Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Yelp (YELP 2.13%) dropped 15% after the local business review specialist announced strong third-quarter results, but followed with weaker-than-expected fourth-quarter guidance.
So what: Quarterly sales jumped 67% year over year to $102.5 million, which translated to net income of $3.6 million, or $0.05 per share. Adjusted EBITDA also rose almost 150% to $20.1 million. Analysts were only looking for net income of $0.03 per share on sales of $99 million.
Yelp's average monthly unique visitors grew 19% year over year to 139 million, helping drive cumulative reviews up 41% year-over-year to 67 million. Within that, mobile users grew 46% year over year to 73 million, and roughly 45% of all new reviews during the quarter were submitted through a mobile device. Meanwhile, active local business accounts grew by 51% over last year to 86,200.
For the current quarter, however, Yelp sees net revenue in the range of $107 million-$108 million, representing decelerating growth of 52% compared to the same year-ago period. That's well short of the $110.96 million analysts were modeling.
Now what: That said, Yelp CFO Rob Krolik later explained Q3 revenue from their strategic agreement with YP drove "Other" segment revenue a much higher-than-expected 158% to $8 million. As a result, they decided to "realign the partnership for everyone's benefit," which meant reducing "Other" segment revenue in Q4 to $7 million. What's more, it's worth noting Yelp's raised full-year guidance calls for revenue of $375 million-$376 million, the mid-point of which is slightly above expectations -- and that's ignoring the possibility Yelp could be playing it safe with a conservative number.
In the end, that makes Yelp's "disappointing" guidance look much less so.
