Stock Update (NYSE:YELP): Yelp Inc Announces Second Quarter 2016 Financial Results


Yelp Inc (NYSE:YELP), the company that connects people with great local businesses, today announced financial results for the second quarter ended June 30, 2016.

  • Net revenue was $173.4 million in the second quarter of 2016, reflecting 30% growth over the second quarter of 2015.
  • Cumulative reviews grew 30% year over year to approximately 108 million.
  • App Unique Devices grew 27% year over year to approximately 23 million on a monthly average basis1.
  • Local advertising accounts grew 32% year over year to approximately 128,000.

GAAP net income in the second quarter of 2016 was $0.4 million, or $0.01 per share, compared to a GAAP net loss of ($1.3) million, or ($0.02) per share, in the second quarter of 2015. Adjusted EBITDA for the second quarter of 2016 was $28.1 million compared to $22.7 million in the second quarter of 2015. Non-GAAP net income, which consists of net income excluding stock-based compensation and amortization, was $12.5 millionfor the second quarter, or $0.16 per share, compared to $9.4 million, or $0.12 per share, in the second quarter of 2015.

“We had a great second quarter with local revenue growth accelerating to 41% year over year,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “Our mission is to connect people with great local businesses and we did that through more than 300 million connections in the second quarter – which include mobile calls, clicks for map views and directions, food orders, restaurant reservations, and new reviews, among other actions. In the second half of the year, we look to execute against our three strategic priorities of growing the core local advertising business, boosting awareness of Yelp and driving transactions.”

Second Quarter Operating Summary

  • Local revenue totaled $151.9 million, representing 41% growth compared to the second quarter of 2015.
  • Transactions revenue totaled $15.5 million, representing 37% growth compared to the second quarter of 2015.
  • Other revenue totaled $6.0 million which declined 6% compared to the second quarter of 2015.

Business Highlights

  • Local Revenue: Local revenue growth accelerated to 41% year over year to $151.9 million driven by strength across the local, national and self-serve channels and improved revenue retention.
  • Transactions: Yelp expanded its transactions capabilities by adding five new platform partners in the second quarter of 2016, and consumers can now transact with over 100,000 local businesses on Yelp Platform. Total transaction volume, which consists of transactions and bookings through Eat24, Yelp Reservations and Yelp Platform, grew 49% in the quarter over the same quarter in 2015.
  • Partnership and Investment in Nowait: Yelp has partnered with and made a small investment in Nowait, a mobile platform that allows restaurants to manage their waitlists. In the coming months, Nowait will be integrated onto Yelp Platform, allowing consumers to conveniently view wait times at thousands of restaurants and even add themselves to the waitlists remotely via the Yelp app.

Jed Nachman Promoted to Chief Operating Officer

The company announced that Jed Nachman has been appointed chief operating officer effective August 9, 2016. Geoff Donaker will be retiring from the COO position after 11 years with Yelp. Donaker will continue as a strategic advisor to the company and retain his seat on Yelp’s board of directors.

“We are excited about Jed’s move to COO,” said Jeremy Stoppelman, Yelp’s co-founder and CEO. “Since joining Yelp in 2007, Jed has grown the revenue organization from 10 to over 2,400 team members and has brought a tremendous amount of energy, leadership and accountability to the company. As an integral member of our executive team, I am confident that Jed will build on our successes thus far as we are just starting to capture the large opportunity ahead of us.”

“For more than a decade, Geoff Donaker has been an important part of Yelp and our journey from a small start-up to a thriving public company today,” said Stoppelman. “His leadership and contributions have been exceptional as we have grown our user base, our employee base and our operations around a durable business model that has delivered strong revenue growth. His advice has been invaluable, and the executive team and I look forward to his continued involvement in Yelp’s future.”

“It has been a privilege and an incredibly rewarding experience to serve as COO, bringing Yelp to new markets, growing revenue to over half a billion dollars and working with such a talented leadership team,” said Geoff Donaker. “Having worked closely with Jed throughout his tenure at Yelp, I am confident he will continue to thrive in this new role. I strongly believe in Yelp’s mission and the opportunity to transform the way consumers and local businesses connect, and I look forward to continued engagement as a strategic advisor and board member.”

Business Outlook

As of today, Yelp is providing its outlook for the third quarter of 2016 and increasing its outlook for revenue and adjusted EBITDA for the full year of 2016.

  • For the third quarter of 2016, net revenue is expected to be in the range of $180 million to $184 million, representing growth of approximately 27% compared to the third quarter of 2015 at the midpoint of the range. Adjusted EBITDA is expected to be in the range of $24 million to $28 million. Stock-based compensation is expected to be in the range of $21 million to $23 million, and depreciation and amortization is expected to be approximately 5% of revenue.
  • For the full year of 2016, net revenue is expected to be in the range of $700 million to $708 million, representing growth of approximately 28% compared to full year 2015 at the midpoint of the range. Adjusted EBITDA is expected to be in the range of $100 million to $108 million. Stock-based compensation is expected to be in the range of $85 million to $87 million, and depreciation and amortization is expected to be approximately 5% of revenue. (Original Source)

Shares of Yelp are up nearly 8% to $35.18 in after-hours trading. YELP has a 1-year high of $32.90 and a 1-year low of $14.53. The stock’s 50-day moving average is $29.95 and its 200-day moving average is $23.84.

On the ratings front, YELP has been the subject of a number of recent research reports. In a report released today, Morgan Stanley analyst Brian Nowak maintained a Hold rating on YELP, with a price target of $26, which reflects a potential downside of -18.4% from last closing price. Separately, on the same day, Piper Jaffray’s Samuel Kemp reiterated a Hold rating on the stock .

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Brian Nowak and Samuel Kemp have a total average return of 7.6% and 11.1% respectively. Nowak has a success rate of 68.8% and is ranked #328 out of 4105 analysts, while Kemp has a success rate of 66.7% and is ranked #1355.

Overall, 3 research analysts have rated the stock with a Sell rating, 5 research analysts have assigned a Hold rating and 8 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $29.44 which is -8 under where the stock opened today.

Yelp, Inc. hosts an online database of user-generated reviews of local businesses. It provides reviews on local businesses, which include restaurants, boutiques and salons, dentists, mechanics and plumbers. The company provides multiple free and paid advertising solutions to engage with consumers, including free online business accounts, search advertising and Yelp Deals.