Yelp Reports Solid Q4 Results with Weaker Guidance for 2024

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Yelp, a leading online review platform, delivered strong fourth-quarter results, although its guidance for both the first quarter and the entirety of 2024 fell short of expectations. The company’s restaurant and retail segment displayed signs of weak demand, prompting cautious projections.

Q4 Revenue and Earnings

Yelp’s fourth-quarter revenue reached $342 million, marking an 11% increase compared to the previous year and aligning with Street estimates. Adjusted earnings per share amounted to 37 cents, slightly below consensus. A significant contributing factor to this discrepancy was a $20 million charge associated with the closure of some office spaces in New York City.

Additionally, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $96 million for the period, surpassing the consensus estimate of $89 million.

Q1 2024 Projections

Looking ahead to the first quarter of 2024, Yelp anticipates revenue in the range of $330 million to $335 million, falling short of the Street consensus of $345 million according to FactSet. Similarly, adjusted EBITDA is expected to be between $47 million and $52 million, below the consensus estimate of $63 million.

Explanations for Soft Demand

Yelp’s CFO, David Schwarzbach, attributed the softened demand in the “restaurants, retail, and other” business segment to various factors. He mentioned that in the latter half of December and extending into January, the company observed “broad-based softness.” Extreme weather conditions, respiratory illnesses, and residual effects from a robust holiday season were cited as reasons behind the decreased retail advertising demand. On the restaurant side, budget constraints were identified, partly due to rising input costs that have put pressure on restaurant margins.

Yelp will need to navigate these challenges in the coming months while striving to regain momentum in their restaurant and retail segment.

Yelp Forecasts Revenue Growth in 2024

Yelp has projected its revenue for 2024 to be in the range of $1.42 billion to $1.44 billion, showing a 6% to 8% increase compared to the previous year. Although this estimate falls below the consensus estimate of $146 billion, it will surpass the revenue recorded in 2023, which stood at $1.34 billion.

The company’s full-year adjusted Ebitda is expected to be between $315 million and $335 million, slightly lower than the street estimate of $341 million.

CFO Schwarzbach explained that the lowered Ebitda forecast is partly due to Yelp’s decision to change its employee compensation structure, shifting towards cash rather than equity. As a result, the number of shares granted in 2024 is predicted to decline by 65% compared to the previous year. The CFO also mentioned that stock-based compensation will constitute a smaller percentage of revenue in 2024, dropping to 11% from last year’s 13%.

Yelp has plans to allocate more funds towards lead generation via search engine monetization this quarter.

According to Schwarzbach, Yelp had around 4,700 employees at the end of 2023, a decrease of approximately 200 from the previous year. The company expects the headcount to remain relatively stable throughout 2024.

CEO Jeremy Stoppelman expressed satisfaction with Yelp’s strong financial performance in 2023 and outlined plans for the upcoming year. Stoppelman emphasized that Yelp aims to enhance its provision of business leads to professionals in the home services industry.

“We remain confident in the significant opportunities ahead to drive shareholder value over the long term,” Stoppelman stated.

Despite a more than 40% increase in Yelp’s shares over the last 12 months, the stock has declined by over 5% in 2024.

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