What happened
Shares of Dubai-based Middle Eastern and North African social networking company Yalla (YALA 1.07%) got destroyed today, tumbling 18.7% through 3 p.m. EDT after reporting less revenue than analysts had predicted for its fiscal second quarter 2021 -- and much less profit.
Heading into Q2, Wall Street had forecast $0.17 per share in profit on sales of $68 million for Yalla. As it turned out, the company earned only $0.10 per share, and sales were $66.6 million.
Image source: Getty Images.
So what
But was that really so bad?
Yes and no. On the one hand, despite missing expectations by a bit, Yalla's sales grew 110% year over year, which sounds pretty good to me. On the other hand, profits didn't grow nearly as fast. While management argued that "non-GAAP net income" more than doubled to $32.1 million, when calculated according to generally accepted accounting principles (GAAP), total net earnings were up only 15% in comparison to last year's Q2 -- and earnings per share, diluted, declined 17%.
Now what
Adding insult to injury, Yalla guided investors to expect revenue between $67 million and $72 million in Q3. Wall Street, however, had told investors that $72.8 million would be the magic number -- so even if Yalla's prediction represents greater than 100% sales growth in Q3, this new guidance still amounts to a prediction that it will miss sales next quarter.
Combined with the big earnings miss from Q2, it's no wonder investors were disappointed by this news.