Yelp Earnings: Mobile Continues To Boost Revenues

Yelp (NYSE:YELP) announced its earnings for Q3 on November 1st, and the company once again reported solid growth as revenues grew by 19% year over year $222 million, at the high end of its guidance for the quarter. Additionally, Adjusted EBITDA for Q3’17 was $42.8 million compared to $33.7 million in the previous year, a growth rate of 27%. The company has revised its full-year guidance to reflect the sale of Eat24. For the full year 2017, the company has lowered its net revenue guidance from $855-865 million to $839-844 million. However, Adjusted EBITDA guidance has been revised upwards from $143-$153 million to $154-$157 million, indicating improvement in profitability from transaction revenues. Key takeaways from the results are below:

• Yelp continued to witness strong adoption among mobile users, as the company stated that search queries from mobile grew to 78% of total queries, and mobile ad clicks account for 70% of total ad clicks.
• During Q3, paying advertising accounts grew 17% year-on-year and 4.7% quarter-on-quarter to 155,000. Additionally, claimed business locations, businesses that are listed for free on Yelp, witnessed growth of 24.5% year over year and 6% sequentially to nearly 4 million. As a result, local ad revenues grew by 18% year over year to $199.6 million.
• 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 (50% growth).
• The company’s deal, partnership, and other services reported 20% growth in revenues to $18.4 million as its request-a-quote service reported 100% growth in requests. The company reported that this feature is currently generating $11 million in annualized revenues as quotes requested grew to 15 million in the quarter.
• Additionally, Yelp’s subscription revenues, which includes Yelp’s reservation (Nowait and Turnstyle), grew by 200% during the quarter.

Overall, Yelp’s business has maintained its momentum as the company looks to monetize its transaction and subscription 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 as the company closes the loop between local business and users through its host of services.

We are in the process of updating our Yelp model. At present, our $38 price estimate for Yelp is around 15% below the current market price.

Check out our complete analysis of Yelp

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