Yelp’s Stock Soars As Company Announces Growth In Revenues And Sale Of Eat24

Yelp (NYSE:YELP) announced its earnings for Q2 on August 3rd, and the company once again reported solid growth as revenues grew by 20% year over year $209 million, outperforming its guidance of $202-$206 million. Additionally, Adjusted EBITDA for Q2’17 was $42.9 million compared to $28.1 million in the previous year. The company also announced that it was selling Eat24 for $287.5 million to Grubhub, and revised its guidance for revenues and EBITDA. For the full year 2017, the company has increased the lower end of its net revenue guidance from $850 million to $855 million, while maintaining the $865 million target at the higher end. Adjusted EBITDA guidance has also been revised upwards from $130-$145 million to $143-$153 million. The market was enthused by these announcements, and its stock rallied by more than 20% in aftermarket trading. Key takeaways from the results are below:

• During Q2, paying advertising accounts grew 18.4% year-on-year and 6.5% quarter-on-quarter to 148,000. Additionally, claimed business locations, businesses that are listed for free on Yelp, witnessed growth of 24.7% year over year and 5.5% sequentially to approximately 3.75 million. As a result, local ad revenues grew by 19% year over year to $186.6 million.
• Yelp continued to witness strong adoption among mobile users, as the company stated that its mobile reach now stands at 38% of smartphone users in the U.S. Nearly 70% of the company’s page views were from its mobile application, which grew by 22% to 28 million in Q2.
• Yelp’s ad revenues across all three primary channels – local, national, and self-serve – grew during the quarter. National revenue grew 20% y-o-y, and the company also witnessed a record number of ads for the self-serve channel.
• The company’s deal, partnership, and other services reported 19% growth in revenues to $18.4 million as its request-a-quote service reported 50% growth in requests. Additionally, Yelp’s Reservations revenues (Nowait and Turnstyle) grew by 50% as the company assimilated Nowait into its reservation platform.
• While the company announced the sale of Eat24 to Grubhub, it hopes to add over 30,000 new restaurants for food ordering on Yelp once the deal is completed. This will increase the number of local restaurants on Yelp for online food ordering to over 75,000. The company expects that its transaction revenues will improve once the deal is closed, as it will receive a 60% per order fee on each transaction delivered to and completed on Grubhub.

Overall, Yelp’s business has maintained its momentum as the company looks to monetize its transaction services business amidst improving metrics for its local ads business. We expect both the claimed business accounts and Average revenue per active local business to grow in the coming quarters.

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