Yelp Earnings Top Guidance on Strong Ad Demand

In late trading Thursday, Yelp shares were 2% higher to $43.99.

Adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, was $84 million, up 25% from a year ago, and well above the Street’s forecast range of $60 million to $70 million. Profits were 21 cents a share, topping the Street at 15 cents.

Yelp CFO David Schwarzbach said in an interview with Barron’s that the strong quarter was driven in particular by growth in services advertising generally—up 15% from a year ago—and home service providers in particular—up 25% for the second quarter in a row. “We continue to generate robust advertiser demand,” he says. “Part of our strategy is to focus on delivering value to advertisers, and particularly to service pros.” Services advertising now accounts for about 60% of the company’s overall revenue.

Yelp also saw 11% revenue growth in the quarter from restaurants, retailers and other advertisers. Schwarzbach said that large national advertisers aren’t yet back to the marketing budgets of a year or two ago, but he adds that there is “robust demand” from small and medium sized businesses. He notes that queries on Yelp tend to be “high intent,” with consumers who “know exactly what they’re looking for.” Advertisers, he said, are shifting away from brand advertising and to “performance marketing, with measurable ROI.”

For the September quarter, Yelp sees revenue of $337 million to $342 million, above the Street consensus at $334 million, with adjusted Ebitda of $84 million to $89 million.

For the full year, Yelp now sees revenue of $1.32 billion to $1.33 billion, up from a previous forecast of $1.295 billion to $1.315 billion. Yelp lifted its full-year Ebitda forecast to a range of $310 million to $320 million, from a previous range of $290 million to $310 million.

Yelp shares have rallied 58% so far this year.

Write to Eric J. Savitz at [email protected]