What happened
Shares of Yelp (YELP 1.04%) jumped on Friday after the company reported mixed third-quarter results but provided solid guidance for the fourth quarter. The small-cap stock was up 15.4% at 12:25 p.m. EST.
So what
Yelp reported third-quarter revenue of $262.5 million, up 8.9% year over year and about $0.4 million higher than the average analyst estimate. Earnings per share came in at $0.14, down from $0.17 in the prior-year period and $0.05 lower than analysts were expecting. The earnings number includes fees related to shareholder activism.
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Growth was driven by a 42% year-over-year increase in ad clicks, which was boosted by improvements in local advertiser retention. Yelp added 14,000 paying advertiser locations during the quarter, and spending from existing clients rose by a mid-teens percentage.
"We believe the strengthening fundamentals of the business will not only drive stronger growth in the fourth quarter, but also set us on a course to achieve the long-term financial targets we laid out at the start of the year," said interim CFO James Miln during the earnings call.
Now what
For the fourth quarter, Yelp expects its year-over-year revenue growth rate to accelerate to a range of 11% to 13%. The company also expects its adjusted EBITDA margin to improve by 2 to 3 percentage points. In the longer term, Yelp is aiming to produce mid-teens-percentage revenue growth annually through 2023, along with margin expansion driven in part by reducing costs.
Including Friday's rally, shares of Yelp are now roughly flat since the start of 2019.
