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Yelp Inc. (NYSE: YELP) announced better-than-expected second-quarter 2018 results on Wednesday after the market closed, detailing accelerated advertising revenue growth and record paying advertising account additions following the rollout of the company's more flexible non-term ad contracts.
With shares up nearly 15% in after-hours trading as the market reviews the news, let's take a closer look at how the local business review specialist ended the first half.
Image source: Getty Images.
Yelp results: The raw numbers
| Metric | Q2 2018 | Q2 2017 | Year-Over-Year Growth |
|---|---|---|---|
| Revenue | $234.9 million | $209.9 million | 11.9% |
| GAAP net income attributable to common stockholders | $10.7 million | $7.9 million | 35.4% |
| GAAP earnings per diluted share | $0.12 | $0.09 | 33.3% |
Data source: Yelp.
What happened with Yelp this quarter?
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Revenue was above Yelp's guidance provided in May, which called for a range of $230 million to $233 million.
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Adjusted EBITDA increased 9% to $47 million, above guidance for a range of $39 million to $42 million.
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Yelp's bottom line also handily exceeded consensus estimates for earnings of $0.01 per share.
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By segment:
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Advertising revenue grew 21% year over year to $226 million, led by growth in the size of Yelp's local salesforce and business owners' positive response to Yelp's new non-term advertising products.
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Transactions revenue declined to $4 million from $18 million a year ago, driven again by last year's sale of Eat24 to GrubHub. Yelp is now paid a fee under a new partnership with GrubHub for food orders originating on its platform.
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Other services revenue increased by $1 million to $5 million, driven by efficiencies from combining Yelp Reservations and Yelp Nowait sales teams, as well as growth from the Yelp WiFi marketing platform.
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Cumulative reviews increased 21% year over year to 163 million.
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App unique devices grew 15% to 32 million.
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Paying advertising accounts soared 31% year over year to 194,000, marking a record sequential increase of 17,000 customers from last quarter. Again, growth here was driven by the completion of Yelp's transition to non-term contracts.
What management had to say
Yelp co-founder and CEO Jeremy Stoppelman stated:
Second-quarter results were once again driven by strong revenue growth in our core Advertising business. We completed the transition to selling non-term local advertising in the quarter, which helped deliver record advertising account additions. Our growth initiatives elsewhere also produced encouraging results.
In his latest quarterly letter to shareholders, Stoppelman elaborated on the strategic contract changes that left the market worried over whether last quarter's strength was sustainable: