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Yelp's (YELP) Q3 Earnings & Revenues Top Estimates, Up Y/Y

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Yelp YELP came up with third-quarter 2021 earnings of 23 cents per share, beating the Zacks Consensus Estimate of a penny. The bottom-line result reflects a commendable reversal from the year-ago quarter’s loss of a penny.

Revenues jumped 22% year over year to $269 million and surpassed the Zacks Consensus Estimate of $263 million. The top line benefited from the reopening of the U.S. consumer economy and an easy comparison with the year-ago quarter, wherein revenues had dropped 16% on lockdowns and social-distancing measures amid the COVID-19 pandemic.

Quarter Detail

Advertising revenues (96% of total revenues) climbed 22% year over year to $257 million. This upside mainly resulted from higher customer spend, an increase in Paying Advertising Locations and an improved NTC retention rate. Paying Advertising Locations reached 535,000, up 28,000 from the year-ago quarter and 7,000 from the previous quarter.

Yelp Inc. Price, Consensus and EPS Surprise

Yelp Inc. Price, Consensus and EPS Surprise
Yelp Inc. Price, Consensus and EPS Surprise

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

Within key categories, Paying Advertising Locations for Services business increased 13,000 from the third quarter of 2020. Paying Advertising Locations for Restaurants, Retail & Other categories were up 15,000 from the third quarter, primarily driven by the relaxed pandemic-related restrictions.

Within Advertising, Services revenues grew 18% year over year to $157.3 million. Restaurants, Retail & Other revenues climbed to $99.5 million.

Transaction revenues came in at $3 million in the third quarter of 2021, down 32% year over year on lower food take-out and delivery order volumes, as several restaurants resumed and increased their dine-in operations.

Other service revenues jumped 78% to $9 million, as the company reduced relief incentives to the pandemic’s most affected customers in the form of waived fees. The surge in this segment’s revenues also reflects benefits from the strong adoption of its Yelp Fusion program which was introduced in May 2020.

Diners seated via Yelp surged more than two-fold year over year but remained flat sequentially. This year-over-year increase was aided by the relaxation of the pandemic-related restrictions over the last 12 months.

Total costs and expenses flared up 17% year over year to $248 million, reflecting the company’s continued investments in its long-term growth initiatives.

Yelp’s third-quarter adjusted EBITDA increased 34% year over year to $71 million. The adjusted EBITDA margin also expanded from the year-ago quarter’s 24% to 26% in the third quarter of 2021.

Balance Sheet & Cash Flow

As of Sep 30, 2021, Yelp’s cash, cash equivalents & restricted cash were $532.6 million, down from $558.2 million as of Jun 30, 2021.

During the first nine months of 2021, the company generated operating cash flow of $167.7 million.

Guidance

For the fourth quarter, Yelp projects revenues between $255 million and $265 million.

Management plans to increase hiring in the fourth quarter, as a result of which, the fourth-quarter adjusted EBITDA is expected to be in the range of $55-$65 million.

The company raised its lower-end revenue guidance range for 2021. It now estimates revenues between $1.02 billion and $1.03 billion, up from the previous forecast of $1.01-$1.03 billion. The adjusted EBITDA is now anticipated in the range of $233-$243 million, up from the $200-$220 million guided earlier.

Zacks Rank & Stocks to Consider

Yelp currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Applied Materials AMAT, Broadcom AVGO and Perficient PRFT, all carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Applied Materials, Broadcom and Perficient is currently pegged at 19.4%, 15% and 18%, respectively.


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