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Yelp (YELP) Q4 Earnings Down Y/Y, Revenues Beat Estimates

Zacks

Yelp Inc. YELP reported fourth-quarter non-GAAP earnings of 19 cents per share, which declined 29.6% year over year. The Zacks Consensus Estimate was pegged at a loss of 25 cents.

Revenues increased 12% year over year to $218.2 million, which surpassed the Zacks Consensus Estimate of $215 million. The top line was driven by strong local advertising revenues and higher-than-expected revenue per order from Eat24, which was divested to Grubhub GRUB in October 2017.

In 2018, Yelp expects that the Grubhub partnership will help it almost double the number of restaurants available for online ordering. The company has plans to raise the number of bookable restaurants through Yelp reservations and Nowait.

Yelp Inc. Price, Consensus and EPS Surprise


Yelp Inc. Price, Consensus and EPS Surprise | Yelp Inc. Quote

Top-Line Details

Advertising revenues (95.5% of revenues) increased 18.1% from the year-ago quarter to $208.4 million. Self serve channel saw fastest growth, followed by national and local. Paying advertiser accounts grew 7600, sequentially, to reach 163K, up 21% year over year.

Transaction revenues plunged 68.7% from the year-ago quarter to $5.2 million. Almost $2 million in transaction revenues came from Eat24 prior to sale. The company recognized almost $1 million in additional revenues related to extra revenue per order from the Grubhub partnership.

Other services revenues surged 170.6% to $4.6 million, driven by an increase in the customer base of Yelp Reservations, Nowait and Yelp Wi-Fi marketing.

In fourth-quarter 2017, cumulative reviews rose 23% from the year-ago quarter to almost 148 million. App unique devices grew 20% year over year to approximately 29 million on a monthly average basis.

Operating Details

Yelp reported adjusted EBITDA of $41.6 million, down 8.2% on a year-over-year basis.

Sales and marketing (S&M) expenses increased 18.7% year over year to $111.1 million, while product development costs surged 29.8% to $47.9 million. General & administrative (G&A) expenses declined 2.6% from the year-ago quarter to $26.7 million.

Sales headcount grew 32% on a year-over-year basis to 3,300. Advertising sales force increased by roughly 250 people in the quarter.

Guidance

For the first quarter of 2018, Yelp expects revenues between $218 million and $221 million. Adjusted EBITDA is expected between $29 million and $32 million.

For 2018, net revenues are expected in the range of $935-$965 million. This reflects year-over-year growth between 18% and 22%. Adjusted EBITDA is expected between $175 million and $187 million.

Management expects faster improvement in advertising revenues in the home and local category than other categories in 2018. The upside can be attributed to increasing adoption of Request to Quote. Advertising revenues are projected to grow in the high teens to 20% range.

In 2018, transaction revenues are estimated at $10 million, with most of that coming from the Grubhub partnership. Other services revenues are expected to grow in the mid 30% range year over year to approximately $20 million.

Operating expenses growth is projected in the low to mid teens for 2018, driven by an expected increase in product development and sales & marketing expenses. Headcount is expected to grow in the year.

Yelp is likely to incur operating loss of $20-$25 million related to Nowait, Yelp Reservations and Yelp WiFi collectively in 2018 due to continuing investments in highly-trafficked Restaurants category.

Zacks Rank & Stocks to Consider

Yelp carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader technology sector are The Trade Desk TTD and Facebook FB. While The Trade Desk sports a Zacks Rank #1 (Strong Buy), Facebook has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for The Trade Desk and Facebook is projected at 25% and 7.88%, respectively.

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