) incurred a loss of 4 cents per share in the first quarter of
2014, narrower than the Zacks Consensus Estimate of a loss of 6
cents per share. It was also narrower than loss of 7 cents
reported in the year ago quarter. This improvement was primarily
attributable to robust revenue growth.
Revenues for the quarter surged 65.6% from the year-ago quarter
to $76.4 million. Reported revenues were ahead of management's
guided range of $73.5 million to $74.5 million as well as the
Zacks Consensus Estimate of $75.0 million.
Local revenue was $65.2 million, up 67.0% on a year-over-year
basis while brand advertising revenues increased 57.0% year over
year to $7.5 million. Other revenues increased 56.0% year over
year to reach $3.8 million. International revenues contributed
about 3.0% of total revenue in the quarter.
In the reported quarter, the total international traffic grew 95%
year over year to 23% of total traffic and reviews grew 210%
compared to year ago quarter to comprise 11% of total reviews.
The company expanded its presence in Latin America and Asia with
the launch of new country sites in Mexico and Japan, its 25th and
26th countries. Yelp also ventured into new local markets
in Quebec City, Canada and Lisbon, Portugal and now has a total
of 120 Yelp markets worldwide.
In the first quarter, Yelp recorded a 65.0% increase in active
local business accounts from the year-ago quarter to reach a
level of 74K.
In the reported quarter, cumulative reviews increased 46.0% from
the year ago quarter to $ 57.0 million. Monthly unique visitors
surged 30.0% on a year over year basis to $132.0 million in the
Yelp mobile continues to witness increased consumer engagement.
In the reported quarter, Yelp had approximately 61.0 million
mobile unique visitors (which includes both mobile web and mobile
app users), up 52.0% on a year-over-year basis. Approximately,
35.0% of the new reviews were contributed through mobile devices.
Almost 60.0% of all searches came from mobile in the quarter.
Yelp has been continuously endeavoring to improve the mobile web
experience for its users and in the reported quarter it launched
a feature that enabled users to add photos via mobile web.
In the reported quarter, Yelp revamped its business listing page
by increasing the number and size of photos and improving review
highlights in order to emphasize on the information that
consumers find most useful.
The reported quarter also witnessed Yelp's partnerships with
) and YP.com. This partnership with Yahoo will integrate Yelp's
local data into Yahoo's search experience on both desktop as well
as mobile. Yelp's alliance with YP.com, on the other hand, is
expected to introduce more business to Yelp.
Further, in the reported quarter, Yelp collaborated with a
leading cloud-based platform, Booker to enable consumers to book
spa and salon appointments directly on Yelp going forward. This
in turn will improve customer satisfaction and enhance growth and
profitability of the company going forward.
Yelp reported adjusted earnings before interest, taxes,
depreciation, and amortization (EBITDA) of $8.5 million compared
with $3.2 million in the year-ago quarter.
Sales and marketing expenses escalated 60.0% year over year to
$45.1 million while product development costs surged 93.2% year
over year to $14.0 million. General & administrative expenses
increased 50.3% from the year-ago quarter to $13.2 million.
Sales headcount grew 55.0% in the quarter on a year-over-year
basis. The company intends to continue investing in sales and
marketing going forward with an eye to explore the large market
Higher level of expenses hurt profitability as Yelp reported an
operating loss of $4.6 million in the quarter. However, the
operating loss narrowed from the year-ago quarter loss of $4.75
million, primarily due to higher revenues.
Net loss narrowed from $4.8 million or 7 cents per share in the
year ago quarter to $2.6 million or 4 cents per share in the
Balance Sheet & Cash Flow
Yelp exited the quarter with $400.0 million in cash & cash
equivalents versus $389.8 million in the previous quarter. The
company generated $9.0 million in cash from operations in the
Yelp expects revenues in the range of $85.0 million to $86.0
million for the second quarter of 2014, representing 55.0%
year-over-year growth. The Zacks Consensus Estimate for the same
happens to be in line with the higher end of management's
guidance range. Adjusted EBITDA is expected in the range of $11.5
million to $12.5 million for the same period.
For full year 2014, net revenue is expected to be in the range of
$363.0 million to $367.0 million, representing year-over-year
growth of approximately 57.0%. The Zacks Consensus Estimate for
the same is pegged at $359.0 million.
The company also projected adjusted full year 2014 EBITDA to be
between $56.0 million and $60.0 million, representing an increase
of 97.0% on a year-over-year basis.
Yelp's positive guidance reflects strong growth in user base
(particularly mobile), its entry into new markets (both domestic
& international) and also new partnerships.
Moreover, it also expanded its Latin American and Asian sales
efforts and is now available in Mexico and Japan too. Since the
Qype integration was completed in Germany alone the number of
contributors has increased 350.0% over the last six months.
We believe that these international initiatives will expand
Yelp's footprint, which will drive the top line going forward.
Additionally, partnerships with Yahoo! and YP.com are positives
for the company.
However, Yelp is enduring alleged complaints by business owners
for posting negative reviews on the website after they refused to
pay for sponsorship. As Yelp continues to explore and expand into
new markets, sales & marketing expenditure is expected to
increase significantly, thereby hurting margins.
Moreover, fierce competition from the likes of
) in the brand related revenue market remain a major headwind
Currently, Yelp has a Zacks Rank #3 (Hold).
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