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Yelp's (YELP) Q1 Earnings and Revenues In Line, Rise Y/Y

Zacks Equity Research

Yelp Inc.’s YELP first-quarter earnings of 2 cents per share reversed the loss of 3 cents in the year-ago period. Meanwhile, the bottom line matched the Zacks Consensus Estimate.

While net revenues increased 6% year over year to $236 million, the metric met the Zacks Consensus Estimate.

Healthy growth in the company’s multi-location and national businesses was a tailwind.

Quarterly Details

Advertising revenues (96% of total revenues) rose 6% year over year to $227 million, driven by growth in the number of Paying advertising accounts.

Paying advertiser accounts were 192,000, up 8% year over year, aided by a transition to non-term advertising.

In the first quarter, Paying advertising locations grew 4% year over year to 529,000 sites but decreased by 15,000 locations sequentially.

Yelp is more and more benefiting from its Home & Local services, which contributed 33% to advertising revenues. Home & Local category was mainly boosted by revenues from ‘Request-A-Quote’, which surged 50% year over year.

Management noted that the launch of Verified License last November led to a rapid adoption with more than 5,000 clients adding the feature to their advertising packages. Moreover, a positive early response to the latest offering, Business Highlights, unveiled at April end, is a tailwind.

Transaction revenues declined 25% year over year to $3 million on revenue loss as a result of Eat24’s sale to Grubhub.

Other services revenues improved 8% to $5 million, banking on growth of Yelp Reservations and Yelp Waitlist.

In the first quarter, cumulative reviews rose 18.7% year over year to more than 184 million. App unique devices climbed 16% year over year to 35 million on monthly average basis.

In the first quarter, the company delivered 19% more ad clicks to advertisers while reducing their average cost-per-click (CPC) by 8%.

Yelp reported adjusted EBITDA of $39 million, up 19% year over year. Adjusted EBITDA margin expanded 200 bps to 17%.

Yelp Inc. Price, Consensus and EPS Surprise

Yelp Inc. Price, Consensus and EPS Surprise

Yelp Inc. price-consensus-eps-surprise-chart | Yelp Inc. Quote

Balance Sheet & Cash Flow

Yelp exited the first quarter with $626 million in cash, cash equivalents & marketable securities, down from $755.9 million at the end of the prior reported quarter.

Net cash flow from operating activities in the first quarter of 2019 was $41 million.

During the first quarter, the company repurchased nearly 2.8 million shares for $102 million. As a result, the company lowered its outstanding shares by 3.5% from the beginning of this year.

Guidance

For the second quarter, Yelp expects a revenue rise in the range of 4-6% and adjusted EBITDA margins to be flat or increase 1 percentage point year over year.

The company still expects to achieve 8-10% revenue growth for 2019. Transaction revenues are expected to be nearly $15 million and Other services revenues might be around $29 million.

Adjusted EBITDA margin is anticipated to improve 2 to 3 percentage points for the full year.

Revenues are likely to rise in the mid-teens’ rate on average during the 2019-2023 period.

Yelp also reiterates its adjusted EBITDA margin growth expectation of 30-35% by 2023.

Zacks Rank & Key Picks

Yelp currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Computer and Technology sector are Cadence Design Systems CDNS, ACI Worldwide, Inc. ACIW and Avid Technology, Inc. AVID, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Cadence, ACI Worldwide and Avid is projected at 12%, 12% and 10%, respectively.

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