Shares of Yelp rallied by up to 20% in trading afterhours on Thursday following the announcement it was selling one of its companies to GrubHub and would buy back shares worth $200 million.
Yelp will sell its Eat24 business, an online business for food ordering, to GrubHub, the MenuPages and Seamless parent company. The deal for all cash is worth $287 million and will unite Yelp and GrubHub in a new partnership that allows users of Yelp to order directly from GrubHub online.
CFO at Yelp Lanny Baker said that the deal shows the value Yelp has created the last two years in Eat24, which it acquired in 2015 for $134 million.
Shares of GrubHub briefly dropped by 7% following the announcement in afterhours trading, but pared losses quickly, and were only down 1%.
Yelp announced its earnings for the second quarter on Thursday that easily beat estimates on Wall Street and turned an unexpected profit.
Yelp posted earnings per share of 9 cents on $209 million in revenue, compared to 1 cent a share earnings on $173 million in revenue for the same period one year ago. Analysts were expecting a 3 cents per share loss on $205 million in revenue.
Yelp saw increases in the double digits in transaction and advertising revenue, while the overall number of reviews was up to over 135 million during the three-month period.
CEO Jeremy Stoppelman cited the mobile app of the company, which is on 22% more devices that the same time last year, as a big driver of the growth at Yelp.
The company is expecting the increases to continue. Yelp forecast that revenue would reach between $855 million and $865 million for its full year, which is far above the midpoint expected by analysts of $856 million.
GrubHub posted its quarterly earnings as well that ended in line with Wall Street and revenue that surpassed expectations. The company said its earnings were 26 cents a share, excluding certain items, with $159 million in revenue. Analysts were expecting earnings per share of 26 cents with revenue reaching $153 million.
GrubHub said both the number of diners on its platform and the value of the food sold increased by 20% compared to the same period one year ago.
Food delivery is becoming increasingly more competitive, with companies like Uber, Amazon and Facebook eyeing that market.