Yelp Posts Solid Earnings, But Offers Soft Outlook as Ads Are Under Pressure

For the fourth quarter, Yelp reported revenue of $342 million, up 11% from a year earlier, and about in line with Street estimates. Earnings on an adjusted basis were 37 cents a share, a penny below consensus; the company said the primary swing factor was a $20 million charge related to the shutdown of some New York City office space.

Adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, was $96 million in the period, above consensus at $89 million.

For the first quarter of 2024, Yelp sees revenue between $330 million and $335 million, falling shy of the Street consensus at $345 million, according to FactSet. Likewise, the company sees adjusted Ebitda between $47 million and $52 million, below consensus at $63 million.

Yelp CFO David Schwarzbach said in an interview with Barron’s that in the back half of December and into January the company saw “broad-based softness” in its “restaurants, retail and other” business segment. He said the softer demand for retail advertising reflects a combination of extreme weather, respiratory illnesses, and some hangover from the strong holiday season. On the restaurant side, he adds, Yelp is seeing softness in ad budgets, driven in part by higher input costs that are pressuring restaurant margins.

For 2024, Yelp sees revenue ranging from $1.42 billion to $1.44 billion, up between 6% and 8%. That is below the consensus estimate of $1.46 billion, but would surpass 2023’s revenue of $1.34 billion. The company forecasts full-year adjusted Ebitda between $315 million and $335 million, below the Street estimate at $341 million.

Schwarzbach notes that the lower Ebitda forecast in part reflects the company’s push to shift more of its employee compensation to cash and away from equity. The CFO said the number of shares granted in 2024 is expected to be down 65% from 2023 levels. Stock-based compensation will drop as a percentage of revenue to 11% in 2024, compared with 13% last year, he said.

He also noted that Yelp expects to spend more this quarter on buying leads via search engine marketing.

Yelp also announced a $500 million expansion of its stock repurchase program, boosting the total current authorization to $582 million. The company bought back $200 million of stock in 2023. The CFO notes that the company has repurchased $1.4 billion of stock since it began buying back shares in 2017.

Schwarzbach said head count in 2023 at year end was 4,700, down about 200 from a year earlier. He expects the total to be about flat in 2024.

In a statement, CEO Jeremy Stoppelman said Yelp in 2023 had its “strongest financial performance ever.” He added that in 2024 the company intends to increase its focus on providing business leads to home services professionals.

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

Yelp shares have risen more than 40% over the last 12 months, but are down more than 5% so far in 2024.

Write to Eric J. Savitz at [email protected]