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If an OpenTable (Nasdaq: OPEN ) quarterly earnings report isn't right, can the waiter send it back to the kitchen until it comes out tasty?
The restaurant reservations leader served up inedible numbers last night. Revenue climbed 40% to $34.4 million, but analysts were targeting a 46% top-line spurt. Adjusted earnings of $0.30 a share matched expectations, but this is the first time since going public more than two years ago that OpenTable didn't beat Wall Street's profit forecast.
If you want a sour dessert after those stomach-turning courses, the number of seated diners slipped sequentially for the first time in three years. There is seasonality in this business, but the summertime lull comes at an inopportune time.
The silver lining here is that OpenTable continues to work for both diners and restaurants. In North America, where OpenTable generates the bulk of its revenue and all of its profitability, the number of restaurants on the platform increased 25% to 16,237. There were 21.8 million patrons seated through OpenTable.com's website and mobile app, 42% ahead of where it was last year. It's good to see reservations growing faster than installed eateries, indicating that the average restaurant is generating more reservations through OpenTable than it was a year ago.
The overseas market is still a bit of a mess. There may be 7,629 restaurants on its rolls -- largely through last year's toptable acquisition -- but just 1.8 million diners were seated. Losses are narrowing overseas, but it will take awhile before Europe and Asia begin moving the needle here.
OpenTable remains the top dog in this space. Urbanspoon's Rezbook -- now owned by IAC (Nasdaq: IACI ) -- recently eclipsed the 1,000-eatery mark. Rezbook is a cheaper solution, as reservations are managed on Apple (Nasdaq: AAPL ) iPads through an app instead of OpenTable's hardware and software solution. Google's (Nasdaq: GOOG ) recent $151 million acquisition of Zagat is unlikely to introduce a well-financed rival, but you never can tell with Big G. For now, both Google and Zagat are OpenTable partners, running their online ressies through OpenTable.com.
OpenTable is still taking a proactive approach. It now offers a different product -- OpenTable Connect -- for restaurants that don't need its enterprise solution. Eateries on Connect pay more per seated diner ($2.50 per person through OpenTable.com vs. $1.00 per person), but they don't have to pay monthly subscription fees for the hardware and enterprise software.
It's been a humbling year for OpenTable. A year ago, it joined Travelzoo (Nasdaq: TZOO ) and The Knot parent XO Group (NYSE: XOXO ) as niche-specific sites rolling out Groupon-like initiatives. Unfortunately, OpenTable Spotlight for restaurants hasn't panned out as well as it has for Travelzoo for touristy deals. OpenTable is rededicating its sales force to push the 1,000-point product, where restaurants pay the company $7.50 per diner to be featured in the plan that issues 10 times the number of points during non-peak dining periods. It's also sticking with its 30% discounts offered through partner Savored.
The pressure is on OpenTable now that its analyst-thumping streak has ended and the competition is closing in. If there's an after-dinner mint to be made, OpenTable better deliver before its battered share price smokes out potential buyers.
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