Yelp shares jump after it posts surprise profit, announces job cuts

Yelp jolted Wall Street with a surprising profit, an unexpected boon to investors that fueled a big rally in the company’s stock on Wednesday.

“We had an outstanding quarter,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “We continue to pursue our mission of connecting consumers with great local businesses everywhere.”

During the third quarter of 2016 that ended in September, Yelp earned $2.1 million, or 2 cents a share, compared with a year-ago loss of $8.1 million, or 11 cents a share.

“We maintained our first-half momentum,” Stoppleman told analysts during a conference call to discuss the third quarter financial performance. “Results exceeded our expectations.”

The results also topped Wall Street’s projections. Analysts had predicted Yelp would lose 3 cents a share. Adjusted for one-time items and gains, Yelp earned 22 cents a share.

Revenue totaled $186.2 million in the July-through-September period, up 29.7 percent from the year before.

San Francisco-based Yelp also disclosed plans to chop 175 jobs, which would equate to 4 percent of the company’s workforce, listed as 4,350 worldwide workers at the end of September, according to a company fact sheet.

“While our domestic business continues to thrive, it has become apparent that changes in the international environment have impaired the near-term growth prospects of our business overseas,” Stoppelman told the analysts. “We have decided to scale back investment outside of our domestic market. This was not an easy decision to make. Our strategy did not pan out” overseas.

The company intends to take a restructuring charge of $2 million to $4 million in related to winding down its sales and marketing operations outside the United States and Canada.

Much of the growth is being driven by apps. About 70 percent of page views came from the use of the Yelp app. App users viewed 10 times as many pages as was the case for views through website visits, according to a presentation prepared for the earnings release.

Local revenue totaled $163.6 million in the third quarter, a 41 percent jump from the same quarter the year before.

Yelp shares rocketed 10 percent higher.

The company believes that its strong results could be a springboard for future success. For the fourth quarter of 2016, revenue is expected to be in the range of $191 million to $195 million. Analysts had predicted the October-through-December quarter would produce revenue of $192 million.

“Our plan is to redirect spending from international and increase the investment behind our most compelling domestic opportunities,” Lanny Baker, chief financial officer, said during the conference call.”

 

Above: Yelp logo (Courtesy of Yelp)

 

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