Earnings preview: What to expect when Yelp reports Q2 results

Yelp Inc. (NYSE: YELP) is scheduled to report second quarter 2019 earnings results on Thursday, August 8, after market close. Analysts expect the company to report earnings of $0.12 per share on revenues of $247 million.

Yelp has consistently topped market estimates over the past four quarters and can be expected to do so in the second quarter as well. The strength seen in the advertising and services segments can be expected to continue in the to-be-reported quarter.

The majority of Yelp’s revenue comes from advertising and this segment has posted consistent growth in the recent past. However, the transactions segment has shown weakness and this is expected to continue for this quarter as well.

Yelp continues to make progress on its strategy to expand its product offerings. During the quarter, the company rolled out new business page upgrades that will help businesses better promote themselves and reach out to new customers more effectively.

Yelp is focused on driving significant growth opportunity by expanding its revenue from multi-location advertisers. The company is also working on improving its customer experience with personalization as its key point of focus.

In the first quarter of 2019, Yelp beat revenue and earnings estimates, with a 6% growth in revenue to $236 million and earnings of $0.02 per share. The company saw single-digit revenue growth in advertising and services while transactions revenue dropped 14%.

For the second quarter of 2019, Yelp has guided for net revenue growth of 4-6%. Adjusted EBITDA margins are expected to either remain flat or expand by up to 1% versus the prior-year period.

Also see: Yelp Q1 2019 Earnings Conference Call Transcript

For full-year 2019, Yelp expects net revenue to grow 8-10% with adjusted EBITDA margins increasing by 2-3% over 2018 levels. Transactions revenue is expected to be approx. $15 million and Other services revenue is expected to be around $29 million.

Yelp expects to generate annual savings of approx. $10 million from reduced overhead and lower sales headcount. The company also expects reduced advertising and marketing expense to yield savings of approx. $15 million this year.

The company’s long-term financial targets include generating a mid-teens percentage compound annual revenue growth rate from 2019-2023 and reaching adjusted EBITDA margins in the 30-35% range by 2023.

Yelp’s shares have dropped 10% in the trailing 52 weeks and 2% in the past one month. The majority of analysts have rated the stock Buy and the average price target is $36.71.

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