Yelp Reviews Its Plans for Long-Term Growth

Yelp Inc. (NYSE:YELP) announced fourth-quarter 2018 results on Thursday after the market closed, detailing stronger-than-expected growth as the local business-review platform continued to press forward following its recent shift to non-term ad contracts. Yelp also significantly boosted its share-repurchase authorization and outlined plans to drive double-digit growth and improved profitability over the next several years.

Still, with shares down modestly on Friday in response, it’s a great time to take a closer look at how Yelp ended 2018.

Yelp logo above animated drawings of various local goods, including clothing, food, and shopping bags.


Yelp results: The raw numbers


Q4 2018

Q4 2017

Year-Over-Year Growth


$243.7 million

$219.4 million


GAAP net income attributable to common stockholders

$31.9 million

$141.1 million


GAAP earnings per diluted share




DATA SOURCE: YELP. GAAP = generally accepted accounting principles.

What happened with Yelp this quarter?
Revenue was above the high end of Yelp’s guidance provided in November, which called for a range of $239 million to $243 million. Adjusted EBITDA increased 26.9% year over year, to $52.9 million, also above guidance for a range of $48 million to $50 million. By segment:
Advertising revenue grew 12% year over year, to $235 million, driven by Yelp’s transition to non-term advertising contracts and a larger sales force. Transactions revenue fell 37%, to $3 million, due to Yelp’s sale of Eat24 to GrubHub last year. Remember, GrubHub now pays Yelp fees for Eat24 food orders originating on Yelp’s platform. Other services revenue grew 23% year over year, to $6 million, driven by efficiencies from combining Yelp Reservations and Yelp Waitlist sales and support teams and a higher number of restaurant customers using the products.
Yelp’s number of paying advertising accounts grew 17% year over year, to roughly 191,000. Cumulative reviews increased 20%, to 177 million. App unique devices grew 14%, to 33 million. Yelp doubled its share repurchase program to $500 million and plans to repurchase $250 million in shares during the first half of 2019.

What management had to say

Yelp co-founder and CEO Jeremy Stoppelman stated:

In 2018, we evolved our go-to-market strategy to capture more of our addressable market and reduce sales friction. We also made significant progress in driving consumer usage in the Restaurants vertical and business-owner monetization in the Home & Local Services vertical. We plan to continue the transition in 2019, and expect to achieve stronger revenue growth and higher adjusted EBITDA margins in the second half of 2019 as our growth initiatives begin to deliver. 

Looking forward

Stoppelman added that Yelp anticipates mid-teens revenue growth from 2019 to 2023, with adjusted EBITDA margins expanding to a range of 30% to 35% the end of that period.

In the meantime, Yelp expects first-quarter 2019 revenue to increase 4% to 6% year over year, while adjusted EBITDA margins should expand by 1 to 2 percentage points. For the full year of 2019, Yelp sees revenue climbing 8% to 10% year over year, with adjusted EBITDA margins expanding 2 to 3 percentage points. By comparison, and though we don’t typically pay close attention to Wall Street’s demands, most analysts were modeling top-line growth near the high end of Yelp’s full-year guidance range. 

In the end, that light outlook (relative to expectations) explains why Yelp shares closed down a modest 0.7% Friday in response. But I think this report represents an encouraging follow-up to the temporary advertising weakness that left Yelp stock reeling three months ago. If the company is able to deliver on its plans for sustained double-digit growth and improving profitability in the coming years, I suspect the stock will respond in kind.

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