Yelp Inc. (NYSE: YELP) announced better-than-expected second-quarter 2018 results on Wednesday after the market closed, detailing accelerated advertising revenue growth and record paying advertising account additions following the rollout of the company's more flexible non-term ad contracts .
With shares up nearly 15% in after-hours trading as the market reviews the news, let's take a closer look at how the local business review specialist ended the first half.
Image source: Getty Images.
Yelp results: The raw numbers
|Metric || |
GAAP net income attributable to common stockholders
GAAP earnings per diluted share
Data source: Yelp.
What happened with Yelp this quarter?
- Revenue was above Yelp's guidance provided in May, which called for a range of $230 million to $233 million.
- Adjusted EBITDA increased 9% to $47 million, above guidance for a range of $39 million to $42 million.
- Yelp's bottom line also handily exceeded consensus estimates for earnings of $0.01 per share.
- By segment:
- Advertising revenue grew 21% year over year to $226 million, led by growth in the size of Yelp's local salesforce and business owners' positive response to Yelp's new non-term advertising products.
- Transactions revenue declined to $4 million from $18 million a year ago, driven again by last year's sale of Eat24 to GrubHub . Yelp is now paid a fee under a new partnership with GrubHub for food orders originating on its platform.
- Other services revenue increased by $1 million to $5 million, driven by efficiencies from combining Yelp Reservations and Yelp Nowait sales teams, as well as growth from the Yelp WiFi marketing platform.
- Cumulative reviews increased 21% year over year to 163 million.
- App unique devices grew 15% to 32 million.
- Paying advertising accounts soared 31% year over year to 194,000, marking a record sequential increase of 17,000 customers from last quarter. Again, growth here was driven by the completion of Yelp's transition to non-term contracts.
What management had to say
Yelp co-founder and CEO Jeremy Stoppelman stated:
Second-quarter results were once again driven by strong revenue growth in our core Advertising business. We completed the transition to selling non-term local advertising in the quarter, which helped deliver record advertising account additions. Our growth initiatives elsewhere also produced encouraging results.
In his latest quarterly letter to shareholders , Stoppelman elaborated on the strategic contract changes that left the market worried over whether last quarter's strength was sustainable:
We are pleased with how the transition has gone. Clients have responded well to the increased flexibility, and our salesforce has closed more new deals than ever before. We added a record number of advertisers in the quarter, and trial conversion and client retention were consistent with our expectations.
For the third quarter, Yelp expects revenue ranging from $242 million to $246 million, with adjusted EBITDA of $49 million to $52 million. As such, Yelp increased its its full-year guidance to call for revenue of $952 million to $967 million, compared with $943 million to $967 million before, with adjusted EBITDA of $186 million to $192 million, up from $179 million to $188 million previously.
In short, this was a solid beat-and-raise performance from Yelp that should effectively silence skepticism over whether its transition to non-term advertising contracts was ill-advised. And the stock is rightly soaring as investors respond in kind.
10 stocks we like better than Yelp
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Yelp wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018
Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Yelp. The Motley Fool has a disclosure policy .