Two Thumbs Way Up for Yelp's Latest Quarterly Beat

Image source: Yelp Inc.

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Shares of Yelp Inc.(NYSE: YELP) popped nearly 10% on Wednesday after it announced another stronger-than-expected quarter. And the local business review specialist revealed a more focused plan to make the most of its burgeoning domestic operations. But before we get there, let's take a closer look at how Yelp kicked off the second half of the year.

Yelp results: The raw numbers


Q3 2016 Actuals

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Q3 2015 Actuals

Growth (YOY)


$186.2 million

$143.6 million


GAAP net income (loss)

$2.1 million

($8.1 million)


GAAP earnings (loss) per diluted share




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    Data source: Yelp. YOY = year over year.

    What happened with Yelp this quarter?

    What management had to say

    Yelp co-founder and CEO Jeremy Stoppelman called the quarter "outstanding," noting this marked Yelp's highest-ever adjusted EBITDA. Stoppelman then stated:

    We continue to pursue our mission of connecting consumers with great local businesses everywhere, and our local business in the U.S. has accelerated this year. We have not yet achieved the same level of traction internationally and we have decided to redirect our resources toward the domestic opportunity for now. This was not an easy decision as it affects our valued colleagues abroad, however it allows us to sharpen our focus on the large, profitable and rapidly growing domestic business.

    Yelp CFO Charles Baker elaborated during the subsequent call that just 1% (or roughly $5 million) of Yelp's revenue so far this year came from those regions that will be affected by Yelp's decision to realign resources. By comparison, the company incurred more than $10 million in net operating investments in its international sites over the same period.

    Looking forward

    As such, Yelp expects to incur a one-time restructuring charge of $2 million to $4 million in the fourth quarter, primarily stemming from severance costs associated with up to 175 of its 4,350 worldwide employees.

    "Our plan is to redirect spending from international and increase the investment behind our most compelling domestic opportunities," Baker added. "Accordingly, we do not expect an immediate step-up in margins and EBITDA, but rather are planning to invest to drive stronger growth and profitability in the long term."

    In the meantime, Yelp expects fourth-quarter revenue of $191 million to $195 million, representing year-over-year growth of 26% at the midpoint. Yelp also expects fourth-quarter adjusted EBITDA of $36 million to $40 million.

    As a result, Yelp increased its full-year guidance to call for revenue in the range of $709 million to $713 million (up from $700 million to $708 million previously), representing 29% growth over 2015 at the midpoint, and adjusted EBITDA of $111 million to $115 million (up from prior guidance of $100 million to $108 million).

    In short, there was little not to like about this strong beat and raise from Yelp, especially considering the company has clearly communicated in the past that its international operations would likely takeyearsto reach the same level of traction currently enjoyed by its core U.S. business. That doesn't mean Yelp can't eventually return its attention to replicating its stateside success in international markets. But for now, it's hard to blame the company for reallocating its resources toward fostering that core business. And it's no surprise to see investors cheering the move this week.

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