Equity Research Report - LinkedIn Corp.

Date: 03/31/2016

Hugo CastalanCity University of New York – Baruch [email protected]

Equity Research Report LinkedIn Corp.

Company Description• Online professional network founded in 2002.• Approximately 414 million members across 200 countries as of

February 2016.

• Free solutions: members are able to create, manage and share their professional identities. They can also stay informed and connected with other members or organizations.

• Sources of revenue:• Talent Solutions: hiring tool for companies and learning products

for customers.• Marketing Solutions: enable enterprises and individuals the ability

to advertise to its member base.• Premium Subscription: help members and enterprises to grow

their network, manage their identity, access to insightful information, and connect with talents.

Management Overview

Reid HoffmanCo-Founder and Chairman

• Board member during the creation of PayPal, and became COO in 2000.

• Was CEO of LinkedIn before becoming chairman and President in 2007.

• Known as one of Silicon Valley’s most prolific investors. Current and part investments include: Facebook, Airbnb, and Coupon.com.

Jeffrey WeinerCEO and Director

• Spent 7 years at Yahoo where he became EVP of the Network Division.

• Became CEO of LinkedIn and director of the Board in 2009.

• Also a member of the Board of Directors at Intuit Inc., which develops financial and tax preparation software for small businesses.

Steven SordelloCFO and Senior VP

• Previously served as CFO at TiVo Inc. and IAC Search & Media Inc.

• Was Director of Financial Planning of Adobe Inc. and held senior positions at Adobe System Inc. and Syntex Corp.

• Became CFO at LinkedIn in 2007 and Senior Vice President in 2011

• Currently a member of the Board of Directors at Cloudera Inc.

Products Overview

63%19%

18%Product Segmentation Talent Solutions: hiring and learning productsMarketing Solutions: advertising optionsPremium Subscriptions: offers additional fea-tures

57%28%

9%6%

Geographic SegmentationUSAEMEAAPACOthers

SWOT Analysis

Strengths:

• First mover advantage.• Users (400 million).• Three different streams of revenue.• Operating in over 200 countries.

Weaknesses:

• Low user engagement on the platform.

• Heavy dependency on online recruiting for income.

• Communication platform.

• Growing job market in emerging countries.

• Acquisition of online service Lynda.com.

• Opportunities:

• Other social networks with strong database.

• Fake accounts and hacking instances.• Dependent on the job market.

Threats:

LinkedIn Corp.

Number of Unique Visiting Members (mm)

Q1 '12

Q2 '12

Q3 '12

Q4 '12

Q1 '13

Q2 '13

Q3 '13

Q4 '13

Q1 '14

Q2 '14

Q3 '14

Q4 '14

Q1 '15

Q2 '15

Q3 '15

Q4 '15

0

20

40

60

80

100

120

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

50

100

150

200

250

300

350

400

450

Number of Members since Creation (mm)

Acquisition of Lynda.com (2Q 2015)Lynda.com:• Founded in 1995.• Online learning

company teaching business, technology and creative skills.

• Learning solutions: business, academic and government.

• 4,606 courses taught by industry experts. Over 250,000 video tutorials.

• Available in English, German, French, Japanese, and Spanish.

The deal:• Announced April 9,

2015.• Acquisition price: $1.5

billion.• 52% cash; 48% stock.

Opportunities:• LinkedIn aims to

connect people with job opportunities. Lynda.com aims to connect people with an education for those jobs.

• Integration of tutorials to increase users’ time spent, frequency and engagement on LinkedIn.

• Possibility for recruiters to target users who have completed specific training.

Challenges:• Adapt existing learning

solutions to Lynda’s products.

• Close skills gap using the existing database to match job candidates to related online courses.

Current Situation

Global

Environment

After announcing four interest hikes for 2016, the Fed seems more likely to raise interest rates only twice this year. Indeed, questions concerning the global economic growth, as well as unconvincing data about the US economy, pushed policymakers and investors to reconsider their strategy at the start of 2016. The S&P500 was down 5.07% and 0.41% in January and February. It rebounded in March (+4.11%) as investors regained confidence in the strength of the US economy. Growth is expected to be slow in 2016 as weaker economies around the globe prevent the Fed from taking serious actions, and volatile energy price maintain a considerable level of uncertainty.

Earnings

Performanc

e

Since FY2014 Q1, LinkedIn delivered a series of negative EPS. It recorded a slightly positive EPS on FY2014 Q4 ($0.02). Since then EPS sank deeper, going as low as negative $0.53 on FY2015 Q2. Total EPS for FY2015 was -$1.29. LinkedIn excepts 2016 revenues and EPS of $3.6B-$3.65B, and $3.05-$3.20 respectively.

Recent

Pullback

On February 4th, LinkedIn topped expectation on earnings and estimates for FY2015 Q4, but announced weak guidance. Weiner said to expect Q1 revenue of $820M ($866.7 consensus), 2016 revenue of $3.6B-$3.65B ($3.91B consensus), and 2016 EPS of $3.05-$3.20 ($3.67 consensus). As a result, the stock slid more than 40%, losing $1billion in market value.

Finance and Trading Summary

Trading InformationLast Price: 115.63

52 week High/Low: 266.53/ 98.2552 week range: -53.62%

Beta: 1.5250-Days MA: 114.19

200-Days MA: 187.97

Valuation MeasuresMarket Cap 15.27B

P/E NMP/B 3.38P/S 5.05

EV/EBITDA 52.84EV/Revenue 4.33

Financial HighlightsEV/EBITDA 52.84

Profit Margin -5.56%Operating Margin -4.07Return on Assets -1.22%Return on Equity -4.21%

Revenue per Share 23.18Diluted EPS -1.29

Cash per Share 23.62Total Debt/Equity 25.06

Current Ratio 3.31Book Value Per

Share 33.84

Annotated Stock Chart

Earnings 15Q4Beat EstimatesLow Guidance

Earnings 15Q1Beat EstimatesLow Guidance

Earnings 14Q4Beat Estimates Earnings

15Q4Beat EstimatesHigh Guidance

Earnings 14Q2Beat Estimates

Earnings 15Q2Beat EstimatesHigh Guidance Settles class action lawsuit for

$13M: repeatedly sending email to users with suggestion to add people who didn’t approve those emails

Files a shelf registration in the amount of $683.15 million

Comparable Companies Analysis

LinkedIn Inc.

Monster Worldwide

Inc.

Facebook Inc.

Twitter Inc.

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0xP/B - MRQ

Business Oriented Social Network Companies

Other Social Net-work Companies

LinkedIn Inc.

Monster Worldwide

Inc.

Facebook Inc.

Twitter Inc. (35.0x)

(25.0x)

(15.0x)

(5.0x)

5.0x

15.0x

25.0x

35.0x

45.0x

55.0x

EV / Revenues EV / EBITDA

Other Social Net-work Companies

Business Oriented Social Network Companies

LinkedIn Corp.LinkedIn Corp.

Comparable Companies Analysis (cont.)

2015 2016 2017 2018-5%15%35%55%75%95%

115%135%155%

Accumulated Revenue Growth

LinkedIn Corp. Monster Worldwide, Inc. Twitter, Inc. Facebook, Inc.

LinkedIn Corp.

Monster Worldwide, Inc.

Facebook, Inc.

Twitter, Inc.

-30% -20% -10% 0% 10% 20% 30%

-5.55%

11.04%

20.57%

-23.49%

Net Profit Ratio

Business Oriented Social Network Companies

Other Social Network Companies

2-year Performance

3/31/1

45/1

/146/1

/147/1

/148/1

/149/1

/14

10/1/

14

11/1/

14

12/1/

141/1

/152/1

/153/1

/154/1

/155/1

/156/1

/157/1

/158/1

/159/1

/15

10/1/

15

11/1/

15

12/1/

151/1

/162/1

/163/1

/16 20

40

60

80

100

120

140

160

S&P 500 Internet Software and Services Index LinkedIn Inc Monster Worldwide Inc

%

LinkedIn Corp.

2-year Performance (cont.)

3/31/1

45/1

/146/1

/147/1

/148/1

/149/1

/14

10/1/

14

11/1/

14

12/1/

141/1

/152/1

/153/1

/154/1

/155/1

/156/1

/157/1

/158/1

/159/1

/15

10/1/

15

11/1/

15

12/1/

151/1

/162/1

/163/1

/16 20

40

60

80

100

120

140

160

180

200

LinkedIn Corp S&P 500 Facebook Inc Twitter Inc

%

Discounted Cash Flow Analysis Actual Projected Forecast

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

$mm $mm $mm $mm $mm $mm

Total Revenue 2,990.91 3,674.88 4,416.53 5,281.73 6,156.06 7,148.53

EBITDA 893.96 449.14 811.24 1,125.45 1,020.11 1,130.60

EBIT (121.80) (193.46) (32.36) 201.46 558.50 919.41

Tax Rate 37.50% 37.50% 37.50% 37.50% 37.50% 37.50%

EBIAT (76.13) (120.91) (20.23) 125.91 349.06 574.63

Depreciation & Amortization 420.47 568.68 614.59 723.74 733.85 795.26

Change in Working Capital (168.40) 20.06 (99.07) (110.32) (67.85) (102.27)

Capital Expenditures (507.25) (639.69) (714.75) (766.79) (791.70) (839.66)

Unlevered Free Cash Flow (UFCF) 5.50 (211.98) (21.32) 193.19 $359.06 632.51

Discount Rate (WACC) 8.03% 8.03% 8.03% 8.03% 8.03%

Present Value of Future Cash Flows 5.50 $(196.22) $(18.27) $153.23 $263.61 $429.83

Sum of Present Value of Projected UFCF 632.18

Discounted Cash Flow Analysis (cont.)EV/EBITDA

12.78 14.28 15.77 17.28 17.28

WACC

7.93% $110.26 $122.16 $134.06 $145.95 $145.95

7.98% $110.22 $122.11 $134.00 $145.89 $145.89

8.03% $110.17 $122.05 $133.94 $145.83 $145.83

8.08% $110.12 $122.00 $133.88 $145.76 $145.76

8.13% $110.08 $121.95 $133.82 $145.70 $145.70

Mean $131.56

Median $133.94

High $145.95

Low $110.08

Long-Term Growth Rate

3.70% 3.85% 4.00% 4.15% 4.30%

WACC

7.93% $117.65 $121.80 $126.28 $131.11 $136.34

7.98% $116.33 $120.39 $124.75 $129.46 $134.55

8.03% $115.04 $119.00 $123.26 $127.85 $132.81

8.08% $113.78 $117.65 $121.81 $126.28 $131.12

8.13% $112.55 $116.33 $120.39 $124.76 $129.47

Mean $123.63

Median $123.26

High $136.34

Low $112.55

Price Target RangesP/B implied

$80 $90 $100 $110 $120 $130 $140 $150 $160 $170 $180 $190 $200 $210 $220

Current $115.63

Mean $145.15

ConclusionLinkedIn is the uncontested leader in the online professional network sector. The number of users grew exponentially over the years, but the overall user engagement stays low. The acquisition of Lynda.com offers interesting opportunities as it will improve the learning solution, which, combined with the hiring solution, represents 63% of sales. The evolution of job markets in emerging countries will benefit LinkedIn (only 85% of revenues comes form USA and EMEA).

Recent results show signs of weakness. LinkedIn failed to engage its members on their platform. Most users use the free version, judging the premium version is not worth it. For a long time, trading multiples suggested outstanding growth ahead for LinkedIn. The company was not able to deliver the expected results and investors changed their mind in February 2016. A 40% pull back from almost $200 to a $115 range is excessive.

Recommendation: BUY Price Target: $145.15

APPENDIX

Number of users since creation (slide 6):Source: https://ourstory.linkedin.com/#year-2014http://expandedramblings.com/index.php/by-the-numbers-a-few-important-linkedin-stats/February 2016

Years Users #2003 0.000012004 0.12005 1.62006 4.22007 82008 172009 322010 562011 1202012 1502013 2772014 3322015 414

Number of Unique Visiting Members (mm) (Slide 6):Source: http://www.statista.com/statistics/274052/number-of-unique-visitors-to-linkedin/February 2016

Quarter Unique VisitorsQ1 '12 50Q2 '12 51Q3 '12 52Q4 '12 58Q1 '13 65Q2 '13 75Q3 '13 78Q4 '13 76Q1 '14 82Q2 '14 84Q3 '14 90Q4 '14 93Q1 '15 97Q2 '15 97Q3 '15 100Q4 '15 100

Geographic Segmentation (Slide 4):Source: Bloomberg Pro3/31/2016

Locations Sales (mm)USA 1,500

EMEA 730.24APAC 246.88

Others 167.98

Sources of Revenue Revenues

Talent Solutions: hiring and learning

products0.628

Marketing Solutions: advertising options 0.194

Premium Subscriptions: offers additional features

0.178

Product Segmentation (Slide 4):Source: Bloomberg Pro3/31/2015

Finance and Trading Summary (Slide 9):Source: Yahoo Financehttp://finance.yahoo.com/q/ks?s=LNKD+Key+Statistics

Additional Financial Statements:

S&P Capital IQ

Income Statement (Slide 20)Balance Sheet (Slide 21)Cash Flow Statement (Slide 22)

Income Statement 

For the Fiscal Period Ending12 months

Dec-31-2010

12 monthsDec-31-

2011

12 monthsDec-31-

2012

12 monthsDec-31-

2013

12 monthsDec-31-

2014

12 monthsDec-31-

2015 Revenue 243.1 522.2 972.3 1,528.5 2,218.8 2,990.9 Other Revenue - - - - - - Total Revenue 243.1 522.2 972.3 1,528.5 2,218.8 2,990.9

Cost Of Goods Sold 44.8 81.4 125.5 202.9 293.8 418.9 Gross Profit 198.3 440.7 846.8 1,325.6 1,925.0 2,572.1

Selling General & Admin Exp. 94.0 239.6 452.9 747.7 1,115.7 1,497.8 R & D Exp. 65.1 132.2 257.2 395.6 536.2 775.7 Depreciation & Amort. 19.6 43.1 79.8 134.5 236.9 420.5 Other Operating Expense/(Income) - - - - - -

Other Operating Exp., Total 178.7 414.9 789.9 1,277.8 1,888.8 2,693.9

Operating Income 19.6 25.8 56.9 47.8 36.1 (121.8)

Interest Expense - - - - (6.8) (50.9) Interest and Invest. Income 0.1 0.2 1.0 2.9 5.0 10.6 Net Interest Exp. 0.1 0.2 1.0 2.9 (1.8) (40.3)

Currency Exchange Gains (Loss) (0.4) (3.0) (0.7) (1.6) (3.3) (15.0) Other Non-Operating Inc. (Exp.) (0.3) (0.1) (0.2) 0.0 0.1 (8.5) EBT Excl. Unusual Items 19.0 22.9 57.1 49.1 31.1 (185.7)

Merger & Related Restruct. Charges - - - - - (29.1) Impairment of Goodwill - - - - - -Gain (Loss) On Sale Of Invest. - 0.0 0.1 0.1 0.1 0.1 Other Unusual Items - - - - - - EBT Incl. Unusual Items 19.0 22.9 57.1 49.2 31.2 (214.7)

Income Tax Expense 3.6 11.0 35.5 22.5 46.5 (50.0) Earnings from Cont. Ops. 15.4 11.9 21.6 26.8 (15.3) (164.8)

Earnings of Discontinued Ops. - - - - - -Extraord. Item & Account. Change - - - - - - Net Income to Company 15.4 11.9 21.6 26.8 (15.3) (164.8)

Minority Int. in Earnings - - - - (0.4) (1.4) Net Income 15.4 11.9 21.6 26.8 (15.7) (166.1)

Balance SheetBalance Sheet as of: Dec-31-

2010Dec-31-

2011Dec-31-

2012Dec-31-

2013Dec-31-

2014Dec-31-

2015ASSETSCash And Equivalents 93.0 339.0 270.4 803.1 460.9 546.2 Short Term Investments - 238.5 479.1 1,526.2 2,982.4 2,573.1 Total Cash & ST Investments 93.0 577.5 749.5 2,329.3 3,443.3 3,119.4

Accounts Receivable 58.3 111.4 203.6 302.2 449.0 603.1 Total Receivables 58.3 111.4 203.6 302.2 449.0 603.1

Prepaid Exp. 4.9 10.8 14.3 32.1 53.0 63.0 Other Current Assets 16.1 26.3 51.3 91.9 176.8 149.7 Total Current Assets 172.2 725.9 1,018.8 2,755.5 4,122.1 3,935.1

Gross Property, Plant & Equipment

95.1 192.3 328.3 605.4 1,147.4 1,709.3

Accumulated Depreciation (38.4) (77.4) (141.7) (243.7) (406.5) (662.3) Net Property, Plant & Equipment

56.7 114.9 186.7 361.7 740.9 1,047.0

Goodwill - 12.2 115.2 150.9 356.7 1,507.1 Other Intangibles 5.2 8.1 32.8 43.0 131.3 373.1 Deferred Charges, LT 1.7 - - - - -Other Long-Term Assets 2.3 12.6 28.9 41.7 76.3 148.9 Total Assets 238.2 873.7 1,382.3 3,352.8 5,427.3 7,011.2

LIABILITIESAccounts Payable 12.9 28.2 53.6 66.7 100.3 162.2 Accrued Exp. 27.6 58.6 104.1 183.0 260.2 316.8 Unearned Revenue, Current 65.0 139.8 257.7 392.2 522.3 709.1 Other Current Liabilities - - - - - - Total Current Liabilities 105.5 226.7 415.4 642.0 882.8 1,188.1

Long-Term Debt - - - - 1,081.6 1,126.5 Def. Tax Liability, Non-Curr. 6.6 18.6 27.7 14.9 - -Other Non-Current Liabilities

1.9 3.5 30.8 61.5 132.1 201.1

Total Liabilities 114.0 248.7 473.9 718.4 2,096.4 2,515.7

Pref. Stock, Convertible 103.8 - - - - - Total Pref. Equity 103.8 - - - - -

Common Stock 0.0 0.0 0.0 0.0 0.0 0.0 Additional Paid In Capital 25.1 617.6 879.3 2,573.4 3,285.7 4,588.6 Retained Earnings (4.7) 7.2 28.9 55.6 39.9 (129.1) Treasury Stock - - - - - -Comprehensive Inc. and Other

0 0.1 0.3 0.3 (0.2) 9.1

Total Common Equity 20.4 625.0 908.4 2,629.4 3,325.4 4,468.6

Minority Interest - - - 5.0 5.4 26.8

Total Equity 124.2 625.0 908.4 2,634.4 3,330.8 4,495.5

Total Liabilities And Equity 238.2 873.7 1,382.3 3,352.8 5,427.3 7,011.2

Cash Flow

For the Fiscal Period Ending

12 monthsDec-31-

2010

12 monthsDec-31-

2011

12 monthsDec-31-

2012

12 monthsDec-31-

2013

12 monthsDec-31-

2014

12 monthsDec-31-

2015 Net Income 15.4 11.9 21.6 26.8 (15.7) (166.1) Depreciation & Amort. 15.7 34.1 58.7 102.5 161.6 234.0 Amort. of Goodwill and Intangibles

1.0 3.6 9.9 16.4 34.6 134.7

Depreciation & Amort., Total 16.7 37.7 68.6 118.9 196.2 368.7

Other Amortization 2.9 5.4 11.2 15.6 46.6 97.4 (Gain) Loss On Sale Of Invest. - - 5.3 8.3 13.6 20.3 Stock-Based Compensation 8.8 29.8 86.3 193.9 319.1 510.3 Tax Benefit from Stock Options (0.1) (1.6) (35.8) (43.8) (99.2) (12.2) Provision & Write-off of Bad debts

1.8 3.1 0.6 4.8 11.3 12.7

Other Operating Activities - - - - 0.4 1.4 Change in Acc. Receivable (35.7) (54.9) (91.3) (102.6) (137.6) (149.5) Change in Acc. Payable 15.6 37.0 85.6 114.7 150.0 100.9 Change in Unearned Rev. 39.5 74.8 117.9 134.5 129.3 144.0 Change in Inc. Taxes (0.5) 9.7 27.1 3.1 19.3 (36.3) Change in Other Net Operating Assets

(10.1) (19.4) (30.1) (37.7) (64.4) (84.5)

Cash from Ops. 54.4 133.4 267.1 436.5 569.0 807.0

Capital Expenditure (50.0) (89.0) (125.4) (278.0) (547.6) (507.2) Cash Acquisitions - - (60.5) (6.7) (220.5) (676.7) Divestitures - - - - - -Sale (Purchase) of Intangible assets

(4.5) (7.4) 3.5 (12.5) (33.0) (1.1)

Invest. in Marketable & Equity Securt.

- (239.4) (245.5) (1,055.4)

(1,472.3)

386.4

Net (Inc.) Dec. in Loans Originated/Sold

- - - - - -

Other Investing Activities (1.1) (2.7) (5.1) (4.9) (19.8) 6.6 Cash from Investing (55.6) (338.5) (433.0) (1,357.5)

(2,293.3)

(792.1)

Short Term Debt Issued - - - - - -Long-Term Debt Issued - - - - 1,305.4 -Total Debt Issued - - - - 1,305.4 -Short Term Debt Repaid - - - - - -Long-Term Debt Repaid - - - - - -Total Debt Repaid - - - - - -

Issuance of Common Stock 4.8 445.9 61.3 1,405.5 66.4 71.0 Repurchase of Common Stock (0.2) - - - - (25.2)

Total Dividends Paid - - - - - -

Special Dividend Paid - - - - - -Other Financing Activities (0.3) 6.6 35.3 48.7 16.7 32.1 Cash from Financing 4.3 452.5 96.6 1,454.2 1,388.5 77.8

Foreign Exchange Rate Adj. (0.1) (1.3) 0.8 (0.5) (6.4) (7.4) Net Change in Cash 3.0 246.1 (68.6) 532.7 (342.2) 85.4

Comparable Companies Analysis (Slide 11): Source: S&P Capital IQS&P Capital IQ Estimates

Company P/B - MRQ EV/Revenue EV/EBITDA Net Profit Margin

LinkedIn Corp 3.4x 4.9x 48.5x -5.55%Monster Worldwide Inc 0.6x 0.5x 4.9x 11.04%

Facebook Inc 7.4x 16.3x 41.6x 20.57%Twitter Inc 2.6x 4.9x (31.9x) -23.49%

Comparable Companies Analysis (cont.) (Slide 12): Source: S&P Capital IQS&P Capital IQ Estimates

Company 2015 Sales

Growth

2016Sales

Growth 1Yr

2017 Sales

Growth 2Yrs

2018 Sales

Growth 3Yrs

LinkedIn Corp 2,990.91 0% 3,674.88 122.87% 4,416.53 147.66% 5,281.73 176.59%Monster Worldwide

Inc 666.90 0% 648.66 97.26% 668.07 100.17% 709.90 106.45%

Facebook Inc

17,928.00

0%

25,605.75

142.83% 33,893.52 189.05% 43,561.9

9 242.98%

Twitter Inc 2,218.03 0% 2,958.26 133.37% 3,714.63 167.47% 4,502.47 202.99%

Charts 2-Year Performance (Slide 13 & 14):Source: S&P Capital IQ

Dates: 3/30/2014 to 3/30/2016.Relative Performance.Slide 13: focused comparison.Slide 14: broad comparison.Constituents:

-LinkedIn Corp(LNKD)-Monster Worldwide Inc (MWW)-Facebook Inc (FB)-Twitter Inc (TWTR)-S&P 500 Index (^S&P500)-S&P 500 Internet Software and Service

Index.

S&P 500 Internet Software and Service Index (4/17/2016)

Company Name

Exchange: Ticker

Market Cap (mm)

Revenue (mm)

Price Close P/E P/BV

Akamai Technologie

s, Inc.NasdaqGS:A

KAM 8990.39 2197.45 50.93 28.61x 2.89x

Alphabet Inc.

NasdaqGS:GOOG 529633.13 74989 759 32.17x 4.46x

Alphabet Inc.

NasdaqGS:GOOGL 529633.13 74989 780 33.06x 4.46x

eBay Inc. NasdaqGS:EBAY 28817.28 8592 25.22 15.76x 4.54x

Facebook, Inc. NasdaqGS:FB 321611.46 17928 109.64 84.82x 7.03x

VeriSign, Inc.

NasdaqGS:VRSN 9657.59 1059.37 88.7 31.45x NM

Yahoo! Inc. NasdaqGS:YHOO 34568.09 4968.3 36.51 NM 1.19x

Historical pricing data provided by:

-20%

-15%

-10%

-5%

0%Working Capital to Revenue

Discounted Cash Flow Analysis (Slide 15):

Total Revenue, EBITDA, EBIT, EBIAT, D&A, Capital Expenditures.Source: S&P Capital IQ Estimates

Change in Net Working Capital: Most relevant driver: Total RevenueCorrelation Coef: -0.3065Sd: 0.022Mean: -12.43%

Driver FY2011 FY2012 FY2013 FY2014 FY2015Revenue $522.19 $972.31 $1,528.55 $2,218.77 $2,990.91

Change in Revenue * $279.10 $450.12 $556.24 $690.22 $772.14 Correlation Coefficient -0.3065

Working Capital to Revenue -14.98% -15.03% -14.12% -9.19% -12.45%Standard Deviation 0.022Mean -12.43%

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

Revenue $4,501.22 $4,347.72 $5,144.81 $6,032.47 $6,578.36 $7,401.22

WC to Revenue -12.45% -12.43% -12.43% -12.43% -12.43% -12.43%Working Capital $(560.42) $(540.35) $(639.42) $(749.74) $(817.59) $(919.86)Change in Working Capital $(168.38) $20.06 $(99.07) $(110.32) $(67.85) $(102.27)

Discounted Cash Flow Analysis (cont.) (Slide 16):Source: S&P Capital IQ

Terminal Value

Growth in Perpetuity Method (1)

Long-Tern Cash Flow Growth Rate 4.00%

Final Projected Year Cash Flow $632.51

WACC 8.75%Terminal Value $13,843.78

Presnt Terminal Value $ 12,729.72

Exit Multiple Method EV/EBITDA (3)

Average EV/EBITDA (MWW, FB, TWTR) 15.78

Final Projected EBITDA $1,130.60

WACC 8.75%Terminal Value $17,837.98 Presnt Terminal Value $16,402.50

Risk Free Rate of Return (10-year Treasure Bill)

1.91%

Beta of the security 1.418

Expected Market Return 7.14%

Market Risk Premium 5.23%

WACC - CAPM Method

Cost of Equity 9.38%Cost of Debt 4.52%Tax Rate 37.50%After Tax Cost of Debt 2.82%

Total Equity $ $4,468.64 Total Debt $ $1,126.53 Total Capital $5,595.18

Equity Weighting 79.50%Debt Weighting 20.50%

WACC 8.03%

Price Target Ranges (Slide 17):Source: Yahoo Finance

P/B:EV/Revenue:P/S:Capital IQ Concensus:

See Slide 16 for Growth in Perpetuity and Exit Multiple Method

Name Ticker

P/B - MRQ

EV / Revenues

P/S - MRQ

LinkedIn Corp. LNKD 3.4x 4.9x 5.1x

Monster Worldwide Inc.

MWW 0.6x 0.5x 0.4x

Facebook Inc. FB 7.4x 16.3x 18.3x

Twitter Inc. TWTR 2.6x 4.9x 5.2xLast Twelve Months LTM

Pessimistic Mean

Optimistic

P/B implied

3.02 3.52 4.02

BVPS Actual

33.83 33.83 33.83

Price per Share 102.15 119.07 135.99

Last Twelve Months LTMPessimisti

c MeanOptimisti

c

EV/Revenue implied 6.16 6.66 7.16

Revenue Actual 3209.41 3209.41 3209.41

EV Implied 19762.61 21367.31 22972.02

Debt 546.24 546.24 0.00

Cash 581.70 581.70 581.70

Equity Value 19216.37 20821.07 22972.02

Price per Share 145.50 157.65 173.93

Last Twelve Months LTMPessimisti

c MeanOptimisti

c

P/S implied 6.26 7.26 8.26

Sales per Share actual 22.65 22.65 22.65

Price per Share 141.82 164.47 187.11

S&P Capital IQ Consensus Estimates

Target Price:Mean 172.5High 250Low 120

Std. Dev. 32.41

Price Range (1 Std. Dev. – 68%) 140.09 204.91

Last Twelve Months LTMDCF Analysis Quartile 1 Mean

Quartile 3

Price per ShareEV/EBITDA 122.00 131.56 145.76

Growth in perpetuity

117.65 123.63 129.46