Local business platform Yelp (NYSE: YELP) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.7% year on year to $358.5 million. The company expects the full year’s revenue to be around $1.48 billion, close to analysts’ estimates. Its GAAP profit of $0.36 per share was 10.7% above analysts’ consensus estimates.
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Yelp (YELP) Q1 CY2025 Highlights:
- Revenue: $358.5 million vs analyst estimates of $352.1 million (7.7% year-on-year growth, 1.8% beat)
- EPS (GAAP): $0.36 vs analyst estimates of $0.33 (10.7% beat)
- Adjusted EBITDA: $84.94 million vs analyst estimates of $68.16 million (23.7% margin, 24.6% beat)
- The company reconfirmed its revenue guidance for the full year of $1.48 billion at the midpoint
- EBITDA guidance for the full year is $355 million at the midpoint, in line with analyst expectations
- Operating Margin: 8.2%, up from 3.4% in the same quarter last year
- Free Cash Flow Margin: 24.4%, up from 16.6% in the previous quarter
- Market Capitalization: $2.30 billion
“Our first quarter results demonstrate the strength of our services business and the progress we’ve made against our product roadmap,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer.
Company Overview
Founded by PayPal alumni Jeremy Stoppelman and Russel Simmons, Yelp (NYSE: YELP) is an online platform that helps people discover local businesses through crowd-sourced reviews.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Yelp’s 10.1% annualized revenue growth over the last three years was decent. Its growth was slightly above the average consumer internet company and shows its offerings resonate with customers.
This quarter, Yelp reported year-on-year revenue growth of 7.7%, and its $358.5 million of revenue exceeded Wall Street’s estimates by 1.8%.
Looking ahead, sell-side analysts expect revenue to grow 3.7% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Yelp has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors while maintaining a cash cushion. The company’s free cash flow margin averaged 19.6% over the last two years, quite impressive for a consumer internet business.
Taking a step back, we can see that Yelp’s margin expanded by 1.6 percentage points over the last few years. This is encouraging because it gives the company more optionality.
Yelp’s free cash flow clocked in at $87.46 million in Q1, equivalent to a 24.4% margin. This result was good as its margin was 4.6 percentage points higher than in the same quarter last year, building on its favorable historical trend.
Key Takeaways from Yelp’s Q1 Results
We were impressed by how significantly Yelp blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 2.1% to $36.49 immediately after reporting.
Yelp put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
