Yelp (NYSE:YELP) turned in another disappointing quarter on Wednesday.
The local reviews giant continues to enjoy strong growth, but it isn't expanding as rapidly as analysts had hoped. Although Yelp's first quarter earnings report beat on the bottom line, top line growth proved disappointing. At the same time, its traffic growth slowed notably from prior periods.
During its subsequent earnings call, Yelp's CEO Jeremy Stoppelman and its CFO Rob Krolik offered a few key takeaways on Yelp's business. Below are five of the most important quotes from that earnings call.
On its plans for Eat24
In February, Yelp announced that it had purchased Eat24, an online food-ordering service, for $134 million. Given that the majority of Yelp's reviews are for restaurants, integrating online food ordering into its business seemed to make sense. During the call, Stoppelman provided some color on how Yelp thought about the Eat24 acquisition.
Our goal with the acquisition of Eat24 is to increase daily engagement in one of our most important verticals -- restaurants. Based on the Nielson study we commissioned this month, approximately 70% of food orders in the U.S. were placed offline ... we believe there's significant opportunity for growth if those orders shift online.
Yelp's app engagement is rising
Like other Internet-based companies, Yelp is the midst of a shift. Increasingly, users are visiting it from its mobile app rather than its traditional desktop website. Yelp has long offered its traffic metrics for mobile in its earnings releases, but during the call, Stoppelman went a step further, providing color on its app engagement.
In [the first quarter] more than 50% of our reviews and photos were contributed via the app ... for the first time, our mobile unique visitors were roughly equal to our desktop unique visitors. In the same quarter, mobile devices accessing our app grew 47% year-over-year to about 16 million ... those users have become our most valuable and engaged.
A long-term goal
Yelp certainly isn't a value stock. In fact, under traditional accounting metrics, Yelp isn't even profitable. Investors buying shares are likely looking focused on Yelp's long-term potential. During the call, Krolik reiterated Yelp's aim to generate $1 billion in annual revenue by 2017.
We feel we have a long runway, and we'll focus on investing to capture the large market opportunity ahead of us. We continue to believe we can be a $1 billion revenue company in 2017.
Helping to explain the disappointing top line
Following its earnings release, Yelp shares fell more than 15%. Investors were likely disappointed in Yelp's quarterly revenue, which fell short of analyst estimates. It was a topic Yelp's management explored frequently during the call, as it tried to offer up some sort of explanation. Krolik placed blame on execution -- a shift in the way in which it organized its sales team.
As additional color on local revenue, we implemented a territory change within our sales organization at the beginning of January in an effort to increase our reach to more local businesses. But the change had a negative impact on sales productivity.
Why Yelp can make its annual guidance
Given its disappointing first quarter, it was somewhat surprising that Yelp's management reiterated its full year outlook. When asked about it, Krolik explained that Yelp had corrected its execution mistakes, and that improving productivity in March and April gave him confidence in the company's ability to execute for the rest of the year.
I've seen productivity recover in March. It gives us confidence. And [there has been] continued strength in April ... especially with all the new [and] existing sales people we hired, and the fact that we're going to hire more because of [our] confidence that we're going to achieve our full year guidance and that's [why we reaffirmed] it.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple and Yelp. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.