When Yelp Inc. (NYSE: YELP) released its third-quarter financial results after the markets closed on Thursday, the company said that it had $0.43 in earnings per share (EPS) on $241.1 million in revenue. The consensus estimates had called for $0.35 in EPS and $245.4 million in revenue.
The company noted in the report that although the number of new local account additions remained higher in the third quarter compared to periods prior to the transition to non-term advertising, the pace of new account growth that it saw in the first half of 2018 slowed in the third quarter
Overall, management does not believe there was a single or predominant factor that led to the shortfall relative to expectations, but rather a combination of smaller operational factors that negatively affected productivity.
Most of these issues primarily included lower-than-planned sales headcount, adjustments to sales promotions, a now-resolved technical issue in the lead assignment system and a lower success rate in reaching key decision makers in outbound sales calls.
Looking ahead to the 2018 full year, the company expects to see revenue in the range of $938 million to $942 million with adjusted EBITDA of $178 million to $180 million. Consensus estimates call for $0.36 in EPS and $962.96 million in revenue for the year.
Jeremy Stoppelman, Yelp’s co-founder and CEO, commented:
Although we achieved our adjusted EBITDA outlook for the third quarter, revenue was lower than we anticipated. While the shift to non-term advertising has opened our sales funnel, it has also made our results more sensitive to short-term operational issues. We have begun to address a number of the issues that impacted our third quarter results; however, we expect them to affect our fourth quarter results as well, as reflected in our Business Outlook. We remain positive about the move to more flexible and dynamic advertising terms, as we believe the shift greatly increases our long-term sales opportunity and opens up additional levers to expand Yelp’s sales reach and profit margins.
Shares of Yelp were last seen down about 29% at $30.96, in a 52-week range of $29.33 to $52.50. The consensus analyst price target is $51.17.