A month has gone by since the last earnings report for Yelp (YELP Quick QuoteYELP - Free Report) . Shares have added about 18.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Yelp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Yelp Reports Q1 Results

Yelp reported wider-than-expected loss for first-quarter 2020. For the quarter, the company reported a loss per share of 22 cents, wider than the Zacks Consensus Estimate of a loss of 9 cents.  It compares unfavorably on a year-over-year basis as well, wherein Yelp had reported earnings of 2 cents in the year-ago quarter.

Yelp provides information through online communities on restaurants, shopping, nightlife, financial, health and other services. However, the coronavirus-led lockdowns and restrictions on public life are hurting these businesses, in turn, affecting Yelp.

Despite the coronavirus crisis, Yelp managed to register a 6% year-over-year increase in first-quarter revenues, primarily on growth in the number of paying advertising locations. The company’s quarterly revenues of $249.9 million also surpassed the Zacks Consensus Estimate of $236 million.

Revenues

Advertising revenues (96% of total revenues) increased 6% year over year to $240 million. This increase was driven by growth in the number of paying advertising locations.

Paying advertising locations grew 6% year over year to 562K sites in the first quarter, mainly on continued improvements in Local customer retention through the end of February. An increase in revenues generated from the existing national customers also aided paying advertising locations growth.

However, these positives were partially offset by the relief provided by Yelp to the coronavirus-affected local businesses in the form of waived advertising fees, and free advertising products and services.

Transaction revenues were $3 million in the first quarter of 2020, down 20% from the year-ago quarter mainly due to decline in volume.

Other service revenues rose 28% to $7 million on growth of Yelp Waitlist and Yelp Reservations subscription revenues.

Cumulative reviews climbed 14.3% year over year to 210.8 million. However, app unique devices edged down 1% year over year to 34.7 million on a monthly-average basis.

Profits and Margins

Gross profit increased 5% year over year to $233 million. However, gross margin contracted 100 basis points (bps) to 93% mainly on inflated cost of sales. Costs flared up on higher advertising fulfillment costs and elevated website infrastructure expense.

Total costs and expenses rose 16% year over year to $277 million. Elevated employee costs, higher commissions, and an increase in provision for doubtful accounts mainly escalated costs and expenses.

As a result of higher costs and expenses, Yelp’s first-quarter adjusted EBITDA plunged 57% year over year to $17 million. Moreover, adjusted EBITDA margin shrunk 10 percentage points to 7% from the year-ago quarter’s 17%.

Balance Sheet & Cash Flow

As of Mar 31, 2020, Yelp’s cash, cash equivalents & marketable securities were $491 million, up from $466 million as of Dec 31, 2019.

Net cash flow from operating activities was $41 million compared with the previous quarter’s $56 million.

Outlook

Yelp had already withdrawn the full-year 2020 outlook citing uncertainties related to the coronavirus pandemic, which is impacting global business and consumer activities.

Furthermore, the company is focusing on reducing costs in an effort to stay afloat in these difficult times. As part of its cost-reduction plan, Yelp has laid off 1,000 workers and furloughed more than 1,100 staff.

The company projects its cost-saving initiatives to reduce operating expenses by $70 million in the second quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -236.5% due to these changes.

VGM Scores

At this time, Yelp has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Yelp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.