Yelp’s Product-Led Strategy Drove Strong 2022 Results

2022 Net Revenue reached a new high of $1.2 billion

2022 Net Income a positive $36 million

2022 Adjusted EBITDA increased to a record $270 million

Expects 2023 Net Revenue in the range of $1.29 billion to $1.31 billion and Adjusted EBITDA¹ in the range of $290 million to $310 million

SAN FRANCISCO--(BUSINESS WIRE)--Yelp Inc. (NYSE: YELP), the company that connects people with great local businesses, today posted its financial results for the fourth quarter and full year ended Dec. 31, 2022 in the Q4 and Full Year 2022 Shareholder Letter available on its Investor Relations website at yelp-ir.com.

“We delivered a number of record financial results in 2022 thanks to the strong execution of our teams on our product-led strategy,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “Record net revenue, driven by record advertising revenue from services businesses as well as in our most efficient sales channels, reflected strong advertiser demand across categories. We also reached record levels in the number of business locations that advertise on Yelp and the average amount each location spends, signaling that our product investments are paying off. Looking ahead, we’re confident in our plan to drive profitable growth over the long term as we deliver on our mission to connect consumers with local businesses.”

“Yelp’s strong performance in 2022 led to 16% year over year net revenue growth, reaching a record $1.2 billion,” said David Schwarzbach, Yelp’s chief financial officer. “These results demonstrate the strength of our broad-based local advertising platform and the momentum across our strategic initiatives. In 2023, we plan to continue our disciplined investments to drive shareholder value over the long term.”

¹ Yelp has not reconciled its Adjusted EBITDA outlook to GAAP Net income (loss) because it does not provide an outlook for GAAP Net income (loss) due to the uncertainty and potential variability of Other income, net and Provision for (benefit from) income taxes, which are reconciling items between Adjusted EBITDA and GAAP Net income (loss). Because Yelp cannot reasonably predict such items, a reconciliation of the non-GAAP financial measure outlook to the corresponding GAAP measure is not available without unreasonable effort. We caution, however, that such items could have a significant impact on the calculation of GAAP Net income (loss). For more information regarding the non-GAAP financial measures discussed in this release, please see “Non-GAAP Financial Measures” below.

2022 Key Business Highlights

Yelp’s product-led business model drove a number of record results in 2022, even as macro challenges persisted:

• Net revenue increased by 16% year over year to a record $1.2 billion, near the high end of Yelp’s outlook range provided in November 2022 and $14 million above the high end of the company’s initial outlook range provided in February 2022.
• Net income decreased by approximately $3 million year over year to positive $36 million.
• Adjusted EBITDA grew 10% year over year to a record $270 million, at the midpoint of Yelp’s outlook ranges provided in February and November 2022, representing a 23% adjusted EBITDA margin.
• Strong advertiser demand drove this record revenue performance across categories and channels. Total advertising revenue increased by 15% year over year to a record $1.1 billion, reflecting balanced growth in paying advertising locations and average revenue per location. Paying advertising locations for the year increased by 7% compared to 2021.
• In Services, Yelp demonstrated consistent year-over-year growth throughout 2022, resulting in a record $694 million of advertising revenue from Services businesses for the year. The company reported the 10th consecutive quarter of growth in average revenue per location in these categories. Advertiser demand was particularly robust in the Home Services category, where annual revenue increased by approximately 20% year over year and at a compound annual growth rate of nearly 20% from 2019.
• Advertising revenue from Restaurants, Retail & Other businesses increased by 17% year over year to $441 million, primarily driven by growth in paying advertising locations.
• Advertising revenue from each of Yelp’s most efficient channels, Self-serve and Multi-location, grew by approximately 25% year over year in 2022.
• Ad clicks for the year decreased by 8% from 2021, a year that benefited from reopening tailwinds and elevated consumer spending. Average CPC for the year increased by 27% as advertiser demand for Yelp’s valuable, high-intent clicks was robust, demonstrated by records in both paying advertising locations and average revenue per location for the year.
• On the consumer side of Yelp’s business, demand remained below pre-pandemic levels as consumers visited many types of businesses less frequently. In 2022, app unique devices were flat compared to 2021. The company also reported an increase in average review submission frequency among users, who contributed 21 million new reviews in 2022, up 3% from the prior year. This resulted in more than 265 million cumulative reviews as of December 31, up 9% year over year.

Outlook

The company expects 2023 Net revenue will be in the range of $1.29 billion to $1.31 billion as it continues executing on its strategic initiatives. The company also expects Adjusted EBITDA will be in the range of $290 million to $310 million.

Quarterly Conference Call

Yelp will host a live Q&A session today at 2:00 p.m. Pacific Time to discuss the fourth quarter and full year 2022 financial results and outlook for the first quarter and full year 2023. The webcast of the Q&A can be accessed on the Yelp Investor Relations website at 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 and its investment plans, including the ability of its investments and initiatives to drive profitable long-term growth and shareholder value, 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 the modest increase in churn in the second half of 2022 substantially worsens 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 or Quarterly Report on Form 10-Q at yelp-ir.com or the SEC’s website at sec.gov.

YELP INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
	December 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	306,379		$	479,783
Short-term marketable securities		94,244			—
Accounts receivable, net		131,902			107,358
Prepaid expenses and other current assets		63,467			57,536
Total current assets		595,992			644,677
Property, equipment and software, net		77,224			83,857
Operating lease right-of-use assets		97,392			140,785
Goodwill		102,328			105,128
Intangibles, net		8,997			10,673
Other non-current assets		133,989			65,408
Total assets	$	1,015,922		$	1,050,528
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	137,950		$	119,620
Operating lease liabilities — current		39,674			40,237
Deferred revenue		5,200			4,156
Total current liabilities		182,824			164,013
Operating lease liabilities — long-term		86,661			127,979
Other long-term liabilities		36,113			7,218
Total liabilities		305,598			299,210
Stockholders’ equity:
Common stock		—			—
Additional paid-in capital		1,649,692			1,522,572
Accumulated other comprehensive loss		(15,545	)		(11,090	)
Accumulated deficit		(923,823	)		(760,164	)
Total stockholders’ equity		710,324			751,318
Total liabilities and stockholders’ equity	$	1,015,922		$	1,050,528

YELP INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
	Three Months Ended December 31,					Year Ended December 31,
	2022		2021			2022		2021
Net revenue	$	309,103	$	273,400		$	1,193,506	$	1,031,839
Costs and expenses:
Cost of revenue^(1)		28,483		24,045			105,705		78,097
Sales and marketing^(1)		126,357		113,379			514,927		454,224
Product development^(1)		72,225		70,384			305,561		276,473
General and administrative^(1)		37,967		28,859			164,108		135,816
Depreciation and amortization		10,687		17,140			44,852		55,683
Restructuring		—		—			—		32
Total costs and expenses		275,719		253,807			1,135,153		1,000,325
Income from operations		33,384		19,593			58,353		31,514
Other income, net		3,478		626			8,425		2,204
Income before income taxes		36,862		20,219			66,778		33,718
Provision for (benefit from) income taxes		16,717		(2,971	)		30,431		(5,953	)
Net income attributable to common stockholders	$	20,145	$	23,190		$	36,347	$	39,671
Net income per share attributable to common stockholders
Basic	$	0.29	$	0.32		$	0.51	$	0.53
Diluted	$	0.28	$	0.30		$	0.50	$	0.50
Weighted-average shares used to compute net income per share attributable to common stockholders
Basic		70,001		72,955			70,867		74,221
Diluted		71,607		76,054			73,402		78,616
^(1) Includes stock-based compensation expense as follows:
	Three Months Ended December 31,					Year Ended December 31,
	2022		2021			2022		2021
Cost of revenue	$	1,060	$	1,029		$	4,761	$	4,302
Sales and marketing		8,160		7,703			33,621		32,335
Product development		20,090		19,817			86,871		81,624
General and administrative		7,027		6,584			30,837		33,418
Total stock-based compensation	$	36,337	$	35,133		$	156,090	$	151,679

YELP INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
	Year Ended December 31,
	2022			2021
Operating Activities
Net income	$	36,347		$	39,671
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		44,852			55,683
Provision for doubtful accounts		25,006			14,574
Stock-based compensation		156,090			151,679
Noncash lease cost		32,810			39,339
Deferred income taxes		(56,621	)		(9,190	)
Amortization of deferred contract cost		18,827			14,613
Asset impairment		10,464			11,164
Noncash gain on lease termination		—			(11,485	)
Other adjustments, net		1,036			392
Changes in operating assets and liabilities:
Accounts receivable		(49,555	)		(33,535	)
Prepaid expenses and other assets		(36,032	)		(49,246	)
Operating lease liabilities		(40,057	)		(41,008	)
Accounts payable, accrued liabilities and other liabilities		49,142			30,004
Net cash provided by operating activities		192,309			212,655
Investing Activities
Purchases of marketable securities — available-for-sale		(127,080	)		—
Sales and maturities of marketable securities — available-for-sale		32,821			—
Purchases of property, equipment and software		(31,979	)		(28,282	)
Other investing activities		94			632
Net cash used in investing activities		(126,144	)		(27,650	)
Financing Activities
Proceeds from issuance of common stock for employee stock-based plans		23,497			24,984
Taxes paid related to the net share settlement of equity awards		(61,023	)		(62,545	)
Repurchases of common stock		(200,006	)		(262,928	)
Net cash used in financing activities		(237,532	)		(300,489	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(2,136	)		(415	)
Change in cash, cash equivalents and restricted cash		(173,503	)		(115,899	)
Cash, cash equivalents and restricted cash — Beginning of period		480,641			596,540
Cash, cash equivalents and restricted cash — End of period	$	307,138		$	480,641

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 restructuring costs, impairment charges and net gain on lease termination. 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 restructuring costs, impairment charges and net gain on lease termination; 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 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 December 31,						Year Ended December 31,
	2022			2021			2022			2021
Reconciliation of Net Income to Adjusted EBITDA:
Net income	$	20,145		$	23,190		$	36,347		$	39,671
Provision for (benefit from) income taxes		16,717			(2,971	)		30,431			(5,953	)
Other income, net		(3,478	)		(626	)		(8,425	)		(2,204	)
Depreciation and amortization		10,687			17,140			44,852			55,683
Stock-based compensation		36,337			35,133			156,090			151,679
Restructuring		—			—			—			32
Asset impairment^(1)		—			—			10,464			11,164
Gain on lease termination, net^(1)		—			(3,748	)		—			(3,748	)
Adjusted EBITDA	$	80,408		$	68,118		$	269,759		$	246,324
Net revenue	$	309,103		$	273,400		$	1,193,506		$	1,031,839
Net income margin		7	%		8	%		3	%		4	%
Adjusted EBITDA margin		26	%		25	%		23	%		24	%

^(1)	Recorded within general and administrative expenses on our condensed consolidated statements of operations.