- PAYING FOR A DISTRACTION: YELP is establishing a trend of questionable acquisitions following disappointing earnings releases (last quarter, it was two international acquisitions). Today, YELP purchased Eat24 for $134M ($75M in cash, remainder in stock). The company is guiding toward an incremental $36M in acquired revenues, although the actual contribution could be more (no historical Eat24 revenues provided).
- THE BIG QUESTION IS ACCOUNTING: Where will YELP account for its newly acquired Eat24 customers? For context, YELP acquired SeatMe back in 3Q13. Beginning in 2014, YELP discretely reclassified its SeatMe accounts as Active Local Business Accounts, and then stopped providing its total number of SeatMe customers beginning in 2Q14. In essence, YELP inflated its core advertising account metrics by including accounts paying for the reservation service it acquired. So, why should we expect anything different this time around?
For our most current thoughts on YELP, see the note below.
YELP: Shot Itself in the Foot (4Q14)
02/06/15 07:38 AM EST
Let us know if you have any questions, or would like to discuss in more detail.
Hesham Shaaban, CFA