Yelp’s Strong Execution Drove Record Net Revenue in the Second Quarter 2023

Second quarter Net Revenue increased by 13% year over year to a record $337 million

Net Income increased by 84% year over year to a positive $15 million

Adjusted EBITDA increased by 25% year over year to a record $84 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 second quarter ended June 30, 2023 in the Q2 2023 Shareholder Letter available on its Investor Relations website at www.yelp-ir.com.

“Yelp's record-breaking top-line second quarter results are a testament to our increased product velocity and consistent execution across the company,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “For the ninth consecutive quarter, we delivered double-digit growth. Net revenue reached a new high driven by record advertising revenue across categories. Self-serve and multi-location accounted for more than half of our advertising revenue for the first time, reaching a milestone that reflects our long-term strategy to drive growth through our most efficient advertising channels. As we remain focused on enhancing our already strong product pipeline, we’re confident in our ability to gain market share and deliver long term shareholder value.”

“Yelp’s second quarter results demonstrate the durability of our top-line growth while delivering healthy profitability,” said David Schwarzbach, Yelp’s chief financial officer. “We grew net revenue by 13% year over year to a record level, while also expanding net income margin and adjusted EBITDA margin by two percentage points each from the prior-year period. We believe the strategic investments we’ve made have positioned us well for continued profitable growth over the long term.”

Quarterly Conference Call

Yelp will host a live Q&A session today at 2:00 p.m. Pacific Time to discuss the second quarter financial results and outlook for the third 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 lingering 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 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)
	June 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	270,256		$	306,379
Short-term marketable securities		126,909			94,244
Accounts receivable, net		151,655			131,902
Prepaid expenses and other current assets		38,690			63,467
Total current assets		587,510			595,992
Property, equipment and software, net		75,588			77,224
Operating lease right-of-use assets		79,591			97,392
Goodwill		103,260			102,328
Intangibles, net		8,315			8,997
Other non-current assets		179,024			133,989
Total assets	$	1,033,288		$	1,015,922
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	$	171,871		$	137,950
Operating lease liabilities — current		38,246			39,674
Deferred revenue		5,414			5,200
Total current liabilities		215,531			182,824
Operating lease liabilities — long-term		67,777			86,661
Other long-term liabilities		41,378			36,113
Total liabilities		324,686			305,598
Stockholders' equity:
Common stock		—			—
Additional paid-in capital		1,732,909			1,649,692
Treasury stock		(159	)		—
Accumulated other comprehensive loss		(13,876	)		(15,545	)
Accumulated deficit		(1,010,272	)		(923,823	)
Total stockholders' equity		708,602			710,324
Total liabilities and stockholders' equity	$	1,033,288		$	1,015,922

YELP INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
	Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Net revenue	$	337,126	$	298,884	$	649,564	$	575,512
Costs and expenses:
Cost of revenue ^(1)		30,184		26,988		56,243		50,417
Sales and marketing ^(1)		139,150		129,412		286,605		255,509
Product development ^(1)		85,030		76,848		173,227		157,533
General and administrative^(1)		53,405		38,377		99,914		77,760
Depreciation and amortization		10,615		11,258		21,420		22,748
Total costs and expenses		318,384		282,883		637,409		563,967
Income from operations		18,742		16,001		12,155		11,545
Other income, net		5,898		1,327		11,110		2,256
Income before income taxes		24,640		17,328		23,265		13,801
Provision for income taxes		9,911		9,319		9,714		6,707
Net income attributable to common stockholders	$	14,729	$	8,009	$	13,551	$	7,094
Net income per share attributable to common stockholders
Basic	$	0.21	$	0.11	$	0.19	$	0.10
Diluted	$	0.21	$	0.11	$	0.19	$	0.10
Weighted-average shares used to compute net income per share attributable to common stockholders
Basic		69,256		71,217		69,537		71,427
Diluted		71,238		72,835		71,645		73,572
^(1)Includes stock-based compensation expense as follows:
	Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Cost of revenue	$	1,346	$	1,248	$	2,728	$	2,553
Sales and marketing		8,607		8,200		17,721		16,855
Product development		24,974		22,304		50,841		45,429
General and administrative		8,653		8,309		18,547		16,284
Total stock-based compensation	$	43,580	$	40,061	$	89,837	$	81,121

YELP INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
	Six Months Ended June 30,
		2023			2022
Operating Activities
Net income	$	13,551		$	7,094
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,420			22,748
Provision for doubtful accounts		14,636			12,676
Stock-based compensation		89,837			81,121
Amortization of right-of-use assets		15,699			16,870
Deferred income taxes		(42,148	)		(24,114	)
Amortization of deferred contract cost		11,716			8,413
Asset impairment		3,555			—
Other adjustments, net		(64	)		717
Changes in operating assets and liabilities:
Accounts receivable		(34,389	)		(30,014	)
Prepaid expenses and other assets		12,156			(22,149	)
Operating lease liabilities		(20,943	)		(19,813	)
Accounts payable, accrued liabilities and other liabilities		37,225			24,683
Net cash provided by operating activities		122,251			78,232
Investing Activities
Purchases of marketable securities — available-for-sale		(82,491	)		—
Sales and maturities of marketable securities — available-for-sale		50,613			—
Purchases of property, equipment and software		(15,153	)		(14,498	)
Other investing activities		146			19
Net cash used in investing activities		(46,885	)		(14,479	)
Financing Activities
Proceeds from issuance of common stock for employee stock-based plans		26,095			11,026
Taxes paid related to the net share settlement of equity awards		(38,201	)		(32,046	)
Repurchases of common stock		(100,000	)		(100,006	)
Payment of issuance costs for credit facility		(799	)		—
Net cash used in financing activities		(112,905	)		(121,026	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		1,175			(1,154	)
Change in cash, cash equivalents and restricted cash		(36,364	)		(58,427	)
Cash, cash equivalents and restricted cash — Beginning of period		307,138			480,641
Cash, cash equivalents and restricted cash — End of period	$	270,774		$	422,214

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 litigation settlement expenses and 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 litigation settlement expenses and 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 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 June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
Reconciliation of Net Income to Adjusted EBITDA:
Net income	$	14,729		$	8,009		$	13,551		$	7,094
Provision for income taxes		9,911			9,319			9,714			6,707
Other income, net		(5,898	)		(1,327	)		(11,110	)		(2,256	)
Depreciation and amortization		10,615			11,258			21,420			22,748
Stock-based compensation		43,580			40,061			89,837			81,121
Litigation settlement expense^(1)		11,000			—			11,000			—
Asset impairment^(1)		—			—			3,555			—
Adjusted EBITDA	$	83,937		$	67,320		$	137,967		$	115,414
Net revenue	$	337,126		$	298,884		$	649,564		$	575,512
Net income margin		4	%		3	%		2	%		1	%
Adjusted EBITDA margin		25	%		23	%		21	%		20	%
^(1)Recorded within general and administrative expenses on our Condensed Consolidated Statements of Operations.