MSFT Microsoft Corporation

By Deepa Seetharaman 

Professional online network LinkedIn Corp. reported both its highest-ever revenue and its largest loss as a public company in one of its final quarterly reports before it is set to be bought by Microsoft Corp.

Second-quarter revenue rose 31%, to $932.7 million, from $711.7 million, driven by its cornerstone talent-solutions division, which helps corporate recruiters identify job candidates. Revenue from this unit jumped 35% to $597 million as LinkedIn added customers and prior customers boosted spending.

At the same time, the Mountain View, Calif. company posted a loss of $119.3 million, or 89 cents a share, compared with the year-ago loss of $67.7 million, or 53 cents a share. The loss, driven largely by a $101 million expense related to the company's tax assets, was LinkedIn's largest since going public in 2011, according to FactSet data. LinkedIn said it wrote down the value of its deferred tax assets because it no longer expects to realize them.

Excluding certain expenses, LinkedIn said it would have earned $1.13 a share. Analysts, on average, had expected the company to post earnings of 78 cents per share on that basis, according to Thomson Reuters.

"Results are reassuring given this is Microsoft's largest deal by a factor of 3x and clearly demonstrate LinkedIn's dominant position in the professional social network," UBS analyst Brent Thill said.

Microsoft agreed in June to buy LinkedIn for $26.2 billion, betting LinkedIn can bolster its software offerings. For LinkedIn, the deal offers an opportunity to reaccelerate growth by tapping Microsoft's large customer base.

In a regulatory filing, LinkedIn reiterated that it expects the deal to close in 2016. The company said it expects transaction-related costs of about $100 million.

The Microsoft deal also provides an exit for LinkedIn shareholders after the stock tumbled from a peak of $269 in February 2015 to as low as $101.11 last February after the company issued a disappointing outlook, which it attributed to a slowdown in its higher-margin online sales business and a decision to shelve an ad product.

Microsoft agreed to pay $196 per LinkedIn share, a 50% premium to the social network's price before the deal. The stock has traded in a tight range since then, closing Thursday at $192.01 and barely moving after the earnings report.

LinkedIn's current business model and results don't reflect the potential of the Microsoft deal, Wedbush analyst Steve Koenig said in an email, adding that LinkedIn content could help Microsoft differentiate its products.

Outside the talent-solutions group, LinkedIn said revenue from its marketing-solutions unit rose 29% to $181 million, with about 60% coming from "sponsored content" or ads that appear within users' LinkedIn feeds. This is one of the company's fastest-growing ad products.

Premium subscriptions revenue increased 21% to $155 million.

LinkedIn ended the quarter with 9,906 employees, up 13% from the previous year. The company said it would continue to expand its workforce in 2016 but at a slower pace than in 2015. Stock-based compensation costs in the quarter were roughly $145 million, or roughly 16% of its revenue.

Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com

(END) Dow Jones Newswires

August 04, 2016 18:58 ET (22:58 GMT)

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