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Yelp's (YELP) Q3 Earnings Miss Estimates, Ad Revenues Rise
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Yelp Inc.’s (YELP - Free Report) third-quarter 2019 earnings of 14 cents per share missed the Zacks Consensus Estimate by 26.3% and declined 22.2% year over year.
Revenues of $262 million also lagged the Zacks Consensus Estimate of $263 million. However, the figure increased 8.9% year over year, driven by higher advertising revenues.
Quarterly Details
Advertising revenues (96% of total revenues) increased 9% year over year to $253 million. Paying advertising locations grew 7% year over year to 563K sites.
Self-serve revenues grew roughly 40% in the reported quarter.
The company benefited from rapid adoption of its products by local advertisers. At the end of the reported quarter, subscribing locations for Verified License and Business Highlights more than doubled on a sequential basis.
Revenues from multi-location advertisers grew 21% year over year, backed by growth across mid-market and particularly national advertisers.
Yelp continues to benefit from its Home & Local services. Revenues grew at a mid-teens rate in the reported quarter. Home & Local category was mainly boosted by revenues from ‘Request-A-Quote,’ which surged 30% year over year.
Transaction revenues were $3 million in the third quarter of 2019, reflecting a slight increase from the year-ago quarter.
Other services revenues rose 14% to $6 million, driven by growth of Yelp Reservations and Yelp Waitlist.
Cumulative reviews rose 17% year over year to 199 million. App unique devices climbed 11% year over year to 38 million on a monthly-average basis.
The company delivered 42% more paid ad clicks to advertisers while reducing their average cost-per-click by 22%.
Yelp reported adjusted EBITDA of $58 million, up 16% year over year. Moreover, adjusted EBITDA margin expanded 140 basis points on a year-over-year basis to 22%, driven by controlled operating expenses.
Balance Sheet & Cash Flow
As of Sep 30, 2019, Yelp’s cash, cash equivalents & marketable securities were $417 million, down from $450 million as of Jun 30.
Net cash flow from operating activities was $51 million compared with $14 million in the previous quarter.
During the reported quarter, Yelp repurchased nearly 2.3 million shares for $77 million.
Guidance
For the fourth quarter, Yelp expects revenues to increase in the 11-13% range year over year. Moreover, adjusted EBITDA margin is expected to increase 2-3 percentage points on a year-over-year basis.
The company reiterated its 8% revenue growth projection for 2019.
Adjusted EBITDA margin is projected to improve 2-3 percentage points in the full year.
Yelp remains on track to achieve the $25 million in annualized savings it guided at the beginning of the year. This is expected to boost adjusted EBITDA margin.
Long-term earnings growth rate for Cadence, Microsoft and MSCI is currently pegged at 10.5%, 11.9% and 10%, respectively.
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Yelp's (YELP) Q3 Earnings Miss Estimates, Ad Revenues Rise
Yelp Inc.’s (YELP - Free Report) third-quarter 2019 earnings of 14 cents per share missed the Zacks Consensus Estimate by 26.3% and declined 22.2% year over year.
Revenues of $262 million also lagged the Zacks Consensus Estimate of $263 million. However, the figure increased 8.9% year over year, driven by higher advertising revenues.
Quarterly Details
Advertising revenues (96% of total revenues) increased 9% year over year to $253 million. Paying advertising locations grew 7% year over year to 563K sites.
Self-serve revenues grew roughly 40% in the reported quarter.
The company benefited from rapid adoption of its products by local advertisers. At the end of the reported quarter, subscribing locations for Verified License and Business Highlights more than doubled on a sequential basis.
Yelp Inc. Price, Consensus and EPS Surprise
Yelp Inc. price-consensus-eps-surprise-chart | Yelp Inc. Quote
Revenues from multi-location advertisers grew 21% year over year, backed by growth across mid-market and particularly national advertisers.
Yelp continues to benefit from its Home & Local services. Revenues grew at a mid-teens rate in the reported quarter. Home & Local category was mainly boosted by revenues from ‘Request-A-Quote,’ which surged 30% year over year.
Transaction revenues were $3 million in the third quarter of 2019, reflecting a slight increase from the year-ago quarter.
Other services revenues rose 14% to $6 million, driven by growth of Yelp Reservations and Yelp Waitlist.
Cumulative reviews rose 17% year over year to 199 million. App unique devices climbed 11% year over year to 38 million on a monthly-average basis.
The company delivered 42% more paid ad clicks to advertisers while reducing their average cost-per-click by 22%.
Yelp reported adjusted EBITDA of $58 million, up 16% year over year. Moreover, adjusted EBITDA margin expanded 140 basis points on a year-over-year basis to 22%, driven by controlled operating expenses.
Balance Sheet & Cash Flow
As of Sep 30, 2019, Yelp’s cash, cash equivalents & marketable securities were $417 million, down from $450 million as of Jun 30.
Net cash flow from operating activities was $51 million compared with $14 million in the previous quarter.
During the reported quarter, Yelp repurchased nearly 2.3 million shares for $77 million.
Guidance
For the fourth quarter, Yelp expects revenues to increase in the 11-13% range year over year. Moreover, adjusted EBITDA margin is expected to increase 2-3 percentage points on a year-over-year basis.
The company reiterated its 8% revenue growth projection for 2019.
Adjusted EBITDA margin is projected to improve 2-3 percentage points in the full year.
Yelp remains on track to achieve the $25 million in annualized savings it guided at the beginning of the year. This is expected to boost adjusted EBITDA margin.
Zacks Rank & Stocks to Consider
Currently, Yelp carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the same sector include Cadence Design Systems (CDNS - Free Report) , Microsoft (MSFT - Free Report) and MSCI (MSCI - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Long-term earnings growth rate for Cadence, Microsoft and MSCI is currently pegged at 10.5%, 11.9% and 10%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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