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Yelp Inc. Gets 5 Stars With Another Excellent Quarter

By Steve Symington Fool.com

Image source: Yelp Inc.

Yelp Inc.(NYSE: YELP)announced second-quarter 2016 results Tuesday after the market close, and excited investors drove shares of the local-business review specialist up nearly 13% Wednesday as a result. Here's a closer look at how Yelp finished the first half of the year, and what to expect going forward.

Yelp results: The raw numbers

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Data source: Yelp. YOY = year over year.

What happened with Yelp this quarter?

  • On an adjusted (non-GAAP) basis, which adds perspective by excluding items like stock-based compensation, net income increased 33.8% year over year, to $12.5 million, or $0.16 per share.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 23.8% year over year, to $28.1 million. (Yelp's previous financial guidance called for lower revenue in the range of $167 million to $171 million, and adjusted EBITDA of $21 million to $25 million.)
  • The company generated cash flow from operations of $46.5 million.
  • Local advertising accounts increased 32% year over year, to 128,000.
  • Local advertising revenue grew 41% year over year, to $151.9 million.
  • Transactions revenue increased 37% year over year, to $15.5 million, notably as Yelp has lapped its Q1 2015 acquisition of online-food-ordering specialist Eat24.
  • "Other" revenue declined 6% year over year, to $6 million, driven by partnership arrangements and consistent with last quarter.
  • The company announced a new partnership and small investment in Nowait, a mobile platform used by over 4,000 restaurants to manage their wait lists and allow diners get in line remotely. Nowait will be integrated into Yelp's platform in the coming months, enabling Yelp users to see current wait times at thousands of restaurants and get in line using the Yelp app.
  • Cumulative reviews grew 30% year over year, to 108 million.
  • App unique devices increased 27% year over year, to 23 million, on a monthly average basis, up from 21 million last quarter.
  • Yelp app users continued to represent roughly 70% of total page views in Q2, and still view more than 10 times as many pages as website users.
  • There were 73 million monthly unique visitors on desktop during the quarter, and69 million monthly unique visitors via Yelp's mobile website.
  • Focus remains on the domestic market, but the company has made early progress on international site monetization, with international revenue climbing $500,000 sequentially, to $3.7 million.

What management had to say

Yelp co-founder and CEO Jeremy Stoppelman called it a "great" quarter as local revenue growth accelerated to 41%, adding:

Looking forward

For the third quarter, Yelp expects revenue between $180 million and $184 million, or year-over-year growth of 27% at the midpoint, and adjusted EBITDA of $24 million to $28 million. While investors would be best served not paying close attention to Wall Street's short-term demand, analysts' consensus estimates predicted third-quarter revenue near the bottom end of Yelp's guidance range.

Yelp also increased its guidance for the full year,and now expects 2016 revenue in the range of $700 million to $708 million (up from $690 million to $702 million previously), or growth of 28% over 2015 at the midpoint, and adjusted EBITDA in the range of $100 million to $108 million (up from $93 million to $105 million previously).

All things considered, this was indeed a great quarter as Yelp continued to capitalize on its engaged mobile audience, improved monetization with accelerating local ad revenue growth, and swung to GAAP profitability in the process.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Yelp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.