Yelp Makes Progress in Another Solid Quarter

Yelp (YELP) stock dropped more than 10% on Monday, but don't blame the surprise early release of the company's reasonably solid fourth-quarter results. Shares were already down along with the broader market early in the day, and it's hard to find much not to like as the local business-review specialist sustained momentum for its promising mobile-centric approach.

Let's take a closer look at what Yelp accomplished this quarter: 

Yelp results: The raw numbers

Data Source: Yelp.

What happened with Yelp this quarter?

• Revenue came in above Yelp's guidance, which called for revenue of $149.5 million to $154.5 million. 
• Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 30.1%, to $17.5 million -- below guidance for $20 million to $24 million.
• Yelp remained unprofitable based on generally accepted accounting principles; GAAP net loss was $22.2 million, or $0.29 per share, including a $20.3 million income tax expense because of recording of a valuation allowance against deferred tax assets.
• Generated cash flow from operations of $3.8 million
• Local advertising rose 36% year over year, to $125.9 million.
• Transactions revenue jumped to $14 million from $1.4 million in the same year-ago period, driven by Yelp's acquisition of online food ordering specialist Eat24 in the first quarter of 2015.
• Brand advertising decreased 18% year over year, to $7.1 million. Note Yelp has now completed the phase out of its brand advertising product, fulfilling plans announced last year to do so, and will have no Brand Advertising revenue in 2016. 
• "Other" revenue was flat year over year, at $6.8 million, primarily driven by partnership arrangements.  
• Cumulative reviews increased 34% year over year, to 95 million.
• App unique devices increased 38% year over year, to 20 million, roughly even on a sequential basis from last quarter.
• Yelp app users were over 10 times as engaged as website users based on number of pages viewed.
• There were 74.6 million monthly unique visitors on desktop, down 4% year over year.
• There were 65.9 million unique visitors via Yelp's mobile website, up 14.2% year over year.
• Yelp completed its transition to a performance-based advertising business.
• 61% of local advertising revenue came from CPC advertisers, up from 32% in the same year-ago period.
• Eat24 revenue growth accelerated to 80% year over year, with over 15 million diners seated (up 120% YOY) through SeatMe.
• International revenue contributed $3 million, or roughly 2% of total sales.
• Yelp announced the impending resignation of CFO Rob Krolik, who will continue in his post until the earlier of Dec. 15 or until a replacement has been hired.

What management had to say
Yelp co-founder and CEO Jeremy Stoppelman stated:

We are pleased with the progress we made on the key initiatives we set at the beginning of 2015. We have evolved to a mobile-centric company and have successfully completed our transition to a performance-based advertising business. In 2016, our priorities are to continue to build our core local advertising business, further increase engagement and awareness and grow transactions. With our rich, relevant review content and highly engaged consumer traffic, we are well-positioned to capture the enormous opportunity ahead of us.

Krolik added perspective on his resignation:

I am a strong believer in the power of Yelp to help consumers and local businesses alike, which is why it has been such a tremendous opportunity and privilege to serve as CFO. It's been a rewarding experience taking Yelp public, diversifying our offerings through acquisitions, and seeing our team deliver significant and consistent revenue growth year after year. After almost five years with Yelp, I am ready to take some time off to spend more time with family, but expect us to seamlessly transition to a new chief financial officer in the meantime.

Looking forward 
For the current quarter Yelp anticipates revenue of $154 million to $157 million, up 31% year over year at the midpoint. Analysts' consensus estimates called for revenue near the low end of that range. Yelp also expects first-quarter adjusted EBITDA of $10 million to $12 million. 

For the full year 2016, Yelp expects of $685 million to $700 million, up 26% over 2015 at the midpoint, which is also above consensus estimates for revenue of $687.4 million. Meanwhile, Yelp's full-year adjusted EBITDA is expected to be $90 million to $105 million.

In the end, though some users may be concerned with the resignation of Yelp's CFO, keep in mind he's doing so for personal reasons and is willing to stick around until the end of this year if need be, to ensure a smooth transition. But apart from any uncertainty generated there -- and putting aside inevitable concerns over slowing growth at Yelp's maturing domestic business as international remains in the early stages of growth -- this was a largely solid quarter that came in ahead of expectations. As Yelp continues making itself a more indispensable part of consumers' shopping habits, I think investors should be pleased with where it stands today.