What To Expect From Yelp’s Q2 Earnings

by Trefis Team
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Yelp (NYSE:YELP) is scheduled to announced its second quarter results on Wednesday, August 8 after the market closes. In recent quarters, Yelp has reported steady growth in advertising revenues driven by a corresponding increase in paying advertising accounts. On the other hand, transaction revenues have declined in recent quarters after the company sold Eat24 to GrubHub for nearly $290 million last year. This is looking like it was a smart decision for Yelp, given that GrubHub decided to shut down Eat24 delivery services offerings in the coming months. Even with transaction revenues expected to generate only around $10-11 million for Yelp through the year (from over $60 million in 2017), the company’s revenues are expected to continue to increase steadily through the year driven by strength in advertising and listings.

For the June quarter, we forecast Yelp’s core advertising revenues to continue to increase in the mid-teens percentage range to around $218 million. On the other hand, transaction revenues are expected to fall nearly 60% over Q2’17 to $8 million, keeping up the trend from the March quarter. As a result, net revenues are forecast to be up nearly 11% to $231 million. Our forecast is in line with the company’s guidance. Despite revenue growth, we expect margins to remain low through the year. The company has guided for adjusted EBITDA to be around $40 million for the quarter, which implies a 2 percentage point decline in adjusted EBITDA margin over the comparable prior year period. Based on our estimates, we expect Yelp’s Q2 net income and EPS to be over 50% lower on a y-o-y basis to $10 million and 11 cents per share, respectively. We have summarized our expectations on our interactive dashboard analysis on what to expect from Yelp’s Q2 earnings. You can modify the revenue forecasts for each business segment as well as our margin expectations to see how changes would impact the company’s earnings for the quarter.

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