Yelp, the local online business and restaurant guide that has become the web’s go-to resource for reviews of local businesses since launching in 2004, announced its 2013 third quarter earnings after the market closed this afternoon. For the second straight quarter, the company beat expectations, with revenue coming in at $61.2 million in the third quarter and a per-share loss of $0.04.
Considering Yelp posted a greater-than-expected loss of $2.3 million, it wasn’t a categorical victory, but it was a win nonetheless, with revenue increasing 80 percent from the same period in 2012, while cumulative reviews grew 42 percent year-over-year to over 47.3 million, average unique visitors grew 41 percent year-over-year and local business accounts grew 61 percent to 57,000.
Wall Street expected Yelp to announce a loss of $0.01 per share on revenue of $59.40 million for the quarter. Yelp passed muster in revenues, but saw an uptick in its net losses in the third quarter of $2.3 million, or $0.04 per share, compared to a net loss of $2.0 million in the third quarter of 2012.
Thanks to a fairly consistent performance in recent quarters and solid progress from its local ads business, Yelp’s stock price has bounced back significantly over the last six months — 180 percent in all. This is a strong signal that investor confidence has returned for Yelp, even if many analysts believe that the market is a little too bullish on the company at the moment.
The company’s stock price had been hovering around $68 per share on Tuesday, but is currently down 6 percent in after-hours trading on the higher-than-expected loss, though it continues to vacillate.
Reflecting on his company’s third-quarter performance, Yelp CEO Jeremy Stoppelman highlighted the company’s renewed focus on its mobile experience as a continuing source of growth and opportunity. The CEO also expects its new “Yelp Platform,” which launched in July and allows local businesses to interact directly with customers via its portal, to provide additional value for businesses while increasing engagement among consumers. The company also saw continuing growth in its unique user base over the last quarter, which now stands at 117 million.
In its earnings statement today, the Yelp CEO continued:
We saw another quarter of strong momentum thanks to the high-quality, authentic content contributed by Yelpers around the world … and our focus on connecting consumers with great local businesses continues to drive our success. In the third quarter, we improved the user experience by adding the ability to write and post reviews from mobile and launched new features such as the customer activity feed for business owners. Looking to the rest of the year and beyond, we are well positioned to capture the large local opportunity ahead of us through our innovation around mobile, geographic expansion and closing the loop with local businesses.
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Other than that, after adjustments, Yelp’s EBTIDA came in at $8.1 million for the third quarter, compared to $2.2 million for same quarter in 2012. The company showed 46 percent of its advertisements on mobile devices in Q3, which represented a 6 percent increase from the prior quarter. However, Yelp’s performance here will need to be stronger going forward, considering companies in its class, like Facebook, have been able to drive significant increases in revenue by way of mobile advertising.
Again, the 46 percent figure is only a 6 percent improvement from last quarter, which takes on a greater significance considering the company doesn’t break out mobile revenue as many other companies do, instead limiting its report to mobile advertising share.
Nonetheless, overall, Yelp’s mobile ad business has continued to grow steadily over the last year, and the optimization of its mobile platform has become one of its chief priorities. For example, last month, Yelp finally gave users the ability to post reviews from their mobile devices — key functionality that has long been missing from its mobile experience.
Yelp’s cash position grew slightly over the last three months, increasing by about $5 million to $101 million at the end of the third quarter. Its acquisition of SeatMe in early July for $12.7 million was announced at the time, but recorded as part of this quarter’s financial statements.
The company also said today that it has finally integrated Qype’s French and U.K. portals after acquiring the European startup last year. The total cost of restructuring and integrations in Q3 was $2.8 million, compared to $1.8 million in Q3 2012.
All in all, Yelp booked a mixed performance in the third quarter, just beating revenue expectations, while keeping firm hold of its cash and growing traffic. However, the company’s loss widened in the third quarter, thanks in large part to the cost of acquisitions and integrations mentioned above.
During the third quarter, Yelp took its first steps into Latin America, for example, beginning with Brazil. Yelp will likely look to Brazil to act as a gateway to the region, helping it to secure a foothold in Latin America. Looking forward, the company will likely continue to accelerate its international expansion and, while this could be a drain on profits in the short-term, Yelp could see significant gains in local ad revenues in the long run as it launches in new markets.
As a result, the company expects revenue between $66 million and $67 million in the fourth quarter, slightly above analysts’ forecasts, which tentatively pegged the company’s sales at $64.9 million.
Finally, the company separately announced a $250 million follow-on share offering, with an over-allotment of $37.5 million, which Yelp will reportedly use for “general corporate purposes.”