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Yelp Drove Record Net Revenue in the Third Quarter 2023 as it Delivered More Value to Advertisers

Third quarter Net Revenue increased by 12% year over year to a record $345 million

Net Income increased by 539% year over year to a strong $58 million

Adjusted EBITDA increased by 30% year over year to a record $96 million

Raises full-year outlook to $1.332 billion to $1.337 billion of Net Revenue and $319 million to $324 million of Adjusted EBITDA

Yelp Inc. (NYSE: YELP), the company that connects people with great local businesses, today posted its financial results for the third quarter ended September 30, 2023 in the Q3 2023 Shareholder Letter available on its Investor Relations website at www.yelp-ir.com.

“We continued to see strong momentum from our product-led strategy as our team delivered another quarter with a number of record-breaking results,” said Jeremy Stoppelman, Yelp's co-founder and chief executive officer. “Third quarter net revenue reached a new high, driven by record advertising revenue in our services category as service pros spent more on Yelp than ever before, 25% growth in our self-serve channel and a 9% increase in ad clicks year over year. As we continue to execute on our robust product roadmap to make Yelp the go-to platform for services, deliver more value to advertisers, and enhance the overall consumer experience, I’m excited about the opportunities ahead to drive profitable growth and long-term shareholder value.”

“The Yelp team delivered its 10th consecutive quarter of double-digit revenue growth in the third quarter,” said David Schwarzbach, Yelp’s chief financial officer. “Net revenue grew 12% year over year while net income margin expanded 14 percentage points year over year. Adjusted EBITDA increased by 30% year-over-year to a record $96 million, representing a 28% adjusted EBITDA margin. Investing in our product-led strategy has continued to strengthen Yelp for the long term, giving us even more conviction in the durability of our business.”

Quarterly Conference Call

Yelp will host a live webcast today at 2:00 p.m. Pacific Time to discuss the third quarter financial results and outlook for the full year 2023. The webcast of the Q&A can be accessed on the Yelp Investor Relations website at www.yelp-ir.com. A replay of the webcast will be available at the same website.

About Yelp

Yelp Inc. (yelp.com) is a community-driven platform that connects people with great local businesses. Millions of people rely on Yelp for useful and trusted local business information, reviews and photos to help inform their spending decisions. As a one-stop local platform, Yelp helps consumers easily discover, connect and transact with businesses across a broad range of categories by making it easy to request a quote for a service, book a table at a restaurant, and more. Yelp was founded in San Francisco in 2004.

Yelp intends to make future announcements of material financial and other information through its Investor Relations website. Yelp will also, from time to time, disclose this information through press releases, filings with the Securities and Exchange Commission, conference calls, or webcasts, as required by applicable law.

Forward-Looking Statements

This press release contains forward-looking statements relating to, among other things, Yelp’s future performance, its investment plans, and its ability to deliver profitable growth and shareholder value over the long term, that are based on its current expectations, forecasts, and assumptions that involve risks and uncertainties.

Yelp’s actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Factors that could cause or contribute to such differences include, but are not limited to:

  • macroeconomic uncertainty — including related to inflation, rising interest rates, supply chain issues, and the lingering impact of the COVID-19 pandemic — and its effect on consumer behavior, user activity and advertiser spending;
  • the impact of fears or actual outbreaks of disease and any resulting changes in consumer behavior, economic conditions or governmental actions;
  • Yelp’s ability to maintain and expand its base of advertisers, particularly if advertiser turnover substantially worsens and/or consumer demand significantly degrades;
  • Yelp’s ability to maintain continued growth in connection with strategic investments;
  • Yelp’s ability to continue to operate effectively with a primarily remote work force and attract and retain key talent;
  • Yelp’s limited operating history in an evolving industry; and
  • Yelp’s ability to generate and maintain sufficient high-quality content from its users.

Factors that could cause or contribute to such differences also include, but are not limited to, those factors that could affect Yelp’s business, operating results and stock price included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Yelp’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q at www.yelp-ir.com or the SEC’s website at www.sec.gov.

YELP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

September 30,

2023

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

305,103

 

 

$

306,379

 

Short-term marketable securities

 

121,468

 

 

 

94,244

 

Accounts receivable, net

 

159,633

 

 

 

131,902

 

Prepaid expenses and other current assets

 

39,735

 

 

 

63,467

 

Total current assets

 

625,939

 

 

 

595,992

 

Property, equipment and software, net

 

72,373

 

 

 

77,224

 

Operating lease right-of-use assets

 

72,098

 

 

 

97,392

 

Goodwill

 

101,927

 

 

 

102,328

 

Intangibles, net

 

7,977

 

 

 

8,997

 

Other non-current assets

 

147,004

 

 

 

133,989

 

Total assets

$

1,027,318

 

 

$

1,015,922

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

143,889

 

 

$

137,950

 

Operating lease liabilities — current

 

38,733

 

 

 

39,674

 

Deferred revenue

 

7,064

 

 

 

5,200

 

Total current liabilities

 

189,686

 

 

 

182,824

 

Operating lease liabilities — long-term

 

57,527

 

 

 

86,661

 

Other long-term liabilities

 

40,531

 

 

 

36,113

 

Total liabilities

 

287,744

 

 

 

305,598

 

 

 

 

 

Stockholders' equity:

 

 

 

Common stock

 

 

 

 

 

Additional paid-in capital

 

1,757,174

 

 

 

1,649,692

 

Treasury stock

 

(267

)

 

 

 

Accumulated other comprehensive loss

 

(15,278

)

 

 

(15,545

)

Accumulated deficit

 

(1,002,055

)

 

 

(923,823

)

Total stockholders' equity

 

739,574

 

 

 

710,324

 

Total liabilities and stockholders' equity

$

1,027,318

 

 

$

1,015,922

 

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

Net revenue

$

345,122

 

 

$

308,891

 

$

994,686

 

 

$

884,403

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of revenue (1)

 

28,370

 

 

 

26,805

 

 

84,613

 

 

 

77,222

Sales and marketing (1)

 

137,703

 

 

 

133,061

 

 

424,308

 

 

 

388,570

Product development (1)

 

81,020

 

 

 

75,803

 

 

254,247

 

 

 

233,336

General and administrative (1)

 

45,695

 

 

 

48,381

 

 

145,609

 

 

 

126,141

Depreciation and amortization

 

10,461

 

 

 

11,417

 

 

31,881

 

 

 

34,165

Total costs and expenses

 

303,249

 

 

 

295,467

 

 

940,658

 

 

 

859,434

Income from operations

 

41,873

 

 

 

13,424

 

 

54,028

 

 

 

24,969

Other income, net

 

6,154

 

 

 

2,691

 

 

17,264

 

 

 

4,947

Income before income taxes

 

48,027

 

 

 

16,115

 

 

71,292

 

 

 

29,916

(Benefit from) provision for income taxes

 

(10,189

)

 

 

7,007

 

 

(475

)

 

 

13,714

Net income attributable to common stockholders

$

58,216

 

 

$

9,108

 

$

71,767

 

 

$

16,202

 

 

 

 

 

 

 

 

Net income per share attributable to common stockholders

 

 

 

 

 

 

 

Basic

$

0.84

 

 

$

0.13

 

$

1.03

 

 

$

0.23

Diluted

$

0.79

 

 

$

0.13

 

$

0.98

 

 

$

0.22

 

 

 

 

 

 

 

 

Weighted-average shares used to compute net income per share attributable to common stockholders

 

 

 

 

 

 

 

Basic

 

69,030

 

 

 

70,630

 

 

69,366

 

 

 

71,158

Diluted

 

73,566

 

 

 

72,658

 

 

72,920

 

 

 

73,577

 

 

 

 

 

 

 

 

(1) Includes stock-based compensation expense as follows:

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

Cost of revenue

$

1,298

 

 

$

1,148

 

$

4,026

 

 

$

3,701

Sales and marketing

 

9,200

 

 

 

8,606

 

 

26,921

 

 

 

25,461

Product development

 

24,047

 

 

 

21,352

 

 

74,888

 

 

 

66,781

General and administrative

 

8,922

 

 

 

7,526

 

 

27,469

 

 

 

23,810

Total stock-based compensation

$

43,467

 

 

$

38,632

 

$

133,304

 

 

$

119,753

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Nine Months Ended

September 30,

 

2023

 

2022

Operating Activities

 

 

 

Net income

$

71,767

 

 

$

16,202

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

31,881

 

 

 

34,165

 

Provision for doubtful accounts

 

26,664

 

 

 

18,249

 

Stock-based compensation

 

133,304

 

 

 

119,753

 

Amortization of right-of-use assets

 

22,848

 

 

 

24,962

 

Deferred income taxes

 

(8,845

)

 

 

(41,162

)

Amortization of deferred contract cost

 

17,818

 

 

 

13,477

 

Asset impairment

 

3,555

 

 

 

10,464

 

Other adjustments, net

 

(229

)

 

 

1,291

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(54,395

)

 

 

(38,130

)

Prepaid expenses and other assets

 

3,101

 

 

 

(39,920

)

Operating lease liabilities

 

(30,255

)

 

 

(29,928

)

Accounts payable, accrued liabilities and other liabilities

 

9,896

 

 

 

58,413

 

Net cash provided by operating activities

 

227,110

 

 

 

147,836

 

 

 

 

 

Investing Activities

 

 

 

Purchases of marketable securities — available-for-sale

 

(115,388

)

 

 

(92,895

)

Sales and maturities of marketable securities — available-for-sale

 

89,613

 

 

 

1,649

 

Purchases of property, equipment and software

 

(20,850

)

 

 

(20,104

)

Other investing activities

 

160

 

 

 

43

 

Net cash used in investing activities

 

(46,465

)

 

 

(111,307

)

 

 

 

 

Financing Activities

 

 

 

Proceeds from issuance of common stock for employee stock-based plans

 

28,958

 

 

 

16,143

 

Taxes paid related to the net share settlement of equity awards

 

(61,142

)

 

 

(48,161

)

Repurchases of common stock

 

(149,999

)

 

 

(150,006

)

Payment of issuance costs for credit facility

 

(1,049

)

 

 

 

Net cash used in financing activities

 

(183,232

)

 

 

(182,024

)

 

 

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

903

 

 

 

(3,030

)

 

 

 

 

Change in cash, cash equivalents and restricted cash

 

(1,684

)

 

 

(148,525

)

Cash, cash equivalents and restricted cash — Beginning of period

 

307,138

 

 

 

480,641

 

Cash, cash equivalents and restricted cash — End of period

$

305,454

 

 

$

332,116

 

Non-GAAP Financial Measures

This press release and statements made during the above referenced webcast may include information relating to Adjusted EBITDA, Adjusted EBITDA margin and Free cash flow, each of which the Securities and Exchange Commission has defined as a "non-GAAP financial measure."

We define Adjusted EBITDA as net income (loss), adjusted to exclude: provision for (benefit from) income taxes; other income, net; depreciation and amortization; stock-based compensation expense; and, in certain periods, certain other income and expense items, such as material litigation settlements, impairment charges and fees related to shareholder activism that we deem not to be indicative of our ongoing operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net revenue. We define Free cash flow as net cash provided by (used in) operating activities, less cash used for purchases of property, equipment and software.

Adjusted EBITDA and Free cash flow, which are not prepared under any comprehensive set of accounting rules or principles, have limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of Yelp’s financial results as reported in accordance with generally accepted accounting principles in the United States (“GAAP”). In particular, Adjusted EBITDA and Free cash flow should not be viewed as substitutes for, or superior to, net income (loss) or net cash provided by (used in) operating activities prepared in accordance with GAAP as measures of profitability or liquidity. Some of these limitations are:

  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
  • Adjusted EBITDA does not reflect changes in, or cash requirements for, Yelp's working capital needs;
  • Adjusted EBITDA does not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to Yelp;
  • Adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;
  • Adjusted EBITDA does not take into account any income or costs that management determines are not indicative of ongoing operating performance, such as material litigation settlements, impairment charges and fees related to shareholder activism;
  • Free cash flow does not represent the total residual cash flow available for discretionary purposes because it does not reflect our contractual commitments or obligations; and
  • other companies, including those in Yelp’s industry, may calculate Adjusted EBITDA and Free cash flow differently, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider Adjusted EBITDA, Adjusted EBITDA margin and Free cash flow alongside other financial performance measures, including net income (loss), net cash provided by (used in) operating activities and Yelp’s other GAAP results.

The following is a reconciliation of net income to Adjusted EBITDA, as well as the calculation of net income margin and Adjusted EBITDA margin, for each of the periods indicated (in thousands, except percentages; unaudited):

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

Reconciliation of Net Income to Adjusted EBITDA:

 

 

 

 

 

 

 

Net income

$

58,216

 

 

$

9,108

 

 

$

71,767

 

 

$

16,202

 

(Benefit from) provision for income taxes

 

(10,189

)

 

 

7,007

 

 

 

(475

)

 

 

13,714

 

Other income, net

 

(6,154

)

 

 

(2,691

)

 

 

(17,264

)

 

 

(4,947

)

Depreciation and amortization

 

10,461

 

 

 

11,417

 

 

 

31,881

 

 

 

34,165

 

Stock-based compensation

 

43,467

 

 

 

38,632

 

 

 

133,304

 

 

 

119,753

 

Litigation settlement(1)(2)

 

 

 

 

 

 

 

11,000

 

 

 

 

Asset impairment(1)

 

 

 

 

10,464

 

 

 

3,555

 

 

 

10,464

 

Fees related to shareholder activism(1)

 

671

 

 

 

 

 

 

671

 

 

 

 

Adjusted EBITDA

$

96,472

 

 

$

73,937

 

 

$

234,439

 

 

$

189,351

 

 

 

 

 

 

 

 

 

Net revenue

$

345,122

 

 

$

308,891

 

 

$

994,686

 

 

$

884,403

 

Net income margin

 

17

%

 

 

3

%

 

 

7

%

 

 

2

%

Adjusted EBITDA margin

 

28

%

 

 

24

%

 

 

24

%

 

 

21

%

(1)

Recorded within general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2)

Represents the loss contingency recorded in connection with the settlement of a putative class action lawsuit asserting claims under the California Invasion of Privacy Act. For additional information, see our most recently filed Quarterly Report on Form 10-Q at www.yelp-ir.com or the SEC’s website at www.sec.gov.

The following is a reconciliation of net cash provided by operating activities to Free cash flow for each of the periods indicated (in thousands; unaudited):

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

Net cash provided by operating activities

$

104,859

 

 

$

69,604

 

 

$

227,110

 

 

$

147,836

 

Purchases of property, equipment and software

 

(5,697

)

 

 

(5,606

)

 

 

(20,850

)

 

 

(20,104

)

Free cash flow

$

99,162

 

 

$

63,998

 

 

$

206,260

 

 

$

127,732

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

$

420

 

 

$

(96,828

)

 

$

(46,465

)

 

$

(111,307

)

 

 

 

 

 

 

 

 

Net cash used in financing activities

$

(70,327

)

 

$

(60,998

)

 

$

(183,232

)

 

$

(182,024

)

 

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