Investors are encouraged by the company’s strong earnings report.
In spite of being one of the best-known customer review sites, Yelp has struggled in recent years. Increasingly, consumers are looking to Facebook and Google for company reviews, and this caused the company’s advertising revenue to take a hit.
Then last week, the company delivered its second-quarter earnings report, and the results gave investors reason to be hopeful.
The company reported strong revenue growth, which is largely credited to some of its second-quarter initiatives. The stock rose 5% after the news broke.
Things Going Well for Yelp
Yelp’s revenue was $247 million during the second quarter, which is up more than 5% from a year earlier. Adjusted earnings per share were 16 cents, which is up 33% from a year earlier.
Most of the company’s revenue comes from advertising, and this number grew by 5% during the second quarter to reach $238 million. The company’s paying advertising accounts grew by 5,000 to reach 197,000 total.
But most importantly, the company’s multi-location clients grew by 21% year over year. Yelp saw that it could get the biggest bang for its buck by advertising with companies that have five or more locations, like Starbucks or McDonald’s.
The company said that this strategy has been its biggest revenue driver this year. However, Yelp does make a smaller percentage of its income from other services.
This grew by 15%, thanks to a higher number of restaurant customers using Yelp Reservations and Waitlist. However, the company’s transaction revenue fell by 25%, mostly due to the company’s sale of Eat24 to Grubhub.
What’s Next for Yelp?
This report was the good news investors have been waiting to hear. Although the stock is still down nearly 30% from a year earlier, this could signal a turnaround for Yelp.
CEO Jeremy Stoppelman told investors that going forward, the company plans to focus on improving its monetization efforts and coming up with new products. The company reiterated its full-year revenue guidance and increased its adjusted EBITDA margin by 1%–2%.
Analysts reacted positively to the news as well. A Barclays analyst said the improvement is “encouraging” while an analyst at RBC Capital Markets said the company’s efforts could help it drive “premium growth.”
