Why Yelp, Inc. Is Tumbling After a Mixed Quarter

Yelp just beat bottom-line expectations for itsthird consecutive quarter, but it's still getting terrible reviews from Wall Street.

Shares of the local business review specialist plunged 15% in Wednesday's after-hours trading after it announced that revenue climbed 55% year over year to $118.5 million. That translated to a net loss of $1.3 million, or $0.02 per share, a significant improvement over the $2.6 million, or $0.04-per-share, net loss it saw in the same year-ago period. Adjusted earnings before interest, taxes, depreciation and amortization climbed 92% year over year to $16.3 million. And on an adjusted basis -- which means excluding stock-based compensation and amortization -- Yelp achieved net income of $7.9 million, or $0.10 per share.

Analysts were only expecting adjusted net income of $0.01 per share, but on slightly higher revenue of $120 million. But remember that Yelp told investors back in February to expect first-quarter revenue of $114 million to $116 million, which means its top-line results actually outpaced its own expectations. To be fair, though, Yelp also projected higher first-quarter adjusted EBITDA of $19 million to $21 million.

Here's what happened (again)Arguably more concerning to investors, however, is the continued slowing growth of Yelp's user base. Average monthly unique mobile visitors grew 29% to 79 million, while desktop visitors declined 3% to 80 million. On a combined basis and considering any overlap, total average monthly unique visitors grew 8% year over year to roughly 142 million.

For reference, almost three months ago the market was lamenting that Yelp's combined average monthly unique visitors rose "just" 13% to 135 million, marking its first-ever quarter of sequential declines in the number of overall visitors. On a more positive note, this fulfills management's promises that the decline was due more to seasonality than anything, and that positive sequential growth in monthly visitors would resume in Q1.

Yelp also saw cumulative reviews grow 36% year over year to 77 million, including a company-record 6 million reviews contributed in the first quarter alone. Active local advertising accounts also grew 43% year over year to 90,200 and drove local advertising revenue growth of 51% to $98.6 million. Meanwhile, brand advertising revenue fell 11% over the same period to $6.6 million. Finally, Yelp's "Other" revenue category rose 254% to $13.3 million, including a $5 million contribution from Yelp's recently acquired online food ordering specialist, Eat24.

Keep moving forwardYelp offered a look at what to expect in the future.

For the current quarter, Yelp anticipates revenue of $131 million to $134 million, which represents year-over-year growth of roughly 49%. Adjusted EBITDA in Q2 should also be in the range of $22 million to $24 million. Analysts, on average, were anticipating higher second-quarter revenue of $138.4 million, with adjusted earnings of $0.03 per share.

But things get a little more interesting with Yelp's full-year 2015 forecast, which calls for adjusted EBITDA of $102 million to $105 million, and revenue of $574 million to $579 million. The latter range is good for a 53% increase over 2014 and indicates that Yelp expects accelerated growth in the back half of the year. Unfortunately, that's little solace to Wall Street analysts, who came into the report already modeling 2015 revenue at the high end of Yelp's expected range.

Again, however, remember that Yelp is also working hard to expand overseas, most recently with the help of last quarter's acquisitions of Europe-based review sites Restaurant-Kritik and Cityvox. But it will take time to develop and properly monetize international markets, as Yelp is currently working on doing with its core U.S. site. In the meantime, though, and while I still think Yelp is a great opportunity for long-term investors, Yelp remains at the mercy of a fickle market worried about its temporarily slowing stateside growth.

The article Why Yelp, Inc. Is Tumbling After a Mixed Quarter originally appeared on Fool.com.

Steve Symington owns shares of Apple. The Motley Fool recommends Apple and Yelp. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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