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KEY POINTS
- Transaction Revenue to Decline: This should be obvious, but some on the sell-side are still expecting reveneus to grow. The overwhelming majority of YELP's transaction revenues appear to be coming from Eat24, so the sale is basically a segment divestiture. YELP will still have some skin in the game with the Grubhub deal, but all YELP will be getting is a take of its prior take, and only on orders on the Yelp Platform.
- Small Percentage of Eat24 Orders from the Yelp Platform? During the 2Q17 call, mgmt suggested that food orders on the Yelp Platform grew almost 50% (vs. 19% growth in Transaction revenue). That delta suggests that the overwhelming majority of Eat24's transactions are coming from its own platform. We estimate that <25% is coming from the Yelp Platform.
- Transaction EBITDA to Decline? Mgmt has suggested that cash flow per food order is going to increase, but point 2 suggests it is only going to be collecting on less than 25% of Eat24's volume. So the only way that EBITDA doesn't decline is if Eat24 hasn't been able to achieve any leverage on its growth over the past +2 years after being EBITDA neutral (link) back in 2014.
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