What Tripped Up Yelp Earnings

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Yelp Inc. (NYSE: YELP) reported fourth-quarter and full-year 2016 results after the markets closed Thursday. The local business guide company posted diluted earnings per share (EPS) of $0.10 on revenues of $194.8 million. In the fourth quarter of 2015, Yelp reported a net loss of $0.29 per share on revenues of $153.73 million. The consensus estimates for the quarter called for EPS of $0.03 and $194.49 million in revenue.

For the full year Yelp reported a net loss per share of $0.06 and revenues of $703.1 million compared with a 2015 net loss of $0.44 per share and $549.71 million in revenues. Analysts called for a net loss per share of $0.13 and revenues of $712.85.

The bad news for the company came in its outlook for the first quarter and the 2017 fiscal year. For the quarter Yelp expects net revenues of $195 to $199 million, up 25% year over year. For the full year the company estimates net revenues of $880 to $900 million, again up about 25%. Analysts were looking for first quarter revenues of $204.43 million and full-year revenues of $895.33 million.

Yelp did not provide earnings per share guidance noting that preparing a non-GAAP estimate “is not available without unreasonable effort.” Adjusted EBITDA for the first quarter is pegged at $25 to $28 million and full-year EBITDA is estimated at $150 to $165 million.

Non-GAAP income in the fourth quarter of 2016 totaled $0.27 per share and for 2016 came in at $0.73 per share. The totals exclude charges for stock-based compensation , amortization of intangible assets, and restructuring. A quarterly and full-year gain on a tax adjustment is also included.

In the fourth quarter, approximately 24 million unique devices accessed Yelp via the mobile app on a monthly average basis, an increase of 20% compared to the same period in 2015. The number of pages viewed per user increased nearly 20% in the fourth quarter of 2016. Transactions rose by more than 40% in the fiscal year.

CEO Jeremy Stoppelman said:

We had an outstanding year, growing local revenue by 39%. I am extremely proud of how Yelp has become deeply integrated into consumers’ daily habits and increasingly essential to local business owners. In 2017, we look forward to increasing engagement on the app, expanding transactions and broadening our sales strategy.

Even though Yelp topped earnings and revenue estimates, the revenue and EBITDA outlooks are below expectations. This is never a good sign from a company that depends on growing its business with new and more active users.

Shares closed at $41.49 Thursday and tumbled about 8.7% to $37.90 after hours in a 52-week range of $14.53 to $43.41. The consensus price target on the stock was $41.56.10 before this afternoon’s report.