Company Pages University Pages Who's Viewed...

  • Page 8
    ... Media, Career Pages) LinkedIn Job Postings Job Seeker Recruiter Lite Learning & Development Lynda.com Free Solutions Sponsored Updates LinkedIn Ads Elevate Sponsored InMails Display Ads Ads API Professional/Individual Subscriptions Sales Solutions (Sales Navigator) Profinder Many of our member...

  • Page 9
    ... quickly contact anyone at their company, even if they are not connected to them on LinkedIn. Members can find coworkers by title, skill, name, and expertise. Only coworkers using LinkedIn Lookup can view the profile data a member enters into this application. Address Book Importer. Our address book...

  • Page 10
    ... sites. Job Search App. LinkedIn Job Search Application provides tools for finding a job. Members can find opportunities with location-based search, get automatic recommendations and notifications based on their job searches, and can apply to jobs using their LinkedIn profile. Company Pages. Company...

  • Page 11
    ... a standard set of terms and then integrate a subset of our content and services into their applications leveraging standards-based technology. These applications can be hosted on third-party websites or deployed on our platform. We also make our APIs available to support a range of Partner Programs...

  • Page 12
    ... of Company Profiles and content on Career Pages to allow potential candidates to learn more about what it is like to work at the enterprise or professional organization, whom to contact if they are interested in a position and what relevant opportunities are available. • LinkedIn Job Postings...

  • Page 13
    ... Solutions products enable enterprises and individuals the ability to advertise to our member base. Our targeting capabilities allow marketers to reach potential customers according to a number of attributes such as industry, function, seniority, and company size, among others. • Sponsored Updates...

  • Page 14
    ... in their area with the help of LinkedIn's trusted network. It's currently being piloted in the San Francisco Bay Area and New York. Sales, Marketing and Customer Support Sales We sell our Talent Solutions, Marketing Solutions, and Sales Solutions (included in Premium Subscriptions) offline through...

  • Page 15
    ... accounts and how to use our features and products. Self-service support is available through our website and customers can also contact us via email. We have specific premium support teams dedicated to premium subscribers, online advertisers, and our Talent and Sales Solutions customers. Customers...

  • Page 16
    ... professional insights by utilizing our rich dataset. This engine enables us to provide our users with customized content and recommendations. For example, based on a member's profile, their second and third degree connections, their viewing and clicking history, and a host of other criteria...

  • Page 17
    ... unauthorized use and streaming of our online training videos. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results. Companies in the Internet, social media technology and other industries may own large numbers of...

  • Page 18
    ... learning and development industries, may partner with Internet companies, including social networking companies, to provide services that compete with our solutions, either on their own or as third party applications. If the efficiency and usefulness of our products to enterprises and professional...

  • Page 19
    ...of member data. Our privacy policies and user agreements describe our practices concerning the use, storage, transmission and disclosure of personal information, including member, visitor and user data. Any failure by us to comply with these terms or privacy related laws and regulations could result...

  • Page 20
    ...financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. Investors and others can receive real-time notifications of new information posted on our investor relations website by signing up for email alerts and RSS...

  • Page 21
    ... all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes, before deciding whether to purchase shares of our Class A common stock. If any of the following risks are realized, our business, operating results and prospects could...

  • Page 22
    ...our total user traffic increases. If our services are unavailable when users attempt to access them or they do not load as quickly as users expect, users may seek other websites or services to obtain the information for which they are looking, and may not return to our website or use our services as...

  • Page 23
    ... or loading our applications in app stores. As new devices and platforms are continually being released, it is difficult to predict the challenges we may encounter in developing versions of our solutions for use on these alternative devices, and we are devoting significant resources to the support...

  • Page 24
    ... number of registered members, unique visiting members and member page views, with internal tools, which are not independently verified by any third party. Our internal tools have a number of limitations and our methodologies for tracking these metrics may change over time, which could result...

  • Page 25
    ... do not visit our websites on a monthly basis, and a substantial majority of our desktop and mobile traffic is generated by a minority of our members. If the number of our actual members does not meet our expectations, if the rate at which we add new members slows or declines or if we are unable...

  • Page 26
    ... laws relating to disclosure of companies' practices with regard to Do-Not-Track signals from Internet browsers, the ability to delete information of minors, and new data breach notification requirements. California has also adopted privacy guidelines with respect to mobile applications. Outside...

  • Page 27
    ... to these practices, the design of our websites, mobile applications, products, features or our privacy policy. In particular, the success of our business has been, and we expect will continue to be, driven by our ability to responsibly use data about our members. Therefore, our business could...

  • Page 28
    ...our existing competitors in the markets for Talent Solutions, Marketing Solutions and Premium Subscriptions (including Sales Solutions) to continue to focus on these areas. A number of these companies may have greater resources than us, which may enable them to compete more effectively. Specifically...

  • Page 29
    ...within their search results. Enterprises and professional organizations-Talent Solutions. With respect to our Talent Solutions, we compete with online recruiting companies, talent management companies and larger companies that are focusing on talent management and human resource services, job boards...

  • Page 30
    ... value that our solutions provide. We expect our operating results to fluctuate on a quarterly and annual basis, which may result in a decline in our stock price if such fluctuations result in a failure to meet the expectations of securities analysts or investors. Our revenue and operating results...

  • Page 31
    ...adverse effects that could harm our operating results. We expect our revenue growth rate to decline, and, as our costs increase, we may not be able to generate sufficient revenue to sustain profitability over the long term. From 2010 to 2015, our annual net revenue grew from $243.1 million to $2,990...

  • Page 32
    • sales and marketing, including a significant expansion of our field sales organization; • international expansion in an effort to increase our member base, member activity and sales; • general administration, including legal and accounting expenses related to our expanding global presence ...

  • Page 33
    ... around the world and our websites and mobile applications are available in numerous languages. For the year ended December 31, 2015, international revenue represented 38% of our total revenue. We expect to continue to expand our international operations in the future by opening offices in different...

  • Page 34
    ... or unlawful; • increased competition from local websites and services that provide online professional networking solutions, online recruitment services and learning and development products, which may benefit from first-mover advantages. These competitors have expanded and may continue to expand...

  • Page 35
    ... our base of members, enterprises, advertisers, corporate customers and other partners, and increasing their engagement with our services, and will depend largely on our ability to maintain member trust, be a technology leader and continue to provide valuable and high-quality solutions, which...

  • Page 36
    ... others could use similar tactics to develop products that compete with ours. These activities could degrade our brand, negatively impact our website performance and harm our business. When we have become aware of such online services, in many instances we have employed contractual, technological or...

  • Page 37
    ... and operating results. We may also incur significant costs in enforcing our trademarks against those who attempt to imitate our ''LinkedIn'' brand and other valuable trademarks and service marks. In addition, we have chosen to make certain of our technology available under open source licenses...

  • Page 38
    ... with alternative companies on acceptable terms or on a timely basis or both, which could negatively impact revenue from our Marketing Solutions. In addition, the use of display advertising is declining and we face challenges coping with ad blocking technologies that have been developed and are...

  • Page 39
    ... allow users to locate and download our mobile applications that enable our service. Our ability to maintain the number of visitors directed to our website and users of our online services is not entirely within our control. Our competitors' search engine optimization, or SEO, efforts may result in...

  • Page 40
    ... rates. We incur expenses for employee compensation and other operating expenses at our non-US locations in the local currency, and accept payment from customers in currencies other than the US dollar. Since we conduct business in currencies other than US dollars but report our financial results...

  • Page 41
    ... may adversely impact our business and results of operations. We have made and will continue to make acquisitions to add employees, complementary companies, products, technologies or revenue. These transactions could be material to our financial condition and results of operations. We also expect to...

  • Page 42
    ... condition. In addition, any acquisitions we announce could be viewed negatively by users, marketers, developers or investors. Risks Related to Our Class A Common Stock The dual class structure of our common stock as contained in our charter documents has the effect of concentrating voting control...

  • Page 43
    ... Fluctuations in the valuation of companies perceived by investors to be comparable to us or in valuation metrics, such as our price to earnings ratio, could impact our stock price. Additionally, the stock markets have at times experienced extreme price and volume fluctuations that have affected and...

  • Page 44
    ...-takeover provisions, such as those listed above. We generally will consider recommendations of institutional shareholder representative groups, but we will make decisions based on what our board and management believe to be in the best long term interests of our company and stockholders. Our dual...

  • Page 45
    ..., our share price and trading volume could decline. The trading market for our Class A common stock depends, to some extent, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts or the information contained...

  • Page 46
    ... to the extent that the market price per share of our common stock exceeds $381.82. In connection with establishing their initial hedge of the note hedge and warrant transactions, the option counterparties or their respective affiliates have purchased shares of our common stock and/or entered into...

  • Page 47
    ...common stock. We can provide no assurances as to the financial stability or viability of any of the option counterparties. Item 1B. None. Item 2. Properties Unresolved Staff Comments Our headquarters is located in Mountain View, California, where we lease approximately 373,000 square feet of office...

  • Page 48
    ... no public trading market for our Class B common stock. The following table sets forth the high and low sales price per share of our Class A common stock as reported on the NYSE for the periods indicated: 2015 High Low High 2014 Low First Quarter ...Second Quarter . Third Quarter . . Fourth Quarter...

  • Page 49
    ... of Financial Condition and Results of Operations,'' our consolidated financial statements, and the related notes under Item 8 ''Financial Statements and Supplementary Data'' of this Annual Report on Form 10-K to fully understand factors that may affect the comparability of the information presented...

  • Page 50
    ...audited consolidated financial statements not included in this report. Our historical results are not necessarily indicative of future results. 2015 Year Ended December 31, 2014 2013 2012 (in thousands, except per share data) 2011 Consolidated Statements of Operations Data: Net revenue ...Costs and...

  • Page 51
    Stock-based compensation included in the consolidated statements of operations data above was as follows: 2015 Year Ended December 31, 2014 2013 2012 (in thousands) 2011 Cost of revenue ...Sales and marketing ...Product development ...General and administrative ... ... ... ... ... ... ... ... ... ...

  • Page 52
    ..., our working capital needs; • adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation; • adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and • other companies, including companies in our industry, may...

  • Page 53
    ... Lynda.com, provides subscriptions to enterprises and individuals to online education courses. Our Marketing Solutions enable enterprises and individuals to advertise to our member base through relevant content. Our Premium Subscriptions (inclusive of Sales Solutions) enable professionals to manage...

  • Page 54
    ... our value propositions: helping members stay connected and informed, advance their careers, and work smarter. • Customers. We plan to invest in our core product development efforts to transform the way customers hire, market, sell, and learn. In addition, we expect to continue to invest in mobile...

  • Page 55
    ... languages, create more localized products in certain key markets, and more broadly expand our member base internationally. We believe that a higher number of registered members will result in increased sales of our Talent Solutions, Marketing Solutions, and Premium Subscriptions, as customers...

  • Page 56
    ...to grow sales within Talent Solutions, Marketing Solutions, and Premium Subscriptions. Continued growth in unique visiting members will be driven by growth in the number of registered members, improvements to features and products that drive traffic to our website and mobile applications, and global...

  • Page 57
    ... overall site traffic is increasingly coming from mobile, we expect this metric to become less meaningful over time, as a well-designed mobile application reduces the number of clicks and pages a user touches in order to create a high quality mobile experience. For example, member page views may be...

  • Page 58
    ...online channel. Our online, or self-service, sales channel allows members to purchase solutions directly on our website. Members can purchase Premium Subscriptions as well as certain lower priced products in our Talent Solutions and Marketing Solutions, such as Job Seeker subscriptions, Job Postings...

  • Page 59
    ...and evaluating our operating results in the same manner as our management and board of directors. For additional information on the limitations of adjusted EBITDA, see ''Adjusted EBITDA'' in Item 6 ''Selected Financial Data'' for more information. Year Ended December 31, 2015 2014 2013 (in thousands...

  • Page 60
    ... of future results. Year Ended December 31, 2015 2014 2013 (as a percentage of net revenue) Consolidated Statements of Operations Data:(1) Net revenue ...Costs and expenses: Cost of revenue (exclusive of depreciation and amortization below) ...Sales and marketing ...Product development ...General...

  • Page 61
    ... and annual and multi-year subscriptions for enterprises. Marketing Solutions. Marketing Solutions revenue is earned from advertisements (consisting of content-based, graphic display, and text link) shown primarily on LinkedIn.com and its mobile applications based on either a cost per click or cost...

  • Page 62
    ... 31, 2015 2014 ($ in thousands) Year Ended December 31, 2014 2013 ($ in thousands) % Change % Change Net revenue by product: Talent Solutions Hiring ...Learning & Development Total Talent Solutions . Marketing Solutions ...Premium Subscriptions ...Total ...Percentage of net revenue by product...

  • Page 63
    ... International revenue represented 38%, 40%, and 38% of total revenue in 2015, 2014, and 2013, respectively. The increase in international revenue is due to the expansion of our sales, technical, and support operations in international locations and growth in our global member base due to developing...

  • Page 64
    ...% 51% 45% Cost of Revenue Our cost of revenue primarily consists of salaries, benefits, and stock-based compensation for our production operations, customer support, infrastructure and advertising operations teams, and web hosting costs related to operating our website. Credit card processing fees...

  • Page 65
    ...primarily consist of salaries, benefits, stock-based compensation, travel expense and incentive compensation for our sales and marketing employees. In addition, sales and marketing expenses include customer acquisition marketing, branding, advertising, public relations costs, and commissions paid to...

  • Page 66
    ... stock-based compensation for our executive, finance, legal, information technology, human resources and other administrative employees. In addition, general and administrative expenses include outside consulting, legal and accounting services, and facilities and other supporting overhead costs not...

  • Page 67
    ... related to the conversion features in the preferred stock of our joint venture. See Note 1, Description of Business and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements under Item 8 for additional information on this adoption. Provision (Benefit...

  • Page 68
    ... Experimentation credit, which was included in the 2013 tax benefit. The increase in foreign losses is due primarily to research and development expenses growing at a faster rate than international revenue. International research and development expenses include costs charged by LinkedIn Corporation...

  • Page 69
    ... consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K. The results of historical periods are not necessarily indicative of the consolidated results of operations for a full year or any future period. Dec 31, 2015 For the Three Months Ended...

  • Page 70
    ...Total stock-based compensation ...$134,800 $126,874 $145,491 $103,109 $93,626 $82,910 $74,828 $67,769 For the Three Months Ended Jun 30, Mar 31, Dec 31, Sep 30, 2015 2015 2014 2014 (as a percentage of net revenue) Consolidated Statements of Operations Data:(2) Net revenue ...Costs and expenses: Cost...

  • Page 71
    ..., 2014 Mar 31, 2014 Additional Financial Data: Net revenue by product: Talent Solutions Hiring ...$486,746 $460,838 $425,812 $396,375 $369,348 $344,568 $322,227 $291,594 Learning & Development ...48,593 41,273 17,558 - - - - - Total Talent Solutions ...Marketing Solutions ...Premium Subscriptions...

  • Page 72
    ...Mar 31, 2014 Other Financial and Operational Data: Adjusted EBITDA(1) ...$248,502 $208,094 $163,347 $159,861 $178,918 $151,295 $145,256 $116,745 Number of registered members (at period end) ...413,671 396,254 379,887 363,929 346,731 331,517 313,428 296,466 LinkedIn Corporate Solutions customers (at...

  • Page 73
    ...14, 2015, we acquired Lynda.com. We believe that the acquisition of Lynda.com positions us to be able to further expand on our long-term content strategy, and to realize our vision of building the world's first economic graph. The total purchase price paid for all of the outstanding equity interests...

  • Page 74
    ... in technology hardware to support our growth, software to support website functionality development, website operations and our corporate infrastructure. Purchases of property and equipment may vary from period to period due to the timing of the expansion of our operations. We expect our planned...

  • Page 75
    ... stock option exercises and stock purchase plan, as well as the excess tax benefit from stock-based compensation. Additionally, we had repurchases of equity awards of $25.2 million, partially offset by proceeds from our issuance of preferred shares in our joint venture of $20.0 million. In 2014...

  • Page 76
    ... associated with revenue recognition, stock-based compensation, the valuation of goodwill and intangible assets, website and internal-use software development costs, leases, income taxes, and legal contingencies have the greatest potential impact on our consolidated financial statements. Therefore...

  • Page 77
    ...results. Over the life of the derivative, the cumulative fair value adjustments in the consolidated statement of operations could be up to $155.0 million. Website and Internal-Use Software Development Costs We capitalize certain costs related to the development of our website and mobile applications...

  • Page 78
    ... and test new features and functionalities related to our website and mobile applications, assess the ongoing value of capitalized assets, or determine the estimated useful lives over which the costs are amortized, the amount of website and internal-use software development costs we capitalize and...

  • Page 79
    ...recorded are based only on the information available at the time. As additional information becomes available, we reassess the potential liability related to the legal proceeding or litigation, and may revise our estimates. Any revisions could have a material effect on our results of operations. See...

  • Page 80
    ... fair value using an option-pricing model is affected by the market value of our common stock as well as assumptions regarding a number of other complex and subjective variables. These variables include our expected stock price volatility, the expected term of the awards, risk-free interest rates...

  • Page 81
    ... increase when interest rates fall and decrease when interest rates rise. Additionally, the fair value of our Notes may be impacted by price of our Class A common stock. As of December 31, 2015, the estimated fair value of our Notes was $1,382.0 million based on the closing trading price of the...

  • Page 82
    ...the cumulative fair value adjustments in the consolidated statement of operations could be up to $155.0 million. Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant...

  • Page 83
    Item 8. Financial Statements and Supplementary Data LINKEDIN CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm . Consolidated Balance Sheets ...Consolidated Statements of Operations ...Consolidated Statements of Comprehensive Income...

  • Page 84
    ... Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 11, 2016, expressed an unqualified opinion on the Company's internal control over financial reporting. /s/ DELOITTE & TOUCHE LLP San Jose, California February 11, 2016 82

  • Page 85
    ...B common stock, $0.0001 par value; 120,000,000 shares authorized, 15,580,510 and 15,782,261 shares issued and outstanding at December 31, 2015 and 2014, respectively ...Additional paid-in capital ...Accumulated other comprehensive income (loss) ...Accumulated earnings (deficit) ...Total stockholders...

  • Page 86
    LINKEDIN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2014 2013 2015 Net revenue ...Costs and expenses: Cost of revenue (exclusive of depreciation shown separately below) ...Sales and marketing ...Product development ...General and...

  • Page 87
    LINKEDIN CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) Year Ended December 31, 2015 2014 2013 Net income (loss) ...Other comprehensive income (loss): Change in unrealized gains (losses) on investments, net of tax Change in unrealized gains on cash flow hedges ......

  • Page 88
    ... stock in connection with employee stock purchase plan ...Issuance of common stock related to acquisitions, net of reacquired shares ...Vesting of early exercised stock options ...Repurchase of unvested early exercised stock options ...Stock-based compensation ...Excess income tax benefit from stock...

  • Page 89
    ... of common stock in connection with employee stock purchase plan ...Issuance of common stock related to acquisitions, net of reacquired shares ...Repurchase of unvested early exercised stock options ...Stock-based compensation ...Excess income tax benefit from stock-based compensation ...Change in...

  • Page 90
    ... for doubtful accounts and sales returns ...Amortization of investment premiums, net ...Amortization of debt discount and transaction costs ...Stock-based compensation ...Excess income tax benefit from stock-based compensation ...Changes in operating assets and liabilities: Accounts receivable...

  • Page 91
    ... the Company in terms of its future consolidated financial position, results of operations, or cash flows: scaling and adaptation of existing technology and network infrastructure; protection of customers' information and privacy concerns; security measures related to the Company's website; rates of...

  • Page 92
    ... recorded in the consolidated statements of operations for declines in fair value below the cost of an individual investment that are deemed to be other than temporary. The Company assesses whether a decline in value is temporary based on the length of time that the fair market value has been below...

  • Page 93
    ... in management's judgment, market participants would take into account in measuring fair value. Deferred Commissions Deferred commissions are the incremental costs that are directly associated with non-cancelable subscription contracts primarily related to sales of the Company's Talent Solutions and...

  • Page 94
    ...years ended December 31, 2015, 2014 and 2013, respectively. Land is not depreciated. Website and Internal-Use Software Development Costs The Company capitalizes certain costs to develop its website, mobile applications, and internal-use software when planning stage efforts are successfully completed...

  • Page 95
    ... consists primarily of annual subscriptions that are billed monthly, quarterly, or annually. The Company also earns revenue from Job Slots, which enable an enterprise or professional organization to post jobs on its website, and allows the job that is posted to be changed, updated or modified over...

  • Page 96
    ... annual and multi-year subscriptions for enterprises. • Marketing Solutions-Marketing Solutions revenue is earned from advertisements (consisting of content-based, graphic display, and text link) shown primarily on LinkedIn.com and its mobile applications based on either a cost per click or cost...

  • Page 97
    ... included in sales and marketing expense in the consolidated statements of operations. The Company incurred advertising costs of $20.0 million, $5.7 million and $3.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. Stock-Based Compensation Stock-based compensation expense...

  • Page 98
    ... are measured at fair value each reporting period, with changes recorded in Other (income) expense, net in the consolidated statements of operations. The Company early adopted this standard in the fourth quarter of 2015 on a modified retrospective basis. As a result of adopting this standard, the...

  • Page 99
    ..., the customer should account for a cloud computing arrangement as a service contract. This Company early adopted this standard in the fourth quarter of 2015 on a prospective basis, which had an immaterial impact on its financial statements. Recently Issued Accounting Guidance Financial Instruments...

  • Page 100
    ... Company's assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of December 31, 2015 and 2014, are summarized as follows (in thousands): Level 1 Level 2 Level 3 Total December 31, 2015: Assets: Cash equivalents: Money market funds...

  • Page 101
    ... Fiscal 2015 Acquisitions Lynda.com On May 14, 2015, LinkedIn acquired lynda.com, Inc. (''Lynda.com''), a Carpinteria, California-based privately held online learning company teaching business, technology, and creative skills to help people achieve their professional goals. LinkedIn's purchase price...

  • Page 102
    ... with the largest change related to the early adoption of authoritative accounting guidance on deferred taxes. The results of operations of Lynda.com are included in the consolidated financial statements from the date of acquisition. The Company has recognized $107.4 million in revenue and net loss...

  • Page 103
    ......Definite-lived intangible assets: Subscriber relationships-Enterprise Subscriber relationships-Individual . Content(2) ...Developed technology ...Trade name ...Other assets ...Accounts payable ...Accrued liabilities ...Deferred revenue(3) ...Deferred tax liabilities ...Other long-term liabilities...

  • Page 104
    ... total purchase price is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their respective fair values on the acquisition dates. The results of operations of these acquisitions have been included in the consolidated financial statements from the date of...

  • Page 105
    ... 28, 2014, LinkedIn completed its acquisition of Bright Media Corporation (''Bright''), a San Francisco, California-based privately held online job board with candidate matching capabilities. LinkedIn's purchase price of $100.6 million for all the outstanding shares of capital stock of Bright...

  • Page 106
    ...On April 17, 2013, LinkedIn completed its acquisition of Alphonso Labs, Inc. (''Pulse''), a San Francisco, California-based privately held leading mobile news reader and content distribution platform. LinkedIn's purchase price of $47.6 million for all the outstanding shares of capital stock of Pulse...

  • Page 107
    ... assets acquired and the liabilities assumed based on their respective fair values on the acquisition date. Pulse's results of operations have been included in the consolidated financial statements from the date of acquisition. To retain the services of certain former Pulse employees, LinkedIn...

  • Page 108
    ... sheet as of December 31, 2015, as the preferred shares include a put right against the Company available to the noncontrolling interest holders in the future. Net income attributable to common stockholders on the Company's consolidated statements of operations includes the accretion of the RNCI...

  • Page 109
    ...and earnings will be adversely affected by foreign currency exchange rate fluctuations. The Company's program is not designated for trading or speculative purposes. These derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of...

  • Page 110
    ..., 2015 and December 31, 2014, the Company had outstanding balance sheet hedges with a total notional amount of $239.9 million and $190.1 million, respectively. Other Derivative The Company's other derivative is related to the accounting for the embedded features on the preferred stock of the Company...

  • Page 111
    ...5,591 5,591 - 149 - 149 $5,442 See Note 2, Fair Value Measurements, for additional information related to the fair value of the Company's foreign currency derivative contracts and other derivative financial instrument. Financial Statement Effect of Derivative Contracts The following table presents...

  • Page 112
    ...table presents the impact of the Company's derivative contracts on the consolidated statement of operations for the periods presented (in thousands): Location Year Ended December 31, 2015 2014 2013 Cash flow hedges ...Cash flow hedges ...Balance sheet hedges ...Other derivative financial instrument...

  • Page 113
    ... for the periods presented (in thousands): Goodwill-December 31, 2013 ...2014 acquisitions ...Goodwill-December 31, 2014 ...2015 Lynda.com acquisition ...2015 other acquisitions ...Goodwill-December 31, 2015 ...Other Intangible Assets The following table presents the detail of other intangible...

  • Page 114
    ... 59,357 31,900 11,249 31,706 $260,189 Total ... Effective November 1, 2015, the Company implemented a discretionary-time-off policy for certain US employees, wherein there is no set amount of minimum or maximum vacation time. The Company paid-out in cash $34.5 million of accrued vacation balances...

  • Page 115
    ...ending on March 31, 2015 (and only during such calendar quarter), if, for at least 20 trading days during the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter the last reported sale price of the Company's Class A common stock is greater than or...

  • Page 116
    ... and issuance costs ...Total ...Effective interest rate of the liability component ... $ 6,631 45,559 $52,190 4.7% $ 881 5,916 $6,797 4.7% The total estimated fair value of the Notes as of December 31, 2015 was $1,382.0 million. The fair value was determined based on the closing trading price of...

  • Page 117
    ...416 Total other income (expense), net ... (1) The Company capitalized $1.3 million of interest expense related to properties under construction in 2015. The Company did not capitalize interest expense in 2014 and 2013. (2) In the fourth quarter of 2015, the Company adopted authoritative accounting...

  • Page 118
    ... the release of RSUs, and to a lesser extent, the incremental common shares issuable upon the exercise of stock options and purchases related to the 2011 Employee Stock Purchase Plan. The dilutive effect of these potential common shares is reflected in diluted earnings per share by application of...

  • Page 119
    ... of undistributed earnings ...$(166,144) $(20,166) $ (15,747) $ (2,088) $ 26,769 $ 5,039 Denominator: Number of shares used in basic calculation . . Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A common shares outstanding ...Employee stock options ...RSUs and...

  • Page 120
    ... of which is expected to expire in 2029. The Company's future minimum payments, which exclude operating expenses, under non-cancelable operating leases for office facilities and data centers having initial terms in excess of one year as of December 31, 2015, are as follows (in thousands): Gross...

  • Page 121
    ... As of December 31, 2015, the Company had reserved shares of common stock for future issuances in connection with the following: Options outstanding ...RSUs outstanding ...Available for future stock option and RSU grants ...Available for future employee stock purchase plan awards ...2,582,517 6,136...

  • Page 122
    ... be granted at a price per share not less than the market value of the underlying stock at date of grant. Option grants are generally NSOs and granted only to certain employees and members of the Company's Board. Options granted to existing employees generally vest monthly over a four-year period...

  • Page 123
    ... of stock option activity in 2015 is as follows: Options Outstanding WeightedNumber of Average Shares Exercise Price WeightedAverage Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding-December 31, 2014 Assumed options from acquisitions Granted ...Exercised...

  • Page 124
    ... the amount of stock-based compensation related to stock-based awards to employees on the Company's consolidated statements of operations during the periods presented (in thousands): Year Ended December 31, 2015 2014 2013 Cost of revenue ...Sales and marketing ...Product development ...General and...

  • Page 125
    .... Compensation cost is not recorded for awards that do not vest. The fair value of RSUs is based on the closing market price of our common stock on the date of grant. The fair value of options and ESPP shares is estimated using the Black-Scholes option valuation model, which requires the Company to...

  • Page 126
    ... 31, 2015, 2014 and 2013, respectively. The weighted-average grant date fair value of assumed acquisition-related stock options was $168.34, $164.71 and $166.08 for the years ended December 31, 2015, 2014 and 2013, respectively. The following table presents the weighted-average assumptions used to...

  • Page 127
    ... and the Company's effective tax rate for the periods presented: Year Ended December 31, 2015 2014 2013 US federal taxes at statutory rate ...State income taxes, net of federal benefit Foreign rate differential ...Permanent differences ...Stock-based compensation ...Research and development credits...

  • Page 128
    ... presents the significant components of the Company's deferred tax assets and liabilities for the periods presented (in thousands): December 31, 2015 2014 Deferred tax assets: Accruals and reserves ...Net operating loss carryforwards Tax credit carryforwards ...Stock-based compensation ...Other...

  • Page 129
    ... 1986, as amended and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. The Company believes an ownership change, as defined under Section 382 of the Internal Revenue Code, existed in prior years, and has reduced its...

  • Page 130
    ... and in assessing performance. The chief operating decision maker for the Company is the Chief Executive Officer (''CEO''). The CEO reviews financial information presented on a consolidated basis, accompanied by information about revenue by product, sales channel, and geographic region for purposes...

  • Page 131
    ...by geographic region for the periods presented (in thousands): 2015 Year Ended December 31, 2014 2013 Net revenue by product: Talent Solutions Hiring ...Learning & Development ...Total Talent Solutions ...Marketing Solutions ...Premium Subscriptions ...Total ... $1,769,771 107,424 1,877,195 581,328...

  • Page 132
    ...Class A common stock, and anticipated to close in the first quarter of 2016. For accounting purposes, the equity consideration will be valued based on the closing price of the Company's Class A common stock as reported by the NYSE on the closing of the acquisition, and is therefore subject to change...

  • Page 133
    ...evaluation of internal control over financial reporting excluded the internal control activities of lynda.com, Inc. (''Lynda.com''), which we acquired on May 14, 2015, and whose financial statements constitute 1.5% of net assets and 3.5% of net revenue of our consolidated financial statement amounts...

  • Page 134
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of LinkedIn Corporation Mountain View, California We have audited the internal control over financial reporting of LinkedIn Corporation and subsidiaries (the ''Company'') as of December 31, 2015, based...

  • Page 135
    ... Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2015, of the Company and our report dated February 11, 2016, expressed an unqualified opinion on those financial statements. /s/ DELOITTE & TOUCHE LLP San Jose, California...

  • Page 136
    ... None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2015 annual meeting of stockholders (the ''Proxy...

  • Page 137
    ... Schedules Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes herein. 3. Exhibits See the Exhibit Index immediately following the signature page of this Annual Report on Form 10...

  • Page 138
    ... executive officer) Senior Vice President and Chief Financial Officer (principal financial officer) Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer) Director Chair of the Board of Directors Director Director Director Director 136 2/11/2016 2/11/2016...

  • Page 139
    .... Form of LinkedIn Corporation's Class B Common Stock Certificate. Third Amended and Restated Investors' Rights Agreement, by and among LinkedIn Corporation and the investors listed on Exhibit A thereto, dated June 13, 2008. Indenture, dated November 12, 2014, between LinkedIn Corporation and...

  • Page 140
    ... Number Exhibit Description Form Incorporated by Reference Exhibit(s)/ File No. Appendix Filing Date 10.3+ Form of Stock Option Agreement under 2011 Equity Incentive Plan. Form of Indemnification Agreement by and between LinkedIn Corporation and each of its directors and executive officers...

  • Page 141
    ...2011. Sublease by and between LinkedIn Corporation and Actel Corporation, dated February 18, 2010. 2011 Employee Stock Purchase Plan. Form of Supplement to Offer Letter by and between LinkedIn Corporation and certain named executive officers. Form of Restricted Stock Unit Agreement under 2011 Equity...

  • Page 142
    ...other parties. Agreement and Plan of Merger By and Among the Company, lynda.com, Inc. and other parties. List of subsidiaries. Consent of Deloitte & Touche LLP, independent registered public accounting firm. Power of Attorney (see the signature page to this Annual Report on Form 10-K). Certification...

  • Page 143
    Exhibit Number Exhibit Description Form Incorporated by Reference Exhibit(s)/ File No. Appendix Filing Date 32.1 Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. ...