Yelp Pops 7% After Hours On Q3 Revenue Beat Of $143.6M

Today following the bell, Yelp reported its third-quarter financial performance, including revenue of $143.6 million, and earnings per share of $0.03, calculated using non-traditional metrics.

Investors had expected Yelp to post revenue of $141.42 million.

Shares of the popular online reviews service are up sharply in after-hours trading, currently north more than 7 percent. The company fell nearly 4 percent in regular trading. The company’s earnings report is certainly, at least so far, a shot in the arm for the company.

On a year-over-year basis, Yelp grew its revenue by roughly 40 percent compared to its year-ago quarter. The company made an adjusted profit of $2.7 million in the quarter, discounting certain non-cash costs. Using normal accounting techniques, Yelp lost $8.1 million in its third quarter, or $0.11 per share.

As Yelp is a quickly growing shop, investors currently value it more on a net cash basis than on a full-cost basis. So, when Yelp reports profits, its preferred metrics discount non-cash costs such as share based compensation.

Importantly, Yelp demonstrated in the quarter that it can derive revenue from sources that are not advertising-based. From its report: “Transactions revenue totaled $12.0 million, compared to $1.3 million in the third quarter of 2014, primarily due to the acquisition of Eat24 in the first quarter of 2015.”

That’s a nice dollar delta. Local advertising grew a more modest 36 percent to $115.9 million in the quarter.

Looking ahead, here’s where Yelp expects to end up in the fourth quarter:

For the fourth quarter of 2015, net revenue is expected to be in the range of $149.5 million to $154.5 million, representing growth of approximately 38% at the midpoint compared to the fourth quarter of 2014. Adjusted EBITDA is expected to be in the range of $20 million to $24 million. Stock-based compensation is expected to be in the range of $16 million to $17 million, and depreciation and amortization is expected to be 5%-6% of revenue.

Notably, that revenue forecast is above current street expectations of $152.1 million in fourth-quarter revenue.

To summarize, Yelp beat expectations, guided ahead of estimates, and dramatically expanded one of its more nascent revenue sources. That’s a decent mix.

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