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Demand for Yelp’s Advertising Products Drove Strong First Quarter 2023 Results

First quarter Net Revenue increased by 13% year over year to a record $312 million

Net Loss remained relatively consistent year over year at ($1) million

Adjusted EBITDA increased by 12% year over year to $54 million

Yelp Inc. (NYSE: YELP), the company that connects people with great local businesses, today posted its financial results for the first quarter ended March 31, 2023 in the Q1 2023 Shareholder Letter available on its Investor Relations website at www.yelp-ir.com.

“Yelp’s strong results mark the sixth straight quarter of record net revenue driven by our product-led strategy,” said Jeremy Stoppelman, Yelp co-founder and chief executive officer. “We continued to generate robust advertiser demand, particularly in home services, which saw revenue growth of approximately 25% year over year. I’m excited about the progress we’ve made on our roadmap for the year, launching more than a dozen new product updates to make it even easier for consumers to discover and connect with great local businesses. We remain focused on executing against our strategic initiatives and are confident in our ability to deliver profitable growth over the long term.”

“Demand for our broad-based local advertising platform drove a 13% year-over-year increase in first quarter net revenue as we continued to deliver value to advertisers and match them with our high-intent audience,” said David Schwarzbach, Yelp’s chief financial officer. “Services continued its strong performance in the quarter with advertising revenue from businesses in these categories increasing 15% year over year to a record $184 million. Looking ahead, we are raising our full-year net revenue outlook, which we now expect to be in the range of $1.295 billion to $1.315 billion.”

Quarterly Conference Call

Yelp will host a live Q&A session today at 2:00 p.m. Pacific Time to discuss the first quarter financial results and outlook for the second quarter and 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 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 ongoing impact of the COVID-19 pandemic and efforts to contain it — and its effect on consumer behavior, user activity and advertiser spending;
  • the impact of fears or actual outbreaks of disease, including COVID-19 and any variants thereof, 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 from recent trends and/or consumer demand significantly degrades;
  • 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)

 

March 31,

2023

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

289,298

 

 

$

306,379

 

Short-term marketable securities

 

124,903

 

 

 

94,244

 

Accounts receivable, net

 

140,401

 

 

 

131,902

 

Prepaid expenses and other current assets

 

36,992

 

 

 

63,467

 

Total current assets

 

591,594

 

 

 

595,992

 

Property, equipment and software, net

 

76,936

 

 

 

77,224

 

Operating lease right-of-use assets

 

87,100

 

 

 

97,392

 

Goodwill

 

103,195

 

 

 

102,328

 

Intangibles, net

 

8,656

 

 

 

8,997

 

Other non-current assets

 

154,201

 

 

 

133,989

 

Total assets

$

1,021,682

 

 

$

1,015,922

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

152,860

 

 

$

137,950

 

Operating lease liabilities — current

 

39,023

 

 

 

39,674

 

Deferred revenue

 

7,414

 

 

 

5,200

 

Total current liabilities

 

199,297

 

 

 

182,824

 

Operating lease liabilities — long-term

 

77,184

 

 

 

86,661

 

Other long-term liabilities

 

41,073

 

 

 

36,113

 

Total liabilities

 

317,554

 

 

 

305,598

 

 

 

 

 

Stockholders' equity:

 

 

 

Common stock

 

 

 

 

 

Additional paid-in capital

 

1,692,923

 

 

 

1,649,692

 

Treasury stock

 

(37

)

 

 

 

Accumulated other comprehensive loss

 

(13,758

)

 

 

(15,545

)

Accumulated deficit

 

(975,000

)

 

 

(923,823

)

Total stockholders' equity

 

704,128

 

 

 

710,324

 

Total liabilities and stockholders' equity

$

1,021,682

 

 

$

1,015,922

 

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended

March 31,

 

 

2023

 

 

 

2022

 

Net revenue

$

312,438

 

 

$

276,628

 

 

 

 

 

Costs and expenses:

 

 

 

Cost of revenue (1)

 

26,059

 

 

 

23,429

 

Sales and marketing (1)

 

147,455

 

 

 

126,097

 

Product development (1)

 

88,197

 

 

 

80,685

 

General and administrative (1)

 

46,509

 

 

 

39,383

 

Depreciation and amortization

 

10,805

 

 

 

11,490

 

Total costs and expenses

 

319,025

 

 

 

281,084

 

Loss from operations

 

(6,587

)

 

 

(4,456

)

Other income, net

 

5,212

 

 

 

929

 

Loss before income taxes

 

(1,375

)

 

 

(3,527

)

Benefit from income taxes

 

(197

)

 

 

(2,612

)

Net loss attributable to common stockholders

$

(1,178

)

 

$

(915

)

 

 

 

 

Net loss per share attributable to common stockholders

 

 

 

Basic

$

(0.02

)

 

$

(0.01

)

Diluted

$

(0.02

)

 

$

(0.01

)

 

 

 

 

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

 

 

 

Basic

 

69,821

 

 

 

71,639

 

Diluted

 

69,821

 

 

 

71,639

 

 

 

 

 

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

 

 

 

 

Three Months Ended

March 31,

 

 

2023

 

 

 

2022

 

Cost of revenue

$

1,382

 

 

$

1,305

 

Sales and marketing

 

9,114

 

 

 

8,655

 

Product development

 

25,867

 

 

 

23,125

 

General and administrative

 

9,894

 

 

 

7,975

 

Total stock-based compensation

$

46,257

 

 

$

41,060

 

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

2023

 

 

 

2022

 

Operating Activities

 

 

 

Net loss

$

(1,178

)

 

$

(915

)

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

 

 

 

Depreciation and amortization

 

10,805

 

 

 

11,490

 

Provision for doubtful accounts

 

6,784

 

 

 

7,562

 

Stock-based compensation

 

46,257

 

 

 

41,060

 

Amortization of right-of-use assets

 

7,899

 

 

 

8,453

 

Deferred income taxes

 

(19,862

)

 

 

(11,074

)

Amortization of deferred contract cost

 

5,738

 

 

 

4,039

 

Asset impairment

 

3,555

 

 

 

 

Other adjustments, net

 

576

 

 

 

248

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(15,283

)

 

 

(11,968

)

Prepaid expenses and other assets

 

20,709

 

 

 

(7,494

)

Operating lease liabilities

 

(10,397

)

 

 

(9,492

)

Accounts payable, accrued liabilities and other liabilities

 

18,641

 

 

 

27,994

 

Net cash provided by operating activities

 

74,244

 

 

 

59,903

 

 

 

 

 

Investing Activities

 

 

 

Purchases of marketable securities — available-for-sale

 

(53,157

)

 

 

 

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

 

23,355

 

 

 

 

Purchases of property, equipment and software

 

(7,518

)

 

 

(6,636

)

Other investing activities

 

40

 

 

 

61

 

Net cash used in investing activities

 

(37,280

)

 

 

(6,575

)

 

 

 

 

Financing Activities

 

 

 

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

 

14,647

 

 

 

540

 

Taxes paid related to the net share settlement of equity awards

 

(19,354

)

 

 

(18,487

)

Repurchases of common stock

 

(49,999

)

 

 

(50,006

)

Net cash used in financing activities

 

(54,706

)

 

 

(67,953

)

 

 

 

 

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

 

439

 

 

 

(101

)

 

 

 

 

Change in cash, cash equivalents and restricted cash

 

(17,303

)

 

 

(14,726

)

Cash, cash equivalents and restricted cash — Beginning of period

 

307,138

 

 

 

480,641

 

Cash, cash equivalents and restricted cash — End of period

$

289,835

 

 

$

465,915

 

Non-GAAP Financial Measures

This press release and statements made during the above referenced webcast may include information relating to Adjusted EBITDA and Adjusted EBITDA margin, 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 impairment charges. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net revenue.

Adjusted EBITDA, which is not prepared under any comprehensive set of accounting rules or principles, has limitations as an analytical tool and you should not consider it in isolation or as a substitute 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 should not be viewed as a substitute for, or superior to, net income (loss) prepared in accordance with GAAP as a measure 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 impairment charges; and
  • other companies, including those in Yelp’s industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA and Adjusted EBITDA margin alongside other financial performance measures, net income (loss) and Yelp’s other GAAP results.

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

 

Three Months Ended

March 31,

 

 

2023

 

 

 

2022

 

Reconciliation of Net Loss to Adjusted EBITDA:

 

 

 

Net loss

$

(1,178

)

 

$

(915

)

Benefit from income taxes

 

(197

)

 

 

(2,612

)

Other income, net

 

(5,212

)

 

 

(929

)

Depreciation and amortization

 

10,805

 

 

 

11,490

 

Stock-based compensation

 

46,257

 

 

 

41,060

 

Asset impairment(1)

 

3,555

 

 

 

 

Adjusted EBITDA

$

54,030

 

 

$

48,094

 

 

 

 

 

Net revenue

$

312,438

 

 

$

276,628

 

Net loss margin

 

%

 

 

%

Adjusted EBITDA margin

 

17

%

 

 

17

%

 

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

 

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