Max Grigoryev
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Max Grigoryev in YELP: YELP Inc,

YELP: curious Q3 results

Last week YELP reported its Q3 results and filled 10-Q form. The company's stock is growing after its announcement, today its stock price increased by almost 5%.

I wrote an article around a month ago about YELP's marginality problems. Let's summarize what YELP showed in its financial statement:

Financial data:

  • Revenue grew up significantly: the company finished nine months of 2015 with around $322M in net revenue (+48% in comparison with 2014). I suppose that was the main reason why the company's stock price increased by 5% already;
  • Local advertising is the biggest part of Yelp's revenue, however, nothing changes from Q2. Last year company had around 84% of revenue from local advertising, this year its around 81%. That's a good signal, because the company diversifies the revenue sources;
  • Transaction revenue increased from 1% to 8% - this is a good trend as well, Yelp acts as a marketplace;
  • Sales and marketing expenses decreased by 1% from 55% as of September 2014 to 54% as of September 2015.
  • YELP increased its cost of revenue and product development costs as % of revenue. Cost of revenue grew up from 6% to 9% (as of September 2014 and 2015) and product development costs increased from 17% to 20%.

Operating metrics:

  • Conversion rate from claimed local business locations to local advertising accounts grew up from 4.03% to 4.16%. I cannot tell that this growth is a trend, fiscal year results will show it (this conversion rate was around 4.63% in 2014);
  • Customer acquisition cost grew up from $16,386 to $21,423. I mentioned above, however, that sales and marketing expenses decreased as % of revenue from 55% to 54% and that means that the company has still some potential to increased its customer acquisition cost.

I suppose that the company still has some issues to solve with its marginality. I didn't see any positive or negative trends in its financials and metrics, that's why I cannot recommend this stock to buy or sell. What do you think about YELP?